Payment by results in international development: Evidence from the first decade

Payment by results is a relatively new way of giving development aid, where a recipient's performance against pre-agreed measures determines the amount of aid they receive. Advocates for the mechanism argue it provides donors with both a ready justification for maintaining aid budgets and better results through innovation and autonomy. It has proved popular, with most bilateral aid donors having at least experimented with the mechanism and the variety of measures stretching from individual health workers being paid for each procedure, to national governments being paid for students' test scores. However, there has not been a robust assessment of whether Payment By Results (PbR) achieves its aims for greater effectiveness. I synthesize the evidence from eight projects fully or partially funded by DFID, the recognized world leader on PbR. This represents the best evidence currently available, and is critically analysed using the leading theoretical framework that breaks each agreement into its constituent parts. I find no evidence that PbR leads to fundamentally more innovation or autonomy, with the overall range of success and failure broadly similar to other aid projects. This may partly be due to the current use of Payment by Results, with no readily identifiable examples of projects that truly meet the idealized PbR designs. Advocates of PbR may thus conclude the idea is yet to be tested. I argue PbR does not deal with the fundamental constraints that donors face, and so it is unsurprising that PbR is subject to the normal pressures that affect all aid spending.