Results Based Financing

MCC has a strong track-record at the frontier of aid effectiveness. With an evidence-based approach, MCC delivers impact using a comprehensive results framework to report on outputs and outcomes. These results frameworks have revealed that maximizing impact sometimes requires funding to be tied directly to project results. This approach is called Results-based Financing (RBF).

In contrast to traditional activity-based funding, which provides funding for inputs, RBF ties a portion of funding to achieving the desired results. This can help improve outcomes while providing greater accountability for taxpayers’ dollars since at least a portion of funds are only disbursed when the goals are achieved. It also provides additional flexibility and local ownership to MCC’s partners by allowing them to adapt activities as needed to reach the desired outcomes. Through RBF, MCC promotes a focus on delivering development results for the people who benefit from our investments. Funding is released only as objectives are met and there are outcomes that truly improve individual’s lives.

What is MCC Doing to Strengthen the Use of RBF?

Since 2015, MCC has piloted the use of RBF to improve water and electricity services in Sierra Leone and enhance workforce development in Morocco.

Through these experiences MCC has learned that RBF can be a powerful tool, but details and context matter. For example, certain problems are more responsive to RBF and key conditions may be necessary for RBF to have an improved impact over traditional input-oriented funding. Now, MCC is developing a set of tools, guidance, and policies to facilitate RBF’s effective use while simultaneously designing new RBF approaches into more Compact and Threshold programs. This includes a new RBF initiative in the Senegal Power Compact to reduce the cost of and improve the quality and reliability of electricity. Additionally, an RBF activity is included in the proposed second compact with Lesotho to improve the oversight of essential health service delivery. Together, working closely with MCC’s partners, the agency will continue to refine the RBF approach to maximize the impact, reduce poverty and advance economic growth.