This article is written by Amel Karboul, CEO the Education Outcomes Fund, an independent trust fund hosted by Unicef.

Global government debt is reaching record levels due to the Covid-19 pandemic. Around the world, governments are carefully considering how they can guarantee that their spending delivers results, particularly in hard-hit sectors such as education that were already struggling prior to the current crisis.

In 2019, global spending on education was estimated to be $4.7 trillion. Yet despite this investment, more than half of the children in low and middle income countries are already in "learning poverty" — unable to read a simple story, or out of school entirely. And as Covid-19 continues to wreak havoc on education systems, an already dire situation could get even worse.

Outcomes-based funding has the potential to significantly improve learning outcomes by tying funding to measurable results. For example, imagine that a Ministry of Education wanted to ensure that 100,000 out of school children got back into school.

Under the typical way of funding education, they would pay an education provider for a prescriptive set of inputs and activities, such as a certain number of hours of remedial education multiplied by the number of children in those programs, plus any costs for materials such as textbooks.

Then once the program was completed, the children would be placed into the classroom and the provider would be paid regardless of whether those children were truly prepared to go back to school.

There isn’t an educator in the world who wants children to fail, but what we are doing now isn’t working

Under an outcomes-based program, the Ministry would instead give providers more freedom to define the type of activities they think will be most effective. And they would be paid based on the improvement in the level of learning that children in the program are able to demonstrate, indicating that they are ready to move into the classroom.

This shifts providers’ accountability from simply delivering on set activities, to the results they are able to achieve. And it gives them much more flexibility to adapt and iterate in order to deliver the desired outcomes.

With 194 impact bonds registered by the Indigo impact bond data set, this shift in approach has already shown results through programs such as Educate Girls in India, where learning levels for students grew 79% more than their peers in other schools — almost the difference of an entire additional year of instruction. Now is the time to build on these successes at scale.

As with any relatively new approach, outcomes-based funding can be challenging to implement for the first time. But given its potential to deliver game-changing results, it is well worth the effort, and those that have already set out on the journey are enjoying positive impacts. To get started, government leaders need to ask themselves three questions: what, how, and why?

What results do you want to achieve, and what are they worth?

When exploring outcomes-based funding, a necessary first step is to define the outcomes you want to achieve. Is it ensuring children attain a basic level of literacy and numeracy? Or girls successfully transition from primary to secondary education? Or is success when a young person secures employment?

It’s critical that these outcomes are specific, tangible, and measurable so that you will be able to clearly identify whether they have been achieved. It’s also important that you understand your starting point.

Baseline data and well-designed evaluations will be essential for measuring progress and for assessing the effectiveness of previous programs. This may require some challenging conversations, but it is necessary to identify opportunities for improvement.

Defining objectives and ensuring tax-payer value for money can be challenging, but support is available at every stage of the goal setting and management process

Then you need to determine what these outcomes are worth. What is the price of a child’s education? We’re used to answering that question based on the cost of desks, textbooks, and teachers’ time. But we’re less accustomed to answering based on the social cost of a girl dropping out of school and becoming a mother far too young, or based on the potential boost in earnings for every additional year of education.

In defining outcomes and setting the prices for them, it is also crucial to guard against perverse incentives or “gaming the system.” Taking steps such as paying for aggregate learning gains can help remove incentives to exclude children whose test scores are low. And paying for progress — rather than absolute thresholds — can ensure there are incentives in place to work with the children with the biggest learning challenges.

Defining objectives and ensuring tax-payer value for money can be challenging, but support is available at every stage of the goal setting and management process. As outcomes-based funds continue to gain acceptance and grow in their popularity, templates and best practices are becoming more readily available to guide governments throughout the process.

How do you structure an outcomes-based program, and how do you mobilise support inside and outside government?

Once outcomes have been defined, getting started can seem daunting. Governments are used to designing programs with regimented sets of activities and clear inputs; designing a programme around outcomes instead puts that process on its head. But you don’t need to do it alone, nor do you need to build all the capabilities in-house.

While outcomes-based funding is still in its early stages, we are using our expertise developed at the Education Outcomes Fund to share knowledge with others across the sector and work with stakeholders to demystify the process. We’re creating a suite of services that others can use, with template contracts, case studies, and knowledge of what works, pushing open doors and allowing others to follow. And now, thanks to our hosting relationship with Unicef, we have the platform to share our knowledge on a global scale and bring others with us on the journey to improve learning for children around the world.

A structured approach to change management is critical when trying to shift such entrenched processes and norms

But beyond the technical elements of designing and executing an outcomes-based program, the biggest challenge is shifting mindsets. As a former government minister, I know all too well how inertia and resistance to change can sink innovative new approaches.

Despite increasing demands to deliver more for less, civil servants have often followed the same patterns for decades against a complex backdrop of changing political cycles. A structured approach to change management is critical when trying to shift such entrenched processes and norms.

This requires ensuring strong political will and insight into managing diverse sets of stakeholders at the top level and building technical capabilities to effectively commission for outcomes from the bottom up. As with any change management program, it requires a committed leadership working towards a well-defined shared purpose.

There must be regular communication to bring people along, and a concerted effort to build the capacity needed to embrace innovative approaches to contracts and providers, oversee program implementation, and make data-driven decisions throughout.

It also requires a change in how we approach partnerships. For outcomes-based programs to succeed, collaboration between governments, the private sector, and civil society must go further than the public-private partnerships of the past. Even at a time when government budgets are constrained, they are still the biggest source of funding, and account for 79 percent of all spending on education.

Governments have an opportunity to leverage this fact by engaging philanthropists in new ways, giving them a chance to amplify the impact of their funding by aligning with government-led programs and priorities.

Similarly, by engaging education providers in outcomes-based programs, governments can harness the energy and innovation that non-state actors can bring to the table and direct it towards achieving systemic change.

Why pursue a new approach?

We need to face the uncomfortable truth that our education systems are failing. There isn’t an educator in the world who wants children to fail, but what we are doing now isn’t working.

When you look at individual programs and school systems around the world, there are glimmers of hope and optimism; out-of-school children who get back into the classroom and leapfrog their peers, teachers who identify innovative approaches to spark a love of learning in their students, and government leaders who take the leap and try something different.

Outcomes-based programs are not a panacea, but they are a powerful tool that has already demonstrated significant impact.

If Covid-19 has had any positive side effect, it has demonstrated that dramatic change is possible in a short space of time. Now is the moment to change our approach, to be bold in our actions, and to build political will and public support by demonstrating the impact we could make. We owe it to the next generation. — Amel Karboul

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