Result-Based Financing Landscape In India

Anshika Bhalothia, Niti Aayog

1. RESULT BASED FINANCING

A. WHAT IS RESULT BASED FINANCING?

A financing arrangement known as ''Results-based Financing'' is so called because a portion of the repayment is conditional on the attainment of certain, predetermined, and verifiable results.

In RBF arrangements, the results funder and the incentive agent play crucial roles.

One example of RBF is a contract between a multilateral organisation like GPOBA (the results funder) and a service provider (the motivated agent) to increase the number of persons with access to safe drinking water (the defined outcome).

The idea behind this method is to more closely associate funding with actual results achieved, as opposed to the means by which those results were achieved. The objective is to provide more incentives for responsible behaviour and boost programme efficiency.

The funding goal, the amount of pre-financing, and the targeted link in the results chain are all ways in which such programmes can be uniquely designed, despite their shared strategy of linking payment to results.

Contracts can be negotiated with either government partners or with the implementers themselves as part of results-based funding. The amount of risk that is an acceptable transfer to the financing aim determines the proportion of the funding that will be disbursed up front and upon delivery. It is also possible to agree on a partial payment schedule for outcomes that are still in progress. In conclusion, a considerable portion of the results chain can be covered by results that can trigger disbursements.