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Financing Options

Issues in financing Early Child Development (ECD) programs relate to which parties will contribute to the costs, to how much the various stakeholders will contribute (that is, the relative share they finance) and how these relative contributions change over the life of the program.

Government. The most common source of financing for early childhood programs is the regular budget of the government. Budgets for ECD usually come out of Health, Education or Social Services budgets. At times funds will be assigned through budgets for women's development, rural development, agriculture, or employment. Sometimes, governments earmark funds for ECD programs through special payroll or other taxes, or trust funds instead of the regular budget.

The trend to decentralize social services to local government levels shifts responsibilities for financing of ECD programs to sub-national or local levels. Most national governments share the cost of early childhood interventions with sub-national governments and program beneficiaries. Kenya's central government, for instance, funds the training of caregivers, while local authorities provide and maintain preschool program sites. India's national government pays for everything but supplementary feeding, which is financed by the states (Myers 1995).

Families. Most countries have instituted user fees to finance at least part of their early childhood interventions. Parents participating in Colombia's Community Child Care and Nutrition Project, for instance, are expected to contribute on a sliding scale according to family income. In Bolivia's Integrated Child Development Project, parents pay a flat monthly fee equivalent to US$2.50 (in 1993 prices) for the first child and a decreasing fee for each additional child enrolled. Parents often pay for the costs of caregivers' salaries or honorariums. Families and communities can also make contributions in-kind, such as construction and rehabilitation activities, voluntary work, food preparation, etc.

Cost recovery strategies that aim to cover most or all of the costs through user fees have several drawbacks. Especially the poorest families that would need ECD services most, are unlikely to be able to pay enough contribution. From a poverty reduction and equity point of view, subsidizing child care is very much recommended. Moreover, a healthy development of the children living in a country will provide benefits not only to the participating children, but also to society as a whole through a better educated, healthier, more productive population. As such, the government could bear at least some of the costs. Indeed, many developing countries heavily subsidize child care services to make sure that they are available to poor families, who already spend almost all of their income on food, housing, and transportation. Colombia's government, for instance, finances 85 percent of the costs of its Hogares Comunitarios de Bienestar program, primarily through a payroll tax.

Social organizations, such as community, charitable, religious and other non-governmental organizations can play an important role in financing ECD programs. They might provide the entire of services or pay part of the costs, either in money or in kind such as time and labor, donation of materials or the location for a child care center.

Private sector. The role of the private sector in financing ECD services varies. Some child care centers are run as private, for-profit businesses. Usually, they either target the richer children in order to receive the required fees to cover costs, or they are subsidized by the government to provide for lower-income children. Private sector contributions can also consist of the employer financing a daycare center at or close to the workplace for the children of its employees.

International organizations might contribute relatively large amounts of money at the start of a project. This money is generally used to set up the program, try out pilot or small-scale projects, and lay the base for implementation on a larger scale. The funding would cover (part of) the initial investment costs. Funding for operating or recurrent costs will usually be decreased over time. Ultimately, international organizations often expect ECD projects to become sustainable and rely on national and local rather than external support.

Innovative funding schemes

A relatively new alternative for financing ECD programs is the creation of micro-enterprise projects. Loans are granted to women who want to start up a home-based day care center to earn income. Usually the start-up funds will be accompanied by training and support to the women to ensure quality day care services. Another way micro-finance can be used as a mechanism to fund ECD-programs is by financing (separate) income-generating projects, such as a garden attached to the preschool, or the production and sale of handicraft by the women who enroll their children in the child center during working hours. A percentage of profits will be allocated to support the operation of the daycare center. Finally, women could obtain loans from micro-enterprise projects to earn income and be able to pay for child care services themselves. In Vietnam, such a program was set up through establishing Home-Based Day Care Centers in conjunction with a Rotating Savings and Credits Association for women.

Thailand has worked out a funding scheme in which loans paid back to village loan funds (financed by the Christian Children's Fund) are funneled into a capital fund to support early child development programms in the community on a continuing basis.

Similarly, in East-Africa (Kenya, Tanzania and Uganda) the Madrasa preschool program is experimenting with the creation of an endowment that would provide funds on a more continuing basis. The endowments consist of funds raised by the community and the Madrasa program. The annual income generated by the endowment would supplement the participating schools' finances and lead to more regular payment of teachers' salaries.

In Mauritius the government created the Export Processing Zone Welfare Fund as a concession to EPZ workers, who make up 20 percent of the country's labor force but do not benefit from the more advantageous labor regulations that apply outside the zones. Created to finance social services for EPZ workers and their children, the fund derives its revenues from a tripartite system of monthly payments from the state, employees, and employers. The EPZ social service fund gives start-up and operating grants to nongovernmental organizations to create and run day care centers and subsidizes preschool fees for the children of EPZ workers. Under this tripartite funding system, the national government contributes about 10 percent of EPZ social service fund revenues.


  • Wilson, Sandra.1995. "ECD Programs: Lessons from Developing Countries." (Washington, DC: The World Bank, Human Development Department).
  • Evans, Judith L. with Robert G. Myers and Ellen M. Ilfeld. 2000. Early Childhood Counts. A Programming Guide on Early Childhood Care for Development. Washington, DC: The World Bank.
  • Myers, Robert. 1995. The Twelve Who Survive: Strengthening Programs of Early Childhood Development in the Third World. 2d ed. (Ypsilanti, MI: High/Scope Press).
  • Wilson, Sandra.1995. "ECD Programs: Lessons from Developing Countries." (Washington, DC: The World Bank, Human Development Department).
  • Barnett, W. Steven. 1997. "Costs and Financing of Early Child Development Programs". In: M.E. Young (editor), Early Child Development: Investing in our Children's Future. Amsterdam: Elsevier Science B.V.
  • Financing Child Care 1996. Center for the Future of Children, Los Altos, California. Volume 6, number 2 - Summer/Fall 1996. The Future of Children (Princeton-Brookings)
  • Consultative Group on Early Childhood Care and Development "Financing Early Childhood Programs".
  • Child Care for Low Income Families. Philips, Deborah A., (1995) U.S. Steering Committee on Child Care Workshops