Financing Education Differently: The Time for Innovative Financing

Education is the largest budget item in many states around the world — and this choice is no accident. France devotes €63 billion to it in 2025, the first budget of the Nation. Norway allocates about 10% of its public spending. Morocco and Namibia are among the few African countries to have kept their international commitments over the 2013–2023 decade, reaching the 15–20% of public spending threshold recommended by the Incheon Declaration. Ghana has written into its national policy the goal of devoting between 15 and 20% of its budget to education in line with the Incheon Declaration — and its allocations ranged between 13 and 20.7% of public spending between 2018 and 2025, peaking at 20.7% in 2021. Sierra Leone completes the picture by guaranteeing free universal access to primary and secondary education while meeting the recommended funding thresholds.

These commitments are real. They are also insufficient. Because in a context of widespread fiscal constraint, growing debt service — which absorbs on average 34% of public revenue in Sub-Saharan Africa — and intense demographic pressure, public resources alone can no longer meet the scale of needs. According to UNESCO, the education financing gap in low- and middle-income countries exceeds $100 billion a year. Faced with this structural challenge, a new generation of financial mechanisms is emerging — and beginning to profoundly transform the way resources for education are thought of, mobilised and deployed.

Why turn to innovative financing?

Before detailing the mechanisms, it is essential to understand why they have become necessary — not just useful.

First, public budgets are reaching their structural limits. Governments face multiple pressures at once: ageing populations, the ecological transition, debt inherited from crises, growing demands in health and security. Education, although declared a priority, is losing ground in real terms in many countries.

Second, needs are accelerating. Global demographics, especially in Africa where the school-age population grows by 2 to 3% a year, demand massive investment in infrastructure, teacher training and teaching materials. No national budget can absorb this alone.

Third, innovative financing does not replace the state — it amplifies it. This is perhaps the most important point to stress for decision-makers and funders: these mechanisms act as levers. One public euro invested in a guarantee can mobilise four or five more on private markets. They transform the logic of spending: we no longer finance only inputs, we finance measurable, verified, comparable results.

Fourth, the private and philanthropic sector is ready. ESG investors, sovereign wealth funds, corporate foundations, family offices: these actors are looking for impact investment opportunities. Education is still under-represented in their portfolios, not for lack of interest, but for lack of suitable vehicles. Innovative financing creates precisely those vehicles.

Innovative financing: how it works

Innovative financing refers to all the mechanisms that make it possible to mobilise resources beyond traditional public spending channels. It covers a wide variety of tools, which can be grouped into several families.

Financial leverage instruments (blended finance) make it possible to use a limited public resource to attract much larger private capital. A public guarantee of 100 million can thus mobilise 400 or 500 million on the markets. This is the principle of blended finance, now used in many sectors — energy, infrastructure, health — but still too little in education.

Social impact bonds (Contrats à impact) make repayment conditional on achieving measurable objectives. A private investor pre-finances a programme; the state repays only if success is confirmed by an independent evaluator. This model radically transforms the logic of public spending: we finance results, not inputs. In France, impact contracts have existed since 2016, mainly in the fields of employment and the environment.

Social bonds are securities issued on financial markets to fund projects with high social value. They follow strict principles — identification of beneficiaries, traceability of funds, annual impact reporting. Unédic in France issued €1 billion in 2024 to finance training and career retraining.

Results-based financing (RBF / PforR) links the disbursement of public or international donor funds to the achievement of predefined performance indicators — enrolment rates, assessment results, number of teachers trained. It is notably used by the World Bank in its Program-for-Results loans.

Blended philanthropic financing mobilises private foundations, corporate philanthropy and structured donations to co-finance programmes alongside public funds. It can take the form of endowment funds, co-investment mechanisms or catalytic grants intended to kick-start projects that will then attract other funding.

Green and sustainability-linked bonds tied to education make it possible to combine climate finance and educational investment — particularly relevant for school building renovation programmes or environmental education.

Sovereign guarantee mechanisms allow a state to obtain better conditions on financial markets thanks to the backing of an international institution (World Bank, AFD, EIB), thereby reducing the cost of its debt and freeing up budget room for its development priorities.

Debt-for-development swaps consist of refinancing existing debt on more favourable terms, provided that the savings made are earmarked for investment in priority sectors — education, health, climate. It is a powerful mechanism for countries that do not lack political will, but budget room.

Crowdfunding and community funding platforms are also starting to find their place in education, notably for local projects, school equipment or scholarships.

What makes these mechanisms powerful is their ability to bring together interests that at first sight diverge: the state's budgetary discipline, investors' search for return or impact, and the ambition of education project leaders.

Focus on education: what is already being done

These tools are not theoretical. Concrete experiences, at different scales, show that they work in the education sector.

Results-based financing is establishing itself as a new international standard. The Global Partnership for Education has developed a mechanism called Multiplier: a $40 million GPE grant in Ghana made it possible to mobilise a further $40 million from a consortium of philanthropic foundations, multiplying the initial impact. In Haiti, a $19 million GPE grant catalysed $57 million in co-financing from the World Food Programme and the Inter-American Development Bank.

Impact bonds are finding their place in education. In Portugal, a social impact contract financed school success programmes. In India, Development Impact Bonds improved reading and numeracy results in disadvantaged rural areas, with investors repaid in proportion to the progress achieved. These experiences show that results-based logic, long confined to employment or reintegration, can apply to foundational learning.

The debt-for-development swap is perhaps the most striking example. In December 2024, with World Bank support, Côte d'Ivoire carried out the first operation of this kind ever backed by the World Bank Group: nearly €400 million of costly commercial debt was refinanced thanks to a policy-based guarantee of €240 million. The operation freed up €330 million over five years, a saving of €60 million in net present value. The Ivorian government committed to devoting most of these savings to building 30 lower secondary schools hosting about 30,000 pupils, half of them girls. What distinguishes this operation from earlier ones: it relies on national systems already in place, avoiding costly offshore structures, and is tied to an existing education programme whose results are independently monitored by the World Bank. A replicable model, in the World Bank's own words.

These examples have one thing in common: they do not substitute private for public. They catalyse public spending by giving it a leverage effect that it could not achieve alone.

Three priority areas: what international institutions say

Despite these advances, a consensus is emerging among the major international organisations: innovative financing remains under-deployed in education, and three priority areas clearly stand out.

Document, evaluate, share the evidence. UNESCO explicitly calls for the creation of knowledge banks to record good practices, innovative financing mechanisms and national and international commitments. This advocacy is not rhetorical: the joint World Bank/UNESCO report on tracking education financing (EFW 2024) stresses that global education spending is rising, but that this increase does not translate into a substantial rise in spending per child — notably for lack of sufficiently documented and replicable mechanisms. Evaluation is not an academic luxury: it is the condition for scaling up.

Develop investment vehicles dedicated to education. The Fortaleza Declaration, adopted in October 2024 by more than 650 participants, including 50 ministers, at the Global Education Meeting organised by UNESCO, calls for urgent action to scale up innovative financing instruments specifically suited to the education sector. The GPE has shown the way with its Multiplier fund, which since 2018 has mobilised more than $2 billion in additional co-financing from $480 million in initial funding — a leverage ratio above 4 to 1. This model remains the exception. Following what has been built in the climate sector — green funds, green bonds, carbon markets — equivalent instruments dedicated to education, accessible to institutional investors (insurers, pension funds, family offices), have yet to be developed on a large scale.

Strengthen states' capacity to structure and manage these operations. UNESCO provides countries directly with technical support and capacity-building assistance so they can improve their financing strategies and public finance management. The EFW 2024 report is explicit on this point: innovative debt relief and conversion mechanisms can only produce their effects if accompanied by sustained domestic resource mobilisation, efficient spending and sound public finance management. The Ivorian example is a concrete demonstration: the operation could be set up and secured because the country had trained teams, an operational monitoring framework and a relationship of trust built up over many years with the World Bank.

Education is too often perceived as a cost. These mechanisms remind us that it is, first of all, an investment — and that this investment can be structured, measured and amplified. The conceptual framework exists. The evidence is beginning to accumulate. The actors are mobilising. What remains is to make the political and financial choice to scale up.

Sources: World Bank / UNESCO — EFW 2024 report (Education Finance Watch); Global Partnership for Education — Annual report 2024; UNESCO — Fortaleza Declaration, Global Education Meeting 2024; UNESCO — Education financing page (2026); UNICEF Ghana — Education Budget Brief 2024; Human Rights Watch — Africa report, June 2025; French Ministry of National Education — 2025 Finance Bill (PLF 2025); IMANI Africa — Analysis of Ghana's education budgets 2025; Agence Ecofin — Education in Africa, February 2026.

Sonia Beguide