The Beautiful Tree (40 page)

The solution could be to extend what is occurring within the private schools to create
targeted
vouchers for the poorest, for those children whose parents don’t care about their education, and, in countries where boys are likely to be favored as I found in India, for girls to use at private schools. I gave a few examples in Chapter 10 of apparently successful schemes that work like this. Easterly also notes the success of the World Bank Food for Education program in Bangladesh—a rare example, he says, of successful aid—that gave cash payments to parents in return for their allowing their girls to go to school (indeed, he notes precisely, “This is the kind of program that could help Amaretch in Ethiopia”
³
). That’s great—but it still doesn’t capitalize on the full range of incentives that are there for the picking: through these targeted vouchers, true,
parents
have the incentive to send their girls to school, but the schools—presumably public schools—have
no
incentive to educate the girls once they’re in school. There’s no way the school is accountable to the parents, so teachers still don’t have to show up and can still sleep in the classroom. As Easterly pointed out in his earlier work,
The Elusive Quest for Growth
, if people “have the right incentives, development will happen. If they don’t, it won’t.”
⁴
Harnessing incentives from everyone is the key to successful approaches.

If targeted vouchers are made available for
private
schools in the right way, they have the potential not only to incentivize parents to send their children to school (and if opportunity costs are a problem, these vouchers could include supplements for the parents themselves, as well as to cover school fees), but also to incentivize school management to do its best for the children once in school. The key here is to ensure that parents receive physical vouchers to take to the school of their choice and to use in lieu of school fees, just as if they were cash. The school can then cash in these vouchers from the agency providing them, after suitable checks to prevent fraud. Crucially, as far as the school is concerned, these parents
are
paying fees, just like all the others, and so the school will suffer if they are not satisfied—they can move their children to another school, just as they could if they were paying cash—so the short route to accountability is still maintained. Furthermore, targeted vouchers can also include supplements for textbooks and even midday meals, to allow the poorest to have the education that the wealthier-of-the-poor parents can afford.

If done “in the right way” is the important caveat—which is one reason why I’m not suggesting, even if anyone would listen, a wholesale Big Plan to transfer aid funding straightaway to targeted vouchers for private schools for the poor. I’ve been experimenting with a small-scale targeted voucher scheme through the Educare Trust in Hyderabad, India, using the physical voucher idea to fund 500 children in private schools. On a small scale, it seems successful. But even on this scale, in schools that I knew fairly well, a case of fraud arose. This problem would grow exponentially with the scale of the intervention, and so we would need to learn countermeasures early on. And even on this small scale, we were aware of small misgivings on the part of one family that was paying fees—why was this other girl being subsidized when they were struggling to pay for their children? In this case, we were able to demonstrate that the girl in question had a bedridden father, and that the fee-paying family should not be deterred from finding funds. But this problem—of moral hazard that bedevils any social welfare scheme, that apparently seems to punish those who virtuously struggle to provide for their children and can seem to reward those who do not—is a real one that any scheme would have to find ways of addressing.

It’s easy to see how it could all go wrong. Targeted vouchers handled by the wrong agencies could lead to widespread fraud. I recently did some research for the World Bank in Karnataka, India, one of the most forward-looking, least corrupt Indian states. In Gulbarga, one of the poorest districts, I investigated scholarships, administered through the Ministry of Social Welfare, that were supposedly aimed at some of the most disadvantaged, India’s “scheduled castes” and “scheduled tribes,” and especially girls from these groups. Parents and school managers told me that most of the scholarships didn’t reach the children for whom they were intended. Most were siphoned off as they went through the various levels of the district bureaucracy. And that was in one of India’s least corrupt states. Giving funds for targeted vouchers to state agencies like that would seem to be precisely the wrong way forward. But if reputable nongovernmental organizations or microfinance banks with good track records for genuinely reaching the poor could manage the funds, then there might be some hope of reaching a multitude of children.

And there’s nothing ideological here: if an experiment showed that having vouchers available for public schools also worked, that would be fine too. The public schools would probably need to be properly incentivized. Thus, if the school’s—and teachers’—income depended on getting the vouchers, and so they really had to compete for them, then they would not abandon the children using them in the classrooms.

But surely finding the funds for a large number of targeted vouchers would be a problem? I don’t think it would. Even
as things stand now
, with current levels of aid funding and
without touching any government funds currently being spent on public education
, so with no need to reform public education and public finance, I reckon we could afford to send
every
out-of-school child to private school. (In what follows, please, I’m not suggesting that all these funds be immediately diverted to do this. I’m just showing, in case anyone was worried about this point, that the required funding is already available.)

Take Ghana for instance. The British aid agency, Department for International Development,
alone
gives about $27 million per year to Ghanaian state education. In the poor areas of Ga, where my research was conducted, a typical private school for the poor might charge about $30 per year. In remoter rural areas, the cost will be even lower. If all those funds spent by DfID alone in Ghana were spent on scholarships to fund 100 percent of these private school fees, it would provide places for at least 900,000 children annually. Suppose, more realistically, that there are some costs associated with voucher administration, say 6 percent of the funding. It would still provide funding for nearly 850,000 out-of-school children. No one really knows how many children are currently out of school in Ghana. The government estimates about 1 million, but some of them are not out of school at all, but in private unregistered schools. If around 15 percent of the out-of-school children are currently in such private schools, then
the education aid budget for Ghana from DfID alone would provide all the funds for targeted vouchers for those currently out of school to attend private schools.
Add in the education aid budgets for Ghana, from the U.S. Agency for International Development, Oxfam, the Nordic countries, Germany, the Netherlands, and so forth, and it soon becomes clear that children currently in government schools could also attend private school.

A second objection might be that this is all well and good for urban areas, where we know there’s already a huge supply of private schools, but what about remoter rural areas, where there might be only a few schools, or even
none
? Even if we could, in theory, fund the schooling of all these rural children, this would still be useless if there were no private schools for them to attend. But it is surely plausible that a major reason for the lower number of private schools in rural than urban areas is because fewer parents can afford the fees. If so, then targeted vouchers could also lead to an increase in the number of private schools in rural areas, just as their numbers are higher in urban or small-town areas where fee-paying capacity is higher. Based on what I have seen in my journeys, it seems likely that private entrepreneurs would respond to this kind of incentive. And if the reason why entrepreneurs are not establishing schools in some remote villages—cases in rural Gansu, China, spring to mind—has less to do with finance than with the lack of availability of suitable teachers, then incentives can be worked into the targeted vouchers to solve this problem too. Perhaps targeted vouchers in these kinds of remote rural areas could include additional amounts for teacher recruitment, training, and/or accommodation. As long as everyone is suitably incentivized, there would seem to be no reason why a process of judicious experimentation couldn’t discover ways of making this work, even in apparently inhospitable places.

Getting Amaretch into private school is one, solvable, challenge. But what about the quality of education when she gets there? At a recent conference, Professor Keith Lewin said to me that there should be “a plague on both your houses.” Candidly he agreed that government schools for the poor are appalling. But so too are private schools for the poor: “You might have shown that they’re better than public schools,” he chided, “but they’re still rubbish.”

Perhaps he had in mind problems such as poor infrastructure, lack of proper latrines, leaky roofs, and so on. Of course, he’s right. These can be improved. How can we get Amaretch’s private school to be of a higher infrastructural standard? Here a creative new frontier for investors and philanthropists is dramatically revealed, where the investment community can potentially make a huge difference in the lives of poor people. The key relevant finding of the research is that the vast majority of the private schools in the poor areas are
businesses
, not charities, dependent more or less entirely on fee income and, very importantly, making a reasonable profit.

I explored this with 10 to 15 case study schools in each of the countries, to gain a deeper insight into finances. In every instance, the case study schools showed a viable return for the proprietor. For example, in the shantytown of Makoko in Lagos State, a typical case study school had 220 pupils and 13 teachers, and average fees of 1,800 naira ($12.41) per term, with 9 percent of students on free scholarships. Teacher salaries averaged 4,388 naira ($30.26) per month, with other recurrent expenditures at 7,450 naira ($51.38) per month, plus the proprietor’s monthly salary of 8,000 naira ($55.17). Such a school made a surplus of about $1,456 per annum, or about 20 percent of its income.

Because the private schools for the poor are run as businesses, a pretty easy solution is available to help school proprietors improve their infrastructure: microfinance loans could be provided, through existing or purpose-created microfinance organizations. Again, through the Educare Trust in Hyderabad, and Educare in Makoko, Nigeria, I set up two small pilot loan schemes, each funded by donations of $25,000, that offered loans of between $500 and $2,000, at commercial interest rates to private school managers who wanted to improve their infrastructure. The entrepreneurs submitted detailed proposals, which were vetted, along with their (usually informal) accounts, to ensure that the plans were reasonable and the repayments—typically over three years—were affordable. Typical projects included building proper latrines, refurbishing classrooms or building new ones, buying land, or on the lower end, buying a school bus and desks and chairs. I’ve also seen the need for a bit of financial management advice and training, to help school proprietors manage their budgets more effectively. All this can be provided with philanthropic funding.

I’ve found a hunger for this kind of money, available to schools that couldn’t usually access other funds, perhaps because they didn’t have formal property rights or were operating only semilegally—the kind of small businesses highlighted by Hernando de Soto in
The Mystery of Capital
. This hunger showed that critics’ claims of private school proprietors’ profiteering from the poor—the “hidden curriculum” condemnation I heard, that if schools don’t provide latrines, for instance, it shows the proprietor only cares about profit, not the children in his care—are completely misplaced. As soon as funds were made accessible, the private school proprietors showed themselves eager to invest in improvements. In these small-scale projects, we’ve had no problem with defaulters, using some of the mechanisms common to microfinance programs, such as peer pressure, in our case through private school associations. If larger microfinance agencies can embrace such loans, then it could be taken to a much larger scale. Easier access to financing could mean that problems with poor private school infrastructure are also relatively easily solvable. Amaretch’s school is already looking much better.

But perhaps Professor Lewin had in mind other, deeper problems with budget private schools, concerning teaching methods and curriculum? Suppose Amaretch is a really bright girl. Will she then be stuck in a class, learning by rote, week after week, topics that she could easily assimilate in a few hours? Or suppose she’s not so quick herself, perhaps because of her lack of schooling. Will she then be stuck in a class falling further behind the others and eventually fail altogether? And what will she be taught? Will she be forced to digest subject after subject of the state national curriculum that she’ll only pass in exams through extensive cramming and that will make her wonder what the point of all that cramming is? And will she wish that she had covered other topics in school that would seem much more immediately relevant to what she would need in her adult life? If she became the proprietor of a small business, would she wish she’d had training in business skills, entrepreneurship, or accounting methods? If she got a job in a product-support call center, would she wish she’d had an advanced course in English pronunciation? In short, even when she gets to private school, can we really say that she is receiving the
education
that she deserves, rather than a certain amount of dubious
schooling
?