Education Systems and Multilateral Development Banks: International Practices and Perspectives
This article examines the role of multilateral development banks (MDBs) in financing education development at the national level. It evaluates the share of national expenditures spent on education, analyzes loan structures by stage of education, and highlights key measures and instruments. In the context of the global economic slowdown, expected to continue for the long term, the most important objective is to identify new drivers of economic growth as traditional sources are exhausted. One of the main sources of economic growth is human capital, especially with regard to the gradual transition from an industrial economy to a service and knowledge economy. Human capital accumulation is particularly important in developing countries. Most developing countries face insuperable obstacles in building human capital accumulation particularly with regard to education development.
The potential contribution of MDBs to human capital accumulation has been underestimated and there is a lack of empirical research on this issue. An evaluation of current experience will help identify opportunities for MDBs to increase their role in education performance, which in turn could have a positive impact on economic growth in developing countries.
This article addresses this issue by studying MDBs’ financing of education projects in emerging economies. The authors collected a database that includes information on the volume and structure of financing with a breakdown by education stage. It was based on more than 500 projects funded by key MDBs. Sources included loan and grant agreements, project interim reports and project completion reports. The authors calculated an average annual ratio of MDB education financing to public expenditure for each country in the final selection.
Results showed that the ratio of average annual MDBs allocations to average government expenditures on education is relatively low — between 1.5% and 4.0% for most countries. The largest share can be seen in relatively small countries, where government expenditures stay at low levels. Large developing countries such as Brazil, India, Indonesia and Mexico are lead in terms of absolute volumes of financing from MDBs. The authors also show that most projects during period researched aimed at reducing inequality, developing infrastructure, improving teacher qualifications and reforming the management of education system. The authors also give recommendations for the BRICS New Development Bank.