Foreign aid has been an important element in development and poverty reduction theories and practices of poor countries. Aid flow to poor countries has been increasing, Riddell (2007) puts the figure to £100bn (Riddell 2007), as much as 30% being provided by NGOs and 10% as emergency aid. Riddell noted that aid has been expanding the recent years and several donor countries have pledged to double their aid to achieve the MDGs and the target of 0.7 percent of GNI for ODA. Aid has been partly driven by the thinking that poor countries can not get out of poverty trap or even achieve the millennium development goals unless aid continues to follow in big amounts to these countries. Aid has been conceived to enable poor countries achieve sustained economic growth, good governance, and poverty reduction. Aid was originally been given on a blanket ‘altruism’ basis but now days on "selective" basis to countries considered to have good governance or willing to reform. Literature reveals that aid has been given for several reasons; helping provide welfare assistance, emergency aid, development aid and anti-terrorism aid (Fowler 2005, Riddell 2007). Indeed some scholars argue that aid is bad and other say it is one good thing.

Scholars have be critical of ills of aid (Easterly 2006, Dambisa Moyo, 2009 ) bringing out the evidence that aid has been ineffective i.e. not being able to effectively handle poverty which legitimises its existence in the first place (Matlin and Satterthwaite 2007, Doucouliagos and Paldam 2009). As such donor agencies do not work directly with the poor or groups of the poor but they work with government and other structures where aid is eventually swallowed by corrupt and inefficient practices before it reaches the poor. Easterly (2005) maintains that ‘limitless development assistance to African governments, has fostered dependency, encouraged corruption and ultimately perpetuated poor governance and poverty’. Even WB&IMF say ‘there is no correlation between aid and growth in Africa and aid has harmed development by supporting governments whose policies have actually impoverished people and yet there is ‘no evidence that aid works better in better policy or geographical environments’ (Vásquez, 2005). Hanlon 1991, 1997 and Amutabi 2006, argue that aid has been used as a tool of exploitation by the west. They claim that aid is used by donors to set parallel structures to weakness the state so as to control it and also to employ expatriates to exploit resources in poor countries. Other scholars denounce aid as being unable to bring development or even eradicate poverty in the south, it instead supports exploitative government, and does not ensure wealth creation and its results are short term (Vasquez 2005, Mwenda 2007). In fact aid is not as important as its supporters argue. Dambisa Moyo, (2009) maintained that aid has harmed Africa and its remains a white man’s burden (Easterly 2006) with elusive promises. What is important are the foreign policies, migration and trade policies rather than aid.

On the hand some scholars exposes instances where aid can work bringing out the idea that there is still hope in aid i.e. aid can also be cost effective. Easterly (2006) highlights examples of donor interventions in Kenya and India that have worked including; the provision of deworming drugs, dietary supplements, education and treating sexually transmitted diseases, indoor spraying against malaria, and provision of fertilizer subsidies, vaccination and urban water provision. Easterly attributed success of such project to the ability of the donors to understand the local settings and adjusting project meet needs of the people. Matlin and Satterthwaite (2007) using an example of the International Urban Poor Fund (IUPF) support directly to grassroots initiatives by a transnational network of slum/shack/homeless people’s federations and their support NGOs to show that the small grants given to groups/members of these federations has enabled them to secure land for housing and getting basic services in 17 nations. They argue that aid can work in instances where there is local ownership of development assistance. Aid effectiveness has been recognized by the Official Development Assistance agencies (ODA) multilateral development banks and bilateral agencies as a crucial element in ensuring that international financing obtains its objectives and reaches the poorest categories in the world.

The aid industry has been under pressure to demonstrate results and be an effective force the good its providers claim it is. Aid effectiveness is the concern of every actor in the aid chain. The need for aid effectiveness has seen development of Marshall Plans to which Easterly (2006) argues that they do not work. Matlin and Satterthwaite (2007) notes that the recognition that ‘far too many people were remaining poor and that the number of people facing poverty was growing has made donor agencies get committed to the Millennium Development Goals in 2000 and to the Paris Declaration in 2005 and also the earlier commitments such as those to “meet basic needs” made in the mid-1970s,) those to ensure universal access to water and sanitation made in 1976–77 and those to support “human development” made in the early 1990s. Matlin and Satterthwaite (2007:483) insists that these international commitments and related funding may not change poor people’s situation unless donors are ‘willing to relinquish more decision-making powers and more financial control to local organizations formed by and accountable to the urban poor’. This is because donor agencies are bureaucratic, they work through government and unable to support the local social processes needed to make aid effective. They argue that ODA needs a more direct relationship with the poor, including new lines of accountability and transparency. Arjan de Haan (2009:20) after analyzing the four perspectives of the debates in the aid industry i.e. 1) proponents who argue that aid money goes to international development; 2) the technocrats who argue that aid matters less than how it is given; 3) the relativists who say foreign policy, trade and migration policies matter more than aid; and the accountant who are mind about how much they know what aid achieves; maintains that the debates can be counterproductive too because it takes insufficient account of the diversity of aid motives, agencies, modalities, and problems. What is important is to focus on aid accountability for both the funder and the recipients but more especially that which is aimed at ‘creating space for Southern voices’.