Outcome-based financing (OBF) has gained notable momentum in the last decade as a promising source of funding for social programs in the Global South. With a robust focus on achieving—and aligning payments with—outcomes rather than activities or outputs, OBF is highly complementary to core priorities in the humanitarian and development sectors, including strengthening programming at the center of the nexus, supporting accountability to local partners, and advancing localization.

In 2021, the Near East Foundation (NEF) launched the implementation of a Refugee Livelihoods Development Impact Bond (DIB) in Jordan to mobilize OBF to support income generation and local livelihoods for refugees and host communities. The DIB is supported by Norad, the IKEA Foundation, Novo Nordisk Foundation, Ferd and the U.S. International Development Corporation and convened by KOIS. A recent third-party evaluation confirmed that the DIB is already exceeding its outcome-based targets and has enabled 98.5% of small businesses in the first cohort to remain active for ten months—a benchmark of business sustainability. NEF’s success in implementing the DIB is driven by the active adoption of outcome-based management and adaptive management, which have enabled the NEF team and partner community-based organizations (CBOs) to maintain a tight focus on achieving livelihood outcomes for local communities. NEF has developed and operationalized a data-driven strategy to support this approach, including a real-time data dashboard that feeds into an iterative cycle of progress review and course correction to ensure the program is on track to achieve meaningful impact for businesses in Jordan.

In addition, NEF’s approach emphasizes localization, building the capacity of CBOs to take leadership roles in future programming. The DIB incorporates gender-focused initiatives, such as empowering women entrepreneurs and addressing sexual and other forms of gender-based violence through targeted community outreach. Over time, NEF’s focus on OBF and adaptive management has fostered long-term organizational change, enhancing monitoring and evaluation systems and promoting a culture of continuous learning and flexibility.

The Potential and Promise of Outcome-Based Financing

Over the past ten years, OBF has gained traction among development and humanitarian practitioners as a viable mechanism to mobilize new sources of funding to address pressing social issues in the Global South. Also known as performance-based financing or payment by results, this approach aims to channel multi-year funding to highly effective implementing partners who deliver on a set of agreed outcome metrics. The outcome metrics articulate the specific and measurable targets the program intends to achieve. For example, a livelihoods program may include as an outcome metric the percent of businesses that are still active after a specific period of time; an education program may focus on the percent of children achieving certain learning outcomes; and an infant health program may aim to achieve a minimum percentage of weight gain among a given proportion of newborns. Independent evaluators assess whether the project has achieved its targets, and investors only receive a payout if the targets are met. OBF’s focus on aligning incentives to achieve social impact has the potential to both increase the overall funding available for development interventions by providing an entry point for less traditional funders (e.g., impact investors) and to strengthen program impact for marginalized communities.

In addition to these global examples, one innovative mechanism to implement OBF is through a DIB, which combines OBF with investment vehicles, blending two nascent yet promising financing modalities in this space. The first DIB was launched in 2015 in India to improve school attendance and the quality of education for girls. Nearly 300 DIBs have now been implemented worldwide, raising over 763 million USD in capital to support social impact in sectors ranging from agriculture to health to livelihoods. NEF’s own Refugee Livelihoods DIB in Jordan is a prime example of how this model can mobilize OBF to support income generation and local livelihoods for refugees and host communities.

Outcome-Based Financing in Support of the Humanitarian-Development Nexus

According to the Interagency Standing Committee, a high-level humanitarian coordination platform, OBF mechanisms such as DIBs can facilitate the transition from short-term emergency assistance to sustained development. A key component of the nexus is support for long-term risk reduction, crisis prevention, local resilience, and reducing the level of need over time to ensure that contexts transitioning out of a humanitarian emergency continue moving towards the development side of the nexus. However, recent funding trends demonstrate that official development assistance is still used primarily for humanitarian programs rather than for programs supporting self-reliance and other nexus objectives that can foster long-term resilience to crises.

OBF and DIBs provide a distinct opportunity to increase the funding available for nexus programming, both because they can mobilize additional funding from less traditional investors and because they are well-placed to support the transition from the outputs-based measurement and monitoring that appropriately underpins humanitarian aid in emergency contexts, to the outcome-based interventions that are needed in the development space. Additionally, investors in DIBs are less likely to have a fixed mandate to operate in either the humanitarian or development space—a segmentation that often characterizes the landscape of traditional funding systems and which may limit the availability of funding that can transcend the humanitarian/development dichotomy in support of the nexus.

Another key advantage of OBF and DIBs in the context of nexus programming is that these mechanisms often provide multi-year funding and enable flexible budgeting. Implementers working in the nexus can more easily reallocate funding across budget lines and program activities as needed, based on actual progress, challenges, and mid-project adaptations—including as conditions shift from a humanitarian to development context. Given that projects’ financial structure and resulting budget constraints have a direct and paramount effect on project implementation, the budget flexibility allowed within OBF grants is critical to ensuring that programs in the nexus can be responsive to learnings and easily pivot at the activity level in order to achieve outcomes for communities.

The budget flexibility that characterizes OBF programs in turn fosters the use of adaptive management, which is also well-suited to the dynamic nature of nexus contexts. In particular, in environments such as Jordan—which has evolved in the past decade from an acute refugee crisis to a more stabilized context—adaptive management can allow for responsive adjustments throughout program implementation to continue to meet local needs.

Advancing Localization Through Outcome-Focused Accountability

A final advantage of OBF and DIBs is that by maintaining a focus on outcomes, these approaches ensure that all stakeholders are accountable for—and prioritize—the impact achieved for local communities. Centering impact for program participants as a shared goal—and establishing monetary incentives to support that goal—advances the capacity and resilience of local stakeholders in the long term, enhancing their ability to play a leadership role in future programming and decision-making.

It is no secret that local partners are vital to the success and impact of any program implemented in the Global South, within or outside the context of OBF. However, with a robust focus on impact, DIBs can help all stakeholders prioritize meaningful engagement and upskilling for local partners, without whom outcome metrics could not be achieved. This, in turn, promotes authentic consultation with local partners—who are often the only stakeholder with the local expertise and knowledge needed to achieve outcomes—and facilitates overcoming barriers that in other contexts can inhibit genuine engagement and partnership.   

In 2021, NEF launched a “first of its kind” Refugee Livelihoods DIB in Jordan to provide Syrian refugees and host communities with the support needed to develop long-term livelihoods and economic self-reliance. The 13.5 million USD DIB is implemented in five of NEF’s Siraj Centers in Jordan, which are community-based hubs that provide entrepreneurs with training in hard and soft skills, business development support, and market linkages needed to start and expand their businesses. The DIB is structured around two outcome metrics: 1) the percentage of businesses that are active ten months after receiving a cash grant; and 2) the increase in household basic consumption two years after receiving the cash grant.

The Near East Foundation’s Refugee Livelihoods Development Impact Bond

In 2023, an independent third-party evaluation found that the DIB had so far exceeded the original target (75%) for the first outcome metric. According to the evaluation, 98.5% of businesses in the first cohort had remained active ten months after receiving a grant—including more than 98% of businesses run by men, women, Jordanians, Syrians, youth, and adults. In addition, over 90% of grantees reported that their business had generated net profit in the month prior to the survey.

Box 1, above, provides further information on the overall expected economic impact of the DIB; Box 2, below, elaborates on how the DIB and Siraj Centers take a community approach to supporting women’s economic success.

A Holistic Approach to Innovative Finance

The DIB is one component of NEF’s broader strategy to leverage innovative finance to support income generation and self-reliance for marginalized refugees and host communities in Jordan. To ensure a focus on outcomes throughout all program work streams, NEF is also providing innovative outcome-linked financing to the CBOs that host the Siraj Centers and supporting the CBOs to implement locally-led revolving funds for community members to finance their businesses (see Box 3, below. These activities work in synergy with the DIB as a whole to ensure that the focus on outcomes is shared by all project stakeholders).

Leveraging Outcome-Based and Adaptive Management to Achieve Economic Self-Reliance for Communities in Jordan

The DIB implemented by NEF is closely aligned with the needs of communities in Jordan, as well as with NEF’s long-term strategy for the Middle East: the DIB is focused on outcomes, supports localization, and is well-positioned to enable a transition from humanitarian to development programming. In particular, in line with NEF’s focus on local partnerships and localization, achieving the outcomes of the DIB will ensure that small business owners and CBOs in Jordan have sustained capacity in the long term to continue supporting local livelihoods and income generation.

Given that the DIB is designed as an OBF instrument—and explicitly seeks to achieve outcomes, as opposed to only outputs—the program necessitates a management and implementation approach that features a corresponding emphasis on outcomes. In turn, NEF is leveraging outcome-based and adaptive management to enable successful implementation of the DIB. While traditional management approaches may focus on managing processes, inputs, or budgets, outcome-based management (OBM) emphasizes achieving the specific, measurable outcomes defined within OBF programs, which are utilized as the benchmark for success. A key approach underpinning OBM is adaptive management, which is grounded in iterative cycles of testing, measurement, analysis, and adaptation to ultimately improve outcomes. Instead of adhering to a static theory of change throughout an entire project cycle, adaptive management enables teams to update their assumptions and ways of working based on new learnings and real-time data that inevitably emerge during program implementation (see Box 4, below, for a summary of key definitions).

OBM and adaptive management can be applied throughout the entire program cycle, from design and budgeting to implementation, monitoring, and evaluation. As these approaches focus on outcomes, they provide a safety net for trial and error at the activity level, fostering creativity and innovation that might not be possible with more rigid approaches that emphasize achieving specific, pre-determined outputs (see Box 5, below, for an example of OBM under the DIB).

A Data-Focused Strategy for OBM: Measure, Analyze, Adapt

At the start of the DIB, NEF developed a bespoke strategy to facilitate and promote the use of OBM and adaptive management throughout the program. The strategy comprises a three-step process of measure-analyze-adapt (Figure 1, below). This process is an iterative cycle through which rigorous, real-time data is collected, analyzed, visualized, and used to guide course corrections at the activity and output levels to ensure the DIB is on track to achieve its outcomes. This cycle continuously repeats: data is collected again based on the latest program adaptations to further inform decision-making. It is important that these feedback loops are short enough—and that relevant data is reviewed on a frequent basis—to allow for timely adjustments throughout the program.

A core enabling factor for this strategy is NEF’s real-time data dashboard, which provides the program team with continuous and centralized access to key project indicators and contextual data (see Box 6, below). The dashboard helps staff at every level of NEF to stay engaged and informed about progress towards outcomes under the DIB. Regular meetings are held to discuss outcomes, challenges, and potential adjustments, ensuring that all staff—not just the monitoring and evaluation team—are involved in the measure-analyze-adapt process. This approach fosters a collective commitment to achieving the desired outcomes and course-correcting as needed.

Designing an effective dashboard for the DIB requires careful consideration of several factors. First, NEF reflected on who would need access to what level of data. Activity and output level data are most relevant to field staff, whereas output and outcome level data are more relevant to managers and directors.

Second, NEF considered the type of data featured in the dashboard, including both descriptive data regarding the characteristics of a population, as well as performance data focused on outcomes over time, outliers, and performance disaggregation.

Third, NEF reflected on how to ensure the data would be easy to interpret, which required selecting a visualization method that can best communicate meaningful insights for each specific set of data points. This data-focused strategy for OBM and adaptive management has yielded tangible successes for NEF and businesses participating in the DIB. For example, real-time data from these start-ups enabled NEF staff to flag a concern about the accuracy of financial data submitted by participants as part of their business plans. In response, NEF introduced one-to-one mentoring that improved entrepreneurs’ capacity to correctly report business revenue and household income; having accurate data in turn enables NEF to provide the most effective support for entrepreneurs throughout the project.

As another example, NEF notably improved the quality of business plans submitted by entrepreneurs by using data to identify opportunities to improve trainers’ capacity, mapping areas of the training curriculum that required improvement, and identifying specific components of tools—such as financial modeling templates—that could be further optimized. OBM and the data dashboard have also led to the development of a bespoke social and environmental framework that resulted in 73% of businesses going beyond standard do-no-harm and mitigation measures to also identify positive environmental features of their operations.

Using OBM, Adaptive Management, and Real-Time Data to Improve Training Impact

One clear example of the power of combining OBM, adaptive management, and real-time data emerged early on during the DIB implementation. NEF was experiencing two challenges within the business development foundational training program: a high drop-out rate of over 10%, and limited youth participation that fell short of the 30% target. The business development foundational training is a vital component of the support channeled through the DIB and Siraj Centers, providing entrepreneurs with the strong foundation of skills and knowledge they need to sustain successful businesses in the long-term. The high drop-out rate and limited youth participation threatened the quality of the foundational training, and in turn could have undermined the final outcomes that NEF prioritizes related to business success and household income.  

The fact that NEF was able to quickly identify these problems in the first place—via daily data updates that tracked key program indicators in the real-time data dashboard—was already a small success in a sector where such issues often go unnoticed until the timeframe for addressing them has passed. To resolve the underlying challenges, NEF used adaptive management to test multiple activities and approaches, collecting and analyzing data at each phase to reflect on their effectiveness. As part of this process, and in line with NEF’s commitment to localization and elevating the voices of local partners, NEF undertook a participatory feedback exercise to understand the perspectives of participants, trainers, partners, and the NEF team. NEF triangulated this feedback with the rich, quantified participation data collected through the real-time data dashboard, and then worked with partners to collectively identify key entry points for corrective action.

Based on these consultations, NEF decided to diversify the outreach approach for reaching potential participants to include multiple actors and channels—and especially channels that would reach youth—such as social media, traditional media, canvassing, sports and youth clubs, peer referrals, and youth networks. To improve participant retention, NEF leveraged its bespoke digital platforms, Siraj Digital (see Box 7, below) and Siraj Market, which together provide entrepreneurs with digital training through flexible content, on-demand support from NEF master trainers, business-to-business sales opportunities, and a nation-wide network for advertising and sharing resources. NEF also supported the cost of internet access for participants and included highly interactive and accessible training pedagogies on the digital platforms, which appealed to youth. Youth were consulted at the sub-group and neighborhood levels in the design and delivery of all project activities, and NEF promoted youth leadership and voices through local youth advisory boards and youth-led initiatives. Other barriers to participation were addressed by providing childcare, improving accessibility, and offering transportation support.

This review and adaptation process was facilitated by OBM and adaptative management, which enabled NEF to understand the causes, results, and solutions in order to prioritize outcomes (the effectiveness of the training program and the ultimate impact on entrepreneurs’ business and employment outcomes) over adherence to a specific set of outreach activities. Moreover, the budget flexibility encouraged through an OBM approach allowed NEF to rapidly re-allocate resources to support the updated, improved strategy for retention and youth participation.

Continuous learning and adaptation were also facilitated by the DIB’s cohort approach, which created space for refining the participant selection processes and targeting the most vulnerable groups in successive cohorts. The multi-year project design also enabled NEF to apply lessons learned and to course correct across repeated cohorts, which increased both the program’s reach and the retention rates of the most vulnerable. This iterative learning cycle ensured that the project continuously adapted to the needs of its participants, enhancing the overall impact of the training. As a result of the new strategies identified through OBM and adaptative management, NEF was able to meet its target of 30% youth participation, achieve a 97% retention rate, strengthen the impact of the program as a whole, and preserve the focus on outcomes over activities.

Supporting Teams to Prioritize Outcomes

OBM and adaptive management are most successful when teams, organizations, and partners are prepared to implement these approaches and when existing ways of working align with a focus on outcomes. NEF has identified several best practices regarding how to streamline OBM and adaptive management. First, it is important to set aside time at the start of the project to ensure that clear, measurable outcomes are communicated to all stakeholders and that staff and teams understand the need for and prioritize the adaptation of activities in order to achieve the outcome metrics. To do this, NEF conducted an initial kick-off meeting that brought together the team working on the DIB, together with the CBO managers. During the kick-off, NEF management shared key information regarding the financing structure of the DIB and how this OBF model granted flexibility in some components of the project—particularly around activities and outputs—while at the same time limited flexibility around the outcome metrics.

While an initial theory of change can support project design and planning, it is also important for teams to treat theories of change as hypotheses and be open to adjustment based on new data and insights. Also key is a flexible budget that includes contingency funding to allow for mid-cycle corrections and innovations. For teams who previously worked on less flexible projects, embracing such a responsive approach may be an adjustment.

In addition, it can be useful to designate specific roles within a team to manage information and facilitate discussions, as well as to invest in building intentional processes to collect, analyze, and share data to inform decision-making. This data should feed into regular opportunities for reflection, which in turn should be aligned with organizational planning cycles.

One potential risk with OBM and adaptive management is that flexibility may lead to uncertainty. An effective mitigation strategy is to define decision-making frameworks up front, to provide teams with a degree of structure and clarity for how adaptation and learning processes will take place, even if the final outcome of those processes is unknown. 

While implementing OBM and adaptive management can require a shift in mindset and ways of working, these approaches are critical to ensuring programs maintain a focus on outcomes and impact for communities. These tactics have been a key success factor in NEF’s implementation of the DIB, enabling the program to support small business owners to generate a sustainable income and economic self-reliance.

Long-Term Change Management Supported by the DIB

The DIB has presented a valuable opportunity to encourage a broader outcomes-focused culture within NEF. The DIB’s sharp focus on measurable, tangible results, has led to several long-term organizational changes that extend beyond the scope of this single project. One such change has been the development of more robust monitoring and evaluation (M&E) systems and capacity within NEF. To meet the stringent requirements for tracking and reporting outcomes, NEF has invested in building internal capacity around data collection, analysis, and reporting. This shift towards more rigorous M&E practices has had a spillover effect across other projects, enabling NEF to apply these advanced tools and methodologies in different contexts and programs.

Another long-term effect is that the DIB’s outcome-driven approach has ingrained a culture of adaptive management within NEF. By consistently measuring results and analyzing performance data, NEF has learned to be more agile, adjusting strategies mid-project based on real-time feedback and evidence. This has enhanced NEF’s ability to learn from its experiences and apply those learnings across different interventions, allowing for continuous improvement.

The DIB’s multi-year, multi-cohort model has also strengthened NEF’s ability to holistically invest in local partners. Unlike traditional annual funding cycles, which often limit the scope of capacity-building, the longer timeframe associated with the DIB has enabled NEF to build more sustainable, long-term partnerships with local actors, aligning with the broader localization agenda. This has facilitated more meaningful capacity development, with partners growing alongside NEF in terms of technical, managerial, and organizational capacities.

Lastly, with the flexibility that comes from the DIB structure, NEF has moved away from being overly focused on rigid log frames or predefined outputs. Instead, the emphasis is now on achieving outcomes and impact, which has allowed NEF to adjust its strategies and activities dynamically in response to changing conditions. This shift towards a more outcomes-driven approach has permeated NEF’s overall operational model, empowering teams to innovate and focus on delivering real, lasting change.