7
Models of Financing Structures
Speakers discussed both traditional financing models, such as grants, and innovative financing, such as public–private partnerships and social impact bonds, and the roles they could play in increasing funding for initiatives. They explored ways in which private investment can be best leveraged to support existing programs as well as to finance scale up. They also considered the limitations of private investment and examined the need for coordination of diverse financing mechanisms.
Amita Chebbi of the Children’s Investment Fund Foundation noted that private funding has a significant role in early childhood education and development initiatives. She stated that in India, for example, while public funding has increased in absolute terms, year over year, in relative terms it has remained the same. Chebbi indicated this is an opportunity for private-sector investment. At the same time, she cautioned, it is important that private-sector funding does not crowd out public-sector funding, but instead serves as a catalyst to accelerate funding in neglected areas. For her, the role of private investment is to strengthen existing public systems. Private firms cannot create infrastructures and must instead work within and strengthen existing systems.
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1 This section summarizes information presented by Amita Chebbi, Children’s Investment Fund Foundation, India.
Chebbi pointed out that a number of countries have demonstrated proof of concept in programming for young children and are poised to scale up their initiatives. Because this shift requires significant amounts of capital, Chebbi suggested that private investment could provide supplementary funds to support early infrastructure, systems development, and management. In addition, as countries rapidly urbanize and as programs continue to focus on rural populations, Chebbi indicated there is a coverage gap for certain populations, such as the urban poor. She suggested that the private sector could step in to finance services for this disadvantaged group.
Chebbi also raised the question of the means of private funding, particularly alternative models. Market-based solutions, she noted, could potentially be a mechanism for funding children’s services. For example, she stated, there is significant investment in research and development in medication for pediatric patients by the pharmaceutical industry. She suggested that creating marketplaces that place children at the center of products and services could further early childhood development. In addition, new mechanisms that apply traditional financial instruments for social impact, such as social impact bonds and development impact bonds, could be useful means of financing early childhood development, according to Chebbi. Finally, she proposed the creation of an aggregator for corporate social responsibility funding, particularly as it is a growing source of funding in India.
In his presentation, Bose noted that public–private partnerships can also be useful for financing and sustaining large-scale child development programs and that these schemes have been used to provide infrastructure for private schools. Under a system called “viability gap funding,” a one-time grant can be issued to a private school to cover up to 20 percent of costs. This grant provides important upfront funding for projects that do not have immediate commercial returns, but do have important social benefits and long-term value for public dollars. Bose stated that the public–private partnership structure could be useful in other areas as well, such as the provision of midday meals, among other areas.
Bose proceeded to describe several other areas of financing in India, including the newly introduced Companies Act, which requires corporations to dedicate 2 percent of profits to corporate social responsibility efforts. He cautioned that this funding is subject to a significant amount of competition, however. Although 2 percent of corporate profits appears substantial, many organizations are vying for a contribution; many efforts and sectors are seeking funds from corporations. He also mentioned conditional cash transfer schemes, some of which have worked successfully in health programs. In schools, however, the use of cash transfers in India comes with the risk of multiple enrollments. This hurdle, he said, could
be countered with the use of unique identifiers, a solution that estimates indicate could save the state of Maharashtra, for example, 2 billion rupees.
ILIFA LABANTWANA: INCREASING ACCESS, INCREASING EQUALITY2
Sherri Le Mottee is the program leader of Ilifa Labantwana, an early childhood development program in South Africa. The program focuses on the 40 percent of children who are affected by poverty in the country, providing them and their caregivers with an early and essential package of services from conception to entry to formal education. Le Mottee explained that this innovative donor collaboration is a partnership among the DG Murray Trust, the ELMA Philanthropies, and the FirstRand Foundation, with additional support from the UBS Optimus Foundation. The partners work together with the Ilifa program staff to develop a strategy for investing in young children, engaging both the government and civil society sectors when targeting interventions and communities.
A core element of the program, Le Mottee said, is the belief that government holds the primary responsibility for the provision of early childhood services. For this reason, the program’s focus is not to replace public-sector responsibility, but rather to enable the system. In all areas in which Ilifa Labantwana works, there are memoranda of understanding with the government. Le Mottee emphasized that this arrangement was crucial in the setup and sustainability of the program and acts as part of the common vision. She said it also served as a guiding principle in the establishment of the fund, as a means of overcoming the challenge of aligning different institutional cultures, and in the exit of the program implementers once the government takes it over. She also emphasized that Ilifa Labantwana does not pilot initiatives, but instead co-creates testing models in conjunction with the government and civil society within the existing infrastructure. At the same time, the community plays an essential role in determining what is needed. She said the approach is bottom-up, with a focus on institutionalizing what works.
Another element of the fund Le Mottee highlighted is the need to be nimble, responsive, and adaptable to changing political circumstances. She said that rather than spending time on mapping exercises, reporting, or brainstorming solutions, the program mobilizes resources quickly once an area of intervention has been identified. Ilifa Labantwana is also engaging—donors commit a significant amount of funds into one “bucket” but maintain their own investment portfolios for other child development programming. This in essence not only doubles the
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2 This section summarizes information presented by Sherri Le Mottee, Ilifa Labantwana.
funds in the sector but also creates strategic partnerships and deeper bonds between stakeholders, Le Mottee explained. Furthermore, Ilifa Labantwana is catalytic. Although donors have increased overall funding to support early childhood development through their own contributions, the fund has also had the impact of generating additional government funding. Le Mottee gave an example of costing work done with the finance department of the Department of Social Development on providing home visitation programs. Information from this work informed the annual provincial budget process, resulting in an allocation for the first time in the Department of Social Development’s budget for community-based services for young children. According to Le Mottee, the program also served a secondary function by changing the system to enable the employment of regularly paid workers for the home visitation program. In essence, Ilifa Labantwana ensured not only that funding flowed to the right intervention but also that the intervention itself could be implemented appropriately.
Le Mottee closed with a description of work currently being done to increase access to a child subsidy available to early childhood development centers in South Africa. She said that because the funding was not reaching a significant portion of children, the solution previously had been to increase the amount of money available. However this did not result in greater access, so Ilifa Labantwana was given the task of assessing the process. They found that the children who needed the subsidy the most were not getting it because they were attending centers that did not have the capacity to fulfill the onerous paperwork and registration requirements. Ilifa Labantwana has been working to streamline this process and increase participation in the scheme. Le Mottee explained that because of its ability to cut through institutional barriers, Ilifa Labantwana can demonstrate and model work that is possible and assist the public sector in developing similarly responsive mechanisms.
In response to a question about challenges, Le Mottee noted that politics often serve as a logjam in the system. She said that while having resources opens doors, navigating both individual and systemic politics can still cause delays. One solution for this, she proposed, is a continuous revisiting of the relationship to ensure that the needs of all stakeholders are being met. In addition, Le Mottee spoke further on donor engagement in addressing a question on private investment strategies. She stated that donor funding tends to mirror the existing sector, which can lead to redundancy and parallel structures. What is needed, she said, is a big-picture look at how best to use the strengths of private-sector funding in the existing space, a strategy that requires, at a minimum, mapping existing contributions.
Madhav Chavan of Pratham India spoke of his experience navigating public–private partnerships in childhood education in India. He reiterated the responsibility of the government in providing both financing and programming for early childhood programs and noted that the private sector could be best utilized in supporting the government system. He also emphasized the importance of ensuring quality of services. Increased public funding, he said, is a necessity, but it should do more than expand services; it should also ensure their quality.
In India, Chavan pointed out, 35 percent of students go to private schools. He said this percentage was so high because caregivers believe private schools are superior to public schools, despite a government commitment to the right to education. For him, there is a growing divide between those who can afford to pay for privately provided services and those who cannot, and he cautioned against relying too heavily on using the private sector to create improved services. Instead, he suggested that the private sector should focus on improving existing government services.
Chavan proposed one mechanism for private investment through partnerships in which the private sector can fund gaps in existing services, perhaps by providing additional staffing in early childhood centers, for example. In addition, he noted that although strengthening institutions is an important goal, strengthening family structures is also necessary. Families and communities need to be empowered to care for children in a collective manner, according to Chavan. He stated that both the government and the private sector should support the irreplaceable role of primary caregivers early in children’s lives.
In response to a question about public funding versus public provision, Chavan noted that a mix is often required, particularly in large, centralized systems. He gave an example of a community in Bihar that came together to supplement the first through eighth grades of school with two additional community-funded years. On the other hand, decentralization could more accurately address needs across diverse settings. However, Chavan stressed that a culture of distrust around decentralization needs to be addressed before it can be successfully implemented. He added that it also requires strong commitment from nongovernmental actors to create a working partnership.
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3 This section summarizes information presented by Madhav Chavan, Pratham India.
Karlee Silver of Grand Challenges Canada and a member of the Forum on Investing in Young Children Globally presented the major themes raised by the breakout group that discussed how to converge funding for impact. Participants in this group raised the notion that investment involves not just money but also people and nonmonetary resources. One theme that arose was the recognition of different stakeholders in a multisectoral area. She reported that there was a need for all sectors to be involved and aligned for maximum impact.
Some participants believed that one way to incite collaboration is through developing a common vision. A common vision could bring together multiple approaches, such as top-down governmental approaches, bottom-up grassroots implementers, and the front line of families and implementers. At the same time, existing structures of governance, decision making, and funding would dictate the means by which a common vision can be created and promoted. In developing this vision, Silver noted that several participants thought that some successful models of engagement already exist, and there was pushback against the idea of doing more case studies. Rather, several discussants believed that it was crucial that multiple sectors and stakeholders take ownership of these issues so that if the political climate changes, there is still continuity in funding and programming.
In the discussion following the reporting, several participants raised additional points. One participant noted that, in addition to funding, there is a need for convergence in policy and operations and that convergence may hold different meanings for different stakeholders. Another participant emphasized that convergence is most effective when the outcome—for example, the development of the child—is holistic and not fragmented. This participant added that when all the various departments involved in child development programming begin to work in a more collaborative manner, rather than separately and with their own measurement indicators, convergence will naturally happen.
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4 This section summarizes individual remarks by participants in concurrent session 3.
