Investing in Early Learning: Exploring Innovative Financing in Early Childhood Care and Education

Group Submission Type: Formal Panel Session

Proposal

Inclusive and quality early childhood care and education (ECCE) can lead to outsized benefits in children’s development and learning outcomes. High quality ECCE interventions focus on preparing children for primary school, and can result in improved learning outcomes including school readiness, socioemotional development, and improved cognitive abilities. Studies show children who receive ECCE test almost one year ahead of children without ECCE. Investing in ECCE yields a compounding effect by diminishing the likelihood of future achievement gaps and the related costs required to mitigate these gaps. Additionally, ECCE sets children on a positive trajectory to advance their learning outcomes and reduces dropout rates. By providing the critical foundation for literacy and numeracy, early learning experiences are not only key to academic success but also necessary for effectively engaging with the digital tools and platforms of modern society.

However, as highlighted by UNESCO and UNICEF’s Global Report on Early Childhood Care and Education, nearly 60% of children in low-income countries lack access to early learning opportunities. To achieve national targets of providing at least one year of organized learning before primary school, low-income and lower-middle-income countries face a significant challenge: they must close an annual financial gap of USD 21 billion and recruit over six million educators by 2030.

Despite efforts to expand access to universal and free pre-primary education, governments are struggling to create fiscal space to ensure access to these services. In this context, alternative financing mechanisms can play an important role. These innovative financing approaches can support governments in expanding access to and improving the quality of ECCE services by offering creative solutions that go beyond traditional funding methods and engaging the non-state sector. With strong stewardship from governments with adequate regulatory capacity, this can present an opportunity for the rapid and equitable scaling up of quality ECCE services.

Innovative financing in ECCE is a relatively new approach, and there is still limited evidence on what strategies are most effective. As the field continues to evolve, it is crucial to build a robust evidence base that can guide future initiatives and inform best practices. This requires ongoing research, monitoring, and evaluation of innovative financing models to understand their impact on access, quality, and sustainability of ECCE services. Additionally, sharing learning and experiences across different contexts will be essential in refining these approaches and scaling successful models to benefit more children globally.

In this panel, organized by the Education Finance Network, we will explore current trends, opportunities, and challenges in innovative financing for ECCE. The session will share insights gained from the implementation of various innovative financing models in ECCE, including outcomes funds, outcomes-based "recognition and rewards" financing to incentivize service quality, and technical assistance to financial institutions in designing loan products tailored for a variety of ECCE providers.

We will present findings from a global review of projects using various outcomes-based financing (OBF) approaches in early childhood care and education (ECCE).

We will also share will share key findings and insights from the design of ECCE outcomes funds, as captured in a series of technical papers on measurement tools, evaluation methods, disability inclusion, and cost analysis.

Finaly, key learnings will be shared from on two blended finance initiatives in ECCE: 1) an outcomes-based financing model supporting access and quality improvements in ECCE, implemented in South Africa and Rwanda; and 2) a collaboration with a commercial financial institution in Tanzania offering a segmented loan product for ECCE providers facing challenges accessing commercial capital.

Sub Unit

• Economics and Finance of Education SIG

Organizer

• Jenny Berg, Opportunity International

Chair

• Charlie Habershon, Dalberg Advisors

Individual Presentations

• Leveraging Outcomes-Based Financing to Transform Early Childhood Care and Education: A Global Evidence Review - Arushi Terway, NORRAG

• Potential and Limitations of Innovative Finance for Early Childhood Education: The Case of Early Childhood Education Outcomes Funds - Ozsel Beleli, The Education Outcomes Fund

• Blended Financing Models to Increase Access to and Incentivize Quality in Non-State Early Childhood Care and Education Centers - Lauren Pisani, The Palladium Group; Andrew McCusker, Opportunity International; Joseph Di Silvio, The Palladium Group

Discussant

• Elizabeth Laura Lule, Early Childhood Development Action Network