KCPPERSPECTIVESPutting Knowledge to Work

SEPTEMBER 2014 VOL. 4 ISSUE 1

The LEAPS Project: Bringing Together Evaluation andResearch in the Education Sector'

At the turn of the century, it was widely believed that faced with a failed public schoolsystem and general dysfunction, children in Pakistan were turning in droves to religiousschools called macdrassas and (where they could) to private schools that exploited poor

Inparents and provided education that was below par. Once funding became available,In tis Isuedonors and policyrnakers thought, madrassas could be controlled, public schools could

1 The LEAPS Project: be improved and education would come to the masses.Bringing TogetherEvaluation and -

Research in the When we sta red orkEducation Sector

different ground reality. We2 Message from the seldom found children attend-Editor ing religious schools, but we

Globadid find a sharp increase in3 evlopamFnnia secular and co-educational pri-

Deveo t vate schools. By 2005, thereReport 2014:Fsnancial Inccusion were 47,000 private sch olsth

accounting for a third of allcpri-mary enrollments. In contrast,between I and 1.5 percent ofall children were enrolled inreligious schools and the frac-tion had barely budged since Photo credit: Fahad Suleri and Wasif Mullick.

s T055582, T094625. This project is led by Jishnu Das (DECRG), Tahir Andrabi (Pomona College) and Asim IjazKhwaja (Harvard University) with numerous collaborators. In Pakistan, the survey work has been carried out by ateam developed through the LEAPS project and now incorporated as Research Consultants (RCons). Core funding forthe project has been given by the Knowledge for Change Program, through two grants, between 2006 and 2012 andby grants from the South Asia region of the World Bank, a PSIA and an NSF grant. Story contributed by Jishnu Dasbased on findings from the project, a list of outputs of the project can be found in the completion report of the project:http://go.worldbank.org/GA2lH993SO.

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t's my pleasure to present to you our latest issue a key part of the puzzle on how to improve learningof "KCP Perspectives". This publication examines among children in low and middle income countries.completed projects funded by the KCP,

and assesses the impact that these research As Financial inclusion has moved up theprojects have had on development policies global reform agenda and become a topicworldwide, and hopefully provide lessons of great interest for policy makers, regula-

going forward. In this issue, we look at tors, researchers, market practitioners, andtwo very interesting projects: one studies other stakeholders, the project-Globaleducational choice, outcomes and policy Financial Development Report 2014-in Pakistan and the other looks compre- contributes new data and research thathensively at financial inclusions. help fill some of the gaps in knowledge

about financial inclusion. It also drawsThe first story features the Learning and on existing insights and experiences toEducational Achievements in Pakistan contribute to the policy discussions on this(LEAPS) project which contributed to the critical development issue. New evidencesuccessful completion of the fifth round of LEAPS data, demonstrates that financial inclusion can significantlyand constructed the largest longitudinal panel of test- reduce poverty and boost shared prosperity, butscores in low-income countries. The findings to date underscores that efforts to foster inclusion must behave substantially altered the educational debate not well designed.only in Pakistan, which has moved away from religiousschools towards understanding how children learn and We hopethatyou will enjoy reading these stories, andthe potential role of private schools, but also globally see how KCP funds contribute to constructive changeas educational markets are increasingly recognized as in the developing world.

the 1980s. Far from being an exploitative sector, private research program structured around the construction of a

schools were run by small entrepreneurs hiring locally large longitudinal database that tracked children, schools,resident female teachers and earning profits just sufficient parents and teachers in more than 800 schools spread

to keep themselves open. through 112 villages in Pakistan's most populous province,Punjab. Building on these data as well as available data

This change was representative of a broader shift in many sources, the team's research built a body of evidence to

South Asian and African countries: There are now 80 mil- guide education policy in the country, with significantlion children studying in private schools in South Asia and repercussions for similar discussions worldwide.

in Sub-Saharan Africa, after a decline during the eighties,

private school participation now stands at 15%. Private The research progressed in three phases. In the first phase,

schools represent both an opportunity and a challenge we documented basic facts about the education system in

for educational policy necessitating a shift from a single- Pakistan and presented causal evidence on the structureminded focus on public schools to thinking broadly about of the education market. We showed that the existing

the educational marketplace and the role of the government narrative of wide ranging madrassa use as a response to ain each of its four broad areas of provision, financing, failing schooling system was factually incorrect and that

regulation and information disclosure, the real story in Pakistan was the rise of low-cost private

schools that had opened up numerous schooling options

Given this background, the main motivation of the LEAPS even for rural, poor populations. We described the school-project was to use data and research to bring together ing environment in terms of learning and the role schools,

the latest economic thinking on the role of the state in teachers and households, with a closing discussion ofimproving educational outcomes for children in this new issues for debate.

landscape. The LEAPS project put together an ambitious

2 SEPTEMBER 2014

We further argued that sector and providing key public goods-and doing so will

private schooling was intrin- improve the overall educational experience for children

sically linked to the availability regardless of the schools they choose to attend.

of locally educated women. Where such

women could be found, private schools came up Moving forward, in the third phase we are using the

and were cheap-because secondary educated women research base to invest in a program on market approaches

have few opportunities in the formal sector, private school- to education. Over the last 3 years we have developed a

ing offered an important opportunity, with cost-savings new product (The Education Development Fund), which

passed on to households. We also showed that the educat- proposes various different financial instruments tailored

ing women had an impact not only through the setting up to private schools, from outright grants, to debt and equity

of private schools, but also through investments at home. contracts. In an exciting development, we are piloting the

Children whose mothers had even one year of education loan component with the largest MFI in Pakistan, and if

spent more time studying at home and had higher test- successful, this project has the potential to bring a com-

scores. Finally, we showed that students in private schools pletely new product rapidly to scale around the world.

attain higher test-scores than those in public schools, after

accounting for differences in their backgrounds. We also

looked at the production of civic knowledge and values and

showed that these are better in private than public schools.

This work has been widely disseminated through multiple

In terms of policy, the key insight was that public school- presentations and frequent consultations, including three

ing may be required to build up the teachers (which the special conferences, one with Pakistani parliamentarians

private market does not do), but once this basic first push and two as part of broader workshops on evaluation and

is achieved, the private sector may be well positioned to education in the country. The most remarkable achieve-

take over provision while the state becomes responsible ment was the production of a consensus document with

for financing. key policy makers where the group unanimously agreed on

the need for testing, measuring and disseminating learn-

In our second phase we started looking at what solutions ing achievements, recognized the centrality of teachers

may work in improving education in the current land- for education both in terms of providing support to them

scape. As one example, we designed and implemented and holding them accountable, and acknowledge the

an information intervention where we gave report cards importance of the private sector as an additional provider

to parents on the performance of the schools in their vil- of education in the country.

lage, and of their own children. We showed that report

cards increased enrollment, improved test-scores and We have also made public 3 (out of 5) years of LEAPS data

decreased prices in private schools. In fact, the decline through our dedicated website www.leapsproject.org. These

in prices was almost identical to the cost of providing data have been downloaded more than 1,000 times, and

the intervention, so in essence we managed to improve we have been able to track another 10 papers that have

outcomes at zero cost. been written using these data by researchers in the United

States and Pakistan. To put these numbers in perspective,

A second example was the provision of financial support between 1985 and 2005, on average there were 7 papers

to public schools through school-based management com- written on Pakistan on all economic topics in the top 202

mittees. Although the implementation of the program was economics journals. Beyond the particular data that has

delayed by 4 years, our constant data collection and repeat been collected in these surveys, our research has helped

visits to the field finally paid off in our 2011 survey. Here "crowd-in" other researchers as a body of knowledge has

we found that, 4 years after schools received a large cash built up on this topic, with independent teams working

influx through the program, test-scores were much higher on vouchers and subsidies.

in treated public schools and private schools responded to

higher quality public alternatives by improving their own In addition, our systematic training and support to the

performance. These two results suggest that governments survey team has yielded dividends for researchers working

can focus on improving the performance of the public on Pakistan. We started the LEAPS survey with 4 people

3

we hired and then trained over a period of 2 years on that private schools largely catered to the elite

household and school surveys and child testing. After 2 and charged high fees has also disappeared to be

years, we helped them form their own company and have replaced by active aid to private schools. Finally, learning

worked with them as an independent company on open has become a central part of any discussion on Pakistani

bids, where their quality and price substantially beats the education. New efforts have sprung up by independent

remainder of the market. Through more surveys, their NGOs and the government to test children regularly and

capacity has built up further and they are now providing discuss the results. There is increasing cognizance that

survey services to virtually all academic researchers in the systematic measurement of learning is the first step

the country and research based on their surveys has been in ensuring that it improves over time. The LEAPS project

published in leading academic journals, validating the also brought the idea of education markets and policy

quality of the data for contracted surveys to researchers in such markets to a global audience. New programs are

other than from our team. being tried that simultaneously attack the twin problems

of low enrollment and low learning in many countriesaround the world and the role that education marketscan play is increasingly recognized in these discussions.

The LEAPS project has fundamentally changed the educa- The LEAPS project thus provides an example of a deep

tion dialogue. In Pakistan, the notion among donors and engagement with policy in the education sector, which

the government that religious schools were the dominant brings together an unprecedented data collection effort

source of education has disappeared to be replaced by a with research on the economic models underpinning the

renewed focus on improving the educational experience education sector and the causal linkages that govern the

in public and private schools. Simultaneously, the view link between policy levers and outcomes.

Global Financial Development Report 2014: Financial Inclusion 2

Over the past decade, financial inclusion-typically defined as the proportion of individuals andfirms that use financial services-has entered the center stage of national and global policy debates.In November 2010, the Leaders of the G20 endorsed a Financial Inclusion Action Plan in the G20Summit in Seoul. Enhancing financial inclusion is now part of the mandate of about two-thirds ofregulatory and supervisory bodies around the world and as many as forty countries now have clearlydefined targets forfinancial inclusion (World Bank 2013). The World Bank's second series of the GlobalFinancial Development Report which was released in November 2013 focused on this increasinglyimportant theme, and distilled policy conclusions from existing research and operational experience

of the World Bank Group (World Bank, 2013).

This increased interest is related to the recent theoretical are without an account at a formal financial institution

and empirical findings that show access to variety and (Figure 1), with the Middle East and North Africa region reg-

complementary financial services has positive impacts on istering the lowest rate, at 18 % and high income economieseconomic development and poverty reduction, and if done registering the highest at 89%. While lacking an accountin an equitable and responsible manner, it can also reduce at a formal financial institution is not always tantamount

inequality and boost shared prosperity. The report shows to lacking access to financial services, it nevertheless is a

for instance that the poor benefit greatly from low cost good proxy for financial inclusion (or exclusion), because

basic payments, no frills savings and insurance services.I TF015344: Global Financial Development Report 2014. Led by

According to the findings presented in GFDR 2014 half Martin Cihak; story contributed by Thierry Tressel and Amin

of the world's adult population, about 2.5 billion adults Mohseni-Cheraghlou.

4 SEPTEMBER 2014

most if not all forms of formal Financial inclusion and access to finance are different

financial activities are often linked issues. The lack of use does not necessarily mean a lack of

to formal accounts. Individuals or firms access. Some people may have access to financial services

without a formal account are often forced to at affordable prices, but choose not to use certain financial

address their financial needs through the informal services, while many others may lack access altogether. So,

financial markets, which are often associated with higher the key issue here is the degree to which the lack of inclu-

costs and risks and little to no legal protections against sion derives from a lack of demand for financial services

frauds or breaches in the contract. or from barriers that impede individuals and firms from

accessing the services.The reasons for not having a formal account are rooted in

a complex set of economic, legal, social, political, cultural, As a result, boosting responsible financial inclusion is

and personal factors but can be classified into two main not trivial and creating new bank accounts and providing

categories: voluntary and involuntary reasons (Figure 2) access to credit does not always translate into regular and

with the involuntary reasons of not having enough money responsible use. For example, only 9 and 22 percent of theand being too expensive as the main constraints, global adults who were banked in 2011 received loans and

S 100% 8900

~u~ 80%-

OL .0 60% 55%acs45% Global Average 50%

(uruur39%C:. 40% 33%(D -C 1 4

20% ii,4 18%

atafo+alepics,bt hos no-ouecrti iaca

2e0%

U) High Income East Asia Europe Latin America South Asia Sub-Saharan Middle East& Pacific & Central Asia & Caribbean Africa & North Africa

sio derve frmcia axlsin lako2dmn0frfnaca1srieSource: Globa Finanfral bclusiens(Globl Fmndee)inaaietduAlthord Cflculation

Lack of Money 65%

Too expensive 25%

Family member already has one 23%

Too far away 20%

Lack of necessary documentation 18%

Lack ofuTrust Fo 13%

Religious = 5%

0% 10% 20% 30% 40% 50% 60% 70%

Percent of unbanked adults (%)

Source: Source: Global Financial Inclusion (Global Findx) Dataset Author Calculation.Note: Respondents could choose more than one reason.

5

saved through financial institutions respectively. Therefore that use teachable moments, such as starting a

one must be careful of not equating access to usage. job or purchasing a major financial product, have

been shown to have a measurable impact. Moreover, theMoreover, things can go-and do go-badly, especially impact of financial education is enhanced by leveraging

if credit starts growing rapidly. The promotion of credit social networks, which means involving both parents and

without sufficient regard for financial literacy and stabil- children in the program or, in the case of remittances, both

ity may result in a crisis, as we have seen in the global senders and recipients.

financial crisis that started with the subprime mortgage

crisis in the United States in the second half of 2000s. New technologies can also play an important role for

Therefore, financial inclusion does not mean finance for expanding financial inclusion. Innovations in technology-

all at all costs, and efforts to subsidize these services may such as mobile payments, mobile banking, and borrower

be counterproductive and result into financial instability. identification using biometric data (fingerprinting, iris

scans, and so on) -make it easier and less expensive forSo what role can governments play in promoting financial people to use financial services, while increasing financial

inclusion? In many cases, the use of financial services is security. The impact of new technologies can be amplified

constrained by market failures that cause the costs of these by the private sector's adoption of business models that

services to become prohibitively high or that cause the complement technology platforms (as is the case with

services to become unavailable due to regulatory barriers, banking correspondents).

legal hurdles, or an assortment of market and cultural phe-

nomena. Access can be improved by creating the associated The evidence highlighted in the report indicates that one

legal and regulatory framework, supporting the information of the factors that truly make a difference is competition

environment, and educating and protecting consumers. among providers of financial services. To harness the

potential of technologies, regulators need to allow com-According to the 2013 Financial Development Barometer, 78 peting financial service providers and consumers to take

percent of the respondents consider the lack of knowledge advantage of technological innovations.

about basic financial products and services as a major barrier

to financial access among the poor. When asked about the Finally, product designs and innovative business models

best policy to improve access to finance among low-income that address market failures, meet consumer needs, and

borrowers, the policy selected by the greatest number of overcome behavioral problems can foster the widespread

respondents (32 percent) was financial education.' use of financial services. Recent years have seen a growth ininnovative channels for the delivery of credit through retail

However, not all forms of financial education enhance the chains or large suppliers, reliance on payment histories to

capacity of consumers to understand and use financial make loan decisions, and the reduction of costs through

services. The research highlighted in GFDR 2014 shows the use of existing distribution networks. For example, an

that standard, classroom-based financial education aimed interesting case is Mexico's Banco Azteca which, thanks to

at the general population does not have much of an impact its branches opened in the stores of Grupo Elektra, a large

on financial inclusion. It takes more than lectures and retailer, leveraged its data and experience and contributed

memorizing definitions to develop the capacity needed to to increased informal business ownership and employment

benefit from financial services because financial literacy and to higher income.

does not ensure that a person is financially capable and

able to make financially sound decisions. The report argues Financial Development Barometer; for full results, see the Globalthat it is possible to boost financial capability through Financial Development Report website, at www.worldbank.org/well-designed and targeted interventions. Interventions financialdevelopment.

The KCP Perspectives is a newsletter that highlights KCP projects that have had a positive impact on development poli-

cies. The views and opinions expressed in the articles are those of the authors and do not necessarily reflect the officialpolicies of the World Bank. For more information about the KCP Perspectives and/or the Knowledge for Change Program(KCP), please contact jolazoporworldbank.org.

6 SEPTEMBER 2014