Using Results-based Financing to Address Forced Displacement in Cities

Overview & Synopsis

Forced displacement is increasingly urban and protracted, presenting a developmental challenge for cities that host displaced populations. The abrupt arrival of many displaced people creates technical and financial challenges for cities. An integrated and comprehensive approach is essential to respond to the interconnected needs of both the displaced individuals (people-based) and their host municipalities (place-based). Results-based financing (RBF) is an innovative financing mechanism that augments the effectiveness of development programs by conditioning all or part of the funding on pre-agreed results and incentives. RBF has the potential to significantly improve the responses to forced displacement in ways that benefit both forcibly displaced people and the cities that host them. This report and the accompanying Guidance Note offer examples of solutions where RBF can be used to improve the effectiveness of urban forced displacement (UFD) responses. RBF solutions can close existing financing gaps by bringing in private sector participants and targeting the needs of both cities and displaced people. RBF needs verification of results to disburse and that need presents an opportunity for capacity building in local government as targets are set, measured, and payment occurs when results are achieved. RBF is extremely useful in achieving key World Bank scorecard indicators, such as providing essential healthcare services and ensuring learning outcomes for children. It also has potential to lead to vital institutional strengthening by incentivizing local actors in contextually appropriate ways.