Submission to UK IDC Parliamentary Inquiry
Investment for development:
The UK’s strategy towards Development Finance Institutions

February 2023

1. This submission was drafted by Oxfam, ActionAid, Africa Network Campaign on Education For All -ANCEFA, Coalition for Transparency and Accountability in Education (Liberia), Education International, Eurodad, Global Campaign for Education, Global Initiative for Economic Social and Cultural Rights, Global Justice Now, Initiative for Social and Economic Rights (Uganda), Latin American Campaign for the Right to Education-CLADE, National Education Union (UK), Right to Education Initiative, and World Organization for Early Childhood Education-OMEP. These organisations work to promote the right to education and the realisation of the global education goals including SDG 4. This submission highlights concerns about British International Investment’s (BII) funding in the area of education.

Background on BII investments in education

2. According to its project database, BII has made 40 investments in the education sector over the last 15 years, of which at least 11 are in the provision of pre-primary through to secondary education, in addition to indirect investments through other funds.[1] These include two investments in the controversial for-profit school chain in Africa, Bridge International Academies, also known by the name of its parent company, New Globe Schools.[2] Other types of investments in this portfolio include for-profit universities and technical/vocational post-secondary education, education technology companies, childcare providers and infrastructure/services.

3. BII is currently vested in the majority of these projects indirectly through financial intermediaries. The large majority of education projects over the last 15 years are intermediated investments (36 out of 40), for which BII provides very limited information. BII offers little to no publicly available information about the impact of specific education investments, including in key dimensions such as impact on poverty, access for excluded and marginalised groups, inequalities in educational access and outcomes, and impacts on the wider public education system.

4. In its new strategy for 2022-2026, BII indicates that in education, “we will focus our investment activity on higher education, technical education, and education technology companies. We will not prioritise new investments in K-12 (kindergarten to twelfth grade) private education.”[3] This is a welcome development given the concerns outlined in this submission, although it does not go far enough. It is not a formal commitment to cease investments in K-12 for-profit education, and it is short term. Elsewhere, the strategy indicates BII will “support specialised financial-service products that deliver basic needs. We aim to invest in specialised lenders and insurers that meet the basic needs of people, and also empower banks and other traditional lenders to lend to basic-needs-related segments of the economy [including...] education finance and health insurance.” This suggests that BII support to for-profit schools is at risk of continuing through financial intermediaries such as private equity funds, even if the fewer direct investments cease.

The evidence about for-profit and commercial schools

5. A growing body of evidence raises deep concerns about the negative impact of commercial and profit-oriented private schools in education. In its 2021 report focused on private actors in education, UNESCO’s Global Education Monitoring report warns of growing inequality and exclusion due to private educational institutions’ high costs and weak government regulation, and in particular warns that “profit-making is inconsistent with the commitment to guarantee free pre-primary, primary and secondary education.” It cautions against seeing education as a “market” where competition between providers is a feature; and provides a strong reminder that education must always be free to the user, and that school fees have no place in equitable education systems.[4]

6. In particular, evidence on commercial and for-profit schools raises the following concerns:[5]

1. Exclusion of girls and gender inequity: The widespread elimination of fees in primary schools in the 2000s meant that millions of girls around the world were able to go to school for the first time,[6] however the expansion of low-fee private education threatens to undermine this progress. A review of the academic evidence commissioned by DFID found that girls are not able to access private schools equally to boys.[7] For example, government data from India shows that only 44% of children enrolled in private schools at the elementary level are girls, and the gender gap in private schools has been steadily increasing over time.[8] This approach risks disproportionately excluding girls and deepening gender inequalities in education.
    
2. Serious quality concerns: There is no evidence to support claims that learning outcomes are consistently better in private schools.[9] However, there are serious concerns about education quality in for-profit and low-fee private schools. Commercial chains and for-profit schools often put business interests before education quality by employing poorly qualified, uncertified and poorly trained teachers as well as using other cost-saving measures that undermine education quality, such as not investing in adequate educational materials and facilities.[10] The reliance on unqualified teachers flies in the face of strong evidence from the World Bank and others that the presence of a trained, qualified, and well-supported educator is one of the most important factors for achieving strong learning outcomes.[11]
    
3. Deepening poverty and inequality: Evidence also strongly suggests these schools are not reaching out-of-school children, children in rural areas, or children from the poorest families.[12] Families who do manage to find or borrow the money to pay fees often do so at great sacrifice, forgoing other basic needs and causing them to fall deeper into poverty or debt.[13] In Ghana, for example, Omega Schools, a major low-fee private school chain that targets poor communities, charges fees for one student that are equivalent to 40% of the income of the poorest families’ household income.[14] A poor, average-sized family in Pakistan would have to spend 127% of its income to send all its children to a low-fee private school.[15] In India, children from the poorest wealth quintile are almost 5 times less likely to attend private school than those from the wealthiest quintile.[16] Low fee and for-profit schools risk creating or reinforcing segregated and stratified education systems, leading to greater economic and social inequality.
    
4. Resistance to regulation and lack of accountability: Commercial chains often flout national laws and resist regulations that seek to ensure compliance with education standards, including regulations related to teacher certification and curriculum standards, as well as labour laws related to teachers’ work conditions and pay.[17] This increases the risk of corruption, and undermines governance and the rule of law in host countries. For example, Bridge International Academies was ordered by the Ugandan government to close its schools in the country in 2018 after its ongoing refusal to meet standards related to teacher certification and qualifications, curriculum, and school facilities.[18]
    
5. Negative impact on public education systems: Whilst some investments are relatively small in value, they can support the expansion of commercial school chains and can therefore catalyse dramatic changes in host country education systems. Little rigorous research has assessed the cumulative effects of large-scale private schooling on the long-term sustainability of public-school systems, but concerns include undermining the political constituency for investment in quality public schooling in the longer term, and the creation of an untrained teacher workforce due to reliance on underqualified teachers hired on short-term contracts. Moreover, where such schools receive public funding, they displace efforts and funding to expand public education, leaving limited alternatives for those children who are left behind.[19]

7. Given the concerning evidence about socio-economic and gender inequality and exclusion of low-income communities in low-fee and commercial private schools, BII’s investments in for-profit schools would seem to undermine its mission to “ensure more productive, sustainable and inclusive economies” and “enable people… to build better lives for themselves and their communities.”[20] Importantly, we believe these investments contradict the UK government's broader commitments to fighting poverty, and undermine its focus on women and girls, and specifically, the importance of girls’ education.

Concerns about BII Investments in Bridge International Academies/New Globe Schools

8. BII has made two investments in New Globe Schools/Bridge International Academies: a $7 million direct equity investment in 2013, and in 2014, an indirect investment via the financial intermediary Novastar Ventures East Africa Fund (amount not disclosed).[21]

9. Civil society organisations have been raising concerns about the company’s operations for a number of years, including in a 2018 open letter to investors[22] signed by 88 organisations highlighting concerns about the quality of education, lack of transparency, poor labour conditions, high cost relative to family income, and lack of respect for the rule of law in host countries. For example, all 63 Bridge Schools in Uganda were ordered to be closed by the High Court of Uganda in 2018 after they failed to comply with requests from the Ministry of Education to meet its legal and educational standards, including on teacher certification.[23] In addition, concerns were raised about the company’s model which seeks to extract profit from the aspirations of poor parents, who sacrifice other basic needs, or fall into debt, to pay fees for an education of uncertain quality.

10. More recently, an evaluation of a program in Liberia to outsource public schools to private operators, including Bridge Academies, found only modest learning gains in Bridge schools that plateaued after the first year, while at the same time cited “stark tradeoffs” such as mass expulsions of students from Bridge schools leading to dropouts and negative impacts on access to education, per-student costs at least three times higher than in public schools, and failure to reduce sexual abuse.[24] Another study recently found evidence of student learning gains in Bridge schools in Kenya,[25] however education organisations have highlighted the limitations of the study and called for caution in interpreting its findings.[26]

11. In March 2022, the World Bank’s International Finance Corporation (IFC) divested from New Globe Schools/Bridge Academies after a series of serious complaints to the IFC’s independent accountability mechanism, the Compliance Advisor Ombudsman (CAO) regarding the IFC’s investment in the company (see Annex). Allegations in the complaints range from violations of labour rights, child sexual abuse involving BIA staff and students, and inadequate health and safety measures that led to the tragic death of one child and the injury of another. Compliance appraisal reports by the CAO in the course of their investigations have found “substantial concerns regarding the child safeguarding and protection outcomes of IFC’s investment in Bridge”[27] and regarding its environmental and social outcomes, including community impacts, registration status of schools, and adherence to health and safety requirements.[28] The final reports are still forthcoming.

12. The International Development Committee has itself released a report on DFID’s work in education in 2017, which included concerns about UK funding for Bridge Academies and referenced the predecessor committee’s investigation which included field visits to Bridge schools in Nigeria, Uganda and Kenya, and which raised “serious questions about Bridge’s relationships with governments, transparency and sustainability.”[29]

A growing consensus: Public development assistance should not support for-profit provision of education

13. Recent developments in key international and regional agencies have resulted in a new standard of best practice for public development assistance in education, which follows the principle that public development assistance should not support for-profit or commercial provision of core education services.

14. In June 2022, the IFC announced that it would not resume its investments in fee-charging kindergarten through grade 12 (K–12) private schools, following the release of an independent evaluation by the World Bank Independent Evaluation Group (IEG) on the IFC’s investments in this area and their impacts on educational outcomes, poverty, and inequality.[30] The evaluation noted that its “findings support a single conclusion: resumption of IFC investments in K–12 private schools is not advisable without making substantial changes to IFC’s approach.”  In its response to the evaluation, IFC noted that most private K–12 schools are difficult to invest in directly, and cited a number of challenges with such investments including weak financial results and the "potential for investments in private K–12 schools to exacerbate inequalities and have unintended, undesirable spillovers into the public sector school system. IFC management takes these findings seriously and wishes to refrain from activities unfavourable or detrimental to international development."

15. Similar recent policy shifts have included the Global Partnership for Education’s decision in its 2019 Private Sector Strategy to prohibit funding to for-profit provision of core education services, and a 2018 resolution by the European Parliament that declared the European Union and its Member States must not use development aid money to fund commercial private schools. Most recently, in 2022 the African Commission on Human and Peoples’ Rights in its General Comment No. 7 on State obligations in the context of private provision of social services, stresses the non-commercial character of public services, including education. These positions uphold the principle that education is a right, not a market commodity. Investing in access to free and inclusive public education of good quality is the best way to ensure fulfilment of SDG4 and education for all.

Recommendations for BII

16. Formally commit to cease investments in for-profit schooling: We welcome BII’s recent education strategy which indicates that it will not be prioritising direct investments in K-12 education provision. However, given the body of deeply concerning evidence about this approach, a more unequivocal and long-term policy commitment is needed that also clearly covers indirect investments. BII should follow the decision of IFC and commit to ceasing all direct and indirect investments in for-profit preschool through secondary education provision, and should cease to provide policy advice in this area. We would also like to see a similar commitment from FCDO which is supporting for-profit education through different channels with its aid funding.[31]
     
17. Exit investments in New Globe Schools/ Bridge International Academies: In light of the documented concerns about the behaviour and operations of Bridge International Academies, also known as New Globe Schools, we recommend that BII exit in the shortest possible time from its investments in the company and refrain from making any future investments. BII should fulfil its legal due diligence obligations and responsibilities, investigate concerns about the company’s behaviour and take action to respond to the harms caused by these investments.
     
18. Ensure all investments in education support the right to education, comply with human rights standards, and contribute to strengthening the public education system in host countries, as well as supporting good governance, democratic control, transparency and accountability. The UK Government should commit to supporting the development of free, quality, public education systems in line with its commitment to the achievement of SDG4 by 2030.

ANNEX

Summary of CAO complaints regarding IFC’s investment in Bridge International Academies: 

19. The IFC’s accountability body, the Compliance Advisor Ombudsman (CAO), has received a series of complaints about the IFC’s investment in the commercial school chain Bridge International Academies (BIA). These include a complaint filed in April 2018 by EACHRights in Kenya on behalf of parents, students and teachers, raising concerns about the company’s health, safety, and labour conditions as well as economic discrimination, lack of parental inclusion, and transparency. In October 2019, CAO’s first compliance appraisal report found “substantial concerns regarding the Environmental & Social outcomes of IFC’s investment in Bridge”. The final investigation report is still forthcoming. Three other cases have been filed since then, 02, 03, 04, involving the health and safety of students, as well as child safeguarding concerns, resulting in a subsequent compliance investigation for case 04.
     

1. BIA-01/Kenya case: In April 2018, 10 parents and former and current teachers at BIA submitted a complaint highlighting BIA’s negative impacts, especially on the right to education, health and safety, and on labour rights. In its Appraisal Report published in October 2019, the CAO announced its decision to carry out a full compliance investigation into the adequacy of the IFC’s due diligence and supervision of its investee. “CAO concludes that there are substantial concerns regarding the E&S outcomes of IFC’s investment in Bridge considering: (a) the specific allegations of adverse impacts to teachers, parents and students raised in the complaints; (b) the E&S risk profile of the schools in light of their number, locations and concerns regarding their construction methods; and (c) the registration status of the schools and adherence to relevant health and safety requirements.”  The compliance investigation is ongoing.
    
2. BIA-02/Kenya and BIA 03/Kenya cases: In June 2020, the CAO confirmed acceptance of two new cases on BIA, filed by the parents of two children who were electrocuted while in a BIA school in Nairobi, Kenya. The electrocution caused the death of one child and injuries to the other. The Complainants and the Company agreed to engage in dispute resolution to try to arrive at a mediated settlement. The dispute resolution process has concluded for BIA-02 case and is still ongoing for BIA-03.
    
3. BIA-04/Kenya case: In the course of the BIA-01/Kenya investigation, CAO staff and experts travelled to Nairobi in February 2020. The investigation team spoke to community members who raised concerns regarding instances of child sexual abuse at Bridge schools. In December 2020, the CAO concluded in its appraisal report that there are “substantial concerns regarding the child safeguarding and protection outcomes of IFC’s investment in Bridge considering: (a) specific allegations of child sexual abuse involving Bridge staff and students; (b) the child safeguarding and protection risks of the schools in light of their number, their student body (coming from low-income families), and the young age of students.” The compliance investigation is ongoing.

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