Events
Private Investment in Early Childhood Care and Education
This Education Finance Network event, held on February 9, featured a panel discussion about the potential of private investment to foster high quality and widely accessible early childhood care and education (ECCE). The panel comprised of representatives from the Brookings Institution, the Early Childhood Development Action Network (ECDAN), and the LEGO Foundation, and was introduced and moderated by Suezan Lee, Senior Education Finance Specialist at the USAID Bureau for Development, Democracy, and Innovation: Center for Education.
Daniel Waistell from Cambridge Education presented a summary of the recent CATALYZE EduFinance Global ECCE Landscape Assessment, which examined ECCE interventions from 15 countries to bring out examples of promising approaches. The assessment identified the following key recommendations to help private investment in ECCE achieve the ‘triple dividend’ of 1) improving health and education outcomes for children, 2) increasing women’s employment and productivity, and 3) creating new jobs and supporting economic growth:
- Encourage entrepreneurship in ECCE.
- Leverage employer financing of childcare.
- Build on promising models.
- Encourage the development of financial products for ECCE in mature markets.
- Demand results from the investment and link these to financing.
- Blend different types of finance in different contexts to spread risk and maximize expanded opportunities.
Below are the key take-aways from the panel discussion.
To finance well, you first have to cost well
High-quality data on the cost of ECCE interventions is important to enable investors to finance ECCE sufficiently, effectively, and equitably. Such data can be used to price outcomes in outcomes-based financing, and to conduct cost-effectiveness and cost-benefit analysis. Emily Gustafsson-Wright from Brookings presented a new tool for costing ECCE and basic education services for children and youth, called the Childhood Cost Calculator, which will be launched this spring. The calculator is an important tool that can help answer questions such as:
- What resources are needed to deliver an intervention?
- Is the project feasible within a given budget?
- What are the cost implications of a programmatic change, such as in dosage?
- What would be the cost of scaling up a program or intervention?
- How do the costs of intervention A compare to those of intervention B?
- What are the cost drivers of this intervention?
- What is the unit cost of an intervention or program?
Applying systems thinking to ECCE investments
Elizabeth Lule from ECDAN encouraged investors to apply systems thinking and support a holistic approach to ECCE. In ECCE workforce development, this would mean thinking beyond simply expanding the workforce to also include registration, accreditation, professional standards, career pathways, established salary scales and recognition, and adequate and regular payment to retain the workforce.
The speaker also noted that, when investing in systems strengthening, it is important to consider the unintended consequences that interventions in one part of the system can have on another, and how a systems mapping can help identify the gaps and understand the barriers to scaling up. The LEGO Foundation’s funding of an Early Childhood Development (ECD) census in South Africa, which aimed to give the government a clear picture of the ECD landscape, illustrates an investment to support a holistic approach. LEGO Foundation also recently started a partnership with Innovations for Poverty Action to support their Embedded Labs in education, where they will work with stakeholders not just in in the Ministry of Education, but across ministries engaged in early childhood initiatives, to strengthen the use of data and evidence in public policy.
Private investors should work in partnership with governments
Thomas Chupein from the LEGO Foundation discussed the critical role of governments as drivers in ECCE systems, and argued that, where government demand is absent, private investors have a responsibility to generate demand by demonstrating how their ECCE work aligns with government goals. To make collaboration effective, governments need to see private investors as trusted long-term partners. Investors need to build this trust by remaining open to adapting quickly and coming up with new strategies to support the government with its pressing needs, such as strengthening technical or institutional capabilities or helping it overcome constraints outside of the planned work.
To establish successful partnerships between governments and investors, there must be an understanding of each party’s incentives, accountabilities, and comparative advantages. Private investors can often take more risks than governments and are therefore better able to test new approaches, which enables both parties to achieve more together.
Results-based financing can help build and scale promising models
The speakers discussed the rise in payment by results, particularly in the impact bond space, experienced in the education sector. Just last year, four new impact bonds and one results-based financing project were launched through the Education Outcomes Fund in Sierra Leone.
Although the size of the market is still relatively small, such investments have the potential to change the market by shifting the focus to outcomes; empowering non-state service providers to identify promising strategies to achieve outcomes and to allow for innovation in service delivery; improving collaboration between state and non-state sectors; and experimenting with new interventions or testing the scale-up of pilots.
How can governments attract more private investment in ECCE?
Finally, the panelists discussed the key policy recommendations governments should consider to attract more private investment into the ECCE space.
- Support the consolidation of small standalone centers through a micro-franchise model (such as SmartStart or Kidogo) who train, provide materials to, and/or license pre-school operators, and can use model schools to demonstrate good practice.
- Engage investors to support innovative models being tested with a promise to adopt the model once it’s proven successful.
- Provide an enabling environment for investors and non-state providers to experiment with design and delivery, and learn how to produce quality outcomes more of cost-effectively.
- Create an appropriate investment climate for private investors, and ensure effective regulatory mechanisms that enable the investors to manage risks.
- Develop an equity plan to prioritize the removal of barriers to access for the hardest-to-reach, including children with disabilities, children on the move, refugees, and those in humanitarian situations.