Back to cover

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


Total enrollment in kindergarten through grade 12 (K–12) private schools in low- and middle-income countries has been rising for more than a decade. That demand is driven by a combination of factors: income growth and urbanization, a changing labor market, and a desire for greater choice and accountability in education. Development finance institutions, including the International Finance Corporation (IFC), have contended that governments alone cannot meet this growing demand and that the private sector can help do so. IFC, for its part, started investing in K–12 private schools in the 1990s and continued to do so until ceasing investment in the subsector in 2017.

This evaluation was designed to help the Board of Executive Directors and management of IFC consider the circumstances that favor financing investments in K–12 private schools. It assesses IFC’s investments in K–12 private or nonstate schools during the period from fiscal year (FY)01 to FY20. It focuses on IFC investment instruments and considers IFC advisory services only as part of the Risk-Sharing Facility (RSF), which integrates advisory services with an investment component. Other investments related to K–12 education more broadly, such as technology-related or public-private partnership projects, were outside of the evaluation mandate, as were IFC advisory services.

The findings of the evaluation support a single major conclusion: resumption of IFC investments in K–12 private schools is not advisable without making substantial changes to IFC’s approach. The Independent Evaluation Group (IEG) finds that IFC’s limited development outcome focus, the challenges of financing K–12 private schools, and the lack of a financially viable market make it difficult for IFC’s interventions in K–12 to achieve development objectives, cover its costs of doing business in this subsector, and make sufficient returns on investments. IFC’s business model is poorly suited to supporting small schools. IFC was able to achieve success only with investments in larger networks of schools that catered to the middle class. Although IFC’s focus on financial viability was practical and potentially useful in improving the creditworthiness of schools and their eligibility for financing, it overlooked important measures of access (including equitable access) and education quality. Hence, IFC would have to change its business model if it were to pursue equitable access, aim to reach lower-income and impoverished students, improve the quality of education, and make a sufficient return on investment.

The evaluation used a mixed methods approach to collect data and triangulate findings among multiple sources of evidence to answer three evaluation questions:

  1. How did IFC investments in K–12 private schools align with identified country education needs?
  2. To what extent did IFC investments reflect the characteristics of quality K–12 private education?
  3. What has been learned that could help IFC improve its engagement in K–12 private education in the future?

The approach applied international good practice, knowledge, and evidence to IFC’s portfolio and to specific cases. It sought to overcome deficiencies in the evidentiary base and existing literature through the design of the evaluation and collection of data from multiple sources.

The evidence and support for the main conclusion of this evaluation are summarized below. The conclusion offers a forward-looking assessment of changes IFC would need to make if it were to consider resumption of investment in K–12 private schools.

IFC Portfolio in K–12 Private Schools

IFC’s portfolio in K–12 private schools over the FY01–20 period was small and used a variety of instruments. The portfolio of 25 direct investments—mostly loans, with $156 million in commitments—accounted for a very small portion of IFC’s overall education portfolio. Over the same period, IFC also provided $20.5 million (net asset value of IFC’s investments) in indirect support to the subsector through equity participation in 27 Funds (private equity funds and venture capital funds) with investments in K–12 private schools. The operational details of the K–12 investee companies in these cases are not documented, nor are their development outcomes monitored by IFC. Hence, the K–12 investments of the 27 Funds were not evaluable, and the 25 direct investments are the focus of the evaluation.

IFC’s direct investments in K–12 private schools evolved over the evaluation period. From FY01 to FY08, IFC provided loans to small private schools in International Development Association (IDA) countries and diverse types of K–12 private schools (a nonprofit religious school, international schools, and a secondary vocational school) in middle-income countries (Indonesia, Lebanon, Mexico, and Turkey). In 2007, IFC introduced a new instrument, the RSF, to encourage local banks to provide financing to K–12 private schools in IDA countries and mitigate currency risks that could affect debt servicing to local banks. The RSF projects in Ghana, Kenya, and Rwanda ranged from $2.1 million to $12 million, with IFC commitments that ranged from $854,000 to $4.7 million. Advisory services associated with the RSFs supported business development in borrowers and capacity development in lenders. By the FY09–17 period, the limitations of the RSF instrument were evident, and client cancellation of the facility agreements (although not the advisory services component) led IFC to abandon its use of the RSF. During this period, IFC shifted its focus to experienced owners of K–12 private schools embarking on within-country, cross-border, regional, or even international expansion. The size of the investment projects during this period ranged from $3 million to $45 million, with IFC commitments ranging from $2 million to $22 million. Then, in 2017, IFC stopped all new investments in K–12 private schools for lack of viable investment opportunities.

The 25 direct investments in K–12 private schools were distributed across all regions, with projects in middle-income countries accounting for 75 percent of IFC’s commitments. By number of projects, the investments were almost evenly distributed among IDA countries (mostly in Sub-Saharan Africa) and non-IDA countries. By commitment amounts, 75 percent of IFC investments in K–12 private schools were to schools in non-IDA (or middle-income countries) in the Middle East and North Africa Region, followed by East Asia and Pacific.

The history of IFC investments in K–12 private schools suggests an exploratory approach, with IFC seeking an appropriate investment niche in a complex and risky subsector. Although IFC initially sought to engage small schools in low-income countries, it eventually found that its most viable opportunities lay in larger schools, schools that cater to middle-income and upper-middle-income students, clients that have diversified sources of revenues other than tuition fees, and networks of schools in middle-income countries. IFC was also exploring its options transaction by transaction, without an introspective assessment of the impact of its investments or lessons learned. The need to identify financially sustainable investment and the transactional approach meant that IFC did not consider local education systems when making its investment decisions.


The evaluation assessed the 25 direct investments based on their contributions to education access and equity, education quality, and financial sustainability and investment outcomes.

Despite investing $156 million over 16 years in 25 projects, IFC did not collect relevant data on most of its K–12 private school projects’ stated development objectives after commitment. The absence of evidence for postproject approval makes it impossible to determine if the stated development impacts of IFC investments (such as reduced crowding in public schools, increased efficiency in the public schools through increased competition from private schools, or spillover effects in training for public teachers and schools) occurred.

Access and Equity

IFC investments in K–12 private schools mainly financed the construction or expansion of school buildings and other capital expenditure needs. Of the 25 IFC direct investments, 19 supported financing clients’ needs for the establishment of new school buildings. Another five projects (all in Sub-Saharan Africa) financed a combination of building a new school—either through acquisition or new construction—and improvements or modernization of existing facilities. Objectives in such cases mentioned increasing access to quality private education to meet demand for quality education from middle-class parents.

IFC’s focus on “increased access to quality education” was mostly in K–12 private schools that enrolled children from middle-income families. This approach was in line with IFC’s strategic aims at the time. IFC also invested in a school that enrolled K–12 students from upper-income households and another that enrolled students from both middle- and upper-income households. Project documents typically mentioned scholarships or bursaries as a means of attracting students from lower-income households, but data were not consistently collected and tracked. There is no indication in project documents that IFC investments were intended to address access beyond the students enrolled in the supported schools to include underserved groups, such as children out of school, from low-income households, or with disabilities.

Although IFC also invested in some low-fee K–12 private schools, socioeconomic data on students who attended those schools are not available. The four RSFs in Sub-Saharan Africa were designed to support the expansion of schools that charged relatively low fees. Although these schools may have catered to students from low-income families, monitoring documents offer no information on whether the schools maintained the low-fee structure or on who attended the schools, nor did they track the number of low-income students or out-of-school children who received scholarships or bursaries because of IFC’s investment.

IFC’s assessment of affordability was broadly based on benchmarking the fee structure of supported schools against other K–12 private schools in the country, including international schools. Fees charged were often less than those comparators but still unaffordable for households close to or below the poverty line.

IFC investments rarely responded to barriers to access encountered by certain groups or to broader challenges faced by local education systems. Because of IFC’s transaction-based approach, access was considered in relation to the schools financed by IFC without considering the effect those schools may have on the local education systems or opportunities available to potentially underserviced groups.

Education Quality

IFC neither monitored education quality nor compiled evidence to verify it. Where indicators were associated with education quality, they tended to be output measures. IFC also did not identify, track, or monitor indicators associated with improved quality. Four projects collected data on the rate of student graduation; none tracked other key data such as the rate of dropout or repetition.

The advisory services accompanying the four RSFs were designed to improve the overall capacity of low-fee schools and financial intermediaries. The advisory program supported training provided directly to schools and capacity-building work that would strengthen their business viability. Case studies of two RSF projects found that the training and advisory support were highly valued by the school owners.

IFC’s engagement with education quality in K–12 private schools was minimal. Investments rarely supported education quality enhancement, such as teaching quality. IFC assessed quality during appraisal based on the school’s assessment systems, accreditation, curriculum, student graduation and retention rates, and teachers’ qualifications. However, the assessment ended with project approval, as IFC education experts were not usually involved in project monitoring. Literature and secondary data analysis reviews suggest that the guarantee of better quality in K–12 private schools (compared with public provision) cannot be assumed.

Financial Sustainability and Investment Outcomes

IFC emphasized financial sustainability in assessing private K–12 school projects, and its additionality was primarily financial, as it offered loans with longer tenors and, in some projects, better interest rates than local or other international financiers. Nineteen of IFC’s projects also created nonfinancial additionality through loan conditions that required improved business or financial management, corporate governance, and environmental, health, and safety standards. As a pioneer among development finance institutions in investing in private education, IFC provided signaling effects to international and domestic financiers about the business potential of investing in K–12 private schools.

IFC loans to K–12 private schools experienced higher incidence of cancellation, droppage, and overall weak disbursement compared with the rest of IFC education sector investment projects and its overall portfolio. The cancellation rate of IFC loan commitments to K–12 private schools was 56 percent compared with an overall IFC loan cancellation rate of 15 percent. Nineteen of the 25 direct investments projects were either fully or partially canceled, including the 8 projects in which IFC’s loans were not disbursed or were dropped, indicating that the projects were not executed as planned. The incidence of nondisbursement or droppage was also high. Eight of the 25 direct investment projects were closed without using IFC’s financing commitment and therefore were not monitored for their performance and outcomes. Problems with land acquisition, cost overruns, and implementation delays halted school owners’ plans to relocate, expand their existing premises, or open new school branches. Several sponsors, especially the owners of small schools, also had difficulty complying with IFC financing covenants that curtailed the disbursement of IFC’s financing.

The high level of cancellations, dropped projects, and weak disbursement record of K–12 private school projects kept IFC from covering its transaction costs of doing business and making expected returns on its investments. IFC experienced negative risk-adjusted returns on its lending to K–12 private schools. It also experienced cash and economic losses from its investment operations in this education segment through FY21. Only one of IFC’s two direct equity investments in K–12 private schools met the expected equity internal rates of return. In this project, IFC’s equity participation in a successful school operation catered to upper-middle-class students and helped the school open branches in Australia, Canada, Malaysia, and Singapore. Despite this example, the overall IFC equity return on its investments in K–12 education over a 10-year period ending June 2021 was negative.

Even with the reported growth in the number of K–12 private schools and associated increases in enrollment in developing countries, the investable market is limited. Investments in K–12 private schools are dominated by traditional financing, including individual and family entrepreneurs, and by private equity. Family-run K–12 private schools tend to be small, limiting investment opportunities. The small size and relative business immaturity of many K–12 private schools, particularly low-fee private schools, inhibit scalability.


At the level of individual clients, IFC’s investments were relevant but limited in scope, and there is no evidence of their relevance to the local education systems. The investments were relevant to the school owners in that they met a clear need for financing that was otherwise unavailable. However, case studies and reviews of project documents found no planned or actual spillover effects beyond the investment projects and the project sponsors.

It is not possible to assess the relevance or impact of IFC’s investments in K–12 private schools at the sectoral and country levels. The small scale and limited nature of the investments rendered nonexistent any effect or impact on broad educational needs at the sectoral or country level. In 9 of the 14 countries where IFC directly invested in K–12 private schools, the operations were single transactions. IFC commitments in K–12 private schools in 5 countries ranged from $5 million to $15.5 million, with four of the single transaction investments averaging $1.7 million in IFC commitment amounts.

IFC’s engagement with education quality in K–12 private schools and education systems 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 contribute to accelerated learning. The same can be said for the four advisory services provided with the RSFs. In most instances, quality provision was assumed based on existing or expected national or international education accreditation.

Considerations for the Future

Resumption of IFC investments in K–12 private schools with a business-as-usual approach is not advised. If IFC decides to resume investments in K–12 private schools, it needs to adopt a different business model. IEG provides the following suggestions for the consideration of IFC management and the Board:

  • Adopt an investment approach that engages a wider spectrum of stakeholders involved in the education system likely to be affected, whether positively or negatively, by the school receiving IFC financing. Recalibrate IFC processes and procedures throughout the investment life cycle to move from the current narrow transaction orientation to an approach in which IFC works with governments, the World Bank, development finance institutions, and other partners to harness and scale innovations and mitigate potential negative impacts on local education systems.
  • Establish a clear framework for investing in 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 improving 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 (such as 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 enhanced and more sustained project monitoring and evaluation beyond business indicators and should include an assessment of factors related to education 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 RSF, or investments in K–12 private schools by Funds supported by IFC. Data collection and sustained project monitoring should include student profile, accommodations for children with disabilities, initiatives such as scholarships to support access for 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 the implementation phase. Evaluation should be built into projects and contribute to reliable 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.