What can the private sector do to address the education funding crisis?


By Ray Douse, Co-Founder of Whizz Education

The funding gap is widening

Education Finance Watch, 2021, the annual joint World Bank and UNESCO Global Education Monitoring report, has brought into sharp focus the pandemic’s likely effect on funding for education, especially in low and lower middle-income countries. The past decade has seen growth worldwide in real education spending, especially in low-income countries (LICs) and lower middle-income countries (LMICs). However, COVID-19’s adverse effect on LIC and LMIC household budgets, pandemic-induced reductions in aid funding and declines in the education budgets of two-thirds of the poorest countries during 2020 are likely to bring this trend to a shuddering halt.

Disparities in spending per child between rich and poor countries are widening at a time when yawning gaps in educational achievement have been exacerbated by children in most LICs and LMICs being out of school for a year with limited remote learning opportunities. The annual funding gap for the poorest countries striving to achieve SDG 4 by 2030 is thought to have increased by a third to $200 billion. This is largely explained by the huge need, brought on by COVID-19, for remedial programmes to support the return to school of the most marginalised learners, help them catch up and maximize their chances of staying in school.

The gargantuan funding needs for an effective catchup following COVID-19’s disruption of education are daunting enough for rich countries. In the UK, the Institute for Fiscal Studies has estimated that the cost of providing the average half a year of day-to-day schooling lost by UK school children is £30 billion, dwarfing the funding for the National Tutoring Programme thus far committed by the Government. Meanwhile, the U.S. Federal Government has allocated $122 billion to its Elementary and Secondary School Emergency Relief (ESSER) Fund to top up the spending already committed by individual states and municipalities for public school funding.

The $200 billion SDG4 education funding gap in the LICs and LMICs appears vastly in excess of the capacity of traditional sources of finance for education in these countries, namely student households, LIC/LMIC Governments and agencies providing Official Development Assistance (ODA). In 2018-19, these three sources together provided just $28 billion to finance education in LICs of which households contributed $10 billion, Governments $12 billion and ODA $5 billion [JM1]. In LMICs, households provided $94 billion, Governments $200 billion and ODA $7 billion, a total of just over $300 billion. Only new actors with deep pockets focused on educational outcomes are likely to change this arithmetic.

A two-part model for addressing education’s funding gap

Our suggestion of a brand new potential contribution to the SDG4 funding gap would bring together:

(a) private sector educational technology [SH2] companies motivated to work with LIC and LMIC administrators to deliver educational outcomes; and

(b) sources of finance prepared to tie the returns on their capital to such outcomes.

For example, Whizz Education’s participation in Project iMlango in Kenya over the period 2014-2021 demonstrated the improvement in learning which online maths tutoring is able to achieve in LMICs when deployed as part of a holistic programme with a multi-stakeholder approach. The key ingredient was a project structure allowing teachers to receive both training in the deployment of the technology, and in interpretation of the data, [SH3] and constant support in ensuring students access it regularly. Course corrections, led by Whizz Education’s on-the-ground support staff in Kenya, led to the doubling of learning rates in mathematics over the life of the project. Vital to the success of this approach is the in-built, real-time tracking of student learning levels. This significantly reduces the cost of monitoring and evaluation since data collection and analysis is an automatic by-product of students’ learning.

Private sector funds could be mobilised to finance outcomes-based supply contracts where the suppliers of the technology have proven execution capability, the outcome metrics are tightly defined and proven to be reliably collectible, in-country educational authorities buy in to the initiatives, and the obligations of such authorities to pay in the event of educational outcomes being achieved are guaranteed by a credible third party. Development agencies would serve as credible guarantors, the type of intervention which USAID and Deloitte propose in their 2019 paper ‘Mobilising Private Finance for Development: A Comprehensive Introduction’. Even better, new actors such as Corporate Social Responsibility funds could be encouraged to contribute to educational projects where the suppliers had already demonstrated that minimum agreed student learning outcomes had been achieved. Results-based payments are also a means of appealing to truly private sector funders whose interest in participation in development finance is not altruism but profit. The G20 Insights Platform has recognized how important it is to incentivize the private sector in support of all the SDGs. [JM6]

A call to action, a meeting of parties

Whizz Education suggests that, as soon as the lifting of COVID-19 travel restrictions allow, the G20 development agencies call together interested parties for a conference focussed specifically upon the expansion of education funding. Speakers should include the educational service providers with proven approaches to achieving positive student outcomes at scale in a development context, the private sector funds interested in providing finance for outcomes-based contracts, intermediaries experienced in the Development Impact Bond sector, Ministries of Education wanting to broaden their sources of finance, experts in the measurement of educational progress, educational supply contract lawyers, and representatives from CSR and private educational foundations.

We all instinctively know the incredible returns available from successful investment in education. Millions of children now need the world’s most innovative minds to come together to solve the horrendous gap in SDG4 education finance. As Professor Luigi Zingales of the University of Chicago states: ‘The biggest benefit of finance…..is to provide opportunities to people’. He was thinking mainly how finance could enable those who hadn’t been born rich, or who hadn’t saved a long time, to start companies. Innovation in finance for education to open new funding floodgates will contribute, in our view, an even bigger benefit.