Outcome Funding

Over the years, the market for innovative funding for the development sector in India has been expanding. Development Impact Bonds (DIBs) are a new way of funding projects that open avenues of leveraging multi-donor funds focused on predetermined outcomes, thus leading to greater impact.

Within this form of financing, an investor (or group of investors) provides up-front financing for the operations of a service provider, and receives a return once independently-verified results have been achieved. If outcomes are met or exceeded as verified by independent evaluators, philanthropic donors pay back the investors’ principal investment along with a pre-agreed rate of return.

Concerned with the quality of education, the Tata Trusts have invested in outcome-based funding to achieve their goal of strengthening the education system. The overall vision is to enable a market for innovative financing in India to support improvements in the quality of education with a focus on programmatic outcomes and designed programmes that are scalable, measurable and impact education outcomes.

For example, the Trusts have invested as a knowledge partner in Quality Education Development Impact Bond QE DIB), along with like-minded partners, to address the goal of improving the quality of learning in the country.

QE DIB, launched in 2018, seeks to develop a new funding approach that is focused on learning outcomes across primary grades by working across four selected programmes to improve the quality of literacy and numeracy across the country. The goal is to ensure that maximum impact for the provided investment is achieved.

The Trusts have also provided seed support to Social Finance India (SFI) in order to explore the ecosystem of innovative funding in the country. This support will help SFI to collaborate with governments, non-profits, for-profit social enterprises, philanthropic foundations and impact investors to create innovative financing solutions to improve social outcomes. To achieve this goal, SFI established the India Education Outcomes Fund (IEOF) focusing on poor and low-income students in government and affordable private schools. Support is provided to interventions across the K-12 segment, from enhancing school readiness at kindergarten level and improving learning outcomes at primary school level to using Ed-tech for enhanced learning in secondary education, preparation for competitive examinations and vocational training.

The Trusts’ interest in outcome-based funding is in line with its focus to create meaningful and measurable impact in strengthening educational systems. This innovative approach offers the Trusts the time and space to assess outcomes. The learnings of this funding will help governments make informed decisions to achieve more robust education results.

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