How Microfinance Institutions Can Increase Access to Education
Nelson Mandela famously said, “Education is the most powerful weapon which you can use to change the world.”
Education may be the “silver bullet” of development. It is, as Nelson Mandela described it, the “most powerful weapon which you can use to change the world.” Increase access to quality education for children and adults, and the knock-on effects can be profound – on health, women’s and girls’ opportunities, technology, and the growth of a prosperous middle class and a knowledge economy.
But increasing both the level of access and quality of education among low-income populations in poor countries is as difficult as it is worthwhile. Within often tight fiscal constraints, how can governments provide new programs that meet the needs of the poor? When parents are burdened, and their livelihoods affected, by the high cost of education, how can we alleviate this stress? How can we ensure that education curricula do indeed prepare children and young adults for employment with opportunity for advancement, and not just drudgery and a generational cycle of poverty? How can we ensure that young adults have the skills to succeed in fast-evolving work environments? And what role should the public, private and third sectors play in increasing access? These are crucial questions to answer to let this “most powerful weapon” achieve its goal.
Of course, progress has been made already, including under the umbrella of the Millennium Development Goals (MDGs), which have overseen an increase in primary education access to 91 percent (although short of Goal 2’s 2015 target of universal access), but much more needs to be done. Education drives future economic status and self-reliance, and its absence breeds unemployment, crime, skills shortages and social isolation. But population growth in low-income countries makes the demand for increased education access more important than ever before, notwithstanding piecemeal progress achieved under top-down programs such as the MDGs.
Governments naturally play a major role in addressing this. The philanthropic sector can boast many achievements, too. But there is a practical need for private financial resources to support education access. Cost is a major barrier faced by students, parents and providers alike. So the microfinance sector can play an important role in many ways here, by supporting families and students in managing their education-related financial needs, providing financial services to educational providers, and supporting both through non-financial support, including training and capacity-building.
Poor access to education can be addressed on both the supply and demand side, through either financial or non-financial services. On the supply side, this means improving the financial capacity and efficiency of the education system. Education Provider Loans (EPL) can give schools, vocational colleges and training centers the investment capital to address overcrowding, insufficient or outdated educational material, poor physical infrastructure, and other challenges that limit both school access and student educational attainment, including school drop-out.
On the demand side, barriers to school entry disproportionately impact the poorest children and youth, increasing their probability of never entering the education system or dropping out before completion. Education finance products can include education loans for students and their families to pay for tuition fees, transportation, exam-related preparation expenses, or uniforms and other school materials. Dedicated savings products can absorb the shock of periodic household expenses related to school fees, uniforms, school material or books. Micro-insurance products can be linked to education saving plans or loan products to cover school fees for children in specific circumstances, such as the death or disability of a parent. Remittance program can encourage migrants to use remittances for educational purposes in their countries of origin, by providing subsidies in the form of matching funds, linking remittances with an education loan from a microfinance institution (MFI), or simply providing a reliable means for family members to support a student at a far-off school.
And these are just the financial products and services. Non-financial services on the supply side can include capacity-building services aimed at increasing scale, depth and quality of educational activities in schools and vocational training centers, such as teacher training, education and financial management training for school owners/entrepreneurs, curriculum development support or enhancing school safety standards. On the demand side, “Education to Employment” services include vocational training or capacity development services for young people and unemployed adults, after which trainees are linked with employers for internships or apprenticeships, or offered start-up loans for their own businesses. Many of these possible models involve partnership with education providers, employers and local governments – allowing financial institutions to focus on their core competencies.
To support these efforts, the seventh European Microfinance Award has the subject of “Microfinance and Access to Education,” inviting applications from institutions that are innovating, experimenting, being bold or taking risks in this area. The award will recognize the role of microfinance in enabling access to education for children and skills training for youth and adults to enhance their employment opportunities, as well as in improving education quality, through financial or non-financial services. The goal is to support financial institutions that are testing new ideas that go beyond their core financial services, and that exemplify the evolution of the microfinance sector beyond boilerplate microenterprise credit. These ideas may yet be replicated in other contexts, and leveraged to scale, making a significant contribution to addressing education access for the many millions who need it now and in the future.