Multi-bi aid – donor contributions to multilateral organisations earmarked for specific purposes – is an important channel for financing development, and is expected to grow. Yet multi-bi aid poses significant challenges for both multilateral and bilateral actors, including lack of alignment with recipient-country priorities, aid fragmentation, and increased transaction costs. This report explores the potential for smart reforms of multi-bi aid.

A five-step plan to improve multi-bi aid requires:

• better data-access and management;
• recovering the full economic cost of earmarking;
• fee structures for improving impact;
• stronger internal rules to curb fragmentation; and
• better country ownership and participation.

These reforms can make multi-bi aid more effective and efficient while enhancing its legitimacy in the eyes of recipients.