While there has been more progress with poverty reduction since the 1950s than in any comparable period of human history, poverty remains a severe global problem. This book determines that the effectiveness of aid is not the amount received but rather the institutional and policy environment into which it is accepted. It examines how development assistance can be more effective at reducing global poverty and gives five main recommendations for making aid more effective: targeting financial aid to poor countries with good policies and strong economic management; providing policy-based aid to demonstrated reformers; using simpler instruments to transfer resources to countries with sound management; focusing projects on creating and transmitting knowledge and capacity; and rethinking the internal incentives of aid agencies.