Why are charities in the developing world more cost-effective?

Charities operating in the developing world are typically more cost effective than those doing direct work in the developed world.

Why is this?

A commonly given reason is that your pound (or dollar) goes further overseas, which is understood to mean that things are simply cheaper in the developing world.

To a certain extent this is fair, but it's worth also bearing in mind that a typical large NGO which operates in the developing world will likely have a head office in the developed world (e.g. the UK or the US), and then staff members in the field may well be paid at international (i.e. not local) rates. While charity sector employees are typically paid less than their private sector counterparts, a large chunk of an NGO's cost base (indeed likely most of it) is not fully benefitting from the fact that things are cheaper in the developing world.

Does this mean that the cost-effectiveness edge is only small?

No. It's not rare for us to see charities in the UK whose cost to achieve one relatively low-impact outcome is similar to the cost of around 100 relatively low-impact outcomes in the developing world. E.g. a charity in the UK may offer a holiday for a child or an intervention to tackle an intractable problem and spend over £1000 per beneficiary, and see relatively small levels of result for each person helped, whereas a simple an intervention such as a malaria net may be 100x cheaper.

And this hints at a big reason for the difference in cost effectiveness.

It's not just that things are cheaper in the developing world (although they are, and this does help make your donation go further).

It's because of low-hanging fruit.

It's because lots of easy to implement, cheap and effective ways to do good simply aren't options in the developed world. Want to fund cheap, simple health interventions in the UK? Tough luck, the NHS is already doing that. Want to help a Norwegian child get an education? Tough luck, the ones who are already well-positioned to learn are already getting a free education from the state.

But to a certain extent, the reason *why* developing world interventions have so much more bang for your buck is less important than the result. The fact that these charitable giving opportunities is so much more cost-effective is a great opportunity for a donor to have more impact for the same money.