Results Based Incentive Structures for Agricultural Development

Results-based incentive structures can offer donors an opportunity to enter into higher-risk markets that, if successful, could lead to significant development impact and more efficient use of donor funds. However, given that these mechanisms are relatively new, development practitioners are eager to understand how they can be applied to their own projects and what are best practices for designing and implementing them.

This was the resounding response the AgResults team received from approximately 20 World Bank staff on Wednesday, February 7, at a brown bag lunch hosted by the World Bank’s Agriculture Global Practice and coordinated by Chris Brett, Global Lead for Agribusiness and Value Chains. The AgResults team presented an overview of the program and how it was created to test these incentive structures as an option for donors and document what works and what doesn’t to achieve the program objectives.

After the overview presented by Rodrigo Ortiz, Secretariat Lead, the implementation team discussed two of their pilots: The Vietnam GHG Reduction Pilot was presented by Justin Kosoris.  This pilot is early in its implementation yet already giving valuable lessons learned.  The Nigeria Aflasafe™ Pilot was presented by Parasto Hamed. This pilot has been operating for over five years and continues to provide a wealth of learnings.  By presenting both pilots, the team highlighted various lessons that can occur in different stages of the design and implementation of this type of projects. Lessons from the pilots included:

• Ground-truthing is a crucial first step prior to launching a pilot. This process validates assumptions laid out in a business plan and confirms public and private sector interest and commitment. The Vietnam Pilot was the first pilot to benefit from ground-truthing as a formal part of the pilot launch activities and this allowed for a smoother launch and shorter implementation timetable.
• A high level of outreach is needed to make private sector companies aware of the prize and the benefit to them. This will foster support for the prize and increase interest by potential participants.
• For some pilots, like the Vietnam GHG Reduction Pilot, verification is costly but can also prove to be an added incentive to participation.
• These mechanisms may not achieve the full market penetration that was originally anticipated but can produce a first mover advantage to spur future sustainability. This was the case in the Nigeria Pilot, which did not reach the anticipated scale but laid the groundwork for another project to take the featured technology to scale.

The presentation was followed by a lively discussion that ranged from technical questions on how to verify the reduction of GHG emissions to the correct application of an agricultural input. Further technical discussions included how to identify the appropriate technology to promote using a results-based mechanism.

The discussion quickly turned from technical agriculture questions to the role these incentives play in the work of the World Bank Group. While funding structures of these mechanisms are still unclear (i.e. whether the World Bank can utilize a trust fund for these mechanisms or create new funds for them) these mechanisms are housed under the pay-for-results program (P4R) and are gaining momentum as an option for World Bank Staff to apply to their work. Earlier in that week, Jim Kim, the president of the World Bank, highlighted similar results-based mechanisms in a panel discussion on Maximizing Finance for Development, a high-level panel discussion on how to leverage private sector finance for development.

AgResults is a $122 million multi-donor initiative between the governments of Australia, Canada, the United Kingdom, the United States, and the Bill & Melinda Gates Foundation to incentivize the private sector to overcome market barriers and develop solutions to food security and agricultural challenges that disproportionately affect people living in poverty. The World Bank Group acts both as the trustee and as a non-voting member of the Steering Committee of the program.