Results-based finance (RBF), which links financial rewards or penalties to a set of pre-agreed results has been deployed across the water sector, from rural sanitation to stormwater management, with successful outcomes, demonstrating that the instrument can effectively lead to results. Typically, RBF models achieve results by disrupting “business-as-usual”, whether by incentivising organisations to increase service levels (increasing coverage rates in hard-to-reach areas or improving quality of services) or to adopt innovative technologies and operational processes. However, there is limited data on the costs of designing and managing RBF projects. Future efforts should pull evidence on the cost-effectiveness of RBF schemes and develop guidance on when and how to deploy RBF most effectively.
Financing Water Security
Abstract
Results-based finance (RBF) links financial rewards or penalties to a set of pre-agreed results. It can be appealing to funders looking to maximize impact and value for money.
RBF has been deployed for results across the water sector, from rural sanitation to stormwater management, with successful outcomes.
RBF can be embedded in grant and repayable finance mechanisms and has been used in contracts with private service providers as well as public sector organisations.
Whilst initial RBF models focused on rewarding output-level results, such as the number of water supply connections, there has been a gradual integration of outcome-level results relating to services’ viability and effectiveness.
RBF seeks to achieve results by disrupting “business-as-usual”, whether by incentivising organisations to increase service levels (increasing coverage rates in hard-to-reach areas or improving quality of services) or to adopt innovative environmentally responsive technologies and operational processes. RBF can also be used to incentivise institutional reforms, which requires strong organisational buy-in.
The introduction of RBF models should be carefully assessed against potential limitations and challenges, which include: (i) design and implementation costs (particularly for setting commonly agreed performance metrics and for the verification agent); (ii): the capacity of funding recipients, which may require providing them with technical assistance to mitigate the risks of failure; (iii) the risk of service providers’ relying on results-based grants rather than identifying opportunities for efficiencies and more stable sources of funds; (iv) replicability at scale: few large-scale development finance organisations have adopted results-based contracting, limiting the adoption of this funding modality at scale.
Funding facilities that have adopted results-based payment structures, such as the Uptime Catalyst Facility, offer the opportunity to pool funding from different sources and could help overcome funders’ internal barriers to RBF. Indeed, most of the institutions that have implemented RBF mechanisms have set up pilots within specific projects, without adopting RBF as institutionalised financing instruments (as procedures differ from standard processes). Dedicated financing facilities with established, standardised procedures could facilitate broader adoption of RBF mechanisms.
Results-based finance (RBF) refers to a variety of instruments linking financial rewards and/or penalties to the achievement of pre-agreed results. RBF mechanisms are set in contracts between funders and funding recipients that typically feature the following components:
Clearly defined targets for agreed results.
A payment structure for each specific result.
Independent verification of the achieved results prior to payment release.
RBF appears increasingly relevant considering emerging funders’ priorities and profiles. The focus of RBF tools on results with payment triggers strictly attached to their achievement can appeal to public funders facing budget constraints and seeking value for money. RBF can also be attractive for private impact investors, increasingly interested in water-related investments and keen to see financial as well as social and environmental returns. Innovative RBF instruments are emerging, such as SLBs, which tie the cost of capital to the achievement of pre-agreed results (ICMA, 2024[1]).1
Such instruments could potentially help tackle water sector challenges. Globally, 400 million people lack access to improved water supply and nearly one billion lack improved sanitation (WHO, 2022[2]). In addition to access to services, the water sector is confronted with the challenges of long-term viability, inclusion and resilience. Far too often, investments in infrastructure provision do not lead to viable services. In many countries, wastewater treatment plants are under-utilised, due to limited sewerage connections, resulting in plants severely under-performing (Kennedy-Walker et al., 2020[3]). Investments in urban water supplies are wasted in leaking pipes as many cities and utilities lack capacity and incentives for asset maintenance. A study estimates that up to 346 million cubic meters of water are lost daily, representing a financial loss of USD 39 billion every year (Liemberger and Wyatt, 2018[4]). In some regions, rural water infrastructure is at an even greater risk of failure, with water systems sometimes left for non-professional groups to manage (Kativhu et al., 2022[5]). In addition, in some countries, services’ expansion has mostly benefited the more well-off and more densely populated areas, leaving pockets of peri-urban and rural populations under-served (Mitlin et al., 2019[6]). Environmental changes only exacerbate these challenges, as it increases the risks of service failure through the impact of droughts and flooding events.
This chapter examines the use of RBF contracts in the water sector for improving the durability, efficiency and impact of water-related investments. It first analyses the extent of the use of RBF for water-related results, noting an emerging focus on rewarding services’ performance improvements and the different types of funding instruments embedding the RBF element. The chapter then presents how RBF has been deployed to incentivise changes within organisations’ modus operandi for greater impacts at service level. Finally, this chapter draws lessons on conditions of success of RBF schemes.
Findings in this chapter build on eight selected case studies of RBF initiatives for water-related investments. These initiatives include one-off RBF contracts and dedicated funding facilities deploying multiple RBF contracts simultaneously. The choice of case studies was guided by their scope (geography, sector and funding instrument), but also the availability of documentation. This chapter has been prepared based on a literature review and some complementary interviews. Authors did not access independent evaluation reports of these initiatives. As there is limited data on the costs of designing and implementing RBF projects, this chapter focuses on their design features and outcomes at organisational and service delivery level.
This section is an overview of selected results-based finance initiatives implemented in the water sector in recent years. It presents their main characteristics, including the type of outcomes those initiatives set to achieve as well as their funding structure.
4.2.1. RBF for a range of outcomes, with an emerging focus on services’ performance
RBF has been deployed to deliver results across the water sector, from rural sanitation to stormwater management. Table 4.1 presents a selection of RBF programmes implemented globally. These programmes are initiated and managed by different types of funders and implementers, including IFIs, foundations, private impact investors, NGOs and utilities. Recipients of RBF are central governments themselves, utilities, SMEs as well as NGOs.
These RBF contracts set two broad types of objectives, which can be categorised as follows:
1. Increase access to infrastructure: this type of results is measured by indicators on the availability of the infrastructure at one point in time. Typical indicators include the number of water and sewerage connections, or the number of toilets installed; and
2. Improve service performance: this type of results is measured by metrics related to operational and financial performance, such as Non-revenue Water (NRW), stormwater runoff, treatment efficiency, metered and working connections. In some cases, improving services’ performance may also require intermediary results, such as organisational changes, measured through the adoption of new tools (e.g. business plans, sector strategy), or procedures and technologies.
Initial RBF contracts only focused on the availability of infrastructure. In Accra (Ghana), the Global Partnership for Results-based Aid (GPRBA) programme for urban sanitation focused on the number of toilets constructed.3 The programme was initiated in 2014 at a time when the Government of Ghana started to embrace non-sewered sanitation as a potential technology for densely populated areas. The output-based payment, amounting to 70% of the total toilet cost was introduced to incentivise service providers promoting the technology and to reduce the cost of purchase for households. In total, an estimated 70 000 toilets were constructed in Accra using a similar approach since 2014 (GPRBA, 2021[7]).
More recent initiatives continue to focus on infrastructure development. Aqua for All’s impact-linked finance portfolio, for example, provides grants to selected water utilities for developing piped water services in harder-to-reach rural areas. The impact-linked finance instrument deploys outcome-based grants to reward enterprises for achieving additional social impacts, including water connections (Aqua for All, 2024[8]).
In addition, recognising the challenges of services durability, funders are increasingly using RBF to incentivise improved water service performance beyond the delivery of infrastructure. The World Bank rural sanitation “Programme for Results (PforR)” in Egypt combines payment triggers for infrastructure delivery, organisational development and improved service performance. The USD 1.15 billion programme has been running since 2015 with USD 550 million financing from the World Bank with a specific focus on the development of wastewater services in rural areas. World Bank financing is delivered on achievement of results measured by so-called “Disbursement-Linked Indicators (DLIs)” that were pre-agreed with the government. These payment triggers combine results at institutional level (for example, the approval of a revised strategy for rural sanitation), organisational level (for example, the operating ratio of local Water and Sanitation Companies or WSCs) and infrastructure coverage (World Bank, 2018[9]).
The adoption of services’ performance as a payment trigger requires more complex metrics to measure results. Uptime Global was set up in 2020 to address the lack of durability in rural water services provision, with a focus on the most vulnerable. Uptime provides quarterly results-based grants to selected service providers operating in rural areas on the condition that infrastructure is functioning for at least 96% of the time. Payments are made retroactively on the basis of verified results, based on volume of water sold and sales revenue (see Box 4.5). In 2024, Uptime introduced additional results-based payments related to water safety and water quality metrics. As of 2025, Uptime estimates that more than 5 million people in 16 countries benefit from safe and reliable water services delivered through results-based contracts (Uptime Global, 2024[10]).
Some RBF mechanisms involve strategic partnerships to enable access to various sources of financing and build capacity towards results. Aqua for All, for example, initiated in 2025 a three-year RBF programme with the Kenyan bank Co-op Bank and the international NGO Water.org to support investments in efficiency improvement for public utilities targeting NRW reduction, energy cost saving (solarization and efficient pumps), metering and last mile connectivity. According to the programme concept, such improvements require small operational capital of around KES 50 million/USD 385 000. Aqua for All has secured Co-op Bank’s participation for the provision of commercial loans to eligible utilities, and up to 15 utilities will receive technical assistance from Water.org to prepare loan proposals. Aqua for All will disburse results-based grants to eligible utilities capped at 25% of the principal loan. The payment to utilities is conditional on achieving their pre-agreed outcome targets and full repayment of the loan. Co-op Bank has committed to disburse USD 3.85 million in loans to selected utilities, whilst Aqua for All will disburse a total of USD 825 000 in results-based grants and Water.org will provide USD 257 000 in technical assistance.
The Urban Water Catalyst Initiative (UWCI) launched in 2025 is also a partnership set-up to improve operational and financial performance of selected urban water utilities and enable them to access repayable finance. The programme, supported by the German and Dutch cooperation and the EU, has a two-stage approach. It first addresses the technical and financial performance of eligible utilities through Water Operator Partnerships (WOPs). Provided that utilities meet performance improvement targets, they can also benefit from repayable finance at attractive terms, enabled by a loan and guarantee facility. The second phase of the programme still relies on development finance (with loans and guarantees provided by KfW, the European Commission and other interested financial institutions), while increasingly positioning development finance in a catalytic role to mobilise local finance – including local currency lending – through the provision of guarantees (UWCI, 2025[11]). The main rationale for the programme is to better link finance (especially development finance) to performance and durability of service provision, measured through utility KPIs such as NRW, working ratio and energy efficiency.
Source: (UWCI, 2025[11]).
4.2.2. RBF embedded in grants and repayable finance to shift some risks onto implementers
RBF initiatives have various funding structures, channelling either grants or repayable finance (or both) to implementers (or funding recipients). Figure 4.2 presents some examples of RBF structures. A common RBF structure is the results-based grant model, which was initiated by the World Bank GPRBA. In this model, the results-based grant is simply delivered upon achievement of pre-agreed results, as verified by an external agent. In recent years, more sophisticated structures of RBF have emerged. For example, in the impact-linked loan model shown below, the results-based element takes the form of a partial debt relief if pre-agreed results are achieved, or a penalty (additional payment due) if results are not achieved. In the Development Impact Bond structure, an additional funder is introduced (the impact investor), who will provide a typical grant but will be repaid with interest (in the form of “outcome/performance-based bond”) if the implementer succeeds in achieving the pre-defined results.
A common characteristic of several RBF structures is to shift some financial risks to the implementer. This is the case, for example, of Uptime which only pays service providers after results have been achieved and confirmed. It therefore shifts the financial risks on the service providers, who face the prospect of implementation costs not being recovered if pre-agreed results are not achieved. Such a funding structure requires service providers to have the capacity to deploy funding for these investments and operations upfront.
Shifting this risk to service providers and requiring them to fund all investments upfront can limit the deployment of RBF at scale. The Development Impact Bond (DIB) designed to increase the uptake of sanitation facilities in Cambodia sought to address this limitation of RBF instruments, whilst retaining a focus on results. Unlike in a typical RBF structure, service providers do not pre-fund investments and operations. Initial funding is provided by the impact investor who only recovers the investment from an “outcome funder” after results are achieved. In a DIB, impact investors, rather than service providers, bear the bulk of financial risks (See Box 4.1).
DIBs are a spin-off from Social Impact Bonds (SIBs). SIBs are performance-based financing mechanisms in which the ultimate funder (outcome payer) only disburses funds based on the achievement of pre-agreed outputs and/or outcomes related to a social intervention. Unlike earlier performance-based financing structures with an outcome funder and a service provider, SIBs involve an additional, intermediary funder. This intermediary funder (the impact investor) provides upfront capital to the service providers. If and when intended results are achieved, the impact investor recoups its investment (with interest) from the outcome payer. The major benefit of the model is the availability of capital for service providers. Specific outputs/outcomes are pre-agreed and targeted at the design stage, and pre-funding to service providers is made available. Service providers do not have to concern themselves with building the initial working capital, as is often required in more classic results-based schemes.
The DIB in Cambodia is the first globally for sanitation and for WASH in general. It involved four main actors (see Figure 4.3):
The Stone Family Foundation (SFF) provided the upfront working capital, which enables the service provider iDE to plan securely all required activities.
iDE provided service provision expertise.
USAID1 provided outcome funding (up to USD 10 million worth of outcome-based payments), which included a return on investment (premium) for the impact funder and therefore an incentive for the investor (SFF).
The government of Cambodia is the verification agent.
The programme aimed to ensure that 1 600 villages in six Cambodian provinces were open-defecation-free through the adoption of low-cost toilet facilities. In addition to reaching impact, the project aimed to serve as a demonstration project for DIBs for water and sanitation. By the end of 2023, the DIB outperformed its initial targets with over 1 700 villages declared open-defecation-free.
1. The references to USAID as a model funder of results-based finance mechanisms should be understood in their historical context, as US development finance architecture has evolved significantly and USAID no longer exists.
RBF can also be embedded in impact-linked loans or bonds in a manner that incentivises borrowers through debt repayment terms. Examples of this use of RBF in the water sector include:
The NGO Aqua for All’s loan product, which interest and principal repayment may be reduced if the borrower achieves pre-agreed targets; and
The Environmental Impact Bond (EIB) with the public utility DC Water, which has to adopt green infrastructure for stormwater management (US EPA, 2017[13]) (see Box 4.2).
In 2016, the public utility DC Water issued an Environmental Impact Bond (EIB) to finance green infrastructure aimed at reducing stormwater runoff and mitigating combined sewer overflows. The USD 25 million tax-exempt bond, purchased by Goldman Sachs Urban Investment Group and Calvert Impact Capital, introduced a Pay-for-Success model, linking investor returns to the actual effectiveness of green infrastructure in stormwater retention. The project implemented 20 acres of green infrastructure, including bioretention rain gardens, permeable pavements and green parks in the Rock Creek sewershed. Performance was independently monitored, with financial payouts contingent on runoff reduction levels. The payment was structured to overcome DC Water’s reluctance to invest in green infrastructure: the city was already heavily investing in grey infrastructure and there was limited evidence of the effectiveness of green solutions. Transaction advisors estimated a range of runoff reduction (between 18.6% and 41.3%), above which DC Water would pay investors a USD 3.3 million bonus. If the green infrastructure underperformed (below 18.6%) it would trigger a USD 3.3 million payment to DC Water. If the reduction was within the expected range, no additional payment was made. Results showed a nearly 20% reduction, within the expected range, demonstrating the viability of green infrastructure for urban stormwater management, without financial losses to any party.
RBF is typically introduced to disrupt “business as usual” and incentivise shifts in funding recipients’ modus operandi for greater impacts. Using reward and/or penalty mechanisms, RBF seeks to generate greater ownership of the process and buy-in for the pre-agreed results, critical to secure the achievement of desired outcomes. Drawing on the case studies, this section examines the different pathways to change RBF have introduced for achieving greater results at service delivery level.
4.3.1. RBF to disrupt business as usual
RBF instruments have been used to incentivise three broad types of changes within organisations:
Internal organisational development and/or policy reforms, as demonstrated by institutional reforms at government level and the adoption of improved organisational processes at corporate level.
The delivery of higher standards of services, as evidenced by the expansion of services to underserved areas and the achievement of higher performance indicators.
The adoption of green infrastructure.
For some organisations, results are first expected at the organisational level – without which service level results will not be achieved (see Figure 4.4). In the case of better performing organisations, significant changes at the organisational level may not be required, but RBF are introduced to stimulate higher impacts, more challenging to achieve and representing a shift in the way the organisation would “normally” operate. These three types of changes are further discussed below.
4.3.2. Internal organisational development and policy reforms
One main objective of RBF schemes has been to incentivise organisational development and/or policy reforms, including at the level of government institutional systems, in order to improve the delivery of water and sanitation services. The PforR instrument of the World Bank is an example of RBF introduced to incentivise governments’ system change. The instrument is designed to build capacity within country recipients and enhance the effectiveness, efficiency and sustainability of results. Unlike other World Bank instruments, PforR uses countries’ own institutions and processes for project implementation, linking the disbursement of funds directly to the achievement of specific programme results. The World Bank and the government agree on disbursement-linked indicators, which can relate to service delivery, institutional reforms or any other intermediary results. As the programme builds around government systems, it offers the opportunity of co-funding and therefore leverages partnerships with other funders. The rural sanitation programme in Egypt illustrates the rationale for using the RBF instrument when a whole government system change is required (see Box 4.3).
In Egypt, the PforR for rural sanitation was introduced following previous traditional project lending that failed to deliver the expected services. This experience showed that planning for infrastructure alone was not sufficient: by the end of the project, although wastewater networks had been laid, wastewater treatment plants (WWTPs) were not operational, with beneficiaries lacking access to the full chain of services.
The PforR set to address these issues by strengthening government systems for stronger impacts at the service level. The PforR built on the national sanitation programme and identified all intermediary steps that were missing for effective service delivery. Discussions between the World Bank and the government established the disbursement-linked indicators, which would incentivise the implementation of reforms and accelerate the achievement of results. Such intermediary indicators included, among others, the introduction of a sanitation strategy (setting clear goals, targets and strategic measures for the sector) and land acquisition (to avoid construction delays) in addition to KPIs on utility performance. By 2023, when the first phase came to a close, the programme had achieved all expected results, both in terms of improving government systems and service levels (see Table 4.2).
RBF has also been deployed to incentivise changes at utilities’ organisational level. Among the case studies, the UWCI has a strong focus on utilities’ performance improvement, which can require significant organisational changes, such as leadership development, business planning, processes and procedures for asset maintenance as well as efficient human resources policy. In the first phases of the programme, the UWCI intends to provide technical assistance to partner utilities to build their capacities in these areas through Water Operator Partnerships (WOPs). Participating utilities will be able to access finance from the Facility only when deemed to have made significant improvements, as reflected in their financial performance. The PforR in Egypt also includes measures (and payment triggers) related to Water and Sewerage Companies’ performance (measured by their operating ratios).
4.3.3. Higher standards of service levels
For many funders, reaching remote areas and populations is the main outcome expected through the RBF model. The rural sanitation DIB in Cambodia and the Ghana’s output-based aid for urban sanitation, for example, were designed to incentivise service providers to enter markets they would not necessarily consider because of perceived risks. The results-based feature of the grant acted as an incentive for service providers to accelerate the pace of services’ uptake. In Cambodia, the NGO iDE who was the funding recipient of the DIB was already involved in rural sanitation provision and had significant hands-on experience with “selling” sanitation. The RBF project was designed for iDE to use this experience in remote areas where open defecation was high. Aqua for All also entered into an RBF contract in Cambodia to enable poorer or more remote communities to benefit from services from an operator that was already well-performing (see Box 4.4).
Aqua for All implements an RBF programme (referred to as “ILF for WASH” or SIINC) that provides grants in the form of Social Impact Incentives (or SIINC) to impactful SMEs. In 2020, the water enterprise Khmer Water Supply Holding (KWSH) entered into an agreement with Aqua for All for a SIINC. At signing, KWSH already offered clean and affordable water services to about 12 000 (semi) rural households, demonstrating a strong capacity for impact. It had already acquired and upgraded five license areas (areas where the provider has the license to operate). Due to higher investment costs, more difficult-to-reach and often poorer households and areas were in some cases left behind. The SIINC for WASH was designed to encourage and reward the enterprise for going the extra impact mile. This is measured through two metrics that incentivise KWSH to create additional impact: (i) percentage of connected households and (ii) additionality level of new license areas. The second metric aims to steer KWSH’s decision to acquire stations in the next three years, where their intervention would have deeper impact. The extent of new license areas’ impact is assessed using three criteria: i) percentage of poor households; ii) coverage rate (expressed in percentage); and iii) percentage of people with access to clean water. SIINC for WASH only rewards medium and high additionality areas. In total, the transaction involved EUR 350 000 in impact-linked funding (non-repayable) over three years, with impact verification scheduled every 12 months.
Source: (Aqua for All, 2024[8]).
Whilst all RBF initiatives target the improvement of services, some put particular emphasis on increasing the quality of services, with the disbursement of funds linked to the achievement of specified standards. Uptime for example, was set-up to incentivise professional service delivery models and address the lack of lasting water services in rural areas. Its results-based contracts with selected service providers include key performance indicators, in addition to incentives for improving revenue collection. Box 4.5 illustrates the Uptime’s model based on one of its contractors’ experiences, UDUMA, a rural water operator. Additional revenues generated through the RBF agreements incentivise the operator to maintain reliable service levels in vulnerable communities where revenue collection may be below cost recovery.
Uptime designs and executes results-based grants to selected operators based on performance data related to water systems’ “uptime” (referring to the continuity of services), the volume of water sold, and revenue collected by rural water operators. The model was designed to address the lack of lasting rural water services, in the context of poor capacity to pay by vulnerable populations and lack of access to predictable funding.
UDUMA is a private company specialised in water services operating in four countries in Africa. It mainly operates under lease contracts with governments for the management of standpipes and water connections in rural and small-town water systems. The company has a results-based contract agreement with the Uptime Catalyst Facility for 38 water points in Burkina Faso and 272 water points in Mali.
The grant amount disbursed by Uptime is determined every quarter based on the performance of each water point. The payment comprises:
A “results payment” or a top-up on the revenues from water sales for each water point that is functional 96% of the time: for water systems using a flat fee, UDUMA receives up to USD 50 per water point, minus local revenue collected; for systems using a volumetric tariff, UDUMA receives up to USD 0.50 per m³ of water sold.
A “revenue-match payment”: UDUMA gets an additional 50% of the local revenue collected to encourage cost recovery.
Such results-based grants provide strong incentives for operators such as UDUMA to enter markets where operating rural water systems requires some subsidies and to ensure water systems offer continuous services. At the same time, the matching payment based on revenue incentivises operators to continue to seek revenues from sales rather than relying on grants only.
Source: Interview with UDUMA, (UDUMA, 2025[15]).
4.3.4. Adoption of green and environmentally friendly infrastructure
RBF has also been used to incentivise the adoption of greener and environmentally friendly technologies, which service providers are not always able or willing to prioritise. DC Water’s Environment Impact Bond is a case in point. When the bond was designed, DC Water was already implementing a USD 2.6 billion grey infrastructure project to control sewer overflow. This mega project was a response to intense rainfalls, which have led to combined sewer systems overflowing into river ways – an estimated 2 billion gallons of raw sewage was dumped into river ways each year. The Environmental Impact Bond set up a results-based financing structure to test an alternative and complementary flood management system via green infrastructure. As DC Water was reluctant to invest in the green infrastructure, the bond (the first of its kind in the US) was structured such that DC Water would incur an additional one-time payment to investors if the reduction in the runoff was better than anticipated (contributing to sewer overflow reduction); or if the green infrastructure performed less, with greater runoff, then DC Water would receive a one-off payment from investors.
RBF schemes have the potential to enhance the results deriving from investments in the water sector, but they also come with limitations and implementation challenges. These include:
Costs: RBF contracts can be costly to design and manage as resources are required to identify results that will be payment triggers and to structure the associated financial reward (or penalty). The success of RBF schemes is also dependent on setting up adequate performance verification mechanisms, which come with an additional cost.
Higher risks for implementers (funding recipients): In most RBF contracts, payments are strictly linked to the achievement of results, which may put service providers in a difficult financial position and in turn affect project implementation. In addition, as discussed above, RBF can be used to incentivise significant changes at the organisational level, which implementers may not be ready for.
Perverse incentives: Where grants are provided to service providers (for example, for serving remote areas), RBF risk creating a dependency on external funding rather than more stable sources of funds (for example, tariffs).
Performance data management: With funding dependent on results, only reliable performance data management systems (from reporting to verification) provide credibility to RBF initiatives. This requires strong capacity and data management systems on both the funder and implementation side.
Funders considering the use of RBF should take these limitations and challenges into account and put appropriate mitigation measures in place from the project preparation stage. Examples of such measures are provided below.
4.4.1. Project preparation: consulting and building on experience
RBF are partnerships between funders and implementers and require a collaborative effort from the project preparation stage for setting ambitious yet achievable targets. During the project preparation stage, funders can assess, in consultation with the implementer, all the risks involved together with potential mitigation measures. These consultations should lead to a consensus on (i) the level of results to be achieved and potential intermediary results, striking the balance between ambition and the risk of non-achievement, (ii) the funding amount and (iii) the level of flexibility of the agreement in case of unforeseen events.
Where RBF models build on an established partnership between donors and implementing agencies, achieving this balance is generally more straightforward. This is the case of the World Bank PforR in Egypt, the Development Impact Bond for rural sanitation in Cambodia and the Urban Water Catalyst Initiative, for example. Previous experience between stakeholders can be a stepping stone for the development of results-focused programmes and can facilitate a common understanding of the results to be achieved, of potential challenges and of any intermediary results that should also be considered.
4.4.2. Providing technical assistance where needed
Given that payments are conditioned on verified results, thereby imposing substantial performance and financial risks on implementers, their effective deployment may necessitate robust technical assistance mechanisms. In the case of the PforR in Egypt, the World Bank provided technical assistance to the government for carrying out the necessary reforms. Technical assistance was funded through the Global Water Security and Sanitation Partnership (GWSP), which enabled the government to meet expected results at government systems levels. Aqua for All has also embedded technical assistance strategy in several of its results-based grants and lending programmes. The results-based loan programme for water utilities in Kenya, for example, includes a technical assistance activity for project preparation and business case development (provided by Water.org), to enable utilities access loans. Similarly, as mentioned above, the UWCI has integrated technical assistance in the first phase of utilities’ participation to strengthen their operations and financial capacities.
4.4.3. Addressing risks of perverse incentives in results-based grants
RBF models can address the risk of substituting more stable sources of funds for grants.
First, funders can restrict the use of RBF to selected geographies, where alternative sources of funding are difficult to secure due to affordability constraints. This requires funders to screen geographies and clearly identify targeted areas.
Second, RBF can embed specific measures to incentivise financial performance, in addition to service coverage or quality. Uptime, for instance, derives its results-based disbursements from water-sales revenue reported by service providers, with grant amounts scaled proportionally to the level of revenue generated. Rather than substituting for water sales income, Uptime rewards the generation of higher revenues (Uptime Global, 2024[10]).
In the case of Aqua for All’s results-based grant programme, eligible funding recipients are private entities that have the capacity to access repayable finance. The impact-linked grant is linked to the achievement of results creating additional impact, for example by reaching customers who would not otherwise be served.
4.4.4. Strengthening the results verification process
The credibility of RBF approaches is fundamentally determined by the rigor of their results-verification processes, starting with the precise setting of performance measures. Some RBF schemes have set sophisticated results indicators, requiring high level expertise for establishing the baseline, measuring and rewarding improvements. The Environmental Impact Bond for stormwater management through green infrastructure (DC), for example, required hydraulic engineering to set the baseline and establish measures of payment triggers. DC Water monitored rainfall and sewer flow for 12 months in the specific areas where the green infrastructure was to be installed. The analysis allowed DC Water to estimate the baseline (current amount of stormwater runoff) and then estimate the performance of the green infrastructure (in terms of reduction of stormwater runoff).
The adoption of outcome-level indicators as payment triggers can be a challenge for measuring performance. As shown in this chapter, several schemes aim to achieve improved services’ performance, which may be more difficult to measure compared with output-level indicators (for example, access to infrastructure). For instance, Uptime monitors data provided by more than a dozen service providers reporting on thousands of water points. To address this challenge, Uptime has set-up a comprehensive data integrity process, combining quarterly validation of reporting from service providers, annual onsite verification (site visits) and a virtual data audit to identify anomalies. Minor anomalies are addressed directly with service providers, while major data concerns may lead to penalties or potential contract suspension (see Box 4.6).
Uptime’s data system underpins its results-based contracting mechanism. Uptime ties financial disbursements to objectively verified service results, reducing the risk of inefficient spending.
The methodology integrates (i) quarterly validation of results submitted by service providers, including automated anomaly detection, and (ii) annual virtual and on-site verification (audit and site visits).
Data audits and site visits verify service reliability, volumes of water distributed and revenue collected, with major discrepancies leading to financial penalties or withholding of payments. Uptime has also introduced onsite verification of water safety metrics, including sanitary inspections, microbiological and chemical testing, thereby expanding verification beyond infrastructure reliability.
Source: (Armstrong et al., 2025[16]).
In some cases, the RBF approach, because it requires data for verification, can enhance organisations’ own sector data management systems. This is the case in the World Bank-funded rural sanitation programme in Egypt. The programme introduced a key performance indicator and payment trigger related to the financial performance of water and sanitation companies in charge of wastewater assets. As a result and due to reporting requirements, the programme led to the establishment of a sector monitoring system through the Egyptian Water Regulatory Agency (EWRA), which publishes annual performance reports on the rural sanitation sector. Adopting technologies such as remote sensing and earth observation-based monitoring of the impacts, especially in the areas of improving water use efficiency, surface water infrastructure, and others, are way forward to enhance and scale RBF approach (see Box 4.7). Currently such technologies are not mainstreamed because of lack of easy-to-use platforms and required capacity.
In the water sector, remote sensing and Earth Observation (EO) provide crucial capabilities for implementing and validating results-based financing initiatives. These technologies enable the objective monitoring and assessment of key water-related outcomes across various scales, which is essential for the verification step required in RBF. For instance, satellite data can be also used to track the projects aimed at improving water availability such as installation of hand pumps, tanks, newer constructions, and canals. In addition, satellite data can track changes in surface water extent (lakes, reservoirs, rivers), estimate water volume in reservoirs, map the area and efficiency of irrigation schemes, monitor groundwater-dependent vegetation, assess flood inundation extents or even provide proxies for water quality parameters like turbidity or chlorophyll concentrations. This allows RBF programs focused on goals such as increasing water storage, improving irrigation efficiency, restoring watersheds or enhancing water access to independently verify whether the contracted results have been achieved before disbursing payments, thereby increasing accountability, transparency and the overall effectiveness of financing for water management.
Recently, there have been increasing demand from the ministries to improve their capacity in using remote sensing for monitoring water use efficiency and identifying hotspots for further interventions. For example, Egypt has set up a remote sensing-based water accounting and water productivity analysis group within their Ministry of Water Resources & Irrigation (MWRI) leveraging remote sensing-based satellite datasets. They have been using satellite data to identify the impact of interventions to improve water use efficiency in the Nile Delta through multiple programs.
RBF is used across the water sector, demonstrating multiple approaches to better tie funding with results. At least four of the initiatives reviewed in this chapter have led to improved and higher standards of service delivery: the Development Impact Bond in Cambodia, which outperformed expectations, the PforR in Egypt, which has delivered on all results initially defined and received additional financing, the Uptime Catalyst Facility and the Environment Impact Bond with DC Water. Other initiatives are promising but are at early stages of implementation.
Increasingly, RBF are embedding durability indicators, moving away from narrow infrastructure-level results (e.g. number of connection). Indicators relate to the performance of water and sanitation services (continuity of supply, green infrastructure performance) as well as organisational performance (working ratios and revenue, for example, in the case of utilities). This use of RBF demonstrates that such mechanisms can be deployed to shift the focus towards more impactful outcomes. However, measuring associated results can be challenging, requiring adequate skills and resources.
Although they can address multiple water sector challenges, from inclusion to resilience, RBF contracts are not a panacea. There should be a clear rationale for introducing RBF based on the results to be achieved, the capacity of implementers and an assessment of risks of failure.
A key factor of success of RBF initiatives is a transparent and constructive partnership between funders and implementers. Such a partnership contributes to designing RBF contract terms that are challenging, yet achievable. It is also critical to identify potential requirements for technical assistance, especially for utility and government organisational level results.
Going forward, further engagement between funders and implementers is needed to replicate and scale RBF approaches. Few international finance institutions are equipped for such RBF mechanisms in practice. When the Development Impact Bond in Cambodia ended, despite its impressive results and interest from impact funders, the model did not replicate due to the lack of interested outcome funders. The lack of interest can be linked to the absence of structures within some international finance institutions for RBF.
A model that could be explored further to overcome the funder’s internal barriers to RBF is the funding facility model. Indeed, RBF mechanisms have not been widely replicated partly because they require procedures that differ significantly from the standard processes used by funding agencies. Funding agencies piloted RBF mechanisms within specific projects, rather than adopting them as an institutionalised financing instrument. To facilitate broader adoption of such mechanisms, dedicated financing facilities with established, standardised procedures should be created. Uptime is an example of such a facility. It can receive funding from multiple sources and manage results-based payments on behalf of funders. The challenge, however, with this type of pooled funding, is to ensure that the scope of the facility (in terms of targeted services, implementers and geographies) is wide enough to address different funders’ policy priorities, while retaining a credible data management system.
Finally, further analyses should be carried out to better understand the value for money of RBF schemes. To date, there is limited evidence on the cost-effectiveness of RBF versus other funding modalities. Whilst the initiatives reviewed in this chapter show that RBF have succeeded in delivering expected outcomes, there is limited data on the costs of designing and managing such contracts and the overall cost-effectiveness of RBF initiatives. Such an assessment would require greater transparency over the total costs of RBF programmes.
References
[8] Aqua for All (2024), ILF for WASH, Aqua for All.
[16] Armstrong, A. et al. (2025), The Data Dividend: Applying a data integrity methodology to deliver better value for results-based funding for safe drinking water services, https://static1.squarespace.com/static/5d5fc19961d87c00011689d2/t/6818e4af93680c2e01b21136/1746461881842/The+Data+Dividend.pdf.
[18] FAO and IHE Delft (2020), Water Accounting in the Nile River Basin. FAO WaPOR water accounting reports, https://doi.org/10.4060/ca9895en.
[7] GPRBA (2021), Output-based aid sanitation facility for greater Accra in Ghana, World Bank.
[17] Guzinski, R. et al. (2014), “Enabling the use of earth observation data for integrated water resource management in Africa with the water observation and information system”, Remote Sensing, Vol. 6/8, pp. 7819-7839, https://doi.org/10.3390/rs6087819.
[1] ICMA (2024), Sustainability-Linked Bond Principles. Voluntary Process Guidelines.
[5] Kativhu, T. et al. (2022), “Sustainability of water facilities under community based management in Zimbabwe”, Vol. Volume 71/Issue 1.
[3] Kennedy-Walker, R. et al. (2020), Connecting the unconnected, World Bank.
[4] Liemberger, R. and A. Wyatt (2018), “Quantifying the global non-revenue water problem”, Water Science & Technology Water Supply.
[6] Mitlin, D. et al. (2019), Unaffordable and Undrinkable: Rethinking Urban Water Access in the Global South, World Resources Institute.
[12] Stone Family Foundation, iDE & USAID (2019), Cambodia rural sanitation development impact bond.
[15] UDUMA (2025), UDUMA Home, https://www.uduma.net/en/.
[10] Uptime Global (2024), Progress and Prospects. Presentation at Stockholm World Water Week 2024, Uptime Global.
[13] US EPA (2017), DC Water’s Environmental Impact Bond: A First of its Kind.
[11] UWCI (2025), Supporting utilities in the transition to financial sustainability and climate resilience, UWCI.
[2] WHO (2022), Tracking universal health coverage: first global monitoring report, https://www.who.int/publications/i/item/9789241564977.
[9] World Bank (2018), Program Paper. Sustainable rural sanitation services program-for-results.
[14] World Water Council (2022), Nature contributing to water security? An investor guide, World Water Council.
← 1. SLBs are bonds where the proceeds are exclusively applied to finance or re-finance a combination of both green and social projects. Its financial and/or structural characteristics are contingent on the issuer achieving predetermined environmental and social objectives, incentivising organisations to improve their performance in these areas.
← 2. The references to USAID as a model funder of results-based finance mechanisms should be understood in their historical context, as US development finance architecture has evolved significantly and USAID no longer exists.
← 3. GPRBA is a Trust Fund managed by the World Bank. Initially named Global Partnership for Output-based Aid (GPOBA), it has allocated 29% of its resources to water sector projects since inception in 2003 (GPRBA, 2021[7]).