From left to right: Mr S M Monirul Islam, Chief Financial Officer IDCOL. Mr Ernest Schoffelen, Cordaid. Mr Joachim Beijmo, Sida’s head of Communications. Dr William Savedoff, Senior Fellow, Center for Global Development. Catherine O’Farrell, Global Partnership on Output-Based Aid, World Bank
Photo: Veronica Perzanowska/Sida
Well visited seminar on Results Based Financing Approaches
On October 8th Sida held a seminar on Results Based Financing Approaches (RBFA) at the Sida headquarters in Stockholm. The seminar assembled international expertise to introduce the methodology, discuss design-questions and give the latest update on lessons learnt from current interventions.
Results Based Financing Approaches (RBFA) are rapidly growing in importance and use in development cooperation. Sida is currently, as several other donor agencies, exploring ways to incorporate RBFA into its toolbox for international development cooperation in order to make foreign aid more effective. RBFA means that the financer only disburses when the agreed results has been achieved, instead of more traditional approaches where aid is given in advance in order to finance input for activities that are expected to produce results.
Sida is developing guidelines for RBFA and has started piloting and testing a number of different results based financing approaches to learn how RBFA works most efficiently. Sida recently held a seminar to discuss developments within RBFA and to exchange ideas and experiences. The seminar, titled “Paying for results – what kind of aid is that?”, was well visited and attracted participants from USA, Germany, France, Bangladesh and the Netherlands as well as participants from Sida.
-The great interest for the seminar shows that not only donor agencies but also actors from civil society, authorities and private sector from all over the world are exploring the possibilities with Results Based Financing Approaches. The World Bank and DFID for instance are among those that have implemented RBFA a bit longer in their development cooperation projects, says Veronica Perzanowska, project manager for Sidas internal project on RBFA methodology.
Increased focus on results
In her introduction speech to the seminar, Sidas Managing Director Charlotte Petri Gornitzka, said that Sida should be in the front line in the discussion about Results Based Financing Approaches. From Sida’s perspective, RBFA could make it possible to move the focus from activities and plans to the monitoring of results.
Using RBFA means that the focus is on the results, while the ways and means getting there are less important. Sidas partners could therefore be given more freedom to choose suitable activities and methods and determine the budget according to needs, which could create scope for ownership and innovation. All the presenters at the seminar underlined the importance of ownership and Mr. William Savedoff from the Center for Global Development has written a blog discussing some of the Seminar conclusions “Paying of Results requires Verification and Autonomy”.
Results Based Financing Approaches can be used in cooperation with the public sector, the private sector and with civil society organisations in a variety of areas. Sida has started a few pilots and are testing a number of different results based financing approaches, to learn about the circumstances under which it works most efficiently and to learn how to handle the potential risks associated with the different approaches.
At the seminar, the Dutch non-governmental organisation Cordaid shared their experiences from working over 10 years with Results Based Financing Approaches. Several of their positive experiences came from working in results based service delivery projects in conflict countries. Cordaids view is that RBFA works well in difficult environments such as conflict countries and that their evaluations indicate that working in this way improve achieving the expected results.
Design and context are crucial for success
As several of the seminars attendees pointed out, the design and context of RBFA projects are crucial for its success rate. Achieving good results in one country, region or village does not necessarily mean that one successful project can be duplicated somewhere else. Mr Islam from the Sida funded Infrastructure Development Company Ltd in Bangladesh who is implementing an out-put-based aid program on renewable energy that brings solar power to rural households shared his experience. The success of the program is in part due to the willingness to use the long experience that Bangladesh has with micro financing and to work closely with the local non-governmental organisations.
Sida will learn both from own pilots as well as other international experiences. It is important when exploring and designing interventions with RBFA to analyse the local incentive structure and the measurability of the results as financing are paid upon achieving these results. To conduct independent verification are also crucial.
-We want to be clear that Sida today does not have all the answers on how and when RBFA is best implemented. There are several challenges linked to RBFA and securing good systems for monitoring and evaluating results are one of them. That is why we are so keen to learn more, says Veronica Perzanowska.
Sida will develop its own methodological guidance on how and when to best use RBFA approaches. The Sida RBFA project experiences so far are gathered in an introductory guidance paper, attached to this article.
-I hope RBFA will be an important part of our toolbox in the future, where we could use results based financing approaches for development cooperation. But first of all we need to explore more under which circumstances this approach can be successful and should be considered in our work and finally could be used as a complement to traditional funding approaches, says Veronica Perzanowska.