the International Finance Facility for Education
What is a finance facility?
The International Finance Facility for Education is a groundbreaking way to finance education in countries around the world. By multiplying donor resources and motivating countries to increase their own investments, the Facility will unleash tremendous new funding streams for education. The Facility has the power to help tens of millions of children go to school and prepare millions more young people for the future of work.
The Facility is a recommendation of the Education Commission, put forward in the Learning Generation report released in September 2016. In the first round of funding, donor countries will provide the Facility with about $2 billion in guarantees, which will then be leveraged to create up to about $8 billion in new financing. By blending this financing with grant funding, the Facility would help mobilize more than $10 billion for education.
If we do not change the way we teach today, we will be in trouble tomorrow. The knowledge-based approach to learning of centuries ago will fail our children who will never be able to compete with machines in the workforce of the fourth industrial revolution. Children should be taught “soft skills” like independent thinking, values and teamwork — and the International Finance Facility for Education gives countries the opportunity to revolutionize the teaching and learning process to prepare the next generation to thrive in our global society. It is an effort that all who care about the future should get behind.
Founder and Executive Chairman, Alibaba Group
In our fast-changing world, we cannot accept 250 million children failing to learn even the most basic skills. In the coming decade, some one billion young people will enter the workforce. They all need education so they can help build a world of peace, prosperity, dignity and opportunity for all. That is why the proposed new International Finance Facility for Education can be so important.
Secretary-General, United Nations
Education is the key to unlocking many of the Sustainable Development Goals and requires investments from the early years through to primary, secondary and skills training for the jobs of the future. The International Finance Facility for Education offers a new way to generate resources to help those countries dedicated to achieving inclusive and equitable education for all. The international community now has a full set of financial and delivery tools at our disposal to help ensure even the most marginalized child has the opportunity to realize her potential.
Executive Director, UNICEF
We look forward to working with the International Finance Facility for Education to offer Latin American and Caribbean countries more options to access blended finance. This innovative mechanism will provide our borrowers greater incentives to invest in raising the quality of education, a key to higher growth and long-term prosperity.
Luis Alberto Moreno
President, Inter-American Development Bank
Greater investment in education is essential to ensure continued growth and prosperity in the Asia and Pacific Region. We look forward to working together with the International Finance Facility for Education to leverage donor funds and create new ways for countries to increase their investments in our region’s next generation.
President, Asian Development Bank
Education is a basic right that truly transforms lives, everywhere. Investing in inclusive, equitable and quality education empowers people, lifts them out of poverty and builds the foundation for prosperous and peaceful societies. It is an urgent imperative that we invest in the full cycle of education, SDG 4, from childhood development to youth skills and adult learning. We must reach all people, with a special focus on girls and those caught up in crisis situations and left behind. Success depends on funding that is predictable, sustainable and at scale.
We look to the International Finance Facility for Education to help bridge the enormous financing gap and make quality and relevant education a reality for all.
Deputy Secretary-General, United Nations
I view the International Finance Facility for Education proposal as an encouraging initiative that will provide much needed additional funding for education in countries committed to reform and enhance investment in that field…Believing that it is incumbent upon the international community to seize this moment, to avoid an education crisis and create a generation of children who will transform education across the world, I am firmly convinced that greater investment in a reformed education sector is critical to Indonesia and to the world.
H.E. Joko Widodo
We are in a global learning crisis, and poorer countries especially will need more investment to improve the quality of their education systems. But we cannot depend on public finance alone—we must find new ways to fund this cornerstone of human capital. The International Finance Facility for Education is taking a lead role on innovating in education finance, and we commend their efforts to develop a full set of financial tools to invest in the skills, talents and knowledge of the next generation.
CEO, The World Bank
Tunisia is delighted to be part of this initiative and supports the International Finance Facility for Education. I strongly believe that greater investment in a reformed education sector is critical to Tunisia and to the world. Tunisia is a committed partner in achieving the Learning Generation, whose time has come.
H.E. Béji Caid Essebsi
Malawi is pleased with the progress of the Education Commission and offers its full support for the International Finance Facility for Education. This is an encouraging development that will provide much needed additional finance for education to countries willing to reform and increase investments in education.
H.E. Peter Mutharika
Learning levels in Africa trail behind other parts of the world. To bridge the gap, increase levels of growth and development, and connect skills to jobs of the future, we must invest heavily in the education of our young people today. The International Finance Facility for Education is a welcome and much-needed innovation that will allow us to unlock new financing and rapidly accelerate progress in human capital development.
President, African Development Bank
How would it work?
The Facility is based on an innovation that will generate new and additional financing for education. The Facility will leverage new financing through guarantees provided by contributing countries. The Facility will make its guarantee base available to Multilateral Development Banks (MDBs) – the African, Asian, and Inter-American Development Banks, the European Bank for Reconstruction and Development, and the World Bank – only if they use it to leverage and make available new and additional financing for education in eligible countries. By using grant aid contributed to the Facility, the terms of this money can be reduced to very concessional terms, making the new financing attractive and affordable for educational investment. This will make grant aid to lower-middle income countries four times more effective.
Countries will be able to access this financing if certain criteria are met. Countries will need to have:
- Evidence of a credible education sector plan,
- Ability to take on additional lending through the MDBs without a high risk of debt distress,
- Country agreement to prioritize education within its national budget and increase its domestic education budget if necessary, and
- Agreement on integrating results-based approaches.
By placing a focus on domestic resource mobilization, countries can increase their tax capacity and make future revenues available to pay for urgent needs today to realize the right to education.
Why do we need an International Finance Facility for Education?
The knowledge divide is widening. Learning standards in the typical low- and lower-middle-income countries – and across Africa – are 100 years behind today’s average high-income countries. On current trends, it will take until after 2100 for all countries to reach the targets set in the United Nations’ Sustainable Development Goal 4 (SDG 4) – ensuring that all children complete primary and secondary education. That timeline falls far short of the global community’s pledge to meet the SDGs by 2030.
The problem is so severe that by 2030, more than half of the world’s children and young people – over 800 million, including about 400 million girls – will not have the basic skills or qualifications needed for the modern workforce.
Additionally, lower-middle-income countries (LMICs) face a structural challenge. They are home to 700 million girls and boys of school age, more than three times the number in low-income countries. These countries lose access to the funds they once had as low-income countries since they are still ramping up tax revenues that cannot cope with their current education needs. The funding drop-off is startling. Recent analyses show that, of the $40 billion in funding available for middle-income countries from the multilateral development banks, less than one percent goes to education in all of Africa and Asia combined.
These countries face an untenable choice: stop sending children to school or borrow money at much higher or commercial rates that saddle them with risky debt. Recent reports show significant increases in commercial debt in a number of countries. Even as LMICs mobilize substantial additional domestic resources, existing grant finance is not sufficient as they still have a gap that needs to be filled with additional, affordable financing.
The Facility provides LMICs with longer-term, predictable, and sustainable funding to help achieve the education Sustainable Development Goal. It keeps their education financing options more constant and avoids a sudden systems shock by extending the highly concessional terms that LMICs once enjoyed and offers funding with a grant element of more than 50 percent. By providing affordable “bridge financing,” these countries can continue investing in their education systems during this critical stage of their development. Thus, they will not face the choice of taking on expensive commercial debt or denying education to millions of children.
What makes this approach unique?
The Facility is a pioneering instrument that shifts focus away from a reliance on grants to an approach that combines innovative multilateral financing with increased domestic investment.
The Facility runs on a basic set of principles:
- Efficiency: The Facility will harness the power of multilateral development banks to efficiently leverage financing and deliver development assistance. It will use existing mechanisms and require no new actors at the country level.
- Scale: The Facility has the potential to multiply traditional aid more than four times and reach considerable scale. It will double existing investments from the MDBs and mobilize $10 billion of new investments in education in its first few years of operation.
- Affordability: The Facility will soften loan terms making them more affordable and manageable for educational investment.
- Sustainable financing for results: Investments mobilized through the Facility will be aligned with education sector plans, encourage domestic resource mobilization along with active debt risk management, and help deliver results. The Facility will also track the investments of the MDBs, allowing more information to be accessible on the role the MBDs play in contributing to SDG 4 on a sustained basis.
Growing support for a new way to finance the right to education
- In 2015, ten million people signed a global petition demanding action to deliver universal education, which led to the UN’s 2030 timetable for the SDGs including quality primary and secondary education for all.
- More than one million people have signed a petition demanding that the SDGs be transformed into action with the Facility.
- Presidents and prime ministers urged support for the Facility in their Joint Leaders’ Declaration at the 2017 G20 meeting in Hamburg, Germany.
- The UN Secretary-General, the World Bank, and the four regional development banks support the Facility.