For some time, we’ve been cheering MCC’s interest in pursuing approaches that pay for outcomes and encouraging the agency’s stakeholders to get onboard (here and here). Now we can applaud an important step forward. The agency’s new compact with Morocco, which both partners celebrated at an event last Thursday in Rabat, spells out the potential for a results-based financing component—a welcome development.

A substantial portion of the new Morocco compact will seek to increase employment through improvements in education and training as well as a project to support the replication and expansion of successful integrated job placement services. According to the compact agreement, a key component of the latter will involve the use of results-based financing “to catalyze a market for improved employment outcomes.” In contrast with conventional employment programs, which often define results in terms of “number of people trained”, MCC and Morocco are looking to pay for beneficiaries actually placed in jobs.

MCC investments will support and strengthen the Government of Morocco’s existing efforts to link payment to the achievement of independently verified outcomes and strengthen service providers to deliver and manage for results. Results-based financing models shift program risk and align incentives, prioritize evidence, allow for adaptation to keep pace with changing circumstance, and have shown promise in improving service delivery. As we’ve often noted, the idea of paying for success fits well with MCC’s model. Approaches that disburse on the basis of results necessarily require robust measurement of results, and results measurement is an area where MCC has often been ahead of the curve. Moreover, the approach dovetails nicely with MCC’s focus on country ownership since results-based programs provide partner governments and project implementers with increased flexibility to find the best ways, within a specific local context, to reach agreed-upon targets.

Of course, with the compact just getting started, there’s still plenty of work left to do to determine project details. The agency is exploring a range of results-based financing tools, including—as mentioned in the compact agreement—the possibility of a Social Impact Bond (the inspiration for Development Impact Bonds). Ultimately, the devil will be in the details.  Many of the advantages expected from pay-for-performance programs fail to materialize if they are simply better-implemented conventional programs. Focusing on paying for measurable outcomes (including specifying from the outset the desired outcome(s), how it will be measured, and what will be paid per unit achieved) is key to unleashing the innovation and adaptation results-based financing tools promise.    

As the compact unfolds, we’ll be watching intently from the sidelines. Among US agencies, MCC has positioned itself on the cutting edge of thinking about results and country ownership. Its exploration of an approach that would pay for outcomes in Morocco demonstrates its interest in staying there.

Thanks to Bill Savedoff for helpful comments.