1. Results-based financing for poverty alleviation
October 30, 2018

2. Contents
Results-Based Financing: Rationale, instruments, and market trends
A Poverty Alleviation Outcomes Fund for Kenya

3. Results-Based Financing
Tying funding to pre-agreed and verified results
Verified outcomes
Inputs and activities
The vision
100%
Status quo 0%
Funding tied to…
Business trainings
Savings groups formed
Job trainings
Increased assets
Increased
consumption

4. How Can RBF improve results?
Key drivers of greater impact
Measuring and drawing attention
to outcomes
Aligning financial incentives with beneficiary welfare
Grow effective approaches and organizations
Providing flexibility to achieve results
Improving accountability to beneficiaries

5. Growing resources in RBF
$26.5 billion allocated to programs tying funding to results
Launch of first Development Impact Bond
World Bank’s Program for Results launched
$1.5 billion Advance Market Commitment for Pneumococcal Vaccine
Information of developing countries, defined as not high income countries in 2013 by the World Bank.
Resources could be double counted if the money is used in two or more RBF contracts.

6. RBF in developing countries
78 developing countries have used RBF instruments
Legend
Impact Bonds
Performance Debt Buy Downs
Program for Results
Results Based Aid
Performance-based grants
Performance-based contract
Excludes Conditional Cash Transfers and Performance-Based Incentives (incentives to frontline workers).
RBF in high-income countries are not listed. Developing countries are all the countries that are not classified as high income by the World Bank in 2013 (i.e. for WB FY2015 the country had a GNI per capita <12745).
Multiple RBF instruments

7. Sector mapping RBF experience is concentrated in health Sector
Peer organization
Education
DFID and World Bank
Energy
Global Partnership for output-based aid (World Bank)
Health
Health Results Innovation Trust Fund (World Bank)
WASH

8. Classic grants pay out funds at the outset of a project
Funders
Implementer
services
data
How can we make this evidence matter as much as possible?
Independent
Evaluator
Beneficiaries
data

9. But how will the implementer get started?
If funds are paid in the end, they can be made dependent on evidence of success
funds
Funders
Implementer
services
data
But how will the implementer get started?
Independent
Evaluator
Beneficiaries
data

10. Impact bonds bring on board investors to help finance pay-for-success contracts
funds
Funders
Implementer
funds
funds
Financiers
services
data
Independent
Evaluator
Beneficiaries
data

11. The very first: Educate Girls Impact Bond in India
Improving child learning and enrollment
funds
Funder
Implementer
Educate Girls
funds
Children’s Investment
Fund Foundation
Financiers
funds
UBS Optimus
Foundation
services
data
Independent
Evaluator
Beneficiaries
IDinisght
15,000 children
data

12. Educate Girls Impact Bond
Educate Girls surpassed targeted results after three years
Outcome
Three-year target
Final result
Performance as percentage of target
Aggregate learning gains for all students (grades 3-5)
+5,592 ASER learning levels above control group
+8,940 ASER learning levels above control
160%
Enrollment of out-of-school girls
79% of eligible girls
92% of eligible girls
116%
Aggregate Learning Gains
(Treatment-Control) by Year
Enrollments of Out-of-School Girls
(Treatment) by Year

13. Impact Bonds Worldwide
6/108 are in low- and middle-income countries CA 04 01
SWE
UK40 08
NLD 02
FIN 01
BEL 02
GER 02
FRA 01
AUT
US20 01 04
SWZ
PRT 03
JPN 02
ISR 02
SKR 02
IND 01
COL 01
NZL
DRC, ML, NG 01 01
PER
KEN
UGA 01
Legend
# impact bonds completed or in implementation:
5-10
<5
>10 08
AUS
Nov 2017, database from Social Finance & Instiglio.

14. Contents
Results-Based Financing: Rationale, instruments, and market trends
A Poverty Alleviation Outcomes Fund for Kenya

15. Benefit/Cost Ratios By Trial Site in 6-Country Replication Study
Graduation has been cost-effective – but impacts have differed greatly across sites
Benefit/Cost Ratios By Trial Site in 6-Country Replication Study
(using 5% real discount rate)
(threshold)

16. What might explain this variation?
There were only modest differences in targeting and curriculum
Other factors likely play a role
Which ones?
Among them may be very subtle ones:
The culture of the implementing organization
The capability of mentors to relate to beneficiaries at a personal level
Highly localized contextual factors
“Secret Sauce” / “Magic Dust” / “Human Touch” / “Tacit Knowledge”
This creates scaling challenges
“Rolling out the right components” to “the right target populations” does not guarantee success
We can’t fully define “all quality factors” or where they are in place
“Quality” may correlate with scale
How to route funding to those efforts where impact does materialize?

17. In principle, impact bonds are a great tool to route funding where there is impact
But:
1. Funders don’t usually work like this; how to engage them?
2. How to make all of this cheap and routine?
funds
Funders
Implementer
funds
funds
Financiers
services
data
Independent
Evaluator
Beneficiaries
data

18. Trustee (outcomes fund)
An outcomes (trust) fund makes pledges to allow all of this to function cheaply & routinely
Funders
funds
pledge
funds
Trustee (outcomes fund)
Implementer
funds
funds
Investors
services
data
Independent
Evaluator
Beneficiaries
data

19. We tested a prototype poverty alleviation outcomes fund in Kenya & Uganda
DFID
USAID
WPF
funds
pledge
funds 9
GDI
Village
Enterprise
funds
funds
Investors
services
data
IDinsight
12,660
Beneficiary
households
data

20. There is donor interest in scale-up, and we hope to find where this model can add the most value
Kenya comes with promising opportunities
The Government of Kenya
has already demonstrated a strong appetite for innovation through its performance-based management and contracting
is already prioritizing and investing in social protection programming through
its Vision 2030 plan
the Big 4 Pillars
the Sustainable Development Goals 1&2
its partnerships with the World Bank and IFAD
A sophisticated ecosystem of 10 evidence-backed high-capacity service providers such as BRAC, One Acre Fund, BOMA Project
are already supporting poor rural populations in Kenya with training or mentorship
are already partners to the outcomes fund
There are many possible synergies related to the scale-up of graduation approaches in local social protection policy

21. How best to partner? Government as learning partner
Government as funder
Government as implementer
Or potentially a combination of the above

22. Q&A

23. The long term vision is to
Linking cost-effective programs to government social protection
Ecosystem of evidence-based poverty alleviation service providers
Government social protection programs
Outcomes Fund as a link
The challenge
This creates room to leverage coordination amongst governments, service providers, and donors.
A proposed solution:
- This creates a funnel from innovation to scale for cost-effective approaches, increasing the collective impact of government, donors, and service providers working to reduce poverty.
Potential contribution of an outcomes fund
An outcomes Fund can act as a pull mechanism for cost-effective programs and is an opportunity to connect evidence-based programs with large-scale government social safety net programs.