Publication: Transforming Economic Inclusion: Government Innovations through Outcomes-Based Financing
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2025-06-11
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2025-06-11
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Adoption of economic inclusion programs (bundles of coordinated, multidimensional interventions that support individuals, households, and communities to sustainably increase their incomes and assets) is expanding rapidly, with a global increase of more than 50 percent in the reach of such programs since 2021. By 2024, these programs were supporting over 15 million households, benefiting more than 70 million people directly and indirectly . Governments are increasingly leading these scale-up efforts. About 43 percent of 405 surveyed programs are government led, accounting for about 74 percent of all participants. Economic inclusion initiatives must be highly adaptable and tailored to the contexts of regions and communities; innovation and strong accountability mechanisms can ensure that programs are implemented effectively and resources used efficiently. Outcomes-based financing (OBF) is an approach to results-based funding in which payments are at least partially linked to the achievement of outcomes. It can potentially transform government-led economic inclusion programs by aligning stakeholder interests with the interests of the communities the programs are meant to serve and creating space and incentive for innovation. By shifting the focus from what goes into a program to what comes out of it, OBF can offer a more strategic and results-driven approach to program implementation. This paper draws on global experience with OBF and defines OBF and its principles; provides an overview of the OBF landscape; presents case studies of OBF projects in Colombia, India, and East Africa; and examines the contextual challenges to consider when determining whether OBF is the right approach for government-led programs. Finally, the authors offer practical guidance on addressing the risks and challenges, suggests strategies for scaling outcomes-based finance initiatives, and identifies the research gaps.
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“Aroldi, Mara; Brubaker, Celeste; Osorio, Sebastian; Velarde, Juliana Outes. 2025. Transforming Economic Inclusion: Government Innovations through Outcomes-Based Financing. PEI in Practice; Volume 12. © World Bank. http://hdl.handle.net/10986/43323 License: CC BY-NC 3.0 IGO.”
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