paying for education: how the world bank and the international monetary fund influence education...

7/30/2019 Paying for Education: How the World Bank and the International Monetary Fund Influence Education in Developing

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This document was written for Oxfam America. Portions of it may be found in other publi-cations by Nancy C. Alexander, including: Accountability to Whom: The World Bank and ItsStrategic Allies, published in Derde Wereld in May 1998; various issues of News & Notices forWorld Bank Watchers; NGOs in the International Monetary and Financial System, (withCharles Abugre) in International Monetary and Financial Issues for the 1990s, published by

UNCTAD; and Financing for Development, published by Friedrich Ebert Stiftung.Requests for reprints should be sent to Nancy C. Alexander, Director of the Citizens Net-

work on Essential Services A Project of the TIDES Center 7000B Carroll Avenue Takoma

PEABODY JOURNAL OF EDUCATION, 76(3&4), 285338Copyright 2001, Lawrence Erlbaum Associates, Inc.

Paying for Education: How the WorldBank and the International MonetaryFund Influence Education inDeveloping Countries

Nancy C. AlexanderCitizens Network on Essential Services,A Project of the TIDES Center

The 1980s are sometimes described as a lost development decade.School enrollments slumped. The tremendous progress made toward uni-versal primary education in the 20 years from 1960 to 1980 was arrested orreversed in many countries.

In 1990, the Education for All (EFA) Conference in Jomtien, Thailand,made an urgent appeal to governments, donors, and creditors to addressthe decline in basic education. Donor governments and creditors, includ-

ing the World Bank, made commitments to help developing countriesachieve education for all.

In June 1996, a conference was convened in Amman, Jordan, to assessprogress since the EFA Conference in Jomtien. The United Nations


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International Childrens Emergency Fund (UNICEF, 1998) cites the find-ings of the conference report:

Overall, primary enrolment was the brightest sign of progress bymid-decade, with some 50 million more children in developing coun-tries enrolled in primary school than in 1990. Discouragingly, howev-er, this figure only managed to keep pace with the numbers of chil-dren entering the 6- to 11-year old age group over the period. (p. 15)

Unsatisfactory progress was noted in some regionsSouth Asia and sub-Saharan Africa. Progress in educating girls had also been disappointing.

During the five years following the conference, little gain was recorded

in the developing world in girls primary enrollment as it rose only bya fraction of a decimal point, from 45.4% in 1990 to 45.8% in 1995. Thegender gap in adult literacy actually widened over the same period.(UNICEF, 1998, p. 15)

At the World Education Forum in April 2000, the international commu-nity promised to launch a global initiative to mobilize resources to sup-port national education efforts. However, since the Dakar, Senegal,Forum, there has been no headway toward launching the initiative.

Educational progress is uphill. The world economic slump has hitdeveloping countries hard. Many are in recession or depression. Mean-while, the donor and creditor community is increasingly tight-fisted.However, as discussed later, more money for education is not necessarilythe answer. Even with vigorous education campaigns, there will be disap-pointing progress unless creditorsespecially the International MonetaryFund (IMF) and the World Bankbegin to support homegrown, nationaldevelopment strategies and education action plans. In addition, the insti-tutions need to change their policy prescriptions for ailing economies, ingeneral, and for the education sector in particular.

This article provides an overview of the roles of the IMF and WorldBank from 1980 to the present. It distinguishes between two types ofimpacts exerted by the IMF and World Bank in the education sector ofborrowing countries: (a) the World Banks direct involvement in the edu-cation sector of developing countries and countrywide economic reformsand (b) Structural Adjustment Programs (SAPs) financed by the IMF aswell as the World Bank.

The first two sections of this article address the World Banks directinvolvement in education through project investments (e.g., school con-struction, curriculum development, or textbook publication) and reformof the education sector (e.g., school privatization, cost recovery, decentral-


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Paying for Education

1Technically, governments with active IMF programs are not borrowers, although theterm is used in this article They are actually purchasers of resources some of which they

Bank. Unlike the World Bank, the IMF does not make project investmentsor reform education policies; it only engages in structural (and sectoral)adjustment lending. The impacts of IMF- and World Bankfinancedadjustment programs ripple throughout a society, including householdsand school systems.

Few independent analysts have attempted to evaluate the impact ofadjustment on education. This is unfortunate because adjustment policiesare a more powerful influence on the education sector than educationprojects. As a result of the hiatus in research, we are significantly depen-dent on the World Bank and IMF for their own evaluations of the impactof adjustment on education.

This article finds that the operations of the institutions have had bothpositive and negative impacts. The net influence of each institution hasbeen different in different countries, among different groups within coun-tries, and in different time frames. Much of the literature about the impactof the institutions addresses their track records in the 1980s, when evenaccording to their own admission, the institutions paid scant attention tothe impacts of their economic reform loans on vulnerable people.

This article underscores the World Banks conclusion that, in manycountries, adjustment lending had a negative impact on primary educa-tion in the 1980s. During the 1990s, there appears to be a weak, but posi-tive, response to measures taken by the institutions and borrowing coun-tries to modify SAPs. That is, in some circumstances, safety nets andeducation investments have helped to stem school enrollment declines orincrease enrollments.

In 2002, the World Bank Group launched a Private Sector Development(PSD) strategy that aims to expand the provision of educational servicesby private firms and nongovernmental organizations (NGOs). In selectedinstances, this approach may have merit. In general, however, the PSDstrategy endangers educational progress because it ignores the lessons ofexperience. Among other things, it ignores the fact that when educationalservices are provided at cost, they will not reach poor populations evenwhen subsidy schemes are used.

To analyze the influence on education of the IMF and World Bank oper-ations, this article reviews the following issues:

IMF and World Bank loans. Historically, the IMF and World Bankprovide loans1 at market rates as well as credits at concessional


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rates (with interest rates below 1%). Shortly, the World Bank willincrease its levels of grant assistance.

The volume of resources for education. Too often, the public seesincreasing amounts of resources for education as a good thing.However, history shows that aid has sometimes been used todismantle education systems. Greater quantities of aid should beused only to support good education policies.

The types of loans: projects investments or adjustment loans. Overtime, adjustment loans generally have a stronger influence on edu-cational outcomes than do investments in education projects.

The purposes of reform. The purpose of many adjustment pro-grams (e.g., cutting deficits and lowering per pupil costs) can com-plement or conflict with educational goals.

The impacts of reform. In many countries, the formulae used bythe Bank to reform the education sector have had more negativethan positive impacts. Furthermore, SAPs have often sabotagededucational progress while weakening the state. Ultimately, thestate needs to be the guarantor of educational access, quality, andprogress.

IMF and World Bank Instruments: Grants and Loans

As a rule, bilateral donor governments and United Nations agenciesprovide grant aid, whereas the World Bank and IMF provide loans andcredits. Hard currency debt obligations to the institutions must be repaid.

Grants are usually more valuable to countries than foreign loans;soft, or concessional, credits are more valuable than hard, or marketrate, loans. Concessional loans have a significant grant component; theyhave low interest rates and long grace periods.

The World Bank has facilities that offer both types of loans. The Inter-national Bank for Reconstruction and Development (IBRD) extends so-called hard or market rate loans. The International Development Asso-ciation (IDA) extends concessional credits to poorer governments. IBRDand IDA together constitute the World Bank.

The United States is exerting tremendous pressure on the IDA to pro-vide an increasing amount of grant financing, especially for education.Ordinarily, this would be good news. However, the United States wantsthe World Bank to privatize education and use the grants to offset thecosts of providing education to poor populations. Experience demon-strates that efforts to offset educational services through subsidy schemes


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2Germany, Japan, the United Kingdom, France, and The Netherlands shifted considerableaid into basic education. Australia, Austria, Canada, Denmark, Finland, Switzerland, andthe United States made modest shifts Belgium Italy and Norway decreased allocations to

The Volume of Resources for Education

Grant assistance has declined over the last decade. In 199495, bilateraldonor governments provided less support for education (both in absoluteterms and as a percentage of total aid) than they did in 19891990 beforethe 1990 EFA Conference in Jomtien. The good news is that the volumeand percentage of education aid devoted to basic education has tripled.2

World Bank lending for education has increased significantly since theJomtien conference. Overall lending for education doubled from the 1986to 1990 period to the 1991 to 1998 period. Lending for primary educationhas increased by 360%. In 1995, the volume of Bank loans ($3.1 billion)represented 28% of all external finance for education.

Of the approximately $15 billion in education loan commitments madeby the World Bank from 1991 to 1998, two thirds were at market rates. Onethird ($5.7 billion) was for poorer countries, which borrow from the IDAand are concentrated in Africa. From the mid-1980s to the mid-1990s, theshare of education lending rose for two regionsSouth Asia and LatinAmerica and the Caribbean; the share of education lending fell for fourregionssub-Saharan Africa, Middle East and North Africa, East Asiaand the Pacific, and Europe and Central Asia.

The volume of World Bank assistance to the education sector under-states the institutions influence, because high levels of assistance provid-ed by bilateral donors usually help finance World Bankfinanced projectsand policies. Bank assistance (indeed, all external finance) represents atiny proportion (0.5% of 1%) of global spending for education. However,in some times and places, it is significant in terms of volume of resourcesfor, and influence on, education. For instance, during the 1980s, Bankresources constituted 16% of the resources available to African govern-ments for education.

The Types of Loans

Project lending is very different from adjustment lending. WorldBankfinanced projects take 5 to 7 years for implementation. In contrast,adjustment loans are quick disbursing.

Adjustment loansSAPs and sector adjustment loans (SECALs)influence both the demand for and supply of educational services. Demand


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3Figures derived from a list provided to the author by the Poverty Reduction & Economic

for educational services is elastic; that is, demand rises or falls as directand indirect costs of education rise or fall relative to a familys incomelevel. Families make choices and set priorities. Often, families place ahigher value on education of boys than girls.

The Purposes of Reform

In addition to influencing the incomes of households and the cost ofeducation, SAPs attempt to reduce the budget deficits of borrowing gov-ernments. Because education budgets usually constitute a significant por-

tion of the federal budget, SAPs often change the level or composition ofeducation spending. Such changes affect many aspects of school systems,such as school construction, administration and maintenance, teachersalaries and benefits, and educational materials.

Generally, adjustment loans for the education sector or for an entireeconomy are more powerful and influential than project loans. Hence, anunderstanding of the net impact of the IMF and World Bank on educa-tion relies heavily on an understanding of the impact of adjustmentloans.

Adjustment loans for the education sector may attempt to privatizeand decentralize education while recovering costs through user fees.They also reorient spending from secondary and higher education tobasic education. These recipes, or formulaic approaches to the educa-tion sector (World Bank, 1979), have often retarded educationalprogress. In addition, the goals of SAPs often conflict with the goals foreducation.

From 1980 to 1993, there were more than 3,000 policy conditionsattached to World Bank SAPs, but only 50 related to education. Of these

50, only 6 explicitly called for increased spending on education.3 Nowsocial conditionality (requirements in a loan agreement in addition to theterms of repayment) is the rule rather than the exception. However, socialconditions are often discretionary. The important binding conditions onSAPs (e.g., up-front conditions, which are imposed at negotiation,preappraisal, and prior to release of loan installments, or tranches) mayhave an adverse impact on the social sectors. Among other things, thesebinding conditions usually induce governments to cut budget deficits,which puts pressure on social sector spending.


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4The World Bank refers to the institutions market rate window, the IBRD, as well as theconcessional window, the IDA. The IBRD is the facility for countries with per capita annual

incomes exceeding $925; IDA is the facility for poorer countries. IDA provides soft, or con-cessional, loans to the poorest countries, which are concentrated in sub-Saharan Africa andSouth Asia Affiliate members of the World Bank Group include the International Finance

The World Bank Groups4 Approach to theEducation Sector

Volume of Assistance for Education

One can gauge the influence of a donor or creditor on the educationsector of a developing country by reviewing the volume of assistance andits type, purpose, and impact. Too often, the volume of assistance provid-ed by a financier is used as a proxy for effectiveness. This is misleading.

Forms of Assistance: Grants and Loans

Bilateral donor governments and United Nations agencies give grantsto developing country governments. Grant resources may seem morevaluable to developing country governments than loans, because grantsdo not need to be repaid. However, the World Bank is considering extend-ing grant assistance to subsidize privatization of education in borrowingcountries.

Declining Grant Aid for the Education Sector

In 1994 and 1995, bilateral donor governments provided less supportfor education (both in absolute terms and as a percentage of total aid) thanthey did in 1989 and 1990 before the 1990 EFA Conference in Jomtien.However, the percentage of education grants devoted to basic educationtripled during this period.

In the early 1990s (19911994), the volume of Bank loans for education($7.9 billion) represented 40% of all bilateral grants ($19.8 billion). Thispercentage has increased. According to UNESCOs (1998) World EducationReport, the World Banks education commitments represented 46% ofbilateral assistance and 28% of all assistance in 1995 (Table 1).


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Table 1

1995 External Expenditures for Education in Millions of Current U.S. Dollars

Expenditure Amount

Bilateral assistance $4,450All multilateral resources $2,717World Bank ($2,057)UN programs $278UNESCO ($100)Total $7,445World Bank as % of total 28%

Note. From World Education Report (p. 112), 1998, Paris: United Nations Educational, Scientific

and Cultural Organization. Copyright 1998 by UNESCO. Reprinted with permission. UN =United Nations; UNESCO = United Nations Educational, Scientific and Cultural Organization.

Technical Assistance That Never Reaches Developing Countries

The Development Assistance Committee (DAC) of the Organizationfor Economic Cooperation and Development (OECD) categorizes aid asfollows: investment projects, sector aid, technical cooperation, and other.Importantly, 70% to 75% of all donor support since the mid-1980s hasfocused on technical cooperation. Usually, most technical cooperationmonies and some project monies are spent in donor countries for purpos-es such as training. Thus, it is calculated that 60% to 80% of all educationaid commitments are spent in donor countries (Bennell & Furlong, 1998).

Levels and Types of Bank Lending

Overall lending for education doubled from the 1986 to 1990 period to

the 1991 to 1998 period. During the 1990s, lending levels for basic educa-tion have fluctuated wildly. In fiscal year (FY) 1998, the level of educationloan commitments$3.1 billionwas three times the FY 1997 level. The$3.1 billion level represents 36 loans to 28 countries, which is 9.1% of totalWorld Bank loan commitments of $28,594 billion. Commitments are dis-bursed over a period of years. In FY 1998, education loan disbursementstotaled nearly $1.9 billion.

Basic Education Emphasis

Bank lending for primary education increased by 360% from the 1986 to1990 period to the 1991 to 1998 period During the nine FYs 1990 to 1998


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5If country conditions change in the interim the Bank updates the CAS by preparing a

which is four times the annual average for the years 1986 to 1989. Duringthe 1990s, basic education constituted about one third to one half of Bankeducation lending. Although basic education encompasses adult literacyas well as primary education, adult literacy is not a Bank priority. In FY1996, only two projects (in Ghana and in Indonesia) focused on this goal.

Prominence of Education Operations in the Banks Loan Portfolio

The World Banks medium-term plan for a borrowing country, theCountry Assistance Strategy (CAS), lays out the framework and rationale

for Bank investments in a country. A CAS is prepared every few years foreach borrowing country.5 The CAS describes plans for both kinds of lend-ing operations: economic reforms, or SAPs, and project investments indifferent sectors, such as agriculture, power, education, and health. TheWorld Banks CASs identified education as a priority in 77% of all CASsprepared during FY 1997 and the first half of FY 1998. Twenty percent ofthe subject CASs proposed education loans; an additional 20% proposededucation research. Education loans represented 9% of all loans proposedby the CASs, whereas education research represents 7% of all research

proposed by the CASs.

IBRD and IDA Lending for Education

International Bank for Reconstruction and Development. In 1962, whenthe Bank began education lending, there was controversy about whetherit was appropriate to use Bank finance (rather than grants) for educationpurposes. The Board considered a proposal to use IBRD net profits foreducation grants in IBRD countries. However, it was decided that netprofits should be channeled to low-income, IDA countries.

Of the approximately $15 billion in education commitments madeby the World Bank from 1991 to 1998, nearly two thirds were extendedby the hard loan window, the IBRD. The biggest borrowers for edu-cation are IBRD or blend (both IBRD and IDA) countries: Mexico,India, Brazil, Indonesia, China, Pakistan, Argentina, Korea, and thePhilippines.


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6The IFCs approach to the education sector is described in Karmokolias and Maas (1997).7The World Banks (1995c) 1995 Annual Report referred to the institutions shift to sup-

porting private-sector investment (as opposed to direct lending to governments) as a dra-matic departure from what had been Bank policy for half a century.

8For the most part, the IFC would also take charge of the World Bank Groups on-lendingoperations and policy risk guarantees. That is, if the market does not provide these servicesto borrowing countries, the IFC/MIGA will provide them (or refer the borrower to the IBRDand IDA).

9One internal paper distributed within the Bank in March 2001 envisioned the Banks

administrative budget growing from $1.2 billion in FY 2001 to about $1.3 billion in FY 2002.It succeeds the Banks FY 1998 to FY 2000 Strategic Compact.

10IDA commitments increased to $6 8 billion for 134 projects in FY 2001 compared with

International Development Association. During this time frame, overone third ($5.7 billion) of the $15 billion in commitments represent creditsextended by the IDA. Most IDA countries are in Africa in which the ratioof enrollments to the primary school-age population is declining. In FY1998, 11 of 35 new education loan commitments were to IDA countries.(Seven of the 11 were in sub-Saharan Africa.)

The World Banks financing of education fell from an average of $2 bil-lion per year in the 1990s to $1 billion per year for the last 2 years. Theselevels continue to gyrate. Why? First, education is increasingly a priorityof powerful shareholder governments, such as the U.S. government.Hence, the Bank is under pressure to move money for education. Sec-ond, there are bottlenecks in the lending pipeline because many govern-ments cannot or will not provide the local cost financing components ofeducation operations.

Implementation problems also stem from other factors, such as politi-cal turmoil and weak institutions. Some Bank critics claim that SAPs,which have downsized governments, are partly to blame for the inabilityof governments to efficiently process and administer education loans.

International Finance Corporation.6 The power and authority of theWorld Banks private-sector affiliate, the IFC, is expanding.7 (The IFC hasa mandate to lend to, and take equity positions in, private ventures.8) TheIFC will increasingly team up with the Banks soft loan arm, the IDA,which lends to low-income governments. The Bank increased its budgetin FY 2002 to help finance expanded lending to low-income borrowers,9

which is expected to reach $7 billion in FYs 2002 to 2004.10 Together, theIFC and IDA are aggressively promoting the privatization of education.The World Bank has an online service, EdInvest, which guides investorsto profitable ventures in the education sector.


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11IFC investments increased four and a half times over in real terms between 1980 and2000 The IFCs infrastructure department was created in 1992 and by 2000 one fifth of IFC

The IFCs paper, IFC: Strategic Directions (World Bank, 2001), targetsfive frontier areas for business expansion, including the social sectors,infrastructure, small and medium-sized enterprises, domestic financialinstitutions, and information technology and communications. Especiallyin these areas, the IFC will increasingly take the lead in expanding privateprovision of services,11 and IDA will work with governments to designsubsidy and other schemes to offset the costs of private provision to low-income consumers.

Initiatives to privatize education are being taken without regard for theneeds and preferences of citizens in borrowing countries. Indeed, the IMFand World Bank are suspending debt relief for several countries due totheir inadequate progress in privatization. Such coercive tactics subvertefforts by citizens in borrowing countries to shape their own futurethrough national planning processes (e.g., the Poverty Reduction StrategyPaper [PRSP] process; World Bank, 1992).

Regional patterns. From the mid-1980s to the mid-1990s, the share ofeducation lending rose for two regionsSouth Asia and Latin Americaand the Caribbean; the share of education lending fell for four regionssub-Saharan Africa, Middle East and North Africa, East Asia and thePacific, and Europe and Central Asia. Of the six geographical regions,Latin America and Caribbean and East Asia and the Pacific received themost education resourcesabout 65%.

Demand for education loans. Governments prefer grant financing toloan financing of education. Historically, demand for education loans hasbeen sluggish due to factors such as:

The high level of sustained, recurrent costs (e.g., teacher salariesand educational materials) required for effective education opera-tions. Governments prefer to borrow for capital expenditures (e.g.,construction of facilities).

Education operations, like other operations, require that borrow-ers provide counterpart funds. Borrowers provide almost 20% ofthe total cost of education operations in counterpart funds. Thepoorer governments have greater difficulty providing counterpartfunds.


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Returns on education are realized in the long term. Educationoperations do not usually generate a stream of revenues in the nearterm. Nor do they directly contribute to the generation of foreignexchange revenues, which can help to service foreign debts andimport goods and services.

Thus, although lending for education has been expanding since the late1980s, demand by the poorest countries is much lower than demand bylower middle-income and middle-income countries.

Many NGOs in developing countries oppose the government practiceof borrowing at market rates for social services, which they believe theirgovernment should underwrite with their tax dollars. Some NGOs alsooppose greater World Bank provision of grants for education wheregrants would subsidize the privatization of education.

Fungibility (the ability to freely move money from one category of expenditureto another). As described later, aid and credit are sometimes diverted forother-than-intended purposes. Once assistance reaches a governmentstreasury, it is fungible or transferable for any purpose. Education assis-tance is especially fungible because governments are averse to providingsustained levels of local cost financing for purposes such as teachersalaries and educational materials. In addition, where there are IMF pro-grams, governments may divert assistance to avoid violating IMF budgetdeficit targets.

Staffing

The Bank has approximately 240 staff working in the education sector.Of this total, about 20% have graduate exposure in the field of education.The World Banks 10,000 staff members are organized into thematic net-works that provide services to country and regional departments.

The staff of the country and regional departments within the Bank holdthe reins of power in the Bank. A powerful country director, along with achief economist, staffs each Country Management Unit. In conjunctionwith their client country or countries, these individuals coordinate thedesign of CASs and determine the level and composition of lending,including education lending.

The Country Management Units generate demand for the advice andservices of the Banks thematic networks. The Human Development (HD)


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12In addition the Bank and the IFC offer a variety of partial risk and partial credit guar

and social protection operations to the country and regional departments.The HD Network is relatively powerless compared with the thematic net-works that focus on macroeconomic reform, private-sector engagement,and infrastructure.

Lending and Nonlending Education Services

Lending Services

The principal loan instruments of the World Bank are (structural and

sectoral) adjustment loans and project investments.12

Adjustment loansare popular with the World Bank and its borrowers because they are fastdisbursing and inexpensive to process. In contrast, project loans disburseslowly over the course of 6 or more years.

As a rule, adjustment programs have a greater impact on the educationsector than do project investments. Thus, it is unfortunate thatresearchers that seek to understand the influence of the World Bank onthe education sector tend to focus on education projects and overlookadjustment programs. Hence, the public tends to have a distorted view of

the role of the World Bank and the IMF in education. Education sectoradjustment policies and structural adjustment programs are discussed inthe next sections.

Structural Adjustment Programs

Adjustment loans, which aim to liberalize and privatize economies inthe context of strict budget discipline, are controversial and unpopular

for reasons described in the next sections. Hence, the IMF and WorldBank are gradually expunging the term adjustment from their lexicon. Atpresent, many World Bank adjustment loans to low-income countries arenow called Poverty Reduction Support Credits (PRSCs); IMF loans topoor countries are called Poverty Reduction and Growth FacilityArrangements. World Bank adjustment loans to middle-income countriesare being called Development Support Loans. These name games are cos-metic; they are not accompanied by any change in the institutions policyprescriptions.


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13In the 1989 movie Field of Dreams, a lover of baseball believed that if he built the perfectballpark, baseball players would rise from the dead to play

Sector Adjustment Loans

Adjustment loans for the education sector often attempt to privatizeand decentralize education while recouping costs through various means,including user fees.

Hybrid Loans

Adjustment provisions are also being packaged with project investmentloans. Hybrid loan instruments, including adaptable program loans (APLs)and learning and innovation loans (LILs), combine adjustment and projectelements. The APL is a loan with a long-term development purpose and aphased-in implementation process, which allows the borrower to pilot andthen scale up and replicate projects. Like the APL, the LIL allows a grow-as-you-go approach to lending. However, it is smaller in scale. These newinstruments are especially well suited to education operations, whichinvolve a variety of governmental and nongovernmental stakeholders.

Project Investments

In the early days of Bank project lending, nearly 80% of projectsinvolved civil works construction. The volume of construction hasdeclined steadily and now stands at about 23% of lending.

Most education expenditures are recurrent expenditures, such asteacher salaries and benefits, textbooks, and other educational materials.However, until the late 1980s, a Bank policy prohibited loans to supportrecurrent expenditures. When this policy changed, the composition ofBank lending changed. In 1995 to 1997, about 60% of operations supplied

equipment and textbooks or provided technical assistance.Bank-financed projects focus on the supply side of educationthat is,

provision of buildings, technology, and educational materials. Supply-side financing works on the field of dreams theory that if you buildthe school, they (the students) will come.13 Providing a place in schoolfor every child is a demand-side as well as a supply-side challenge; fami-lies must be able to afford the direct and indirect costs of educating theirchildren.


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14The average 6-year-old girl from a low- or middle-income country can expect to attendschool for 7.7 years; the average 6-year-old boy can expect 9.3 years of schooling (Patrinos &

Ariasingam, 1996).15Sun Microsystems, URLabs, AMP, Cisco Systems, Advanced Network Services, Intel,Apple, Lucent Technologies, Security Storage, Microsoft, and 3com

Projects are only beginning to address issues relating to instructionalquality and demand-side barriers to education faced by certain popula-tions. Barriers come in many varieties: language barriers, gender discrim-ination,14 high direct and indirect costs, the opportunity cost of educa-tionthat is, income foregone from children forsaking employment forschool, the location of schools in deprived rural settings, trade-offsbetween investing in the education of different children within a family,cultural and religious biases with respect to the value and type of appro-priate education, and so on.

Nonlending Services

Training

In the late 1990s, six private foundations, 21 bilateral donors, and 20multilateral development organizations funded activities of the EconomicDevelopment Institute (EDI). During 1998 and 1999, EDI, which is theBanks training and education arm, had 21 core courses, one of whichfocused on education reforms.

EDIs program on education reform is intended to build capacity andconsensus for education reform in developing countries, focusing onthree areas, education financing, improved governance, and school andteacher effectiveness. EDI also has a Girls Education Program, which ispart of the Partnership for Strategic Resource Planning, a multidonor col-laboration with African countries led by African Women Educators(World Bank, 1998a, p. 32).

In 1997, 11 companies gave substantial support for EDIs World Linksfor Development, an electronic network for teachers and students on

development issues.15 This program reached 105 schools in 11 developingcountries in FY 1998.

EDI also has a program in Distance Education, Technology and Net-works for Education, Health and Population, which helps countriesuse distance education, technology and networks to address problems


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of access and quality in their health and education sectors (WorldBank, 1998a, p. 32).

Grant Giving

In late 2000, IDA began to provide a large volume of grants for educa-tion in recipient countries. To date, however, IDA grant giving has beenlimited to countries in conflict or projects funded by the Banks Develop-ment Grants Facility, which endorsed the first year of a multiyear programto support UNICEFs education programs. In FY 1998, a $1.2 million grantsupported small-scale innovative programs at the community and locallevels to increase girls enrollment rates. A partnership between the U.K.sDepartment for International Development, the Rockefeller Foundation,and UNICEF (1998, p. 70) will study the implementation of girls educationprojects and initiative.

The Banks Education Knowledge Management System is designed toprovide clients, partners, and staff of the Bank with the latest informationin the following areas: access and equity in basic education, effectiveschools and teachers, education and technology, economics of education,early childhood development, education system reform and manage-ment, and postbasic education and training.

Research

Recent or forthcoming research reports include:

Impact Evaluation of Education Projects: Decentralization and Pri-vatization Issues

Improving Primary Education in Kenya: A Randomized Evalua-tion of Different Policy Options

Child Labor and Schooling in Latin America When Learning Makes Reform More Productive: An Agenda for

Analysis El Salvadors School-Based Management Reforms Improving the Quality of Preschool Education in Kenya Evaluating the Impact of Supplementary Teachers in Nonformal

Education Centers The Impact of Colombias Voucher Program: Using Randomization

Through a Lottery for Program Evaluation


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Monitoring and Evaluation

As of FY 1995, midterm reviews were conducted for only 12% of theWorld Banks education loans. As noted earlier, the Banks (World Bank,1997b) 1997Annual Report, which concentrated on issues of developmenteffectiveness, states that the Banks current systems for evaluating theeducation sector are inadequate.

The Banks monitoring and evaluation (M&E) system has beenplagued with difficulties. Borrowers sometimes resist using projectresources to collect data required for M&E. Moreover, until the 1990s,M&E was seldom performed by client country constituencies, which havethe most intimate knowledge of the accomplishments of an operation.

In 1992, the Banks Portfolio Management Task Force was disparagingof Bank M&E. A 1994 Operations Evaluation Department (OED) studyfound that Bank managers did not satisfactorily supervise projects orreport on their outcomes at completion. The study also found that track-ing project indicators did not measurably contribute to project outcomes.

Historically, M&E has measured Bank inputs rather than outputs, orresults (e.g., schools built rather than children educated). Since 1992, theBank has concentrated on building results-based methodologies of M&E.By 2002, the Bank was focusing on measuring results-based indicatorsand seriously neglecting medium-term indicators. Hence, the Bank andits borrowers are learning more about outcomes without understandingwhat caused them.

Quality of Adjustment Lending

The Banks OED provides misleading assessments of the performanceof adjustment programs. There are three types of adjustment perfor-mance indicators: policy, intermediate, and outcome indicators. Policyindicators reflect whether the government has complied with policy con-ditions. Outcome indicators monitor progress toward growth and pover-ty reduction goals. Intermediate indicators reflect progress towarddesired outcomes.

The OED relies heavily on policy indicators in claiming that 86% of FY1999 and 2000 structural adjustment loans and 90% of SECALs performedsatisfactorily. (SECALs constitute roughly one third of all adjustmentlending by volume.) At the same time, OED finds that just 76% of adjust-ment loans during these FYs were likely to sustain benefits over time. ForAfrica, about half of its SECALS and 43% of its structural adjustment


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A closer look at adjustment programs gives a gloomier view of theirperformance. For instance, the Bank found that only 45% of FYs 1998 to2000 adjustment operations addressed poverty issues adequately. Lessthan 20% of a sample of adjustment loans linked adjustment policies withefforts to reduce poverty; 22% of these loans made provisions for moni-toring poverty and social indicators.

Another evaluation of adjustment loans found that:

The majority of [adjustment] loans do not address poverty directly, thelikely economic impact of proposed operations on the poor, or ways tomitigate negative effects of reform. Even where traditional subsidy and

budgeting procedures are to be dismantled, the assumption is thatpoverty alleviation is to be achieved through improvements in macro-economic stability and in improvements in public administration, tar-geting, efficiency, etc. ... Direct efforts to address short-term impact onthe poorest are rarely considered. (Environmentally and Socially Sus-tainable Development Network, 1999)

Quality of Project Investment Loans

The Banks OED has generally measured project success relative tothree criteria: achievement of objectives, sustainability, and institutionaldevelopment.

Achievement of objectives. The OED found that for a cohort of projectscompleted in the 1973 to 1993 time frame, over 82% achieved their statedobjectives, such as manpower development, skills training, access to and

quality of education, and institutional development.

Sustainability. An evaluation of 111 education projects supported bythe Bank since 1989, 62% were judged as likely to sustain their gains. Dis-aggregated by region, we see that sustainability is exceptionally low inAfrican countries (56%) and Latin American and Caribbean countries(50%), but higher in East Asian countries (85%).

Evaluation data show that project success is inversely correlated withthe number of years the Bank has been involved in the education sector.(The longer the Bank is involved in the education sector, the less chance of


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The Bank is increasingly providing support for education, health,water, and other basic services through social funds (SFs), which operatein parallel to activities of borrowing governments. SF projects allow localstakeholders to determine investment decisions through subproject pro-posals, which they themselves prepare. In 20012002, the Bank is evaluat-ing the relevance, efficiency, sustainability, and institutional developmentimpacts of SFs. This evaluation trivializes the extent to which SFs subvertthe authority and effectiveness of governments, because the SF operationsare usually carried out in parallel with federal and state programsalmost like another line ministry. To make a sustainable, lasting contribu-tion to social well-being, SF activities will need to be integrated withmainstream social programs offered at the federal, state, and local levels.

World Bank Recipes for Educational Reform

Overview

The level of Bank support for education generally varies depending ona borrowing governments willingness to undertake reforms recommend-ed by the Bank. In principle, this makes sense. As a lender with fiduciaryresponsibility, the Bank has a right to ensure that borrowers do not wasteor misuse resources. However, the Banks recipes for reform are oftenstandardized and simplistic: privatize, decentralize, recover costs, andtransfer resources from higher to primary education. Because theserecipes are viewed as goods, then it is often assumed that there is a lin-ear relationship between the recipe and the outcome (e.g., if some decen-tralization is good, then more must be better).

In and of themselves, these recipes are neither good nor bad. Their effica-cy depends on the circumstances. In general, the analytical basis for Bank-proposed reforms was developed in the industrial North. For instance, therationale for the Banks 1990 primary education policy draws largely ondeveloped country experience as the basis for its policy recommendations.There is a conspicuous lack of research and analysis of the impact of reformsbased on information and experience in developing countries.

Still, the application of simple, standardized recipes has revolutionizedthe Banks education portfolio. According to Jones (1992), a comparison ofloans approved in 1990 with loans approved in 1980 shows that (a) thepercentage of projects with increased privatization and cost-sharing rosefrom 33% to 100%, (b) projects aimed at reducing recurrent costs rose from33% to 78%, and (c) projects to expand secondary and tertiary education


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primary schooling, 67% of projects reduced subsidies for secondary andtertiary students, 56% raised tuition fees, 67% enlisted communities inschool construction, and 56% contained covenants encouraging govern-ments to support private education (Jones, 1992, pp. 177178). Impacts ofthe Banks formulaic approach to fiscal adjustment and education reformresulted in the widespread imposition of user fees, which in turn,deprived generations of poor children of an education. As many studiesdemonstrate, charges for basic services impose a tax on human develop-ment (Oxfam International, 2001).

In October 2000, the U.S. government enacted a law requiring U.S. rep-resentatives to international financial institutions to oppose any loanoperation that would impose user fees for primary education and basichealth care. Subsequently, the Bank beat a fast retreat from its past policiesof encouraging and even requiring user fees.

As of September 2001, the Banks policy on user fees was ambiguous(Adams & Hartnett, 1996; Bray, 1996a; Patrinos & Ariasingam, 1996; vander Gaag, 1995; World Bank, 1996b). Although the Bank states principledopposition to user fees for primary education, it often assumes that stateswill continue to impose such fees. Hence, the Bank sees a role for itself incarefully designing user fee policies so that poor people will not be hurt.

There is broad agreement among communities of educators and econo-mists about the importance of certain economic and social values.Although many policymakers agree on educational values, such as quali-ty and equity, differences arise when such values are consistently subordi-nated to economic values. In addressing the qualifications of teachers,United Nations Educational, Scientific and Cultural Organizations(UNESCO) 1998 World Education Report cites the International LaborOrganizations 1996 report, Impact of Structural Adjustment on the Employ-ment and Training of Teachers:

. . . No other aspect of structural adjustment programmes [than teachercompensation] has demonstrated so clearly the increasing tendency ofnational development policies to subject education to the same cost-cutting logic of market forces that is applied to the overall system ofproduction: if qualified people are willing to teach for less pay than thestandard rates, then why not hire them? (UNESCO, 1998, p. 36)

UNESCO claims that the same logic is often applied to the issue of class-room size. That is, in seeking economic efficiency one can continuedecreasing the teacherpupil ratio, much as a factory manager wouldattempt to increase output while cutting costs. Cost containment is animportant value when considered in tandem with the requisites of a quali-


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Measures of internal efficiency may relate to (a) staff efficiencystudentteacher ratio, multigrade teaching, multiple shifts, and length-ened school week and school year (in general, the Bank emphasizes thebenefits of a lower teacherstudent ratio [fewer teachers per class] andshifting expenses from salaries to training and educational materials);(b) reducing repetition and dropout rates; (c) efficiency of facility usepercentage of time (day/week/month/year) facilities are occupied; and(d) construction costssimplify designs, use appropriate materials andcommunity labor while upholding safety and building standards. In con-trast, external efficiency focuses on how education translates into jobs, pro-motes productivity gains, reduces poverty, and increases social mobility.

Because staff with advanced degrees in education are in such shortsupply in the Bank, staff deployed to the Banks education unit often lookfor simple, standardized solutions. Especially for weaker borrowers, theprovision of simple, standard answers to complex needs can be unhelpful.This is worrisome because governments must be able to monitor andevaluate the policies and practices of a burgeoning number of actors inthe education sector. If such actors lack accountability to governments,the government will be unable to facilitate achievement of educationgoals, such as universal primary education. If institutions in borrowercountries are challenged to design solutions to their unique circum-stances, their capacity grows.

It is possible that, if the Banks analysis had greater depth, the Depart-ments of Education would seek out Bank experts in Western countries.However, the Bank does not receive contracts from countries in the OECD.

Recipes

As noted earlier, the Bank has five major policy prescriptions for the

educational challenges of borrowing countries.

Privatize. Recover costs through user fees. Implement demand-side financing. Decentralize. Transfer subsidies from higher education to basic education.

The Bank packages such products in adjustment or project loans. Hereare two typical Bank policy packages:

1. Increase the private costs of higher education; reduce public


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16The IFC committed to seven education projects in FY 1998 five of which are located in

students; and transfer public resources from higher education tobasic education.

2. To improve resource utilization, the borrowing government should:decentralize by establishing school-based management; offer fami-lies a choice of schools; involve the private sector in financing andservice delivery; increase class size; provide incentives for teacherachievement; and monitor educational outcomes and achievement.

Each policy prescription is defined and described in the following section.

Privatize

To some, privatization connotes transfer of ownership of educationfacilities from government to private or nongovernmental entities. Here,the term is intended to encompass all aspects of private-sector and non-governmental involvement in education. Privatization can involve thetransfer from public to private hands of:

Ownership of education facilities and other assets. Financing. Management. Delivery of education services.

Some estimate that private investment accounts for one third of educa-tion spending globally, whereas public investment accounts for two thirdsof spending. In fact, there are insufficient data to know this with anydegree of certainty.

World Bank Group Strategies

The World Bank Group (including the private-sector affiliate, the IFC)16

emphasizes three options for publicprivate collaboration in education:

1. Private schools subsidized by public money.2. Public schools that are privately managed.3. Parental choice, which often involves providing parents with

vouchers that permit them to choose their childrens schools.


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The Share of Private-Sector Investment

The proportion of total spending from private sources ranges widely:Haiti80%, Hungary6.9%, India11%, Kenya38%, Uganda57%,and Venezuela27%. However, 90% of primary school students areenrolled in public education systems (World Bank, 1995a, pp. 5355).

Some governments, such as Indias, have systems for supplanting pri-vate financing with public financing. In Indias Maharashtra State, thegovernment will absorb costs of funding schools after they have scoredhigh on key capacity-building areas.

Boosting Privatization of Education ThroughOutput-Based Aid Schemes

Increasingly, education systems will be administered through output-based aid (OBA) schemes, in which the government delegates service pro-vision to private (or nonprofit) providers and compensates providers onlyafter services are delivered (e.g., after students pass standardized tests).

OBA focuses on achieving measurable results. In education systems inthe United States and elsewhere, student achievement, as measured by

success on standardized tests, is considered an output or a result. Butin the United States, student achievement has not been improved afteralmost a decade of obsessive focus on standardized testing. Even whenschool districts use performance contracting to hire and pay private firmsto produce a single output (e.g., higher test scores), firms do no betterthan public schools. Hence, the growing, large-scale resistance to theemphasis on standardized testing by parents and educators. What is sur-prising at first is that outputsmassive levels of standardized testinghave not redirected funding within education systems in any significant

way. The sector has been beset with confusion about what criteria to useto award funding increases to high-performing or low-performingschools.

The chances of poor people receiving services through output-basedschemes are poor for a host of reasons, including the following:

The difficulty of targeting subsidies and leakage, or capture, ofsubsidies by well-to-do groups. For instance, the bureaucraticapparatus needed to conduct means testing to target subsidies andexemptions has, in some cases, been shown to cost more than sub-sidies themselves.

The incentives for private providers to pocket subsidies or inflate


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The lack of regulatory mechanisms, which can oversee and enforceOBA contracts and ensure that services are delivered in acceptableways.

The lack of judicial mechanisms that permit poor users to appeal orseek recourse when a contractor fails to deliver services in the spec-ified manner. It is unrealistic for the PSD Strategy to assume that anarms-length relationship will exist between borrowing govern-ments and service providers

The fiscal liabilities assumed by the public sector when OBAschemes fail.

Resistance to foreign service providers. Increasingly, contractors inOBA schemes will be international or foreign service providers,which will exacerbate cultural conflicts, access, affordability andaccountability problems. Usually, domestic service providers willlack the deep pockets for up-front financing for health, educa-tion, or water services, as required by OBA schemes.

Social Funds

One way of devolving government responsibility for education is the

SF. As noted earlier, SFs channel monies to local communities for small-scale projects to reduce poverty by, among other things, delivering socialservices and creating jobs. SFs were originally designed to accompanyadjustment programs in Latin America. Because the SFs bypass govern-ment bureaucracies, they sometimes offer speedy services. However, SFprograms fail to coordinate their activities with those of government min-istries. They can also cater to special interests.

SFs have become widespread. The Bank has helped to establish SFs in22 countries, including Bolivia, Cameroon, Ethiopia, Honduras, Senegal,

Uganda, and Zambia. Funds generally pool resources from multipledonors and creditors.

Examples

Chile. Beginning in 1980, the government provided incentives for pri-vate schools to compete with public schools by providing vouchers forboth. The percentage of subsidized private primary school enrollment hasdoubled and stands at one third (33%).

Colombia. British Petroleum, in partnership with the government and


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ects in municipalities to establish integrated family care centers. BritishPetroleum is involved in large-scale oil exploitation in various parts ofColombia. Colombia has also initiated a Bank-supported program to pro-vide vouchers (financed by the central and municipal governments),which students can use to attend private schools.

Pros

Like private education, public education is often biased against thepoor. In the case of public or private provision, access to education for dis-advantaged groups can require subsidies.

Unlike public systems that can run deficits, private systems mustexercise financial discipline and still remain competitive.

Teachers unions can sometimes protect the employment and wageinterests of public teachers at the expense of other interests (e.g., recurrentexpenses, such as materials and training).

In some countries, the public-sector provision of education is highlyinefficient and poor in quality. These deficiencies reduce demand for edu-cation.

Cons

The responsibility of federal, state, and municipal governments foroversight and supervision of the education sector can diminish when edu-cation functions are transferred to the private sector. OBA schemes and SFsoften circumvent and undercut the government. In turn, this can undercutachievement of education goals, such as universal primary education.

Fewer and fewer Bank loans by the end of the 1980s were free of theobligations imposed by loan conditionality to promote the privatizationof education through the building up of systems of private institutionsand the expansion of user charges in the public sector. Bank-promotedsubsidization of private schools increased to questionable levels when itwas in clear danger of jeopardizing public commitments to educationalquality, in both public and private institutions.

In theory, private school systems can foster greater financial account-ability. However, where private schools are subsidized with publicmoney, financial discipline can be compromised. Thus, World Bank sup-port for private school subsidies has been controversial.

Private-sector actors, which the Banks affiliate, the IFC, calls


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high-quality formal educational services on a large scale with financialaccountability. Their niche is usually in small-scale innovation.

Private school systems can increase social stratification andruralurban divisions. Children of low-income and racial or ethnic minor-ity families are often ghettoized in public school systems that underper-form their private-sector counterparts.

Sometimes poorly functioning systems, which are intended to subsi-dize the direct or indirect fees for private (or public) education via vouch-ers or other means, impede access to education (Lennock, 1994).

Private teachers are usually not able to protect their intereststhrough collective bargaining.

To succeed, SFs require strong project selection criteria, effectivemonitoring and supervision, and integration with government-providedservices. Currently, they constitute a parallel delivery system. SF innova-tions, principles, and technologies should be mainstreamed into public-sector programs. SFs should also address the capacity-building needs oflocal organizations.

Recover Costs

The term cost recovery refers to the following:

The cost of constructing educational buildings and facilities. It isnow common practice for such communities to absorb the cost of con-structing school facilities. In fact, this is the main kind of cost recovery atthe primary education level still officially sanctioned or advocated by theWorld Bank. The contributions of foreign aid to the capital costs of con-struction are widely criticized. Aid is blamed for excessive costs for facili-ties that are often inappropriate to the needs of communities.

Textbook fees and the topping off of teachers salaries are common-place. Formal tuition fees are uncommon at the primary school level.

The less visible costs to families involve: the costs of travel to andlodging in proximity to schools and the costs of food and uniforms, orclothing.

There are also opportunity costsnamely work that children cannotperform at home when they are at school. In general, girls contributemore significantly to work around the home than do boys. There is alsothe cash income foregone by children obtaining an education rather thanworking for pay. It is significant to note that families need to make trade-offs with respect to the education of their children. Increasingly, sec-ondary schools impose more significant fees on families than do primary


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secondary school students may find the direct or indirect costs of educat-ing a primary school student less affordable.

Examples

Nicaragua. In the Bank-financed project that decentralized schoolmanagement (see following section, Decentralize), parents equateddecentralization, or participation, with the imposition of fees (cuotas)on impoverished rural families. The system became highly controver-sial and altered social relations inside the school. Parents said: It is likethe institution is privatizing itself. They now say education is no longer

free. You have to pay for everything. Oxfam International (2001) pro-vides additional examples of how education charges constitute a tax onhuman development in Tanzania, Zambia, and Ghana.

Pros

In theory, cost-recovery schemes can waive fees for primary schooland low-income children.

In theory, recovery of costs can help ensure efficient and effectivespending.

Cons

In practice, waiver and exemption systems often fail. Thus, forlow-income families, fees can be a barrier to school enrollment andcompletion.

Using both cost-recovery and demand-side financing mechanisms

may be inefficient when a majority of the students in the locale orcountry are poor.

Many countries have limited capacity to administer cost-recoveryand demand-side financing mechanisms.

Implement Demand-Side Analysis and Financing

Description of the Issue

In the 1990s, Bank-financed projects still emphasized the supply side ofeducationprovision of buildings, materials, and technology. However,


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or social assessment) to identify problems that impede school attendanceof girls, low-income students, and other marginalized or disadvantagedgroups.

With the benefit of such analysis, education loans can be designed inways that increase school attendance. For instance, in Turkey, a number ofmeasures were taken to induce girls to attend school, including:

Construction, extension, and rehabilitation of facilities, especiallythose that can induce attendance of girls (e.g., secure boundarywalls, lavatories, and female teacher housing).

Provision of secure transportation to and from schools in areaswhere school closings have led to consolidation.

Introduction of flexible school schedules, child care policies allow-ing siblings to accompany students, and provision of double shiftsthat make it easier for parents to forego girls help at home.

Incentives to increase the number of female teachers in rural areasthrough provision of scholarships, housing, and hardship pay.

The Bank has also undertaken strategies to compensate families for thecost of their childrens education. Such strategies may involve stipends(cash payments), community financing (through monetary or nonmone-tary contributions), targeted bursaries (cash payments that go directlyto schools, municipalities, or provinces), vouchers (usually publiclyfinanced cash payments), and scholarships.

In 1995, school dropout rates in Brasilia were dramatically reduced whenGovernor Buarque established an innovative scholarship program. Theprogram provided a stipend (or bolsa) equivalent to a minimum wage ($128per month per family, regardless of the size of the family or the number ofchildren in the family) to every low-income family with children aged 7 to14. Eligible families were in the lowest quintile of the income distribution(with an income level less than $50 per month per family member) andemployed or searching for employment. A school savings program provid-ed a deposit of approximately $90 into a savings account for each child of aparticipating family who successfully completed a school year.

Enrollment statistics often mask demand-side problems. During thelate 1980s, enrollments were declining for poor populations in CtedIvoire, despite the fact that net enrollments and education expenditureswere increasing. In other words, increases in enrollments of nonpoor chil-dren exceeded the decline among enrollments of poor children. The gapin enrollment and in educational progress widened between the nonpoorand the poor, between urban and rural areas, and between various socio-


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To achieve universal primary education, it is essential to boost thedemand by poor families for education by protecting and increasingincomes and, at the same time, boosting the supply of education servicesto disadvantaged regions and groups. Even after the significant declinesin primary enrollments in the 1980s, the Bank is hesitant about embracingdemand-side solutions. A recent Bank publication, School EnrollmentDecline in Sub-Saharan Africa: Beyond the Supply Constraint, notes thatbetween 1981 and 1991, primary enrollment declined in at least 14 of 27African countries surveyed. It concludes that declining incomes andemployment opportunities may affect household decisions and, therefore,the Bank should not assume inelastic demand for education (Bredie &Beeharry, 1998). It is puzzling that the Bank is so tentative about this con-clusion, given the evidence about how declining income and employmentopportunities influence the decisions, including education decisions, ofpoor families.

Demand-side solutions might include ensuring that IMF and WorldBank adjustment policies do not jeopardize livelihoods and diminishincomes, user fees are eliminated, and indirect costs of schooling are cov-ered by stipends and scholarships. Until recently, the Bank only consid-ered strategies to offset the indirect costs of schooling. To that end, it ana-lyzed the effectiveness of funding student subsidy schemes to increaseenrollment among the rural poor in several countries, includingBangladesh, Brazil, Pakistan, and Tanzania.

Examples

The World Bank has instituted a variety of demand-side financingschemes in Bangladesh (stipends for girls), Chad (community financing),China (targeted bursary for poor and minority children and free text-books), Colombia (targeted bursary, voucher system), Jamaica (studentloans), Mexico (targeted bursary for poor and indigenous populations),and Pakistan (subsidies to private schools servicing low-income, rural girlstudents).

Pros

Demand-side financing can reduce or eliminate family costs forschooling and raise enrollment rates.

Where targeting of low-income children or girls is effective,


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Cons

The costs of applying for a waiver may be prohibitive. In Zimbab-we, families were required to travel long distances to apply forexemptions to fees. Furthermore, there were often long time lags(69 months) in benefit payments.

Financing may only compensate a family for partial costs ofschooling. Indirect costs of schools (e.g., transportation, clothing,foregone income) may be prohibitive.

Stipends may be misused or siphoned off. A social stigma may be attached to children in the populations tar-

geted for assistance. Systems may be difficult to administer.

Decentralize

Decentralization entails devolving the responsibility and the opera-tions of the educational system from the federal government to subsidiarylevels of government, such as states and municipalities. In some countriesand regions, such as Latin America, centralized control over school fund-

ing, curricula, and personnel issues is seen as a remnant of colonialism.

Examples

El Salvador. The Educacion con Participacion de la Comunidad decen-tralizes education by strengthening direct involvement and participation ofparents and community groups. It was conceived as a way to expandaccess to education for children in remote rural areas. The program has haddiscouraging educational outcomes (Jimenez & Sawada, in press). Howev-er, it did lead to higher teacher attendance rates (World Bank, 1998b).

Brazil. In the Brazilian state of Minas Gerais, decentralization shiftedresponsibility for decision making from the state capital to school boardsheaded by an elected principal and composed of equal numbers of parentrepresentatives and school staff. Educational standards have improved, anddropout and repetition rates have dramatically declined (UNICEF, 1998).

Nicaragua. Nicaragua decentralized management and budget deci-sions to local school councils (consejos directivos) The theory was that


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trators would result in greater accountability, which would raise schoolachievement. Data also show that passing authority to the schools, whichwere unable to squeeze sufficient fees from poor families, created conflict.Many parents resented the imposition of fees (cuotas). In addition, therewas insufficient parental participation, confusion over who actually hadthe power to hire and fire teachers, poorly functioning teacher incentivesystems, and insufficient responsibility on the part of directors forimproving pedagogical methods or monitoring school repetition anddropout rates or achievement. When asked what decentralization meantto them, parents said:

We are responsible for higher cuotas [to pay] for electricity, thewater, the phone . . . this is what autonomy means to me.

Now the Government is no longer sending the amount ofresources the institution needs . . . now the burden is on ourshoulders.

Teachers said, During the [decentralization] workshop we weretold that we should ask parents for a cuota of 5 cordobas, but weshould say it is voluntary.

Pros

Decentralized governments are expected to be:

More efficient in responding to demands for the delivery of services. More flexible in adapting to changing local circumstances. More accountable to the local population than are centralized

governments.

The Banks vice president and chief economist for the Latin Americaand Caribbean region summarized the pros of decentralization this way:

Because local governments are better than national governments at rec-ognizing the needs and preferences of local residents, and because localgovernments are at least as efficient as national governments at deliv-ering public goods that benefit only local residents, it will be more effi-cient to have local governments provide the optimal level of public

goods in each local jurisdiction. Local governments can be expected tobe more efficient than national governments because local residentsmay find it easier to hold accountable local as opposed to national


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Cons

The federal governments responsibility for oversight and supervi-sion can diminish when functions are devolved to lower levels ofgovernment.

Many localities lack the capacity or the resources to implementdecentralized education programs. In addition, many localitiesbecome overloaded as the federal or state government devolves anincreasing number of responsibilities.

Decentralization cannot increase equity unless state and local gov-ernments are equitable and transparent and possess adequateresources for expanding access to schools, especially by children

from low-income families and from ethnic and racial minorities.Inter-American Development Bank (IDB) literature acknowledgesthe need for such preconditions. In Latin America After a Decade ofReforms, the IDB (1997, p. 156) says that various circumstancesmust converge for decentralization to serve the people, including(a) local officials are elected, the democratic process works wellenough to provide sufficient electoral discipline, and decisions aremore visible and accountable; (b) local governments have institu-tional capacity to handle their expanded responsibilities; (c) the

decentralization arrangements between different levels of govern-ment are clearly specified; and (d) there is a correspondencebetween the costs and benefits of government programs.

In Nicaragua, decentralization was viewed as an attempt to under-mine teacher rights, wages, and job security.

It is difficult to monitor and evaluate decentralization efforts.

Transfer Subsidies From Secondary andHigher Education to Basic Education

The Bank places a higher priority on allocating budget resources toprimary education than to tertiary education. Primary education cancontribute to benefits at many levels: individual, family, community,and society. As described in the Banks 1980 World Development Report,primary education can increase human potential and social cohesionwhile improving health, reducing fertility, and boosting income genera-tion potential (Heyneman, 1995, 1997, 1998; Ilon, 1994; World Bank, inpress).

Policymaking should emphasize basic education. In developing coun-tries as a whole, 71% of school-age children share just 22% of public


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resources. The cost of primary education is low relative to tertiary educa-tion. In Tanzania, the cost of sending one student to university is equiva-lent to the cost of sending 238 students through primary education.Although that statistic is telling, it is also true that a university studentmay help govern the nation or become a private-sector entrepreneur inthe near term.

European and North American countries provided heavy subsidies forhigher education, although they also guaranteed universal education atan early date. The worlds job market is quickly bifurcatingdividingworkers into skilled and unskilled categories. To compete in a global mar-ketplace, developing countries must build on a strong primary schoolfoundation by expanding enrollments in secondary, vocational, and high-er education.

Methodologies for calculating rates of return to different levels ofeducation are fraught with problems. They involve dividing the bene-fits of education (measured in projected annual income of a student) bythe lump-sum cost of the education (tuition, expenses, and foregoneearnings during school years). These private rate-of-return calculationshave limited application (e.g., setting tuition or scholarship policies).However, the methodologies are still too primitive to use in policymak-ing. Important factors still defy calculation, such as variable studentabilities, variable quality of instruction, and in-kind earning potential.

Social rates of return attempt to measure the benefits of education tosociety at large. World Bank calculations show that social rates of returnare high in the primary years and decline thereafter (Psacharopoulos,1985). These methodologies are also rife with problems. The World Banksresearchers have studied the question of how education contributes togrowth and found that the greatest needs for expanded education at agiven level vary from country to country.

However, the Banks operations are a different story. In its operations,the Bank generally stresses that borrowers must shift budget expendituresfrom higher education to basic education. At the same time, the Bankexerts pressure on governments to institute significant user fees at non-compulsory levels of education. Citizens in many countries feel that theBank is contributing to a gutting of secondary and tertiary education sys-tems. Many citizens would prefer that their governments shift resourcesfrom other sectors (e.g., military) into primary education sector, ratherthan slashing spending for secondary and tertiary education. One Brazil-ian member of Congress assailed the Banks short blanket philosophyof education financingnamely that the blanket can cover the head(higher education) or the feet (primary education) but not both. Many cit-


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domestic consensus in favor of significant support for higher education.Even the Banks Board of Executive Directors (e.g., the 1995 sector reviewdiscussion) has expressed opposition to the strong emphasis on transfer-ring subsidies from higher to basic education.

In a study commissioned by the Bank (1996b), African advisors rec-ommended that:

The Bank needs to review its policies of not making loans availablefor higher education. Although higher education in Africa is expen-sive and not very effective, this should be an argument in favor ofreform rather than a reason for neglect. Indeed, the Bank should

investigate mechanisms for channeling resources to higher educationto ensure at least the existence of a limited network of good universi-ties in the region. Ways should be found to allocate resources to uni-versities on a competitive basis. For instance, resources could be allo-cated according to proposals submitted by the universities aimed atimproving performance. Preference could be shown for imaginativeprograms that enhance a universitys prospects. In addition, bur-saries could be provided for students to use at the universities of theirchoice. The bursaries could function much like a voucher system,

with universities competing for the fee-paying students. (p. 14)

Social scientists and economists could try to forge methods that do notunderstate the real cost of education (which is highly subsidized in mostcountries) and understate the benefits of education. However, attempts toput a price on externalities, such as the contribution of education tosocial cohesion, good citizenship, well-functioning institutions, or indi-vidual fulfillment may prove as illusive as valuing the beauty of a pristineforest instead of its value as timber. Likewise, the types and costs of dys-function, which arise from the lack of education (e.g., famine, socialbreakdown, and war), are incalculable.

IMF and World Bank Approaches to Structural Adjustment

Overview

The Bank has worked in the education sector since 1962. For the first18 years (19621980), the Banks goal was to support construction andequipment for technical, vocational, and secondary education to meet


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Banks first education policy paper was issued in 1971, directing thatanalysis of the education sector should precede investment lending. Thepurpose of education lending was also expanded to include software, cur-riculum development, and administrative and management support.

There were also major performance problems in the portfolio. Regard-ing capital investment in diversified secondary schools, Haddad reportedthat completed buildings were considered inadequate in quality andeducational relevance in 40% of the projects. . . . Similarly, almost all proj-ects faced problems in the acquisition of equipment . . . . There were alsomajor problems in the provision and utilization of laboratories and work-shops (Jones, 1992, p. 253).

The year 1980 was pivotal. From 1980 onward, Bank-financed educa-tion operations were often undertaken in the context of SAPs. The condi-tions attached to adjustment loans require governments to take actionsintended to help achieve fiscal equilibrium and macroeconomic stabilityand stimulate growth. SAPs aim at such outcomes by restricting domesticdemand and expanding production of exports. Typical SAP measuresinclude downsizing or decentralizing government, devaluing the curren-cy, removing import barriers, providing incentives to exporters, reform-ing the tax or legal system, and revising labor codes.

SAPs have not generally improved economic performance. In fact, inmost of the developing world (with a few exceptions, notably China), percapita income growth in the period 1980 to 1997 (after SAPs were intro-duced) is much lower than per capita income growth in the 1960 to 1980period (before SAPs were introduced). From 1960 to 1980, there wereincreases in primary and secondary school enrollment in nearly everycountry. However, declines in school enrollments began in about 1980 andgrew during the decade.

SAPs exacerbated the gap in per capita income (gross national product[GNP]) between the countries with the richest fifth of the worlds peopleand those with the poorest fifth. This gap widened from 30 to 1 in 1960, to60 to 1 in 1990, and to 74 to 1 in 1995.17 There is also a disturbing pattern ofwidening income inequality within countries, which among other things,spawns political and social unrest.

Critics contend that SAPs frequently cause substantial short-term painand hardship for poor and vulnerable groups offset only by a promise oflong-term gains that may or may not materialize. In other words, adjust-ment may not always produce economic growth, and if it does, the bene-fits do not always trickle down to poor people. In fact, many NGOscontend that vulnerable groups, such as poor people and women, are


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often disproportionately hurt by adjustment and receive no tangible ben-efits. Even when the costs of adjustment are widely shared, SAPs maybring disappointment to upper income groups, but hunger and higherrates of mortality to low-income groups.

Incomes, especially those of low-income populations, are vulnerabledue to a variety of dynamics: competitive pressures can bid down wages;union bargaining power can diminish; and budget cuts often retrenchcivil servants, cut subsidies for basic staples, and cut pension and socialsecurity benefits. Tight credit can reduce consumption and investment.Privatization of services can raise costs.

The World Bank sometimes pressures a developing countrys govern-ment to accept a pace or sequence of adjustment measures that exposeslocal enterprises to international competitive pressures in imprudentways. Although competition is a worthy value, it is important that thestructural advantages of transnational corporations are not systematicallyreinforced at the expense of local enterprises.

State-owned enterprises have often been grossly inefficient, sometimessubsidized by taxes on low-income agricultural producers. But privatiza-tion sometimes creates private monopolies or competitive systems that donot service regions in which the majority of poor populations are located.In addition, when user fees are imposed to recoup costs of primary healthcare and basic education, there is evidence that some poor people can nolonger afford to pay for services.

As a result of SAPs, borrowing countries are increasingly dependent onexport revenues to balance their accounts. When Northern demand plum-mets, as has been the case in 2001 and 2002, then developing countriessuffer disproportionately. For developing countries and economies intransition, global linkages have amplified the impact of the vicissitudes inworld economic growth in the past few years. Moreover, the impact hasoften been asymmetric, with most developing countries tending to benefitless than the leading developed economies in the upturns, but sufferingequally, or more so, in the downturns.

In the late 1980s, when the World Bank and IMF acknowledged that, insome countries, the negative social impact of SAPs was not only a short-term concern, but also a medium- and long-term concern, safety nets orconditions protecting social spending were sometimes attached to SAPs.

It is taking many years for the Bank to come to grips with the socialimpact of adjustment, because the institution is quite schizoid. Its identityas a bank is often at odds with its identity as a development institution. Onefinds this reality reflected in the Banks internal operations. The righthand of Bank economic reform appears to be poorly informed by the activ-


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the Bank is comprised of worlds within worlds that often do not intersect.The history of the Banks Social Development Task Force reflects a sharpdivide between the Banks economists and noneconomic social scientists.Many of the conflicts between the two groups revolved around the ques-tion of whether economic policies should be normative or nonnormative.

Like education sector reforms, SAPs are often administered in a top-down way. Many borrowing country officials accuse the IMF and Bank ofundermining government capacity by their heavy-handed, single-mindedstyle of operating.

. . . [I]t could be suggested that the low morale of the civil service inmany African countries was an unintended result of structural adjust-ment. . . . Furthermore, the Bank only considers it has achieved suc-cess in its SAPs when the loan conditions result in policies that wouldnot otherwise have occurred. This hinders the use and development oflocal capacity and results in a paradoxical outcome: key decisions aremade by donors who, at the same time, emphasize the importance ofpolicies being locally owned. (World Bank, 1996b, p. 14)

Methodologies for detecting the impact of SAPs on education are rifewith problems. Later, we identify flaws in the methodologies used by theBank and the IMF. However, even with results that appear to be biased,the Bank identifies declining primary school enrollments as a conse-quence of adjustment during the 1980s (World Bank, 1990b). Table 2shows the declines in pri

paying for education: how the world bank and the international monetary fund influence education...

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