This is the fourth blog in the Insights series from the Working Group on Innovative Finance for Early Childhood Development (ECD), co-convened by the Education Finance Network (EFN), the Education Outcomes Fund (EOF), the Brookings Institution, and the Early Childhood Development Action Network (ECDAN). Over a period of seven months, the group brought together experts from 25 organizations for five in-depth discussions on the opportunities and challenges of applying innovative finance mechanisms in ECD interventions.
July 30, 2026 – Early childhood development (ECD) services are widely recognized as high-value investments. The evidence is clear and mounting, and international commitments have multiplied, from Sustainable Development Goal (SDG) 4.2 and the Tashkent Declaration to the G20 Initiative for ECD, signaling broad consensus on the importance of ECD. Yet despite this convergence of evidence and commitment, financing does not consistently translate into coordinated, sustained services that reach the children who need them most. Across the Working Group discussions, a consistent theme emerged: the challenge is not only resource scarcity but also designing financing approaches that can respond to the multidimensional nature of ECD services.
The core issue is not simply a lack of political will. It lies in how policymakers understand and respond to a defining feature of the ECD service landscape: its multidimensionality. When asked why financing ECD services feels difficult, most answers point to the sector’s complexity. ECD includes many different services, each requiring distinct financing approaches, while also depending on one another, so that gaps in one area can affect overall system performance. For example, an integrated rural preschool program may involve teacher salaries funded by the Ministry of Education or community contributions, a feeding program supported through social protection or donors, and health screenings delivered by the Ministry of Health. Each of these components operates under different funding streams, requirements, and timelines, meaning that delays or gaps in one area can affect service quality as a whole. Budgets are also spread across different levels of government, and funds can be delayed or diluted as they move from the national to the local level. These dynamics illustrate the multidimensional nature of the sector. But they describe a characteristic of the system, not the core constraint itself. Too often, that description becomes the endpoint of the analysis when it should be the starting point.
When complexity is misdiagnosed as the problem itself, decision-making tends to narrow rather than adapt to how the system actually operates.
Understanding Multidimensionality
What does multidimensionality mean in practice in the context of ECD financing? It means the ECD services landscape has many moving parts that differ from one another and interact at the same time. Services are funded differently, delivered differently, and designed for different groups of children. These differences are not incidental. They shape the financing choices available. A community-based childcare center, for example, may rely simultaneously on parent fees, government subsidies, philanthropic guarantees, and local savings groups. An outcomes fund may combine donor and government capital while also embedding equity premiums for children with disabilities. These layered arrangements reflect the structural diversity of the ECD services landscape, rather than policy inconsistency, and illustrate why financing decisions cannot be approached through a single model.
Variation does not only exist in how services are financed. It also exists within the services themselves. A routine child health and development visit and a parenting education group both support young children, but they operate differently and therefore require different financing approaches. Services also differ in how they are paid for. Some lend themselves to per-visit payments settled monthly. Others require per-pupil grants paid by term or facility operating grants to cover fixed costs. They also differ in how results are verified, who provides them, how money flows, how equity is built in, where services are delivered, and how much they cost.
Taken together, these dimensions are structural features of the ECD services landscape. They arise because services must reach different populations, address diverse needs, and adapt to varied local conditions. As Yuen Yuen Ang argues in her 2025 paper, “Adaptive Political Economy: Toward a New Paradigm“, the task is not to eliminate complexity but to identify the order within it. In this context, multidimensionality is not inherently chaotic. It can be mapped, compared, and acted upon through frameworks that make differences visible and actionable. Working Group members noted that innovative finance mechanisms can contribute to this process when used as diagnostic and coordinating tools rather than standalone solutions. For example, blended finance approaches can help identify cost drivers and subsidy gaps in childcare markets, while outcomes funds can incentivize priority results and community-based financing models can support last-mile delivery where formal systems have limited reach. In this way, different instruments can play distinct but connected roles, with coordination typically emerging through deliberate design by governments, funders, and implementing partners rather than through market forces alone.
Recognizing order within complexity helps clarify the task ahead. The goal is not to treat complexity as a barrier but to make it more legible for decision-making while addressing the financing blockages that inhibit progress. This requires clearer frameworks, decision rules, and sequencing pathways, enabling countries to compare service types, identify constraints, and more deliberately align financing approaches. It also calls for targeted reforms, such as establishing a legal basis for particular payment types, strengthening verification data, consolidating fragmented budget lines, or improving the predictability of cash releases.
Importantly, many of these blockages are political and institutional rather than purely financial. Delayed cash releases, fragmented ministerial mandates, regulatory rigidity, and weak data infrastructure can undermine even well-designed instruments. Addressing these constraints requires sustained government ownership, cross-ministerial coordination, and long-term capacity building. When policymakers must navigate a multidimensional service landscape through these constraints, they often respond by narrowing the decision space.
Three Common Response Patterns to Complexity
Faced with multiple choices about which services to prioritize, how to allocate limited budgets, which financing instruments to adopt, and how to sequence reforms, policymakers often rely on simplifying strategies that feel practical in the moment. These responses are understandable, but over time they can leave financing for ECD services incomplete or uneven.
These tendencies are not theoretical. Participants in the Working Group on Innovative Finance for Early Childhood Development repeatedly described similar dynamics in practice. In some contexts, flagship preschool expansion programs crowd out complementary services such as parenting support or disability inclusion. In others, innovative financing instruments are introduced in response to growing global momentum and interest, with implementation revealing that service providers, data systems, or regulatory frameworks may still need to evolve to fully support them. These experiences suggest that narrowing responses are often attempts to cope with complexity, even if they do not fully address the interdependencies across services and financing.
Pattern 1: Concentrating on Visible Flagship Services
The first pattern is to concentrate on a few major services, focusing resources on flagship interventions that are visible, politically compelling, and easy to communicate to funders or finance ministries. This can help generate momentum and secure initial budget commitments. In contexts where ECD has struggled for recognition, a flagship program can also establish legitimacy and demonstrate state capacity. The risk, however, is structural. Financing flows heavily to the flagship while essential complementary services remain underfunded. The impact of the flagship program may then plateau because critical inputs are missing elsewhere in the system. No single intervention, however well executed, can compensate for gaps in the broader package of care required for healthy development.
In the Working Group discussions, this perspective also emerged in relation to outcomes funds and blended finance. Participants highlighted how these approaches can play a valuable catalytic role, helping to mobilize diverse sources of capital and demonstrate effective models. Outcomes funds pool donor or public resources to pay for verified results, while blended finance brings together public, donor, philanthropic, and private capital, with different sources playing distinct roles in enabling scale and managing risk. At the same time, sustained child development gains are more likely when such efforts are complemented by investments in workforce capacity, data systems, subsidy alignment, and inclusion mechanisms.
Pattern 2: Funding What is Easiest to Measure
A second narrowing response operates more subtly. It prioritizes interventions with the strongest measurable returns. Decision-makers select services that can demonstrate high cost-effectiveness ratios, typically those backed by published research and quantifiable outcomes. This logic is appealing, especially where budgets are tight and ministries of finance demand clear justification for expenditure. Over time, however, the definition of what qualifies for financing can narrow toward what can be readily counted. Services such as support for children with disabilities, outreach to families in remote areas, or programs addressing the underlying conditions shaping children’s lives—such as poverty, poor housing, unsafe environments, or limited access to nutritious food—may not generate the same kind of clear short-term evidence. As a result, financing can systematically bypass those who face the greatest barriers to access.
This tension also surfaced strongly in conversations about outcomes-based financing. Participants noted that when payments are tied to easily measurable indicators, what is counted can crowd out what is harder, but equally important, to measure, such as social-emotional development, caregiver well-being, or disability inclusion. The design of metrics is therefore not merely technical. It shapes incentives and influences which children are prioritized.
Pattern 3: Fitting Services to the Instrument of the Moment
A third response shifts attention from services to instruments. The pattern is to adopt whichever financing instrument is currently favored in global development circles by influential institutions. The appeal is understandable. These instruments can open access to available financing streams and align with prevailing donor priorities. The risk, however, is that instrument choice begins to drive service design rather than the reverse. A results-based financing scheme may require verification protocols that do not suit community-based services, while a conditional cash transfer may depend on registry systems and payment infrastructure that do not exist in fragile contexts. The question shifts from what a service needs in order to function well to which services can be squeezed into available financing templates.
Across Working Group sessions on blended finance and outcomes-based financing, members emphasized the importance of aligning instrument choice with service needs. Results-based financing may require verification systems that are still developing, while concessional lending models may depend on providers reaching certain levels of formalization and financial literacy. When introduced before the necessary systems are in place, such instruments can make it more difficult for informal and community-based providers—often those serving the most marginalized children—to participate.
Each of these approaches can make sense in particular circumstances. The problem arises when narrowing becomes the default response to complexity. Because ECD is multidimensional and made up of interconnected services, funding only a few parts leaves the system incomplete by design.
Implications for Policymaking
The financing challenges facing early childhood development are real and consequential. Millions of children do not receive the services they need because resources do not flow reliably, equitably, or at scale. In recent dialogues, practitioners highlighted that equity must be embedded directly into financing rules through targeted subsidies, premium payments for children facing additional barriers, loan guarantees for informal providers, or context-adapted measurement frameworks. Complexity in ECD is not the problem. The problem arises when financing systems are designed without accounting for that complexity. Solving this requires a shift in how policymakers understand and respond to the ECD services landscape.
This shift means developing frameworks that illustrate the order within complexity. It requires making multidimensionality explicit through a structured classification of service types and their financing requirements, matching services to financing instruments using evidence-based rules, and sequencing reforms to create realistic pathways from current conditions to more appropriate financing arrangements. The focus moves from finding the right answer to building systems that enable countries to diagnose their own situation and assess which instruments fit current conditions.
ECDAN partners are developing the Financing Toolbox for the Early Years to put this exact approach into practice. The Toolbox will provide a structured, service-first method for mapping ECD services, matching them to financing instruments under real public financial management constraints, and identifying the reforms needed to expand financing options over time. Rather than promoting a single instrument, it provides a transparent, repeatable method for building a financing portfolio that is technically sound, equitable, and grounded in country realities.
As earlier blogs in this series have explored, mechanisms such as blended finance and outcomes-based financing offer tools to navigate this terrain. Their effectiveness, however, depends on whether they are deployed as part of a broader systems approach that recognizes the multidimensional structure of ECD services. The challenge is not to choose the best instrument, but to match instruments to services in ways that reinforce system coherence and equity.
Financing ECD services will never be simple. The ECD service landscape is inherently multidimensional because children’s needs are diverse, delivery requires multiple platforms and providers, and contexts vary enormously. With the right conceptual framing, it becomes possible to move from overwhelm to structured decision-making and from narrowing patterns to more coordinated and systematic approaches. This shift in framing can help countries manage multidimensionality and build financing systems that fit their context and can be sustained over time.
This article was co-authored by Matthew Townshend and Shekufeh Zonji of the Early Childhood Development Action Network (ECDAN), with contributions from Louise Albertyn, Richard Chivaka from Spark Health Africa, Elizabeth Lule from ECDAN, Sadashiv Nayanpally from the Thrive program at Oxford Policy Management (OPM), and Saskias Sickinger from the Dalberg Group.
Disclaimer: This article reflects insights shared within the Working Group and the personal opinions of the co-authors.