An Evaluation of the World Bank's Trust Fund Portfolio

SummaryAs development challenges expand and expectations intensify for accelerated aid results, trustfunds have emerged as a significant pillar of the global aid architecture, used alongside bilateraland multilateral aid. In 2007–08, trust funds accounted for about 11 percent of total OfficialDevelopment Assistance (ODA), and they now finance a substantial part of the World Bank’sbusiness.Trust funds do not demonstrably provide additional resources at the global level. Donorcountries generally allocate money to trust funds from within a fixed aid budget in order toearmark and pool aid for particular countries or issues, or to foster innovations in aid financingand approaches. But trust funds add value as a distinct aid vehicle by providing coordinatedfinancing and grant resources for individual countries, targeted development issues, and globalpublic goods. The value added of trust funds is more evident when they support global publicgoods than when they are used merely to supplement national development efforts.Trust funds have not been a consistently effective way of providing financing. They do notnecessarily integrate well with countries’ own programs, nor do they foster coordination on theground with other sources of aid. The way they are designed and managed influences theireffectiveness. Notably, many trust funds of global scope involve insufficient recipient participationin the design of their objectives and modalities, and lack clear outcome objectives. Also, singledonortrust funds generally work less well than multidonor funds in improving aid efficiency andcoordination (except in the case of trust funds that finance activities in a single country).Substantial management changes will be needed to increase the effectiveness and efficiency oftrust funds as a channel of development assistance. Improved accountability for the results oftrust-funded activities can be achieved only with full integration of Bank-managed trust fundresources into the Bank’s mainstream management processes.While continuing to accept trust funds that fill critical gaps in the provision of aid, the Bankshould develop a more strategic approach to accepting and managing these funds. Theevaluation recommends that the Bank create a three-pillar structure for trust funds to fostermore effectiveness, efficiency, and accountability for results in the use of their resources. Itshould also initiate a discussion with its shareholders to explore the comparative advantages ofmultilateral and trust fund aid modalitiesWhat Are Trust Funds?Trust funds are vehicles for channeling aidresources from governmental andnongovernmental donors to be administered by atrustee organization such as the World Bank orother development organization. Trust funds arenot programs in themselves; rather, they arededicated sources of funding for programs andactivities agreed between the donor(s) and thetrustee organization.Trust funds administered by the World Bank arehighly varied. They comprise single-donor andmultidonor funds, and may provide financing tosingle or multiple recipient countries in support ofa specific issue. They include FinancialIntermediary Funds (FIFs)—for which the Bankholds, invests, and disburses funds wheninstructed by another body without Banksupervision or oversight of the use of theresources—as well as trust funds whose programsand activities are managed by the Bank.vi