Reimagining scholarships: can big data reduce child absenteeism?

More than two billion people live on less than $2 (£1.30) a day. Education is key to breaking this cycle of poverty, yet more than 124 million children worldwide are not in school because their families can’t afford tuition, uniforms and books.

In our experience over the past 40 years, it is parents – in addition to money – who keep kids in school longer. There are two ways to think about the cost of education to a family – financial affordability and “attitudinal affordability”, which is how much a family is willing to sacrifice to ensure their children receive a good education.

Determining which families get aid, when and how much has, until now, been based on assumptions of total need. In fact, scholarships in the global south have traditionally been an all-or-nothing proposition, meaning students either receive a scholarship that covers all their expenses or no scholarship at all.

We estimate that around half of child absenteeism from school, the first indicator of dropout risk, is the result of parents’ inability to pay school fees on time. But what if we could use big data to better understand parents’ needs – who needs help, when and how much – in a way that reduces our dependence on all-or-nothing models and stretches aid money for greater impact?

The model

At Opportunity International we are leveraging relationships with families that have been identified as struggling to quality for a loan – and the data behind them – to begin serving families that don’t quite qualify for loan support but have children at high risk of dropping out of school.

A school fee loan spreads the cost of fees over the academic year, freeing up cash that parents can invest in their small businesses. In turn, this increases their long-term cash flows and their ability to pay school fees in coming years. The objective of the loan is to prevent education costs from exceeding income at the start of the school year and to ensure that parents’ incomes continue to grow.

Our new scholarship model has the same objective, but we need to know what parents require to ensure education costs don’t overwhelm income, and who better to help us understand this than schools. We are working with our client schools that serve low-income populations to access big data on parents’ payment histories, family needs and students’ academic histories. We also have longstanding relationships with school administrators, who often know each family’s situation well. And crucially, by tracing our school fee loan data back to non-qualifiers, we will be able to identify pockets of need in communities.

This gives us a pool of data to create a robust, targeted and situation-specific scholarship programme that can identify financial need in students and families. This is far more effective than, for example, a more traditional opt-in scholarship model that solicits applications from the general population.

Access to such data on families requires respect and sensitivity. We restrict access to prevent misuse by school proprietors and others by creating proxy indicators that don’t allow any one party to see a full data set. This ensures we can use big data without putting families at risk of losing their privacy, or tempting schools or banks to leverage new data to overengineer pricing.

We are piloting 83 scholarships in Rwanda, with plans to expand to more than 500 across the region. We structure the scholarships to assist parents with education expenses for two years, which allows them to generate increased income that will enable them to pay 100% of their costs in subsequent years or qualify for a school fee loan from a local bank. This also ensures there are definitive start and end dates, and a pre-defined financial commitment that makes the progamme easy to plan and fund.

Sustainability of the project

Like all sustainable financial programmes, our education lending portfolios – schools and parents – produce income. This allows our microfinance banks to deepen their social impact and continue lending or, in this case, give more scholarships. So the bigger the loan programme in education, the more scholarships our microfinance banks can provide to their communities, creating a sustainable cycle of social impact that reaches deeper into the bottom of the pyramid.

I believe sustainable scholarships will eventually replace the all-or-nothing scholarship model. We are far from a perfect model, but we are certain of one thing: we are close to a solution that leverages data in our education finance model to create greater impact with every scholarship dollar, moving the world more quickly towards the day when educational attainment in developing countries is an expectation rather than a dream.

Nathan Byrd is head of education finance for Opportunity International, a global nonprofit financial services organisation.

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