Maximizing Impact with Results-Based Financing: Insights Gained from Years of Practical Experience

• In Event: Case studies in philanthropy: corporate social responsibility, grant making and technical assistance

Proposal

Global challenges like climate crises, wars, and economic shocks are pushing governments, civil society, and the private sector to rethink development cooperation. A key innovation in this space is Results-Based Financing (RBF), a model that moves away from traditional aid, which focuses on financing inputs and activities, toward a model that ties payments to the achievement of agreed-upon outcomes. RBF ensures that financial disbursements are made only after the successful verification of results, fostering accountability and driving more efficient and impactful development efforts.
RBF has been applied successfully in various sectors, from education to water, sanitation, and hygiene (WASH), to governance. Helvetas, a leader in implementing RBF, has substantial experience applying this model, particularly in employment promotion projects in countries like Ethiopia and Nepal. In these settings, RBF incentivized vocational training providers to meet performance milestones, such as trainee graduation, passing of skills tests, and job placement. In Nepal, for instance, Helvetas supported the training of 90,000 individuals who achieved gainful employment, demonstrating the effectiveness of RBF in driving real-world outcomes.
A review by the Swiss Agency for Development and Cooperation and Switzerland’s State Secretariat for Economic Affairs found that RBF is a growing tool in development cooperation, with its use increasing from $1 billion in 2007 to over $26.5 billion in 2017. Organizations like the World Bank and Millennium Challenge Corporation have adopted RBF as a core funding model, with RBF currently representing 15% of World Bank development lending.
One of RBF's key strengths is its flexibility. Instead of adhering to rigid plans, implementers can continuously adjust activities to better fit local contexts while remaining focused on achieving results. This adaptability encourages innovation and enhances the overall impact of projects. Helvetas has successfully adapted RBF across diverse regions, demonstrating its scalability.
Local government support is critical for the long-term success of RBF. In Ethiopia, the regional government of Amhara partnered with Helvetas to integrate RBF into vocational training systems, ensuring institutionalization and sustainability. This collaboration helped establish RBF as a participatory and transparent approach to improving training outcomes.
In addition to its effectiveness, RBF promotes social inclusion. Helvetas uses differential pricing models in its employment projects to encourage training providers to support disadvantaged groups, including youth from remote areas, ethnic minorities, and people with disabilities. This ensures that the benefits of RBF reach the most vulnerable populations.
While RBF offers many advantages, it is not without risks. One concern is that partners may become mere service providers, reducing the focus on trust and long-term relationships. Additionally, although achieving employment outcomes is a key success measure, it does not always guarantee the quality of training. Ensuring inclusivity and high standards alongside RBF incentives is essential.
As traditional development budgets face cuts and the world struggles to meet the Sustainable Development Goals (SDGs), innovative financing models like RBF are increasingly vital. Helvetas is committed to expanding the use of RBF in new sectors and exploring impact-linked finance, which combines RBF’s focus on outcomes with private sector investments.

Author

• Tatev Ohanyan, Helvletas USA