From Funding to Partnership: a Multilateral Perspective on Philanthropy in Public Education Finance

As domestic and external financing resources tighten and global uncertainty persists, the question of how countries can secure long-term financing for public education has taken on renewed urgency.

Multilateral organisations increasingly find themselves working at the intersection of fiscal pressures, rising expectations, and a complex ecosystem of actors pursuing learning for all outcomes. In this context, the International Education Funders Group (IEFG) and OECD’s network of Foundations Working on Development (netFWD) invited OECD, UNESCO’s International Institute for Educational Planning (IIEP), the Global Partnership for Education (GPE), and the World Bank (WB) to contribute to a shared reflection, drawing on our respective areas of expertise rather than offering formal institutional positions.

Why should philanthropy get involved in macro-fiscal policy?

Why should philanthropic actors (whose funding, as we are often reminded, will not replace aid, and whose incentives are neither public nor political) concern themselves with macro-fiscal policy or the use of country financial systems? Why engage a community that does not raise taxes, issue debt, or negotiate with finance ministries?

The answer is that philanthropy already influences how education is financed, at a scale that makes disengagement implausible.

OECD data show that, taken together, grant-based philanthropic funding for education is comparable to that of a major bilateral donor (e.g. JICA or FCDO). These resources are fragmented and rarely flow through government budgets, but their aggregate weight shapes priorities, narratives, and incentives.

Philanthropy’s comparative advantage is catalytic: testing ideas, absorbing risk, and nudging reform. Whether such efforts succeed in the long-term depends heavily on macro-fiscal contexts, particularly debt dynamics and fiscal space, constraints that are now tightening across many low- and middle-income countries as debt burdens rise and aid stagnates.

Philanthropy cannot, and should not, fill public-finance gaps. But philanthropy does influence how education is financed, governed, and implemented.

That gives the global education philanthropy community a clear interest in engaging with the macro-fiscal dialogue and multilateral debates that increasingly determine what is feasible in education policy today, a point underscored by this year’s IEFG & netFWD joint statement ahead of FFD4, and by IEFG’s Executive Director as a ‘Back to Office Report’ from FFD4.

Understanding fiscal foundations: why domestic revenue matters for philanthropic engagement

From the perspective of Bert Brys, Senior Tax Economist at the OECD Centre for Tax Policy and Administration, any discussion on sustainable financing for public education must begin with the fundamentals of domestic revenue. Tax policy determines not only the size of the fiscal envelope, but also how predictable and resilient resources are over time. These dynamics influence governments’ ability to plan, expand, and sustain education investments.

Bert emphasised a structural distinction that helps frame the challenge clearly. Social protection systems are often financed through contributions paid today, with benefits received later. Education works in the opposite direction: students benefit now, while the fiscal returns (higher earnings and increased tax payments) materialise years later. This timing asymmetry makes education particularly sensitive to the depth and resilience of domestic revenue systems.

Education actors could engage in the aspects of domestic tax policy that are directly linked to education, and that influence the fiscal space available for education and may have an impact on the cost of education for households. For example, deductions for education-related expenses from taxable personal income, training levies, VAT exemptions or reductions for education expenses, and other tax expenditures that tend to be invisible to sector actors but shape the cost of education and the tax revenue base. In many low- and middle-income countries, narrow tax nets, the weight of informality, and administrative constraints compound these limitations.

For philanthropic actors, this fiscal lens is important. Long-term support to education systems is inseparable from the long-term capacity of countries to generate and manage their own public revenues. Philanthropy has significant experience supporting tax and fiscal reforms in other sectors, including in tobacco control and tobacco taxation, where Bloomberg Philanthropies is a worldwide leader in tackling the global tobacco use pandemic. Similar engagement in education that takes a broader education financing perspective could help countries strengthen the domestic foundations required for sustained investment.

Bert also pointed to ongoing OECD work aimed at assessing education spending needs and identifying concrete tax policy options that could sustainably support them. A central element is facilitating dialogue between ministries of finance and education. He noted that these ministries do not always share a common understanding of needs and constraints. By funding education financing country reviews, philanthropy could play a catalytic role in supporting this analytical effort and the dialogue it requires, helping countries build a clearer picture of what sustainable financing pathways could look like.

From fiscal constraints to sustainable financing pathways: structuring philanthropic capital for education

For Raphaelle Martinez, Lead Economist for Sustainable Finance, GPE, the fiscal realities described by Bert translate into very concrete challenges for the education sector. A GPE study developed in the context of the African Union Year of Education examined the fiscal space and budget prioritisation constraints shaping the overall financing envelope for education across African countries. While revenue determines the size of the fiscal envelope, what matters for sector actors is how much of that envelope ultimately translates into predictable funding for education over time.

National budget ceilings are often set upstream, cash-flow decisions follow treasury constraints rather than sector needs, and the absence of credible multi-year budget commitments limits the ability of ministries of education to sustain reforms, constraining both the scope of sector plans and the effective execution of budgets. From a fiscal space perspective, this translation is also inherently political, reflecting prioritisation choices and bargaining dynamics rather than purely technical allocation rules.

These same fiscal realities also shape how philanthropic capital can be deployed alongside public and concessional financing, contributing to financing pathways that can be sustained as public systems gradually assume a larger share of funding. While modest in volume relative to domestic public financing, philanthropic capital becomes particularly catalytic in contexts where expanding the fiscal envelope for education – whether through revenue mobilisation or budget reprioritisation – is insufficient or slow-moving, limiting governments’ ability to frontload reform investments even where policy ambition exists.

In practice, this contribution lies less in the scale of philanthropic capital than in how it can be structured: its flexibility allows it to step in at moments when government resources cannot adjust quickly, engaging with uncertainties of policy timing, early implementation, or institutional readiness that often slow system reforms, with these catalytic functions operating differently depending on fiscal and institutional context.

This makes it possible to invest in system-level public goods (such as data, monitoring, and digital or institutional capabilities) that are difficult to fund through annual budget cycles. Because philanthropy is not bound by fiscal-year constraints, it can help maintain momentum during transitions, bridge delays in cash releases, and finance early-stage work that enables larger public or multilateral investments to move forward more smoothly. Such investments are most effective when grounded in strong country partnerships and institutional ownership, but in financing terms, their distinctive value lies in sustaining reform continuity where public funding cycles are volatile.

In some cases, philanthropic endowment capital extends this catalytic support beyond grant funding through balance-sheet deployment, such as loans or guarantees, reducing risk or financing costs for subsequent public and private investment. This shift is particularly relevant in fiscally constrained environments where additional sovereign borrowing to finance education expansion may be limited or unsustainable, increasing the value of risk-sharing instruments that can mobilise investment without adding direct pressure to public debt stocks when structured off sovereign balance sheets.

For education equity priorities that are structurally more resource-intensive – reaching remote communities, supporting learners with additional needs, or sustaining services in fragile contexts – philanthropic resources, when integrated into country systems rather than operating around them, can help make these commitments viable without fragmenting delivery or adding parallel structures. This is especially important in low-income settings where even meeting benchmark levels of education spending as a share of GDP may still translate into inadequate per-student financing in absolute terms, leaving high-cost inclusion priorities persistently underfunded within domestic budget envelopes.

The structural risk behind philanthropy’s flexibility

Philanthropy’s defining flexibility – across timing, instruments, and risk tolerance – carries a structural risk. When deployed in isolation, philanthropic support can inadvertently pull attention toward siloed pilots or bespoke projects.

The challenge, therefore, is not flexibility per se, but how that flexibility is used within the structure of broader partnerships and financing arrangements over time. Without this kind of structuring, philanthropic capital risks operating at the margins of system financing rather than reinforcing sustainable expenditure pathways anchored in public finance

But when aligned with country systems and policy processes, relatively modest philanthropic commitments can go a long way. They can play a critical sequencing role by supporting upstream institutional or policy adjustments and helping unlock larger, sector-wide investment aligned with national priorities, particularly when embedded within national financing frameworks and sector planning processes.

Turning investments into results: why efficiency matters

Within our shared reflection, the perspective brought by Diego Angel-Urdinola, Senior Economist and Thematic Lead for Education Finance at the World Bank, places the emphasis on a crucial dimension of financing: sustainable financing for education. Sustainable financing depends not only on expanding fiscal space and prioritising education spending but on how effectively countries use the resources they already have.

Currently, about 16% of public education funding in developing countries is misallocated due to inefficiencies. These stem from the way systems allocate teachers, manage payrolls, execute budgets, and align spending with real needs on the ground. These patterns emerged repeatedly across the country cases recently reviewed by the World Bank and GPE: inefficiencies are structural, not incidental.

However, we need to break some efficiency myths.

Myth: LICs are inherently inefficient users of education resources

This is an incorrect perception; indeed, once differences in input costs and poverty levels are accounted for, LICs perform comparably – and in many cases more efficiently – relative to the resources available to other developing countries, according to research conducted by the World Bank.

Myth: Traditional cost-reduction measures can generate fiscal space

In fact, evidence reviewed by the World Bank shows that traditional cost-reduction measures—such as increasing class sizes, freezing teacher wages, double-shift schooling, and expanding contract teachers—have generated limited fiscal space and have often undermined teaching quality and learning outcomes. Similarly, while public financial management reforms are essential for system functioning, their direct impacts on learning and cost efficiency are generally modest when implemented in isolation.

Efficiency measures that work

More promising approaches to efficiency consistently link resource allocation with performance, effectiveness, and needs. These include sustained and equitable financing of foundational learning; decentralisation paired with clear accountability and adequate capacity; investments in teacher preparation, deployment, and professional development; and systematic use of data to guide policy and budget decisions. Additional efficiency gains can come from needs-based funding formulas, school consolidation, well-regulated public–private partnerships, and the strategic use of EdTech and AI where infrastructure and skills allow.

How concessional finance can support efficiency-focused reforms

Because such reforms unfold over time and are embedded in macro-fiscal frameworks, they require predictable, multi-year engagement and investments in oversight and institutional capacity building.

This is where concessional finance can play a distinct role. Beyond adding resources, it provides the medium-term commitment needed to support efficiency-oriented reforms and institutional changes that help governments redirect resources toward higher-impact uses.

When effectively designed, these reforms enable government systems to allocate education budgets in ways that promote results, transparency, and equity. Results-based financing, for instance, as seen in countries such as Brazil and Peru, links funding to local performance and has been associated with improvements in learning outcomes. Success with this approach depends on strong data systems for monitoring, as well as robust (preferably decentralised) regulatory and quality-assurance frameworks.

How philanthropy can support efficiency-focused reforms

Philanthropy complements this from a different angle. Efficiency-focused reforms depend on early diagnostics, data availability, and targeted piloting: areas where public budgets and traditional ODA often face constraints linked to procurement rules, political sensitivities, or timing. While ODA and philanthropic financing for education often operate in parallel, philanthropic contributions (given their greater flexibility) can effectively complement and reinforce ODA investments.

In particular, philanthropic capital carries a distinct advantage in supporting the early stages of complex reforms: it can move faster, take on higher-risk analytical work, and invest in global and national public goods that are often outside the scope of many concessional instruments. Once these foundations are in place and the direction of reform becomes clearer, concessional finance can consolidate and scale the changes within national systems.

To reduce fragmentation, improve alignment, and promote the use of government delivery systems, philanthropic capital can be channeled through existing trust funds within MDBs and global funds with funding tied to measurable outcomes and, where appropriate, earmarked for specific themes or geographies. Large foundations are beginning to adopt this approach and prioritise specific policies using government delivery systems, with many initiatives later scaled via concessional lending. By doing so, they can influence the pace and direction of major reforms, mobilise additional financing, and ultimately help make systems more efficient and effective.

When philanthropy and concessional finance work in sequence (one generating the conditions for reform, the other scaling what works) countries gain a more coherent pathway to financing education sustainably.

Closing the loop: using national systems is key for sustainable education financing

From the perspective of Claude Ndabananiye, Education Finance lead at UNESCO’s IIEP, the sustainability of education financing depends fundamentally on how effectively available resources flow through national institutions and processes to reach classrooms and pay teachers on time.

Evidence from an upcoming IIEP-AFD-GPE study shows that external support to education still frequently bypasses the national systems it is meant to strengthen. The growing number of actors and financing channels overwhelms education ministries that already operate with limited capacities and high staff turnover. As a result, partner countries lose coherence, visibility over spending, and the ability to sustain reforms beyond individual project cycles.

Claude’s emphasis is that bold domestic resource mobilisation and capable public financial management arrangements are central to building results-oriented education systems. What ultimately matters is whether resources are planned, released, and executed through functioning country systems. Delays in cash releases, weak payroll management, or dysfunctional procurement processes translate directly into implementation failures, regardless of the quality of policy design and the volume of funds mobilised. When public financial management systems are weak, or when external funding bypasses them rather than strengthening their use, the sector’s ability to deliver and sustain reform is fundamentally constrained.

How can philanthropy deliver sustainable education solutions?

Like other external funding sources, philanthropic funding will only deliver sustainable solutions if intentionally aligned with policies and plans, and will be even more impactful if delivered through, rather than outside, country public finance systems.

While alternative delivery models can accelerate results in the short term and bring innovation, they rarely create financing or service delivery arrangements that governments can sustain once external funding exhausts. From an investment perspective, such approaches may deliver visible outputs but tend to weaken institutional ownership, limit scale-up, and undermine the durability of reform.

This reflects a structural constraint: philanthropic resources are finite and typically insufficient to sustain nationwide delivery or recurrent costs over time. When interventions exclusively rely on parallel arrangements, scaling them through public systems becomes even more challenging. For this reason, the use of country systems cannot be treated as a downstream consideration; it needs to be built progressively from the outset, so that delivery models, cost structures, and implementation responsibilities can be absorbed into public systems as reforms mature.

Some parts of philanthropy already recognise this shift towards involvement in education finance. Foundations engaged in transparency, accountability, and tax justice have shown that private capital can participate (carefully and legitimately) in debates over fiscal space, public resources, and state capacity. Education philanthropy, by contrast, has been slower to test these waters.

The question is not whether philanthropy should replace public finance, but whether a critical mass of funders is willing to engage with the conditions that enable it.

This raises uncomfortable but necessary questions:

1. Is there a constituency within education philanthropy prepared to influence, and be influenced by, macro-fiscal debates?

2. What role might domestic philanthropy play, given its often deeper, more durable relationships with governments at national and local levels?

3. If the sector is serious about country systems, will some of the more household-name large institutional philanthropies move beyond advising governments through parallel project-management units to funding directly through national financial and procurement systems?

These are not questions of ideology, but of effectiveness. In a world where fiscal constraints increasingly determine educational outcomes, the relevance of education philanthropy will depend less on the elegance of its pilots and more on its willingness to engage with the public systems through which education is ultimately financed and delivered.