Follow the Money: Three Shifts Reshaping the Financing of Early Childhood Education
Something is shifting in how governments finance early childhood education (ECE). Governments are realizing that how you spend matters as much as how much you spend. Three trends stand out, each reflecting a deeper move away from simply expanding access toward building systems that are equitable, sustainable, and designed to reach every child.
1. Universal Access That Prioritizes Vulnerable Children
One of the most notable shifts is governments stepping up as the primary funder of operational costs — without necessarily becoming the primary provider of services The South Africa model illustrates this well: the state funds the system while a range of providers delivers it on the ground. In addition, more governments are using financing tools like per capita and block grants to actively target disparities. Funding is being tied to equity indicators — socio-economic background, disability status, location or size — rather than distributed uniformly in order to get more resources to the children who need them most.
The evidence is compelling: OECD countries that subsidize tuition fees for specific populations (such as low-income families) have ECE participation rates approximately 13 percentage points higher than those without such subsidies (OECD, 2024).
Two caveats are worth flagging. First, funding needs to reflect what quality actually costs. As South Africa and other countries have found, it is challenging to deterine the full cost of quality ECE and secure enough funding to cover it. Second, even well-designed subsidies often do not reach all eligible families (see Trend 3).
COUNTRY EXAMPLES
Brazil
ECE is treated as a public good and is compulsory for children ages 4–6. Financing is primarily public and decentralized across municipalities, states, and the federal government. A national education fund (FUNDEB) pools state and municipal tax revenues and redistributes them across states to reduce regional and socio-economic inequalities.
Indonesia
While Indonesia still has a way to go on universal access, the government provides operational funding to all registered ECE centers, with more going to centers serving children in poverty, children with disabilities, and those affected by emergencies. Equity is built into the formula.
2. From Financing Services to Financing Systems
The second trend is about scale. Hiro Yoshikawa and colleagues draw useful distinction between “small to bigger” (reaching more children) and “big to better” (strengthening the system so quality and equity are not compromised as services expand). A growing number of governments are doing both. In practice, this means investing in the infrastructure behind services, including legal frameworks, governance, workforce development, quality assurance, monitoring. South Africa’s approach is a good example of what it looks like to treat system-building as a financing priority, not an afterthought.
COUNTRY EXAMPLES
Morocco
As part of the cross-sectoral National Initiative for Human Development (INDH), preschool enrolment nearly doubled nationally (from 45% in 2018 to 80% in 2025) and almost tripled in rural areas (33% to 91%). Some keys to Morocco’s progress include a costing study to model what funding was needed, a strong legal framework, and sustained investment in educator training, standards, and quality assurance.
Ireland
Ireland’s First Five strategy brought four separate financing streams together into a more coherent, publicly funded system. The result is a tiered subsidy approach that combines universal and targeted support. Fee freezes keep costs down for parents, better pay attracts and retains educators, and stable funding helps providers remain financially viable.
3. Addressing Both Direct and Indirect Barriers Facing Families
This is the most emergent of the three trends — and in some ways the most interesting. Governments know how to use financing to tackle the direct barriers: cost, availability, proximity. What is less well understood is how to address the indirect ones. Confusing application processes, distrust of formal services, language barriers, concerns about quality are challenges that may not show up in a budget line, but they keep children out of ECE. This is why, even in countries that guarantee every child a place, significant enrollment gaps persist across socio-economic groups, as a recent OECD report makes clear. Closing those gaps means combining traditional financing with other supports like simplifying application procedures and conducting outreach with underrepresented families.
COUNTRY EXAMPLES
Germany
A recent study shows how much difference small interventions can make. Giving families clear information about the childcare application process — plus some hands-on support from a trained expert — significantly increased enrollment and effectively closed the gap between socio-economic groups.
New Zealand
“Equity Funding” supports providers in low-income, isolated, or language-minority communities with staffing and curriculum resources. And the Engaging Priority Families program works through community organizations to reach Māori and immigrant families directly, helping them understand how to enroll their children and why it matters.
These three trends show that financing ECE well means thinking carefully about how much to spend, for whom the system is designed, and how the money is allocated. The countries profiled here offer a useful starting point.
This blog post draws from a presentation at a webinar on “Financing the future: Scaling quality and equitable early childhood education,” organized by UNESCO International Institute for Educational Planning (IIEP-UNESCO), UNESCO, and the Education Outcomes Fund on March 11, 2026. The full recording is available here.
