I am very excited by a report published today by the White House Global Development Council, which strongly recommends pay for success and DIBs. Here is the recommendation:
Utilize Payment for Results. The overwhelming majority of development dollars remain focused on an outdated model of paying for inputs. Standard development contracts typically fund an agreed plan of activities and then disburse as these activities are completed, giving few incentives to try new ways to reach a stated program goal. This approach has too often locked the U.S. government and its developing country partners into activities even if they fail to deliver concrete results prioritized by both parties. In contrast, payments for results funding models represent a stark shift from traditional approaches. By illustration, a program that provides payment for the number of students who have finished school or acquired specific skills (an outcome) is dramatically different from a program that pays for number of teachers trained (an output). We urge USAID and other actors in the U.S. government development community embrace a bigger push to utilize outcome-based financing as a regular part of their operations. One option would be for President Obama, working closely with Congress, to establish a Development Impact Fund to support initiatives by agencies to pilot, and then scale, outcomes-based development approaches, like Cash on Delivery and Development Impact Bonds, across a range of different geographies and sectors. Another option for advancing payment for results would be to coinvest along with other donors and private foundations in a multi-donor development outcomes fund that would support pay for performance efforts and Development Impact Bonds. Pooling resources together in such a fashion could catalyze reforms not only for U.S. development practices, but also for the broader global development community.
Michael Belinsky 