The first outcomes fund (OF) was established in the UK in 2012. Since then the number of OFs has steadily increased and they now exist in a variety of contexts around the world. As OFs are evolving over time this document will be updated to reflect emerging developments. Please send us information on your experiences, challenges and recommendations by emailing email@example.com.
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A primary goal of OFs is to improve services and programmes that tackle complex social issues by scaling up the outcomes-based contracting market (particularly by funding impact bonds and other payment-by-results mechanisms). In their broadest sense OFs signal a commitment to pay for measurable social outcomes at scale, rather than paying for activities or outputs.
There is considerable variation in the way OFs are being designed and there are currently several models under development. A simplified operational process for OFs follows four key stages:
Diagram 1 provides a stylised depiction of how an OF works. Reading the diagram from left to right, it shows the general process starting with the capital provided by potential funders and concluding with the payment for social outcomes, which is only made when social impact has been verified by an outcomes evaluation.
Diagram 1 has a series of operating assumptions that it is important to clarify, given the different models that could be launched in reality.
The primary goal of OFs is to improve services that tackle complex social issues, thereby improving social outcomes. OFs aim at scaling the use of outcomes-based contracts so as to incentivise service providers to achieve improvements in social outcomes for specific target populations. Through greater collaboration and synergy between actors, they aim to contribute to more effective solutions for addressing complex social issues.
Nevertheless, OF are not always able to achieve the outcomes targeted by the outcomes-based contracting projects. The achievement of outcomes relies on many factors linked to the local implementation context and the outcomes-based contracting market in each targeted geography and policy area. The capacity of local actors to administer OFs and to apply a flexible approach to learning may also affect the successful adoption of the approach.
At present the evidence on the effectiveness of OFs themselves and of the contracts funded by OFs is limited. You can read more about the evidence on impact bonds in our introduction to impact bonds. Currently there are promising signs but it is too early to tell.
Alternative Outcomes Fund models: the spectrum of OFs
OFs vary considerably in their scale:
The time frame allocated, population, policy theme and geography to be targeted also vary.
Here are the main ways that OFs differ:
We have compiled a list of readings that will be helpful to further your knowledge of outcomes funds.
Government Outcomes Lab (2016). Building the tools for public services to secure better outcomes: Collaboration, Prevention, Innovation. Evidence report. Click to download: https://golab.bsg.ox.ac.uk/documents/176/BSG-GOLab-EvidenceReport.pdf
Government Outcomes Lab (n.d.). An introduction to outcome-based contracting.
The Education Outcomes Fund for Africa and the Middle East (2019). Flyer: https://gsgii.org/wp-content/uploads/2019/04/EOF_FLYER.pdf.
The GO Lab has put together this guide with help from many members of the team. We are also grateful to Social Finance who reviewed this guide.
We have designated this and other guides as ‘beta’ documents and we warmly welcome any comments or suggestions. We will regularly review and update our material in response. Please email your feedback to firstname.lastname@example.org.