To begin, microfinance in its strictest sense does not propose to alleviate poverty nor is it the panacea for all developing country (and developed for that matter) woes. What it does do is provide access to formal financial services for hundreds of millions of people left out of the traditional formal financial sector. Microfinance provides steady credit lines, places to save (those that offer it), with the long-term goal/hope that those accessing these services will in turn graduate up-market to the previously mentioned formal financial sector.
Now, if a market exists, with profits to be gained by lending to the poor, why would this not work with education. It’s more complex, I recognize that. Lending money from a financial entity to a single person is direct and relatively cut and dry. Education involves multiple moving parts, long-term commitment, and it does after all, occupy the most formative years of a person’s life. Screw this up and there’s a lot of making up to do.
Fast forward to the U.S. Government public schools for the most part under-perform private and charter schools in most major cities throughout the nation. Teacher’s unions, federal and state mandates, and the general thinking that it is the government’s job to ensure every child has access to a “good” education are the major concepts in play. I am not proposing a massive overall to the education system, just soliciting opinions really. So when I ask what is the purpose of teacher unions, I am looking for a thoughtful reply. Same with charter schools or those schools offering vouchers for parents. What are the up and down-sides?
The crux of my post is this – there were and are hundreds of millions of people lacking financial services and microfinance entered this market. Sure they have been subsidized, have had policy and regulation altered to smooth their delivery, but if this can be done with financial services, why not education? An easy response would be, “nobody would pay.” Recent evidence from micro savings and insurance studies suggests this isn’t so. Not only do the poor repay their micro loans at astonishing rates, they also seek out savings and insurance coverage to invest in as well. I would suggest if the alternative market for micro-schooling (need a better term for this one) were there, parents would indeed pay and gladly opt out of the government monopoly run schools. Problem is, name me a politician who would dare take this one on …