Measuring education outcomes for outcomes funds: A balancing act across technical, systematic and programmatic considerations

• In Event: Highlighted Session: Four types of data required for results-based financing in ECD and education

Proposal

Outcomes funds, a results-based finance model, have gained substantial traction in recent years in the Global South. Notably, the Governments of Ghana and Sierra Leone launched the world’s two largest education outcomes funds in 2022 in partnership with the Education Outcomes Fund. These funds involve governments and donors contracting multiple service providers to achieve pre-agreed education outcomes aligned with their policy and program priorities. This working paper delves into the experiences and insights of the Education Outcomes Fund in co-designing these two recently launched outcomes funds focused on basic education, as well as three upcoming outcomes funds focused on early childhood education.

At the heart of effective education outcomes funds lies outcomes measurement, which serves three crucial purposes. Firstly, since payments are contingent on achieving outcomes, accurate and reliable measurement of those outcomes becomes paramount for the success of these funds. Outcomes must be accurately rewarded or penalized so that all stakeholders trust the process, which also ensures service providers stay incentivized to work towards pre-agreed outcomes. Secondly, careful consideration of the indicators used for measuring outcomes plays a pivotal role in minimizing perverse incentives and unintended consequences, such as cream skimming, cherry picking, and teaching to the test. Thirdly, regular data collection on outcomes enables service providers to adapt and refine their interventions based on real-time feedback, leading to improved program performance.

Selecting outcomes metrics involves balancing various technical, systematic and programmatic considerations.

On the technical front, metrics for payment must be chosen by assessing multiple factors. One essential technical factor involves transferring a manageable amount of risk to service providers by accounting for external dynamics beyond their control that could affect the outcome. Another technical factor concerns the measurability of the metric.

On the systematic front, the outcomes metrics selected must align with the government’s and donors’ policy priorities in the relevant sub-sector. Moreover, outcomes data collection should build on and strengthen existing capabilities and systems of the government and the service providers, generating positive system-level effects.

Programmatic factors that need to be considered in selecting outcomes metrics include flexibility of design, which allows service providers autonomy to adapt and innovate their interventions as needed to achieve the pre-agreed outcomes. Additionally, it is vital to consider the anticipated time for pre-agreed outcomes to materialize, cash flow timelines, and the estimated cost of achieving specific outcomes.

Author

• Max McCabe, Education Outcomes Fund