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Putting Children at the Centre: Reimagining ECCE funding through outcomes-based finance

Updated: Nov 1, 2023

Updated: September 21, 2023


The importance of high-quality early childhood care and education (ECCE) for children’s school readiness and performance, and life-long well-being, is gaining ever-increasing recognition. In testament to this, the substantial benefits of ECCE for children were highlighted in the Political Declaration adopted at the SDG Summit two days ago. However, many countries still face significant challenges in providing high quality and equitable ECCE services.

In many low- and middle-income countries, ECCE services, such as preschools and day-care centres, are provided by a range of non-state actors (see footnote 1). The ability of governments to effectively regulate and guarantee quality in these services is of paramount importance. Without effective regulation and oversight, quality levels across ECCE services – and as a result, their benefits for children – vary significantly.

Governments are also faced with the delicate balancing act of broadening ECCE access while maintaining equity and high-quality services. The underfunding of ECCE compounds this challenge (see footnote 2). Policymakers are often forced to make trade-offs between expanding ECCE access and ensuring services are of high quality; in many cases, this balance tilts in favour of increased access, compromising the benefits for young children. Often, the burden of financing ECCE falls on households, more so than for basic or higher education. This exacerbates the gap in both access to and quality of ECCE between children from higher-income and lower-income households.

Navigating these challenges demands an approach that addresses multiple constraints simultaneously. It requires forging collaborations between the public and private sectors, to create partnerships for public purpose (see footnote 3). This approach must not focus on access alone; it must also underscore high quality and equity in ECCE to enhance child development outcomes. And, as well as bringing new sources of funding to the pool, it must ensure that investments in ECCE are spent more effectively.

Enter outcomes-based finance, a transformative financing approach that holds great potential for meeting these challenges. Several outcomes-based finance models, each with a different structure, have already been used in the education sector. One model gaining significant traction in recent years is the outcomes fund: in the past year, two of the largest outcomes funds in the education sector, targeting over 200,000 primary school-aged children, were initiated by the governments of Sierra Leone and Ghana in collaboration with us (see footnote 4). However, while other outcomes-based finance models have been used for ECCE programmes, no past or current outcomes fund has been specifically designed for ECCE.


What is an outcomes fund? Outcomes funds contract multiple implementing partners to achieve a set of pre-specified outcomes. They are often created under government stewardship and can pool funding from one or more sources. They can target programme participant’s outcomes (e.g., child development outcomes) and/or intermediary factors that have been shown to impact participant outcomes (e.g., process quality in ECCE). Unlike a traditional grant contract, where a payment is made in advance for a pre-described activity or programme, payments from the outcomes fund only occur when pre-specified outcomes are achieved. The programme is rigorously and externally evaluated to determine whether these outcomes have been achieved.

Outcomes funds also give implementing partners the flexibility to adapt and innovate their intervention models whilst the programme is ongoing, thereby improving programme quality and enabling implementing partners to determine context-specific solutions. This focuses the programme on the most important aspect of success: measurably improving outcomes for programme participants. The ability of implementing partners to adapt and innovate in response to outcomes data, combined with a rigorous external evaluation, also enables context-specific evidence generation whereby the government and its implementing partners can learn about effective ECCE models, their impact channels and cost drivers, and use these learnings in designing future programmes.


At the Education Outcomes Fund, we believe that the conditions are ripe for putting to test the potential of outcomes funds in ECCE programmes. An outcomes fund can be designed to facilitate government stewardship in building partnerships for public purpose and in strengthening its regulatory capabilities for high-quality service provision by state and non-state actors (see footnote 5). Outcomes fund also allows governments to focus on equity by building it into the fund’s targeting and financial incentive structure. In both recently launched outcomes funds in education in Sierra Leone and Ghana, for example, the respective governments decided to incorporate gender equity into the financial incentive structure and will make a higher per-child payment for girls’ learning gains. Pooling funds from multiple donors and sectors can improve alignment of investment priorities and, by doing so, help improve overall effectiveness. Moreover, focusing on outcomes increases the likelihood that funds are being spent only on interventions that have a positive impact on young children’s development outcomes, ensuring a move away from a trade-off between access and quality. This built-in accountability for outcomes can also attract new philanthropic donors to invest in ECCE.

As part of a strategic partnership initiated in 2022 between the Education Outcomes Fund and the LEGO Foundation, we have been supporting governments in Rwanda, Sierra Leone and South Africa in the development of outcomes funds for ECCE. In our new concept paper, we describe the scope of this strategic partnership in detail and extend an open invitation for collaboration around new programmes and an extensive learning agenda that will accompany these programmes. In the coming weeks, we will also co-launch an initiative to collectively reflect on and learn from other past and ongoing outcomes-based finance programmes in the ECCE sector. We believe that by facilitating peer-to-peer learning, we can hone the tools of outcomes-based finance for effective use in ECCE and incorporate these lessons into future outcomes funds.


 

This blog was written by Dr. Özsel Beleli and Jessica Trollip. We invite you to stay tuned as this conversation unfolds, our shared insights grow, and we collectively strive to create more impactful ECCE programmes that deliver better outcomes for young children. For further information on EOF's work in early childhood care and education, please contact Dr. Özsel Beleli at ozsel@edufundmea.org.



 

Footnotes


  1. In 2019, the proportion of non-state institutions in pre-primary enrolment was 37%globally, with the shares ranging from less than 1% in many Eastern European countries to more than 90% in some countriesin Oceania. In middle-income countries, private institutions accounted for 46% of total enrolment among children under 3 years of age (United Nations Educational, Scientific and Cultural Organization, Global Education Monitoring Report: Non-state actors in education, 2021, www.unesco.org/gem-report/en/non-state-actors, accessed 7 September 2023).

  2. An analysis of domestic financing of pre-primary education in low-and middle-income countries found an average allocation of 2.9% and 6.5% of total education spending to pre-primary education, respectively.2Additionally, international financing for pre-primary education constitutes only a minor fraction of the aid allocated to education – around 1.2% (Asma Zubairi and Pauline Rose, ‘Bright and Early: How financing pre-primary education gives every child a fair start in life: Moving towards quality early childhood development for all’, Theirworld, June 2017, accessed 28 August 2023; Zubairi, Asma and Pauline Rose, ‘One-year update: A Better Start? A progress check on donor funding for pre-primary education and early childhood development’, Theirworld,October 2022, https://theirworld.org/wp-content/uploads/2022/11/Theirworld-ECE-A-Better-Start-2022-single-page-FINAL.pdf, accessed 28 August 2023.). https://theirworld.org/wp-content/uploads/2017/06/Theirworld-Report-Bright-and-Early-June-2017.pdf, accessed 28 August 2023; Zubairi, Asma and Pauline Rose, ‘One-year update: A Better Start? A progress check on donor funding for pre-primary education and early childhood development’, Theirworld,October 2022, https://theirworld.org/wp-content/uploads/2022/11/Theirworld-ECE-A-Better-Start-2022-single-page-FINAL.pdf, accessed 28 August 2023.).

  3. Partnerships for public purpose is a term that emphasizes the importance of multilateral relationships that support sustainable, long-term and systemic impact by harnessing the technical expertise, approaches and networks possessed by governments, private sector organizations, non-governmental actors and donor agencies (H.E. Amel Karboul, Emily Gustafsson-Wright, Max McCabe, ‘Partnerships for public purpose: The new PPPs for fighting the biggest crises of our time’, Brookings,May 2021, https://www.brookings.edu/articles/partnerships-for-public-purpose-the-new-ppps-for-fighting-the-biggest-crises-of-our-time/, accessed 8 September 2023.).

  4. The Sierra Leone Education Innovative Challenge (SLEIC) and the Ghana Education Outcomes Project (GEOP) were launched in 2022 and 2023, respectively. SLEIC is a US$18 million programme that aims to improve the learning outcomes in literacy and numeracy for children in primary schools. GEOP is a US$30 million programme that aims to improve the learning outcomes of children in primary school and of out-of-school children.

  5. Understanding outcomes funds’ provides a detailed review of the state of outcomes funds, their purposes and objectives.




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