Nepal’s public education system continues to face big challenges. Many students drop out before completing school, and even those who stay often struggle. According to the Government of Nepal’s Economic Survey, only 64 out of 100 students who start Grade 1 make it to Grade 10. Even more worrying, more than half of SEE students were marked as non-graded in 2024; a record high failure rate in the past five years.
The Ministry of Finance (2019) reported that only 71% of students complete basic education, and just 22% finish Grade 12. These numbers show that something is deeply wrong.
There is no denying that poverty, geography, inequalities & societal structures play a significant role for these worrying statistics. Addressing these issues requires strategic interventions from the government and other major stakeholders.However, challenges within the education system can be addressed through social innovations like the Financial Stimulation Model.
Public schools in remote communities face significant challenges, including inadequate resources, poor academic performance and irregular attendance. Poor hygiene and a lack of motivation further hinder progress. Parents’ illiteracy and the absence of a conducive learning environment at home exacerbate these issues. Additionally, many students find the teaching methods to be monotonous, overly reliant on textbooks and classrooms, or too difficult, often failing to recognize the importance of participatory and lifelong learning approaches.
Amidst this gloomy backdrop, the Financial Stimulation Model (FSM) emerges as a breath of fresh air to address these problems. FSM is not just another intervention; it is a transformative, cost-effective behavioral change model rooted in positive reinforcement.
It integrates financial literacy, life skills, and joyful learning into the school experience in ways that are both engaging and empowering.
Gaurav Nagarkoti, a fourth-grade student at Shree Saraswoti Basic School in Godawari, loves school and is determined to never miss a day. Although his grades were average before, he has recently become the top earner in the FSM Marketplace. Now, Gaurav is excited to buy a diary book next month by earning more points, and he knows exactly what it takes to reach his goal.
FSM is based on three key parts that work together to keep students engaged:
The Behavior Chart (The Foundation):
Behavior charts in each classroom will serve as a powerful tool for students to witness their own growth. Teachers will uplift and guide them, promoting or gently correcting based on their commitment to areas like attendance, homework, hygiene, respect, and participation. Without rigid criterias, these can be contextualized and flexible. Students will earn points — 15 for excellence, 5 for average effort; inspiring them to take charge of their own future.
This chart evolves into more than just a tool; it becomes a foundation that sparks a deep sense of responsibility and pride in each student, empowering them to carve their own future through dedicated effort, wise choices, and unwavering belief in their own potential.
The FSM Marketplace (The Reward):
At the end of each month, the points students earn will be transformed into tokens, giving them a sense of ownership and pride. The school will set up a mini-market, filled with school supplies, toys, and treats — all within reach thanks to their hard work.
Through this, students will not only learn the power of choice, but also the true value of money, the importance of self-control, and the joy of earning something through their own effort.
The Token Bank (The Lesson):
If they choose not to spend every earned token on unnecessary treats, avoiding impulsive buying and learning to prioritize needs over wants, students can save their tokens in the token bank, earning 20% interest next month. They also have the option to take up to 40% of their earnings as a loan, which must be repaid the following month with a 20% interest.
Why FSM Matters
FSM transforms schools from passive learning environments into vibrant, student-centered ecosystems. It promotes attendance, hygiene, academic discipline, respectful behavior, and active participation. More importantly, it shifts the narrative around public education; from one of struggle and stagnation to one of growth, agency, and hope.
FSM brings relevance, joy, and practical value back into the classroom. It provides not just the why but also the how– how to thrive, and how to envision a better future.
By rooting financial literacy in lived experience and anchoring life skills in everyday school activities, FSM empowers students to break the cycle of poverty; not just for themselves, but for their communities.
Social Lab had the opportunity of piloting FSM in 5 public schools in semi-remote communities, and the results have been truly encouraging. Now, we’re eager to expand this initiative to even more public schools in remote areas, but we can’t do it alone. If you’re passionate about making a difference and would like to collaborate or learn more, we’d love to connect with you.
(Ghale is a development practitioner and currently leads a project at Social Lab).
More about Social Lab and FSM
Website:https://sociallab.com.
Awareness Video: https://www.youtube.com/watch?
