Introduction
Through its Sustainable Development Goals (SDGs), the United Nations shared a blueprint for development, peace, and prosperity. One of the most crucial SDGs is poverty reduction. The SDG targets eradicating poverty of all forms everywhere by 2030 and ensuring that people lead dignified lives.
The three core elements considered helpful in achieving the goals are economic empowerment, environmental protection, and social inclusion. It is imperative to note that partnerships and aid play a significant role in achieving the goals. Official development assistance (ODA) is economic development assistance that assists developing countries and other needy cases in achieving their targets.
This research aims to determine whether the aid provided by ODA has helped the nations move closer to the SDG targets. The research is significant because it helps donors evaluate their funds’ effectiveness and make necessary adjustments for effective service delivery. The rate of poverty eradication has significantly reduced, and the aid must be closely monitored to achieve its goal of eliminating poverty by 2030.
The first SDG is eradicating poverty and hunger in the most affected countries. In the 1990s, the developing nations experienced the highest poverty rate, as 47% of their populations were affected by extreme poverty and could not feed their population (Iwegbu & Dauda, 2022). However, significant improvements have been made as the poverty rate was reduced to 14% by 2015 (Mori Junior et al., 2019).
Globally, the number of people living in extreme poverty declined by almost half between 1990 and 2015 (Mori Junior et al., 2019). There was a reduction from 1.9 billion poor people in 1990 to 836 million people in twenty-five years. However, most of the development was achieved in 2000 (Iwegbu & Dauda, 2022).
The aggregate reduction per year was 42,560,000, which allowed the global reduction rate to be abridged. Today, the poverty rate is 8.5%, approximately 682 million people, translating to an aggregate reduction of 30,800,000 annually (Iwegbu & Dauda, 2022). The declining rate imposes a danger to the effectiveness of the aid, and adequate follow-up must be made to ensure that all the resources allocated for poverty reduction are channeled without embezzlement.
Previous Work on the Aid’s Effectiveness
Previous research has underscored foreign aid’s effectiveness in the reduction of poverty. There has been a remarkable reduction in poverty in the countries that received aid to end poverty in the discourse. In Africa, the poorest of the poor have received significant help in improving their situations. Research by Dhahri and Omri (2020) showed that poverty reduction is directly related to economic growth. If the economy grows, the rate of poverty shifts by a similar margin because people experiencing poverty can acquire employment opportunities to improve their economic situation.
Further, the aid increased the income elasticity by 34%, meaning people could control their income through entrepreneurial development (Mori Junior et al., 2019). Since development aid opened the economic zones in the developing nations and empowered people experiencing poverty through employment and grants to start a business, the income elasticity changed, and more people could afford food and other necessities. In Africa, the grants reduced extreme poverty and hunger by 54% (Iwegbu & Dauda, 2022). Poverty reduction has been a successful venture in African countries.
Sub-Saharan Africa is one of the regions hit by extreme poverty and hunger. Foreign aid has been channeled to the countries since 1981 to eradicate poverty and ensure people eat a balanced diet to achieve healthier outcomes (Iwegbu & Dauda, 2022). The aid showed a statistically significant reduction in the poverty rate. It is, however, imperative to note that the source and type of finance had different results in the poverty reduction index.
Official development assistance (ODA) was more effective than other bilateral aid channels in developing countries. There was a direct relationship between the democracy of a nation and the reduction of poverty. Further, globalization played a key role in poverty reduction and had a significant impact. According to previous research, aid has had a direct relationship with poverty reduction and has significantly improved the discourse. The aid is, therefore, the antidote to end the levels of poverty and hunger in the world.
Contribution of Present Work and Comparison with Previous Research
The previous research discussed underscored the success and effectiveness of financial aid in ending poverty. This research, however, investigates the effectiveness of the grants and other contributions to achieving the SDGs. The poverty reduction rate is calculated to attain an annual aggregate that attains the research goal. An analysis of the regression chart shows that poverty reduction at the current rate will be attained in 2147, approximately one hundred and seventeen years later (Dhahri & Omri, 2020).
An analysis shows that two nations may have received a similar amount of aid, but one of the nations records a higher reduction than the other. The analysis further shows that countries that have mature democracies with appropriate checks and balances in their political systems are likely to receive higher development in the long run. Therefore, the aid’s effectiveness depends on some factors, such as political leadership, and the donors must set conditions before disbursement to ensure that it meets the required objectives. The previous error stated that poverty reduction was successful since some countries still needed to achieve the required index.
Research Design
Nature of the Samples
The research design utilized the mixed method, using quantitative and qualitative research to collect and analyze data. Data for the research were extracted from the OECD database to determine the effectiveness of the aid allocated to end poverty in the partner countries. The quantitative research framework was selected because the database contains data on all the foreign aid to nations. Qualitative research was used to determine whether or not the aid had a significant impact on poverty reduction.
A file was extracted from the database, which showed aid flows for one hundred and five countries, 65 from around the world, and 40 from Africa (Data, 2021). The selected nations were analyzed as democracies and how the aid significantly impacted poverty reduction. Most African countries received almost the same grant amount, and its significant impact was determined over the five years. Although donor funding increased over the years, the outcomes in some countries remained stagnant, and the poverty reduction rate declined.
Variables
The two major variables used in the research are annual financial aid per capita and the indicators for poverty reduction. The effectiveness of the donor funds will be achieved when an increase in donor funding significantly increases poverty reduction. Other variables implored in the research include corruption, political stability, and economic policies in the partner countries receiving the aid. A relationship between the two key variables determines the effectiveness of donor funding in achieving the SDG target.
Results
The financial aid offered in the nations for eradicating poverty was ineffective, and the target may not be achieved by 2030. The annual average financial aid per capita received by partner countries was not associated with the target indicator. For example, Senegal received increased aid per capita in 2020, but the increased income did not significantly impact the poverty reduction index.
The direction of the relationship between aid per capita and significant poverty reduction is not linear, as increased aid does not guarantee a positive increase in poverty reduction. The substantive effect of the aid per capita on poverty reduction indicators does not show a direct relationship, as it is dependent on other factors. Change in the aid per capita does not guarantee an improved outcome in poverty reduction. The relationship between aid per capita and change in poverty levels is statistically insignificant because the relationship between the variables needs to be identified.
Conclusion
The research shows that the poverty reduction rate is not directly proportional to the allocated aid. Some nations receiving similar financial aid to end poverty report different results due to a need for a unified monitoring framework. Important lessons to be learned include proper scrutiny and follow-up to ensure that the disbursed aid meets the people’s needs in ending extreme poverty and hunger. Further, the research teaches that corruption, political instability, and embezzlement of funds are key stumbling blocks in meeting the SDGs. The research finding relates to the work covered in class: the declining poverty reduction rate, political interference in aid, and corruption.
The effectiveness of foreign aid depends on the three factors that must be analyzed before disbursing it to help curb poverty. The research study implies that future investigations must be made on the factors that affect foreign aid in poverty reduction. Recommendations on improving the fund’s effectiveness must be implemented for the UN to meet its Millennium Development Goals.
References
Beegle, K., & Christiaensen, L. (Eds.). (2019). Accelerating poverty reduction in Africa. World Bank Publications.
Data, O. E. C. D. (2021). Aid (ODA) Disbursements to Countries and Regions [DAC2a]. Web.
Dhahri, S., & Omri, A. (2020). Foreign capital towards SDGs 1 & 2—Ending poverty and hunger: The role of agricultural production. Structural Change and Economic Dynamics, 53, 208-221. Web.
Iwegbu, O., & Dauda, R. O. (2022). Effectiveness of foreign aid in poverty reduction in Africa: The role of fiscal policy. CBN Journal of Applied Statistics, 13(1), 55-92. Web.
Mori Junior, R., Fien, J., & Horne, R. (2019). Implementing the UN SDGs in universities: Challenges, opportunities, and lessons learned. Sustainability: The Journal of Record, 12(2), 129-133. Web.