The Philippines is among the lower middle-income countries in the Asia-Pacific region that can borrow from the Asian Development Bank's (ADB) new funding aimed at addressing the education crisis.
In a Sept. 26 statement, the ADB said it forged an agreement with the sovereign-backed Geneva-based foundation International Finance Facility for Education (IFFEd) for a minimum of $ 500 million concessional education financing partnership.
Under this agreement, IFFEd will guarantee $125 million of the Manila-based multilateral lender's sovereign loan exposure across all sectors or "synthetic portfolio" while also initially extending a $50-million grant, the ADB said.
"By blending IFFEd's guarantees to the ADB with grants that will comprise 10 percent of every loan, the first-of-its-kind arrangement facilitates a four-times leverage ratio of the guarantee, boosting the amount of capital the ADB can lend while lowering borrowing costs for the bank's developing member-countries," it added.
Besides the Philippines, this facility will be available to these ADB members: Bangladesh, India, Mongolia, Pakistan, Papua New Guinea, Sri Lanka, Timor-Leste, Uzbekistan and Vietnam.
"IFFEd-funded education projects can support ADB programs at any level of the education system — from early childhood development and school education to technical and vocational training, skills development and tertiary education," the lender said.
The ADB cited that lower-middle-income economies like the Philippines "face an education crisis."
"More than 50 percent of students in these countries are not able to read simple text by age 10 despite attending school, and graduates do not have the skills to find jobs, leaving employers unable to fill vacancies," the ADB lamented.
In the Philippines, the Washington-based World Bank earlier found that nine out of every 10 Filipino children aged 10 struggled to read and understand simple texts.
"As countries move from lower to lower middle-income status, they tend to get caught in a financing 'missing middle' where they are no longer eligible to receive grants but cannot afford non-concessional financing — forcing a difficult decision of where to invest, exacerbated by limited domestic financing," the ADB pointed out.
"By bringing concessional or grant resources to developing countries seeking to strengthen their education systems, the ADB-IFFEd partnership's key innovation lies in the fact that — at a time of rapid change — it will help the ADB's developing member-countries prepare for a future characterized by digital transformation, climate change, demographic transitions, and rapid urbanization," according to the bank.
"Education is the cornerstone of modern, prosperous, and inclusive societies, and we are pleased to announce this partnership with IFFEd. By pooling catalytic and concessional financing, this initiative means our lower-middle-income developing member-countries can scale up their investments in education and skills — vital to building knowledge-based economies — along with other sectors at the same time," ADB vice-president for sectors and themes Fatima Yasmin said.
IFFEd was formed just last year in Switzerland to invest in lower middle-income countries' education and skills sectors, with an initial focus on Africa and Asia-Pacific through partnerships with multilateral development banks like the ADB.
This foundation is not only supported by the governments of Canada, Sweden and the United Kingdom; it is also funded by seed capital donated by Atlassian Foundation, Jacobs Foundation, Porticus, Rockefeller Foundation and Open Society Foundations' investment arm Soros Economic Development Fund, the ADB noted.
"Investing in education and skills in lower middle-income countries — home to nearly half of the world's children and youth — is key to powering long-term economic growth and making progress on global health, climate, and equity goals," the ADB quoted IFFEd founding chief executive officer (CEO) Karthik Krishnan as saying.