We must innovate in financing education, including through Islamic finance instruments

Most countries were unprepared for the COVID-19 pandemic, and recovery from its impact will require both large-scale funding from an already shrinking resource envelop, and some strategic reforms to restructure and rebuild more resilient education systems to ensure continued learning under shocks and emergencies. Here is how Islamic financing can help to achieve that.

June 29, 2020 by Amadou Thierno Diallo, Islamic Development Bank Group
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2 minutes read
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Pre-primary school students attend an early childhood education class in Punjab, Pakistan. March 2018
Pre-primary school students attend an early childhood education class in Punjab, Pakistan. March 2018
Credit: ITA

The impact of COVID-19 on the global economy and on the education sector is far reaching and still unfolding.

The Islamic Development Bank’s (IsDB) member countries, like other developing countries, were largely unprepared for the pandemic, and recovery from its impact will require large-scale funding from an already shrinking resource envelop.

It will also require strategic reforms to restructure and rebuild more resilient education systems to ensure continued learning under shocks and emergencies.

Partnering to leave on one behind

While governments shall bear the responsibility for continued learning and enhanced recovery, multilateral development banks have a critical role to play in providing financing that will leverage domestic resources and unlock private sector financing.

This requires building partnerships and forging synergies around the ‘leave no one behind’ rallying call envisioned by SDG 4.

The Islamic Development Bank is collaborating with the Arab Coordination Group (ACG), comprised of all the Arab Funds, to raise US$10 billion toward the COVID-19 response.

In the spirit of innovative blended financing, these resources could potentially be further leveraged to unlock the Global Partnership for Education (GPE) Multiplier resources in several developing and emerging countries.

I therefore call for a tripartite engagement between the GPE Secretariat, the ACG Secretariat and the IsDB to explore these opportunities. It will require flexibility to ensure harmonization of procedures and business processes for expediency and efficiency.

Islamic financing is promising for education

Lessons from the 2007-2008 financial crisis have demonstrated the resilience of Islamic financial products and instruments against some of the features of conventional financing such as debt sustainability concerns.

However, global aid architecture and financing for education are yet to fully explore this largely untapped market.

Indeed, Islamic finance instruments such as Waqf (endowments) hold promising potential for sustainable financing of education.

As an example, the IsDB Awqaf Properties Investment Fund (APIF) has the unique mandate of supporting the establishment and development of endowments, through an operational mechanism designed as an impact investment fund, which pays both social and financial dividends to its investors.

I would encourage GPE to explore the possibility of leveraging this instrument for innovative and sustainable financing. The model has been successfully embedded in education sector as well as other social projects around the world to enhance sustainability of donor financing.

Thus, multilateral development banks must focus on providing social sector financing that serves as a catalyst to leverage more sustainable resources rather than entrench dependency.

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