Author Archives: Priyanka Vyas

The real measure of performance-based financing

September, 21, 2011

What began in Latin America with a small cash transfer program has today emerged into a widely popular approach of financing health and education programs. Performance-based financing or results-based financing — the idea that programs should be funded based on the achievement of pre-determined outcomes and indicators- has almost become the modus operandi of aid agencies and development organizations.

While this ensures that aid money flows into countries that meet the targets to improve health outcomes, it does not compel governments to shell more money from their coffers. As a result many countries like Kenya, Ethiopia, Namibia, Pakistan, Bangladesh, Afghanistan have lowered their share of health spending between 2000 to 2009 while external resources have increased during the same period. On the other hand are countries that have increased their share of health spending even though external resources have increased and have also improved health outcomes.

Sample this: In 2000, Rwanda’s share of government expenditure as a percentage of total expenditure stood at 39.2%. The figure had increased to 43.2 percent in 2009. At the same time, external resources for aid as a percentage of total health expenditure had increased marginally by one percent to 53%. Contrary to some other countries which improved both their government expenditure as well as the share of t external resources, Rwanda was able to improve its health indicators and outcomes in a much greater proportion in comparison to some other countries. The country brought down its under five mortality rate from 106 in a span of decade, improve measles coverage from 74-92, lower maternal mortality rate from 1100 to 540 by 2009- the highest improvement among the 15 countries that are the top recipients of USAID.

Kenya’s story is almost the opposite of Rwanda if not completely. While it lowered government’s share of health expenditure from 45% to 33%, external aid shot up from 8.8 to 36% between 2000 to 2009 based on WHO’s data. Yet, health outcomes improved modestly. Under 5 mortality rate was lowered from 69-55, measles coverage declined from 78-74% and maternal mortality rate was reduced marginally by 30 to 530.

The contrasting tale of Rwanda and Kenya also reveals the contrast in fiscal management and dependence of many of the recipient countries. Some have been able to improve their resource allocation for health, lower their dependence on external aid or have seen an improvement in both internal and external resources. Others have not been able to do so, and some despite of an increased share of external resources have seen modest gains. Now this requires not just performance-based financing but strategically working with recipient countries to improve their fiscal capacity. Clearly, if more countries have to replicate what Rwanda has been able to do, it would be a real measure of not just performance-based financing but performance-based budgeting.


Paradox of the State of Health



Current MMR Cumulative target For 5 years in MMR Current IMR 5 years IMR target CurrentInstitutional Deliveries % 5 year target for institutional deliveries %
Gujarat 148 60 44 24 93.4 97
A.P 134 70 46 23 95.0 100
Assam 381 228.6 58 29
Karnataka 178 (SRS 2009) 80 38 15 97.3 99
Chattisgarh 269 (SRS-2009) 215 54 30 52 95%

The paradox of the state of health is that health is a state subject. For anyone who reads the annual report of the Ministry of Health and Family Welfare, this may seem to be an irony because under the National Rural Health Mission, almost 70-75 percent of the funds flow from the central government to the states. Going forward, the government is aiming to increase the contribution by the states to almost 40 percent. As per the constitution, the central government stipulates the laws and much of the program implementation and delivery is by the state. Perhaps this explains to an extent why some states have shown more initiative in implementing health sector reforms against others. It is quite interesting how states are setting their own targets for the next five years to improve key health outcomes such as infant mortality rate, maternal mortality rate, total fertility rate and number of institutional deliveries. Gujarat is aiming to reduce MMR from the current 148 to 60 in the next five years.  Andhra Pradesh wants to reduce MMR from the current 134 to 70.  And for Assam, the goal is to bring it down from a high of 381 to 228.

The good news is that there states are setting their goals to improve health outcomes; the bad news is that there is wide scale disparity that exists. Even though states are setting their targets and many have shown improvement over the years, central government funding is not tied to states achieving these performance benchmarks. Since central government already funds a chunk of these programs, it could consider introducing certain categorical grants or project-based grants to the states under which states compete to grab a share of it.  Globally, this is quite common in some of the developed countries where the federal government funds some of the projects of the states based on achievement of some of the key performance indicators. One possible way is to develop an incentive mechanism through which states can be rewarded for achieving outcomes. For example, in the US, the No Child Left Behind Act is based on the federal government’s funding is conditional upon the states meeting some of the shared goals in terms of student achievement and graduation rate.

Unfortunately, political pressure many a times overrules strict enforcement of such performance incentive mechanism due to which even when states do not meet some of the goals,  they continue to get funded. As my Professor, Dr. Swiss notes, “It is fairly common for the Feds to impose certain standards on states and local governments, and to say those standards be met to get a full share of money in the future years. But it is also common for the Fed to back down, and keep the funding for the program even if those standards are not met. These waivers are mainly for political reason-Congressional members don’t want their districts to be hurt.”

While instituting a performance-based management system from the top to the lowest levels of the government may not be a complete panacea to lower disparities, in the Indian context it can do two things:

1)      Strengthening Institutions of Governance:

As funding gets tied increasingly to different levels of government meeting some performance benchmarks and being rewarded for their innovation, the upshot of this would be an increase in accountability in government and strengthening of the institutions.  “How do you explain outcomes in certain states in comparison to others? So it is institutional strengthening in some parts ( which explains this). It is no longer ( a problem of ) scare resources –it is how you utilize them and how you allocate them,” asserts political scientist, Sumit Ganguly at a seminar hosted by the Center on Democracy, Development and Rule of Law at Stanford.


2)      It will increase competition among the states for central government’s funds

If competition is good for the private sector, it will good even for governments.  And increased pressure to compete for funds for basic welfare programs such as healthcare and education, will lead to an increased focus on public policy issues within governance rather than the current parochial lens of caste and identity-based politics.  Dr. Ganguly points to the fact that identity-based politics continues to gain resonance rather than real public policy issues such as a primary health care clinic or improved primary education as they have a longer gestation period in terms of electoral gains.


Rwanda-Fixing Each Spoke of the Wheel of its Health Sector


This month Rwanda bagged the 2012 Resolve Award for innovation in reproductive and child health presented by Aspen and administered by USAID and Management Science of Health[i]. This comes as a little surprise not just for the progress it has made on the maternal and child health front but with a bouquet of innovations spanning across its health sector.

It seems to have been first mover on many policy developments. It was one of  the first countries where performance-based financing was pioneered[ii]. Today it has been scaled at a national level with performance contracts enforced between the local units and the President, Paul Kagame[iii]. Its community-based health financing scheme, called as Mutuelle De Sante covers almost 90 percent of the population, and is only health financing scheme to have been scaled up to this extent. When it comes to technology-based initiatives too, Rwanda was among the early birds to get started with the eRwanda project to be the first eGovernment project that got supported by the World Bank in East African countries in early 2003[iv]. In 2009, when Rwanda launched the telemedicine project in partnership with the Ministry of Health, it allowed regional hospitals to be connected with advanced hospitals, thus enabling doctors to seek remote diagnosis, second opinion or send referrals to the advanced hospital. Today it looks like it is reaping the benefits of its early investment in technology with projects in mobile health being rolled out such as TRACNet, which makes  it possible for health workers in distant locations to record real-time data regarding treatment of their AIDS patients.[v]Thanks to such early adoption of technology that a recent evaluation noted that about 80 percent of health workers now report data on patients and treatments using cell phones.[vi] This is not enough. To overcome the shortage of skilled workers it has a signed an agreement with United States, worth $34 million to bring more than 100 senior medical faculty from American universities to Rwanda over the next seven years in an effort to to train and work with the local physicians and build specialty capacity as well as create new residency programs, writes Ms Agnes Binagwaho, Rwanda’s Minister of Health on her blog website.  Ms Agnes, who is a trained physician and a lecturer at Harvard Medical School, boasts of her ministry’s partnership with elite US medical school such as Harvard, Duke, University of Texas, Yale School of Medicine and about seven schools for nursing and midwifery.

This begs the question as to what makes this country a hub of innovative health policy and programs and what lays the context for this country to become a darling of donors? Its infant mortality rate which climbed to 149 in 1995 post genocide from 99 in 1990 has been brought down to 49 by 2010.  Under 5 mortality rate too, which  increased to 183 from 164 in 1990 stood at 64 in 2010. Maternal Mortality Rate is now at 340 from 910 in 1990s.

After the genocide that decimated about 30-40 percent of the population or had them flee the country, there was a shortage of health workers and financial resources. Local non profits and church organizations such as Cordiad, MSH, USAID initiated performance-based schemes in some of the provinces. Rwanda’s strong emphasis on a decentralization policy reflected in its key documents such as country cooperation strategy with multilateral organizations and created a firm grounding to enable such contracting mechanism with a focus on outputs to be enforced.

While the process began in 1996 with the support of W.H.O and through the formation of health districts, it was in 2006 that the process kick started with the government launching Imihigo (performance contracts) in order to achieve its targets and indicators. These intentions were articulated as a part of its Vision 20:20 and Poverty Reduction Strategy Paper. Echoing a similar spirit was the Economic Development and Poverty Reduction Strategy for 2008-2012, which envisaged that 80 percent of the district by 2012 would be using performance contracts, citizens score card and report delivery services, thereby increasing accountability. And its latest decentralization strategy document 2012 states that the central government would reduce its earmarked grants to local units in order to encourage the latter to improve their planning and budgeting capability and give them more autonomy.

As the evaluation kicks in this month for the districts, Rwanda’s current minister for local government, James Musoni said,”The annual performance of all districts, provinces and Kigali City will be evaluated by a national evaluation team composed of senior officials and experts from different institutions led by the President’s Office.” A statement on the local government website noted that the evaluation will assess the implementation progress in all priority sectors and targets indentified in the performance contracts signed between the mayors and the President. It further said that through Imihigo, the government will identify major challenges that impede effective implementation of targets and by showcasing the performance and ranking of each district, the government hopes to promote competitiveness amongst districts as well as identify areas that need strengthening.”

While this doesn’t make a case for any causal argument or even a correlation, intuitively it does seem to be right: you cannot have a strong performance-based system without a solid base for decentralization; you cannot have a community-based financing scheme at a national level without commitment of local units to organize groups; you cannot have workers in remote areas to report data on real time basis accurately through projects like telemedicine without reinforcing the culture of local autonomy and performance-based system. And you cannot have collaborative partnerships with American universities without having the political will and the culture to innovate and bring reforms. It is like fixing each spoke of a wheel when it comes to improving outcomes in social sector. You get one spoke right but if you can’t fix others it is hard to achieve desired results. Rwanda seems to have learnt this much early.


[i] Rwanda Ministry of Health


[ii] Rena Eicher, Ruth Levene, Performance-based financing for global health: potential and pitfall 2009


[iii] Rwanda, Ministry of local government website


[iv] World Bank, Project Appraisal Document for Rwanda

[v] Ministry of Health website

[vi] Nsanzimana S, Hinda R, Lowrance DW, Cishahayo S, Nyemazi JP, Muhayimpundu R, Karema C, Raghunathan PL, Binagwaho A, Riedel DJ. “Cell phone- and internet-based monitoring and evaluation of the national antiretroviral treatment program during rapid scale-up in Rwanda: TRACnet, 2004-2010.” JAIDS 2011; 59(2): e17-e23

Rwanda Human Resources website:

PBF Changing the health system in Rwanda, WHO  Bulletin, 2006, Cordaid Website