The UK’s Department for International Development (DfID) is failing to address the petty but widespread corruption that blights the daily lives of the world’s poorest people and has a particularly corrosive impact on women and girls, Britain’s aid watchdog has warned.

In a report published on Friday, the Independent Commission for Aid Impact (Icai) acknowledges the department’s awareness that everyday corruption is a critical challenge for development, but says it has neither developed “an approach equal to the challenge, nor … focused its efforts sufficiently on the poor”.

The report recognises that DfID’s efforts are often stymied by political sensitivities, acknowledges the increasing “democratisation of corruption” in such countries as Nigeria and Nepal, and notes its work on tackling major fraud and protecting UK taxpayers’ money.

But the commissioners say too little attention has been paid to “the everyday, small-scale but endemic corruption that includes bribery and personal favours, which most directly affects the lives of poor people”.

On the basis of its findings, the commission has awarded DfID its second-worst rating – amber-red – meaning that significant improvements are required as “the programme performs relatively poorly overall against Icai’s criteria for effectiveness and value for money”.

The report says that women and girls bear the brunt of corruption, as it often limits both their access to justice and their social and economic progress.

“We heard, particularly in Nigeria, of women trying to stand for local elections and being thwarted in doing so by corrupt male officials,” it says. “Bribery diminishes the effectiveness of law enforcement, particularly where punishment of crimes relies on evidence from the victim. This can affect women badly, in cases of trafficking and rape in particular.”

Women also lose out, the report adds, when money has to change hands for access to maternal health services and education.

The study highlights the fact that DfID does not have data on the total amount it spends on tackling corruption, as it follows rules laid out by the Organisation for Economic Co-operation and Development (OECD), which classify only certain types of expenditure as anti-corruption measures.

According to that narrow definition, Icai estimates that the department – which has an annual budget of about £10.3bn – has spent £22m on fighting corruption over the past year, up from £3.5m in 2007-08. The figures probably significantly underestimate DfID’s efforts, however, as they exclude funds invested through agencies of multilateral institutions and programmes that have an indirect effect on corruption.

Graham Ward, Icai chief commissioner, said the failure to tackle petty corruption was a “gap in DfID’s programming that needs to be filled”, while the lead commissioner, Mark Foster, called on the UK to be far more ambitious.

“We have recommended that DfID should develop an approach to fighting corruption that will be an integral part of the UK government’s wider efforts,” he said. “DfID, in partnership with the Foreign and Commonwealth Office (FCO), could be a beacon for anti-corruption internationally.”

The report concludes with five recommendations: it suggests DfID should work with the FCO and other departments to devise and implement a detailed plan on tackling petty corruption in priority countries; develop standalone anti-corruption strategies that extend over a 10- to 15-year period; come up with more programmes to target everyday corruption and educate people about its effects; gather and publish stakeholders’ feedback on its anti-corruption work so it can monitor and correct existing programmes; and create “an internal embedded centre of excellence” to gather evidence, share lessons learned and cultivate expertise.

A DfID spokeswoman said the report had recognised some of the department’s work – which reflected its “zero-tolerance” approach to fraud and corruption – adding that DfID has anti-corruption and anti-fraud plans for each country it provides with bilateral aid.

“While these plans are tailored to the individual needs of each country, they are based on a common principle that tackles the root causes of corruption by building strong institutions and requiring good governance,” she said.

“Additionally, DfID funds UK police units and crime agencies to investigate the proceeds of corruption by foreign officials [in] the UK. Internationally, the UK is leading the drive to clamp down on corruption through the G20, World Bank and IMF programmes.”

However, the Labour party described the report as damning and said it ought to serve as a wake-up call to David Cameron’s government and the international development secretary, Justine Greening.

“Greening should have zero tolerance of corruption – especially when it is hitting the poorest – but instead the independent commission has found her asleep at the wheel,” said the shadow international development minister, Alison McGovern.

“This is about many of the world’s poorest people having to pay bribes for life’s essentials – food, water or even safety – setting back the cause of poverty reduction and severely reducing the effectiveness of UK aid.”