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An Evaluation of International Finance Corporation Investments in K–12 Private Schools

Chapter 4 | Conclusions and Implications for the Future

The findings of the evaluation support a single major conclusion: resumption of IFC investments in K–12 private schools is not supported by existing evidence and could be justified only with substantial changes to its approach. IFC’s business model is poorly suited to supporting small schools. Success in the K–12 subsector was elusive for IFC, with the possible exception of larger networks of schools that catered to the middle class. IFC’s focus on the growing middle class was a strategic aim for much of the period evaluated and was justified by gaps in the provision of quality education by public schools. Although IFC’s focus on business fundamentals was practical and potentially useful in improving the schools’ creditworthiness and eligibility for financing, it overlooked important measures of education access, equity, and quality. IEG concludes that the challenges of financing K–12 private schools and the lack of a financially viable market make it difficult for IFC to cover its transaction cost and make a sufficient return on investment (consistent with its mandate), particularly if it were to pursue equitable access and aim to reach lower-income and impoverished students.

The remainder of this chapter supports the main conclusion, drawing on the evidence in chapters 2 and 3 to answer the evaluation questions set out in chapter 1. The chapter also discusses key parameters for IFC management consideration should it decide to resume investment in K–12 private schools. It also links those parameters to a simple theory of change that connects outputs such as pilots, infrastructure, training, and, ultimately, student outcomes, such as learning for all (Carrillo, van den Brink, and Groot 2016; World Bank 2018; World Bank 2019b), which is a prerequisite (second-level outcome) to get to later outcomes (improved human capital) and impact (reduced inequality and poverty), which require other factors (outside of schooling).


How well aligned were IFC’s investments in K–12 private schools to country educational needs?

The evaluation examined the relevance of IFC’s investments in K–12 private schools from three levels: IFC client, local education, and sector and country needs.

IFC investments were relevant for its clients, at least initially, in that the investments met a clear need related to school capacity and financing that was unavailable in the market. Analysis of the project portfolio finds that all of the schools and school networks in which IFC invested sought to better serve a growing school-age population, albeit primarily among middle-class families. In every case, the investments also served growing demand—driven by perceived shortcomings in the public school system—through expanding or improving their facilities to increase capacity.

There is no evidence that IFC project investments were relevant for the local education systems within which the schools operated. The literature, background papers, and key informants all stress the importance of considering the relationship of investments in K–12 private schools to the education systems in which they operate. The case studies of IFC’s investments found no planned interaction between supported projects and local education systems, such as piloting of curricular innovation or co-use of facilities. Project documents did not discuss mitigation against potentially negative spillover effects—such as movement of students from public to private schools rather than increasing overall access, as noted in the literature. The sorting that results from this dynamic can reinforce social and educational inequalities. Whether this occurred with IFC’s investments is not known, however, because of limits in investment data collection. Moreover, while the evaluation team sought evidence of positive spillover effects for public K–12 education and schools in the specific cities and locations where IFC-supported private schools operated, it found none.

The relevance of IFC interventions at the sectoral and country level could not be assessed. The small scale of IFC investments in K–12 education in any given context rendered it unreasonable to expect any effect or impact on broad educational needs at the sectoral or country level. However, as summarized in the previous section, schools can and do impact—both positively and negatively—the local education systems within which they are located. Although IFC examined the regulatory policy, market for basic and secondary education in the country, and limitations of the country’s public school system in every project reviewed in this evaluation, it did not assess fully the specificities of the education systems within which the supported schools operated. It should be noted, however, that because IFC’s mandate is to support the private sector, its view of education systems cannot be as expansive as that of the World Bank. The limitations of IFC’s mandate further emphasize, as per all IFC education strategies since 1999, the importance of engaging and working with the government, World Bank, and others to understand how IFC’s own investments would interact with the education sector in the countries where it invests. As noted earlier, this evaluation found that IFC did not work with the World Bank (an expectation in IFC’s education strategies) to understand and better support the schools in which it invested in the context of local education systems.

Education Quality

To what extent did IFC investments reflect the characteristics of quality K–12 private education?

IFC’s engagement with education quality in K–12 private schools was minimal. Very few investments combined infrastructure improvements with quality-enhancing inputs, such as teacher training, instructional leadership, curriculum development, or textbook updates, that can help accelerate learning. Advisory services provided in parallel with the RSFs, for example, largely focused on improving the business capacity of schools and financial intermediaries, with little attention given to improving education quality. A few investments included financing of teacher training that might have improved quality, but the extent to which they may have done so was not measured. In certain instances, quality provision was assumed based on existing accreditation, although equitable access, as envisaged in more recent IFC education strategies and in SDG 4, was neglected. Nor is there evidence that competition from IFC-supported schools or projects influenced learning or quality in the local education systems within which they operated.

There is little support for a simple correspondence of private education with quality learning outcomes. The literature review undertaken for this evaluation is inconclusive on the relative quality of private education. However, the SDA undertaken for this evaluation found that a private school advantage is not definitive and should not be assumed. Similarly, the Center for Global Development (2019) found that students in private schools achieved better learning outcomes in some instances, but much of this advantage is a result of the access and selection policies operated by private schools that favor advantaged students. The authors emphasize that what really matters is “the real-world size of these impacts, which are small.”

Conditions for Future Engagement

What has been learned that could help IFC improve its engagement in K–12 private education in the future?

This evaluation sought to identify and suggest conditions necessary to improve IFC’s engagement in K–12 private education if management decides to resume investment. Those conditions first need strong roots in the country context and principles of ensuring quality education that does not exacerbate inequalities (see the assumptions and risks listed in appendix I). The literature shows risks associated with support for K–12 private schools that lead to more sorting of students and failure to serve impoverished or marginalized students (people with disabilities, girls, and others). IEG developed an illustrative theory of change derived from the evidence gathered in the evaluation that IFC management may consider with a view to improving IFC’s investment strategy in the subsector.

The starting point of IFC engagement would be working with a broad group of stakeholders beyond the client or private school owner to improve IFC’s understanding of the education systems within which it might invest. This engagement is necessary to not only increase enrollment in supported private schools but also help support access and quality learning that goes beyond enrolling middle-class (and higher-income) students, which was the predominant focus of IFC investments. For this reason, the engagements with clients or project sponsors need to be supported by consultations with a broader group of stakeholders, including government, World Bank, and other DFIs, to help achieve the broader goals of the Bank Group through reducing the number of out-of-school children, improving access, reducing inequalities in access, and improving quality in the form of enhanced learning. We note, as discussed in chapter 3, that other DFIs have recently reviewed their investment policies for K–12 private education and have emphasized the importance of broad stakeholder engagement and a revised approach.

More strategic collaboration and cooperation between private and public sector schools may help support planned, positive spillover from innovations in curricula, teaching, and learning. This type of purposeful interaction was not observed in case studies or project documents. Key informants, particularly among local civil society organizations, noted the potential for positive learning in teaching practices, as private schools could be a way of piloting and sharing between private and public, but these relationships would need to be nurtured. Key informants in IFC and the World Bank noted that realizing this type of cross-fertilization between the public and private sectors is difficult (appendix G). Case studies showed that private school owners have little incentive to create demonstration effects on an economic systemwide scale mentioned in this evaluation.

As noted in the Relevance and Education Quality sections of this chapter, there were shortcomings in the way IFC undertook its investments in K–12 private schools, including an inadequate focus on access to and quality of education. That said, IEG recognizes that there are trade-offs between attaining these development outcomes and ensuring the financial sustainability of the supported schools and adequate returns to IFC (at least to cover its costs). This tension, a trade-off that IFC management needs to resolve, informs the central conclusion of this evaluation.

Considerations for the Future

IEG’s evaluation findings suggest that resumption of IFC investments in K–12 private schools with a “business as usual” approach is not advised, but if there is a case to be made and IFC decides to resume investments in K–12 private schools, it needs to adopt a different approach to contribute to equitable access and quality education for all. IEG provides the following suggestions for management consideration:

  • Adopt an investment approach that engages a wider spectrum of stakeholders involved in the education system likely to be affected, positively or negatively, by the school receiving IFC financing. Recalibrate IFC processes and procedures throughout the investment life cycle to move from the current investment transaction orientation to an approach in which IFC works with government, World Bank, DFIs, and other partners to harness and scale innovations and mitigate potential negative impacts on local education systems.
  • Establish a clear framework for investing in the K–12 private schools that explicitly addresses equitable access and inclusion and the quality of education. This framework would require developing an educational rationale specific to K–12 private schools to underpin IFC’s engagement. The rationale needs to refer to reaching specific target groups (for example, out-of-school children) and to improving the quality of education without exacerbating inequality. The framework should take into account the potential for IFC interventions to maximize positive spillovers into public schools. It would also require engaging with clients who are committed to supporting links with a full range of beneficiaries and stakeholders—such as school administrators, parent associations, teachers, education experts and officials, and others—in the local education systems.
  • Consider trade-offs between ensuring financial sustainability of investments in K–12 private schools and supporting equitable access, education quality, and broader education system effects. IFC needs to ensure the financial sustainability of its investments. Earning sufficient revenue to cover costs plus extra earnings for reinvestment is also necessary for private schools. Investing in K–12 private schools will continue to require that IFC—and private schools—carefully consider the possible trade-off between achievement of educational outcomes (access, equity, and quality) and the financial sustainability of IFC’s investments.
  • Enhance monitoring systems and supervision mechanisms to learn from new investments in K–12 private schools. This change would require more sustained project monitoring and evaluation beyond business indicators and would include the assessment of factors related to education access and equity of access, quality, and positive or negative effects on other schools and local education systems—whether the investments are made through direct loans, equity, quasi-equity, guarantee or RSFs, or investments in K–12 private schools by Funds supported by IFC. Data collection and sustained project monitoring should include student profile, accommodation for children with disabilities, initiatives such as scholarships to support access for low-income impoverished students or those out of school, and methods to address potential negative effects on the education system (and any potential adverse reputational risk to IFC and the client) during project implementation. Evaluation should be built into projects and contribute to the body of knowledge regarding private K–12 education outcomes that will require that IFC find resources to conduct rigorous evaluations within some of its investments or through a special fund.