This study empirically demonstrates the high relevance of elite-compatible project design as an essential condition for improving the effectiveness of foreign aid projects. Elite compatibility is a new approach derived from the recent discussion of institutions in the development discourse: the incentive compatibility of a project design with the interests of the elites in the recipient country. While elites have been largely neglected in the debate on development aid, they are central to the question of its effectiveness both from a theoretical point of view as well as in practice. The elite compatibility approach incorporates this aspect and offers an insightful criterion for project design.