An Overview of Innovative Financing Mechanisms for Education in Development Contexts

Abstract

Traditionally, financing for social development in development settings has utilised bonds and guarantees. These mechanisms focused primarily on resource mobilization by leveraging the balance sheets of international finance institutions to make loans. However, since the mid-2000s, innovative financing has encouraged alternative models where private sector actors share the risks and rewards. This report reviews evidence on the use of Social Impact Bonds (SIBs) and Development Impact Bonds (DIBs) in India or other LMICs to deliver results in primary and secondary education. Evidence suggests that, in recent years, there has been a significant growth in the application of impact bonds in a range of global settings, including for education in LMICs. These mechanisms are seen to be particularly valuable when operating in complex, fluid contexts (REACH 2017), and, with appropriate design, can also contribute towards the development of wider systemic capacity.