5. Financing
How can we set up sustainable funding?
The Forum on Investing in Young Children Globally (iYCG) focused on:
- costs of programs for young children,
- sources of funding, including public and private investments, and
- allocation of those investments, including cash transfers, microcredit programs, block grants, and government financial restructuring.
- What do you think is the cost of lost opportunity for Iyaver?
Consider the benefits of investments and the costs of inaction. Listen to Hiro Yoshikawa, New York University, introduce a panel discussing the costs of inaction and benefits of action at the Washington workshop in April 2014.
Yoshikawa - Costs of Inaction
The title of this overall workshop is on the costs of inaction. The thinking behind that was that at the prior meeting, the evidence-base on the cost of inaction is extremely important for the issues of translation that Peter Singer was talking about this morning in communication. If we are to really bridge that gap between what we know and what we do, we need the economic argument for ECD to be clear, to be based on the strongest evidence and for all of us to really kind of get onto the same message around it.
The purpose of this panel is to understand what the costs of inaction are. To steal a little bit from Jere Behrman’s title. The cost of inaction can be also viewed as the benefits of action. Then we also have to consider the costs of action. If we divide one by the other, that is actually to benefit cost ratio for ECD. The question of what the ratio of benefits to costs is, is something that we all need to kind of learn the literature and have at the front of our minds no matter what sector or discipline or region of the world we are coming from.
The plus here is that we have a stronger evidence-base than many who are unfamiliar with ECD realize. At the same time, we have critical gaps. The purpose of this panel is to really assess critically what we know, what don’t we know and how do different perspectives, most centrally economics, but also the perspectives of children’s rights and perspectives of policymakers and folks that are actually making the planning decisions about how much to spend per child across sectors? How do we think of these different perspectives?
- Yoshikawa tells us that we must understand the benefit-cost ratio for investments in early child development. Why?
- What gaps do you see in our understanding about the cost and benefits of ECD investments?
At the August 2014 Delhi workshop, Pia Britto, UNICEF, and Lorraine Sherr, University College London, explore the gap between the abundant evidence for the benefits of ECD and the actual investments in ECD. They review the opportunities and challenges of investment options for ECD. The following paper unpacks the elements of an investment portfolio for ECD. Britto and Sherr argue that investment is a statement of values and setting of priorities.
Drag the following statements to the appropriate question below:
At the April 2014 Washington iYCG workshop Jere Berhman, University of Pennsylvania, outlines cost-benefit analysis.
Berhman Cost-Benefit Analysis
DR. BEHRMAN: Thank you very much. Thank you for inviting me to talk. I feel like I am the fourth token economist in a row here, but maybe the first on this panel. Hiro kindly addressed some of the questions in my introduction. I will use the term benefits. I see that as just the opposite of the cost of inaction, but I find it clarifying because there are also costs of the action and I want to look at the comparison between the two, which, I think in some abstract sense, benefit cost ratios may be, in a social sense, effective guides for policies. Certainly, in terms of dealing with ministers of finance they could be very useful constructs.
On both, there is lifecycle perspective. Overriding all of this is the question of what policy motives might be. Economists think of policy motives on one hand as relating to efficiency and productivity. We have heard some discussion with that by the previous three tokens. In that case, the efficiency dimension of it is if there are differentials between private and social incentives.
In addition, there is a distributional question. Probably for most people in the room this relates somehow to the poorest people in society being concerned about those living in poverty. A dimension of that, which Ziba will talk about next, will be viewing certain elements of child development as rights. The question is how do you want to incorporate that in the sort of thing that I am talking about? I would argue you could put distributional weights. You could put very heavy weight on improvements in children who are very low on the distributions in order to incorporate that. In principle, one could do that.
Turning to benefits, I have already made these points, except for the middle one that benefits are likely to be multiple. They are likely to be improved health, averted mortality, resources saved, increased productivity. To summarize them, there is a challenge if one wants to get at one measure. Perhaps one way of approaching the measure of potential that Peter mentioned in his earlier comments.
To summarize them one has to weight these different things. How do you add a 0.1 probability reducing mortality with the resources saved from reducing early life morbidity with the added productivity that is gained later in life. That is a challenge. Some of these are very difficult to decide how you put weights on. I think for many people what is most difficult is averted mortality. If one is going to combine these things together then some weights are needed.
This is just a lifecycle kind of schematic. I think there is no reason to spend more than about 10 seconds on this. Hiro said I could have up to 40, but maybe that was two other slides too. The point is we are talking about lifecycle. We are talking about a holistic approach including multiple dimensions of child development, physical development, cognitive development, socio-emotional development, executive function. Those are likely to be started early in the life and have impact on what happens thereafter and the kinds of returns investments later are likely to depend on investments earlier, as Paul said in some of his comments.
There are certainly estimates of associations between dimensions of early life and outcomes over the lifecycle. Here is an example from the Lancet paper by Victora, et al, of associations between infant anthropometric measures and subsequent outcomes over the lifecycle. Here is an example from the Engle, et al, Lancet papers in 2007 and 2011 of impact on cognitive skills. The impacts are order of magnitude 0.3 standard deviations. These are cognitive skills measured when the children are still fairly young, either preschool age or in their early school years. The question of course is how these persist or are amplified later in the lifecycle. There is a lot of literature about these kinds of associations. Before turning to one example and trying to combine them, I want to make two points. The first is that the benefits depend upon survival. Survival still comes in this story and not just infant survival. Secondly, to think about benefits that occurring in the future, such as when people become adults and arguably are more productive or don’t have chronic diseases, one has to worry about discounting those benefits to present terms.
The reason I would argue that you have to worry about that is if you get the benefit of 1000.00 today, you can reinvest it, and tomorrow or next year have 1030.00 or 1040.00 or 1100.00. If you get that same 1000.00 twenty years down the road then in those 20 years in-between you are not able to reinvest and get the return from the investment. It makes a difference. Here in this table are 3 percent, 6 percent and 10 percent discount rates and what 1000.00 is worth in the present if you receive it 10, 40 or 60 years in the future. At a 6 percent discount rate, intermediate one, receiving 1000.00 at 40 years is worth receiving 97.00 now. There is a big difference in having to wait 40 years to generate returns on the investment.
Survival rates make some difference. This is using my tables for India. It reduces the benefits to about 0.8 of what they would have been for benefits which occur late in life and should be incorporated. The discounting is likely to be in the critical factor. Here are some estimates that Terrell Alderman and I did about the present discounted value using discount rates of 3, 5 and 10 percent of 7 major impacts of moving one infant out of low birth weight status to above low birth weight status in a low-income country using the best estimates that we could find to piece this together over the lifecycle.
I guess the first point if we take the intermediate, the 5 percent, the value of doing so is something like 510.00. Notice how this is much larger, a 3 percent discount rate is much smaller if a 10 percent rate is appropriate. Second, given the assumptions we have made to weight these various outcomes, the biggest of this kind of value of gains comes from various kinds of productivity gains of 4 and 5, which have to do with productivity gains when these infants become 20 to 60. Even though we are discounting, so these are discounted back to present, those are big gains. They are big gains because they last over many years.
Third is the critical question I said before is how do you value reduced infant mortality? There is a lot of disagreement about that. If that is valued highly enough that will become the dominant gain. Other points that are important is that these benefits are likely heterogeneous across the various context. The benefits, the fourth point, are likely to be conditional based on what the prevalence of the situation is in the start. In all of this there is considerable uncertainty.
Turning to cost, the point about cost is when we are talking about cost, we are talking about resource cost, peoples’ time, using materials. We are not talking about the expenditures of providers. For many purposes that is not a big deal. One important example that Lee was talking about yesterday is it is a big deal. Conditional cash transfer programs are basically primarily transferring resources from one person to another. That entails some resource cost. It takes someone to run the program. It takes some goods, et cetera. It is nothing like the measure of the expenditures themselves. From a societal point of view is the resource costs that count and not those expenditures. Additional points are that resource costs include private costs. Some people tend to just look at the expenditures of providers, often governments and maybe NGOs and say those are the costs. To me, that is sort of amazing and almost immoral because usually these programs impose significant costs on some of the clients, in particular, usually poor women. To ignore those seems not only inappropriate as an economist, but almost immoral.
The costs also are going to vary over the lifecycle. They also are going to raise the question of discount. Those points are similar. Because of time, I am going to run quickly. Here is an example of some costs for dealing with acute malnutrition that Levin and Brouwer put together as part of a Grand Challenges Canada Project, in which we are engaged. The only point I want to make here is that these and costs for almost any such thing vary a lot as you look across countries, in part because of different ways of dealing in different countries. The ultimate point is the context is going to matter as you look across countries.
I am now going to turn to some benefit cost estimates. I am going to look at these four different groups. The first is the Copenhagen Consensus. There are costs here of various ways for dealing with nutritional interventions or nutritional deficiencies for children under 5, reducing low birth weight, reducing infant and child nutrition, reducing micronutrient deficiencies. The point I would make is that these benefit to cost ratios vary a lot across these various interventions. These are ones that are selected because they are particularly promising, firstly.
Secondly, for a particular intervention, the range is fairly large, depending upon what decisions you make about discount rates and other components. Thirdly, the range of these benefits to cost ratios is huge. Many of them are substantially greater than ones suggesting that these are interventions worth undertaking.
I am going to summarize briefly from the Engle, et al, Lancet 2011 estimates. Some measures of the benefits for closing gaps in preschool enrollment, the basic idea is what would happen if you closed the gap between the top quintile and the other quintile or at least partially closed such gaps. That is reflected then in the relative schooling enrollment across the distribution, which is reflected in productivity earnings. This shows the range between the schooling gap and the pre-primary schooling enrollment rate, which Lee probably made.
There is a lot of variation, but there is a systematic association between the two. Putting this information together, we get an estimated increase in future earnings on the order of magnitude of 11 to 30-some billion dollars with benefit to cost ratios from 6.4 to 17.1. In some ways, this is a conservative estimate. Here are some benefit cost ratios from moving a child from stunting to not stunted in different countries. This is based on some work that Hoddinott, et al, did as well as some work that we had done. The point here is that the benefit cost ratio (a) tend to be large and (b) vary a lot across countries given the different context. Finally, here are some different estimates for Uganda of benefit cost ratios. The only point here is that we have a base-case with an estimate of 1.6, and that is worth doing. It is very sensitive to various assumptions we are making if we make all of the assumptions to get to this. With optimistic assumptions, we get 8.6 which are much larger. If we change the discount rate to 10 percent it is much smaller.
In conclusion, I think apparently there is high benefit cost ratios, although there is a lot of uncertainty in this. There is a lot of heterogeneity. Most of these studies were focusing on poor children, but it might be if you put emphasis on rights you would weight the poorer children among these poor children even more. They don’t say anything about guidance on efficiency, productivity, but let me just leave it at that.
The last point is they are context specific, which I think is important in terms of this panel because Constanza is going to talk about a particular context in Columbia and then Quentin is going to talk about SABER which attempts to look at various contexts. I want to illustrate that point in the last two slides by taking this illustration, which I actually find is a somewhat bothersome illustration. J-PAL is a poverty action lab at MIT. This is from their website.
This is intended as guidance for what you get. How many extra years of primary schooling do you get if you spend 100.00? The range is huge from about 20 years to 0.03 years, looking at different interventions and providing information -- conditional cash transfers for primary enrollment in Mexico? The apparent intent is to provide guidance for some minister of education or fiancée in Bolivia or Chad about what interventions look most promising.
I have lots of difficulties with this, one being the one I mentioned before about conditional cash transfers and confusing transfers and costs and none of the private costs. For me, what I find strangest and most distressing is completely ignoring the context. Ask yourself this question. These are the four countries covered. Which of these four countries are you going to have the least impact on primary schooling enrollment? It has to depend upon where you start. If you start with 97 percent primary enrollment rates, we are not going to have much impact. Is that a surprise? Does that take a MIT economist? In terms of honest disclosure, I should say I have a PhD in economics from MIT. Thank you very much.
Policy makers must make the case that the cost of programs for young children globally is a pathway to sustainable social and economic development, international peace and security. The cost of programs can be considered investments. The sources of funding include public and private investments that can be allocated through a number of mechanisms. Policy makers make hard choices about where to effectively invest to get the maximum benefits. On this page, we will look how programs and services are financed and the challenges and opportunities of a suite of funding mechanisms.
5.1 Public Financing
Public funding for ECD programs varies across and within countries. Larry Aber, New York University, discusses how public funds can best be used to support young children.
Aber - Economic Assistance
Well, I think one of the most; if you agree with my notion that safety, basic safety and support is the first thing, than what are called in the United States, income support policies; what are called in many other countries social protection or social assistance policies; protecting young families with young children from extreme poverty is national policy goal number one from my point of view. And in different countries they do that in different ways. Some countries in the west do it by trying to improve what is called pre-tax and transfer income; enriching the job market, reducing the number of low wage jobs, increasing the number of high wage jobs and helping people be able to be prepared to take high wage jobs. In other countries they do it through direct assistance. The biggest anti-poverty policy in Europe is the family allowance. Every child, those countries-most countries in Europe recognize that raising a child is a very costly thing and that parents are doing that, not only for themselves, but for the nation. So they provide family allowance. It’s an entitlement. It’s available for all. And countries that do that have the lowest child poverty rates in the western world.
Countries who rely on the market have much higher poverty rates. Those strategies don’t appear to be as effective. They’re politically more supported by some folks but there are nonetheless some very powerful things that can be done. In the United States we, the biggest child poverty initiative is the earned income tax credit. And the earned income tax credit provides poor families forty cents of a refundable tax credit for every dollar they earn up to ten thousand dollars. So if you earn ten thousand dollars, you have a refundable tax credit of up to four thousand dollars. And you first pay the little bit of taxes you have but then the rest is refunded to you. And that is thought of, in the United States, as a policy that both promotes work and protects children on the income side. Whereas the family allowance is a mild inhibitor of work if you get the same amount of money without working. So those are some of the kinds of things on the basic support side.
These issues are hotly contested in developing countries as well. Latin America and increasingly Africa and South Asia are exploring what are called conditional cash transfers. But they are transfers conditioned on parents’ investments in their kids. So that’s a whole set of income things. The second major thing national; set of national policies are national but often also state and local and that’s child protection policies. So we’re talking about protecting children from poverty but then we’re also talking about protecting children from violence. And it’s really relatively recently in human evolution where violence against kids was considered unlawful and non-normative and we’ve changed a lot in the last hundred years. And from the declaration of human rights through the convention on the rights of the child through the passage of state in the United States state child protection laws etc. etc. we’ve become more committed to not allowing violence against children and the set of laws that limit violence and protect children is the second most important domain of national policy.
- Do you agree that income transfer to families with young children are a priority for public investment in ECD?
Many countries rely on private sector and NGOs for financing that is often not sustainable. Raising the amount of public investment in ECD and harmonizing existing public funding streams maximizes resources and supports efficient allocation of funds to multisectoral initiatives. At the Delhi workshop, Jan van Ravens discusses sustainable funding for ECD, including the role of public financing.
van Raven – Sustainable Funding for ECD
MR. RAVENS: Thank you so much. We will take questions after the three presentations because they are linked. In fact, it is my honor to bring a bridge between the fascinating tale by Sumit about scaling up services for children in the country, the largest child population in the world. A bridge to what, Caroline, who will speak about provision globally, internationally?
I felt that to build that bridge, I needed something solid, a framework, something that is strong. I found that in the SDGs, the Sustainable Development Goals that will succeed the Millennium Development Goals. This is a fascinating document. It has some people goals. Like the old MDGs, it had some planet goals. At the very end, goal 17, is about creating the conditions to achieve all of those goals. Finance is the first theme of that goal 17. This is it. There are five sub-goals. This is an excellent framework for us. Number one, and I delighted that it is number one, is domestic resource mobilization, what countries can do themselves. Number two, ODA, Official Development Assistance, the role of the donors, foreign contributions.
Number three, additional financial resources from multiple sources. Maybe we can say that is the alternative. Number four is about debt sustainability, which is very important. It works through number one because if countries have debt relief, it will have more scope for domestic resource mobilization for children. I won’t talk specifically about debt relief. Finally, investment promotion regimes. I think it concerns investment in the more industrial sense of the word, agriculture, industry, infrastructure. If it doesn’t, it would still work through number three, the alternatives.
Basically, we have a framework of three key elements, domestic, ODA, and the additional financial resources. Domestic, foreign, and alternative. Very simple. This is the framework for my presentation, which is going to be very short. Domestic resources, you can visualize it like an hour glass. Tax revenue is from the country, right? It is domestic. Coming in from several sectors, it is channeled through the treasury where there is a process of allocation and budgeting and then it is dispersed to various sectors. There is the spending. It goes through the ECD sectors like social affairs, health, and education, but also other sectors like infrastructure, agriculture, anything.
If you want to increase the absolute amount of spending on ECD, there are a couple of ways. Some are difficult and some are promising.
Number one, you are decreasing other budgets. It is politically very difficult to take away budgets from others. You can raise tax levels. It is not very popular. However, here is the side-step. Although we don’t like to pay taxes and although economists will tell you that high tax levels are bad for the economy, countries can also have too little taxation. The indicator is tax revenue as a percentage of GDP and that is really not the 20 or 25 percent. If it is just around 10 or 15 percent, you just don’t generate enough resources as a country to finance all of those services including ECD services. You really should be somewhere around 25 to 50, 50 is the limit. Increase the government deficit is another thing that is not done nowadays. Physical discipline is so important. No country will do that anymore.
Now we get to the promising ways of increasing the city budget. First is economic growth. The next slide will tell you that there is a lot of economic growth in developing countries. If that comes in you can increase tax revenue without increasing the tax levels. You can still have income tax of 20 to 25 to 30 percent. You keep that percentage and you add taxes at 15 percent and you still have more money coming because people will earn more.
Second, enhance the efficiency in government spending. Reduce the leakage, combat tax evasion, in other words good governance. One side step, I once worked in a country and this country had identified the number of essential child services across health education and social protection. They had fairly high enrollment levels already. I estimated the cost of universalizing all of those services only to find that the country was already spending that amount of money. It was not reaching all of those children (interruption in audio).
In high, low and middle income countries alike, money leaks away and ECD is not an exception. You would think so because it is for small children, but it is exists. It is really important and it is major.
Finally, you can promote private provisions where the more public money is left for services for the poorest. However, you have to keep in mind what I call systematic coherence if you have a public sub-system (interruption in audio) to keep coherence, to maintain national standards, et cetera.
Now, this is the transition, this slide from number one, the domestic resources and the foreign resources. The question is in this slide where the donors are and where are the recipient countries. What you see here is economic growth. It goes from 0 percent to 8 percent.
You have a timeline from 2014 to 2018. I don’t have time to talk about all of the lines, but the donors are at the bottom, the lowest is Japan and the Euro zone only slightly higher to USA. That covers 90 percent of your traditional donor countries. They are hardly growing.
At the top, you first see China. It goes down from very high levels to more sustainable levels. China is really a story apart. Then right below it is Asia, Eurasian and these are the developing countries of Asia excluding Japan and China. The light green line going up steeply is Sub-Saharan Africa.
What we see here is the tendency, the richer the country, the lower the growth. The poorer the country, the higher the growth. That sounds like a paradox. It seems to make almost no sense. In reality, there is a strong reason why that is the case. I don’t have time to explain. There is also a reason why this has likely remained the case for the next 15 years. There is a lot of economic growth. Of course, the figure for Africa hides disparities, but really this is so very important. Before drawing the conclusions, I have one side-step to make, which is demography. These are the demographic profiles of India and Niger. Niger is one of the last 10 to 15 countries which have a high fertility rate. It is extremely difficult in such a country to universalize child services as each age cohort is larger than the other one with only a very small working population.
Look at India, it has made the transition to low fertility about 20 years ago. You have a totally different dependency ratio. The number of working age people is much bigger compared to Niger in relation to the number of children. This is another reason. Again, there is no time to really explain it, but another major reason why universalizing child services in the next 15 years is going to be much easier than advanced in the previous 15 years of the old MDGs.
The conclusions: As we see high economic growth in many developing countries, this is a promise of raising significant public and domestic resources for ECD so that ODE, the foreign assistance, can focus increasingly on countries with growth or high fertility. The problem is shrinking in a matter of speaking. The foreign efforts can be more focused. More in general, we still have donors, NGOs and faith-based organizations, et cetera, CSOs they may focus increasingly on creating conditions like capacity development, especially for policy development, innovation research and what have you and maybe capital investment, building hospitals, building dispensaries and building school buildings. The thrust of recurrent funding, salaries, supplies and all personal costs should be domestic, hence, more sustainable. The domestic resources are the most sustainable resource. We have to go increasingly in that direction.
With regards to the funding, we should distinguish the mechanisms from alternative sources. These are two different things. You can have enough of the mechanisms and still rely on domestic resources. Per capita funding is a great innovation, but it simply comes from domestic sources. Results-based budgeting, performance-based contracts also known as social impact policy eventually it is the government that pays from regular tax-based funding.
Finally, your last point is basically a dilemma that I would like to pose to you because I don’t have the solution. It is the most crucial dilemma I think for the theme of this conference. In as far as we rely on the private sector and NGOs and as far as we even further in that direction, this may have the adverse effect that we lose the prospect of funding from sustainable, domestic public sources.
I have seen in a number of countries that policymakers say ECD is an NGO, that is the church, that is the Mosque. That is fine because we don’t have the money so leave it there. The moment we come up with innovative approaches and this does not apply to all of the innovative approaches we should really be careful not to enforce all thinking because this idea of ECD is for others and not for the government. It may be reinforced. This is just a dilemma. Again, I don’t have the solution to that.
My final statement, the prospect of raising domestic resources are really better than ever because of economic growth and low fertility. I think we are going to be able to watch a great next 15 years. Thank you. I would like to give the floor to Caroline.
Van Raven identifies three key areas of financial resources for investment in ECD – domestic resource mobilization, official donor assistance and alternative financial resources from multiple sources.
- Why does van Ravens consider domestic financing as the most desirable approach to sustainable financing of ECD?
Find out about public investment in programs for young children in India. The authors argue that the Union Government and the State Governments in India should increase their investments in early childhood programs
- What did you learn about the Integrated Child Development Services, the largest ECD program in the world?
5.2 Private, NGO and Community Investments
Financing for ECD can reinforce family and community processes that strengthen investments in their children. Public sector funding from governments can be joined by the private sector (including corporate social responsibility and social impact funding) and by funding from non-government organizations and philanthropic groups.
Public–private partnerships may offer mechanisms to maximize available financial resources. At the same time, tensions between the childhood development model and the business model sometimes emerge in allocation decisions.
At the August 2014 Delhi workshop, Sherri Le Mottee, Ilifa Labantwana, discuss how donors and governments came together to fund ECD programs in South Africa.
Le Mottee - Donor Collaboration
MS. LE MOTTEE: Good afternoon, everybody. Where I come from in South Africa, you would always accompany a greeting with asking people how they are. So I’m going to ask you how you are. Hopefully, given that it is this late session in the day we are all still feeling relatively alert, especially all of the amazing food.
I am the program leader, as has already been mentioned of an innovation for early childhood development in South Africa. I am going to just talk to some elements of that innovation that really relate to the funding elements of it and what we are trying to do around specifically influencing public policy for finance and also budgeting processes and trying to bring higher levels of resourcing to early childhood development in the country.
I am going to start by talking very briefly about two elements of the program itself. One is that we are engaged very specifically in pushing an agenda for an early and essential package of services for children. You have heard lots of talk today already around the issues of integrative service provision and so on.
Really that is looking at the development continuum from conception through to the entry into formal education and looking at the cross-sector of services that young children need to have access to and the primary caregivers need to give them the best start and the best chance in life. That is really the basis of the intervention.
The second thing is within the South African context funding for early childhood development in its current form doesn’t provide a solid base for universal access. It tends to still be the advantaged and the children who really do need access to services the way that the funding models are currently structured and not necessarily facilitating that level of access, so it has entered that space where Ilifa has been working.
The first thing to say is that Ilifa has a donor collaboration. Essentially three donors in South Africa came together, all of them with a great interest in making a difference to early childhood development, and particularly to focus on the 40 percent of poverty-affected children and growing up in South Africa. So I have had a very specific focus and very specific interest in those children who were most deeply affected by poverty in the population.
These three donors: One is a large South African donor called the D.G. Mary Trust. The other is Elma Philanthropies who you might know. The third is First National Bank. We did also at one stage have UBS Optimus also as one of the key partners. They have stepped back a little, but they remain engaged in the program and are one of the founding partners. These three partners really got together and developed together a strategy for early childhood development. This donor platform essentially leads and pushes the strategy. So Ilifa is an actor in the sector, using its resources really to bring change. Those resources are used catalytically.
So we look for partnerships both in civil society and in government. The idea of crafting government systems was talked about in the session earlier. At the core of the focus of Ilifa is that government is the primary duty barer for the provision of early childhood services. That may be done in various forms of partnership with various players in the sector, but primary it holds that responsibility.
One of our first things to do is actually to engage directly with government. We are working in modeling and testing and situations in two provinces in the country. Those modeling and testing situations are governed by memorandums of understanding between ourselves and government.
We then work around those memorandums of understanding and we bring other partners into this process that then are able to actually act as the service providers. For example, through the funding we would bring a home visiting program into that province. It would be implemented, but it would be implemented in partnership with government.
Really, our focus is on enabling the system. How do we institutionalize your programs like this so that we can talk directly to the issues of scale? Really the resource-base of the program is about creating access and leverage. We have together one fund. We are working on one focus. In South Africa at the moment we see a huge interest politically in early childhood development. We know that we are working in a space where we have a window of opportunity.
Within this donor fund, there are certain elements. I am sure those of you who work with donors or who come from the donor community know that it is often governed by lots of issues and challenges around how we are monitoring and how we are evaluating and all of the issues that go with that.
Getting this donor fund actually to run and to work effectively has been in itself a fairly ambitious initiative. Given that all of them have had this deep commitment to early childhood development, we have managed to make it work. The idea really is that the fund is able to move quickly.
Instead of us thinking months and having to prepare reports and get things going, we are able to move the resources relatively quickly once we have identified exactly where there is an area of intervention and once we have a strategic partnership.
What the partnership has ended up being is quite generative. It is generative in a few ways. The one is that these donor partners have come together. They have all put an additional fairly large sum of money into a pot to make this strategy work and to drive this strategy. They continue to each hold their individual ECD portfolios and continue to fund early childhood development in other areas in the country, so bringing together a doubling of funding through these organizations to the sector.
Then the other thing that we are engaged through the way in which we use the resources that are sitting in the Ilifa part is to increase the flow of funding. The other is through government buy-in to actually increase what government is contributing to early childhood developments. I will just give you an example of this.
In one of the provinces where we are implementing, we have done very specific costing work on what the service provision actually costs. Taking a home visiting program through home visitors at the community level to be supporting vulnerable families costs us x-amount to get that program going and to run early donor pay groups has cost us x-amount. We then use that in our partnership with the Department of Social Development and the Finance Directorate of that department to prepare the budget which then goes to treasury. Through that process we have brought for the first time into that province funding to community-based early childhood development.
The challenge around this is that the department itself doesn’t have the institutional pathway at this point to be able to use that fund effectively. In other words it doesn’t have a way of contracting these workers directly to then implement the program.
At the same time as us working with the funding, we work with the system around what are the system changes that need to happen to enable this program to be taken up, to enable the employment of these workers and then at the same time to be able to use this funding to contract them in the right way. It is a bit of a top and tale and kind of approach all of the time with our eye on the system, at the same time pushing the system to change through the implementation on the ground. There were a couple of other examples like that of impact on this work. I unfortunately don’t have enough time to share all of those with you. There are a number of publications that were sent to you.
One last thing, very quickly, around working directly with Treasury in South Africa, one of the other successes of this program so far has been that funding to children in centers in South Africa comes with a per child per day subsidy. Not every child is able to access that subsidy because there isn’t enough for it to go around for every single child. In order to access that subsidy centers have to register.
At the moment that registration process is particularly onerous. There are three levels of registration involving 16 different stages. A study that is included in your packet we did around this was taken on board by National Treasury in South Africa. We were asked to come into conversation with them to talk about how we could enhance the system to begin to overcome some of these barriers to accessing registration and therefore accessing the per child per day subsidies. We are currently involved with them on looking at how to refine the system. The processes have now led to the bringing together of all of the Directors of Finance from all of the Departments of Social Development to start talking about how to refine this.
These are just some of the ways in which we have used the resourcing that we have at our disposal to demonstrate and model work around what is possible. At the same time, we can use that modeling and testing catalytically to really drive for increase in funding and resourcing to ECD. Thank you very much.
- Le Mottee points out that governments and public funding were engaged from the outset. Why was this important?
5.3 Innovative Funding Mechanisms
Governments, funding agencies and international donors are exploring funding mechanisms that might be more effective than traditional grants or operational funding in producing the desired outcomes.
- Social impact investing is about making financial contributions to improve social and economic development. Social investment demonstrates a shift from traditional grants to the expectation of a return and the goal of achieving sustainability.
- Conditional and unconditional cash transfers direct money to families. They are a promising financial mechanism for investing in young children and families. Experiences with large-scale initiatives offer policy makers reveal lessons learned about how to best design and monitor cash transfers.
- Results-based financing is funding that is conditional on the delivery of specified outputs or outcomes. It requires data systems that can collect the necessary data and a willingness to make funding allocation decisions based on data instead of ideology or political decisions. Many of the outcomes from investments in ECD occur in the medium- to long-term, not in the short term.
At the April 2014 Washington workshop, Lia Fernald, University of California Berkley, discusses cash transfers.
Fernald
DR. FERNALD: Thank you. It is a real honor to be here today to talk with you. I don't have to tell anyone in this room that the 90 percent of children who live in low and middle income countries face a wide range of risks from poor housing, dangerous neighborhoods, lack of sanitation, and high levels of maternal depression as Atif discussed. Thinking about these risks as what is modifiable and what is protective, as Amina was mentioning, is really a critical part of thinking about how best to intervene for children.
We developed a conceptual framework for this concept with the last Lancet series on early child development. You can see a timeline on the x-axis. The green line represents the scenario where protective factors are outweighing risk factors. This is optimal development for a child. The red line, in contrast, is where risk factors are outweighing protective factors. My real area of interest and also the interest of the global child development group is thinking about how to reduce the risk factors, increase the protective factors through interventions during sensitive periods. Again, we are focusing on what are modifiable risk factors and what kind of interventions can modify those. In thinking about how to improve early child development, there is a huge range of possibilities. We have early nutrition and health programs, which have shown success in iron deficiency, improving breast feeding, improving complementary feeding, iodine supplementation. There is a whole range of health and nutrition interventions that work for children. We also know about parenting programs and family support. Parenting programs often target zero to two year olds. In some cases, for example, in Pakistan, we will use Lady Health Workers, as Atif was describing. These programs work better for some. They are usually more effective for the most vulnerable populations. They often can help promote better problem solving, better pre literacy, encourage reading, and encourage play activities.
Next, we have preschool programs, which are often focused on three to six year olds. These programs show that preschool attendance is, in general, associated with higher scores on many measures of child development. We also know, though, that there is a wide range of quality differential across preschool programs. The higher quality programs do much better in terms of promoting child development.
What I am going to talk about today are more social sector approaches and other broader approaches. I am going to focus, really, on conditional cash transfer programs, which is an area I have worked in. I will also give you some examples of infrastructure improvements and a living wage approach and how those kinds of programs can affect child development. You are probably all aware of how conditional cash transfer programs work. An unconditional cash transfer program is one that just provides cash to a household. A conditional cash transfer program works when cash transfers are conditioned on a certain pre-specified action. I will show you what some of those actions are. Cash transfer programs invest - the idea is that they are investing in families so that those families can then make investments in human capital. The requirements are that families will send children to school regularly, take them to health and nutritional check-ups. In these cases mostly, the cash is given to women. The cash usually ranges from about 5-30 percent.
There are dozens of cash transfer programs now. The very first ones that were developed were in Brazil and Mexico. I will just show you a conceptual framework of what cash transfer programs are trying to do. You may be aware of this graph showing the rate of return to investment in human capital, really emphasizing the fact that the earlier you invest, the bigger impact you can have.
Cash transfer programs do try to get at many of the early interventions. There is a form of parenting support. There is early nutrition and health where needed and continued nutrition and health interventions and emphasis on schooling.
In a recent review, we came up with a theoretic framework of how cash transfer programs could have effects on child development. You might think about two major pathways. First is via the cash the family gets. Again, this can be up to 30 percent increase in income for a household. It is a substantial amount of income increase. You could imagine that this cash transfer could be used to increase parental investment in children through purchasing of basic needs, through investing in a child's future, supportive schooling. You could also imagine that the cash could be a way of decreasing emotional support and depression. I will show you some evidence that the cash transfer programs often are associated with decreases in depression. This can then allow a mother or a parent, a caregiver, to more sensitively and responsively focus on caregiving.
Along the bottom pathway, you see the conditions. This is the part that - I am in a school of public health. This is the part public health people get excited about - the mandatory participation in health and education services, the direct provision of medical care, prenatal care, vaccinations, and this part down here, the box in the bottom about education for parents, this is the idea of bringing parents into the equation and having them have responsibility to attain that education.
I want to also make a point about the quality and delivery of health and education services. There is a wide range of quality of programs. This is because not every country that implements a cash transfer program has the infrastructure to be able to sustain it, maintain it, and deliver it. I want to say that part of the reason that you will see heterogeneous results across programs is that there is a large amount of heterogeneity in terms of what the programs look like and what the infrastructure looks like.
We have seen – I am giving you the meta picture here about inconsistent effects of cash transfer programs on children and then I will describe the Mexico program. In this review, we found that there were generally positive effects on birth weight, illness, behavioral development, prenatal care, maternal depression, growth monitoring, so several of the pathways that I discussed.
These generally positive effects in this review of about 20 different cash transfer programs were encouraging. What wasn't as encouraging were these mixed or subgroup effects on height, weight, and cognitive and language development, which is the area that I am really interested in, and in terms of the presence of skilled birth attendants. We did not find consistent effects at all in the terms of the effect on hemoglobin concentration.
I am not going to talk now about the differences between unconditional and conditional cash transfer programs, but I am happy to address that in the discussion. It is a very interesting and relevant question at the moment.
Why are there these inconsistent effects? Well, I mentioned that there are radically different cash amounts based on what country you are in and what program you are exposed to. There are different requirements. Some programs have health requirements. Others have all the way through high school schooling requirements. There are also obvious differences in initial levels of poverty and different rates of compliance. This is why there could be inconsistent effects.
Some meta-analyses have tried to take apart these different programs and look at what variables it could be that are explaining what the difference is, but it has been difficult. A conditional cash transfer program, in particular, is just this giant black box of a program that is very hard to disentangle what is actually going on.
Mexico's cash transfer program, just to give you an example - this was the second one that was put in place after Brazil. Children and adolescents - this is, again, part of the requirement for receiving the 25-30 percent increase in cash, the unconditional cash. Again, conditional cash transfer program means that there are conditions, which are required for the receipt of the cash, but the cash can be spent in any way that the family chooses to. There are no conditions on spending the cash. I just want to make that clear. You can see there are check-ups for children throughout childhood. There are check-ups and requirements for pregnant and lactating women. There are some check-ups for adults, but really there is not a lot of investment in adult outcomes. That will come back later.
I am briefly going to tell you about the ten year follow-up we conducted in this randomized control trial. You can see here the design of the two randomized groups, early and late. I am going to tell you, again, about the ten year follow up. We did find that the household, the two groups, the ones that were able to be followed and the ones that were not followed up were well matched. We also found that the randomization that had occurred ten years earlier, what was true ten years after the baseline, the groups were still not different on any of the dimensions that we measured.
The program effects on height and behavior were the most significant. We found a decrease in behavior problems in those children who were exposed to the program, to the conditional cash transfer program. We did not find effects on body mass index, on verbal performance IQ, or cognitive measures of this IQ scale, but we did find effects on height for age Z score in the subsample of children with mothers with no education, which represented about 25-30 percent of the population as a whole. These results were encouraging, in terms of the effects on the most vulnerable kids and on the behavior problems, but we asked ourselves the question of why the program didn't have as much of an effect as we thought it would. Then that led us to doing an analysis where we tried to separate out the cash transfer effect from the conditionality effect, essentially trying to say I understand - we understand this is a post hoc analysis and this is a black box analysis. This is trying to open up the black box and see which part of the program is functioning and how.
What we found is that when we separated out the cash effect, we found that cash transfers, cumulative cash transfers were associated with improvements in growth,improvements in verbal performance, improvements in cognitive performance, and a decrease in behavior problems. Across most of the measures that we collected, we saw that the cash, while controlling for the conditionalities in the form that all of these children had been enrolled in the program for their entire lives, had this independent effect. This was very exciting, thinking about the cash effect separate and apart from the conditionalities.
We also found that there were reductions in depressive symptoms that resulted from participation in the conditional cash transfer program. Again, as both of my co-panelists have alluded to, alleviating poverty is a way that - this is suggesting that alleviating poverty is a way of addressing maternal depressive symptoms. We found a two point differences on the CESD, which is a depression screener. We found a sever percentage point difference when we looked at the prevalence of high depressive symptoms versus low.
I wanted to also show you results relating to child cortisol. Salivary cortisol is a way of measuring child stress. We found that the participation in the program also reduced child stress levels. This was significant. This effect was really driven by children of mothers with high depressive symptoms, suggesting that these children of depressive mothers are more sensitive to context or that non-depressed mothers are better able to provide buffers for their children and protecting them from poverty. What, in summary, we found was that there was a program effect that really influenced behavior, child behavior, and height for age in a vulnerable population and also the program effect on salivary cortisol and depressive symptoms. We found this cash effect that was significant. I didn't show you the previous paper, which showed the effects on the three to five year olds, but both of those papers showed consistently the improvements on stunting, cognitive and language function tests. We showed BMI earlier, and then behavior problems.
I want to point out that cash transfer programs are not a panacea. I certainly don't want to go on the record as saying that they are the only way to improve child development as you have seen many other ways to think about improvements in terms of child outcomes. We also did two analyses showing that, in terms of effects on adults, you see a very small program effect, but when you portion out the cash effect, you actually see that increased cash going to the household is associated with increased BMI, increase obesity, and increased hypertension in adults.
This is a real conundrum for policymakers to think about if our goal is to improve child development, do we focus on that and not worry as much about the adults or do we refocus the program in terms of thinking about obesity in adults? I should mention that Mexico has the second highest prevalence of obesity in the world after the United States. Something like 60 or 70 percent of women in Mexico are overweight or obese. It is a really relevant policy question for a country like Mexico, who is going through the nutrition transition.
The only explanation I have - we have done some analyses showing that increased cash in these households is often associated with purchasing of soda and purchasing of alcohol. That is one potential pathway that - it is possible that parents are making better decisions for their children than they are for themselves. That cash is working positively for children and not for adults.
Now, I am going to quickly tell you about another addition to a conditional cash transfer program that I am really excited about. This is kind of hot of the press data that I want to tell you about that is looking at overlaying a parenting program on conditional cash transfer. For example, I have been disappointed in terms of the effect of the program, itself, looking at poverty alleviation and health inputs as the only way to improve child outcomes. The idea here is to say let's see what we can do by putting a child stimulation program, a group parenting support program on top of a conditional cash transfer program.
This parenting support could be improving outcomes for kids through depression. It could be improving outcomes for children as in the conceptual framework that Amina presented through social support and also through increased quality of care and cognitive stimulation.
I would love to show you a video of what this program looks like. I already got the orange buzzer so I am going to keep moving. I am going to show you that we are finding that this group that perceived that they had to participate in parenting support had much better cognitive outcomes in children. This is a randomized control trial overlaid on a CCT, which said this group - this part of the CCT is attending parenting support. This group part of the CCT, there is no requirement, but we think you should attend. That is the voluntary group. Then the control group, which just had the CCT.
This was encouraging to see that this compulsory group had the best performance, but also raises the question, again, of how do you make something compulsory without being paternalistic about what you think might be best for somebody's child.
I will mention that we had the biggest effects for the most vulnerable children. They kids who started out at baseline with the lowest cognitive scores really performed the best two years later when we followed them up. Clearly, there is a way that they are benefiting. It is really similar, in terms of effect to the stunting reduction that we showed just in the children who were the children of mothers with low education.
I am going to give you some conclusions and show you just two slides on these interesting and novel other kinds of interventions and then I will wrap up. This Educacion Inicial overlay on the conditional cash transfer showed small, significant main effects with significant, consistent, positive effects for very vulnerable children. In spite of the positive results, it really could be strengthened for a greater impact on child development. I think that is going to be one of my larger conclusions, which is that if you really want to focus on early child development, reducing poverty is not getting as far as you want to go. There also needs to be a critical component of child stimulation through parenting support or simply through education for parents about how to provide that stimulation.
I am going to tell you about these two interesting studies, which, again, represent kind of not thinking about direct interventions on children, but representing thinking about the environment. This was a study, a large scale Mexican program that replaced dirt floors with cement ones in a random approach and showed significant reductions in maternal depression, equivalent to what we found in the conditional cash transfer program and also showed significant effects on growth and child development. The explanation for how this could be is that it is possible there is a mental health component and also if you have a cement floor, you are more likely to put your child down and let that child explore the environment than you would - you might be more likely to hold onto that child in a dirt situation. That is one kind of out of the box thinking about how to improve child development in a way that is not directly about it.
This study that I am currently conducting in the Dominican Republic, in which one group - this would be your lucky day if you were in this group - got told after they were hired that their wages were going to be 300 percent of what the neighboring wage was because you were part of a study that was looking at the effect of living wage on outcomes in the Dominican Republic. They are pretty psyched. We did a one year follow up with the mothers and found a five points effect on the CESD, a five point effect out of a scale of 60. These were results that I kept having to go back to. Are you sure this is right? Let's redo the analysis. Let's make sure that we redo it in every way possible because it is such a big effect size. When you think about that it is a three times increase in terms of wage, it is a plausible effect. We are in the process of looking at the children of these women. Also, I am going to just end with a few quotes about - kind of put into context the effects of poverty on describing the benefits of the living wage, just thinking development. "With living wage, I don't lose sleep anymore, as a mother, wondering how I will make ends meet. I would say this program is the salvation for a lot of mothers." Secondly, "to live a dignified life means to have a bathroom inside; it means being able to eat three times a day; it means being able to get an education and being able to get your children an education. A not dignified life is not having a future."
To finish, I just will say that we know that children in low and middle income countries are not performing at their potential because they are exposed to this wide range of risks, including maternal depression and including poverty. These broader approaches that I have talked about today offer one type of solution, these conditional cash transfer, promotion of living wage. I didn't talk about micro credit, but that is another approach that is kind of outside of thinking of direct approaches for children. I would say the large caveat in thinking about these programs is that for these to be most effective in terms of improving child outcomes, particularly thinking about school readiness and learning outcomes and early promotion of early child development and some form of child development, they need to be paired with a direct cognitive or language stimulation.
It has been beeping for a while. I apologize for going over. Thank you.
In her presentation, Fernald explains conditional and unconditional transfers.
- What do you think are the advantages and disadvantages of each approach?
Launched in 2003, the Bolsa Familia program in Brazil is the largest conditional cash transfer program in the world. Its goals are to reduce poverty and invests in long term human capital. Bolsa Familia brought together and scaled up several a number of smaller initiatives that were trying to support poor families. Families (usually the mother) receive small amounts of money if their children and attend school and make preventative health care visits (e.g. prenatal care, immunizations). Bolsa Familia is administered through Brazil’s Cadastro Único (Single Register for Social Programs) - a tool that also collects data and information to identify low income families. Extreme poverty in Brazil has been cut in half – from 9.7% to 4.3% of the population. Income inequality has fallen 15%. Bolsa Famlia now reaches about 1⁄4 of Brazil’s population.
Bolsa familia has promoted the autonomy of the poor, particularly women. School attendance has increased and grade retention is down. There are no indications that Bolsa Famlia has reduced labour force participation.
At the August 2014 Delhi workshop, Ashrafi Ahmad, Bangladesh Health Services, described the success of a public-private partnership of the Shishu Bikash Kendros (Child Development Centers).
Ahmad – Outcomes Based Funding
MR. AHMAD: Good afternoon, ladies and gentleman. As you can see, both my names, my sir name and last name starts with A. Unfortunately, I am the last speaker of today. I hope I can keep you amused or bored, or whatever. Greetings from Bangladesh. I bring a tremendous success story. Our under 5 model rates have demonstrated a steady decline. We are on path to achieve the NDDs, as you already know. What we found out was the rates of neuro-developmental disorders, which include neuro-developmental impairments and disabilities, are considered together as a part of the continuum. It has been increasing.
The reason it still has to be research they were undiagnosed or the children with these delays in development were unrecognized for some reason. Our society is burdened with all types of illnesses and other social pressures. This area was sort of neglected.
To address this, we have incorporated in our health programs divided into operational plans. There are 19 operational plants which are being run. These are in Bangladesh. This system has revenue and development part. The operational plans are under the development budget which is mostly funded by the donor pool fund. With these donor funds we have already established 15 Shishu Bikash Kendros that is child development centers.
I have already told you about the background so 15 Shishu Bikash Kendros or child development centers are now fully functional in our government medical college hospitals. Before it was never even thought of. This is such a new idea. What makes it unique is it is (?) a leading lady in this sector. Many of you know. I am just representing her work. She did a tremendous job. She is working as a national coordinator. She is from a private organization. This is a very unique program for Bangladesh. We have given her the liberty to be the national coordinator of this unique program.
How it is run, there is a multidisciplinary team in each of the Shishu Bikash Kendros. I invite you to please visit these centers when you can. They have a childhood physicians, child psychologist, and developmental therapist. This is a team. They also have a support staff, office manager, cleaners and computer operators and specific clinics.
For those of you who are working with children with developmental delay you know that these are the clinics that are being run. This is very unique. These centers are being run free of cost.
For outcomes, we have until June 2014, 110,000 attendances. These attendances would have been more, but we have to control because of time limitations, governmental hospitals until 2:00 pm. Also, we have to ensure quality. The children that are screened as high risk they are brought from the other wards also. The survey has been done, which is very unique. You can find it on this website for health.
We are placing resident, post-graduate students in these centers because they are not at all motivated about this aspect. All services are free of cost. Our tertiary level hospitals are doing it. At the primary level hospitals we will set up some satellite clinics.
What I want to share is the way forward. This has been a great success story. The CDC is working well. We are planning to set up in the future two district hospitals, which are our secondary tier hospital so that this is more community-base mandate. Networking should be done. Home visits with assistance of the social worker for each hospital is also being planned. More or less we have to do a home-based screening.
What I want to say is that although we are adding this project there is a severe delay in fund release. There are some constraints. This is called reimbursable project eight. We have to reimburse the fund after we spend it. It takes a long time to release the funds. Our team is not paid for the July wage. They have to wait until September. So we are asking for more funding to come up so that this can be run as projected.
I invite you to just look into our website and see whatever we can do because the outcome and best financing is here. You can see the result very directly. With that, I end my presentation. Thank you.
Summary
The financing of sustainable ECD programs is a central and essential component of creating the infrastructure necessary to expand access and quality in low-, middle- and high- income countries.
- Expenditures in ECD are investments in human capital – now and in the future.
- The level of public financing for ECD programs needs to expand.
- Innovative funding mechanisms including results based financing and cash transfers may be effective in maximizing impact of public and private investments.
Test your understanding with this review. Click on the arrow to the bottom right to begin.
