NGOs v Governments: Who Wins the Healthcare Challenge?

Over the past two decades, Non-Governmental Organizations (NGOs) have become key players in providing essential services in developing countries, particularly in sub-Saharan Africa. In Uganda, as in many other nations in the region, NGOs are the main source of basic health services for rural communities. However, their growing influence has sparked a heated debate about their long-term impact on government capacity and sustainable development.

A recent study by Erika Deserranno (Bocconi University), Aisha Nansamba (BRAC International) and Nancy Qian (Northwestern Kellogg MEDS) published in the Journal of the European Economic Association addressed this dilemma: does aid provided by NGOs strengthen or weaken the capacity of local governments to deliver public services? The answer is complex and reveals a surprisingly multifaceted picture.

NGOs and governments competing for human resources

The entry of NGOs into Uganda’s rural communities has produced two opposing effects on the government’s ability to provide health services. NGOs often offer significantly higher salaries than the public sector – in some cases up to 20 times higher – thus poaching the most skilled workers from government facilities. This local “brain drain” has reduced the number of government health workers, undermining the state’s ability to provide essential services resulting in worsening health indicators, including increased infant mortality.

On the other hand, in communities where skilled labor is relatively abundant, the entry of NGOs has complemented and enhanced government services, hiring additional staff without taking human resources away from the state. In these areas, the interaction between NGO staff and government workers has stimulated healthy competition and cooperation, thereby improving access to health services for local people.

The NGOs’ dual model: economic opportunities and perverse incentives

Another noteworthy aspect is the remuneration model adopted by NGOs: health workers are paid according to the number of health products sold, such as fortified oils and soap, rather than for the medical care services provided. This incentive system, while increasing practitioners’ income and improving the distribution of essential goods, has a significant side effect: practitioners tend to concentrate their efforts on selling products rather than delivering critical health services, such as prenatal and postnatal visits.

The result is a paradox: in communities where NGOs hire government workers, the quality and frequency of health services decline, negatively impacting the health of the population. However, in areas where NGOs supplement public provision without taking away staff, the process results in better health coverage.

A fragile balance between help and dependence

The analysis suggests that aid from NGOs is not inherently good or bad, but its impact depends on the local context, particularly the availability of skilled labor. In places where NGOs compete with the government for scarce human resources, they unintentionally risk undermining the state’s long-term capacity, creating a chronic dependence on outside aid. Conversely, in areas with greater availability of skilled workers, NGOs can play a complementary role, strengthening the government’s health response capacity. As Erika Deserranno explains, “If NGOs are to start working in places where skilled labor is scarce, it would be useful to invest more in training and other capacity-building activities that would at the same time increase the supply of skilled labor.”

The study suggests that more coordinated planning and alignment between NGOs and local governments could maximize the positive impact of aid, avoiding the undesirable effects of poaching workers and improving long-term sustainability. NGO intervention, then, can either be a blessing or a hindrance to a state’s ability to deliver essential services, depending on how it is managed. The hope is that future international cooperation policies will inch toward models that are more sustainable and respectful of local dynamics.