What is Results-Based Financing?

Results-Based Financing (RBF) is a tool to give money to social programs that work. In a Results-Based Financing model, a “payer” (a foundation, international donor, or government) conditions its payment to a service provider (an NGO or private company) on desired outcomes (see chart below). Thus, Results-Based Financing allows social programs to focus on achieving real impact rather than following a set of rules. At Instiglio, we currently work with two types of Results-Based Financing models, Impact Bonds and Performance-Based Contracts.

What does Results-Based Financing look like in action?

Results-Based Financing is a way to contract services that focus on evidence. Here are some examples of what Results-Based Financing looks like in the real world.

  • A foundation pays a job skills training center in India for each person who gets and retains a job for at least 6 months, rather than for each person who completes the training program.
  • DFID pays a school in Rwanda $50 for each girl who sits for a standardized exam and $100 for each girl who passes it, but does not pay based on, nor gets involved with, the activities that got them the results.
  • A foundation finances an impact evaluation of a sanitation program, promising money to scale it if it turns out the program passes a pre-defined threshold of cost-per-outcome.
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Who uses Results-Based Financing?

A variety of actors use Results-Based Financing to pay for outcomes. Governments in developing countries (e.g. Rwanda, Uganda, India, Zimbabwe), international donors (e.g. World Bank, DFID, USAID, AusAID) and philanthropies (e.g. Gates Foundation, Clinton Foundation) have all experimented with Results-Based Financing.

In what thematic areas has Results-Based Financing been implemented?

While Results-Based Financing is most widely used in global health, we’re observing emerging interest in other areas such as income generation, agriculture, education and the environment, in which currently relatively few Results-Based Financing programs exist.

Why use Results-Based Financing rather than traditional funding?

It makes money more effective. By tying funding to measurable results, Results-Based Financing reduces the risk of funding programs that don’t work.

It allows providers to adapt to change. By shifting focus from activities to impact – that is, by reimbursing results rather than receipts – Results-Based Financing gives service providers more flexibility to do what they need to do to get results.

It incentivizes better programs. By tying funding to results, Results-Based Financing makes it attractive and profitable for service providers to improve their programs.

What is the evidence that Results-Based Financing improves effectiveness of social programs?

Early evidence, including rigorous evidence from randomized control trials, suggests that Results-Based Financing improves program performance. Examples include the following programs:

An early childhood healthcare Results-Based Financing program in Rwanda increased the probability of health center visits for preventive care of children 0-23 months and 24-59 months by 64% and 133%, respectively.

A prenatal Results-Based Financing program in Argentina reduced neonatal mortality by 74% and low birth weight by 19%.

A health and education Results-Based Financing program in Indonesia incentivized villages to improve 12 health and education metrics. Overall strong results were seen in health outcomes, with a 15% reduction in malnutrition rates.