Originally published on Center for Strategic and International Studies’ Blog | CSIS Prosper
Last month world leaders adopted 17 Sustainable Development Goals (SDGs) to be achieved by 2030. In addition to serious debates about their achievability, one main concern has been around the issue of financing the SDGs. The goals come with a high price tag of $2-3 trillion annually, and, based on current estimates, almost all of the goals will face serious financing limitations. To achieve SDG 4 on education by 2030, for instance, the world needs an extra $39 billion annually.
While a funding shortfall for SDG 4 will present certain challenges to the goal of achieving “inclusive and equitable quality education…for all,” it will likely affect more vulnerable areas of education, including girls’ education, most harshly. Enrolling the global out-of-school population of girls in school; ensuring they continue through the secondary level; and enabling them to achieve literacy and numeracy are largely dependent on financial resources.
Economic and cultural impediments often make girls’ education expensive. While the economic incentive of forgoing school for labor harms both boys’ and girls’ education, some cultural expectations such as bride price harm girls’ education particularly. Furthermore, altering the socio-cultural norms that do not value girls’ education and in some instances even do not allow it, requires interventions beyond just building education infrastructure, facilitating curriculum development, and funding teachers’ payrolls.
While expensive, investing in girls’ education has important financial, social, and human development returns. A one percent increase in the share of women with secondary education improves annual per capita growth by 0.3 percent, and one year of secondary education for a girl delivers a 25 percent increase in her lifetime income. A woman with seven or more years of education marries four years later and has two fewer children. A literate mother’s children have 50 percent more of a chance of reaching their fifth birthday and are 50 percent less likely to be out-of-school. Women spend 92 cents of each dollar on education and food for their children compared to men, who spend only 40 cents of a dollar on this.
With education finance currently 80 percent dependent on traditional sources of financing like public funds and Official Development Assistance (ODA), it is imperative to look for non-traditional sources of funding to close the resources gap for girls’ education. In the last 15 years the notion of using innovative financing instruments to generate additional sources for development has been regularly promoted at global international development stages including the Third International Conference on Financing for Development in Addis Ababa, Ethiopia in July 2015. Innovative financing includes approaches such as frontloading aid, Advance Market Commitments (AMCs), debt swaps, debt buy-downs, and various types of taxes and bonds.
Innovative financing mechanisms have been so far explored and applied most widely in two areas of development – environment and health. The Organization for Economic Cooperation and Development (OECD) estimates that from 2002 to 2010 $31 billion and $5.5 billion were raised for environment and health, respectively, using innovative schemes. As we move forward towards 2030 finish line for SDGs, innovative financing mechanisms could have the potential to mobilize additional resources for girls’ education.
A three-year pilot project that started in 2014 to improve girls’ education in Rajasthan, India through a Development Impact Bond (DIB) provides the first-ever experiment of a DIB in a developing country. A DIB – also referred to as a Social Impact Bond (SIB) or Pay for Success (PFS) – is an instrument in which a private investor puts up capital up front for an agreed to development goal; an NGO implements the program; and an interested donor agency or foundation then reimburses the private investor for the amount invested plus a return percentage – if the project achieves targeted outcomes.
For the Rajasthan project the UBS Optimus Foundation invested $238,000 – with an interest rate of 7-13 percent – to enroll 10,000 girls in school and improve literacy and numeracy outcomes for 20,000 girls and boys in the 150 poorest performing schools. While results of the investment are not yet available, the project has much promise. It is outcome-driven, financially efficient – costing less than $10 per child- and limits risk for the donor.
While not specifically linked to girls’ education there have been some other examples to date of innovative financing for education. Between 1998 and 2008 there have been 18 debt-for-education swaps converting $608 million worth of loans to $283.2 million worth of local education support. Another innovative mechanism that has been used in education is debt buy downs. In 2003 the United Kingdom’s Department for International Development (DFID) bought down $34.5 million of a $100 million International Bank for Reconstruction and Development (IBRD) loan to China to encourage China coordinate with the World Bank on education in poor provinces.
Some development institutions have initiated research on innovative finance mechanisms. In a Brookings Institution and United Nationals Girls Education Initiative (UNGEI) survey on innovation in funding girls’ education, almost half of the 44 funding institutions that responded to the survey reported using at least one type of innovative financing mechanism. These include impact investing, program-related investment, and leveraging corporate assets. So far, some mechanisms have shown potential and some have not.
While careful research and study of these mechanisms for girls’ education is important, the 15-year timeframe of the SDGs calls for prompt action. Innovative financing champions and global education strategists need to move faster in testing potential mechanisms and scaling up the ones that prove their success. Girls’ education – particularly in conflict affected countries and among refugee populations where the education gap between girls and boys is wide – needs strategic, smart and timely solutions.
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