Swedish version here.
30 Dec 2022/STOCKHOLM – Half of the world’s children live in countries where the quality of education is so poor that large numbers of 10-year-olds cannot read an entire sentence – despite having attended school for several years. The quality of education in low- and lower-middle-income countries (LMICs) must be raised substantially, but there is a lack of funding to do so.
To address this global learning crisis, the Swedish International Development Cooperation Agency (Sida) is making its biggest ever investment in education. Sida is providing a loan guarantee of just over SEK 2.8 billion (US$200 million) to the International Finance Facility for Education (IFFEd) to unlock affordable finance for LMICs so they can strengthen the education of the world’s most vulnerable children.
Sida’s education expert, Per Magnusson said, “Giving children and young people a good education is one of the best investments a country can make to reduce poverty. But unfortunately, this isn’t happening in many countries. The quality of the education is neglected and therefore this major investment is incredibly urgent and vital.”
Quality education is crucial
Quality education for all children and young people is essential for a country’s development, and a critical component of its human capital. Education is a leading determinant of economic growth, employment, and earnings, and for societies it spurs innovation, strengthens institutions, and fosters social cohesion. The ability of all citizens to read, write, and count is also important from a democratic perspective. The 2022 report The State of Global Learning Poverty: 2022 Update from the World Bank, UNICEF, USAID, and others, highlights this. It shows that even before the pandemic there was a global learning crisis, but that the situation worsened further when schools were closed in most countries for a long time. At the height of the pandemic, more than 1.5 billion children were affected by the global school closures.
There is a great need for stronger education systems in LMICs that do not have sufficient finances to invest adequately in education. For example, many of these countries do not have trained teachers, lack textbooks and have far too many students in the classrooms.
More expensive loans with increased education
Calculations have shown that as countries advance economically, the share of their total borrowing from development banks for the education sector decreases from 9 percent to 2 percent. The reason is that when countries’ economies become stronger, it becomes more expensive for them to borrow. This means that the education sector is neglected in many countries. But LMICs, on the contrary, need to increase their total spending on education from 6 percent to 9 percent of GDP if they are to achieve the UN’s Sustainable Development Goal 4 of “inclusive and equitable quality education for all” by 2030.
The needs are greater than many countries can finance themselves. But at the same time, the share of total aid going to education has decreased from 13 to 10 percent over the past 20 years.
“We need to find new ways to increase the quality of education and we are doing that now by financing this large loan guarantee. Access to good quality education is a human right,” Mr. Magnusson added.
The International Finance Facility for Education (IFFEd)
Launched in September 2022 at the UN’s Transforming Education Summit, IFFEd is a powerful new financing engine for global education and skills development. It is specifically designed to tackle the education and skills crisis in LMICs which are home to 80 percent of the world’s children and youth.
Through IFFEd, Sida is now providing a guarantee to the development banks. The guarantee means that LMICs can take out concessional loans to invest in quality education. As long as they pay back their loans, no costs arise for Sida. The risk of repayment not taking place is considered very low.
To access funding, countries commit to certain quality and equity results targets in the education sector. Children and young people must improve reading, writing, and mathematics levels and a higher proportion of young people must complete what corresponds to our primary school. The countries also commit to increasing their own funding of education as a share of GDP and of their state budget.
Pre-primary, primary, and secondary education will be prioritized. But vocational training and higher education, as well as teacher training, will also be covered. It will also be possible to invest in, among other things, school infrastructure, such as more toilets and water in schools.
50 countries can receive support
When IFFEd is fully developed, the guarantee will provide roughly 50 LMICs with support through the development banks. IFFEd is currently under construction and the development banks participating initially are the Asian Development Bank (ADB) and the African Development Bank (AfDB). At a later phase, the Inter-American Development Bank (IDB) and the World Bank may join.
Sida’s large guarantee enables IFFEd to release capital for educational investments equivalent to four times the value of the guarantee. Developing and strengthening a country’s education sector is a long process that requires perseverance. The term of the guarantee agreement is 23 years, while the maximum term of the respective education loan is 18 years.
The initial goal for the total guarantee amount from IFFEd to the development banks is 500 million dollars, which is expected to unlock 2 billion dollars of educational investments.
Background: Sida has worked with guarantees for 10–15 years. In 2021, Sida had a portfolio of active guarantees of SEK 10.3 billion, which in turn mobilized SEK 27 billion from the financial market. Losses in the portfolio amounted to SEK 106 million, approximately 1 percent of the total guaranteed volume.
Listen to the Sverige Radio interview with Sida’s Per Magnusson
Learn more about Sida’s guarantees
Learn more about IFFEd