Private Sector Financing in International Aid for Education


Abstract: This paper presents a critical literature review on the subject of international aid for education and the associated global education discourse that is marked by various international frameworks on Universal Primary Education (UPE) and Education for All (EFA). Through analysis of selected journal articles and agency reports, this author discusses three broad themes as they pertain to the global education discourse: the growing prominence of the private sector in international aid, foundations as unique private sector development partners, and the role of the private sector donors in fragile states.


Results of Literature Search
Private Sector Financing
Foundations as Unique Development Partners
Including the Unique Socio-Political Context of Fragile States


In the year 2000, the global education discourse was marked by the official adoption of the Millennium Development Goals (MDG) by the UN and all of its 193 member states (United Nations, 2011). The 2nd MDG, achieving universal primary education (UPE), signaled progress towards a global consensus on education efforts that began in 1990 at a summit in Jomtien, Thailand. At the summit, global leaders, “collectively committed the world community to achieving education for ‘every citizen in every society” (Dakar Framework for Action, 2000, p. 3). Between those years, various bilateral and multilateral agencies have incorporated this global consensus into their mandate, most notable being UNESCO’s Education for All framework (EFA) and its inclusion of private sector partners in order to achieve the goal of UPE. Considering the global education discourse more broadly, trends have indicated that the private sector is increasingly being relied upon to supplement financial support from bilateral and multilateral agencies (Edwards, 2009; Marten and Martin, 2008; Srivastava and Oh, 2010; Steer and Wathne, 2010).

In consideration of the global education discourse and its inclusion of the private sector as development partners, this author conducted a critical literature review in order to better understand the role of the private sector in international development for primary education in fragile states. Results of the literature search indicated the need for critical discussions on the topics of private sector financing, foundations as unique development partners, and the inclusion of fragile states within the global movement for UPE.

Results of Literature Search

This author conducted a systematic literature search for any journal articles and institutional/agency reports that included both a discussion on international development in education and private sector influences. Results of the search indicated the literature’s focus on issues pertaining to financing UPE and the role of private sector financial contributions. Much of the literature on private sector financial contributions focused on the role of foundations as the major financial contributor, which this paper will provide an overview of.

Many studies and authors cite the growing prominence of the private sector in the global education discourse (Srivastava and Oh, 2010; Steer and Wathne, 2010; Marten and Martin, 2008) independently from the influence of the global education discourse in fragile states (Turrent, 2009, 2011; Turrent and Oketch, 2009; Winthrop, Ndaruhutse and Dolan, 2010). Very few critically consider the influence and opportunities of the private sector in fragile states. Furthermore, the literature indicates that educational development priorities should be placed on improving funding mechanisms for fragile states. Considering the increasing prominence of private sector financial contributions overall, it would be worthwhile to begin a critical discussion of its role in fragile states.

Private Sector Financing

Several studies cite the current trend of decreasing Official Development Assistance (ODA) from bilateral and multilateral agencies (Srivastava and Oh, 2010; Steer and Wathne, 2010). Whilst international aid to primary education rose from $2.8 billion to $5.1 billion between 1999 and 2006 (UNESCO, 2008), this still falls short of the estimated $11 billion needed annually in order to achieve UPE (UNESCO, 2007). Steer and Wathne (2010) provide an analysis for the reasons of constraints in donor financing and make some recommendations in order to attract future financing, including contributions from the private sector. Additionally, through interviews with participants from multilateral and bilateral agencies, foundations and corporations, Steer and Wathne (2010) conclude that many remained critical of the private sector’s involvement in a typically public education system.

Despite the critical acceptance of private sector partners, there is an increasing reliance on private contributions to international aid for education in order to fill the gap left by ODA (Srivastava and Oh, 2010; Marten and Martin, 2008). During this author’s literature search for mentions of the private sector in multilateral agency’s official documentation, it was found that many mention the involvement of the private sector (UNESCO, 2006; UNESCO, 2007; UNESCO, 2008). Unfortunately, there is a lack of research and data on specific private sector contributions (Srivastaba and Oh, 2010; Steer and Wathne, 2010; Marten and Martin, 2008).

In order to better understand the effects of international aid for education on national education policy-making, Bhatta (2011) and Hayman (2007) conducted studies in Nepal and Rwanda, respectively. Both countries presented a good case study to analyze the effects of funding for UPE because of their comprehensive adoption of international frameworks on primary education into their national education policy. Bhatta (2011) discovered that dynamic power relations were occurring between donors and national education policy-makers. These power dynamics resulted in national education policies that mirrored international frameworks at the expense of being responsive to local educational needs. Hayman (2007) discovered similar trends in Rwanda where the national government implemented education policies that more closely mirrored international frameworks at the expense of local educational needs. While both studies did not go into depth about the role and influence of the private sector, both acknowledge trends in international aid for education that need to be further explored in light of the growing prominence of the private sector.

In order to progress the UPE movement and provide more opportunities at reduced risks for private sector involvement, several studies and reports put forth recommendations (Winthrop, Ndaruhutse and Dolan, 2010; Burnett, 2010; Marten and Martin, 2008). Winthrop, Ndaruhutse and Dolan (2010) encourage attracting private sector donors, including foundations, to contribute significantly to the Fast-Track Initiative (FTI) which seeks to address primary education efforts in fragile and conflict-affected states. Burnett (2010) emphasizes the pragmatic importance of involving private sector funding over the ideological criticisms because of an urgent need to attract new donors. Marten and Martin (2008) consider the rise of the philanthrocapitalism that characterizes the international efforts of private foundations. They emphasize the opportunities for a business-like approach to development that is less bureaucratic than traditional bilateral and multilateral donor approaches.

Foundations as Unique Development Partners

Within the literature on private sector contributions to international development, the role of the foundation was often used to further examine the overall influence of private sector interests (Srivastava and Oh, 2010; Marten and Martin, 2008; Edwards, 2009; Arnove and Pinede, 2007). Marten and Martin (2008) provide a useful definition for foundations: foundations are, “not profit oriented, are not of the public sector, use their financial resources (unlike NGOs), are led by an independent Board of Trustees or CEO, and aim to face issues for the common good” (p. 5). Furthermore, foundations’ efforts in international development work can be characterized as either providing financing for other actors and/or implementing their own initiatives with or without other actors (Srivastava and Oh, 2010).

Marten and Martin (2008), and Edwards (2009) discuss the unique opportunities of involving foundations in international development efforts and discuss the trend of philanthrocapitalism. Philanthrocapitalism–the use of business and the market to transform philanthropy and foreign aid (Edwards, 2009)–is a relatively new concept to international development which seeks to conceptualize and explain the role of private foundations’ efforts. Popularized at various international gatherings including the World Economic Forum and the Clinton Global Initiative, philanthrocapitalism attempts to legitimize various claims that the private business sector is capable of addressing deeply entrenched social issues at a global scale. Additionally, a central tenet of philanthrocapitalism is the practice of venture-capital investing which assumes greater control for donors in development efforts (Edwards, 2009). This is of interest to this author in examining the role of private sector financial contributions of foundations. If foundations seek more control over development efforts, what control is left for public sector partners, including bilateral and multilateral agencies, and national education policy-makers? As identified in Bhatta’s (2011) and Hayman’s (2007) study in Nepal and Rwanda, control, as an element of power, created tensions between donors and national education policy-makers resulting in conflicting education policies that did not meet local needs.

Marten and Martin (2008) highlight various benefits to philanthrocapitalism including the private sector’s ability to innovate, manage large and complex organizational structures, mobilize media attention to set agendas, and to measure impact on investments. These benefits are practices of capitalism that have proven themselves successful as indicated by the amount of financial assets that private businesses have accumulated over the years. With the advent of philanthrocapitalism, these practices are hoped to be translatable to international development work.

Srivastava and Oh (2010) criticize the role of foundations in international development work because of their lack of neutrality. They identified in the literature that foundations are highly personally-driven with diverse intentions and motivations. A large part of the Gates Foundations’ assets that are marked for development work come from a single private contributor, Warren Buffet, who donated $30 billion in 2006 (Marten and Martin, 2008). Supposing that Buffet operates under the banner philanthrocapitalism and venture-capital investing, it would be a worthwhile investigation into his intentions and motivations considering that this ‘donation’ rivals the amount given by most bilateral and multilateral funding agencies.

Arnove and Pinede (2007) are more critical of foundations’ role in international development work. They liken the practice of foundations as, “ameliorative practices to maintain social and economic systems that generate the very inequalities and injustices they wish to correct” (p. 329). As identified by Marten and Martin (2008), one of the benefits of foundations and their philanthrocapitalists is their apolitical nature and ability to prioritize development projects based on their need rather than any foreign policy or foreign economic concerns. However, Arnove and Pinede (2007) point to historical developments of American foundations over the past 60 years and their heavy involvement in political issues of the time. At the onset of the Cold War, the Henry Ford Foundation’s 1949 report called for using its vast resources, “to assist democracy to meet [the] challenge” of communism (Roelofs, 2003, p. 30). Arnove and Pinede (2007) also consider a more current topic, “post-September 11, 2001”, and the possible involvement of foundations in funding initiatives that may be diverting funds to support terrorism. While no conclusive evidence was found, it is worthwhile to note how foundations were drawn into a heavily debated topic in the American political discourse, thus refuting claims of their apolitical nature.

Including the Unique Socio-Political Context of Fragile States

Fragile states represent a unique socio-political context in which international development occurs. Fragile states are characterized by weak institutional capacity, poor governance, political instability, and/or the effects of current or past conflicts (Turrent, 2009). Education is a fundamental human right which places the responsibility on public institutions (governments) to provide an adequate basic education. However, fragile states are characterized by weak public institutions which are not able to meet the educational needs of the population. Consequently, due to weak institutional governance, funding education initiatives in fragile states remain a high-risk proposition for donor investment (Rose and Greenley, 2006; Turrent, 2011; Winthrop, Ndarahutse and Dolan, 2010).

UNESCO’s Education for All framework launched the Fast-Track Initiative (FTI) in order to ensure systematic progress towards UPE in states that are severely at-risk of not meeting the MDGs 2015 deadline. It is meant to form a global partnership between donor and developing countries to catalyze funding mechanisms that take into account the unique socio-political nature of fragile states. However, Turrent (2009, 2011) and Winthrop, Ndaruhutse and Dolan (2010) are critical of the FTI’s ability to ensure UPE by 2015. Turrent (2011) highlights the lack of measurements and data on how well a fragile state is progressing towards UPE which the FTI requires in order to ensure the proper disbursement of aid. Winthrop, Ndaruhutse and Dolan (2010) highlight an accountability issue where there exists a risk of funds being diverted towards corrupted governmental institutions. In order for proper aid delivery to UPE initiatives, donors are increasingly demanding mechanisms to reduce the investment risks, including metrics on progress and accountability, which are both dependent on a stronger state.

These donor demands presents confounding issues when considering private sector financial contributions to fragile states. Batley and McLoughlin (2010) discuss the role of private sector partners in education provision in fragile states which involves the allocation of funds. They found that weak public institutions and governance resulted in the private sector to operate without the full knowledge and cooperation of the state, which serves to further delegitimize an already weak state government. Rose and Greenley (2006) found similar issues in another fragile state, Pakistan. They found that public-private partnerships that provide private schools are being advocated by donors because of the inability of the state to provide adequate basic education (Rose and Greenley, 2006). A major provider of private schools in Pakistan is the Aga Khan Foundation, which operates on a contractual basis, case by case (Rose and Greenley, 2006). The absence of political commitment creates high-risk investments for private sector providers and donors resulting in unsystematic partial measures over time. These piecemeal measures stand in opposition to the global consensus to coordinate a systematic response to achieving UPE.


In conclusion, the results of the critical literature review indicate the need for critical discussions on the topics of private sector financing, foundations as unique development partners, and the inclusion of fragile states within the global movement for UPE. It is this author’s analysis, based on the literature, that each discussion is dependent on the other. In order to progress UPE and ultimately EFA, partnerships must be continually explored as the global education discourse continues to evolve to include more development partners. Indeed, the 8th goal of the MDGs, ‘Global Partnerships’, reflects the need for diverse and multiple partners along with traditional bilateral and multilateral development agencies in order to achieve all the preceding goals, including achieving universal primary education (United Nations, 2011).


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