CATALYZE EduFinance expands Early Childhood Development access and quality in South Africa

USAID CATALYZE
4 min readNov 1, 2023

ECD business owners participate in an accelerator training in South Africa / Credit: Grow ECD

In South Africa, over 98 percent of children aged seven to 14 are enrolled in school. Despite this achievement, enrollment remains tirelessly low in the early childhood development (ECD) sector, with only 40% of children under four years attending ECD centers.

Early childhood care and education provide children with the foundational skills, including literacy, numeracy, and socio-emotional learning, needed to succeed. Participation in ECD boosts children’s school readiness and reduces the gap between socially advantaged and disadvantaged children, a prevalent issue in South Africa, where race, gender, and wealth inequalities limit access to quality ECD.

CATALYZE EduFinance partners with Kaizenvest — an emerging markets asset manager focused on the future of learning and work — to expand and improve ECD providers serving lower-middle to middle income families in South Africa and Rwanda. In both countries, ECD providers struggle to find adequate financing options to expand their facilities. Kaizenvest collaborates with local financial institutions to provide affordable financing and capacity building support for affordable education providers to enhance their education offerings, as well as improve learning outcomes for students.

Kaizenvest uses an outcomes-based lending model (‘Rewards and Recognition’) to incentivize quality improvements at supported affordable ECD centers. For example, an ECD center that borrows from Kaizenvest will be ‘rewarded’ with financial incentives, such as interest and/or principal rebates on the loans, based on their ability to improve development outcomes for supported children. These institutions are also publicly recognized through promotional materials that encourage uptake of improved ECD teaching techniques at other nearby centers.

As of September 2023, seven financial institutions and investors in South Africa have committed $4.75 million, while Save the Children Global Ventures (SCGV) has committed $1 million to bolster learning outcomes and improve access to capital for affordable education providers in Rwanda.

CATALYZE investment in Grow ECD Accelerator program unlocks capital for ECD entrepreneurs

In South Africa, CATALYZE partners with the ECD network Grow ECD (a social enterprise that works with a network of affordable learning providers) to fund their new accelerator program, which supports women-led, micro-ECD centers to access financing and key trainings to grow their centers and improve development outcomes for children who attend them. The program supports participants by building personal leadership, finance, and business skills, as well as improving understanding of the registration process and expectations to running a high-quality ECD center. The ECD centers involved in the accelerator are predominantly located in peri-urban areas across Johannesburg, Durban, and Cape Town, and mainly serve children aged two to five.

“Overall, I am so grateful for the opportunity to participate in the Accelerator program,” said Lynthesia Arense, an ECD Center owner from Cape Town. “The knowledge and skills I acquired have been invaluable, and I know they will continue to serve me well in the years to come. I believe that I will be able to access other opportunities as a result from this — I am going to run my preschool like a business, and I plan to take [it] to the next level.”

The partnership between CATALYZE and Grow ECD, via Kaizenvest, is expected to generate more than $1 million from CATALYZE’s initial investment of just $50,000 in training and technical support. Since May 2023, Grow ECD has approved 32 loans to ECD center owners across South Africa, equating to R 1,450 million ($80,500). CATALYZE’s training and technical support has upskilled ECD entrepreneurs so that they are better qualified for reduced interest rate loans, which improve the quality of their centers and education they provide.

What’s next?

As of October 2023, Kaizenvest has conducted baseline assessments for 67 out of a targeted 125 ECD sites that meet the Rewards and Recognition program requirements. The Grow ECD Small Business Accelerator Project has made significant strides towards improving the standard of early childhood development in South Africa by empowering, upskilling, and expanding access to capital for ECD business owners. 350 businesses have completed the program to date, and a growing pipeline of investment candidates leave the project poised to make a lasting impact on ECD businesses in South Africa.

Providing avenues for affordable learning providers to access finance will help improve and sustain learning outcomes for children and youth — particularly those from disadvantaged families.

About CATALYZE EduFinance

CATALYZE EduFinance (September 2019–2025) uses a blended finance approach to test models that improve and sustain learning outcomes for children and youth globally, particularly those most vulnerable. CATALYZE pilots multiple models in 12 countries across Latin America, the Caribbean, and Africa, supporting local education stakeholders in state and non-state education in early childhood development and early childhood care and education; primary and secondary education; technical and vocational education; and improving enabling environments. Pilot activities implemented by CATALYZE EduFinance are complemented by a global community of practice, the Education Finance Network.

This blog was made possible through support provided by the Bureau for Development, Democracy, and Innovation, Private Sector Engagement (PSE) Hub and Center for Education, U.S. Agency for International Development. The opinions expressed herein are those of the author(s) and do not necessarily reflect the views of the U.S. Agency for International Development.

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