Impact Bonds for more and better financing for education: Towards examining the theory of change

• In Event: Highlighted Session: Impact Bonds for Education: Does innovation in financing address equity and quality challenges?

Proposal

Social and Development Impact bonds have gained popularity in the last decade as options for making additional finance available for education and improving the efficiency and effectiveness of the available financing. However, little research has been conducted to evaluate if and how innovation in the financing approach itself has contributed to achieving the Sustainable Development Goal 4 (SDG 4), notably in improving inclusive and equitable quality education.

Impact bonds use results-based payment contracts between the service provider, private investors and the ultimate outcome payer, which could be the government, development agency or a philanthropic organisation. Linking payments to achieved results, whether outputs or outcomes, means that significant resources and attention are given to measuring the results of interventions funded through Impact Bonds. Often, this involves an independent evaluator assuring all stakeholders of the credibility of the stated results. To date, most education impact bonds have achieved the minimum targeted results. As with other new approaches to development, the early success of initiatives under Impact Bonds is coupled with a high level of resource investment in “piloting” the new financing approach. Process evaluations of these initiatives have highlighted the high transaction costs and complexity of multi-stakeholder arrangements. This, in turn, has made critics question additional finance claims of the Impact Bonds.

Impact bonds have an internal logic on how this financing approach improves the delivery of social programs while bringing significant cost savings to the government or social sector donors. Currently, no research exists that examines or provides empirical evidence on the validity of this internal logic. In this presentation, the researchers will elaborate on the conceptual framework, and the implicit theory of change envisioned in Impact Bonds for education. It will specifically link the financial structuring and related service delivery management components to reach the disadvantaged and marginalised populations. It will conclude by providing a research agenda on how evidence could be collected to understand the contribution Impact bonds make (or do not make) towards achieving more and better financing for education.

Authors

• Arushi Terway, NORRAG

• Marina Dreux Frotté, NORRAG