1.9 million is the number of poor and underprivileged students at risk of dropping out of the education system by 2022.
The 200 billion is the number of out-of-school children participating in the Equitable Education Fund (EEF) of Bringing Kids Back to School program. The project hopes to bring them back into the education system. But from tracking, it was found that there were 11,719 children who could not be identified.
According to an analysis of the Equitable Education Fund (EEF), poor and exceptionally poor children are only 12 percent more likely to go on to higher education. Moreover, many poor children’s families bear the cost of education at 22 percent of their income. It is four times higher than that of wealthy households, which account for just 6 percent of their income on education.
Children from low-income families have access to higher education at a rate that is three times lower than the national average and five times lower than that of the wealthiest earners in the nation.
It is a case of educational inequality. In the post-pandemic financial crisis, the current national budget cannot fully and effectively resolve the issue. As a result, it is where financial initiatives to address educational issues first appeared. Under the conditions of inequality that will only continue to increase, it is an issue that cannot wait.
The Equitable Education Fund (EEF) welcomes us to learn more about social finance innovations and the concept of Pay for Success, a new operating model for sustainable educational outcomes. That will let us realize there may be a way to end the long-standing educational inequality.
Pay for Success: How to pay well.
In light of declining revenue and the need to boost the economy, Kraiyos Patrawart, manager of the Equitable Education Fund (EEF), said that Thailand has had fiscal restrictions over the last three to four years. It implies that it will be challenging and difficult to increase budgetary funding to address the rising educational disparity. In light of this, Kraiyos believes that searching for other financial breakthroughs is necessary. It may also be an intriguing option to use the current funds to address the issue in a way that maximizes benefits.
The problem of a budget is now one of the significant issues facing organizations that support education around the world. It primarily originates from two sources: first, from the national government, and second, from donations. Neither strategy is sustainable, despite being a good starting point. Therefore, the Equitable Education Fund (EEF)’s financial innovation concept to reduce educational inequality is very interesting.
By inviting youth, social enterprises, and various educational networks to learn and develop new financial innovations to achieve sustainable educational outcomes under the condition of educational inequality and the risk of young people from extra-poor backgrounds dropping out of the education system, the Pay for Success project started to investigate new operational models for generating lasting educational outcomes.
Financial innovations are employed in many countries around the world to promote educational equality, some examples include:
- Social and educational bonds are standard financing methods, as well as high-volume and cross-sector fundraising.
- Crowd funding is a more widespread participation.
- To spread risk across the public and private sectors, use Pay for Success/Results (Pay for Success) or contracts. When the project’s intended outcome is realized, the government makes payment.
One of the examples that Kraiyos presents is the use of financial innovation in the form of the Zero Dropout project in which the Equitable Education Fund (EEF) has collaborated with Sansiri Public Company Limited.
It comes from Sansiri’s donation through the issuance of bonds worth 100 million baht ($28.96 million) to mobilize cooperation to reduce the number of children dropping out of education to ‘zero’ within three years with ‘Ratchaburi Model’ as the model province.
“By issuing Sansiri’s own debentures, Sansiri Group hopes to try out financial instruments. It was possible to raise 100 million baht using this way in only two minutes because people were interested in issuing debentures to support steps to minimize inequity in education throughout the entire Ratchaburi province, ” Kraiyos said.
On the other hand, Mr. Samatcha Phromsiri, head of digital marketing and corporate communications of Sansiri Public Company Limited, suggested that the role of private sector should not only provide funds but should also be involved in monitoring the project. By being involved in the project, we have seen a working process that will make the private sector feel involved and realize that investing in the form of Pay for Success is truly sustainable.
The collaboration with PTT Public Company Limited, which started the PTT Virtual Run activity as part of the Breath for Children Walk-Run project, is another such. A nationwide campaign to raise money for youth education broke the previous record by traveling 600,000 kilometers in just six days. It resulted in a contribution of 151 million baht to benefit equal scholarship students in the border group of Primary 6 and Mathayom 3 children, relieving the load of educational fees and preventing this group of kids from dropping out of the system.
In the above two examples, Kraiyos explains that the Equitable Education Fund (EEF) seeks to develop indicators or Key Results in terms of learning opportunities, learning outcomes, inclusive alternative education, and systemic changes to support financial innovation to be realistic in the long run.
Lessons of Pay for Success Abroad
Sikai Chen of Tri-Sector Associates, a Singapore-based non-profit organization, said Pay for Success or pay for results is an idea that originated from the United Kingdom. It started as a prisoner assistance project. After that, there have been more than 200 projects around the world like this both in developed countries and emerging markets such as Thailand, which require large amounts of capital to help the underprivileged. Whether it is teens, adults, prisons, or young children, these grants not only provide finances, but also assist to organize a wide range of professionals to bring about meaningful change.
Tri-Sector Associates introduced the Pay for Success idea to Asia, and it has since gained traction around the globe. Sikai Chen shared his experiences from this work on three primary subjects: 1) The expansion of Pay for Success; 2) Proposals for Social Benefits; and 3) Case Studies from Singapore and India.
Sikai Chen began by stating that the COVID-19 crisis has affected the use of government budgets in almost every country. Governments around the world are trying to make huge investments to bring the country back to recovery and enable limitless budget utilization.
It means that from now on, the government should use its resources more wisely and carefully weigh the benefits and drawbacks of spending money.
More than that, Sikai Chen sees that governments, service providers, the private sector, and funders themselves have a focus on ‘measuring results’ because they want to make a difference. Additionally, it must stop any potentially harmful impacts from happening. There is a push to measure the outcomes of Pay for Success participants from various sectors from the government sector, service providers, private sector, or funding sponsors themselves.
The macro-trend is a rise in social impact investments, including those that include the environment, society, and governance (ESG investment), are responsible investments, make an effect investments, or millionaires who give back to the community.
“In the past ten years, we have witnessed increasing investments of this nature. Let me highlight that Sansiri just started an initiative in Thailand where they gathered 100 million baht to help solve the problem of children dropping out of school. It will likely be more projects similar to this in the upcoming years, according to this example of successful investment in Thailand and the surrounding area.”
Sikai Chen reflects that questions are a common query what does the Pay for Success or PFS program do to society?, and who is the benefit?
The research from the Brooklyn Research Institute in the United States systematically analyzed the PFS program to find out what it does for society, and they found five advantages for all parties.
- The result will benefit the government because it helps to feel at ease and understand that the results will happen. Service providers can stand out from the crowd because other service providers are not focusing on results or are data-driven.
- There is continuous evaluation because PFS emphasizes evaluation and gives full development time.
- In the long run, providers benefit from this as they can learn new assessment techniques and apply new skills to help improve internal operations.
- Service providers will benefit by learning new skills directly from the private sector and civil society, knowledge that would not be accessible without this cooperation.
- It helps to build good relationships between all sectors.
They not only assist one another in resolving issues that develop along the way, but they will also be able to work together to identify answers if issues arise in the future.
Numerous Indian girls have received assistance from Educate Girls to enroll in school.
Sikai Chen provides a case study from India as an example. Nearly half of the population is female, making it the second-largest country in the world. In Rajasthan, there were more than 3 million females who did not have access to education or surveys in 2014. Less than 79 percent of the male population, or just 52% of the female population, was literate.
According to the NSS 75th Round survey from 2018, there were 187.2 hundred million more females than men who were illiterate. The numbers represent the loss of women’s earning potential, favorable job prospects, childrearing issues, and issues with early marriage. They are all the root causes of the nation’s economic issues and finally result in a vicious cycle of poverty.
The UBS Optimize Foundation, a subsidiary of UBS, has launched the first Pay for Success program in India. It is a financial innovation in the form of a Social Impact Bond, an alternative way to raise public funds from the private sector with the aim of helping society solve the education problems of Indian girls. The project owner will pay back the principal and returns it to investors according to the project’s achievement (Pay for Success Financing).
The initiative has received working capital financing from the UBS Optimus Foundation (UBSOF). Educate Girls (EG), a nonprofit organization, works with local, state, and federal agencies to carry out the initiative under the direction of the social networking organization “Instiglio.”
At the end of the project, the social development organization ‘IDinsight’ will come to evaluate the project results and submitting project evaluation results to a charity to improve the quality of life of children in developing countries named The children’s Investment Foundation (CIFF).
There is a payment of principal and returns to investors. CIFF will pay the principal and return it to investors if the results of the project are only under the specified indicators, or in descending order according to the results obtained.
After just one year, Educate Girls were able to achieve both criteria:
- Learning Outcomes in 3 subjects: Hindi, English, and Mathematics of participating girls must be 5,592 levels higher than those of non-participating girls. More than 8,940 levels, or more than 160 percent of the target, had been completed at the project’s conclusion.
- Enrollment Outcomes: The percentage of female students enrolling in school is 79%, but within three years, 768 females have enrolled, exceeding the goal of more than 116 percent by 92 percent.
By achieving this objective, investors saw a return of more than 52% on their investment, and CIFF paid UBSOF up to $422,000, which was made up of $270,000 in capital and $144,805 in return.
More than that, female students in India have enrolled in the educational system to raise their standard of living and lessen the achievement gap between girls and boys, which has a direct impact on India’s future economic growth. That would mean saving government budgets in other areas, such as crime prevention budgets, health budgets, welfare budgets, and budgets for other social problems. It will use a reduced budget because people in the country have a better education.
