Guidance Note on Education Finance Indicators
The purpose of this note is to help USAID Education Officers understand the state of education finance in the countries where they work.
Education finance refers to the monetary and in-kind resources that are available for education. The sources of finance include the government (central, state, and local) and private sector (households, public corporations, private corporations, and nonprofit institutions) operating within a country as well as international development partners (multilateral agencies, bilateral agencies, and international nongovernmental organizations [NGOs]).
This document contains the following sections:
- Domestic Resource Mobilization and Public Financial Management
- Non-state Actors in Education
- Financing for Education in Conflict- and Crisis-Affected Areas
- Financing for Higher Education and Youth Workforce Development
Education finance looks at resource allocations, how allocation decisions are made, and how these allocations are used. It also considers whether the allocations are sufficient to ensure quality education for all, how equitable and sustainable these allocations are, and what systems exist to foster accountability for and transparency about allocations and use. In its education finance work, USAID strives to increase the quantity of financial resources available for education, and ensure that those resources are used effectively and sustainably to support countries in achieving their education development goals.
This note presents context indicators for education finance. USAID uses context indicators to track external factors beyond the Agency’s control that affect implementation and influence expected results. Context indicators are not used to directly measure the results; rather, they provide understanding of context useful to inform design and implementation. While context indicators are recommended, they are not required. Missions can use context indicators to monitor country and operational context as well as assumptions and risks for activities. EducationLinks has more information on context indicators.
In this note, we introduce Education Officers to nine key indicators that can help them understand their country’s education finance landscape. The education finance context indicators enable tracking of partner country progress to understand how education finance contributes to inclusion and sustainability. These indicators can also inform strategic and operational plans for strengthening partner countries’ education finance. In addition, they promote understanding of the relative scope of education financing across government, private sector, and international development partners. Based on the indicators, Education Officers can find entry points for engaging sources of finance during Activity design and determine how changes in contributions by sources create new opportunities or constrain activities. Education Officers can also identify where opportunities and financial resource gaps exist to design and implement more sustainable education programming.
This note is divided into four sections that are aligned with the key areas of USAID’s education finance framework:
- Domestic resource mobilization (DRM) and public financial management (PFM). DRM and PFM concern the domestic resources allocated for education, the largest source of financing for any country. In particular, DRM refers to mobilizing financial resources for public expenditure through economic growth and appropriate tax policy and collection, while PFM refers to how these resources are budgeted, used, and accounted for by governments.
- Non-state actors in education. Non-state actors include institutions such as non-state schools, financial institutions lending to students, companies developing and supplying learning materials to public and non-state schools, and nonprofit organizations providing critical services. Households are non-state actors that use their household income and assets to pay for education expenses or private education.
- Education in crisis and conflict. Education in crisis and conflict is any education service provided in a country, region, or community that has experienced a crisis or armed conflict. Crises include natural hazards, health epidemics, lawlessness, endemic crime and violence, and climate vulnerabilities; armed conflict means contention over the control of government and/or territory that results in exchanges of armed hostilities between two parties, with at least one being a government of a state.
- Higher education and youth. A higher education institution is an organization that provides educational opportunities that build on secondary education, providing learning activities in specialized fields. Higher education includes what is commonly understood as academic and advanced vocational or professional education. Youth are people ages 10 through 29.
In each section, we present indicators to help Education Officers understand the country’s education finance landscape. The evidence needed may not be conveniently packaged as a predefined, standard indicator. In such cases, we share examples of country-specific studies and background information that provide relevant information. In other cases, indicators and background information do not exist or are not publicly available. We highlight these gaps so that Education Officers are aware of them, and propose new indicators in Annex 2 to address the gaps for non-state actors in education and education in crisis and conflict.
This publication is made possible by the support of the American People through the United States Agency for International Development (USAID) under the Data and Evidence for Education Programs (DEEP), Contract No. GS-10F-0245M. The views expressed herein do not necessarily reflect the views of USAID.
Domestic Resource Mobilization and Public Financial Management
This key area of the education finance framework addresses public financial resources. Domestic government funds are often the largest source of education financing. The indicators in this section can help an Education Officer get a sense of the strength of public resources in their country. What are the government’s priorities? What public resources are available for education, and how well does the government manage those resources? What does the government spend per student and per teacher? These are important questions to consider when looking at the long-term sustainability of USAID programming. If public resources are scarce, investing in resource-intensive programming may not be scalable or sustainable. Thus, exploring alternative resource streams would lead to more sustainable activities without sole dependence on continued USAID funding. In contexts affected by conflict and crisis, coordination with other donors supporting humanitarian and development efforts is essential to keep education systems operating. The following indicators will help you address these key issues for DRM and PFM:
INDICATOR 1: Government expenditure on education as a percentage of Gross Domestic Product (GDP)
This indicator helps Education Officers understand the government’s commitment to education and its ability to raise revenues for public spending. It is also useful for comparisons between countries and over time by viewing the data in a table or graph. When using this indicator, you should look for values in the range of 4 to 6 percent of GDP. That is the benchmark endorsed by the Education 2030 Framework for Action, pointing to the government’s commitment to education and a solid level of public financing. Higher values are acceptable and suggest a high prioritization of public financing for education. By contrast, lower values suggest insufficient public investment in education, inadequately resourced schools, and a greater financial burden falling on the private sector and individual households.
INDICATOR 2: Government expenditure on education as a percentage of total public expenditure
This indicator helps Education Officers assess how much the government prioritizes education compared to other sectors, such as health. These priorities may reflect the country’s demographics; countries with younger populations may allocate more to education in relation to other sectors, while countries with older populations might allocate less. When using this indicator, you should look for values in the range of 15 to 20 percent of public expenditure for education. The benchmark comes from the Education 2030 Framework for Action.
Sources: UIS/WDI. Included in IDEA.
INDICATOR 3: Government expenditure on education per student as a percentage of GDP per capita
This indicator, from SDG 4.5.4, helps Education Officers understand how much money the government spends per pupil across different education levels, offering insight into its educational priorities. This is a critical indicator that provides a realistic perspective on the availability of government resources for both current USAID education projects and sustaining initiatives after USAID support ends. This indicator also reflects how progressive or regressive a government’s education policies may be. For instance, higher spending per pupil in public primary education often signifies a progressive policy, given the larger representation of students from lower socioeconomic status families at the primary level.
Sources: UIS/WDI. This is included in IDEA but not for pre-primary.
INDICATOR 4: Control of corruption
While most of the indicators in this section look at the quantity of public financial resources, education officers should also consider how effectively the government manages those resources. Does the government make funding decisions based on where the need is greatest or are decisions purely
political? Are there systems in place to monitor where the money goes? While there is no education-specific corruption indicator, the control of corruption indicator looks broadly at government accountability across all sectors. This indicator captures perceptions of the extent to which public power might be misused for private gain or influenced by elites and vested interests. The indicator is measured on a scale of -2.5 to 2.5 in which units are a standard normal distribution with a mean of 0 and standard deviation of 1. Higher, positive values indicate a perception of less corruption in a country, while lower, negative values indicate a perception of more corruption. The indicator provides a sense of how effectively the government manages resources. Countries with perceived high levels of corruption are not well suited for direct budget support or public private partnerships, but exploring greater public accountability and promoting transparency in these contexts is useful. For instance, activities that raise public awareness of the gaps between education budget allocations and expenditures.
Source: World Bank World Governance Indicators (WGI). Included in IDEA.
INDICATOR 5: Official Development Assistance (ODA) for education in millions of constant U.S. dollars
The divide between domestic and foreign financing is an important one to consider. ODA measures resources given by the governments of high-income countries to promote the development of middle- and low-income countries. Data are disaggregated by donor, sector (including different education levels, from early childhood education to tertiary; and nature of spending, such as school feeding or education research), channel (public sector, NGOs, etc.), and type of aid (budget support, project-type interventions, etc.). The OECD Creditor Reporting System (CRS), which houses ODA data, also includes financial resources given to poorer countries from 41 of the largest private philanthropic foundations. By comparing this to a government’s budget, one can gauge a nation’s reliance on foreign aid. High dependency suggests a need to leverage international resources to catalyze both global and local private sector contributions, using sustainable blended finance and public-private partnerships.
Source: OECD Creditor Reporting System (CRS).
Non-state Actors in Education
The second key area in the framework addresses the role of non-state and private actors in education, and Education Officers should know how to leverage private-sector partnerships, innovations, and resources. Households provide the largest share of private financial resources for education, including funds received from remittances, and are typically the second largest source of financing after the government. Private companies, foundations, and investors also contribute, providing both core and ancillary educational services. OECD collects data specific to private philanthropy’s expenditures, which are disaggregated by sector and include education. For example, expanding pre-primary or secondary education through private schools might be an effective option, especially if the government has a tradition of working with private schools. Conversely, if the private sector is an untapped resource, you could consider opportunities to mobilize private resources, such as through public-private partnerships and blended finance activities. To that end, it is useful to consult the Guide to Public-Private Partnerships in Basic Education published by USAID’s Data and Evidence for Education Program (DEEP), which outlines the different types of partnerships that can be used to mobilize non-state funding.
INDICATOR 6: Enrollment in private institutions as a percentage of total enrollment
This indicator helps Education Officers measure the role that private schools play in a country’s educational landscape, with data disaggregated by education level from pre-primary to tertiary. A high percentage suggests that families are choosing or relying on non-state educational programs. If a large percentage of education is managed by the private sector, it underscores the importance of incorporating non-state actors in USAID programming.
INDICATOR 7: Household expenditure on education per student as a percentage of GDP per capita
This indicator (from SDG 4.5.4) is similar to Indicator 3, but instead of looking at government expenditures, it considers how much individual households spend per student at a given level of education (primary to tertiary; household spending on pre-primary is not available). A higher value signifies a greater burden on households to fund education. In such cases, Education Officers may need to conduct additional research and analysis to understand what schooling costs (direct and indirect) households are paying and the potential implications for equity and access. For example, if households are forced to pay for direct expenses such as school fees or uniforms or face losing wages that would be earned by an older student who is attending school, you should explore what, if anything, can be done to alleviate that burden, especially for the most marginalized.
INDICATOR 8: Private philanthropy for education in millions of U.S. dollars
As discussed under Indicator 5, this indicator measures the money provided for education by 41 major foundations and standardized by the OECD. Data are disaggregated by development sector and available by foundation or recipient country. This indicator offers data on one source of non-state actor finance coming from outside of a low- or middle-income country. It is useful in conjunction with ODA and domestic budget support for education to determine the scope and relative importance of international private philanthropy for overall education finance. In most countries, private philanthropy is a small share of funding relative to ODA and domestic budget support, but it is a significant share in certain countries. For example, in 2021, Côte d’Ivoire, Ghana, India, Jordan, Kenya, Lebanon, Rwanda, Senegal, South Africa, and Uganda each received more than $10 million. Cumulatively, these countries accounted for 45 percent of the year’s private education philanthropy for data in this indicator.
Financing for Education in Conflict- and Crisis-Affected Areas
The third key area in the framework addresses whether and how education is financed when instability occurs as a result of crisis or conflict. How does education funding change in times of conflict and crisis? Are there shifts in education priorities in conflict and crisis? Is there a humanitarian response targeting education in areas of conflict and crisis, such as a Humanitarian Response Plan? Education Officers should consult USAID’s list of countries in crisis and conflict. If a country is on the list, it is useful to compare its education finance indicators with government expenditure on education per student as a percentage of GDP per capita (Indicator 3) over time. Considering the period prior to the conflict or crisis could demonstrate how the conflict has affected education prioritization and allocation. Ideally, one could examine government expenditures in conflict- or crisis-affected regions within a country relative to regions not affected by crisis or conflict. Unfortunately, it is difficult to obtain the subnational data required to make these comparisons.
In addition to government funding, humanitarian assistance funding for education directly measures financial contributions from international sources toward ensuring access to education in crisis and conflict settings where there is a robust international humanitarian response coordinated by the United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA) and Global Education Cluster.
INDICATOR 9: Amount of humanitarian assistance funding for education in U.S. dollars
This indicator measures the amount of humanitarian assistance funding designated for education for specific countries and years. It provides a proxy to gauge funding for education in crisis and conflict, but is limited to funding from international sources. Data are disaggregated by year, country, sector, flow status (i.e., incoming or pledged), and source. The UNOCHA Financial Tracking Service (FTS) warehouses the data and provides interfaces to analyze them. When using these FTS data, consider the following limitations:
- Nearly half of the financial data are categorized as multisectoral or without a sector.
- There are examples of regional refugee response plans not being reflected accurately in terms of the education funding required or actual education funding.
- Some portion of non-humanitarian ODA is used for education in crisis and conflict.
If there is a large amount of humanitarian funding for education in a country, it demonstrates a significant vulnerable population in need of accessible and quality education. Humanitarian assistance is rarely sufficient to meet the education needs of people affected by conflict or crisis. Therefore, there is a need to examine what additional resources from domestic spending and the private sector can support education in crisis and conflict so that financing becomes more sustainable and less dependent on humanitarian assistance.
Financing for Higher Education and Youth Workforce Development
The fourth key area in the framework addresses financing for higher education and youth workforce development. Financing issues at this level are slightly different than at the basic education level. For example, the private sector plays a relatively large role in higher education in some countries. The need to tie workforce development to the labor market also calls for close partnerships with the private sector. Given each country’s unique demographics and labor market needs, “one-size-fits-all” programming does not work. Education Officers should tailor their strategies based on country-specific public, private, and international resources. As a starting point, four of the indicators presented earlier in this note include disaggregates for higher education and youth workforce development:
The higher education disaggregate of Indicator 3 (Government expenditure on education per student as a percentage of GDP per capita) helps Education Officers understand the extent to which the government prioritizes higher education.
Indicator 5’s disaggregate for higher education (ODA for education in millions of constant U.S. dollars) will give Education Officers a sense of the international resources available to higher education.
Indicator 6’s higher education disaggregate (Enrollment in private institutions as a percentage of total enrollment) will help Education Officers determine how large a role the private sector plays in higher education in their country.
The higher education disaggregate for Indicator 7 (Household expenditure on education per student as a percentage of GDP per capita) will help Education Officers assess the burden that households face when paying for higher education.
Unfortunately, the same gaps discussed earlier are present here, notably the lack of information about public-private partnerships.
Annex 1. Summary of Education Finance Indicators
Annex 2. New Context Indicators for Education Finance
The Guidance Note suggests nine country context indicators—which are not standard indicators and not required for reporting—in four areas of education finance:
- Domestic resource mobilization and public financial management;
- Non-state actors in education;
- Education in crisis and conflict; and
- Higher education and youth.
The nine education finance indicators, sourced from OECD, UNESCO, UNOCHA, and the World Bank, cover most low- and middle-income countries and are readily accessible. It is important for Education Officers to use these context indicators to account for key external education finance factors that are beyond USAID’s control and affect Activity sustainability, implementation, and results.
The following indicators are not publicly available, but are critical to capture to meet USAID’s education finance strategic objectives:
- Non-State Actors in Education: The context indicators do not offer information on private sector spending in education for for-profit corporations, nonprofit corporations, and foundations, or public-private partnerships created for education.
- Education in Crisis and Conflict: The context indicators do not provide an understanding of domestic funding that targets education in crisis- and conflict-affected regions.
The indicators are useful for understanding the sustainability of education finance in a country. They provide vital information that is missing from the other context indicators, so Education Officers have data on private sector spending, public-private partnerships, and government spending in crisis- and conflict-affected regions. The data on private sector spending and public-private partnerships demonstrate how non-state actors augment a government’s provision of education, while government spending on crisis- and conflict-affected regions shows financial resources that are complemented by humanitarian funding. Thus, the indicators are important for meeting the objectives of USAID’s education finance strategy for non-state actors in education and education in crisis and conflict.
This annex proposes three new country context indicators that require Missions or implementing partners to collect data or obtain additional specifications from data generators like partner country governments and multilateral institutions. These new context indicators do not have readily accessible data like the others introduced in the Guidance Note. Education Officers can use these new finance context indicators to understand the landscape in private sector engagement, public-private partnerships, and education in conflict and crisis. Moreover, they can consider whether there are opportunities to capture these data in their education Activities.
Education Officers can use the indicators for strategic and operational plans focused on strengthening partner country education finance in crisis and conflict, or leveraging the private sector and public-private partnerships. Furthermore, Education Officers can see how private-sector financing, public-private partnerships, and government spending in crisis and conflict regions are potential financing sources during Activity design. They can examine whether contributions from these sources would create new opportunities for education Activities. Education Officers can identify opportunities to design and implement education Activities that are more sustainable because of the integration of private sector support and public-private partnerships, or accounting for government spending in conflict and crisis regions.
Non-state Actors in Education
The first proposed new context indicator captures data on private sector finance originating from for-profit corporations, nonprofit corporations, and foundations. The second captures blended finance through the number of public-private partnerships established for education.
1. INDICATOR: Private development finance for education in millions of constant U.S. dollars
Private development finance encompasses funding from for-profit corporations, nonprofit corporations, and foundations. The definition is consistent with UNESCO’s national education accounts methodology, which includes corporations (private and public for-profit corporations) and nonprofit institutions (e.g., NGOs and foundations). The OECD CRS definition of private development finance only counts grants from nonprofit organizations like NGOs and foundations. “Constant U.S. dollars” refers to currency measured over time in dollars corrected for inflation and exchange rate fluctuations. Using constant U.S. dollars can provide a more accurate picture of how much money is actually being invested in education. The indicator is disaggregated by level of education (i.e., pre-primary, primary, secondary, higher education, and youth workforce development) and type of private sector actor (i.e., for-profit corporations, nonprofit corporations, and foundations).
The indicator quantifies private sector entities’ contributions to education finance within a country. While an existing country context indicator measures a subset of the largest private foundations, this indicator will capture a broader range of private sector financing for education.
Education Officers can use the new indicator to develop a more complete picture of non-state actors’ financing of education in a country. This is especially useful in countries where there is substantial international or domestic private sector involvement in education finance, particularly in conflict- and crisis-affected contexts.
An education sector assessment or education landscape assessment can obtain information on education financing and costs. Data on education financing and costs could come from a government ministry or a multilateral organization like Global Partnership for Education (GPE), UNESCO, or the World Bank. UNESCO, UNICEF, the World Bank, and GPE have an extensive methodology for education sector assessments that includes education financing and costs. In terms of education finance, the methodology provides guidance for consolidating financial data to assess government spending on education, including external funding. If financial data identify private development finance as an external source of funding, then it is identifiable as part of the consolidation and analysis of financial data. However, the financial data may not track external funding from private development finance in the same way as other external funding such as ODA. In that case, the starting point is to ask the ministry and other major development partners who the major international and domestic private development finance actors are in the country. Once identified, data collection efforts would need to obtain financial data from those entities. The education sector assessment methodology provides an example data collection instrument for collecting financial data from partners.
2. INDICATOR: Number of public-private partnerships in education
A public-private partnership is “a formal contract between the public and private sectors in which they jointly share risks, costs, and resources, and where remuneration is linked to the private partner’s compliance with the stipulations of the contract.” The precise definition for public-private partnership varies among bilateral donors, multilateral donors, and countries, which affects what is counted as a partnership. In the education sector, governments collaborate with private sector partners to address challenges related to the delivery and quality of education, because private sector partners are viewed as potentially more efficient than the government. For workforce development activities, public-private partnerships are leveraged to improve access to and the quality and diversity of training opportunities for learners. The private sector entity and government each assume a role for financing education and providing education in a public-private partnership. For example, the government finances charter schools and the private sector provides the education in the school. It is crucial that public-private partnership data be distinguished by level of education, i.e., pre-primary, primary, secondary, higher education, and youth workforce development.
The indicator quantifies the number of public-private partnerships in the education sector. The scope of public-private partnerships in the education sector has grown in the last two decades and they are significant components of some national education systems, such as Liberia.
Education Officers can use the new indicator to understand the number of public-private partnerships supporting the government’s Ministry of Education. This information will clarify the scope of public-private partnerships in financing or delivering education. Moreover, if data are collected annually, it is possible to track the growth and trends of public-private partnerships in education over time.
Similar to the previous indicator, these data are best obtained during an education sector assessment or education landscape assessment. The data collection would entail consultation with the Ministry of Education to understand its definition of a public-private partnership and any formal partnerships in education. Based on that initial consultation, a data collection instrument could request a list of public-private partnerships that includes the name of the private partner, the roles of the government and private partner (i.e., financing and education provision), and the type of partnership, e.g., faith-based community schools, charter schools, contract schools, vouchers, co-financing, and government loan guarantees. The list can become the basis for assessing the number of public-private partnerships.
Education in Crisis and Conflict
The proposed new context indicator captures government domestic spending focused on regions in crisis or conflict.
3. INDICATOR: Government expenditure on education per student as a percentage of GDP per capita in crisis-affected areas relative to per-student expenditures in comparable non-crisis areas
The indicator is similar to Indicator 3, which also addresses government expenditure and GDP per capita. It requires subnational data (e.g., state, province, governorate, region) for government spending. The indicator would allow comparisons between regions. Comparisons are possible within the same region by comparing per-student expenditures before and after the crisis. The main disaggregates are education level (i.e., pre-primary, primary, secondary, higher education, and youth workforce development) and administrative unit (e.g., state, province, or governorate).
The indicator measures domestic financing for education in crisis- and conflict-affected settings. Currently, readily accessible financing information for such settings is humanitarian funding in education data, which are a subset of ODA, an international source of financing.
Education Officers can use the new indicator to determine the extent to which domestic resources are financing education in crisis- and conflict-affected regions. The information on domestic financing develops a clearer picture of the funds available for education finance in crisis- and conflict-affected areas beyond humanitarian funding.
An education sector assessment or education landscape assessment can gather this information. Following the UNESCO, UNICEF, World Bank, and GPE methodology for education financing and costs, financial data can be collected from a government ministry, GPE, UNESCO, or the World Bank, then consolidated and analyzed. To make the indicator operational, the source data will need to indicate an applicable subnational administrative unit in the country, such as a state, governorate, or province. After completing the analysis, Education Officers will need to determine which administrative units are conflict- or crisis-affected if they want to make comparisons to administrative units that are not affected by crisis or conflict.
The new country context indicators attempt to address gaps in private-sector financial support for education, public-private partnerships for education, and domestic financing for education in conflict- and crisis-affected regions. These new country context indicators require additional data collection and outreach to operationalize and use. They should supplement the nine country context indicators with readily accessible data.