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What is Results-Based Lending?
What is Results-Based Lending?
RBL provides an added tool for ADB to better meet the needs of its developing member countries (DMC) and improve development effectiveness. Its objectives are to:
- increase government’s accountability and incentives to deliver and sustain results,
- improve the effectiveness and efficiency of government-owned sector programs,
- promote institutional development,
- support country ownership,
- reduce transaction costs, and
- support development coordination and harmonization when more than one development agency is involved in a program.
Under RBL, ADB supports governments in designing and implementing government-owned sector programs. Disbursement is linked directly with the achievement of program results. Program implementation uses the DMCs’ own program systems. The DMC program systems will be assessed, used, and improved as necessary based on commonly accepted good practice principles. The centerpiece of RBL is results achievement and institutional development.
RBL entails a significant paradigm shift which moves the operational focus from:
- financing expenditures and controlling transactions to directly supporting results,
- a rules-based approach to a principle-based approach, and
- ring-fencing ADB financing to positively influence the entire government-owned RBL program and its systems.
This shift requires learning by doing. To enable learning, ADB will pilot RBL in programs for 6 years from 6 June 2013 to 5 June 2019.
There will be no prior country or sector restrictions on RBL applications. RBL can be implemented in any DMC (e.g., middle- and low-income countries) and in diverse sectors (e.g., infrastructure and social sectors). Therefore--as with other modalities--the country, sector, or type of programs that may use RBL are not predetermined. Each program will be reviewed on a case-by-case basis. Practical experience to date demonstrates the wide applicability of RBL. In addition to ADB’s Sri Lanka education sector RBL, the World Bank has approved eight program-for-results financing operations (the RBL equivalent). These operations spread across a diverse range of both middle- and low-income countries, and a variety of social and infrastructure sectors.
A key reason for broadly applying RBL is that it is program-based. DMC sectors and agencies are diverse. Furthermore, the program scope can be defined in such a way as to ensure adequate risk management and mitigation. RBL assessments look at both risks and benefits in engaging with DMCs to strengthen their program systems by bringing about incremental and sustainable improvements over time. ADB will work with its DMCs to identify suitable opportunities to use RBL.