Improving access to quality education through a blended finance fund

Last month we shared the exciting news that the SDG Impact Finance Initiative awarded a US$200k grant to a consortium which brings together IDP Foundation, GSF, Varthana, and Kaizenvest to improve access to quality education in Africa and South Asia by strengthening the affordable non-state sector’s contribution through a market-based, outcome-incentivised solution. The SDG Impact Finance Initiative with support from Convergence, the global network for blended finance, reviewed 76 applications, awarding seven with grants. The grant for this consortium’s proposal was the only one awarded to an education initiative. The Initiative is funded by the State Secretariat for Economic Affairs SECO, the Swiss Development Cooperation Agency SDC, the UBS Optimus Foundation, and the Credit Suisse Foundation

The consortium proposes to set up a Global Finance for Education Fund to provide US$35 million of catalytic and investment capital to financial institutions and intermediaries serving the affordable non-state sector (ANS) with school loans that have incentive-based terms to drive improved learning outcomes. The feasibility of the fund will be assessed through the design process, and is motivated by market potential across South Asia and Africa, with an estimated $4.9bn market for education financing in Sub-Saharan Africa. IDP Foundation (IDPF) will work with the consortium partners to design and pilot a learning outcomes incentive-based loan product for low-fee private schools (LFPS) based on the learnings from an active approach by Varthana in South Asia.

IDPF has been a pioneer in the education finance sector, first proving the financial sustainability of a model supporting schools that reach lower income segments through their Rising Schools Program launching in 2009 in Ghana. This award is a testament to the recognition of the success and market potential of this model today. The foundation’s ambition over ten years ago was to support LFPS that were reaching communities underserved by state schools. The program was designed as a complement to the national education system by filling the gap between the rich and the poor. Now there is the opportunity to scale the model to have global impact, something that has always been part of IDPF’s vision.

IDPF is committed to developing this unique financing vehicle which will serve as an intermediary to anchor funders, investors and foreign aid agencies , and to show how the lower income segment can be reached with quality education whilst alleviating pressure on overwhelmed public education provision. IDPF recognises that the education landscape today is a result of the demands of parents who want better opportunities for their children. Single proprietor independent low-fee private schools are an organic community-level solution to growing demand. Across Sub-Saharan Africa and South Asia at least 30% of school-going children are educated in the Affordable Non-State Sector (ANS). However, the schools that serve the most poor are often operating with little to no support from government or sustainable philanthropy and foreign aid.  They are almost always excluded from affordable capacity building loans (i.e. a business loan).

This global investment fund would be paired with a sister grant fund for technical assistance (with a starting goal of $5-10m in grant funding) to support the local financial institution so they can design loans that are tied to learning outcomes. These designs will include appropriate measurement and assessment tools to ensure monitoring quality improvements is in place, and that they are reaching the appropriate communities.