Can we improve education outcomes by paying service providers for performance?

As a global community, we are still grappling with how best to drive improvements in education outcomes. Despite the substantial progress made over the past decade, the Sustainable Development Goals launched last year were also a sobering reminder of the distance yet to travel when it comes to fulfilling the promise of quality education for all.

In this context, results-based financing in the education sector has become an increasing focus of donors and governments in recent years. At its core, results-based financing is a simple concept: can we improve outcomes by paying for results achieved instead of only financing inputs? While the alphabet soup of results-based financing schemes seems to be constantly growing (RBF, PBR, SIBs, DIBs, COD… the list goes on), each with their own nuances and unique characteristics, all of them ultimately abide to this same core principle.

Output-based aid, or OBA, is yet another form of paying for performance, though one that has actually been around for a while. The concept was formally introduced in 2003 by the World Bank Group, and the Global Partnership on Output-Based Aid (GPOBA) was launched to pilot the approach. While output-based aid has been applied extensively in sectors such as energy, health, water and sanitation, infrastructure, and information and communications technology, its application to the education sector has been limited to date.

In education, output-based aid can be defined as a form of results-based financing in which third-party service providers are contracted to improve education access and/or quality, especially for disadvantaged populations. Whether or not they are paid depends on them meeting pre-defined outputs or outcomes. OBA schemes in education typically provide one of two types of payments to service providers: (i) payments to cover the costs of delivery of education services (subsidies) or (ii) incentive payments. OBA schemes often also provide stipends to targeted students

A new R4D report examines the potential for output-based aid in education. So what exactly does experience show us, what factors drive success, and in what contexts might OBA be an effective instrument for improving education outcomes?

What do we know about OBA in education?  

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 reach 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.

What factors determine success? 

1. Government support and buy-in for the project is often important to determining the project’s sustainability. Active engagement with government at the relevant decision-making level was a determinant for the success of several OBA education projects.
2. Projects should incorporate rigorous evaluations into their design and implementation, especially in education, where the evidence base on the impact of results-based approaches remains relatively weak.
3. It is important that projects are designed with future sustainability in mind and that potential pathways to scale are identified from inception. Very few OBA education projects have scaled and sustained financially.

What contexts is OBA best-suited for? 

1. OBA schemes may be particularly appropriate for education sub-sectors where the public and or private costs of education are high (e.g. secondary education), and where the poor are therefore often excluded.
2. OBA may be most effective when applied to education service providers with greater levels of autonomy. Therefore, OBA may lend itself well to private sector providers or PPPs. It may also lend itself well to de-centralized education systems.
3. Based on these characteristics, our analysis suggests that OBA may be a particularly promising approach in early childhood development, vocational training, and higher education – with an emphasis on marginalized groups. These sub-sectors typically have fees associated with them and are often supplied by the private sector since government does not guarantee their provision.

It should go without saying that results-based financing and output-based aid are not silver bullets. They need to be used carefully and considerately in the right contexts. However, our analysis illustrates that if used in this way, they may provide promising solutions to persistent gaps in education access and quality for those left behind.

Complete findings can be found in the full report available here.