The article, written by Dianne Calvi, president and CEO at Village Enterprise, Avnish Gungadurdoss, the co-Founder and Managing Partner of Instiglio, and Jeff McManus, Senior Economist at IDinsight, discusses the need for adaptation in the international development sector in the face of increasing uncertainty, volatility, and budget constraints. The authors highlight the potential of results-based funding to do more with less but emphasize the necessity of adapting this approach to the new context. They present recommendations for adapting results-based financing, focusing on two main ideas: balancing risk and reward for service providers and planning for unexpected costs and verification challenges.
To balance risk and reward, the authors suggest moving away from a single endline target and implementing multiple intermediate targets with corresponding payments. This would allow quicker feedback loops and reduce the risk for service providers, enabling them to learn and adapt. In volatile contexts, more specific performance-based contracts that pay for a mix of activities, outputs, and outcomes could be more appropriate, keeping service providers focused on results without excessively penalizing them during crises.
The authors also emphasize the importance of planning for unexpected costs and incorporating flexibility into funding arrangements. They recommend budgeting for uncertainties and allocating additional funds as a contingency for significant roadblocks. Moreover, they suggest investing in digital data collection systems and developing shorter-term indicators to capture success during crises.
Overall, the authors argue that funding models in the development sector should be practical and suited to the new normal of crisis and volatility. They propose adapting results-based funding approaches while retaining key elements that drive impact. By doing so, they believe it is possible to drive cost-effective improvements in the lives of more people in poverty.