Analyzing the Potential for Results-Based Financing in Education

The Challenge

Over the last decade, the perception that traditional development aid is inefficient and vulnerable to waste and corruption has grown increasingly pronounced. Donor governments have faced mounting political and public pressure to limit budget allocations to international aid and to demonstrate tangible results of development financing.  At the same time, aid to basic education has declined sharply in recent years. Since 2010 alone, it has decreased by 10% despite increasing steadily from 2002 to 2010. This reduction was much more considerable than the 1% overall reduction in total development aid during that same period, reflecting an overall de-prioritization of education by many donors (UNESCO 2014). In this environment of increasingly scarce donor funding, the global education community and recipient country governments have faced the increasingly pressing challenge of identifying new mechanisms for more efficient and effective spending.

The Opportunity

The concept of results-based financing, in which payments are linked to performance, has gained traction over the past few years as a potential solution to the challenges highlighted above. The overarching goal of results-based financing is to increase the efficiency and effectiveness of development spending and programs.  Having experienced success in other sectors such as health, increasing attention has been paid to its potential application to education. A number of results-based financing schemes have been tested in the education sector, ranging from Cash-on-Delivery Aid, Development Impact Bonds, Conditional Cash Transfers, to name a few.

The Global Partnership on Output-Based Aid (GPOBA) is a World Bank-administered program whose focus is on one particular form of results-based financing, output-based aid (OBA). OBA provides performance-based subsidies or payments to service providers to support improved access to and quality of basic services (including water supply and sanitation, energy, health care, education, communications, and transportation). GPOBA’s mandate is to design and fund output-based service delivery programs as well as to facilitate learning and knowledge dissemination on the role and application of OBA. GPOBA contracted R4D to conduct a scoping study on the potential for OBA in the education sector, one of GPOBA’s less-tested sectors to date.

Our Work

R4D conducted a study which included:

(i)  a literature review of results-based financing (RBF) schemes in education,
(ii)  a landscaping and analysis of existing OBA projects in education, and
(iii)  recommendations for applying OBA in the education sector moving forward.

Key findings from the analysis include:

  1. OBA is a versatile tool that can be applied to address issues in education related to access, quality, and system inefficiencies.
  2. Through a range of targeting mechanisms, OBA is well-placed to target those left behind: poor and disadvantaged, girls, orphans and vulnerable children, disabled children or adults, indigenous populations/ethnic minorities, adults lacking a complete education, etc.
  3. Government support and buy-in for the project is often important to determining the project’s likely sustainability. Active engagement with government at the relevant decision-making level was seen to be a determinant for the success of several OBA education projects.
  4. More projects should incorporate evaluations into their design and implementation, especially in education, where the overall evidence base on the effectiveness and impact of results-based approaches remains relatively weak.
  5. Very few OBA education projects have scaled and sustained financially. It is important that projects are designed with future scaling and sustainability in mind and that potential pathways to scale are identified from inception.

R4D’s report contains practical lessons relevant to implementers, donors and researchers, and highlights education sub-sectors where OBA may have most potential. Download the report and related resources here.

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