(Illustration by Edel Rodriguez)
More than 500 kilometers north of Winnipeg, the nearest major city, the Island Lake region of northeastern Manitoba is one of the most remote communities in Canada, accessible only by air for most of the year or via an ice road in the winter. Its isolation shapes nearly every aspect of life.
The region is home to the Anisininew First Nation people, who have long relied on its waterways and boreal forests for sustenance. Yet today the community faces an ongoing public-health crisis that remains largely unmentioned in national discourse. Type 2 diabetes has reached epidemic levels in Island Lake. Driven by the erosion of traditional diets and limited access to fresh food, the diabetes incidence among First Nations children in Manitoba is more than 25 times that of other Manitoban children, according to a 2020 report by the Manitoba Centre for Health Policy.1
The Anisininew First Nation are outliers, yet they are not alone. Across fly-in Indigenous communities in Canada, fresh produce is scarce and expensive, often costing several times more than in urban centers, making processed, calorie-dense foods the default option. Decades of colonial policies have also eroded traditional diets and lifestyles.
The consequences of this epidemic are severe. Diabetes-related complications, including kidney failures and limb amputations, have become alarmingly common. Health-care facilities in remote First Nations communities are often underfunded and understaffed, leaving residents without access to specialized care. Travel for medical treatment is also a financial burden. Many patients must be flown to urban hospitals for dialysis, wound care, or surgeries, stretching both household and government budgets. Meanwhile, prevention programs remain underfunded, even though long-term solutions require addressing the root causes of the crisis, such as access to fresh food, stable housing, and culturally grounded health education.
Given the scale of the crisis, humanitarian nonprofits and public-health agencies have taken an increasing interest in addressing diabetes in communities like Island Lake. Many initiatives aimed at improving clinical care, expanding access to medications, and promoting healthier lifestyles have been launched.
Despite these efforts, two persistent challenges remain: Funding remains insufficient, and the solutions that do receive support are often designed externally, with little input from the communities they are meant to serve. Many diabetes interventions follow a top-down model, where donors and outside experts determine the solutions, often emphasizing standardized clinical care, nutritional guidelines, and exercise programs. While these approaches may work in urban settings, they often fail to account for the realities of remote northern life. For example, a diet plan built around fresh produce is unrealistic in a community where the price of fresh fruits and vegetables can be two or three times higher than it is in cities.2
But a new solution to this problem is emerging: community-driven outcomes contracts (CDOCs). In Canada, Raven Indigenous Outcomes Funds has pioneered this model with a focus on advancing social outcomes in Indigenous communities, including in areas such as health, housing, and energy security. Like other outcomes-based financing models, CDOCs aim to attract private capital by linking repayments to investors to the achievement of measurable socially beneficial outcomes. They depart from traditional models, however, in the way in which they define those outcomes and develop solutions. CDOCs’ broad philosophy is to shift money and power into the hands of the communities most affected by social challenges. That is, instead of funders, investors, or even outcomes purchasers dictating priorities and solutions, CDOCs aim to guarantee that the affected communities are involved in defining the problem, codesigning solutions and implementation, and determining how success is measured.
The hallmark of the CDOC model is community leadership throughout the entire life cycle of a project, from defining the problem to designing the intervention, selecting metrics, making funding decisions, and evaluating impact. CDOCs treat community members as equal partners, affirming that they have unique insights into context, challenges, and potential solutions. In this way, they represent a new paradigm in outcomes-based financing.
Outcomes Purchasing
Insufficient funding and donor imposition of solutions are not unique to the diabetes crisis in Indigenous communities. Rather, such structural problems plague the humanitarian and development sectors. For example, the funding situation for United Nations-coordinated appeals has been challenging in recent years, as coverage has fallen significantly short of requirements. The Global Humanitarian Overview (GHO), an annual assessment of global humanitarian needs published by the UN Office for the Coordination of Humanitarian Affairs, found that coverage in 2023 reached only 43 percent of the required amount, marking the first time it did not reach at least 50 percent.3 This shortfall is set to worsen as major donor countries, such as the United States and the United Kingdom, cut foreign aid, further straining humanitarian systems’ capacity to respond effectively to global crises.
Whose priorities are ultimately being served? If the primary goal of outcomes purchasing is investor security, rather than bold problem-solving, it risks simply becoming another channel for the “quasi-marketization” of public services.
Evidence also indicates that shortfalls in funding feed into the problem of donor imposition. When money is scarce, funders exert even more control over how it is spent, reinforcing rigid, top-down models that overlook local expertise. Studies show that less than 2 percent of humanitarian aid reaches local actors directly.4 Sustainable-development researcher Maram Ahmed says rightly that financing in this system is “top-down and driven by the Global North, centralized and bureaucratic and criticized for being slow and risk-averse.”5 Imposed solutions that fail to adequately consider the needs and capacity of the affected community not only can be harmful but are often ineffective.
While traditional grants and philanthropy remain essential sources of funding, humanitarian actors and public agencies have increasingly turned to outcomes purchasing to bridge persistent funding gaps. This approach uses private capital to fund nonprofit activities; investors receive returns only if specified outcomes are achieved. Under a typical outcome-purchasing model, such as a social-impact bond (SIB), private investors provide up-front capital to service providers (e.g., NGOs, social enterprises, or local government agencies) to implement interventions designed to achieve specific outcomes. An outcomes purchaser (often a government body or philanthropic funder) agrees to repay the investors (plus returns) only if the independently verified outcomes are met.
Governments’ preference for outcomes purchasing stems from their having to pay only for success, thereby offloading the risk of failure onto private investors. Private investors, in turn, appreciate the opportunity to demonstrate social impact while earning a financial return. Service providers, typically nonprofits, can access larger pools of private capital and address funding shortfalls to identify, implement, and expand social programs to achieve desired social outcomes.
Social-impact bonds were first piloted in 2010 at the United Kingdom’s Peterborough prison6 to reduce recidivism among short-sentenced offenders; investors were repaid based on actual reductions in reoffending rates. Since that pioneering program, outcomes purchasing has found takers across many domains, from employment programs in the United Kingdom to early-childhood education in India, where the Educate Girls Development Impact Bond sought to improve school enrollment and learning outcomes for girls in rural India, making payments based on independent assessments of educational progress.7
In a social-impact bond (SIB), a typical outcome-purchasing structure, five kinds of stakeholders collaborate, each serving a distinct function in the arrangement:
Outcome funder: Usually a government agency or philanthropic organization that commits to paying for the successful achievement of specified social outcomes.
Investors: Private entities that provide the up-front capital necessary to implement the intervention, assuming the financial risk.
Service providers: Organizations, typically humanitarian nonprofit agencies, that are responsible for delivering the intervention aimed at achieving the desired outcomes.
Independent evaluators: Third parties that assess whether the predefined outcomes have been met to determine whether payments to investors are warranted.
Intermediaries: Entities that facilitate the arrangement, coordinating between stakeholders and structuring the deal.
While outcomes purchasing helps provide funding, it does not resolve the deeper issue of top-down decision-making. In these models, governments or commissioning bodies typically define the social issues to address, establish success metrics, and select service providers, leaving minimal room for community input. This centralized decision-making can lead to interventions that may not fully align with the unique needs and priorities of the communities they intend to serve. As noted in a report8 by the Princeton School of Public and International Affairs commissioned by Reinvestment Fund, the SIB financing model is “inherently a top-down approach to alleviating social problems,” in which the government, rather than the community, initiates the process. Consequently, the report observes, “these social problems might not always be the most relevant to the priorities of community organizations or nonprofits.”
(Illustration by Edel Rodriguez)
Moreover, the assumption that SIBs transfer significant financial risk to private investors is not always borne out in practice. A Brookings Institution review of nearly 50 completed impact bonds (out of 194 structured to date) found that in all but two cases, investors were repaid because contracted outcomes had been met.9 If private capital in outcomes-based financing is consistently repaid, it raises the question of whether interventions are designed with financial predictability in mind, rather than taking ambitious risks that could lead to deeper, more transformative social change. Whose priorities are ultimately being served? If the primary goal of outcomes purchasing is investor security, rather than bold problem-solving, it risks simply becoming another channel for the “quasi-marketization”10 of public services, as social-policy researchers Daniel Edmiston and Alex Nicholls call it, with limited space for meaningful community leadership in defining problem and solutions.
Community-Driven Outcomes Contracts
The new model of CDOCs aims to move beyond the limitations of traditional outcomes-based financing. The hallmark of a CDOC is community leadership throughout the entire life cycle of a project, from problem definition to intervention design, metric selection, funding decisions, and final evaluation. Rather than taking a paternalistic approach, CDOCs treat community members as equal partners, affirming that they have unique insights into context, challenges, and potential solutions.
Raven Outcomes’ Minoayawin Initiative, which applies a CDOC to tackle diabetes in the Island Lake Anisininew Nation, exemplifies this approach. Numerous interventions have attempted to address diabetes in Indigenous communities in Canada but failed to achieve lasting impact. These programs have often relied on standardized and conventional medical approaches, like clinical care protocols, dietary guidelines, and fitness plans. While these approaches tend to work in urban settings, they may fail to account for the realities of remote northern life. Public-health researcher Jessica Dutton wrote her 2018 PhD dissertation on Indigenous experiences with diabetes self-management and found that Indigenous people are sometimes frustrated by diabetes-education programs that do not adequately reflect their traditional lifestyles or realities.11 For instance, one person she interviewed emphasizes recognizing traditional activities like hunting or moose-hide tanning while forming exercise recommendations, while another describes the difficulty of adhering to dietary guidelines when fresh food is prohibitively expensive in northern communities.
The Minoayawin Initiative represents a departure from these past approaches. Rather than imposing metrics and solutions from external funders or policy makers, it relies on community elders, health professionals, and potential investors, in which community members play a central role in defining both the problem and the appropriate interventions. First, an intervention is initiated only if members of a community voice a desire for aid to tackle an ongoing issue. Then the outcome metrics, rather than being predefined by government agencies, are cocreated with the community, ensuring that both clinical health markers and culturally relevant indicators of well-being are included.
For remote communities where high costs have long limited access to fresh and healthy ingredients, the “healthy hub” offers a solution. It includes a communal kitchen where multiple families or individuals can cook and prepare food.
One such community-defined indicator, for instance, is a Mino-Bimaadiziwin score, which draws from a broader Indigenous notion of well-being (the Anishinaabe term mino-bimaadiziwin)12 that translates approximately to living “a good life in harmony.” This indicator intends to measure social and cultural notions of well-being, such as whether individuals are participating in community life and contributing to cultural traditions. The initiative includes an outcomes working group that has medical experts, representatives from public-health agencies, and community elders. The group has recommended targets that include not only conventional diabetes-control metrics, such as a reduction in blood-glucose levels, but improvements in program uptake and community-defined measures such as the Mino-Bimaadiziwin score.
The Minoayawin Initiative began in 2019 with a convening of an Indigenous solutions lab, which brought together community members, elders, public-health experts, and NGO service providers. Through workshops and town halls, these participants collaboratively identified root health challenges and codesigned a bundle of lifestyle interventions that combined conventional approaches with programs tailored to the specific needs of the community. These community-designed interventions include regular diabetes screenings; structured educational sessions on nutrition and physical activity; one-on-one consultations with nurses and dietitians; and a wellness app for self-assessment, progress tracking, and remote coaching.
To complement these conventional solutions, the codesign process also identified a need for a purpose-built physical space, a “healthy hub.” For remote communities where high costs have long limited access to fresh and healthy ingredients, the hub offers a solution. It includes a communal kitchen—a shared space where multiple families or individuals can cook and prepare food. The hub promotes peer learning and skill building through cooking classes and meal preparation using traditional and locally available ingredients. Traditional foods in the region include duck, moose meat, foraged berries, and root vegetables like turnips and potatoes.
“We would never have thought about that if we hadn’t asked the community,” says Jeff Cyr, founder and managing partner at Raven Outcomes.13
Private investors provide up-front funding to implement interventions. An independent auditor validates data from both medical and community sources. Finally, as in traditional outcome purchasing, the outcome purchaser (in this case, public-health agencies) agrees to pay back investors (with returns) if the outcome metrics are met, as validated by the independent auditor.
Public-health agencies and philanthropic organizations are showing increasing interest in funding models that support community-led diabetes interventions.14 Though still early in its life cycle, the Minoayawin Initiative demonstrates the potential for culturally anchored interventions to outperform conventional, top-down health programs. Studies have observed that such community-based diabetes interventions have led to demonstrable improvements in clinical metrics and increased quality of life.15
The success of outcomes-purchasing projects necessarily depends on the community adopting the interventions; a communal financial stake, however small, helps to align interests and give the community a sense of ownership.
Importantly, the CDOC model allows for community participation throughout the entire life cycle of an intervention—not just in defining success metrics and designing solutions. For example, Efficiency Manitoba, a crown corporation dedicated to energy-efficiency improvements, partnered with Raven Outcomes to develop a CDOC for deploying efficient heating systems. Winters are harsh and energy costs can be high in First Nation communities in Manitoba. Many homes rely on electric furnaces that are expensive. Rather than pursuing one-off retrofits, the project adopted a whole-home approach, combining energy-efficient upgrades such as insulation and heat pumps. Although private capital formed the bulk of the financing, the community contributed labor, time, and materials. This coinvestment approach created new jobs by training community members to install and maintain systems developing long-term domestic capacity. The CDOC structure supported the community to move beyond piecemeal solutions, invest at scale, and build local capacity through training and maintenance programs, said Amy Tuck, a manager and program lead at Efficiency Manitoba.
The Structure of a CDOC
Now that we have glimpsed how a CDOC works in practice, let us examine in more detail how CDOCs are structured to embed community involvement into each stage of their life cycle.
Community-Defined Outcomes | First, CDOCs enable communities to define success on their own terms, which can shift the focus from investor-friendly, short-term metrics to deeper, systemic change. Critics of traditional outcomes-based financing models allege that they emphasize only quantifiable and immediate improvements, such as reducing emergency-room visits or increasing job placements, without addressing the root causes of the relevant problems.
By contrast, when communities set the agenda, they can prioritize interventions that tackle underlying structural factors. For instance, rather than merely tracking diabetes management through clinical markers such as blood-glucose levels, a CDOC like Raven Outcomes’ Minoayawin Initiative might emphasize food sovereignty, eliminating food deserts, increased access to traditional diets, and culturally grounded health education, or a combination of these, as core success metrics. While some of these measures, like improved access to fresh food, can be tracked using quantitative, objective indicators, others may require qualitative assessment methods. This broader approach ensures that funding supports long-term transformation, rather than short-term symptom management.
(Illustration by Edel Rodriguez)
The process of defining these outcomes needs to be deeply participatory, ensuring that interventions reflect community priorities, not external assumptions. Community consultation can take place through town halls, sharing circles, or structured deliberative sessions that bring together elders, youth, and local health workers. These forums can host inclusive discussions where multiple perspectives can shape what success looks like, ensuring that the chosen outcomes resonate with the realities of people’s daily lives. In some cases, communities may also codevelop their own evaluation tools, such as holistic well-being indices or culturally specific scoring systems (e.g., the Mino-Bimaadiziwin score), to track progress in ways that align with community interests. By embedding these participatory processes, CDOCs also create stronger community buy-in, making interventions more likely to succeed and sustain impact over time.
Context-Specific Interventions | Second, CDOCs also better assure that interventions, rather than applying standardized solutions, are tailored to community realities. They achieve this goal through community-driven needs assessments, where local stakeholders identify priorities and existing strengths before designing programs. CDOCs also emphasize local resource utilization, such as training community members in trades, instead of relying on external workers.
Another successful example of a context-specific intervention is the CommunityFirst collaborative model championed by the SeeChange initiative and the Inuit-led nonprofit Ilisaqsivik Society to tackle a tuberculosis (TB) crisis in Nunavut, Canada. The country’s northernmost territory, Nunavut is a land of ice, tundra, and rugged coastline. It is also home to Inuit communities who have lived for generations in one of the most extreme climates on Earth. While TB is often thought of as a disease of the past, its impact on Inuit communities is devastatingly present. Despite Canada’s overall low TB incidence rate, which hovers around 4.8 per 100,000, Inuit communities’ TB rates are more than 400 times higher than those of Canadian-born, non-Indigenous individuals.
The TB crisis in Nunavut shares many features with the diabetes epidemic in Island Lake. Both are driven by deep-rooted social inequities and have persisted despite repeated top-down efforts to eliminate them. Overcrowded housing, food insecurity, and the enduring consequences of colonial policies have created conditions in these communities where TB continues to spread.16 Prevention efforts such as improved housing, community-led screening, and contact-tracing programs remain underfunded. Moreover, in many cases, interventions are designed and delivered by outside actors, with little involvement from the communities themselves. These externally imposed solutions often focus narrowly on testing, tracing, and treatment protocols, rather than addressing the social determinants fueling the crisis. Also, the historical trauma of colonial TB control measures, including the forced removal of Inuit patients to southern sanatoriums, remain fresh in community memory, fueling mistrust in health-care systems and making public-health response more complex.
The CommunityFirst model offered an alternative that began with the community. Local health workers were trained to recognize early TB symptoms. Workshops led by elders and facilitators helped rebuild trust by navigating the intergenerational trauma caused by past TB policies, including forced separation and confinement.17 The initiative has led to increased TB awareness and a greater willingness to be tested. While it is not a CDOC, since it has not been financed through private capital, its CommunityFirst model applies some of the same core principles, including community governance, culturally grounded solutions, and local capacity building.
Shared Governance | Once a community has defined its priorities and identified approaches to adopt, CDOCs must also ensure that governance structures uphold these priorities throughout implementation. Unlike traditional funding models, where investors or government agencies control critical decisions, CDOCs must establish governance bodies where local stakeholders, such as community elders, youth representatives, and service providers, all play an active role in overseeing the implementation phase. Structured, deliberative processes, such as rotating leadership roles where different community members take turns facilitating meetings, and consensus-driven decision-making modeled after traditional council gatherings can guarantee that diverse voices are heard and disputes are resolved constructively. Such governance measures also assure that the outcomes purchasers (e.g., public-health agencies), investors, and philanthropic partners who are typically involved in governance do not unilaterally dictate terms of implementation.18
Shared Investments | CDOCs can also help communities be active partners in financing solutions. While external investors provide up-front capital, community capital pools—a shared fund in which local businesses, cooperatives, and households can invest small amounts—can reduce reliance on external backers and secure added community buy-in. The success of outcomes-purchasing projects necessarily depends on the community adopting the interventions; a communal financial stake, however small, helps to align interests and give the community a sense of ownership. This stake need not be monetary; it can also be in kind. For housing projects, for example, communities might provide materials from local forestry operations or contribute labor through job-training programs that create employment while reducing costs. CDOCs can also explore time-banking systems, in which residents who contribute labor earn credits that can be redeemed for future community benefits.
Independent Verification | Finally, as in a conventional outcomes-purchasing arrangement, an independent evaluator confirms whether the outcomes have been met. The evaluation criteria are determined collaboratively with the community via blended assessment methods. These pair conventional data points, such as clinical health outcomes or education metrics, with insights gathered through qualitative tools, such as community testimonials, cultural well-being assessments, or local satisfaction surveys. To maintain legitimacy, verification can be conducted by hybrid evaluation panels, combining external auditors with local governance representatives, elders, or community-appointed monitors who can provide cultural and contextual oversight. Some CDOCs explore participatory verification models, where trained community members collect and validate data, ensuring greater ownership over the evaluation process. Others employ adaptive assessment cycles, allowing evaluation criteria to be refined as the project evolves.
Reassuring Stakeholders
In these ways, CDOCs shift control to the communities that these financial contracts are meant to serve. The community-driven nature of CDOCs, while a major strength, can raise concerns for traditional donors or impact investors who are used to holding tight reins on project design and metrics. On the surface, relinquishing control over specific outcomes or intervention details can appear risky. If the community defines priorities that are different than the investor initially envisioned, how does one assure a return on investment?
In fact, interventions codesigned with local stakeholders often enjoy higher adoption rates, deeper buy-in, and more fit-for-purpose interventions, all of which ultimately reduce the likelihood of failure.19 In other words, the very aspects of CDOCs that might initially seem risky can increase the probability of achieving the positive, verifiable results that trigger repayment.
A case in point is a CDOC developed for installing geothermal systems in the Fisher River Cree Nation and Peguis First Nation. In this initiative, community members were trained, certified, and employed to install 124 geothermal heat-exchange and other energy-efficiency home improvements. The project was backed by $5.1 million in up-front capital from a group of private impact investors that included The Lawson Foundation, a Canadian family foundation. Outcomes payments were triggered by verified energy savings and issued by Efficiency Manitoba and Canada Mortgage and Housing Corporation (CMHC), which allowed investors to recoup their principal, along with a 4 percent annualized return. Such community involvement, far from generating risk, actually mitigated it, Amy Tuck noted.
Nonprofits, social enterprises, and Indigenous-led service providers play a crucial role in implementing the CDOCs we have studied. Shifting to a fully community-driven model for outcomes-based financing requires a different operational mindset. Many service providers are accustomed to delivering programs based on externally set funding priorities and reporting requirements. CDOCs require a new approach that emphasizes partnership over program delivery, responsiveness over standardization, and long-term collaboration over short-term project cycles. Service providers and investors must invest in building cocreation processes with community members, ensuring that interventions are not only effective but culturally grounded and locally relevant. This aspect demands additional time and effort but is essential to this approach.
CDOCs are not immune to tensions that plague traditional outcomes-based purchasing. The risk persists that investor expectations may begin to shape the design of interventions, shifting the focus away from community priorities and toward financial predictability.
Intermediaries like Raven Outcomes play a critical role in making CDOCs work on the ground. They connect communities, investors, government funders, and service providers; align incentives; and navigate bureaucratic complexities. Raven Outcomes’ deep relationships with Indigenous communities, as well as its credibility with agencies like CMHC and Efficiency Manitoba, have enabled it to unlock funding streams that were previously underutilized.
In the Peguis and Fisher River First Nations project, for example, Raven Outcomes made it easier for communities to access retrofit funding by simplifying the reporting and verification process. It provided up-front capital, helped communicate outcomes clearly, and supported communities in meeting government requirements—leading to more retrofits completed than ever before. By reducing complexity and building trust on all sides, intermediaries like Raven Outcomes make it possible to scale community-led solutions.
Intermediaries must also strike a balance between investor expectations and community needs, ensuring that financial targets do not come at the expense of community priorities. This approach requires developing new capacities in participatory governance, flexible program design, and community-led evaluation. Service providers and intermediaries that succeed in this transition stand to gain significant advantages, not only in achieving deeper social impact but in securing long-term partnerships with funders who recognize the track record of community-driven approaches.
Governments have an opportunity to support and expand CDOCs as a financial tool that can introduce innovation in community-led decision-making and aligns with broader commitments to self-governance, social equity, and sustainable development. Many nations have already introduced policies promoting local autonomy in health, education, and social services. Canada, for example, pushes for greater Indigenous participation in health-care provisioning through efforts such as the Truth and Reconciliation Commission’s Calls to Action.20 However, funding structures often remain rigid, top-down, and donor-driven. CDOCs offer a way to translate policy commitments into practice, ensuring that communities have not just the right to self-determination but the financial mechanisms to sustain it.
A Cautionary Note
While Raven Outcomes has demonstrated the promise of using CDOCs in Canada, scaling this solution in other contexts raises challenges. CDOCs require even greater coordination among multiple stakeholders than traditional outcomes-purchasing models. They emphasize community-led governance and decision-making, which complicate the process. Negotiating metrics, structuring financing, and ensuring rigorous verification require extensive collaboration, which can be time-consuming and can add administrative burdens. A primary challenge is the inherently project-specific nature of this negotiation process, which requires dialogue and customization for each community context.
Communities are diverse; disagreements can and will arise over who gets to define outcomes, how resources are allocated, and which interventions should be prioritized. If governance structures are not carefully designed to include broad representation, CDOCs may inadvertently deepen any existing divisions, instead of fostering cohesion. For example, in communities where gender-based discrimination persists, a lack of balanced representation can reinforce these inequalities. Adults may resist changes advocated by youth, such as greater inclusion of women in decision-making. CDOCs may also face greater challenges in communities grappling with crises where funders and governments impose strict limitations that conflict with community priorities. Therefore, parties to potential CDOCs must consider the additional transaction and coordination costs of CDOCs and potential delays as governance structures are negotiated and disputes are resolved.
CDOCs are also not immune to tensions that plague traditional outcomes-based purchasing. The risk persists that investor expectations around returns and timelines may, over time, begin to shape the design of interventions, subtly shifting the focus away from community priorities and toward financial predictability. Investor flexibility, patience, and alignment with the project’s social mission are crucial, especially in complex contexts like health crises where timelines and needs may evolve. Raven Outcomes deliberately structures its CDOC funds to accommodate different risk profiles to bring in a broader mix of investors, including those seeking stable, lower-risk returns, as well as those willing to take on more risk to support innovation and social change. Modest return targets and tiered investment tranches are used to align financial incentives with long-term, community-defined outcomes. These design features signal a commitment to mobilize capital in support of ambitious, community-led solutions.
Finally, outcomes-based financing always runs the risk of commoditization and quasi-marketization of public services. Governments may view CDOCs as a replacement for direct public investment, not as a complementary tool. These risks are particularly acute in low- or middle-income countries. If governments shift essential-service funding to private financing models like CDOCs, communities may become dependent on market-driven funding cycles, rather than on stable, long-term public commitments. Further, this option could erode problem-solving capacity within public agencies, leaving communities and public agencies entirely dependent on service providers for expertise. For example, if CDOCs become a preferred financing mechanism for health initiatives in marginalized communities, governments might reduce direct health-care funding, leaving communities reliant on complex financial agreements and vulnerable to the interests of private funders. This result could reinforce the very funding instability that CDOCs were meant to address. CDOCs should function as a supplement to—not a substitute for—public funding.
Despite these challenges, CDOCs’ potential is undeniable. They take a meaningful step toward a more equitable, participatory model of financing community-led social change. Their application and promise across diverse contexts, such as chronic-disease management, housing retrofits, and renewable-energy installation, demonstrates their adaptability to different community priorities. As governments, investors, and communities grow fluent with this model, CDOCs have the potential to transform not just how we fund social programs but how we define and achieve lasting impact, on terms set by the affected communities themselves.
Read more stories by Sofia Tomljanovic, Sanjith Gopalakrishnan, Rachel Kiddell-Monroe & Vanitha Virudachalam.