The Funding Gap in South Africa’s ECD Sector
The 2025 budget speech announced an increase of only R1.59 billion for the Early Childhood Development (ECD) Grant. This is less than the projected R1.9 billion for 2024 that was promised in last year’s budget. This shortfall deepens the funding crisis in a sector already struggling to meet the needs of young children and the women-led centres that serve them.
As a result, the ECD sector is in even greater need of funding and access to alternative sources of capital.
The ECD sector needs access to more varied funding streams. The current subsidy of R24 per eligible child per day was only recently increased from R17, a rate that had remained unchanged since 2019. Yet, nearly 60% of ECD programmes remain unregistered and therefore ineligible for this subsidy (ECD Census 2021). Only 10% of the ECD grant over the next three years will be allocated to helping these programmes register.
To provide access to this crucial funding, Grow ECD has developed an affordable ECD Finance solution for women empowerment and quality education delivery in South Africa’s ECD sector.
Financial inclusion promotes economic growth
advocates for financial inclusion as critical to promoting economic growth and reducing poverty. This institution has recognised that financial inclusion is not only about providing access to financial services like transactions, payments and savings but also to affordable, appropriate and convenient financial loans and insurance that can help small businesses grow.
In South Africa, financial inclusion is severely skewed in favour of higher-income groups. Lower-income groups are regularly excluded, which makes it more difficult to accumulate wealth and further deepens the gaping divide between the rich and poor.
ECD Centres do not have access to relevant and affordable financial opportunities
ECD centres employ over 200,000 people and play a vital role in preparing children for school. Yet they are rarely recognised as small businesses. This oversight leaves them out of formal financial systems, unable to access affordable capital or business development support. Most centre owners must manage everything, from budgeting and compliance to teaching, without administrative help or financial tools.
Introducing ECD Finance: A Blended Finance Solution
In response, Grow ECD launched ECD Finance, in 2021, a blended finance solution tailored to the unique needs of ECD centres to help them invest in areas for quality education improvement, business expansion and compliance readiness. This model combines:
- Low-cost loans with fixed interest rates
- Grant funding to bridge affordability gaps
- Cash investments from ECD centre owners to increase co-ownership
Since then, we have lent over R8.8million, at an average loan value of R53 000, to 165 preschools with a remarkable 98% of borrowers paying instalments on time. Schools have used these loans to invest in classroom kits of educational equipment, infrastructure maintenance and expansion, outdoor play equipment and safety and compliance improvements.
ECD centres face unique business challenges
ECD centres in South Africa face unique small business challenges. They have limited sources of revenue and their income potential from school fees is capped by child-to-teacher ratios and classroom sizes. Their customer base is price-sensitive so they cannot simply increase school fees to afford a loan. Traditional lenders are reluctant to loan capital to ECD centres due to their informal status and lack of formal financial records; while loan sharks offer loans at exorbitant interest rates that lead to crippling debt. Most cannot afford a bookkeeper or administrator and the centre owner must do everything, including financial recordkeeping, cashflow management, budgeting and all the complexities of registration, on top of running the school.
A holistic solution to building thriving businesses
Our low-cost ECD loan model is a pioneering approach to transforming the financial landscape for ECD centres.
We recognised that ECD centres needed more than just loans. They needed a holistic solution that empowers them with affordable capital and equips them to run their centres as sustainable, thriving businesses while delivering on education impact.
Loans must be accompanied by comprehensive business development support and a package of services to ensure that investments in these small businesses succeed and improve financial sustainability and education quality.
The low-cost ECD loan model
Grow ECD partnered with Spoon Money, a registered credit provider that shares our vision for financial inclusion, to pave the way for affordable loans for ECD centres. We negotiated fixed interest rates, ensuring affordability and stability for the ECD centre owners. We have developed a unique loan review, risk assessment and approval process that complements the financial record-keeping capabilities available to ECD centres through our free app. Using this, we assess each centre’s business and determine what she can afford to invest in her centre.
Our commitment to financial inclusion doesn’t stop with loans or blended finance. We understand that investing in these small businesses must have a lasting impact. That’s why we offer comprehensive business development mentorship and break-even analysis as part of the loan review process. This full service solution ensures that the centre doesn’t waste money and is buying a proven recipe for quality education.
Proven Impact
As a result of this financial inclusion strategy:
- Over 11,332 children now benefit from an NCF-aligned daily play-based programme
- 1,552 in-person training workshops were delivered in the past 12 months
- 8 million has been invested in infrastructure, equipment, and registration support
Financial Inclusion Is About Empowerment
Financial inclusion in the ECD sector is not just about loans. It’s about recognising ECD centres as essential small businesses. It’s about empowering women, transforming education, and building resilient communities.
Grow ECD is committed to bridging the financial inclusion gap through blended finance. By doing so, we’re giving women entrepreneurs the tools they need to succeed and nurturing the future of South Africa’s children.
Testimonial: “We trust Grow ECD and are grateful to have them on our side”
Happy Valley Day Care in Strandfontein, Cape Town, established in 2012 by Lionel and Chantal Braaf, has 45 learners, three classes, with four teachers. Chantel says, “Before we started with Grow, things were stressful as we didn’t have a proper curriculum. We had no educational equipment because it was very expensive. As an ECD, we had no access to finance to try to improve our business.
Lionel says, “We used a low-cost loan from Grow ECD to buy the curriculum and classroom equipment we needed. We were delighted that we got approved for that loan because it helped us improve our centre. Getting a loan through a bank is so difficult for a small business. Also, taking a loan is a risk for us because you share your credit record and sign up for a financial commitment. We have a relationship with Grow ECD and trust them. Plus, Grow ECD gives us training on how to implement what you have invested in. This makes us know that Grow has our best interest at heart and cares about our school.”
Chantal says, “Grow helped us with a micro-loan (done through a registered financial service provider) and we paid it off. I get all the lessons, all the equipment we need, all the training we need and an app that helps me run the business properly, it is very good value for money. Now the atmosphere at our ECD is quite relaxed because we all know what we’re doing and what we’re going to do tomorrow and we have all the equipment we need. It is amazing,” she says.
Lionel and Chantel have since then applied and paid off a second loan for infrastructure improvements through Grow ECD. “We took this loan over 24 months. It takes a bit of time to put everything in place but we were ready to do our infrastructure upgrade and refresh our centre. Parents now see the quality and the professional look of our centre and that makes us different from other centres. It help us gain and keep customers,” says Lionel.
“Grow ECD sees our needs and our potential and we have built a relationship with them. That is trust, and we are grateful to have them on our side,” he says.
About Grow ECD
Grow ECD is a non-profit social enterprise working to ensure that every child in South Africa has access to quality early learning. Since 2014, Grow ECD has equipped thousands of Early Childhood Development (ECD) centres with training, curriculum, classroom kits, and business support to help owners run sustainable preschools while delivering 5-star early education. Today, through innovative tools like the Grow ECD App Suite, the organisation continues to expand access to resources, mentoring, and support for teachers, parents, and children across the country.