Expanding Childcare Services: How Can the Private Sector Contribute?

In most countries in Latin America and the Caribbean, more than half of children under age three do not attend childcare centers. Access is even lower among low-income households and in rural areas, according to a study by the Inter-American Development Bank (IDB).

These gaps matter not only for child development but also for women's economic opportunities. Women in the region perform 77% of all unpaid childcare hours. Access to affordable, high-quality services is therefore also critical to women’s economic autonomy. 

Direct public provision is a central part of the answer, but in many countries it faces fiscal, institutional, and capacity constraints. Governments can draw on a range of policy instruments to encourage, structure, or condition the participation of private providers, which can bring existing infrastructure, human resources, and organizational capacity into the system.

Private participation, however, does not automatically lead to better outcomes. It can also result in uneven service quality, segmentation, or arrangements that are difficult to sustain. The key question, then, is through which instruments and under what conditions private participation can help expand access while ensuring quality and equity. 

The new IDB publication, Private Sector Participation in Childcare Service Provision, reviews more than 220 studies, evaluations, and technical and institutional reports. It examines the policy tools governments can use to shape private participation, the conditions under which they work, and the results they can achieve. 

The review finds that there is no single tool that works best in every context. Different instruments address different barriers. 

1. When affordability is the main barrier for families, and there is a sufficient base of providers able to respond, demand-side subsidies can stimulate supply. In the United States, each additional $100 in annual funding per child was associated with 0.026 additional private childcare slots, while prices increased by only about 0.3%. But design matters: subsidies that are too small or unstable, or reimbursement caps that are set too low, may not generate a strong enough signal for providers to invest or expand capacity.
2. When demand alone is not sufficient to sustain providers, supply-side subsidies can make service provision financially viable. These subsidies reduce providers’ financial risk and can helpmaintain services where supply is scarce or demand is geographically dispersed. In Quebec, a heavily subsidized system increased the use of formal childcare by 14 percentage points. In Mexico, the Estancias Infantiles program served around 300,000 children at its peak. Yet these models depend on predictable public funding. In 2019, Mexico replaced funding tied to the operation of childcare centers with direct transfers to families, substantially changing the conditions under which the childcare network operated.
3. Mixed public-private provision can expand coverage by drawing on existing capacity, but it does not reduce the responsibilities of the state; it changes them. In Chile, delegated management accounted for 97% of the expansion in services provided by Junta Nacional de Jardines Infantiles (JUNJI), the country’s public early childhood education agency, between 2011 and 2014. In São Paulo, enrollment in the contracted provider network grew by 227% between 2007 and 2014 and came to account for around 80% of childcare enrollment. Bringing nonstate providers into the system, however, requires public capacity to select and finance operators, monitor compliance with standards, and address noncompliance.
4. Sometimes the problem is not a lack of available places, but families’ difficulty accessing them. In Germany, an intervention combining proactive information with personalized assistance almost entirely eliminated a 21.8-percentage-point socioeconomic gap in applications and cut the gap in actual enrollment by more than half. Simplifying administrative procedures and helping families navigate the system can substantially improve equity in access, although these measures do not create additional childcare slots on their own.

Quality cuts across all of these strategies. Creating new places or increasing enrollment is not enough if different groups of families systematically end up using services of different quality. Evaluating a policy, therefore, requires looking not only at how much coverage expands, but also at who gains access, what type of services they use, and the quality of those services. 

At least three features of Latin America and the Caribbean shape how international evidence, much of which comes from high-income countries, should be interpreted in the region.

First, informality affects both employment and childcare provision. Benefits tied exclusively to formal employment leave out a significant share of the population, while some childcare providers operate outside conventional regulatory and public financing systems. Expanding access may require combining financing with gradual pathways toward formalization, technical assistance, and support for providers.

Second, childcare systems are often institutionally fragmented. In many countries, childcare services are administered by different ministries and levels of government, each under differing arrangements, regulations, and standards. Expanding supply without improving coordination risks increasing coverage while at the same time reinforcing disparities in service quality. 

Third, demographic transition requires greater precision about where to expand services and where to reorganize them. Fertility decline is widespread, but it is not occurring at the same pace or from the same starting point across territories. This does not eliminate the need to invest in childcare. Rather, it makes it increasingly important to identify areas where coverage gaps remain persistent while avoiding excess capacity where the child population is shrinking. 

The main lesson from the comparative evidence is less about choosing one particular instrument and more about how to build an appropriate policy response to the problem at hand. Barriers are often multiple, which means that several instruments may need to be combined. The starting point is to identify those barriers and, based on that diagnosis, determine which policies and capabilities are needed to address them. 

Private participation is not, in itself, a childcare policy. Its contribution depends on the institutional and policy architecture surrounding it. The challenge is to design rules, financing arrangements, incentives, and quality-assurance mechanisms that channel private participation toward greater effective access and better services for families across Latin America and the Caribbean.