Key EduFinance stakeholders convened through a series of engagements to capture and analyze learning and results on blended finance in the education sector
How do we effectively design and implement blended finance models to support broader education strategies across sub-Saharan Africa? This has been the underlying question guiding recent learning within USAID and CATALYZE EduFinance around its activities currently piloted in the Democratic Republic of the Congo (DRC), Kenya, Rwanda, South Africa, Tanzania, and Zambia (see summary of models below). EduFinance designs and leads a formalized process (Learning Agenda) to analyze, package, and disseminate learnings and results generated through these models.
So, what are we learning?
The capital exists to support scaled blended finance solutions in education sectors in developing countries focused on disadvantaged communities. There is a tremendous amount of energy, expertise, innovation, and capital in the education sector in the countries EduFinance pilots its models. The opportunities for blended finance in education that leverage public-private partnerships are extensive and sufficient to scale viable solutions across different education sector contexts. Making the case for blended finance in education, therefore, does not begin with a need to build new human and financial capital in local markets, but to leverage and partner with existing opportunities and assets.
The EduFinance story begins with public investment in education. EduFinance begins with the same core challenge that public education proponents are encountered with: How does it help narrow the gap between school demand and available resources? EduFinance engages private sector actors to leverage capital within and help close that gap, complementing public investments and contributing to broader education strategies. This fundamental alignment with public sector education strategies and outcomes is essential to the adoptability of education finance.
Host-country governments are essential development partners. It is essential to engage host-country governments at the on-set of activity design and at every level. Host country government support is necessary, for example, to ensure enabling policies such as effective and efficient registration and accreditation, a positive investment climate, and improving access to finance through creative uses of collateral for borrowers. More general government support and alignment is additionally required in countries where models are piloted, but do not explicitly focus on policy. Engagement with government officials at any level requires nuanced approaches and language that appropriately accounts for government priorities and demonstrates how education finance contributes to broader education strategies. USAID Missions are critical partners in building overall government buy-in.
Leveraging diversity in the marketplace. There are a variety of education finance groups and models at the global, regional, and local levels that are currently demonstrating how blended finance can be effectively applied to the education sector for various segments of disadvantaged communities. Importantly, different mixtures of capital are required to reach different types of populations; purely commercial financing is often the best fit for middle-income populations and above, while models that mix concessional and commercial capital allow greater reach to lower income populations, with more concessionary financing required for the most vulnerable. Scaling these models effectively is tied to how well these diverse models can be leveraged by EduFinance.
Improved education quality is a long-term prospect. Education outcomes and learning gains — whether tied to capital mobilization targets or not — take time to show results. When EduFinance initiated its activities across sub-Saharan Africa, the expectation was that capital deployed would occur roughly at the same pace as interventions to achieve education and learning outcomes, and that the access to finance would correlate to real-time learning gains. However, a key learning has been that a substantial amount of time is needed between when the initial loans are deployed and when the capital can contribute to learning and education gains. Moreover, significant time and effort is needed to measure education and learning gains. It can be challenging to set up baseline assessments, for example, that neatly match the pace of private capital mobilization. As such, the timeframe to demonstrate the impact of investment in education may not be the same as in other sectors, and patience is required.
Learning extends beyond the education sector. Other sectors such as agriculture offer important lessons and best practices for blended finance in education. These programs in other sectors have pioneered approaches to deploy business advisory service providers, for example, that can facilitate deals between financial institutions and small and medium-sized enterprises. This type of approach should be considered for education finance involving financial institutions and non-state schools who seek school improvement loans.
Blended finance applied to the education sector can significantly contribute to realizing gender gains. There have been demonstrated results and indications of great potential for improving gender equality and women’s economic empowerment through EduFinance. Women are key drivers of education-based blended finance solutions. For example, women entrepreneurs who run early childhood development (ECD) centers receive access to finance and technical assistance through EduFinance, in addition to enabling women to pursue careers outside the home through interventions in early childhood care and education.
Support of schools that serve disadvantaged populations requires a tailored monitoring and evaluation approach. A tenet of EduFinance activities is support (e.g., loans and capacity building) to schools which serve children from disadvantaged families (i.e., low-fee, non-state schools). This design element requires a tailored approach to Monitoring, Evaluation and Learning (MEL), and particularly, how EduFinance verifies data (i.e., whether they meet the threshold of a low-fee school) on schools receiving loans from financial intermediaries (which often are not equipped to collect and share data on their). A key learning is that this tailored MEL verification system further requires extensive coordination with individual financial intermediaries to ensure buy-in and understanding of the verification requirement.
Dissemination of learning and results is a cornerstone to making the case for EduFinance. A dedicated effort to reach and influence strategic stakeholder groups about blended finance in the education sector and learning and result outcomes is essential to making a persuasive case. This dissemination effort should be designed and implemented at a global and in-country market level, which requires active, coordinated communications across USAID/Washington, USAID Missions, Palladium, and implementing partners.
About USAID CATALYZE
USAID CATALYZE (2019–2027), implemented by Palladium, is a $250 million contract designed to mobilize $2 billion in private capital towards underserved sectors, geographies, and populations across 28 countries in Africa, Asia, Latin America and the Caribbean (LAC), and Europe. CATALYZE co-creates with Missions, Bureaus, and Independent Offices (MBIOs) to design multi-year, results-based activities that are managed by Palladium and implemented by a broad network of principally locally-led implementing partners.
This page is made possible by the support of the American People through the United States Agency for International Development (USAID). The contents of this document are the sole responsibility of CATALYZE implemented by Palladium and do not necessarily reflect the views of USAID or the United States Government.
 Currently in co-creation phase.