SDG Impact Finance Initiative, with the support of Convergence, awarded a feasibility study grant of USD 200,000 under its Window to Global Schools Forum for the design of Global Finance for Education Fund. The fund is a consortium, which is funded by Global Schools Forum (GSF), Kaizenvest, IDP Foundation, and Varthana. It aims to improve access to impact-linked financing for education across emerging markets worldwide.
According to the UN, approximately 101 million (9%) of children in primary and lower secondary school fall below the minimum reading proficiency threshold. More recently, with the impact of COVID-19, 24 million learners from pre-primary to university risk not returning to school. This loss in education can lead to an estimated USD 10 trillion in earnings, which is almost 10% of global GDP.
The non-state education sector is an important player in accelerating learning recovery. Many children globally are enrolled in low-cost private schools (LCPS). These LCPS have an average monthly fee, mostly lower than the daily minimum wage, making them affordable to families who struggle financially. However, quality and equity are often challenging for LCPS due to financial constraints, ultimately leading to poor learning outcomes for students.
The Global Finance for Education Fund addresses the quality and equity gaps faced by LCPS through: 1. Increasing the amount of capital available for on-lending to LCPS, and 2. establishing a clear reward system that links financial loans to the LCPS with the improved learning outcomes of marginalized groups. The fund aims to directly improve the schooling conditions of 520,000 low-middle-income learners enrolled in LCPS in the emerging market. Through leveraging GSF’s network of financial institutions, the consortium aims to mobilize private and philanthropic investors and fund more than 2000 LCPS through impact-linked finance instruments.
Design question and learning potential for the market: How can a blended finance education fund improve access to impact-linked-financing for LCPS?
The USD 35 million consortium comprises a USD 25 million investment fund and a USD 5-10 million Technical Assistance (TA) fund. The investment fund aims to mobilize private investment at scale for lending to low-cost private schools, education providers and workforce readiness solution providers. This fund will provide various financial instruments, including Social Impact Incentives (SIINC), Impact Linked Loans, and Social Impact Guarantees (SIG) to financial institutions and intermediaries for on-lending to educational institutes. The technical assistance fund will support experimentation with new or combined instruments to test the impact on education outcomes. The TA fund will also help with community-building practices to strengthen impact measurement in education.
Through the consortium's blended finance design, GSF can attract capital from both private and philanthropic sources, enabling low-income children under the age of 18 to have complete, equitable, and quality primary and secondary education.
