Over the last 20 years, governments and households have devoted ever increasing amounts of their national income to education. These investments have led to unprecedented increases in access, and more children are starting school earlier and staying in school longer than ever before. However, spending inefficiencies have meant that the increased investment in education has not so far led to large improvements in learning even in countries that have universalized access to basic education. Many factors underlie this problem, including poor student and teacher attendance, the failure of inputs such as textbooks to reach schools, and the use of education funding by schools for activities unrelated to learning.
Results-based financing (RBF) holds out the promise of tackling spending inefficiencies and making more effective use of education resources. Results-based financing is an umbrella term referring to any program or intervention that provides rewards to individuals or institutions after agreed-upon results are achieved and verified. The approach has the potential to provide a stronger focus on the actions necessary to improve learning outcomes, foster local solutions to common education challenges, and strengthen the capacity of education systems to measure and track progress. However, these benefits arise from well-designed and well-implemented RBF programs. When interventions fail to meet these standards, they will have limited impact on reducing inefficiency and improving spending effectiveness.
RBF interventions have been used to incentivize many different actors and institutions within the education sector. Many countries have used RBF to provide incentives to children and their parents through conditional cash transfers and similar programs, with the aim of motivating students to attend and do well at school. Improvements in teacher attendance and teaching practice have been achieved using results-based financing to provide incentives to teachers. Some countries have also linked funding to school-level performance indicators to drive quality improvements. In decentralized countries, governments have experimented with incentivizing local governments and their officials by linking funding to sub-national education results. RBF has also been used to tackle bottlenecks in different elements of education systems including book delivery systems.
Development agencies have started using results-based financing as a tool to improve the effectiveness of their aid to developing countries. In the education sector, many development agencies have begun to link development assistance to results in an effort to strengthen the efficiency and effectiveness of aid programs and ultimately to boost learning outcomes. The use of results-based financing in education is relatively new (only began 8 years ago) and few programs have been evaluated. However, lessons for design and implementation of programs are already emerging.
Interventions using results-based financing typically focus on more micro-level activities within the education system, such as performance-based school grants and teacher bonuses. These types of activities aim to change the behaviors of specific actors (e.g. , teachers) to help them focus more sharply on desired results (e.g., improving student learning).
Approximately 400 million primary school-aged children around the world are unable to read proficiently. Evidence from many contexts shows that effective access to and use of textbooks and reading materials are one of the highest impact and most cost-effective ways of improving literacy and raising learning outcomes in developing countries. Yet many children do not have access to the reading materials they need to master basic literacy because of a lack of content in appropriate languages, inflated costs, inefficient supply chains and ineffective use of books for improving early grade learning outcomes
Results-based financing can help countries tackle these challenges by making book chains more efficient and, ultimately, ensuring that children receive quality books in languages they understand. While each country will face its own unique challenges, achieving this objective will require strengthening the book chain which includes: a) book forecasting; b) book development and production; c) book procurement; d) supply chain management monitoring and evaluation; and e) book utilization.
Learn More: Read how World Education is using results-based financing to implement Track and Trace and improve supply chain transparency in Cambodia.
Learn More: Read how IREX is implementing a results-based competitive approach to incentivize book creation in Bangladesh.
Learn More: Explore how Room to Read is using results-based financing to develop a pooled procurement mechanism and to distribute more than 100,000 books to government schools in South Africa.
Results-based financing can be used to support supply chain management by incentivizing the development of results-based monitoring systems, like Track and Trace. Track and Trace is a technology platform that enables government, school-level, and other book distribution stakeholders to track the real-time ordering and distribution of books and other learning materials. It can bring focus on known points of vulnerability along the book value chain, creating a transparent accountability process. Results-based financing could then be used to promote improvements along the chain, ultimately, making texts accessible to children. Current activities in this category incentivize the various actors and more efficient performance along the supply chain and have the potential to ensure that textbooks and supplemental readers are delivered to children in schools at the right time.
Learn More: Read how Zambia is testing randomized, results-based delivery stipends to improve textbook delivery and reduce book shortfalls at the district level.
Learn More: Can incentives to take home textbooks improve learning and book use in the Democratic Republic of Congo?
Government Use of Results-Based Financing in Education
Many governments incorporate elements of results-based financing into their regular planning and budgeting processes. Increasingly, governments are seeking to align their medium-term education budgets with objectives outlined in their education sector's strategic plans. More directly, some countries are allocating resources to subnational governments and education institutions such as schools and universities, based on performance or agreed upon results. Some governments have also introduced specific results-based interventions within the education system to provide incentives to different actors or institutions and drive improvements in education outcomes.
REACH is working to strengthen the knowledge base on government use of results-based financing through a number of initiatives. These include:
1. New research on interventions that use results-based financing to incentivize meso-level actors (e.g., district, provincial, or regional education officers). In 2017, REACH awarded five Knowledge, Learning, and Innovation (KLI) Grants to explore the potential of results based financing to incentivize local government officials to use resources more effectively. Results from these grants are expected from the middle of 2019.
2. Country- or system-level studies that aim to assess the design, implementation, and impact of results-based financing programs in select countries, and to compare them with other approaches to education financing (e.g., traditional input-based funding). The country-level assessments are scheduled to be completed in September 2019.
3. Analytical work that explores the experience of six countries in using results-based intergovernmental fiscal transfers to drive improvements in education. The research and country cases studies will take place in 2019 and a final report is expected at the beginning of 2020.
While results-based financing can be highly effective in the education sector, the approach comes with certain risks. A main risk for governments is that financing becomes less predictable, since disbursement occurs only after results are achieved. For donors, identifying goals that are attainable, impactful, and sustainable can prove challenging. And whenever funding is linked to an indicator, gaming and cheating become possibilities. Such challenges make it all the more critical for incentive programs to identify proper indicators and to include effective systems for verification.
Gaming–the act of deliberately improving or otherwise manipulating performance measures–is always a possibility when financing is linked to an indicator, and even the most well-designed systems can be plagued by such problems. If a teacher bonus is tied to student test scores, for example, the teacher may provide answers to students or teach to the test, or schools may even change students’ scores outright. The use of incentives tied to specific results can also result in the neglect of other priorities or lead to other unintended consequences, such as teachers focusing their efforts on more promising students at the cost of slower learners. The likelihood of strategic or gaming behavior tends to increase the higher the stakes are, the longer the intervention has been operating, and the less able recipients are to influence outcome. Even as it is difficult to prevent gaming, some strategies can help to discourage the practice, such as including several verifiable metrics or setting targets that are conducive to learning or that help build capacity, instead of linking aid to specific inputs or outputs.
It isn’t always easy to know which indicators are the “right” ones in any development financing project, but indicators in results-based financing carry more weight because the disbursement of funds occurs only after the indicators are achieved. Results-based indicators must strike a balance between cost, effort, feasibility, and ambition. World Bank education projects typically use four types of disbursement-linked indicators: input (e.g., set number of textbooks delivered to school), process (an effective curriculum put into place), intermediate (number of schools inspected with reports published on government website), and outcome (demonstrated improvement in student test scores). Few of these projects adopt inputs or outcomes as indicators; any indicators related to traditional inputs tend to focus on quality aspects, whereas outcomes, while providing benefactors with independence, can be hardest to achieve. Given how difficult it can be to identify a clear formula that leads to strong learning outcomes, it is helpful to understand the results chain when deciding on the best disbursement-linked indicators. Many projects tend to concentrate efforts “further up” the chain, focusing on intermediate outcomes and even process inputs and indicators, such as capacity building. Other factors to consider when selecting indicators: the timeframe of the project and pricing, including the ability of an indicator to unlock processes and progress beyond its direct value.
Results-based financing, by its very nature, depends on the verification of results. Without credible systems that can evaluate whether a target or result was attained, results-based financing will not work. Thus, resources should be set aside to guarantee that results can be reported and verified, whether by strengthening existing systems for data collection and reporting, auditing, and evaluation, or providing for independent verification of results. There are various ways to collect and report data to monitor the achievement of indicators. Generally, if government information systems and administrative data are available–such as through a country’s education management information system–this can offer the cheapest option, as long as the data are reliable, accurate, and up-to-date. An alternative is to create a parallel structure to gather the necessary data. While this may be more reliable than working with existing systems, it can be a missed opportunity to strengthen in-country capacity, whether of a school, a district government, or a national-level ministry.
Results in Education for All Children (REACH) seeks to help countries strengthen their education services by focusing programs and initiatives on results, with the ultimate goal of boosting learning outcomes especially among the most vulnerable populations.
Established in 2015, the World Bank program funds results-based financing projects and provides technical support and advice on results-based financing in education to other World Bank teams and development partners. One of its main goals is to contribute to the evidence base around results-based financing in education, gathering data and knowledge that can be used to develop better education programs and policies, with the goal of boosting education outcomes.
REACH is funded by the Government of Norway through NORAD, the Government of the United States of America through USAID, and the Government of Germany through the Federal Ministry for Economic Cooperation and Development.