Objective and Concept
The key objective of the RBF is to overcome market failures constraining private sector delivery of distributed renewable energy systems providing modern energy services to the poor.
The RBF approach applied within EnDev is about developing viable business models that employ financing as a performance incentive rather than a traditional lump sum loan payment. The key feature is payment upon delivery of results. Private participants are expected to take the full risk until the moment of delivery of the contracted results.
The financial incentives are a temporary measure aimed at transforming the market and lifting it onto an efficient and self-sustaining level through mitigation of market and growth barriers.
RBF types to determine and deliver incentives to the recipient can vary from advanced market commitments to auctions or output-based aid and others. However, structurally all RBF projects adhere to the following key principles:
- Delivery of pre-agreed results is only broadly defined to encourage product and service innovation, and giving flexibility to service providers.
- All eligible service providers are able to participate on a competitive basis.
- Monitoring and verification systems, including fraud mitigation measures, function as the trigger for disbursement.
- Disbursement of funds is contingent on the delivery of pre-determined, verified results.
EnDev's RBF facility encompasses 17 projects, covering a wide range of technologies. RBF projects are integrated as much as possible into the regular EnDev interventions within a certain country. The projects were selected in three proposal rounds in 2013 and 2014, with the first two tranches implemented in a country, while projects of the third tranche have a regional or sectoral focus.
Learning and Innovation
Examining new approaches, EnDev’s RBF window serves as an incubator for ideas, for creativity and for developing new types of RBF instruments. In terms of learning, first experiences show that market intelligence is one of the most important first steps in the design of any RBF scheme to ensure that specific opportunities and bottlenecks are fully considered as RBF is part of a market development system designed to be responsive to a unique market context. A favourable business environment is therefore desirable as the strength of market and actors strongly determines the RBF position in the system. This includes alignment and a coordinated approach with government and other development partners.
For an overview of results-based financing in EnDev projects, please see the factsheet.
The brochure 'Driving markets to scale' gathers the lessons EnDev has learnt during the implementation of RBF projects in 14 countries. Available for download here.