A Framework to Promote Education Finance

USAID’s Education Policy describes the Agency’s approach to education finance: 

Countries must be able to lead their own development by sustainably financing and delivering services, through both state and non-state providers, that measurably improve learning outcomes and skills for all children and youth from early childhood, primary and secondary education to youth workforce development and higher education in both formal and non-formal settings. - USAID Education Policy, November 2018 

USAID’s Framework for Engagement in Education Finance articulates how financing can support USAID’s vision of “a world in which education systems in our partner countries enable all children and youth to acquire the education and skills needed to be productive members of society.” It recommends four key areas for USAID’s engagement in education finance. Each of these key areas is applicable to all levels of education: pre-primary, primary, secondary, post-secondary non-higher education, and higher education.

The framework recommends four areas of engagement:

1. Domestic Resource Mobilization (DRM) and Public Financial Management (PFM)

USAID has prioritized the role of DRM and PFM in the Financing Self-Reliance Framework, which seeks to strengthen partner countries’ ability to finance their own development agendas. DRM addresses tax policy and administration to raise revenue to fund government operations across sectors. DRM also does not necessarily mean new taxes or higher tax rates. Governments often see their revenues rise through improved audits or simplified filing processes. PFM refers to how public financial resources are budgeted, used, and accounted for by governments. 

The role of Digital Financial Services (DFS) in how resources are used and accounted for is a prime example. Financial services include banking and payment services conducted using electronic channels. There are several ways digital finance can contribute to strong educational outcomes. Governments can leverage digital finance to pay teachers salaries, reducing leakage and increasing the speed and security of payments. Electronic payments from governments to schools in the form of capitation grants are also rapid, efficient, and safe. Schools or educational systems also may use mobile payments to securely pay for books or other supplies. 

2. Enabling Environments for Non-State Schools and Actors
In some countries, public schools alone cannot meet the needs of all students. Other entities, besides the government, can offer quality education. These include non-profit and faith-based organizations, private schools, and organizations serving students with disabilities. The term “non-state actors” covers all entities that provide educational services, either core (direct provision) or ancillary (support services) that are not serviced by the public sector.  Ancillary services include financial institutions that lend to students, companies that develop and supply learning materials, and services for people with disabilities. 

There are many ways that USAID can support non-state schools and actors to be effective. One way is to improve the government’s ability to oversee these actors and hold them accountable. Civil society, as well as parent and community-based groups, can also provide oversight. Another way is to ensure that qualified and affordable non-state schools and actors have access to finance to improve their services. It’s also important to support and build capacity of non-state schools with technical assistance and training that allows them to deliver quality education. 

3. Financing for Education in Conflict and Crisis-Affected Areas
Bringing quality education to children who are facing adversity, crisis, or conflict can be difficult. Additional financing is needed to ensure that children and youth living through conflict and crisis have access to quality education. In many countries affected by crisis or conflict, non-state education providers are playing a critical role in providing opportunities to learn because the capacity and effectiveness of governments have been diminished. Activities that USAID could support include working with governments and partners to mobilize additional financing for education in conflict and crisis-affected areas; strengthening partner governments’ ability to adapt and respond education system challenges generated by conflict and crisis; working with governments to ensure education is safe and free of violence; strengthening partner governments’ ability to analyze and address gender equality, equity, and inclusion when providing resources for education; and supporting non-state schools and private markets in conflict and crisis-affected areas, so that communities, faith-based organizations, and small businesses can fill temporary shortfalls in the supply of education.  

4. Financing for Higher Education and Youth Workforce Development
Although global enrollments for higher education have increased in the last two decades, the rate of increase in developing countries still lags behind developed nations. Unemployment or underemployment is three times more likely to be higher among young people compared to adults. This is especially true for young women who, in many settings, have fewer job and training options compared to men. 

To address these inequities, USAID can partner with governments and the private sector to strengthen the governance, quality, and finance of higher education. It can also give women scholarships to pursue higher education, increasing their odds of entering the labor market. The U.S. Egypt Higher Education Initiative is a USAID flagship program that provides young people opportunities to study in fields important to Egypt’s future, like science, engineering, and business. Female students are especially encouraged to apply. 

How the Framework Supports USAID’s Vision
Each of the four key areas above is applicable to all levels of education: pre-primary, primary, secondary, post-secondary non-higher education, and higher education. Using this framework, USAID staff and implementing partners can make sustainable investments that enable all children and youth to get the education and skills needed to be productive members of society.

Contact Education Finance expert Suezan Lee to learn more.