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21 Mar 2018 / ArticleA new way to finance education for Africa
By Dr. Amel Karboul, Chief Executive Officer of Education Outcomes Fund for Africa and the Middle East. She is also a Commissioner on the International Commission on Financing Global Education Opportunity. With 20 years’ experience, she has held leadership roles at numerous organizations including the Maghreb Economic Forum and Boston Consulting Group (BCG) etc. She was, until February 2015, Minister of Tourism in the Tunisian transitional government and was nominated as one of 10 most influential young politicians in Africa.
When the riches of the African continent are mentioned, minds usually turn to its gold mines, oil, and all those precious materials under its soil. The biggest asset of the African continent could however be its growing young population, if educated – or perhaps its biggest liability if not.
In my recent Ted Talk about the learning crisis and how to overcome it, I share the sad and shocking reality that nearly half of the world’s children will be ‘failing to learn’ by 2030 if we do nothing about it. Africa will be home to most of them, given our continent is expected to account for more than half of the global population growth between now and 2050, and many of our already struggling education systems will not be able to keep up with the rapid growth. This crisis is made even more dire by predictions that by 2050, up to half of today’s jobs will be lost to automation. The Learning Generation report shows how this combination of forces will hurt our societies in a wide range of insidious ways and undermine every single one of the Sustainable Development Goals. It will hurt our economies too – businesses will be faced with a shortage of skilled labor, and consumers with high unemployment and low disposable income. Investing in Africa’s youth is therefore not just good for society, but a critical imperative for businesses too.
This crisis is made even more dire by predictions that by 2050, up to half of today’s jobs will be lost to automation.
Tackling this looming crisis will require a response from the global community that is commensurate to the scale of the challenge. Innovative financing tools must be deployed to make the best use of available funds, as well as to create new ways for private and public investment to work together. For this reason, The Education Commission, The Global Steering Group for Impact Investing, and The Global Business Coalition for Education have come together to set up a one billion-dollar philanthropic outcomes payment fund for Africa and the Middle-East (‘the fund’), to help drive significantly higher educational attainment levels in the region.
This approach can be transformational for several reasons. Firstly, it will only pay for learning outcomes that are successfully achieved. Too much philanthropic expenditure today still goes into well-meaning programs for inputs that have little to no transparency as to whether children are actually learning as a result of them. Concerns about the effectiveness of expenditure remain one of the main reasons that education is significantly under-invested vs. health and other areas.
Secondly, the fund is expected to attract up to a further US$700m of private investment into ‘Impact Bonds’, to fund the working capital requirements of the interventions the fund will commission. Impact bonds are one form of ‘pay-for-success’ contract, where social investors provide the upfront capital for an intervention and are repaid on the basis of the outcomes achieved. The World Bank highlights that this approach in effect transforms development challenges into investible opportunities and provides access to a new form of capital from the rapidly rising class of impact investor. These investors will have an interest at least equal to that of the donor in ensuring the achievement of the learning objectives, as their financial returns depend on it.
Figure : Structure and key features of the Education Outcomes Fund
As well as aligning incentives around learning outcomes, this form of finance also fosters innovation and flexibility for programs to innovate and adapt to systematically address the barriers to education in complex situations. This entrepreneurial ‘learning engine’ has been demonstrated in many instances to deliver better outcomes and better value for money.
There are over 100 active impact bonds today, and many more in development. In India, the “Educate Girls” Development Impact Bond (DIB) has successfully used a ‘community based’ program to enroll girls and ensure increased learning outcomes. After two years, the DIB remains on track to deliver ambitious three-year targets, with enrolment targets exceeded and improved results for the hardest to reach girls.
However, most impact bonds to date have been set up as individual projects, that are costly and complex to establish. A large-scale outcomes fund shifts this to a coordinated, programmatic approach to tackling development challenges, that will significantly lower transaction costs and make the tool efficient as well as effective.
The education crisis is one of the greatest challenges of our time, and we must think and act boldly using all the tools at our disposal if we are to have a hope of addressing it.