Education for profit

Tuesday, 26 October 2010 02:49 -     - {{hitsCtrl.values.hits}}

Historically, education in Sri Lanka developed around places of worship. The Sinhala Buddhist, Tamil Hindu and Muslim Islamic traditional education developed around religious institutions.

In the Sinhala Buddhist culture, the learned monk was revered as a source of knowledge and wisdom and children were taken to the temple at an auspicious time to be taught the language for the first time at an auspicious time according to the child’s horoscope.

Thereafter, throughout the life of the student monk and the layman, education and learning were synonymous with Buddhist institutions, ranging from the humble village temple to the Raja Maha Viharaya, to the leading monastic institutions in the capital cities of Anuradhapura, Polonnaruwa, Kotte Jayewardenepura and Senkadagala Kande Maha Nuwara. Around these institutions the traditional Pirivena education developed for both the monks of the Sangha and lay Buddhists.

In the Tamil Hindu culture, the Brahmin priests were the pivot around which traditional Sanskrit education evolved, the first lesson taken from the Hindu Priest often during the Navarathri-Saraswathi pooja. Similarly, in the Islamic Muslim culture, it was the Madrassa attached to the mosque which imparted learning to young people.

With advent of the Portuguese, accompanied by Catholic missionaries, education was imparted by the Catholic Church and this continued with the Dutch Protestants and the Church of England, subsequently, when the Dutch ousted the Portuguese and the British succeeded the Dutch.

Weakening connection

The aggressive proselytism of the Christian missionaries to an extent weakened the connection between lay Buddhists and the temples, as in other pre-colonial religions, especially when education in a missionary school was seen as an avenue for the advancement in life under the colonial governments.

This decline was arrested in two ways, at different times. In the Kande Uda Rata, the Monk Venerable Weliwita Saranankara, Sangaraja, with the support of the King of the Kande Uda Rata, long before the ceding of the Kingdom to the British Crown, led a Buddhist revival, strengthening the Sangha by inviting monks from Siam to reintroduce the higher ordination and tightening up discipline and adherence to the Vinaya rules among the Sangha.

In the maritime provinces during the time of British rule, Sinhala Buddhist philanthropists, encouraged by the Buddhist revival led by Anagarika Dharmapala, Colonel Henry Steel Olcott and Madam Blavetsky led to a revival of Buddhist education, not only in and around the viharas but also in schools for lay persons set up by Education Charities, for e.g. Buddhist Education Societies, similar to the Hindu Education Societies and individual philanthropists. This tradition also developed in the hill country.

Intervention of lay persons

This intervention of lay persons in education was not limited to the Buddhists but also extended to the Hindu and Muslim communities.

In this way religious and private education with some participation of the government to a limited extent prevailed side by side in Sri Lanka. The layman and the lay organisations, which set up educational institutions, were not doing so with a motive of profiting from education but were providing a service through a non profit charitable institution providing an education, charging only nominal facilities fees.

They would necessarily have had to have some cost recovery from consumers of their service, this would have been based on the ability to pay and the major costs would have been met by philanthropy. The State also assisted these schools, since only nominal facilities fees were charged from students.

This situation survived until private schools were nationalised in 1961. Except for a few denominational schools, which opted to remain private, education became a government monopoly.

In time, economic constraints on the education budget and the impossibility of continuing high deficit budgeting resulted in reductions in the amount of funds being voted for education by Parliament.

Demand factor

This combined with an increase in the school-going population, pushed up the demand factor. More educated parents also wanted a higher quality product for their children, as education was the great equaliser and leveller in a poor, feudally stratified and hierarchical society.

C.W.W. Kannangara’s Central Schools, which were designed to take the best talent and educate them to a higher level, were gradually run down, and certain handpicked schools were given more resources, resulting in a fierce competition for admission to these perceived better ‘popular’ schools. The competition resulted in a market for private classes opening up.

The very Sri Lankan phenomenon of ‘untrained’ teachers resulted in competent trained teachers conducting very popular private classes outside school hours. This in time blossomed out to a huge industry, which is now a taxed and an important source of State revenue.

The 1961 Act which nationalised education made it illegal to start new educational institutions conducting classes at primary and secondary levels charging fees. It also disallowed teaching in any medium other than Sinhala and Tamil.

International school phenomenon

The huge demand for quality education and the willingness of parents to pay for it resulted in private tutors expanding into educational institutions set up under the Company Law, since the Education Act did not permit fee-charging educational institutions.

The international school phenomenon with education in the English medium took hold. This too today is a huge industry. The result being that Sri Lanka today has three parallel systems of instilling learning in the young – a State-funded system, a charitable not-for-profit system and a for-profit system.

The profit system has certain positive features, as against a State monopoly. Parents are free to choose the school, if they can afford it. The school is free to remunerate teachers according to performance. The schools respond to demand for a quality education. If the education imparted is not good, the institution will fail. There is no politician-driven taxpayer’s subsidy for underperforming institutions.

Charge of elitism

Of course there is the charge of elitism levelled against such institutions, even if they are managed by religious charities, and not-for-profit, but have to make a surplus to merely sustain their function.

As Professor Savithri Goonesekera, delivering the Ladies College Old Girls Association Centenary Oration in Memory of Lillian Nixon, the school’s founding Principal, in October 2009, said: “Private education has often been perceived as elitist... reinforcing the privileges of wealth and class… she [Lillian Nixon] perceived wealth and privilege a dimension of social responsibility…. Her ethic of responsible use of talent and privilege created an appreciation of community service that could impact on the lives of the less privileged.

“A Ladies College education was not meant to encourage irresponsible use of power and privilege and conspicuous consumption because of economic security. She raised funds but managed the school funds carefully. Her resignation in 1914 was because she did not want to accept a proposal to obtain a State grant, believing this would pave the way for erosion of the independence of Ladies College as a single sex women’s educational institution.”

Challenging state monopoly

Worldwide there are examples of state monopoly in education being challenged in this way – in Sweden, the ‘free school’ reforms of the 1990s allowed charities and parents to start schools. The architect of Sweden’s reforms and co-founder of Kunskapsskolan – the country’s largest chain of free schools – now works for a Dubai-based chain of commercial schools called GEMS, which operates in nine countries.

These schools are run for profit – as are the international schools in Sri Lanka. Charter schools in the USA are another example. They may not be run for profit for investors, but they have to make a margin to cover their costs of operation.

Recently, for-profit education has been getting a bad name in some developed economies. Giving evidence to the US Congress, Steve Eisman, a hedge fund manager who made billions shorting bank shares during the financial crisis, declared: “I thought there would never again be an opportunity to be involved in an industry as socially destructive as the subprime mortgage industry. I was wrong. The for-profit education industry has proven equal to the task!”

In the US, for-profit educators have earned a bad reputation by flogging a low grade educational product to students, who are paying with government loans, subsidised by the taxpayer. A new regulation proposed in the US will make a course eligible for government loans only if enough current or past students are repaying their loans.

Success story

However, the fact remains that for-profit education is one of the greatest success stories in American business. Just two examples: the University of Phoenix has over 450,000 fee paying students at over 200 campuses across America and is America’s second largest university system, while Kaplan is a 75 campus organisation with 112,000 students.

The sentiment that profit is too dirty a motive to be allowed in a sector as pure as education is pervasive. In Britain, this sentiment has prevented for-profit schools from getting State funding.

The thought prevails in Sri Lanka too, although schools which levied only ‘facilities fees’ as against full fee charging ones, have been ‘assisted’ with State funding for many years. The allegation of elitism, the inability of the majority of parents to afford the fees of education for profit institutions at the preschool, primary, secondary and tertiary levels has been the crunch point.

Some time ago the State banks provided loans to State university students which they were supposed to pay back after obtaining employment, but the scheme failed and the debts were waived. This scared off private financiers from supporting education with credit.

Some commercial banks are currently lending for foreign tertiary for-profit private education, but on collateral only. There is some anecdotal evidence of microfinance institutions providing small amounts of collateral free credit to poor parents to fund their children’s private tuition classes, so at the grass roots the ice has been broken!

Business opportunity

In Sri Lanka’s long history of education, education for profit, as against educational institution run by charitable institutions (even assisted by the State) or mere private tuition classes, is a recent phenomenon. It is solely based on demand for a quality product which parents aspire to give their children; which the parents perceive that the State monopoly education delivery system cannot provide. It is a worldwide phenomenon reflecting the hunger for and the benefits of a quality education.

Education for profit in Sri Lanka has come to stay and judging from the phenomenal expansion of the sector, it seems a very profitable business model. The inequity of affordability may be alleviated by financial institutions considering providing collateral free credit for profit education on the basis of a scheme designed to operate, as in the US, of the number of past and current students of the institute who are employed and paying back any loans they have taken. A business opportunity awaits an innovative financier.

(The writer is a lawyer, who has over 30 years experience as a CEO in both government and private sectors. He retired from the office of Secretary, Ministry of Finance and currently is the Managing Director of the Sri Lanka Business Development Centre.)

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