Mobilising the missing millions: Women’s Literacy Bonds - Social Policy Bonds

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Mobilising the missing millions: Women’s Literacy Bonds


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-spaced text and appears as a pdf file. It was written in 2006 and is about applying the Social Policy Bond principle to raise literacy levels in Bangladesh. If you are interested in issuing your own literacy-raising bonds click Issue your own in the left-hand menu

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-hearted about educating girls and women. Most often this is an unfortunate historical legacy, though some in power still see education of girls and women as a threat to the established order. But if the countries in the region are ever going to reach their full potential, their girls and women will have to be educated.

Assume that as a long-term goal, the region’s governments, probably with the help of non-governmental organisations (NGOs) and charities from around the world, are determined to raise the literacy and numeracy levels of its girls and women. This is an objective that most of all serves the interests of the women themselves, but also the wider, long-term interests of the entire region. So it is worthwhile both as an end in itself and as a means of solving the region’s social and environmental problems.

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-opt or support those people in positions of authority who want to help, and at the same time bypass, or otherwise undermine, those opposed to our goal.

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-effectively as possible.

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-year old girls and 18-year old women in Country X reached very high levels. Success in achieving this objective could be measured by standardised tests of representative but random samples involving hundreds of Country X girls and young women. The Bonds could be bought by anyone and would be freely tradeable. The Country X government would probably be the largest current supplier of literacy-increasing services. It could buy the Bonds or be given them as a form of aid by the issuers. It would then be in a position to reap financial rewards by doing what it could to increase the literacy of the country’s girls and young women. The government would do this, not by falsifying the results of literacy tests, which would be carried out by independent assessors, but by channelling resources into expanded and improved literacy classes. It could give literacy a higher priority in its schools, or it could decide to strengthen and enforce laws against truancy. It could broadcast literacy programmes on television and conduct research into the most efficient ways of increasing literacy in its society.

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-teaching projects of their own. They might finance literacy programmes for TV, or set up village schools, or give prizes to the families of the most literate girls and women in every village. It would be up to bondholders to decide on those programmes that would give them the highest increase in women’s literacy per unit outlay. The market prices of the Bonds, and their changes over time, would supply helpful information as to how fast the objective is being achieved. These prices would be publicly quoted, just like those of ordinary bonds or shares.

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-raising projects. As has happened with share privatisation issues, the Bonds would mainly end up in the hands of large holders - probably institutions, brokers, or governments.

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-effectively as possible. If they did not, the market value of their Bonds would fall. Their common interest in seeing women’s literacy raised quickly means that they would share information, trade Bonds with each other and collaborate on literacy-raising projects. They would also set up payment systems to ensure that people, bondholders or not, would have an incentive to perform efficiently. Large bondholders, cooperating with each other, would be able to set up such systems cost-effectively.

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-enhancing activities. But there is a crucial difference: under a Women’s Literacy Bond regime the bondholders’ self-interest would give them an incentive to seek out those ways of achieving the targeted level of literacy that would give them the best return on their outlay. Their outlay, of course, is the taxpayers’ outlay. And only when the targeted degree of women’s literacy is achieved would governments end up paying for it. Until then, it is bondholders who have to finance the initiatives that they think will achieve higher literacy. In effect, the issuers would be contracting out the achievement of higher literacy to the private sector. But it is the issuers though who would set the desired literacy outcome, and, by undertaking to redeem the Bonds, would be the ultimate source of finance for that achievement.

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 - any risk of failure or undershooting the literacy target would be borne by bondholders, rather than taxpayers; and

  • that funds for increasing women’s literacy could bypass corrupt or inefficient governments or, by appealing to their financial self-interest, could effectively modify their behaviour in favour of achieving literacy targets.

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.  

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