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Innovative Financing: Four lessons other sectors can learn from education

Nicholas Burnett, Tara Hill   |   March 20, 2017   |   Comments

The education sector sometimes feels like the younger sibling in the global development family. We are often learning from other “big brother and sister” sectors, such as health and infrastructure, where a wealth of evidence as well as funding levels typically exceed those in education. On the one hand, this affords us the unique opportunity to learn from the successes (and failures) of work in other sectors. On the other hand, we rarely pose the question: “What can other sectors learn from education?”

It is undeniable that innovative financing in education lags behind other sectors. Nonetheless, R4D’s work shows that, while education may have less experience than other sectors, it still offers several lessons that other sectors would do well to apply. We highlight four below:

1. Focus on outcomes, not just inputs and outputs

The debate about whether to focus on inputs and outputs versus outcomes (also known as access versus quality) exists in every sector, but the education sector provides a prominent example of how a focus on inputs and outputs will not necessarily achieve desired results. An overemphasis on access-related targets, such enrollment and attendance, as well as inputs, such as infrastructure, led to a well-documented learning crisis over the past decade. It has become clear that while progress had been made in getting children into school, too few children are learning adequately. The education sector is therefore very sensitive to ensuring we are thinking about not just how to incentivize inputs and outputs, which are often the most tangible and easiest to measure, but also outcomes. R4D’s assessment of innovative financing mechanisms for the International Commission on Education describes several pioneering initiatives that are finding new ways to incentivize learning. This same thinking can be helpful in any other sector seeking to move the needle on outcomes.

2. Early and ongoing engagement with the government is key to success

Because education remains overwhelmingly publicly delivered and is seen as a human right in many contexts (arguably more so than almost any other sector), any innovative or results-based financing mechanism must factor in public sector support and effective government engagement if it aspires to be scalable and sustainable. R4D’s review of output-based aid projects in education showed that government engagement and support were critical factors for success and sustainability. While other sectors may rely less on the government than education, it is always good practice to be thinking about how to engage the public sector early on in any innovative financing scheme — especially if scaling up is an ultimate objective.

3. New focus on innovative financing should not be at the expense of traditional financing

The education sector receives significantly less international aid than many other sectors, and this amount has been steadily declining. This has created even more of a demand to identify new and innovative sources of finance. One possible side-effect of this phenomenon is that governments may focus too much on new, innovative sources of finance, and neglect their own substantial public financing commitments to education. Innovative financing should be viewed by local policymakers as additional and complementary to existing public financing (regular education sector budgets derived from general government revenues) — and not seen as a replacement. This same principle is equally important across all sectors. It was a tenet of the early work of the Leading Group on Innovative Financing for Development that is in danger of being forgotten.

4. Building the evidence base is essential

The evidence base around “what works” in education is much weaker than in other sectors. Conclusive knowledge about which education interventions will reliably bring about improvements and positive outcomes remains patchy and limited to particular interventions, such as conditional cash transfers. The evidence base regarding the effectiveness of innovative financing in education is even weaker. To address this well-recognized evidence gap, there is a significant and growing emphasis on evidence generation when it comes to innovative financing in education. Evidence should always guide the way — in education and across all sectors.

These four principles for effective innovative financing are particularly relevant in education, but they are still pertinent to our elder sibling sectors as well. They are not rigid requirements, but rather valuable insights that will ensure innovative financing serves as an effective complement to traditional development aid mechanisms for years to come. 

Nicholas Burnett is a senior fellow at Results for Development (R4D) who focuses on pragmatic and innovative approaches to important but neglected topics in education, including especially out-of-school children, adult illiteracy, innovative finance, ECD finance, non-state education, and the provision of global public goods.
Tara Hill is a knowledge and learning manager at East Meets West Foundation. She was formerly a program officer at Results for Development (R4D), where she focused on innovative financing (among other topics), and authored a study scoping the potential for output-based aid in the education sector.

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