Optimizing Public-Private Partnerships, Blended Finance and Private Sector Investment in the Education Sector Amidst Turbulent Times: Initial Lessons from the USAID CATALYZE EduFinance Program

Group Submission Type: Formal Panel Session

Proposal

There is a significant funding gap when it comes to private capital and investment in non-state education. Government spending is currently unable to meet education demand – there is an estimated $148 – 200 billion funding gap to achieve SDG 4 (quality education). And the non-state education sector is expected to grow – currently one in five children are in a non-state school, and this is expected to increase to one in four by 2024. Programs such as USAID-funded CATALYZE EduFinance, which began in 2019, are implementing a range of public-private partnership (PPP) activities in Sub-Saharan Africa and Latin America/Caribbean to incubate and test new approaches to stimulating private sector investment in education, and to combine that with interventions to improve education quality especially for economically disadvantaged learners. In so doing, EduFinance is supporting a range of goals and principles in USAID’s Education Policy, e.g., strengthening partnerships and leveraging resources; promoting equity and inclusion; and building the capacity of local institutions.

As CATALYZE EduFinance activities are demonstrating, there appears to be a lot of potential demand for PPPs and more specifically private capital mobilization (PCM) in the education sector, in such areas as financial institutions (FIs) providing loans for schools to conduct improvements in infrastructure and affordable loans for parents to cover their children’s school fees (and utilizing public sector and grant funding to mitigate their risks in this area). Based on that demand for financing, arguably there is fertile ground for investors (including foundations and investment firms) to take stakes in the education financing environment, to generate returns on investment that are at least at or above market rate. Yet there are also challenges and obstacles to unlocking commercial investment in the education sector, particularly in this turbulent macro-economic environment and given the effects of COVID-19 (e.g., school closures). For example, some of the more established FIs are hesitant to expand their loan portfolios to the education sector, even if the rates of loan defaults by schools and parents may be relatively low. Other FIs may express more of a desire to receive first-loss guarantees from donors (essentially, funding that is on hand to cover loan defaults) rather than receiving additional capital for lending. And investors may be concerned about the relatively fragmented nature of the education market, the fact that many private or non-state schools may not be registered, etc.

This will be a panel session. Michael Tetelman (EduFinance Activity Lead, CATALYZE, Palladium) will chair the session. Participants will be representatives from USAID (Suezan Lee, Senior Education Finance Specialist to discuss lessons learned from the USAID CATALYZE EduFinance program around capital mobilization; Pascal Tshimanga, Senior Education Program Manager, to discuss the EduFinance DRC activity from the standpoint of private capital and improvement of learning and educational outcomes in DRC; and/or Michael Lisman, Team Lead, Office of Regional Sustainable Development, LAC Bureau – who will discuss the results of PCM, PPPs, and improving education outcomes across the five countries in LAC where EduFinance is implementing activities; Opportunity International (to be represented by Andrew McCusker, Head of Education Finance, and/or Issa Ngwegwe, representing Opportunity International’s Tanzania office, and/or Antonella Abategiovanni, EduFinance Technical Facility Advisor, discussing the lessons learned from private capital mobilization and education finance in the programs Opportunity International is implementing in LAC; and Fundacion Paraguaya to be represented by Melissa Ramos, Coordinator of Special Projects, who will discuss the lessons learned and results to date of Fundacion Paraguaya’s work in El Salvador and in Paraguay. Participants are TBC.

Papers under this topic will cover timely topics associated with stimulating and taking to scale PCM in the education sector and what corresponding impact this has on education and learning outcomes. The format will be designed to inform, but also to engage audience members in sharing their experiences with PCM in the education sector. The papers will cover diverse perspectives, including public and private stakeholders with an interest in an education finance, as well as insights from implementers and management teams.

Sub Unit

• Economics and Finance of Education SIG

Chair

• Andrew McCusker, Opportunity International

Individual Presentations

• Deepening Local Financial Service Offerings to the Education Sector - Andrew McCusker, Opportunity International

• Monitoring, Evaluation, and Learning in Private Capital Mobilization for the Education Sector - Suezan Lee, USAID