Financial aid plays an important role in many third world countries, therefore, many third world countries owe their current development to such aids (Sinjela, p.23, 2007). However, this noble cause has both advantages and disadvantages which are accrued by the countries providing the aid and also by the countries receiving the aid as discussed below.
Financial aid is of utmost importance to poor countries since they speed up the development process a country can make as soon as it gets the aid (Milkias, p.34, 2010). This can be seen when there is a natural calamity facing a nation, e.g. earthquake, and it does not have the necessary resources to recover. However, when an aid is received, repairs can take effect thus the damaged infrastructure and buildings can be rebuilt so that normal activities that build the nation can continue.
In terms of the countries giving the aid, their international relation with other countries are strengthened which results to trade agreements and exchange of resources (Mishkin, p.36, 2008).
On the other hand, one disadvantage of giving financial aid to poor countries is that the countries receiving the aid may start to depend on it regardless of the reason why the aid was given (Sinjela, p. 45, 2007). This makes the individuals in the country lazy thus leading to waste of both the human and natural resources. As a result the country does not experience and growth and development in terms of its economy. This makes the country to be dependent in a long period of time and may not experience industrialization.
The advantage that comes with the country providing the aid is that they may impose ideas and requests which the individuals in the receiving end are not comfortable with (Mishkin, p.36, 2008).