The Role of Innovative Finance in our Education Sector

Context: While the for-profit enterprises are hailed in the health and pharmaceutical sector, their presence in the education sector is frowned upon. The impact on funding in education due to this, must be tackled through innovative financing methods.

Private Sector School Education in India:

• 120 million children (nearly half of India’s school-children) attend private schools. 
• There are about 450,000 privately-managed schools in India. 
• Nearly 40% of the children studying in private unaided schools come from the “aspiring” or “deprived” segments.

Issues with Education Sector:

• Lack of funding: Since education is a public good, its funding is limited to government and philanthropic support.

• In India, schools and colleges by law cannot be run for profit.

• Lack of Quality in Private Education: With the goal of maximizing profits, private education f overlooks learning outcomes.

• A study published by Aspiring Minds reveals that 80% of Indian engineers are unemployable. 
• Low Return on Investment (RoI): in providing university education of high quality; Best universities globally incur up to $1.50 in expenses for every $1 they collect as student fees. 
• Universities have to look for other means like philanthropic support to fund their capital expenditures apart from regular operational deficits.

Way Forward:

• Improving Learning Outcomes through the use of technology: Ed-tech offerings have helped millions of students continue their learning from home during COVID.
• Online Platforms to supplement the education provided in a good school.
• Inherent Scalability helps in increasing accessibility to reach millions of students.
• Purpose driven Entrepreneurships helps strengthen their cause to invest rather than purely directed towards deriving profits.
• For E.g. Bridge International Academies, which runs primary schools for lower incomes groups in Nigeria, Kenya, Uganda, India and Liberia.
• It deploys in-depth teacher training and support, advanced lesson plans and wireless technology to provide a meaningful education.
• Similarly, the US company 2U enables colleges to provide online degree and certification courses. It works with 75 university partners and has enrolled 245,000 students over its lifetime. 

• Use of Innovative Financial Devices: Social Impact Bonds: presents an alternative by which purpose-driven investors can focus on impact delivery, even if it generated lower returns.

• For E.g. In 2015, Educate Girls issued a $270,000 Development Impact Bond as a payment-by-results model and covered 7,300 students in 166 schools in Bhilwara, Rajasthan.
• The targets of increased enrolment of marginalized girls and progress in children’s literacy and numeracy outcomes surpassed over the 3-year bond tenure.

• Role of New Education Policy: It lays down a framework for cooperation between public spending, private philanthropy and impact investing, with its “light but tight” regulatory approach. 

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