Types of foreign aid

  • Private Foreign Aid
  • Bilateral aid (Aid between countries)
  • Multi-lateral Aid (from international institutions)
  • Trade assistance (from export credit institutions).
  • Private capital flow
  • Private foreign aid/investment aims at:
  • Contribution to developing relationships in developing countries.
  • Creation of employment prospects.
  • Transmission of technical know-how
  • Promotion of technical base.

However, private capital flow is often motivated by the following factors:

  • The prevailing low wage rates in developing countries.
  • The security of raw material for mother (donor) country.
  • The possibility of opening up and extending markets for imports from countries.
It is, however, important to note that this has high rate of profit/capital repatriation and needs a very condusive political atmosphere, which rarely exists in LDCs. In addition, private investment may leave the country alone with lack of control and direction of resources by the recipient country.
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