Financing Low Cost Private Schools through Microfinance

This MicroNote highlights the prospect of a sector-led approach for financing of low cost private schools (LCPS) through microfinance. It looks at the role of various stakeholders, including microfinance providers (MFPs), LCPS, donors, and policy makers in building a viable business case for microfinance interventions targeting the LCPS sector. It also examines whether the microfinance sector is currently positioned to serve the needs of this sector, and draws on relevant research to outline potential partnerships and opportunities for stakeholders going forward. The paper makes following observations:

• Pakistan has close to 5.1 million children out of school, government spending on the sector is only 2.3% of GNP in 2011. This indicates the need for greater private sector interventions, including the provision of grants, loans, and technical assistance to LCPS;
• There is great potential in creating access to microfinance services for owners of low cost private schools as a specific sub-set of the MSME sector in the country;
• There is scope for MFPs to introduce a sector-specific microcredit product or modify their existing microenterprise loans, to effectively engage with the LCPS.