Finance Transformation

Mobilizing more and better education investments

The Commission is collaborating with countries, multilateral development banks, and partners around the world to mobilize more and better investment in education. The International Finance Facility for Education (IFFEd) is an innovative proposal for education financing that aims to unlock at least US $10 billion of new funding by 2030, making it possible to get every child in school and learning.

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 $1 billion in guarantees, which will then be leveraged to create up to about $4 billion in new financing. By blending this financing with grant funding, the Facility would help mobilize up to $5 billion for education its first five-year programming period.

Closing the gap in education financing

Funding for education is more important than ever. In 2018, bilateral aid to education increased for the first time in several years. Historic commitments of domestic resources and donor funding were made at the Global Partnership for Education Financing Conference, Commonwealth Heads of Government meeting, G7 Summit, and in support of the Education Cannot Wait fund.

Still, traditional aid for education will not be enough to reach Sustainable Development Goal 4 – the world’s shared aim to ensure inclusive and quality education for all and promote lifelong learning.

While investment in education is insufficient across many developing countries, the external financing challenge is particularly dire in lower-middle-income countries (LMICs), which are gradually losing access to low-interest financing or grants while also facing increasingly urgent education needs. While many LMICs have gained economic ground, their tax revenues have not increased quickly enough to finance the expansion and upgrades that their education systems desperately need. LMICs are home to 700 million children and young people, and these countries will not achieve SDG 4 without innovation, reform, and new ways of financing education.

A new way to finance education

The Facility runs on a basic set of principles:

Efficiency: Harness the power of the multilateral development banks (MDBs)  – the African, Asian, and Inter-American Development Banks, the European Bank for Reconstruction and Development, and the World Bank – to mobilize additional financing in capital markets and implement programs. The Facility requires no new actors at the country level.

Scale: Multiply traditional aid more than four times, double existing investments from banks, and mobilize US$10 billion of new investments in education in its first few years of operation.

Affordability: Soften loan terms to make them more affordable and manageable for educational investment.

Sustainable financing for results: Align investments with education sector plans, encourage countries to mobilize domestic funds for education and manage their debt responsibility, and deliver results.

Multiplying donor dollars

The Facility offers a game-changing model. It combines innovative multilateral financing with increased domestic investment. This creates new funding and moves countries away from dependence on grants.

Donor guarantees: The Facility will leverage new financing through guarantees from contributing countries provided to MDBs as insurance or protection against potential defaults. This will enable MDBs to increase lending for education.

Leverage: The Facility will make the guarantee base available to the MDBs if they use it to leverage and unlock new and additional financing for education in eligible countries.

Grant component: By offering grant finance in addition to guarantees, the Facility will convert the newly leveraged financing into more affordable and attractive financing packages for educational investment in LMICs. This will make grant aid to these countries four times more effective.

Country commitment: Countries will only be eligible to access this new financing if they have a strong education sector plan – a planned commitment to prioritize education within its national budget, a low risk of debt distress, and an agreement to use results-based approaches.

The Facility’s new stream of funding will support financing needs in many of the more than 50 LMICs and it will allow more grant financing to become available in the poorest countries.

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.
  • During the 2018 UNGA, leaders from governments including Bangladesh, Canada, Cote d’Ivoire, Denmark, Malawi, Netherlands, Norway, Pakistan, United Arab Emirates, and the United Kingdom voice support for the Facility’s continued development.
  • The 2018 G20 Eminent Persons Group on Global Financial Governance emphasizes the gaps in global financial architecture and highlights the Facility as a solution supplementing MDB financing for lower-middle income countries.

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.

Jack Ma | 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.

António Guterres | 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.

Henrietta Fore  | 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.

Takehiko Nakao | 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.

Amina Mohammed  | 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 | President, Indonesia

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.

Kristalina Georgieva | Managing Director, International Monetary Fund

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 | Former President, Tunisia

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 | President, Malawi

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.

Akinwumi Adesina | President, African Development Bank