A bold new approach to healthcare is taking shape in Ethiopia, and it's time to shine a light on this innovative strategy.
On October 14, 2025, a symposium brought together key players to tackle a critical issue: the persistent health disparities in low- and middle-income countries. At the heart of the discussions was Performance-Based Financing (PBF), a concept that aims to revolutionize healthcare delivery in developing nations.
But here's where it gets controversial... PBF challenges the traditional funding model by linking financial support to measurable health outcomes. Instead of focusing on inputs, the government is rewarding results, a shift designed to boost efficiency and ensure resources have maximum impact.
Ethiopia embraced this approach with a pilot program in 2015, targeting underserved rural and pastoral areas. The goal? To enhance the quality and reach of health services where access has historically been limited.
Driven by a need to motivate staff, PBF offers financial and non-financial incentives tied to performance. It's a strategy to strengthen institutional capacity and align the health system with national development priorities.
And this is the part most people miss... The impact of PBF extends beyond numbers. It empowers healthcare workers, improves data management, and reduces maternal and child mortality. In areas where PBF is implemented, we're seeing a decline in maternal mortality and better control of communicable diseases. Healthcare workers are more motivated, and hospitals are using the additional funding to enhance service quality and infrastructure.
But what about the global financial landscape? Dr. Dereje Duguma, the State Minister of Health, believes an innovative financial approach is needed. He highlights the importance of mobilizing resources from the private sector, CSOs, and communities through PBF. He also emphasizes the role of development partners in aligning with government strategies to bring flexible and sustainable funding to the health sector.
So, what's next for Ethiopia's health sector? The Ministry of Health is taking a collaborative approach, working closely with organizations like Cordaid and other health service partners. Despite a decline in external financial aid, the Ministry is exploring alternative options to strengthen the country's financial capacity. The health insurance program, benefiting over 63 million Ethiopians, is a major initiative in this regard.
As Cordaid celebrates a century of work in health relief and development, Dr. Dereje Duguma expresses his desire for continued collaboration. He wants Cordaid to prioritize the government's strategies and health sector priorities, mobilizing more resources and supporting the primary healthcare system, which is the foundation of the health sector.
The future of healthcare in Ethiopia is an exciting prospect, and PBF is a key player in this transformation.
