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Education Banking

A 'need-based' approach to ensure sustainable education

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26th-Apr-2019       
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A. R. Farrukh Ahamed :
Education is universally recognized as a right, not a privilege. Unfortunately, this right is often interrupted due to fund unavailability of the education providers and the learners too. The Right to Education is guaranteed by many legal tools of the global bodies as well as by the Constitutions and Laws of the state parties. But in many developing and least developed countries like Bangladesh, this right cannot be fully implemented as there has been a shortage of investment in education. Though 'investment in education' is considered the most effective and trustworthy investment by all the stakeholders, but fund is still not ensured by the parties. In Bangladesh, the public investment in education is only 2 percent of the total GDP. Education experts often opine for the need of better allocating the national resources. To make the defence against low investment in education, they suggest for counting educational expenditures of all government agencies and household expenses. But no argument can deny the fact that the public investment in education in Bangladesh is low in comparison to similar direct public education budgets of other countries.
Hopefully, the government pledged to substantially raise it upto 4 percent to fulfil its 'commitment for education' in line with the SDG4. On the other, the scenario of private investment in education in Bangladesh shows no real picture at all. Educationists all over the world believe that education is a concern for all, including the Governments, Societies, Communities, Students, Parents and Employers. Therefore, the banking sector must not ignore its responsibility in providing services for education. As a significant stakeholder of the education, the role of the banks or financial institutions (FIs) is not clearly mentioned either in banking norms or in any other guidelines. In this context, the Financial Institutions should have operations in the education sector by pursuing new and innovative models of education service delivery and financing. Besides, under Public-Private Partnerships (PPPs), banks can contribute a lot for improving the quality and relevance of education, especially to raise the cost efficiency of education delivery, counting the disadvantaged marginalized groups also.
In this article, there is an effort to frame out a tool for education service delivery dubbed here as 'Education Banking'. Besides, it describes four other segments of this service delivery i.e. education savings, education financing, education loan including institution or student loan, and grant or scholarship for needy and meritorious learners. The motto of such banking is to facilitate the total education system, and therefore, it will not be confined in individual or personal banking, but should be based on educational institution. An institution shall be the consumer of the service and identify the need of the products from these four segments as per need and necessity. Profit margin is not the consideration while providing the service, but necessity of the institutions or students is the prime concern. Hence, this 'Education Banking' should be considered as 'need-based' service of the FIs.

However, funding necessity of the education has made the concept of 'Education Banking'. Though banks are serving the education with some of its existing products i.e. school banking as a savings tool for students, granting individual loan for education, providing scholarship under or out of Corporate Social Responsibility (CSR) and so on, but these are too scanty as per need of the total education funding. Besides, these products are scattered, and not under an integrated service. Moreover, these products are based on individual needs where educational institutions are mostly ignored. Scholarships or grants provided by the banks are allocated as per merit of the students or on the basis of their results where needs of the students are not evaluated to sustain their education. Education Banking shall serve the total education including both the institutions and the students under an integrated approach. It will be an example of the 'need-based' banking where needs of both the educational institutions and students will get the top priority.   
An education institution will be the agent (as well as client) of 'Education Banking' like traditional Agent Banking System of the banks. But it will provide only four services -namely students' savings, financing the institutions, granting loans to the students and teachers, and providing grants or scholarship as per needs of the students. The whole service will depend only on institution to grow up or to provide services in consultation with respective banks' authority.
There are four categories of educational institutions in Bangladesh, according to funding of the education institutions. They are (i) fully funded by the government; (ii) semi government (MPO guaranteed by the government); (iii) Trust or Society funded and (iv) private initiatives. The three segments of education system in Bangladesh i.e. Primary Education, Secondary and Higher Secondary Education and tertiary or higher education are covered with this funding method. There are ample scopes for the financial institutions to engage in these funding systems. They can work with the government and semi government educational institutions under PPP whereas Trust or Private initiatives can be more encouraged with banking involvement in education. Besides, every government and government affiliated educational institutions have to maintain two types of fund as obligation to run up their outlets. They are general funds and emergency funds. Emergency funds are maintained as fixed deposits in banks which cannot be used for general purposes whereas the general funds are used for daily expenditure of the institutions. Banks have the opportunity to use these funds and there should be guideline for the banks to invest these funds as per necessity of the respected educational institutions. Banks can consider the funds as security of their investment in addition to other movable or immovable assets of the institutions. Institutions as collaborator of the education banking, guide the financial institutions where to invest, how to recovery or who will be nominated for loans from teachers and students, or which students are eligible to get Scholarships or Grant in-aid.
(R. Farrukh Ahamed, Researcher on education, email: khosrubd@gmail.com))

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