Journal Issue
Finance & Development, June 1979

Education lending for the poor: How education programs designed to reach the poor and to involve them in the development process can be and have been effective

International Monetary Fund. External Relations Dept.
Published Date:
June 1979
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Abdun Noor

Education, a major instrument for economic modernization, social development, and the assertion of the cultural identity of the developing world, mirrors development itself. Although it is still unclear precisely how education affects and is affected by other strands in the web of growth, it is nevertheless certain that, in countries where education has been easily accessible, it has made the participants politically and socially conscious, economically more productive, and culturally more active in the nation-building process. In each society, the educational process tends to be unique, and the relationships between education and societies are intricate and sensitive.

This article will discuss ways in which the poor—who have hitherto been largely bypassed by education—can be reached by basic education, and how such education can be made more relevant to their needs.

The perception of the development process and its goals has undergone a substantial change during the past three decades. This itself has been due partly to the broadening of educational opportunities in the developing world, which has led more people to contribute to and reap benefits from growth. Traditionally, development has been identified with a concern for growth; to this has been added the eradication of absolute poverty. The quest for growth of income in a growing number of countries, together with the added dimension of income distribution sharply focused on the need to make both the rural and urban poor equal participants in the development process, has become the principal unfinished business of development efforts.

Table 1World Bank lending for education, FY1970–83(In millions of U.S. dollars)
FY1970–74 ActualFY1975–78 ActualFY1979–83 Projected
TotalAnnual averageTotalAnnual averageTotalAnnual average
Education lending
Amount lent8151631,1862972,996599
Number of projects661374199920
Share of poorest countries1
Amount lent13327294741,286257
Number of projects173256327
As percentage of education lending
Amount lent161725254343
Number of projects262334323335

For FY1970–78, countries with per capita income below $200; for FY1979-83, countries with per capita income below $265 (in 1978).

For FY1970–78, countries with per capita income below $200; for FY1979-83, countries with per capita income below $265 (in 1978).

This changed perception of development has brought a renewed interest in education, particularly basic education, mainly because of its efficacy in increasing productivity, especially among the poor. Experience and research show that educated farmers are more productive than the uneducated, particularly in modernizing agricultural environments. In South and East Asia, for instance, surveys have indicated that four years of school education directly results in about an 8 per cent increase in the earnings of the small farmers. Besides raising incomes, more and better education often induces mobility between occupations and between sectors, allowing individuals to increase their productivity substantially, an outcome not normally captured by the data on the effects of education on earnings, but all too visible among the populace of the developing world.

Education, when it is relevant to the needs of the population, is a good economic investment from a national point of view as well as for the individual being educated. The rate of return on investment in primary education has usually been higher for the individual than the return on any other investment, including other levels of schooling. Even where the inevitable waiting and searching for employment by the educated increased the costs of forgone earnings and eroded the benefits of additional earnings, the rates of return still remained substantial.

Previous articles in the series The World Bank and the world’s poorest

I. Changing emphasis of the Bank’s lending policies by Mahbub ul Haq, June 1978

II. The Bank and urban poverty by Edward Jaycox, September 1978

III. The Bank and rural poverty by Leif E. Christofferson, December 1978

IV. The problem of water supply and waste disposal by Yves Rovani, March 1979

V. The Bank and the development of small enterprises by David L. Gordon, March 1979

The Bank’s role

The Bank’s lending for education in the 1970s has gradually moved toward meeting the needs of the poor, both in terms of amounts lent and the types of programs that were supported. Programs have been formulated on the basis of three distinct policies:

  • concentrating lending for education on the poorest countries;
  • augmenting resources for programs that directly benefit the poor; and
  • integrating education with the activities of the other sectors in order to improve the impact of total benefits provided.

Since 1975, countries with the highest concentration of poverty and low incomes have been receiving an increasing share of the Bank’s educational resources—about 25 per cent during FY1975–78, compared with 16 per cent during FY1970–74 (see Table 1). The number of projects undertaken in these countries, some benefiting the poor directly, others benefiting them indirectly, also doubled, to about six projects a year during FY1975–78. At the same time, the proportion of projects in the relatively richer countries has declined, from 44 per cent of all education projects during FY1970–74 to 31 per cent in FY1975–78.

The share of primary and nonformal education out of total education lending was about 32 per cent during FY1975–78, compared with about 10 per cent during FY1970–74. In absolute amounts, the increase was almost five times (see Table 2).

Work on education and training is also done in most other sectors in the Bank, on the assumption that such activities are essential for further development of those sectors. This work covers a wide array of learning activities, such as primary schooling, simple or functional literacy, craft training, community development, health and nutrition education, population education, agricultural extension, and use of information media.

Increasing amounts of funds have been allocated to educational components in programs for rural development, urban improvement, population planning, and others: in FY1978 lending was $65 million, compared with $40 million in FY1977. In fact, out of 144,000 new primary school places to be established through Bank assistance during FY1978, about 55 per cent will be created through urban and rural development projects. The Second Urban Calcutta project alone will create about 12,000 school places—mainly in the slums—which represented about one fifth of all primary school places created by the education divisions during that year. Training for activities directly related to Bank projects in agricultural development, irrigation, highways, and other purposes has risen sharply—from less than $7 million in FY1972 to $97 million in FY1978. Part of these funds, especially those lent for agriculture and irrigation may have benefited the poor indirectly. Moreover, these projects maximize benefits by providing an organizational structure through which delivery of inputs and adequate levels of management and supervision are assured.

Socioeconomic factors

Many factors have to be taken into account in the design of an education program that is directed toward a specific target group—whether this includes children, unschooled youth, the rich, or the poor. The programs may be designed to achieve specific objectives, such as literacy, but the benefits extracted by the target group from the services provided is determined by a number of factors—influencing whether they can participate, and, if they can, whether they will. Many of these factors belong outside the educational process. For example, schools may be located in the areas where the poor live to facilitate their participation; whether they can actually participate, however, would certainly depend on a number of sociopolitical factors that are beyond the purview of the educational system. Similarly, to reduce the burden of direct costs, which affect the poor more than the rich, planners could produce textbooks cheaply and make them widely available; but this would only help the poor if they are already participating in the education system.

In fact, the poor in the developing world, despite clear examples of the economic benefits of basic education, have generally remained unschooled and have, therefore, reaped very little benefit from the educational process, compared with the rich. This neglect occurred mainly because the opportunities were simply not available to them. But even where opportunities were available, they were often neglected. There were several reasons for this neglect but, on the whole, what was taught did not seem to be relevant to their way of life. Even though they could see around them examples of individuals who earned more as a result of their education, the poor could see no very direct link between schooling and specific jobs on the local market; instead they were tempted to migrate from rural areas, with all its subsequent consequences. Moreover, the direct costs of schooling were very high—textbooks, writing materials, uniforms, lunch, and transportation—all these cost money which was needed for food or other physical necessities. The indirect costs in terms of forgone earnings were also high: the time spent attending classes could be better used to earn more to satisfy immediate needs of food, clothing, and shelter; moreover, child labor was an important input to the family enterprises and welfare, and was not compensated; the educational process was often too long, the timing inappropriate. In general, the possible outcome of education often seemed long term and abstract to those of the poor with immediate needs.

Table 2Profile of World Bank education lending, FY1970–83
Millions of US$Per centMillions of US$Per centMillions of US$Per cent
Total lent814.81001,185.61002,995.7100
By level
By sector
Learning materials
Curriculum development/

However, certain types of educational programs can be specifically designed to benefit the poor, and which the poor do see as relevant to their needs. In some types, benefits accrue to the poor directly, in others indirectly. It is important to bear in mind in passing that the programs described relate to recent trends and activities and there has not yet been a systematic evaluation of their impact. Programs that benefit the poor directly are those where the participants (trainees and students) belong to a poverty group. These programs allow broad access to the poor; they tailor their curricula and content to improve the participant’s performance at work, and to maximize his income potential; they are constantly concerned with the quality of instruction, with reducing direct costs, and with minimizing the costs of participation in terms of time lost to forgone activities. In general, programs for primary schooling and nonformal training benefit the poor directly.

Primary schooling

The expansion of a primary school system in a developing country will almost always directly benefit the poor. If a country has a 50 per cent enrollment ratio in primary education, those who are enrolled will tend to be the relatively rich.

A standard feature of the Bank’s lending policies is to expand primary education in rural and remote regions. This involves “school location planning”—an evaluation of existing educational opportunities in a country which takes into account demographic, migrational, and other socioeconomic characteristics, to allow primary education to be extended precisely to those areas in which the poor reside. The Fourth Education Project in Malaysia, for example, agreed in 1977, supports the Government’s five-year primary school construction program in seven of Malaysia’s most disadvantaged states. It will provide educational opportunities to over 200,000 children, many of whom live in rural areas, who up to today had no prospect of being educated.

A second concern has been with measures to improve the relevance of the learning offered and to reduce costs, which should encourage the poor to participate in schooling. The production and wider distribution of low-cost textbooks helps to improve the quality of education and also reduces direct costs to the students. In developing countries it is customary to have one textbook for each five to ten pupils. Very often they are exorbitantly priced, out of date, or printed in a language different from the participants’ mother tongue. In the Philippines, for example, the number of textbooks in the public school system was estimated at one book for every ten pupils in any one subject in 1975. In FY1976 a Bank loan to the Philippines for a Third Education Project helped the Government to write, produce, and distribute about 27 million textbooks, as the first phase of an eight-year program to introduce about 98 million textbooks into public primary and secondary schools. Five per cent of the education projects of the World Bank contained funds for textbooks in FY1975, 10 per cent in FY1976, and 25 per cent in FY1977. Some projects directly assist the preparation and distribution of textbooks, while others create or expand publishing and printing capabilities.

Nonformal education

Nonformal education usually benefits unschooled youth and illiterate adults, as well as their families. Training in basic skills enables them to perform better on the job, and therefore to raise their income. There are two main types of nonformal programs. The first concentrates on skill training, while the second expands the functions of the educational institutions to include community development. Two recent Bank projects involve these two types of nonformal education. The Third Education Project in El Salvador (FY1978) aims to assist El Salvador in establishing a nationwide infrastructure of nonformal agricultural and industrial training. The agricultural component of the project is primarily designed to increase the productivity and income of about 10,000 farmers and rural workers, all of whom are expected to come from the poverty group. In 1975, the Bank lent for the Second Education Project in Sudan that provides integrated rural education centers to serve as both regular primary schools and focal points for village community life and development. They have appropriate facilities, such as health centers and stores for the supply of improved seeds, and permit the regular organization of courses for youth and adults in agriculture and cooperatives, domestic science, village crafts, and health care.

Programs that benefit the poor indirectly have a substantial impact on the poverty group, even though the direct beneficiaries (participants) may not be poor. Teacher training is an example of this indirect impact. Countries with explicit and demonstrated policies to improve the access of poor children to basic education must strengthen teacher education. The teachers trained may not be poor, but most of them may end up teaching the poor. Similarly, education and training for some occupations—such as paramedic personnel, agricultural extension workers, nutrition and population workers, and irrigation engineers—could have a substantial impact on the poor.

Moreover, to reach the poor effectively, activities must be pursued on several fronts. The delivery of services to poor people may require investments in training for complementary occupations. Higher education is a case in point. Peasants in India, who comprise about 78 per cent of the rural population, in order to draw a better livelihood from agriculture must have a cadre of agronomists, plant breeders, irrigation engineers, and extension workers that agricultural universities are likely to furnish.


The tentative forecasts that have been made for the Bank’s education lending for FY1979–83 indicate that its efforts to reach the poor are likely not only to continue but to be intensified. About half of the $3 billion for lending for education is projected to go for primary and nonformal programs, which usually directly benefit the poor in developing countries. In fact, about two thirds of all lending for education in Latin America and South Asia will be allocated to such programs. The average volume of lending for primary and nonformal education annually will be about $300 million, which compares favorably with the approximately $17 million spent annually during FY1970–74.

The poorer countries (with per capita incomes below $265 a year) will receive more attention, an increased allocation of resources, and more projects—their share of total lending for education is projected to increase to about 43 per cent, compared with 25 per cent in FY1975–78. The absolute amount, about $1.3 billion for the period, is about four times the amount lent during FY1975–78. Three poor but populous countries, which accommodate about one fifth of the world’s poor—Indonesia, Pakistan, and Bangladesh—would have manyfold increases; lending would amount to an average of $2.23 per capita during FY1979–83, compared with 19 cents per capita during FY1970–74.

But the overall impact of education lending on poverty could well extend far beyond the fraction of lending that may directly benefit the poor. The dialogue about the policies pursued by the Bank to alleviate the problems of the poor—promoting such principles as equality of educational opportunity, provision of minimum learning needs, relevance of education to local conditions, education for rural development, education for meeting basic human needs—are heightening the awareness of the issue throughout the world. In many countries they may well have helped governments to make appropriate policy decisions. This impact of the Bank’s lending for education cannot be measured. It is, nevertheless, important because the amount of national resources mobilized for education by the governments of less developed countries is far greater than the modest flow of external assistance channeled through the Bank.

The frontal attack on the objective of reaching the majority of the poor in developing countries is, of course, the major responsibility of the developing countries themselves and a great challenge to their leaders. With the best of intentions and support from the Bank and other international institutions, only the people and the leaders of the developing countries themselves can make the changes that are needed if their education systems are to reach the poor. The effort will involve mobilizing their intellectual and material resources, restructuring and reordering their institutions, and organizing the poor to join in the process. In many cases, the effort may not be made, not because of economic reasons but due to the sociopolitical choices involved. Allocating more resources to social programs, for example, would often mean sacrificing some of the services that serve purely the urban or rural elite.

A national political commitment beyond the level of rhetoric is essential to ensure any degree of success. But alone it may not be sufficient. The political will would need to be supported by other elements: institutions that foster a meaningful link with local leadership at all levels of the social hierarchy; national organizations that allow direct representation of the poor at the policy level and induce them to articulate their needs, to participate and to reap benefits from the services provided; agencies willing to formulate projects with the help of the direct beneficiaries and in tune with local realities. These are difficult but surmountable tasks, for which the Bank and the member countries should be willing to commit their resources. Without such commitment, the majority of the poor may not receive any education at all, and with out education they will continue to be bypassed by—and make no contribution to—the development process.

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