Results-Based Aid: Potential and Limits of an Innovative Modality in Development Cooperation

Abstract

Results-based aid aims to identify outputs or outcomes that can be measured and quantified – that is, results that can be directly linked to development activities. A contract between the donor and partner country stipulates that for every incremental success a set amount (’reward’) will be paid. So far, experience of such aid programmes in practice remains limited. Sometimes they are a refinement of performance-based budget supports, but in other cases it has been suggested to incentivise single indicators (i.e. pay per pupil completing school). While this concept can be promising in theory, its practical implementation might turn out to be difficult. For instance, there is a risk of creating adverse incentives because all available resources might be focused on achieving just the one indicator to the detriment of other development objectives.