In a complex and uncertain world, the societal challenges of today require innovative solutions that can scale and sustain. That’s why innovative financing models, such as outcome based financing mechanisms, including development impact bonds are emerging as promising alternatives that can leverage private capital and align incentives for better outcomes.
Often labelled a pay-for-success mechanism, development impact bonds (DIBs) put the risk of delivery on the social investors. This means that outcome funders only have to pay if the target outcomes are achieved. The social investors provide upfront working capital for implementation and are repaid by the outcome funders as the targets are achieved. This takes place after the verification of results – either by a third party or through automated verification.

In 2018, research and policy centre GO Lab undertook research into the value of impact bonds in the UK and found that they added value in terms of innovation, prevention and collaboration. These are key areas that can potentially have a long-term impact on NPOs and how they approach their work and deliverables, particularly when it comes to innovation.

At Tiko, we believe in powering youth to make informed choices resulting in better health outcomes that enable them to do more through our Tiko platform. A crucial role for us in achieving this is by evolving healthcare solutions that are accessible, adaptable, scalable and locally relevant. That means looking at the entire ecosystem and finding new and improved ways of operating, but that also builds accountability and trust for all those involved. This is why “pay for success” models align with our ethos of driving true impact. The Tiko platform enables all stakeholders to keep track of outcome achievements, such as, uptake of SRH services, contraceptives, and HIV-related prevention and treatment in real-time through a live dashboard that displays verifiable data. This keeps all parties committed to transparency and accountability with clear metrics and outcomes for positive change. This is why we believe that Outcome Based Financing mechanisms are in general the best tool to trigger actual impact as this model allows us to use the real-time, verifiable results that we pride ourselves in, to build accountability and transparency with donors and partners.

We first piloted this innovative financing mechanism between September 2020 and February 2022, in Kenya, with the Foreign, Commonwealth & Development Office (FCDO) as outcome funder where we exceeded targets to provide SRH services to adolescent girls in Kenya. Building on that success, we recently launched a fully scaled and ambitious DIB as a catalyst that will set in motion meaningful differences in the lives of girls living in multidimensional poverty with more than half a million family planning and HIV services.

Through this new DIB, launched last month together with UNFPA, UNAIDS, the WHO, the UN Resident Coordinator Office, the UN SDG Partnership Platform and the Children’s Investment Fund Foundation (CIFF) as outcomes funders, and Bridges Outcomes Partnerships as the social investor, we collectively commit to real positive change within the realm of sexual and reproductive health (SRH) for Kenyan youth.

With implementation across 10 counties in Kenya through our digital platform, Tiko – we’ve set five payment metrics targets for this DIB that include delivering more than 500,000 health services they need to thrive in collaboration with our strong network of local providers and community-based organisations over the next two years. At grassroots level this means connecting young people to local networks of stigma-free public facilities and private clinics, pharmacies, and community-based organisations that facilitate free HIV and SRH services for young people.

The steady growth in popularity of Outcome-based Financing is not just driven by budgets and expectations, but by value. The reality is that the world cannot keep up with the needs of the United Nations’ Sustainable Development Goals and the measurable targets achieved by impact bonds offers immeasurable value for governments, funders and investors. From input to outcome, this funding model shifts the goalposts towards results that are more substantial and that allow for implementing partners and funders to fully realise the potential of a programme and to ensure that funding continues in times of crisis. The latter is critical, especially when the crisis has had a phenomenal impact on people who are already at a social and financial disadvantage.

Outcome-based Financing can potentially allow for funders and implementing partners to do things better with a greater focus on achieving the four E’s of success: efficiency, effectiveness, economy and equity. Efficiency asks how the sector can innovate and make the dollar deliver two outcomes rather than one; effectiveness asks how the dollar can achieve better outcomes; economy looks at how this can be done more cost effectively; while equity is ensuring that everyone has equal access to opportunity. Donors want instruments that can incentivise, implementing partners want the opportunity to do more and achieve improved results.

When I co-founded Tiko 9 years ago, it was with the intention to disrupt the NGO status quo by making technology central to our operating model, supporting strong local partnerships and elevating real time data as the key asset for project and performance management. Now operating in six markets across the continent we focus on outcomes-based impact, with an active community of nearly a million users; offering over one and a half million services on its platform since 2020. Pay for success funding mechanisms complement and expand this approach, making a difference, differently.