Demand-side financing is a way in which the government can finance private consumption of certain goods and services. In contrast to supply-side financing, where public funds go directly to suppliers, under demand-side financing consumers (or in the case of education, parents or students) receive a certain amount of money for specific expenditures. There has been considerable attention devoted to demand-side financing in the literature and the popular press. Approaches that allocate financial incentives to families in order for their children to attend school and programs that channel public funds for education through the beneficiary and their family are reputed to be more efficient uses of resources and more effective at improving outcomes than most supply-side only interventions. In most cases, demand-side programs are associated with increased school attendance rates and lower school drop-out rates. They can also be used in some cases to improve learning outcomes and to pursue other important goals such as gender equity and longer-term poverty reduction. One of the main constraints to better programs is the lack of rigorous impact evaluation. While the number of evaluations is growing rapidly over time, it is important to consider this key factor early on in the planning stages. More information about how the program operates, the problems it faces, and the impacts it produces can be used to improve its delivery, modify and expand it as necessary, and disseminate results. All this should be done throughout the life of the program, including the all-important pilot phase.
