EDUCATION FINANCING
LEAPS research studies how easing financial constraints in public and private schools in Pakistan. By providing grants and exploring loan models, we show how access to finance can strengthen school-level outcomes, reduce closure, and under the right conditions, promote learning improvement. This work also highlights the importance of considering market dynamics and spillover effects, as both the effectiveness and impact of financial interventions can depend on market-level factors. Read our studies.
Loans and Support Services for Private Schools
Authors: Tahir Andrabi, Jishnu Das, Asim I. Khwaja, Selcuk Ozyurt
Citation: Andrabi, Tahir and Jishnu Das and Asim Ijaz Khwaja and Selcuk Ozyurt. 2025. “Helping Schools Survive: Experimental Evidence on the Impact of Financial and Educational Support to Private Schools”, NBER Working Paper No. 34042.
Questions and Findings
Can providing low-cost private schools with access to commercially viable loans (equivalent to 25% of annual expenditures) and/or educational service products (EPS) help them avoid closure?
Loans to Private Schools are Commercial Viable: Loans were viable at market rates, with a 36% take-up and a 27% portfolio return. EPS take-up was also high at 27%.
Loans and EPS Reduce School Closures: Over 4 years, access to a loan reduced school closure rates by 16-20 percentage points, while EPS services reduced closures by 28-33 percentage points.
No Added Benefit from Combining Interventions: Receiving both a loan and an EPS service did not provide additional reduction in closure.
Loan Impact is Heterogeneous by Size and Quality: The decrease in closure is significantly higher for large schools and low-performing schools than for small or high-performing schools.
Why This Matters
Low-cost private schools provide vital educational opportunities, both where public options are limited and where parents are seeking to pay for better quality. Yet, private school markets in LMICs are notorious for high churn rates, which disrupt schooling for the most vulnerable children. At the same time, these markets often cannot access credit as lenders see them as too high risk.
This study demonstrates that expanding access to credit empowers these schools to weather economic shocks and maintain operations, while also being commercially viable for lenders. For policymakers, building financial resilience among private schools is a practical strategy to protect community stability, enhance social mobility, and safeguard children’s educational pathways.
Grants to Public Schools: Crowding in Private Quality
Authors: Tahir Andrabi, Natalie Bau, Jishnu Das, Naureen Karachiwalla, Asim I. Khwaja
Citation: Andrabi, Tahir, Natalie Bau, Jishnu Das, Naureen Karachiwalla, and Asim Ijaz Khwaja. 2024. “Crowding in Private Quality: The Equilibrium Effects of Public Spending in Education.” Quarterly Journal of Economics 139(4): 2525–2577.
Questions and Findings
What are the effects of providing unconditional grants (worth roughly 14% of operating revenue) to public schools in Pakistan?
Public School Grants Boosted Test Scores: Four years after program implementation, test scores in public schools increased by 0.2 standard deviations.
Spillover Gains for Private Schools: Test scores in nearby private schools also rose by 0.2 standard deviations in treated markets, demonstrating significant positive spillover effects.
Large Education Multiplier Improves Cost-Effectiveness: Including private sector effects increased program cost-effectiveness by 85% from 1.18 to 2.18 test-score standard deviations per US$100, placing this intervention among the most effective in LMICs.
Market Structure Shapes Grant Targeting: The education multiplier was larger where private schools faced more competition, meaning optimal grant targeting depends on market conditions.
Why This Matters
The evidence suggests that when designing public sector education reforms, it is important to consider the potential ripple effects into other markets, such as the private sector. Policymakers designing public investments in schooling may find that the presence of private schools can amplify the effects of these reforms, benefiting students in both sectors.
Rather than viewing the private sector as separate or even in opposition to public efforts, these findings suggest governments can leverage competitive dynamics to amplify the returns to their education spending. For countries with rapidly growing private schooling sectors, integrating this broader perspective into prorgam design, impact evaluations, and resource allocation could yield more efficient and inclusive education policy.
Grants to Private Schools: Upping the Ante
Authors: Tahir Andrabi, Jishnu Das, Asim I. Khwaja, Selcuk Ozyurt, Niharika Singh
Citation: Andrabi, Tahir, Jishnu Das, Asim I. Khwaja, Selcuk Ozyurt, and Niharika Singh. 2020. "Upping the Ante: The Equilibrium Effects of Unconditional Grants to Private Schools." American Economic Review 110 (10): 3315–49.
Questions and Findings
Can providing unconditional cash grants to private schools increase school expansion and educational quality? How do these effects differ when one versus all schools in a market receive the grant?
Grants Boosted Enrollment and Revenue: Grants increased enrollment and revenues in both arms, yielding high returns overall.
Single-School Grants Raised Profits, Lowered Closures: Grants to one school per village led to large profit gains, 22 more students per school, and a 9 percentage point drop in closure rates, but there was no improvement in test scores or fees.
Grants to All Schools Improved Quality: When all schools received grants, enrollment rose by 9 students per school, fees rose by 8%, and test scores also increased by 0.15 standard deviations.
Competition Changed How Schools Used Funds: A grant to one school boosted profits, but grants to all schools encouraged investment in quality and teacher pay, showing financial saturation can leverage competition for better educational outcomes.
Why This Matters
This study demonstrates that simply injecting money into schools isn’t necessarily enough to improve learning outcomes. It is vital to understand the market dynamics, and give grants in a manner that leverages not hinders competition.
If grants are given in a way that increases monopoly power — e.g. to only one school, as most grants are — they will not increase learning. Instead, schools use a “market stealing” strategy to convince students to move to their school, e.g. by improving infrastructure. However, if grants are given in a manner that saturates the market, it’s no longer enough for schools to invest in infrastructure, so they compete on quality.
For policymakers, this means that well-targeted funding, especially in dynamic, competitive local markets, can maximize the benefits of education investment. Crafting policies that both increase resources and foster competition can create a virtuous cycle for student achievement.
A Dime a Day: Private Schooling in Pakistan
Authors: Tahir Andrabi, Jishnu Das, Asim I. Khwaja
Citation: Andrabi, Tahir, Jishnu Das, and Asim I. Khwaja. 2008. “A Dime a Day: The Possibilities and Limits of Private Schooling in Pakistan.” Comparative Education Review, 52 (3): 329-355.
Questions and Findings
Can low-cost, for-profit private schools sustainably deliver accessible and quality primary education in Pakistan? What social, economic, and community factors determine both their effectiveness and their distribution?
Dramatic Growth and Affordability: Private schools enroll 35% of primary students, have grown nearly tenfold since 1983, and charge median annual fees of about $1.50 per month, making them accessible even to poor families.
Higher Enrollment, Especially for Girls: Enrollment rates reach 58% in villages with private schools versus 41% without, and girls’ enrollment rises by nearly 20 percentage points, greatly reducing the gender gap.
Reliance on Low-Cost Female Teachers: Most private school teachers are untrained, local, single women earning far less than public teachers (Rs 1,069 vs. Rs 5,897), helping keep costs and fees down.
Better Academic Outcomes: Private school students score about 150 points higher in English than public school peers (on a mean 500, SD 150 scale), even after adjusting for background.
Why This Matters
The rapid spread of low-cost private schools in rural Pakistan upends traditional ideas about access and quality in education. These schools serve a broad spectrum of students, not just the wealthy, and deliver better learning outcomes with fewer resources by responding flexibly to local needs.
This suggests that policy approaches shouldn’t focus solely on expanding public school systems but must also recognize and support the evolving private sector. Understanding how and why private schools succeed can help shape more inclusive policies that improve education for all Pakistani children.