Examining the effect of school development loans on education capacity and quality: evidence from Ghana and Uganda

Increased investment in education to build capacity and quality is essential if the world is to meet its ambitious targets on Sustainable Development Goal (SDG) 4: Quality Education. There are 258 million school aged children out of school, of which 98 million are in Sub-Saharan Africa (SSA). Low-income countries are experiencing dramatic growth in their populations and have severe limitations on their ability to fund the required infrastructure development. The financing gap is estimated to be US$ 1.8 trillion to achieve SDG goals (Education Commission, 2016). Low-Cost Private Schools (LCPS), accessible to children from poor families, are growing rapidly in SSA to fill this gap. This study is focused on the potential to increase the use of innovative financing to improve capacity and quality for LCPSs. Most innovative finance schemes utilise some form of a School Development Loan to achieve greater investment in capacity and quality of education. The study evaluates the effect of School Development Loans on several indicators which have been directly associated with capacity and quality, using data from Ghana and Uganda, countries estimated to need a combined 5 million new seats for children by 2023 (7% of their combined population) to account for population growth. Capacity indicators include the Number of Students enrolled in the school and the Number of Classrooms available for use. The indicators of school quality were Pupil Teacher Ratios (Lower), the Number of Washrooms, the Number of Washrooms Dedicated to Girls and the Number of Extracurricular Programmes Offered by the school. The study leveraged pairwise correlation and regression analysis to identify the most directly linked indicators, followed by a mean difference analysis. The study finds that schools taking out School Development Loans have more classrooms, higher enrolment, greater amounts of washrooms and extracurricular activities on offer, indicating that School Development Loans increase both capacity and quality at LCPSs. Despite the encouraging findings, it is early to assess whether the significance of the increase over time. The study recommends a fully coordinated Randomised Control Trial (RCT) for further research, where data is collected prior to the school receiving its first loan and again at the conclusion of the loan