Oh, the Places ESAs Can Go

Published May 12, 2016

If you want to get excited by hearing a brand-new idea, read Jonathan Butcher’s latest study on education savings accounts, which explores the possibilities for families if they were combined with mobile payment technologies. Yes, that sounds dry, so here’s an illustration to whet your interest:

John Makusi Simiyu operates a nondescript real estate and transportation company in Nairobi, Kenya. Yet Simiyu uses what may be the most advanced way to send and receive money in the world: M-PESA. A telecommunications company created M-PESA in 2007, and anyone in Kenya or Tanzania with a cellphone can use the system to deposit money, pay bills, and transfer funds to family and friends. Simiyu also uses M-PESA to pay his employees and transfer money to his customers.

Simiyu explains that when one of his vehicles breaks down, he doesn’t have to run the risk of carrying large amounts of cash to remote areas. ‘Just call me, tell me your problem and how much you need and I will text it through M-Pesa system,’ Simiyu told the BBC.

‘I don’t need to go the bank when I have the bank in my phone.’

The connections to education are obvious. Education savings accounts, of course, give parents maximum control over their children’s education by depositing their child’s public education dollars in a savings account parents control. Butcher explores the possibilities for combining this with mobile payment – the easiest analog for which, among Americans, is the PayPal app on your phone. Parents could pay the piano teacher or speech therapist with a quick phone bump each time they meet for a lesson.

There’s more:

While some mobile payment solutions like M-PESA and Square are not even 10 years old, a growing body of research on M-PESA and similar systems indicates that M-PESA causes more money to circulate in communities where the payment service is available. This activity promotes the growth of small businesses. The education marketplace is populated with small businesses such as personal tutors and education therapists.

You’ll want to read the whole thing. If you’re feeling zippy, follow it with this chaser: Mike McShane’s new discussion of the state of education entrepreneurship.

SOURCES: American Enterprise Institute, Goldwater Institute


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