World Bank's new financing mechanism: Results before funds

The World Bank is rolling out an innovative lending instrument that ties funding directly to the delivery of results.

Program-for-Results will not provide financing to cover a program’s expense. Instead, it will disburse money upon the delivery and verification of predefined results.

The World Bank said PforR is designed to help improve the capacity, transparency and performance of a recipient country’s government systems and institutions. It is to complement two existing World Bank lending instruments: policy-based loans that fund policy changes and project-support loans that finance project expenditures or inputs. PforR, the bank said, can be used in combination with any or both of the two.

The new instrument was developed in response to growing demand from member states for World Bank assistance on government programs and subprograms focused on improving national systems such as those for the health and education sector.

The World Bank is expected to channel 5 percent of its total portfolio through PforR in the first two years of the instrument’s implementation. The Center for Global Development said this equates to some $1 billion or 20 projects per year. The instrument’s progress will be assessed after the first two years.

How it works

All World Bank member states can apply for PforR funding regardless of their income brackets. The request can be for ongoing or new programs financed by the client government itself or by other sources. High-value contracts or those that exceed, for instance, $30 million for goods procurement, are excluded.

PforR proposals will be assessed carefully for social and environmental, fiduciary, and technical factors. The World Bank will also look at a borrowing government’s commitment to deliver results.

Based on its assessments, World Bank experts will work with the borrowing government’s officials to determine the scope of the program, its objectives and results. The two parties will also agree on an audit process and a set of disbursement-linked indicators.

DLIs are the basis for funds disbursements under PforR. Each DLI will have a verification protocol and comes with a predefined amount that will be released once that indicator is met. The World Bank said client countries, especially budget-strapped or fragile states, can access advance funding to support the activities needed to achieve the DLIs.

PforR will be implemented by the client government with support from the World Bank. This support will be provided through reviews of the implementation process, institutional capacity building activities, and risk monitoring and evaluation, among others.

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About the author

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    Ivy Mungcal

    As former senior staff writer, Ivy Mungcal contributed to several Devex publications. Her focus is on breaking news, and in particular on global aid reform and trends in the United States, Europe, the Caribbean, and the Americas. Before joining Devex in 2009, Ivy produced specialized content for U.S. and U.K.-based business websites.