Can a public scholarship program successfully reduce school drop-outs in a time of economic crisis? Evidence from Indonesia

This paper evaluates the role played by Indonesia's Social Safety Net Scholarships Program in reducing school drop-out rates during the Asian financial crisis. The expectation was that many families would find it difficult to keep their children in school and drop-out rates would be high. The scholarships are found to have been effective in reducing drop-outs at the level of schooling at which students were historically most at the risk of dropping out—lower secondary school. At this level drop-outs were reduced by about 3.0% points (or 38%) and costs were recovered. Given its success, the program can be viewed as a model to be followed by other countries that find themselves in a similar situation of crisis. How well the program adhered to its documented targeting design and how effective this design was in reaching the poor is also examined.