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© 2023 Opportunity International Education Finance functions under its US and UK affiliates. Opportunity International United Kingdom is registered as a charity in England and Wales (1107713) and in Scotland (SCO39692). Opportunity International United Statesis a 501(c)3 nonprofit.

Microfinance helps build a school, create jobs in coastal Ghana

By Opportunity International

The latest figures from UNESCO’s Global Education Monitoring Report remind us how donor aid can be so capricious, even for something as critically important as education.

Released on Monday, April 25th, UNESCO’s Global Education Monitoring (GEM) Report estimates that from 2013 to 2014, global aid to education dropped 4 percent to US$13.1 billion.

That means that the world now needs to find an extra US$39 billion per year to achieve universal pre-primary, primary and secondary education of good quality for all non-OECD countries.. That is quite a financing gap.

It opened up, even as the global community was preparing its new sustainable development goals, including Number 4 on education.

So how do we fill it? In theory, governments could increase their spending on education, either by raising more tax or by spending a higher share of their budgets on education.

But we don’t see tax collection improving fast in the next few years. Nor do we see a larger proportion of government budgets going to education. African countries, for example, already spend an average 18.4 percent of their budgets on education. It’s hard to imagine that figure going much higher.

We agree with those who say that education all around the world could gain from better governance.

But we need more money to make that transformational jump in access to education and education quality. The world will need private sector money to fix its education crisis.

Somehow this requires us to align the private sector and education space, to close the market gap by which investors want to invest but not yet in education – which needs investment – on a sufficient scale.

Microfinance offers excellent solutions. With default rates now at less than 1 percent, microfinance for education is now a viable investment for private investors. It also represents an excellent way to get cash directly to where it is needed most – the schools. Microloans bypass government bureaucracy, keeping overheads to a minimum.

Finally, because the money is paid back it can be used again and again and again.

Opportunity EduFinance is the world’s leading non-profit organisation working on microfinance for education at a global scale. These are still early days for our work, but we think microfinance will be a critical supplement to government and donor money and provide solutions to provide effective education at sufficient scale.

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