An Introduction to Outcome-Based Financing

The US$2.5 trillion annual financing gap for achieving the United Nations Sustainable Development Goals necessitates that existing resources are used more effectively and that additional resources are mobilized. Innovative funding approaches such as results-based financing (RBF) can contribute to narrowing the funding gap by increasing the cost-effectiveness of existing funding and unlocking financing from the private sector.

The Global Partnership for Results-Based Approaches (GPRBA) recently launched a new Multi-Donor Trust Fund (MDTF), known as the Outcomes Fund. The objective of the Outcomes Fund is to drive improved social, infrastructure, and environmental outcomes for poor and vulnerable populations using innovative outcome-based financing approaches.

The World Bank is a market leader in RBF, having disbursed over US$22 billion globally through various results-based mechanisms. Although there are notable exceptions, the majority of RBF to date is provided to incentivize government performance, not service providers, and is tied to intermediate results, not outcomes. GPRBA’s Outcomes Fund provides an opportunity for the World Bank to maximize finance for development through the scaling of outcome-based financing.

The objective of this note is to introduce GPRBA’s approach to outcome-based financing.