Results-based financing mechanism
#18: Results-based financing mechanism
Results-based financing mechanism is a mechanism for the financial implementation of agreements such as multi-level contracts.
This type of scheme can ensure flexibility for lower-level authorities and both control and ownership of the implementation process while ensuring the implementation of higher-level objectives. Policies can be adapted to territorial characteristics. Payments can be made annually, proportionally to the achievement of targets during the previous year, i.e. funding that is contingent on the successful implementation of what States have committed to undertake.
Example: Result based financing (RBF) in the São Paulo Water Recovery Project (REAGUA) in Brazil
The São Paulo Water Recovery Project (REAGUA) in Brazil tackles the problem of poor and inadequate level of water in the city of São Paulo through result based financing incentives. The recipients of the incentives are water service providers that can be either public companies, municipal-owned companies or State-owned companies. The funds are to be transferred under the condition of previously-agreed and verified outputs or performances, for example the volume of recovered water or the installment of new infrastructures.
OECD (2015) Water Resources Governance in Brazil. OECD Studies on Water https://www.oecd.org/gov/water-resources-governance-in-brazil-9789264238121-en.htm Retrieved on 24 September 2020 .