With the Singapore government granting schools greater independence as part of its plan to make education a major money earner for its trade-driven economy, two of the republic’s largest institutions are venturing into the capital markets to seek funding by issuing bonds.

The city-state’s largest university, the National University of Singapore, has already embarked on a S$1 billion medium-term note program and banking sources say it will issue its inaugural bond soon.

Nanyang Technological University, meanwhile, is looking at raising S$800 million next year through a variety of instruments, including corporate bonds, term loans and revolving credit, next year.

Accessing the capital markets for funds is unusual among institutions in Asia — although such a practice is common elsewhere, particularly in the US — and could set a precedent for educational institutions in Singapore and elsewhere to follow suit.

"Certainly, we may also see other educational institutions like the polytechnics and other higher learning centers coming to tap the Singapore dollar bond market in future," said Selena Ling, fixed-income analyst at OverseaChinese Banking Corp.

Ajith Prasad, director finance at NUS, said the "decision to use bond financing is not influenced by practices elsewhere, but is consequential to a recent change in the government’s framework for funding public sectorlinked capital expenditure through a mix of loans and grants."

Under the change, the government will fund 40 percent of the cost of a development project.

"The university has to raise funds for the balance from borrowings. The government will fund a substantial part of the university’s borrowing costs," NUS’s Prasad said.

Universities will have greater operational and financial autonomy from next year, with the freedom to decide on governance, budget utilization, tuition fees and admission requirements.

In seeking to reinvent its economy, which is still dominated by a manufacturing sector facing stiff competition from lowercost countries like China and India, the Singapore government has identified education as a potential major sector.

Dubbed the "Global Schoolhouse" scheme, the plan calls for schools to forge partnerships with leading US, U.K., Australian and Indian universities in the hope of luring students from the region seeking education at prestigious schools but at lower costs.