Education Outcomes Fund links funding to measurable learning results

The Education Outcomes Fund aims to transform the lives of 10 million children by taking the concept of outcomes-based education programmes to a global scale. Impact investors will pay a key role in this innovative approach

With 1.6 billion children out of school at the peak of the health crisis, millions more children are now likely to reach adulthood without basic numeracy and literacy skills.

“Covid-19 has exacerbated a substantial learning crisis, that was already predicted to leave half of the world’s children failing to learn by 2030”, Jared Lee, chief programmes officer of Education Outcomes Fund (EOF) tells Impact Investor.

The EOF was set up in 2018 by the UK’s Education Commission and the Global Steering Group for Impact Investment under the chairmanship of Sir Ronald Cohen. The aim of the fund was to take the concept of outcomes-based education programmes to a global scale.

Two years later, EOF moved from being an independent entity to becoming a trust fund hosted at UNICEF. Its first two country programmes in Africa will be launched in the coming months, and have already attracted strong investor interest.

By targeting 900 primary schools in Ghana and Sierra Leone, the aim is to substantially strengthen education systems. The governments of both countries have set the objectives, in partnership with EOF and local stakeholders.

“We cannot afford any further loss of time. That’s why we are excited to prove how powerful and effective this approach can be.”

These projects come at a crucial time. “We cannot afford any further loss of time”, says Lee. “That’s why we are excited to prove how powerful and effective this approach can be. Of course, we first have to build a track record with the two country programmes. But we hope to replicate this concept as soon as possible in many other countries, given there seems to be so much potential for it to support governments and children around the world.”

Outcomes-based payments

The EOF explicitly states that it is not proposing non-state actor involvement in the core delivery of basic education. Instead, it aims “to fill gaps in the existing architecture, providing multilateral finance primarily to non-state actors that can support and strengthen the public education system. By bringing non-state actors into education through outcomes contracts, there is an opportunity to increase oversight, accountability and alignment to government priorities”.

That should be reassuring to critics like Dave Edwards, secretary-general of Education International, a network of teachers’ unions, who warned that a mechanism that draws in private sector investors seeking financial returns risks diverting resources from government programmes.

In Ghana, 70,000 out-of-school children will be reached with an accelerated learning programme, to re-integrate them into formal schooling. Additional support will be given to primary schools and teachers to improve learning outcomes for a further 100,000 children across the country. In Sierra Leone, the focus will be on improving the literacy and numeracy levels of 110,000 primary school children.

“By bringing non-state actors into education through outcomes contracts, there is an opportunity to increase oversight, accountability and alignment to government priorities”

The funding needed has been secured: $30 million for the Ghana programme, and $18 million for Sierra Leone have been made available through commitments by both governments, the UK’s Foreign, Commonwealth, and Development Office (FCDO), and smaller contributions from KOICA, the Korean development agency, and the philanthropic fund of Bank of America. 

The big difference with regular development programmes is that the actual payments by these organisations will only take place when the objectives have been achieved.

Both governments and EOF have set metrics in line with the formulated objectives, and established a price for each targeted outcome. The total of 900 primary schools is split into contractual ‘lots’ of roughly 100 schools each.

Bidding for contracts

Third parties are invited to bid for contracts. These are usual development organisations like Oxfam or Plan, educational organisations or social enterprises, that are already familiar with the countries or the sector involved, as well as a range of local organisations in each country.

To find the upfront working capital they will typically approach impact investors, and work with them to deliver results through an ‘impact bond’. At the end of the 3-4 year programme, independent evaluators will measure the results.

EOF will only repay the principal – plus a modest return – to organisations and impact investors if the measured results demonstrate positive improvement in outcomes for learning.

No ‘impact-washing’

EOF aims to deliver transformational results and pay for success when these are achieved, creating space for private investors to jump in. It’s an approach that requires a big mindset shift for all parties involved, according to Lee.

“No longer do governments and donors pay based on what they think will work, and then holding everyone accountable for what they are supposed to do, and sort of hoping for the best,” Lee says. “Instead, providers get a lot of flexibility to respond to the specific needs of the beneficiaries, and adapt their intervention based on what is working and what isn’t. All data driven. That’s really a radical shift.”

The same goes for the impact investment world, he adds. “We all know that one of the biggest challenges with the whole impact investing movement is ‘impact-washing’ and claiming SDG-linked results with activities that were going to happen anyway.

“I sincerely believe that the type of investment we are working with is the gold standard of impact investing, giving [investors] the opportunity for both financial returns as well as social returns that are directly tied to verified results and better learning outcomes for children.”

The call for proposals for both programmes has now been closed. EOF is now involved in the selection process, reviewing the bids.

Strong investor appetite

“There were initially quite a few sceptics”, says EOF’s chief operating officer Max McCabe. “People said: you’re not going to find investors who are willing to put their capital at risk. Looking at Sierra Leone, for instance. That’s indeed a tough environment to operate in.”

However, getting the investment needed for both programmes turned out not to be a big problem. “We were heavily oversubscribed for the programmes in both countries. The level of investor and other funding as part of the proposals was roughly three times of what we needed.

“It turns out there is actually more than enough capital to support these outcomes programmes,” says McCabe, adding it’s still too early to name the investors involved.

Examples of foundations EOF is partnering with – especially in the field of early childhood education – are Big Win Philanthropy and the Lego Foundation. A ‘playbook’ will be published on how results-based financing can support the expansion of early childhood programmes which are affordable for both households and governments.

Also, a programme is being developed in partnership with the City Administration of Addis Ababa, aiming to reach all 1.3 million children in the Ethiopian city by 2026.