Results based financing in education: is it a challenge to aid effectiveness?

coverOn the occasion of this week’s Global Partnership for Education (GPE) Financing Conference held in Dakar, Senegal, the GEM Report has released a new policy paperon results-based financing (RBF) in education, a financing modality being promoted strongly by some donors.

Donor countries are under increasing pressure to clearly demonstrate to their citizens what aid projects their taxes are funding and whether they provide good value. In many cases donors have been re-writing the aid contract, increasingly tying to the achievement of specific measurable results.

Results-based aid is intended to strengthen accountability. It can also increase awareness among developing country partner governments of the need to pay closer attention to the results ultimately sought. It can help build a culture of monitoring and evaluating results. However, the underlying assumptions of how the approach works may not borne out in practice, which could reduce aid effectiveness. Evidence on the success of results-based aid is still scarce. This calls for more debate on the advantages and disadvantages of the approach and how to adapt it before expanding it.

An increasingly popular approach to financing education

The origins of payment by results in aid may be traced back to the 2005 Paris Declaration on aid effectiveness. Many such approaches have emerged, which vary by the level of result targeted (ranging from institutional processes to learning outcomes) and the type of reward offered (ranging from the release or not of a specific amount to disbursements proportional to the level of the result achieved).

The World Bank has been a particularly strong supporter of the idea that results-based financing helps strengthen education systems and committed at the World Education Forum in 2015 to doubling results-based education lending to US$5 billion between 2015 and 2020. Other donors have also been supportive. For example, the government of the United Kingdom says that this “new form of financing that makes payments contingent on the independent verification of results … is a cross government reform priority”. Its Department for International Development (DFID) called its 2014 payment by results strategy Sharpening Incentives to Perform and promised to make it “a major part of the way DFID works in future”. The new aid reforms announced by DFID’s former Secretary Priti Patel in October 2017 included expanding the department’s use of payment by results.As part of its new funding model, GPE introduced the principle of allocating a fixed 70% to requirements and a variable 30% to results in 2014. In January 2017, five countries had a variable part in their Education Sector Program Implementation Grant. Variable disbursement is dependent on achieving targets in country Education Sector Plans (ESPs) and verified results in equity, learning and system efficiency. For example, Malawi must increase the female to male teacher ratio in grades 6 to 8 in the eight most disadvantaged districts by 10%. The Democratic Republic of Congo must reduce out-of-pocket education fees by 20% for the poorest one fifth of households.

Results-based aid may not fulfil the principle of country ownership

Donors say countries are increasingly enthusiastic about adopting results-based approaches, but the concept originates with donors. Recipient countries are rarely if ever using results-based approaches to manage domestic resource allocation, aside from block grants to local governments, which themselves derive from donor programs. Non-aid budget allocation in recipient countries rarely displays such flexibility and willingness to introduce risk.

The principle of alignment with country systems is inconsistently applied. Donors often favor channeling resources through non-government providers, supporting private management of public schools, voucher programmes and school construction. Yet investment to strengthen public institutions’ capacities must not be neglected. In addition, there is evidence, e.g. from the DFID Girls’ Education Challenge, that most projects have no plan for scaling-up or making their approach integral and sustainable within the public education system. Moving towards one principle of aid effectiveness may therefore undermine others.

If the aim is to achieve a stronger government focus on results, a reasonable question is to ask whether it would be better for donors to build the capacity of national statistical systems rather than hoping that results-based aid contracts will instill an overall result orientation.

An evaluation of the DFID Girls’ Education Challenge programme commended the results orientation of a diverse set of projects but found that most providers faced monitoring and evaluation capacity challenges and that a push towards reaching more girls impaired the aim of reaching the most marginalized. The evaluation also suggested that financial incentives were not necessary to maintain focus on results. The Independent Commission for Aid Impact’s (ICAIs) evaluation equally praised the fund’s innovative features but questioned whether interventions could be sustainably linked to public systems.

Thereby placing this approach at adds with system reform and institutional strengthening.

A number of questions are still open

Do narrow outcomes risk diverting energy to short-term results that are potentially incompatible with, or come at the expense of, long-term development?

Results-based approaches are driven by short term funding cycles and projectized approaches as the results we might truly aspire to take place over the longer term. This is especially true of education and the desire to focus on learning outcomes. Education is not a quick win business. UNesco23FF - donors bus

Does the approach dampen innovation and motivation?

Ultimately, shifting much of the risk to providers can cancel out the promise of innovation that payment by results approaches hold. Development aid’s effectiveness is likely to increase when providers innovate to achieve education results. However, they may be reluctant to risk innovation in delivery if payment depends on certain success. Superimposing external incentives may undermine intrinsic motivation. Actors with high intrinsic motivation may reduce their efforts, perceiving such controls as questioning their commitment. Moreover, being deprived of resources for not achieving the result despite appropriate efforts may be demoralizing.

Payment by results may work best where it is needed least

Education systems with a clear sense of purpose and objectives aligned with donors that can afford to take risks – but also those that are less likely to need aid – are those perhaps best suited to the approach.

GEMrbf 3'Payment by results could be just another attempt to impose conditionality on aid, and one that does not completely address issues that have obstructed aid conditionality in the past. A key conclusion of the high-profile World Bank review of aid conditionality in the early 2000s thus remains relevant: “[Donors] should approach the design of conditionality with a degree of humility, recognizing that the problems faced by developing countries are complex in nature and often do not lend themselves to a single solution”.

Basing disbursements on uncertain outcomes fails to resolve – and maybe exacerbates – the unpredictability of aid flows, a long-standing criticism of current donor practices. The approach seems to dismiss outright the idea of upfront and predictable funding to alleviate financing gaps in development.

There is little indication that the dynamics of accountability are changing for governments whose need for aid to build robust institutions remains as strong as ever. The question of the accountability of donors keen to shift risk onto the aid recipients least prepared to bear it is still open. We should walk before we run.

The GEM Report’s Director Manos Antoninis will host a debate on results-based financing in education at 13:10 on Thursday February 1, at the GPE Replenishment 2020 conference. You can follow the conversation via the Liveblog from the GPE Financing Conference.

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One Response to Results based financing in education: is it a challenge to aid effectiveness?

  1. Pingback: Results based financing in education: is it a challenge to aid effectiveness? – ReliableGuidance

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