Outcome based financing in Türkiye and Jordan
The not-for-profit organization Social Finance was commissioned by DRC Danish Refugee Council to assess the suitability of using an outcomes-based approach and impact bounds to improve the efficacy of livelihood programmes in Türkiye and Jordan, and to secure more stable, longer-term financing for both country teams.
What is the Outcome-based approach?
Outcomes-based approaches tie funding to outcomes, rather than a set of prescribed activities or inputs. As such, they help to align incentives between stakeholders (e.g. donors, service providers and, where needed, impact investors) around a shared definition of success - without the need to track every output indicator along the way. Some of the benefits that this approach brings include:
Frees programme delivery from input-based management, allowing for greater flexibility in adapting programme delivery based on real-time data and changing needs.
Ensures effective use of the resources and value-for-money, as outcomes funding is disbursed only when impact is achieved.
About the project
DRC's motivation to consider these innovative approaches is twofold. On the one hand, DRC seeks to understand how outcomes-based funding could help to increase programme impact, mainly through shifting the focus of DRC staff and local partners towards achieving longer-term outcomes beyond delivering a set of pre-agreed activities. On the other hand, DRC wishes to explore if outcomes-based programmes, such as Impact Bonds, could be leveraged to secure more stable, long-term financing, mobilize private capital and attract new funders to this space.
Impact Bonds require the participation of two types of funders. On one hand, the outcome funders are in charge of paying for the results if – and only if – the programmes succeed in delivering agreed outputs or outcomes. On the other hand, the investor provides upfront financing to pay for all the costs, including the service providers that enable the achievement outcomes. The investors bear the risk of failure, as the outcome funder only makes payments if the agreed results are achieved and verified.
Across Türkiye and Jordan, the DRC programmes share a common goal: to improve the resilience of vulnerable refugees and host communities by supporting them in accessing sustainable livelihoods opportunities and decent employment.