Comparative Analysis of Performance-Based Funding and Block Grants in Higher Education

Abstract

Financing of higher education in Pakistan has been based on block grants, but there is a new debate on performance-based financing (PBF) as a tool to promote accountability and performance. This quantitative research is a comparative study of PBF and Block Grants (BG) in 5 Pakistani public sector universities in the years 2020-2024. The variables and parameters measured were the graduation rates, research publications, faculty/student ratio and budget utilization. The institutional performance was measured based on the two funding mechanisms using descriptive statistics and regression models. The findings demonstrate that the university that fulfills the PBF requirements has achieved substantial improvements in student success and research productivity but the universities that are funded by block grant mechanism are more financially stable and flexible in planning but the performance improvements are less. The paper concludes that hybrid model of PBF with sustainability of BG can provide a more functional and fairer incentives to performance system to develop provision of higher education in Pakistan.