Designing Outcomes-Based Financing for Every Learner: Embedding Equity in Education Finance Models

• In Event: Financing Education for Social Cohesion: Blended Finance Approaches in Emerging Economies

Proposal

Outcomes‑based financing (OBF), including development impact bonds (DIBs), is increasingly adopted to improve accountability and results in education funding. While these models can catalyze learning gains by tying payments to outcomes, without intentional inclusion strategies, they risk excluding the learners who most need support. This paper argues for an equity‑centered design of OBF mechanisms, drawing on evidence and practice, with five key levers to embed inclusion by design.

1. Target marginalised groups directly
By setting quotas or eligibility criteria that focus on disadvantaged populations, OBF programs prioritize inclusion from the outset. Examples include the UK’s Fair Chance Fund—targeting homeless youth—and the Skill India Impact Bond, which required at least 60% of participants to be women.

2. Use differentiated payments for harder outcomes
Contracts can reflect the additional effort required to reach certain learners—by offering higher payouts for outcomes like enrolling out‑of‑school girls or children with disabilities. For instance, the Educate Girls DIB allocated 20% of payments for enrolling the hardest-to-reach learners.

3. Build flexibility to adjust mid-course
OBF contracts can include adaptive mechanisms to respond when new marginalisation patterns emerge during implementation. For example, they can allocate reserve funding to support groups that become visible only mid-program, such as language minorities, based on live data insights.

4. Reward intersectional impact
Compounded disadvantages should be explicitly recognized in OBF design. Instead of separate rewards for gender or disability, contracts can offer additional incentives for, say, girls with disabilities who achieve targeted outcomes—ensuring those with multiple barriers are not overlooked.

5. Blend finance with capacity building for inclusion
Financial incentives must be coupled with technical support so that underserved providers can participate fully. Consortium-based OBF initiatives—such as LiftEd—embed inclusion by combining implementation partners and providing parallel grants for inclusive practices and capacity strengthening.

These five levers elevate OBF from a financing innovation to a vehicle for equitable system strengthening. Structurally incorporating inclusion:
- Redirects resources toward learners farthest from proficiency, narrowing equity gaps.
- Encourages adaptive, context-sensitive implementation, enhancing legitimacy and trust.
- Enables system integration over one-off pilots, laying the groundwork for sustainable reform.

This approach aligns financial incentives with broader social cohesion goals: advancing inclusion and trust by ensuring no child is left behind. As blended finance gains ground in education across emerging economies, embedding these equity levers in OBF and DIB models ensures that they are not only effective but just—and that every learner benefits, not just the easiest to reach.

Author

• Dayoung Lee, Dalberg Advisors