Incentives for Learning (IfL): A new blended edufinance initiative to catalyze learning improvements in low-fee private schools in Kenya

In early 2023 the SDG Impact Finance Initiative with support from Convergence, awarded a US$200k grant to a consortium which brought 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 first task was to set up a global finance for education fund to provide 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. This led to a partnership with Save the Children Global Ventures and the creation of a Generation Empowerment Fund (GEF), a blended fund focused on investments which improve outcomes for children in Sub-Saharan Africa (SSA) across learning, health, nutrition, sanitation and climate resilience. The fund is committed to engineering a robust pathway for impact investing through a child-lens that will maximize long-term impact.

Incentives for Learning (IfL) is the first investment of GEF, co-funded by IDP Foundation, The Waterloo Foundation, and Michael and Susan Dell Foundation alongside technical partner, the Global Schools Forum and local Kenyan financial partners Premier Credit and Jackfruit Finance. The purpose of the initiative is to catalyze learning improvements through incentive-linked loans to low-fee private schools (LFPS) in Kenya, which will reward schools for literacy and numeracy performance by reducing the cost of capital available to the schools for further improvements. While enrolment rates in basic education in Sub-Saharan Africa are near 100%, learning outcomes remain poor, with only one in 10 learners able to read and understand a simple text by age 10 (World Bank; UNICEF). Non-state schools educate a significant portion of learners in low and lower-middle income countries, often those who are hard to reach by government such as those in remote areas, refuges, informal settlements and other underserved communities. This initiative with look at tackling poor learning in non-state schools through incentive-based loans that will encourage school owners and leaders to focus on approaches to teaching and learner-development as well as school infrastructure improvements.

The share of students enrolled in LFPS in Kenya has grown rapidly in recent decades, the percentage of private primary schools grew from 24% in 2009 to 41% in 2019 (RELI). Low-fee private schools in Kenya are regulated by government but receive no formal support and therefore rely on local lenders to access capital for school improvements. Many are in constant need of basic improvements such as a new roof, clean water access, latrines, furniture and other building requirements. When these operational needs have been unmet the safety of pupils and staff has been put in jeopardy. Furthermore, in Nairobi’s urban informal settlements, less than four in 10 children can access a state school, while the LFPS that most children do attend have poorer learning outcomes (APHRC; USAWA). While we encourage governments to expand access to quality education to keep up with population growth and demand, immediate action can be taken to mitigate potential harm and poor learning outcomes in the informal schools that are playing a crucial role in extending education to underserved communities, with the support of microfinance.

IDPF has been successfully backing financial institutions who lend to LFPS for over 15 years in Ghana and 3 years in Kenya, with an average repayment rate of 96% repayment rate. We require all schools to meet minimum standards of safety to be operational and then support further improvements. But even when there are multiple loan cycles resulting in safer, cleaner, and more profitable schools, learning rates are still too low. There is also evidence from MSDF supported initiatives in India that show that embedding financial incentives linked to learning outcomes into loans to schools can positively improve a school’s performance in both literacy and numeracy. Therefore, this initiative seeks to not only create better access to safe school environments but also to drive a focus on classrooms that are conducive to improved foundational learning.

The creation of GEF and IfL show the power of collective action, and as we look forward to the initiative moving from the design to implementation stage next year, we continue to share ideas and insight and remain open to new collaborators. We’d love to hear from other education stakeholders who want to get involved or just know more. Get in touch at info@idpfoundation.org with the subject line ‘Blended Finance for Generational Empowerment’.