Digital Outcomes Monitoring, and verification, in Development Impact Bonds

By Tom Rintoul

Payment-by-results shifts the focus away from what the service provider has done, to the difference that they have made. You connect some or all of the payment for a development project to the latter.

The approach is growing fast. Since 2014, over 24 DIBs have been launched and they are creating a space where we learn faster (more on which here). The broader set of Results-Based Financing initiatives mobilise billions of dollars of aid annually.

But all of this relies on us being able to define and monitor outcomes, and this contains some big challenges:

1. We’re limited to paying for what we are able to monitor, and that is often not the same as monitoring impact. E.g. we can monitor how many bed nets have been distributed, and conduct visits to estimate what proportion are in effective use, but in the end that is not monitoring what we are really interested in, which is the decline in the impact of malaria on people’s health.
2. Monitoring and verifying outcomes can be slow and expensive — draining resources which could go on delivery — and deterring people from defining and monitoring outcomes at all.

So, there’s interest from funders and policymakers in how new technology might be used to change what we can monitor, and to make the whole process less painful.

We’ve been working with a coalition of organizations brought together by FCDO (including Brink, DT Global, and Social Finance) to better understand the problem, explore where existing technologies could already be useful, and consider how to get any useful technology into widespread use.

Some things we’ve already spotted which we’ll be learning more about:

Changing What We Can Monitor

Some interesting examples are already easy to find. For instance:

• NexLeaf’s work on clean cook stoves changes what we can monitor
• Triggerise’s work on identity, service access, and purchases

NexLeaf aims to move us from monitoring whether clean stoves have been distributed, to whether they are actually in use.

What first struck me when starting to look at this issue is that most of the outcomes-based contracts I know well share the same archetypical monitoring challenges.

In healthcare for instance, the following are all common:

• Whether someone received a service you deliver (e.g. sexual health classes in a school);
• Whether someone received a service delivered outside your control (e.g. accessed family planning from the local government-funded health providers);
• Whether someone bought or used a product (e.g. contraceptives; PreP);
• Whether the beneficiary was part of an eligible group;
• Whether or not any claim for payment has already been made in respect of this outcome.

The commonalities between outcomes contacts — this existence of a shared group of archetypal monitoring challenges, suggests that if we already have solutions then they ought to be able to spread them rapidly across the field.

This isn’t happening so far, despite the fact that in adjacent fields there are well established approaches which we could borrow, and that a small number of outcomes contracts have employed then.

So, one early hypothesis is that the quick wins are probably in looking at how we make existing solutions easy to discover and adopt for existing and upcoming outcomes contracts, rather than in creating new technical solutions.

Reducing the Cost of Monitoring and Verification

Today, monitoring and verification operations are typically small-scale, bespoke to each outcomes contract, and deeply analogue. Many appear slow to service providers, and expensive to funders.

Even operating within these constraints it is worth looking into how we make it easier for these operations to make effective use of existing off-the-shelf technology to speed up verification in particular, and to make it cheaper and more transparent for providers. Something we will return to.

More Disruptive Approaches

Initial conversations also flagged up a number of marketplace products, in which organizations are looking to make it easier for those willing to fund social impact to find and pay those who can show they have created it. These include:

• RIKX
• ALICE
• IXO Foundation

Their scope ranges from simple monitoring systems to cultivating a whole ecosystem of standards and services for outcomes monitoring, verification, and exchange. Some envisage an Amazon-style ‘universal store’, others are thinking about the digital plumbing which might link information across hundreds of specialised ‘stores’.

Some of the people running these have big ideas about the future of international development — looking to bring in new funds, to disrupt the monitoring and evaluation industry, or to even to disintermediate the aid agencies themselves. A career aid administrator behind one of them put it to me that « Me and my organisation are the problem! I want a social entrepreneur in Addis to be able to back their idea and get started, without waiting for funders in Europe to catch up.»

There are major architectural, conceptual and ethical debates here, not least the relevance (or otherwise) of blockchain, who actually ‘owns’ a development event, and who gets to decide what has value. But the scale of ambition is exciting.

What Next

The FCDO is funding a pilot to help one impact bond make use of monitoring technology originally developed in another.

The chance to test the technology with a new service is interesting, but perhaps more so is the chance to learn about what it might take to offer these technologies in such a way that they can be taken up by organisations whose expertise is not in technology but rather in service design and delivery.

We’re excited about what we night learn about the practicalities and the costs of adoption, and the type of propositions would-be service providers will need to put together in order for their technology to be taken up in this market — because as implementers would probably point out, great technology has no impact unless it is used.

Image courtesy of Unsplash