There has been a lot of talk about results-based financing, performance-based financing, pay-for-performance projects, conditional cash transfers, and all sorts of similar programs in the past few years. They’ve proven to work in many different circumstances and sectors. Progressa provided cash transfers for Mexican families who kept their children in school. USAID’s pilot PBF program in Rwanda gave cash bonuses to health workers and health centers that met targets for key health indicators; success of the pilot programs in three districts encouraged national scale up of the method. GAVI designed a funding mechanism where there is a fiscal award for vaccines distributed to children in developing countries. High profile programs and obscure bilateral projects alike have illustrated the success possible with these projects, and the recent release of the Center for Global Development‘s Cash on Delivery Aid book has only increased the buzz.
My internship in graduate school gave me six months of experience learning about and developing training tools for these programs. We talked a lot about two things: the very basic human motivations these programs capitalize on (money can be a strong motivator), and the inherent challenges in using financial rewards in development programs, where overreporting, corruption, leakages in the distribution system, and poor infrastructure can handicap or devastate PBF programs.
Think about the idea, even if you’re not from a development background. We can agree that excellent performance at work (for an executive or for a nurse at a hospital) should be rewarded, and often create incentives for managers, directors, or executives to reach certain targets; for example, a salesperson at AT&T may receive a bonus if they sell a certain number of Blackberries to the companies in their area. They have an incentive to work harder at their job, since they know that there is a reward beyond the satisfaction of a job well done. The person at AT&T comes to work everyday, stays a little bit late to close a few sales, and, at the end of the year, receives a bonus in his or her paycheck.
Now think of a female health worker at a health center in Liberia, where the limited number of trained health experts is one of many challenges. She has children of her own at home, and her salary helps pay for her food, clean water, and other needs for her family, but it can still be hard to make ends meet. Her husband works as a day laborer and has only intermittent spurts of income. A program at her health center offers to provide her with an additional 5% of her salary if their center can vaccinate a certain number of children each quarter, which encourages her to show up to work on time, despite the many other competing interests in her life. Money can be a powerful motivator, especially in resource-strapped areas.
This scenario overlooks the many complexities in these programs, but gives you a general idea of why these programs work. You have to admit, whoever thought of applying the same ideas we use for rewarding American productivity to people in resource-strapped nations was probably lauded as a genius at their meeting…and maybe even received a financial bonus for their ingenuity and success at their job. The same idea has been applied to different units in development (employee, service center, and now, with COD Aid, government), rewarding strong performance often measured through targets set for select quantitative and sometimes qualitative indicators.
In light of the continued attention these programs are receiving, here are a few interesting links, old and new, that you might find insightful. If you’re not familiar with these types of projects and are interested in forms of development assistance that move beyond the basic concepts, I’d encourage you to pay some attention to them. As Nancy Birdsall said at the CGD COD Aid book release, “these projects will most likely appeal to conservatives for their transparency and accountability, and to liberals due to their potential to save lives and help others overseas.” While I don’t agree with the divide between the two sides of the aisle, as I know conservatives who have hearts for those less fortunate than themselves and logical liberals who value knowing how aid money is spent, I do agree that there are a number of attractive things about this evolving model for aid.
Performance-based financing in health, with Rwanda as an example (from the WHO)
Bill Savedoff’s CGD blog post on COD Aid, Maternal Mortality, and the G-8
And, for good measure, some insightful thoughts on why solid new ideas that get talked about in the development community don’t always get tried out, and some really horrible ones actually come to fruition in the field. Some wonderful insights on why we don’t do better.