Many development programmes are pivoting to work with private sector partners to spur economic development and sustainable growth. However, a common struggle is engaging in ways that lead to sustainable outcomes beyond programme interventions.
Traditional grant funding places limited financial risk on businesses and may incentivise the delivery of activities rather than measurable and sustainable results, reducing accountability for long-term impact.
The Challenge Fund for Youth Employment (CFYE) addresses this challenge by combining the traditional grant funding mechanism with co-financing and a Payment-by-Results (PbR) model, requiring businesses to invest alongside donor funding and linking payments to verified outcomes.
Co-creating a partner-specific theory of change is also a key part of this process. Together, this model works to align a business’ commercial incentive with employment creation, encouraging partners to embed interventions within their core business model.
Drawing on CFYE’s experience working with the private sector to implement this model, this learning brief highlights key insights and offers practical guidance for working with the private sector to advance impact goals with market-driven interventions within the context of donor-funded programmes.
