Why Pay-for-Results Development Approaches Matter Now - More Than Ever
In the post below, the authors discuss the use of a contest/competition tactic in raising awareness around a specific challenge. The use of contests and/or competitions have been around for a long-time outside development. As a tactic it has shown to be useful at raising awareness and focusing attention on a specific issue, challenge or product. From a market systems perspective, when using such tactics a project should consider a few lessons that have emerged over the years. One important lesson has been that throwing money at a complex development challenge has not been effective. Interestingly, the phrase ‘pay for results’ seems to be a the wrong way to describe the use of competitions. The project seems to be raising the importance/value of certain technologies that for some reason have been undervalued. In this context, the project is not paying for results, but catalyzing local actors to rethink the value proposition of that technology that they can then take forward in pushing adoption as appropriate in their contexts. Another lesson is around sustainability. For a country to continue on a journey to self-reliance, adopting a discrete technology is necessary, but not sufficient. A country has to develop the capacity to effectively identify, prioritize and allocate resources in response to various threats and opportunities. As a result, systems thinkers are keen to understand why such practices and products were not taken up previously, as well as how the system would come up with the next innovation without a donor project. In this context, raising awareness and focusing attention on a specific issue/challenge is an important skill that needs to be resident in a system. Longer term sustainability suggests that a project might want to shift from using such tactics directly to catalyzing local actors including market, civil society, government, etc. actors to learn how to use contests and competitions as a tool to help raise awareness and focus attention on issues they find important.
COVID-19 has dramatically altered the landscape of international development. As the world grapples with how to address this crisis, resource shortages hamper many potential responses. These gaps can shift national priorities, altering the trajectory of the development sector along the way. Host governments, development donors, the private sector, and everyday citizens are all struggling to balance the immediate need to quell the spread of disease with long-term development goals. Given this lens, the development community must adopt innovative approaches to sustain pre-COVID efforts. Now more than ever, it is crucial to leverage private sector investment to complement public resources.
Using Pay-for-Results Competitions to Strengthen Resilience
With an emphasis on engaging the private sector, motivating innovative solutions, and strengthening linkages between market actors, Pay-for-Results (PfR) mechanisms can be a powerful tool in the coming months and years as the development sector moves forward in the wake of COVID-19. PfR approaches, such as AgResults’ prize competition model, help build resilience because they tackle problems with contextualized solutions and encourage local actors to develop linkages with others along the value chain. Rather than providing funding up front, PfR prize competitions incentivize private sector actors to develop and deliver solutions to market challenges that disproportionately affect vulnerable populations such as smallholder farmers. As they achieve prescribed criteria, these “competitors” receive prize payments. The result is economically driven changes in behavior that provide vulnerable populations with access to resources that they could not previously afford.
Although PfR prize competitions do not work directly with vulnerable populations, they engage the private sector to interact with these groups to drive long-term shifts in behaviors. During crises, vulnerable populations are often the hardest hit, and it often takes the longest time for them to fully recover. By encouraging solutions that increase farmers’ access to new markets and strengthening relationships along the value chain, prize competitions can strengthen resilience – an important outcome during a crisis like COVID-19 and in the long run. In this way, prize competitions have the potential for critical short-term and long-term development impact.
Encouraging Sustainable Value Chain Linkages in Kenya
AgResults’ successful work in Kenya to drive smallholder farmers’ uptake of on-farm storage technologies shows how an approach that engages the private sector can effectively address a market failure and encourage resilient linkages. The competition, which incentivized companies to develop, market, and sell on-farm storage devices to smallholder farmers, had significant economic and food security benefits: More than 300,000 farmers benefited through sales of 1,390,777 devices that created 413,265 MT of improved storage capacity. Looking through a lens of market systems development, the competition encouraged private sector actors to invest in new relationships with vulnerable populations, strengthening the overall market. The stakeholders who participate in these value chains are now better positioned to deal with future food security threats or other crises in coming years. (AgResults plans to examine the long-term sustainability of this competition through its External Evaluator in the future.)
Boosting Farmers’ Ability to Respond to Economic Shocks in Vietnam
In Vietnam, AgResults’ aim to reduce greenhouse gas (GHG) emissions by incentivizing improved cultivation practices in rice production is strengthening the value chain and farmers’ resilience to economic shocks. The competition incentivizes grain traders, seed producers, and input suppliers to implement innovative agronomic practices, such as advanced irrigation techniques, with specialized inputs to increase productivity while lowering GHG emissions. Initial results from the first two growing seasons have been scaled up in Seasons 3 and 4 to reach over 20,000 smallholder farmers. Broadly, the competition is cultivating new linkages between the private sector and smallholder farmers, changing long-term behaviors so these populations can better respond to climate change and other threats.
COVID-19 has rattled the entire global system, with economic impacts cascading into developing markets and hitting vulnerable populations especially hard. When designed to intervene in the right contexts, PfR prize competitions can effectively target market failures and motivate new types of relationships that strengthen the whole system. As the development sector reflects on its new role in the wake of the COVID-19 pandemic, exploring newer development financing approaches such as Pay-for-Results may carve out opportunities that drive both immediate response and longer-term resilience.