Enrollment in private primary and secondary education in developing countries has been rising for more than a decade. This comes as public systems struggle to cope with the demand from growing populations. Private kindergarten to grade 12 (K-12) schools have also attracted support from development finance institutions (DFIs) as, in theory, private schools could both ease the pressure on government resources and help achieve Sustainable Development Goal 4. While the evidence on the development impacts of this support is mixed, a recent report offers several lessons to consider for avoiding the risks associated with private schools and ensuring future approaches are aligned with the overall aim of promoting equitable and inclusive access to quality education.
The report by the Independent Evaluation Group assesses the experience of the World Bank Group’s private sector arm, the International Finance Corporation (IFC), which invested in K-12 private schools from the mid-1990s until a decision in 2017 to halt all investments. The Evaluation of International Finance Corporation Investments in K–12 Private Schools looks at the challenge of supporting private schools in low and middle-income countries while aiming to promote equitable access and reach students from underserved and excluded populations. In response to the IEG report, IFC has announced that it will not resume its investments for the foreseeable future, but the lessons learned from its experiences are relevant for any development finance institution currently invested or considering future investments in private K-12 schools.
Preconditions for investment. Any investment first needs strong roots in the relevant country context and in the local education systems within which the private K-12 school operates. This is especially important to avoid the risk of reinforcing social and educational inequalities. The literature on the role of private education cites a number of examples in which improved test results in private schools is the result of systemically selecting students who are already better prepared to learn. Rather than improving overall access this dynamic can lead to the one-way movement of more privileged students from public to private schools, and leave behind more marginalized students, such as children with disabilities and out-of-school children. A clear understanding of the context in which private K-12 schools operate is vital for anticipating the impact that investment may have on the education system and the community at large, and for the design of approaches that meet potential gaps in the supply of quality education that have a positive effect on equity of access.
Engagement with stakeholders. To build a clear understanding of the local context, investors should consult not only with the client or private school owner but with a broad range of stakeholders. Along with other DFIs, the aim should be to build an extensive coalition that includes a full range of groups with a stake in the education system, such as civil society organizations, local governments, education regulators at the national level, parent organizations, and teacher unions. This extensive coalition will improve the investor’s understanding of the education system and create the synergies needed to achieve the broader development goals. Working with this broader group of stakeholders will allow investors to help support access and quality learning that goes beyond enrolling middle-class and higher-income students. The report found that a range of DFIs, recognizing the complexity of education systems, recently reviewed their investment policies for private K–12 education and as a result, committed to piloting and testing innovations around building coalitions that engage key stakeholders. As these developments are recent, the results are not yet known.
Private-public collaboration. More strategic collaboration and cooperation between private and public sector schools may support planned, positive spillovers from innovations in curricula, teaching, and learning that are built on a clear understanding of the local context. Among the many global, regional and local experts with whom the IEG report team consulted, local civil society organizations, in particular, noted the potential for private schools to pilot best practices in teaching and share them with public schools. However, IFC and World Bank officials underscored the challenges involved in realizing this type of cross-fertilization, with a lot of work needed to nurture these relationships. Private schools alone cannot be expected to promote positive spillovers, as case studies showed that they have little incentive to create systemwide demonstration effects, but rather a combination of government regulations and strong implementation support is needed to catalyze public and private collaboration.
An education rationale. Along with a focus on the financial viability of specific schools, investors should also consider the development impact in decisions. A broader framework is needed for guiding investments in private K–12 schools, that incorporates goals such as reaching vulnerable or excluded groups (for example, out-of-school children) and improving the quality of education without exacerbating inequality. It also should require investing in schools that are committed to links with a full range of beneficiaries and stakeholders in the local education system—such as school administrators, parent associations, and teachers.
Longer term investment horizons. Investors will need to consider the trade-offs between ensuring the financial sustainability of investments in private K–12 schools and supporting equitable access, education quality, and broader education system effects. K-12 education is a challenging sub-sector. Investments in private K–12 schools are dominated by traditional financing—including individual and family entrepreneurs—and in the last decade by private equity and impact investors. The investable market is limited. Family-run private K–12 schools tend to be small. The small size and relative business immaturity of many private K–12 schools, particularly low-fee schools, inhibit their scalability. These various factors suggest the need for longer-term investment horizons for private K–12 schools coupled with technical support from investors.
Monitoring and evaluation. Effective systems are needed to monitor the impacts of investments in private K–12 schools, and to learn from them. This requires going beyond business indicators to include assessment of education access and equity of access, quality of education, and effects on other schools and local education systems. This should also include monitoring of factors such as accommodations for children with disabilities, the effect of initiatives such as scholarships to support access for low-income or out-of-school children, and constant learning to address potential negative effects on the education system.
As governments struggle to meet growing demands, the mobilization of finance for education will remain an urgent priority. In 2020, the United Nations Educational, Scientific, and Cultural Organization (UNESCO) projected a shortfall of $148 billion annually in the financing needed to achieve the SDG4 by 2030. The impacts of the coronavirus (COVID-19) pandemic are estimated to have raised that figure to as much as $200 billion annually. The private sector could have a role in addressing this shortfall and contributing to the achievement of SDG4, but only if it can ensure both improvements to the quality of education and equitable access.