Results-Based Lending at the Asian Development Bank: An Early Assessment
The Asian Development Bank (ADB) introduced the results-based lending (RBL) instrument in 2013, with a 6-year pilot phase (June 2013–June 2019). ADB did so in response to the increasing demand from governments and development partners for support for their key expenditure and development programs.
The RBL modality incentivizes governments and ADB to be methodical in their focus on results during the design and implementation of government programs supported financially by ADB. RBL differs in several respects from the other two ADB main lending modalies—investment lending and policy-based lending. Its core value proposition is that the RBL program improves development effectiveness by linking financing explicitly to pre-agreed and achieved intermediate and final outputs and outcomes, and by using country program systems. As a corollary, RBL programs are expected to develop local capacity and build program institutions.
This evaluation aims to assess ADB’s experience in piloting the instrument and to identify key issues and lessons. It provides ADB’s Board of Directors and Management with recommendations to improve operations; enable this new instrument to be mainstreamed, including the allocation of funding to its use; and enhance its potential to add value to developing ADB developing member countries and to ADB itself. As of the end 2016, the total ADB funding approved was 3.8% of the operations funded by ADB’s main funding sources. The evaluation took a close and detailed look at all of the first 12 RBL programs being implemented and consulted with all relevant parties in the nine borrowing countries and with ADB staff to guarantee that inputs from ADB stakeholders, development partners, and independent experts were reflected.
The evaluation concludes that preliminary results of the RBL programs are promising and that the modality has significant potential to add value to ADB operations. Further, the evaluation finds that: (i) the RBL programs have been successfully rolled out during the initial pilot phase; (ii) the design of the RBL instrument is sound, and it has displayed good potential for effective development partnerships; and (iii) the context related to sector knowledge, institutional capacity, and government commitment is particularly important for the use of this instrument and therefore certain circumstances discussed in the report are favorable for RBL programs while others magnify risks.
In addition, the evaluation finds that several issues need attention, including internal quality assurance, on-the-ground assessment of fraud and corruption risks, independent and credible verification of results, exclusion of category A involuntary resettlement activities, and capacity development, both within countries and in ADB.
The report provides a series of recommendations designed to strengthen the use of the RBL instrument by addressing these issues. In IED’s judgment, if these key issues are addressed, ADB would be on solid ground to mainstream the use of RBL at the end of the pilot phase and officially incorporate it as one of its main lending modalities.