International donors use bilateral and multilateral channels to deliver aid to developing countries. While bilateral transactions for aid delivery are initiated and completed by state governments or by their executive agencies, multilateral transactions are governed by multilateral organizations. This article explains the differences between bilateral and multilateral aid and provides a list of the advantages and disadvantages associated with each.
What is Aid?
In the context of international development and cooperation, the concept of aid (or foreign aid) refers to the voluntary transfer of capital (financial transfers), goods or services from a country or an international organization to a developing country with the objective of reducing poverty, achieving sustainable development or strengthening human development. The Organization for Economic Co-operation and Development (OECD) labels foreign aid as Official Development Assistance (ODA) which can be distributed through bilateral or multilateral channels.
Take a look at this article for more information on foreign aid and the top donor countries in 2020
What is Bilateral Aid?
Bilateral aid involves the direct transfer of capital, goods, or services between a donor and a recipient country. Such transactions can be initiated and completed by state governments (e.g., USA, France, Sweden, etc.) or by their executive agencies (e.g., USAID, AFD, or SIDA). For the majority of donor countries, bilateral aid constitutes the largest share of total aid which can, in turn, be influenced by diplomatic, strategic, or humanitarian goals. Donors choose this channel for aid distribution in situations where more accountability is required or when they wish to deepen their relationships with recipient countries.
What is Multilateral Aid?
Multilateral aid refers to the transfer of capital, goods, or services between a multilateral organization and one or more recipient countries. Multilateral organizations (e.g., UNDP, the World Bank, FAO) pool the resources made available by their member states and direct this towards developing countries through various programs and projects. The OECD currently recognizes over 200 multilateral organizations worldwide with specific or overlapping objectives. Multilateral aid channels are preferred in situations where donor countries aim to increase transparency or strengthen their development impact.
Bilateral vs Multilateral Aid (Advantages and Disadvantages)
Some of the advantages and disadvantages related to the distribution of aid via bilateral or multilateral channels are highlighted below:
Bilateral Aid
Multilateral Aid
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