The World Bank has two basic types of lending instruments: investment loans and adjustment loans. Investment loans generally have a long-term focus (5 to 10 years) and finance a wide range of activities aimed at creating the physical and social infrastructure necessary for poverty reduction and sustainable development. Adjustment loans have a short-term focus (1 to 3 years), and provide quick-disbursing external financing to support (mostly economic) policy and institutional reforms.
The Early Childhood Development (ECD) Projects that are supported by the World Bank are typically financed by investment loans. Four types of investment loans can be distinguished, dependent on the objectives and needed flexibility.
The two adaptable Program Loansadaptable loans were introduced as a complement to the traditional lending instruments. New types of projects, such as institutional capacity building projects, politically and institutionally very complex projects, very innovative projects or projects based on long-term processes asked for new flexible lending instruments.
Specific Investment Loans (SIL)
Specific Investment Loans (SIL) are the type of investment loans most often used for ECD projects. Up to date, all free-standing ECD projects have been financed through a SIL, as well as 75 percent of the other human development sector projects that contain a component on ECD.
In general, SILs support the creation, rehabilitation and maintenance of social, institutional and economic infrastructure. In addition, they may finance consultant services and management and training programs.
Sector Investment and Maintenance Loans (SIMs)
Sector Investment and Maintenance Loans (SIMs) focus on public expenditure programs in particular sectors. They aim to bring sector expenditures, policies, and performance in line with a country's development priorities, by helping to create an appropriate balance among new capital investments, rehabilitation, reconstruction, and maintenance. They also help the borrower develop the institutional capacity to plan, implement, and monitor the investment program.
None of the free-standing ECD projects are financed by a SIM. In contrast, some other human development projects with an ECD component are supported by a SIM. These projects mostly aim to strengthen the Education sector:
Learning and Innovation Loans (LILs)
The Learning and Innovation Loans (LILs) provide support to small pilot-type investment and capacity building projects that, if successful, could lead to larger projects that would mainstream the learning experience and results of the LIL.
LILs do not exceed US $5 million and are normally implemented over the relatively short period of 2 to 3 years. All LILs include an effective monitoring and evaluation system to capture lessons learned.
They are used to test new approaches, often in start-up situations and with new borrowers. LILs may be used to:
- build trust among stakeholders,
- test or build institutional capacity,
- test pilot approaches in preparation for larger projects,
- support locally based development initiatives, and
- launch promising operations that require flexible planning, based on learning from initial results.
LILs have not financed any free-standing ECD projects yet, but two 'other human development projects with an ECD component' are funded by a LIL:
Adaptable Program Loans (APLs)
Adaptable Program Loans (APLs) provide phased and sustained support for the implementation of long-term development programs that contribute to poverty reduction and reflect economic priorities. APLs involve a series of loans that build on the lessons learned from the previous loan(s) in the series. Progress in each phase of the program is reviewed and evaluated, and additional analysis undertaken as necessary, before the subsequent phase can be initiated.
APLs are used for long-term programs that develop over time. Investments are made in discrete phases according to agreed milestones. The pace of the program is adjusted to actual delivery and performance. APLs are especially useful when sustained changes in institutions, organizations, or behavior are key to successfully implementing a program.
Free-standing ECD programs have not used APLs as a source of financing. However, there are several examples of recent Education Reform Projects with components on Early Childhood Development activities, which are funded through APLs.