www.ifc.org/ThoughtLeadership Note 32 | February 2017 PRIVATE PROVISION OF EDUCATION: OPPORTUNITIES FOR EMERGING MARKETS The private sector plays an important role in emerging market countries with limited education capacity by providing quality schooling at all levels, from early childhood development to tertiary education and lifelong learning. By strengthening connections between education providers and private enterprises, it helps equip students with skills needed for successful employment, thereby creating additional potential for development. Private firms also play multiple roles in supporting public education by publishing learning materials and developing assessment tools and educational software, building and maintaining schools, and enabling financial support for students in need of it. As a result, private firms can help support all education institutions, private or public, and maximize their contribution to education outcomes. Education is fundamental to improving human lives and living government provision, as when governments outsource or standards, boosting competitiveness in an economy, and contract out various services, including school busing and achieving inclusion and social mobility. Significant progress building, maintenance, and even the private management of has been made in recent decades toward ensuring access to government-owned schools. education at all levels, particularly for women and girls. Yet bolder efforts are needed to achieve universal education, in particular in secondary education and above. Figure 1: Education and Economic Growth Because of its broad societal benefits, governments around the world invest in and support the provision of public education, though to varying degrees. The Sustainable Development Goals aim for primary and secondary education which is free, equitable, and high quality. In fact, quality public education is strongly correlated with economic growth in countries across the income spectrum (Figure 1). Most important, free access to primary and secondary education is essential to the goals of equality and shared prosperity. At the same time, markets for private education exist alongside public education systems in a variety of complementary and substituting functions. In all countries, considerable numbers of students and professionals are educated by private providers. 1 While some of these institutions are operated by religious or other nonprofit organizations, many seek to earn a return on their investment. They consist of a mix of independently owned, controlled, and operated, fully private enterprises, as well as a variety of public-private partnerships. Such partnerships involve both government support of private provision, as with vouchers and cash transfers for parents to send their children to private schools, and private support for Privately owned and operated, for-profit institutions have been Development looked specifically at the advantages that private successful across emerging markets at all levels of education— education provision delivers in emerging economies.4 All the early childhood, elementary, secondary, tertiary, academic, and surveyed studies determined that the single greatest advantage vocational. And demand for private education is not limited to is teaching. It is of higher quality in private schools than in state elites or specialized skill seekers. Populations across the schools in terms of higher levels of teacher presence and socioeconomic spectrum receive, contribute to, and benefit teaching activity, the studies found, with teaching methods that from private education services. are more likely to lead to improved learning outcomes. There is also moderately positive evidence that, as a result of these Private education rarely operates entirely free of governmental advantages, private school pupils achieve better learning influence, however. Instead, it typically involves some outcomes compared with students in state schools. government monitoring, oversight, and regulation. In many emerging economies, however, oversight of the private education sector is constrained by a lack of capacity, legitimacy, and the knowledge necessary to implement Figure 2: Private School Enrollment effective policy frameworks. And the competition and decentralized decision-making that private education providers can bring to the market have done much to improve performance, lower costs, and increase equitable access for the poorest populations in both government and private-run schools. Reforms initiated at private colleges and vocational schools are starting to revolutionize the business model for tertiary education, bringing affordable and accessible education to nearly every corner of the world. Emerging Market Elementary and Secondary Education Effective, compulsory education is available in both advanced economies and in developed countries. Yet in both cases the quality can vary widely. Many parents in low-income countries opt out of public education systems in search of potentially superior results at private schools. Opting out often means However, in most advanced economies participating in PISA choosing private provision over no provision, or over schools (the OECD’s Programme for International Student with absentee teachers and missing learning materials. As a Assessment), students at privately managed schools have more result, private provision of primary school education has grown advantaged socio-economic backgrounds compared to those in considerably and now accounts for more than 20 percent of all public schools.5 This raises questions as to the causes of the primary or secondary school students in 70 low-income better outcomes, and whether they are the enhanced autonomy countries.2 and better resources at private schools, or the advantageous Figure 2 shows primary and secondary private school socio-economic backgrounds of the pupils. In order to avoid enrollment as a percent of the totals in various country income stratification in education, emerging economies require groups. These estimates likely ignore many of the so-called legislation that guarantees that public and private schools “slum schools” that operate within the informal education receive public founding and are open and affordable to all sector. students regardless of socioeconomic status.6 A voucher system introduced in Chile in 2008 might serve as a model. It provides Affordability and Outcomes. Private education has improved more resources for students from low socioeconomic educational outcomes and increased affordability and backgrounds and additional support to schools where accessibility for parents across low and middle-income regions. disadvantaged students are concentrated.7 Several studies have shown that autonomous decision-making is improving learning outcomes in public as well as private While the true size of the private school effect remains open to schools—for example, when local school administrators are debate, the outcome in emerging countries is consistent with able to decide for themselves which teachers they hire. 3 results observed in advanced economies. An analysis of PISA scores from 22 countries in 2008 found that “pupils at private A comprehensive review of the literature conducted in 2014 for (subsidized) schools have a higher net educational achievement the United Kingdom’s Department for International than do (those at) comparable public (government-run) schools This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. with the same social composition.”8 Another international study Private providers are often more receptive and responsive to found that “private school competition attributable to past advice from parents. Parents tap into the knowledge of the local Catholic policies generates higher student achievement in community—the shared experiences of friends and relatives mathematics, reading, and science today.”9 The analysis also living in their urban ghettos and rural villages. Parents also found that competition between the public and private sector closely monitor teacher absenteeism and classroom disruptions. positively affects the achievement of students attending public And accountability to parents encourages the maintenance of schools, and that spending on education is also reduced, higher standards at private schools, creating a feedback loop suggesting that school systems are more productive if they are that often doesn’t exist in state-run schools. more competitive.10 Parents play a critical role in the expansion of private education. Elementary School in Dhaka, Bangladesh While private schools tend to be more cost-effective than government–run institutions, they also tend to be more expensive due to school fees, uniforms, books and other costs. Yet parents often choose private over public schools due to their perceived better quality in terms of teaching, teacher attendance, school performance, class size, and discipline. Private schools have inherent advantages over state schools. Foremost among them is the accountability mechanism that arises from parents’ ability to choose or change their child’s school. Additionally, private providers can be more cost- efficient than their government counterparts with similar or better results. Higher degrees of parental involvement in private schools has also shown positive effects on learning, teacher motivation, and student attendance, and “active engagement results in families and communities holding schools accountable to a much greater degree.”11 Private education over no education. For populations in some of the world’s poorest countries, the choice of private education is in fact a choice over no education. This is due to the limited capacity of many governments to provide free schooling for all. There are many examples of the advantages of private The example of informal “slum schools” is illustrative of the education in emerging countries, along with a growing body of way private education can fill the vacuum and contribute to evidence about the effectiveness of private provision. Still, a basic developmental objectives in regions where they are most number of gaps remain that make it difficult to form definitive needed. conclusions on a broader scale. For example, while much is The influx of households migrating from rural areas to urban known about private education in South Asia, considerably less centers in search of better work puts new strains on city is known about Africa, where the sector’s greatest development infrastructures. Slums emerge when rapid urbanization challenges lay. There is also a lack of data about the extent and outpaces urban policy planning, resulting in a shortage or diverse nature of private schools, and little is known about the complete lack of provision of public services, including particularities of private education in middle and secondary education. Under these circumstances “slum schools”—which schools or in regions on the outskirts of cities and towns.13 Civil operate in the very poorest neighborhoods—have been able to society institutions, along with development agencies, need to provide affordable, accessible, and sometimes superior generate additional research about private education in order to educational experiences to those that can be obtained in less improve and better inform decision-making. numerous government schools.12 Evidence of the performance of these privately owned and Post-Secondary Education: Unleashing Innovation operated schools in urban slums comes from Somalia, Kenya, Sierra Leone, Pakistan, and India, as well as schools in remote, Access to a quality academic, technical, or vocational post- impoverished areas of China where public education is secondary education—one that provides the skills students will inaccessible. It shows that, on average, they delivered superior need to fill the productive, quality jobs required by present and results in math, English, and typically one other subject. future employers—is an essential driver of economic growth, productivity, competitiveness, and social mobility. It is for this This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. reason that governments tend to maintain much stricter control at the post-secondary level. Case Study: Uniminuto’s Inclusive Business Model Private tertiary institutions—especially community colleges, Corporación Universitaria Minuto de Dios, or Uniminuto, is technical training institutes, and distance learning centers—are a rapidly growing, not-for-profit tertiary education institution nonetheless growing across emerging economies and are established in 1990 in Colombia. Uniminuto offers creating a breeding ground for innovation in the sector. Private affordable, high-quality technical, technological, and institutions tend to be more focused on non-academic subjects university education. Its largest presence is the principal that often have direct employment potential. And they often Bogota campus where 30 percent of its students attend cater to middle-income students in need of the skills most school, and its national network reaches nearly 82,000 relevant to employment. Many of their students are already students in 48 locations in over 35 municipalities, with more employed and thus benefit from the flexibility and specialized than half enrolled in distance learning programs. skills that non-traditional programs can offer. There are three key elements in Uniminuto’s business model. In addition, both public and private universities are increasing First, Uniminuto operates independently and through formal collaboration with private firms. For their part, private firms are collaborations with other universities and government seeking to access and integrate external sources of knowledge, entities. It owns seven teaching sites and leases several many of which are available from universities. In addition, in others. It also operates government-sponsored sites in recent decades the mission of universities has moved beyond marginal urban or rural areas and two independent the traditions of teaching and research to include a “third community colleges to provide additional educational mission” related to addressing the needs of industry and services. Its main revenue source is tuition fees, which run contributing directly to economic growth and development.14 between $400 and $1,400 per student. Links with private firms are even stronger in technical and Second, since the ultimate goal for the vast majority of vocational education and training. Public-private partnerships students is to find employment, Uniminuto’s offerings in this area involve a new level of communication between emphasize technology and focus on providing students with employers and education providers that is increasingly needed skillsets. The company works with business, necessary to the development of technical curricula. This government, and nongovernmental organizations to ensure communication enables education providers to update that curricula meet potential employers’ needs. More than programs with skills in demand and to train students for jobs half of Uniminuto’s programs are vocationally-oriented. that change regularly. It also allows private firms to have input Course offerings represent key productive sectors in into the education process and can provide them with a Colombia including engineering, social services, recruiting tool to attract skilled workers. In Germany and communication and visual design, agribusiness, education, several other advanced economies, public-private partnerships and technology. They are tailored to reflect regional industry in technical education have gone a step further, with the so- mixes with certain sites offering hotel management and agro- called dual system of parallel training at public schools and on- ecology. Short-term courses in skills demanded by the-job training at accredited private firms. There is increasing prospective employers, such as web design and occupational demand to implement dual system models in emerging health, are also offered. economies despite an ongoing debate on the transferability of Third, Uniminuto offers programs such as pre-term the system.15 workshops and basic skills tutoring to support students from The innovation that private firms have introduced to education lower socioeconomic groups. provision, both academic and technical, would not have been An important element of the Uniminuto model is its pricing. possible without advances in technology. Private investments Through innovative cost-sharing arrangements and the use of in digital technologies are already transforming the way post- technology, the organization has been able to maintain secondary education is delivered, providing access to massive affordable tuition rates. For example, business undergraduate amounts of knowledge and information previously unavailable studies are priced at less than $1,000 a semester, compared or difficult to access in emerging market education systems. with an industry average of $1,450. Rates are also And profit-driven investors are developing low-cost business differentiated by site in order to align with students’ ability models that take advantage of free online services, offering to pay in different regions. Finally, Uniminuto offers affordable education opportunities for even the most resource financing to students through its Cooperativa Uniminuto. constrained nations. Massive Online Learning provides a good illustration of this trend. The modern Massive Open Online Courses, or MOOC, This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. movement, and its sibling, the Open Courseware Movement, or Services provided to students, such as the provision of learning OCW, were launched in 2001 when the Massachusetts Institute materials and software, student meals, housing, and of Technology began putting free, bare-bones versions of its transportation, also help to reduce the cost of provision without courses online.16 The MIT initiative was soon joined by two penalizing lower income families. Furthermore, there are other private institutions, Harvard University and Stanford private providers of student loans—Brazil’s Ideal Invest is an University, and later by innovators at tech firms including example of one—that assist families and students in financing Google and YouTube, as the program expanded to their education needs.19 Public-private partnerships can be comprehensive offerings of online courses provided by world- highly effective in vocational education programs for young class institutions. adults as well. Between 2011 and 2014, the National Skills Development Corporation equipped two million of India’s The relevance of these technologies for emerging economies is urban and rural youth with the skills necessary to find enormous, as it provides access to students across continents employment in the private sector.20 and social backgrounds that was not possible in the past. Two- thirds of students who attend MOOCs as of 2013 lived outside For the partnerships to be successful, several conditions need to the United States.17 Online classes include video lectures in real be in place.21 Governments need to play the role of facilitator time or recorded, lecture notes, e-textbooks, homework, class and regulator (standards and costs, incentives, monitoring), and papers, interactive discussion boards, team projects, and exams. in particular must ensure that costs are affordable to students. A number of private investors are adapting courses to fit their In return, the state can offer tax or other incentives (land, local communities and cultures, allowing students, most of provision of services, development of common areas, low- them from middle-income families, to get a “first world interest loans, subsidized rental rates, and so forth), thus education” in an emerging country setting.18 attracting developers and securing a return on investments. Nongovernmental organizations and multilateral development However, the potential for online learning programs should not banks can provide vital support in terms of expertise and be overstated. They tend to work best in higher education and financing. well-developed urban areas where high-speed Internet is available and students are self-motivated. Moreover, many online students are adult learners and often working learners as Conclusion well. It remains unclear how effective such programs would be for the poorest children in primary and secondary schools where There are many examples of highly successful, publically close attention is needed to motivate students, or in remote operated institutions at every level of education and in every villages and inner-city slums where Internet access is rare. Still, region of the world. Still, growing competition from private such innovations may prove to be critical in reducing the skills education providers in emerging economies is contributing to gap in low and middle-income countries, where employers improvements the performance of both private and often struggle to find qualified applicants. government-run schools. In many cases where such institutional diversity is allowed, it is driving innovation, transforming the future of both private and public education, Public-Private Partnerships as Education Enablers and improving the life prospects of children and professionals of all ages. Private provision is a useful complement to public The provision of education involves a broad spectrum of education at a time when the demands for education are rapidly activities and actors far beyond the classroom. Infrastructure expanding across emerging markets. maintenance, learning materials and software, student meals, housing, and transportation are obvious examples of goods and Tom Walton, Consultant, IFC (Tom.f.walton@gmail.com) services essential to the sector, and are all dominated by private Alexandros Ragoussis, Economist, IFC (aragoussis@ifc.org) providers. Financing of higher education, management of human resources, and retraining are other, less known Matthew Benjamin, Consultant, IFC (mbenjamin2@ifc.org) examples. Yet all of these involve some degree of partnering Kevin Matthees, Consultant, IFC (kmatthees@ifc.org) with the private sector based on complementarity that benefits both parties while improving education access, quality and relevance.     This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. Notes Woessman. 2009. “School Choice International: Higher private school share 1 boosts national test scores.” Education Next 9 (1): 54-61. Based on data from World Development Indicators (database). 10 West and Woessman 2009, see page 56. 2 Baum, Lewis, Lusk-Stover, and Patrinos. 2014. “What Matters Most for 11 Lusk-Stover and Patrinos 2014, see page 23. See also, Andrabi, Das, and Engaging the Private Sector in Education: A Framework Paper.” System Khwaja. 2006. “A Dime a Day: The Possibilities and Limits of Private Schooling Approach for Better Education Results (SABER) Working Paper No. 8, World in Pakistan.” Policy Research Working Paper 4066, World Bank; Barrera - Bank. See page 8. Osorio. 2007. “The Impact of Private Provision of Public Education: Empirical 3 Baum et al. 2014; See also: Bruns, Filmer, and Patrinos. 2011. Making Schools Evidence from Bogotá’s Concession School.” Policy Research Working Paper Work: New Evidence on Accountability Reforms. World Bank; Hanushek, Link, 4121, World Bank; Barrera-Osorio and Raju. 2011. “Evaluating Public Per- and Woessmann. 2013. “Does school autonomy make sense everywhere? Panel Student Subsidies to Low-Cost Private Schools: Regression-Discontinuity estimates from PISA.” Journal of Development Economics 104 (2013): 212-32; Evidence from Pakistan.” Policy Research Working Paper 5638, World Bank; Lusk-Stover and Patrinos. 2014. “Education for all: the private sector can Bold, Kimenyi, Mwabu, and Sandefur. 2013. “The High Return to Private contribute.” Private Sector & Development: PROPARCO’s Magazine 20 Schooling in a Low-Income Country.” Africa Growth Initiative Working Paper (December): 22-24; Muralidharan and Sundararaman. 2015. “The Aggregate 5, Brookings Institution; Bruns, Filmer, and Patrinos 2011; Hanushek, Link, and Effect of School Choice: Evidence from a Two-Stage Experiment in India.” The Woessmann, 2013; Muralidharan and Sundararaman 2015. Quarterly Journal of Economics 130 (3): 1011-66. 12 This discussion and that in the ensuing paragraphs is liberally drawn from a 4 Ashley, Mcloughlin, Aslam, Engel, Wales, Rawal, Batley et al. 2014. “The role December 2014 interview with James Tooley; the interview can be heard at and impact of private schools in developing countries: a rigorous review of the http://www.econtalk.org/archives/2014/12/james_tooley_on.html. evidence.” Department for International Development. 13 Ashley et al. 2014. 5 OECD. 2012. Public and Private Schools: How Management and Funding 14 Guimón, José. 2013. “Promoting University-Industry Collaboration in Relates to their Socio-economic Profile. OECD Publishing. Developing Countries.” The Innovation Policy Platform, Policy Brief, World 6 OECD. 2016. PISA 2015 Results (Volume I): Excellence and Equity in Bank. Education. OECD Publishing. See page 272. See also: OECD. 2015. Education http://innovationpolicyplatform.org/sites/default/files/rdf_imported_documents/P Policy Outlook: Making Reform Happen. OECD Publishing. romotingUniversityIndustryCollaborationInDevelopingCountries.pdf. 7 OECD. 2012. Equity and Quality in Education: Supporting Disadvantaged 15 World Bank. 2012. World Development Report 2013: Jobs. Washington, DC: Students and Schools. OECD Publishing. See page 76. World Bank 8 Dronkers and Robert. 2008. “Differences in Scholastic Achievement of Public, 16 Kamenetz, Anya. 2013. “Exporting Education: Online courses are taking off in Private Government-Dependent, and Private Independent Schools: A Cross- developing countries, but there’s a major downside.” Slate, November 15. National Analysis.” Educational Policy 22 (4): 541-77. http://www.slate.com/articles/technology/future_tense/2013/11/developing_coun 9 The extent of private schooling stems in large part from the Catholic Church’s tries_and_moocs_online_education_could_hurt_national_systems.html. decision in the 19th century to build an alternative system of education wherever 17 Kamenetz 2013. they were unable to control the state-run system. As nineteenth-century Catholic 18 Kamenetz 2013. doctrine strongly opposed Catholic attendance at state-run schools, local parishes 19 International Finance Corporation. 2011. Accelerating Inclusive Business responded by establishing separate schools in which children received Catholic- Opportunities: Business Models that Make a Difference. IFC. See page 30f. infused instruction. Countries with larger shares of Catholics but without an 20 World Bank. 2015. Labor Market Impacts and Effectiveness of Skills official Catholic state religion in 1900 have significantly larger shares of Development Programs in India. World Bank. privately operated schools in 2003. For more information, see West and 21 Patrinos, Barrera-Osorio and Guáqueta 2009. This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group.