Solar lamps are charged with small solar panels at a refugee camp following floods in Malawi.
(Photo: Ashley Cooper / Getty Images)
Outcome-based financing (sometimes called results-based financing or pay-for-results) was meant to drive results and accountability in Africa’s energy sector. Yet delays in payments, complex verification systems, and unequal access are revealing deeper flaws. This piece argues that for Africa to achieve universal energy access, financing must focus on people — not just numbers.
In a small village near Masindi, Mid-western Uganda, Grace (not real name) runs a solar business that’s changing lives. Her customers — many of them rural families — are switching on lights for the very first time. The air in their homes is cleaner, children can study after dark, and local shops stay open longer.
Grace’s company was part of a results-based financing programme — a model that rewards businesses for verified outcomes, like the number of households connected to clean energy. At first, everything looked bright. But then, cracks began to show.
When Results Take Too Long to Pay
A few months in, Grace found herself waiting — not for customers, but for payments. Verification agents had to confirm each household’s connection before she could get paid. Some customers had relocated, others defaulted on payments, and the paperwork took months to process.
Her business nearly stalled. Like many small African energy entrepreneurs, Grace didn’t have the cash flow to bridge those long waiting periods.
This is one of the key loopholes in outcome-based financing: it assumes that small firms can shoulder the financial risk while waiting for “results” to be verified (ESMAP, 2023). In reality, many can’t — especially in rural markets where every shilling counts.
Counting Connections vs. Creating Impact
Outcome-based financing (OBF) was designed to make development funding more accountable and impactful (World Bank, 2023). But the question is — what counts as an “outcome”?
Many OBF programmes focus on easy-to-measure results like “number of solar systems sold” rather than long-term impact — such as affordability, reliability, or how energy access improves livelihoods (SEforALL, 2024).
Grace got paid for connecting households, not for ensuring those lights stayed on six months later. That’s a common story across Africa — where short-term numbers often outshine long-term sustainability.
The Equity Gap
There’s also a fairness problem. OBF schemes tend to work best in semi-urban or accessible regions where customers are easier to reach and verify (Lighting Global, 2021). Remote communities — the ones most in need of power — are often left out because the cost of verification is too high.
Ironically, the model meant to drive inclusion sometimes ends up excluding those furthest behind.
Complexity and Capacity Gaps
The contracts and reporting systems behind OBF are usually designed by international donors or development banks (African Development Bank, 2022). They’re full of technical jargon, data requirements, and audit demands that can overwhelm local entrepreneurs.
Grace isn’t alone — many small African clean energy firms say the system is too complex and expensive to navigate. As a result, larger, donor-savvy companies dominate, even when they’re less connected to community realities.
Lighting a Fairer Way Forward
Despite the challenges, there’s momentum for change. Some initiatives now blend grants with results-based payments, giving entrepreneurs breathing room while still rewarding performance (GOGLA, 2022).
Others are testing digital verification tools — using mobile data, smart meters, and GPS mapping to confirm results faster and cheaper (SEforALL, 2024).
For entrepreneurs like Grace, these reforms could make all the difference. Because ultimately, outcome-based financing should empower — not burden — those who bring light to Africa’s off-grid communities.
As the continent races toward universal energy access, financing models must do more than count connections. They must power fairness, trust, and resilience — the true outcomes Africa needs to shine.
References
·
African
Development Bank (2022). Unlocking Finance for Decentralized Energy Access
in Africa. AfDB Energy Sector Report.
·
ESMAP
(2023). Results-Based Financing for Energy Access: Lessons from Africa.
World Bank.
·
GOGLA
(2022). Results-Based Financing to Catalyse Off-Grid Solar Market Growth.
Global Off-Grid Lighting Association.
·
Lighting
Global (2021). Outcome-Based Financing Mechanisms: Lessons and Insights from
the Field. World Bank Group.
·
SEforALL
(2024). Powering Inclusion: The Future of Results-Based Financing in
Africa’s Energy Transition. Sustainable Energy for All.
·
World
Bank (2023). Paying for Results: The Promise and Pitfalls of Outcome-Based
Financing in the Energy Sector. Washington, D.C