FOREIGN AID AND POVERTY REDUCTION IN DEVELOPING COUNTRIES: A SYSTEMATIC LITERATURE REVIEW

Abstract

This systematic literature review examines the relationship between foreign aid and poverty reduction in developing countries. The review identified and analyzed 50 relevant studies that were published between 2010 and 2021. The studies were selected based on specific inclusion criteria, including a focus on foreign aid and poverty reduction in developing countries. The results of the review indicate that foreign aid can play a positive role in poverty reduction when it is effectively targeted and implemented in conjunction with good governance. The studies suggest that aid can be used to finance critical social development programs such as healthcare, education, and poverty reduction initiatives. The review also highlights several challenges associated with foreign aid, including the potential for aid dependency, the risk of creating distortions and undermining local institutions, and the issue of corruption in countries with weak governance. Overall, the literature suggests that foreign aid can play a critical role in promoting poverty reduction in developing countries, but that its effectiveness depends on a range of contextual factors. The review provides insights for policymakers and practitioners seeking to use foreign aid to promote poverty reduction in developing countries.