CXO Matters | Performance Based Financing: 5 Lessons to Learn
Finance & Accounting

Performance Based Financing: 5 Lessons to Learn

Performance Based Financing 5 Lessons to Learn
Image Courtesy: Unsplash
Written by Ishani Mohanty

There exist multiple ways to spend the finances of a company. Compassionate businesses dive into humanitarian ventures in health and education as they deem to boost image, popularity, and credibility.

Performance Based Financing (PBF) comes under this category.

What is Performance-Based Financing?

A type of financial support system that instills funding into humanitarian organizations or countries for development based on their performance or activities in the related field. It’s more like a business funding of government projects that can help the people directly. Multinational corporations (MNCs) that tend to bring up their image or any big organization that wants to work with the local governments can emerge themselves in PBF. Often implemented in low to middle-income countries, as well as fragile and humanitarian settings, PBF sets an example to the business community.

PBF in Business

As part of the humanitarian efforts, PBF can help the business in many ways. The performance-based business model utilizes corporate resources and funding. Here each dollar is earned based on the performance of the ground-level workers or organizations that execute the aid.

In return, apart from the humanitarian efforts, businesses can also learn much from the PBF model. Here are five lessons that business leaders can learn from PBF.

5 Lessons From PBF

2.Focus on funds
3.Accountability and transparency


It can be assumed that the Public Finance Management (PFM) of any third-world country will be inaccurate. Issues can range from corruption, underutilized funds, misappropriation of budget, and low-quality services, to fraud and serious crimes. Continuous monitoring can be challenging.

Delegating the funds to the related organizations or the people responsible for the service based on the actual requirement can bring better execution of the funds. There may be situations where autonomy is required for the ground-level staff on site. Delegate the responsibility to such personnel or groups and let them do the needful more efficiently with the allocated finance.

Focus on Availability

Performance-based financing implementation often requires dedicated bank accounts for functioning. Even if the treasure single account (TSA) is not mature enough to handle the cash flow, focus more on the availability of funds at the right time. Execution of timely budgeted funds will keep the distribution of the deliverables on time. 

Accountability and Transparency

Enhancing the financial capability of the front-line service delivery teams earns more efficiency. When facing financial constraints, gaining the ability to be accountable and transparent will increase the credibility of the activity. Ensure that the fund executions are transparent and accountable with the right resources and documents.


PBF innovations should often provide incentives to the people at the lowest strata without trouble. Since the funding and transfer is based on performance, giving bonuses and monetary rewards can be considered apt. Incentives can be included in the funding allocation without providing a separate parallel system for that.


Global humanitarian efforts are not complete without the support of the concerned governments and local government bodies. Allow the development partners to work in a cooperative relationship with the governmental bodies for the execution of the funds.