Education is the leading driver of innovation around the world, and yet it has been left behind while innovative financing for development has taken off over the last decade. So that every child can go to school and learn, more financing is needed. Yet, according to the OECD, foreign assistance for basic education declined in 2007 after stagnating since 2004. While global health and the challenges associated with climate change have mobilized major resources through innovative financing mechanisms, global education still relies on traditional foreign assistance and domestic financing. In 2010, there will be new opportunities to bolster international efforts to achieve universal education through innovative financing mechanisms: one of them being a tax on the 2010 World Cup.
Innovative financing mechanisms are ways of raising funds that are complementary to official development assistance (ODA). These mechanisms focus on new sources and new instruments for raising money that tap into both public and private resources, as well as public-private partnerships. For example, in order to get vaccine-developers to focus on neglected diseases that mostly impact citizens of developing countries, the health sector devised an “advanced market commitment” scheme that provides an incentive to companies to research and manufacture the vaccine by ensuring a donor-commitment to guarantee a market for the vaccine. Another innovative financing mechanism is Product Red, or (RED), a business model started by Bono and Bobby Shriver of DATA to provide financing to the Global Fund to Fight AIDS, Tuberculosis and Malaria: When an individual purchases a (RED)-branded product from a number of well-known companies, such as Nike or Apple, the company donates up to 50 percent of the sale directly to the Global Fund to help eliminate HIV/AIDS in Africa.
Donor governments have continuously been upheld to reach the goal of spending 0.7 percent of GNP on development. While this goal was first created at a U.N. General Assembly resolution almost 40 years ago, and reaffirmed in the 2002 Global Financing for Development conference in Monterrey, Mexico, the majority of donors have yet to meet this goal and unfortunately many have not yet indicated explicit plans to do so in the near term. Moreover, ODA is, by nature, volatile and unpredictable, subject to changes in political and fiscal constraints in donor countries. Current donor funding to development is not sufficiently large enough or sufficiently predictable enough to meet the global development goals. While ODA numbers have flat-lined in recent years, total aid commitments to basic education have declined sharply—nearly 22 percent between 2006 and 2007. Aid for basic education now represents just five cents out of every aid dollar.
Furthermore, the economic crisis put these traditional forms of development financing under more threat. Both national budgets and foreign assistance allocations are being contracted while at the same time, millions of families are falling into extreme poverty. This further delays progress toward achieving the Millennium Development Goals and threatens backsliding in some countries. According to analyses conducted this year by UNESCO and its Institute for Statistics (UIS), national governments are making real efforts to protect their education budgets but have expressed serious concern about their ability to expand educational access and maintain quality. In particular, countries that are heavily dependent upon exports such as Sudan and Yemen, or remittances such as Ghana and Pakistan, are already experiencing the impact of lower foreign earnings on the national education budget. Earlier this year, the World Bank issued a report that identified 33 developing countries where women and girls in poor households would be particularly vulnerable to the effects of the economic crisis, leading to higher infant and child mortality and lower school enrollment levels for girls.
Against the context of inadequate and unpredictable aid, innovative development financing mechanisms began to emerge at the start of this decade. Yet, education has been left out. According to French Minister of Foreign and European Affairs Bernard Kouchner, “Innovative financing has passed its test,” and has moved from a series of pilot programs to being an integral part of global financial flows for development. Together these mechanisms have already mobilized more than $2.5 billion in three years—and there is clear potential for scaling up existing and new mechanisms as a complementary, yet more stable and predictable, source of development finance. A lead economist at the World Bank has cited preliminary estimates that sub-Saharan African countries could raise $5 to $10 billion by issuing diaspora bonds and close to $20 billion by reforming the remittances process. Buoyed by the success of the health-focused mechanisms, Kouchner encouraged his colleagues on the Leading Group on Innovative Financing for Development to “broaden the field of action, particularly to include education and climate change.” Clearly, there is more money that can be raised for development and the education sector should not stay on the sidelines of innovative financing.
UNESCO’s forthcoming “Education for All Global Monitoring Report 2010” has a strategy for getting education into the game. Last week, the United Nations called for a 0.4 percent levy on all broadcast and sponsorship revenues for the 2010 World Cup and the five major European football leagues over the next five years. FIFA has already endorsed the 1Goal-Education for All international coalition that aims to use the World Cup to put education on the top of the world’s development agenda. This “Better Future” levy would generate an estimated $48 million annually for education, putting another 2 million children in school over the next five years. While this is only one step toward filling the financing gap, which is currently estimated at between $11 billion and $16 billion (and likely will be revised higher in coming months), it is essential for global education to tap into other innovative financing in order to give the 72 million out-of-school children a clear shot at education.
While capital investments in building schools and furnishing classrooms are an important part of increasing access to education, recurrent costs such as teachers’ salaries and training must be met in order to ensure quality education. One way to do ensure stable and predictable financing of education would be to issue bonds for education on the capital market, much like the International Finance Facility for Immunizations (IFFIm), which uses these bonds to convert long-term government pledges into resources that are immediately available to give vaccines to children in developing countries. Similarly, as part of the American Recovery and Reinvestment Act of 2009, a set of federally-subsidized bonds were made available to Chief State School Officers to help finance school renovation and construction.
Beyond the initial set of mechanisms, exploratory work is now being undertaken to raise additional resources, including preventing illegal financial flows and tax avoidance, levying foreign currency transactions, and soliciting voluntary solidarity contributions (VSC). The new Millennium Foundation is developing a VSC that makes it easy for the more than 1 billion people who fly every year to make a voluntary micro-donation of a dollar or two when they purchase a plane ticket to help fight contagious diseases. The potential for further advancements in this field offers education the opportunity to take a leadership role in designing and implementing new mechanisms that will help to close the global financing gap for education and help ensure that every child has the opportunity to get a quality education.
Innovative financing is poised to be a critical element in bridging the gap between the resources currently available for development and those needed to reach the Millennium Development Goals. The gap is significant. To make this bridge work for universal education, the education sector needs to support innovative ideas like the “Better Future” levy to ensure that education benefits from innovative mechanisms and be at the forefront of designing and implementing new ones.