This essay was written in 2002. It is 2000 words long. For a longer paper on a similar theme, you can download Universal literacy for Bangladesh: Bangladeshi Literacy Bonds. It is about 30 pages of double-
The region with which we are concerned, North Africa, the Middle East and South Asia, is as diverse as it is huge. It is the home of several of the world’s greatest civilisations. But if its contributions to culture, science and philosophy are immeasurable, so too are the range and size of its problems. Too many of the region’s inhabitants suffer from poverty, hunger and short life expectancy. Many parts of the region are blighted by environmental squalor. These concerns are especially distressing in a region with such a rich inheritance.
There is no single answer to any of the region’s problems. What is needed is a range of diverse solutions; an infusion of ingenuity. From where will this come? Even a casual look at world history would tell us that it cannot be bought, and that, while expertise and goodwill from outside the region will undoubtedly be helpful, the ultimate solution must come from within.
Too many people in the region have been half-
Assume that as a long-
Ideally, then, we need a way of increasing women’s literacy that can help the region’s governments’ to overcome uncooperative or obstructive behaviour. We need a way that can co-
Ideally too, we would use market forces. Markets are the most efficient means yet discovered of allocating society’s scarce resources. Many, however, believe that market forces inevitably accentuate extremes of wealth and poverty, or accelerate the degradation of the environment. So it is important to remember that market forces can serve public, as well as private, goals. The rest of this essay will describe a way of channelling market forces into the education of this region’s greatest untapped resource: its women.
Women’s Literacy Bonds
‘Women’s Literacy Bonds’ are a new financial instrument, designed to raise women’s literacy rates over the entire region. These Bonds would be issued on the open market and would become redeemable for a fixed sum only when women’s literacy reached an agreed, higher, level. In this way there would be no need for the Bond issuers to make assumptions as to how to bring about greater literacy.
Normal bonds are redeemable at a fixed date, for a fixed sum, and so yield a fixed rate of interest. Women’s Literacy Bonds would not bear interest and their redemption date would be uncertain. Bondholders would gain most by ensuring that the targeted literacy rate were achieved quickly.
Under the Women’s Literacy Bond mechanism, governments, with the help of NGOs and charities, would collectively decide on the exact specification of their literacy objective and contribute toward the funds needed to redeem the Bonds. The Bonds would be issued by open tender, as at an auction; those who bid the highest price for the limited number of Bonds would be successful in buying them. Each Bond would become redeemable for, say, $1 million once the targeted level of women’s literacy, as certified by objective measurements made by independent bodies, had been achieved and sustained. Assume that such Bonds have been issued, and that they each sell for just $100 000. People or institutions now hold an asset that can give them a return of 900 percent once the targeted literacy level has been achieved. It is this prospect of capital gain that gives bondholders a strong interest in raising women’s literacy rates, as cost-
Women’s Literacy Bonds could aim at literacy targets for several countries in the region but let us look at Bonds that target ‘the number of literate girls and women in Country X’. Say that Bonds are issued that would be redeemed only when the literacy and numeracy of 11-
If at any time others thought that they could do a better job than the government, they would bid more for the Bonds than their current market value, and buy them from the government. Similarly if the government did not want to be actively involved: people and institutions would buy the Bonds instead and work to modify or supplement literacy teaching in Country X. Bondholders could lobby the government to, say, give a higher priority to the literacy of schoolgirls, or they could develop literacy-
Too large a number of small bondholders could do little to bring about increases in literacy. But if there were many such small holders, it is likely that the value of their Bonds would fall until there were aggregation of holdings by people or institutions large enough to initiate effective literacy-
Even then, each such body might not be big enough, on its own, to achieve much without the cooperation of other bondholders. They might also resist initiating projects until they were assured that other holders would not be ‘free riders’. But they will have a strong incentive to cooperate with each other, and to do so as cost-
What will determine the price of the Bonds? Most obviously, the market’s assessment of how close the female literacy targets are to being achieved. The Bonds would sell for small fractions of their issue price if people thought there were virtually no chance of women’s literacy reaching the targeted level in their lifetime. People’s views will change as events occur that make achievement of higher literacy a more or less remote prospect. But the Bonds, once issued, would be transferable at any time. Bondholders, having done their bit to increase literacy, would see the value of their Bonds rise as the literacy target became closer. They could sell their Bonds, realising the capital gain arising from the higher market price of their Bonds.
Issuers can put a cap on their maximum liability by limiting the number of Bonds issued. Or they could add to the number of Bonds in circulation after floating, at any time, if they wanted to boost the efforts going into achieving the targeted literacy objective.
The main advantage that Women’s Literacy Bonds have over conventional means of raising literacy is efficiency. Bondholders have market incentives to be efficient in raising the literacy of girls and women in the target country. Many governments and NGOs are already carrying out literacy-
Another significant advantage of Women’s Literacy Bonds is their transparency. The Bonds would make clear to everybody exactly what are the objectives of those governments, NGOs, and charities that back the Bonds. The objective of a Women’s Literacy Bond issue is just that: to increase women’s literacy: there is no hidden agenda.
Further advantages of a Women’s Literacy Bond regime are:
that the backers of the Bonds, be they governments (taxpayers), NGOs or private individuals, would pay up only when the targeted literacy level had been achieved -
that funds for increasing women’s literacy could bypass corrupt or inefficient governments or, by appealing to their financial self-
Some powerful people in countries whose literacy rate is targeted by a Bond regime might resent the targeting of such objectives by their governments in this way. That is why any such objective would have to be sensitively defined. But it is precisely this focus on outcomes that would help build a consensus around the goal of Women’s Literacy Bonds. People opposed to women’s education can currently, for example, garner support by saying they oppose mixed schools on moral grounds. But they would be isolated—deservedly— if they were openly to oppose the objective of more literate schoolgirls and young women.
By injecting market incentives into raising women’s literacy, a Women’s Literacy Bond regime would be more effective than conventional ways of bringing about a more educated population and, ultimately, a population with a higher stake in a stable and prosperous future. The implications this would have for the achievement of the region’s other social and environmental goals are incalculable.