However, remittance flows to Sub-Saharan Africa have lagged behind other developing countries. Low-income countries received some $56 billion or 3.5 percent of GDP as remittances in 2006, whereas Sub-Saharan African countries other than South Africa received 2.1 percent. The relatively low share of recorded remittances to Sub-Saharan Africa is almost certainly attributable to a high share of informal transfers.

Institutional remittances, which include grants by U.S and European foundations, were another category of resource flows that are large and growing steadily.<sup>17</sup> Institutional remittances to Sub-Saharan Africa increased from less than $2 billion in the early 1990s to $6.3 billion by 2006. As with personal remittances, most institutional remittances went to the poorest countries, with low-income Sub-Saharan African countries receiving $5.0 billion or 1.6 percent of GDP in 2005.

Private foundations, such as the Bill & Melinda Gates Foundation, are increasingly becoming important players in financing development. U.S. and European foundations provide some $4.4 billion in grants annually for international development (Sulla 2007). However, most of the international assistance from U.S. foundations is channeled through global funds such as GAVI, international institutions, and international non-governmental organizations, and goes to emerging markets such as Brazil, China, India, Mexico, the Russian Federation, and South Africa, rather than the poorest countries in Sub-Saharan Africa where grants from the International Development Association (IDA) continue to play a dominant role.<sup>18</sup> This may result partly from a lack of information and difficulties in implementing projects in the poorest countries in Sub-Saharan Africa.

Institutional remittances have become increasingly important for financing the most pressing development needs of Sub-Saharan Africa, including those essential for reaching the MDGs. However, some of the so-called vertical funds raise challenges because of their focus on specific issues, for example, diseases such as AIDS, tuberculosis, or malaria (see Sulla 2007 for recent trends and issues in grant giving by U.S. and European foundations). Multilateral institutions such as the IDA can help channel external assistance in a coordinated manner, provide support for broader sector-specific (education, health) strategies, and align these with Sub-Saharan African countries’ own development priorities.

> 17 Institutional remittances consist of current and capital transfers in cash or in kind payable by any resident sector (that is, households, government, corporations, and nonprofit institutions serving households [NPISHs]) to nonresident households and NPISHs and receivable by resident households and NPISHs from any non-resident sector and excluding household to household transfers (United Nations Statistics Division 1998). NPISH is defined as a non-profit institution that is not predominantly financed and controlled by government and that provides goods or services to households free or at prices that are not economically significant.

> 18 IDA countries (mostly in Sub-Saharan Africa) received an estimated $20 million from U.S. foundations in 2004, which was less than 3 percent of direct cross-border grants of $800 million provided by U.S. foundations in that year (Sulla 2007).

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