Eclectic Approach to Financing Higher Education

The word eclectic refers to not following one style or set of ideas by choosing from or using a wide variety¹⁴¹. Eclectic approach, thus, is a way of dealing with financing of higher education with a scheme to blending the good deeds of public and private financing. The major assumption is that both the government and private sector have a contribution to make in the financing of higher education. Perhaps, the illusion circumventing benefits of higher education as being accrued substantially by private individuals has informed policy makers to think of including private sector into financing of the education. Chapman (2006: 18) in his discussion “beyond economic efficiency: the case for tuition charge” says private benefits from higher education are arguments for a student contribution that might loosely be referred to as ‘tax equity’. The argument put forth is that since all tax payers have paid for the provision of higher education it is equitable that those so advantaged repay an additional amount for the individual benefits they receive. There are two ways through which government and private sector finance higher education. The government provides grants/scholarships or bursaries and loans (to be repaid after schooling); whereas the private sector provides financial assistance (grants, scholarships, bursaries and loans) and in most cases individuals pay for education costs by themselves. The two mechanisms can at best be demonstrated through a diagram as follow:

141 Hornby, A. S. (2006: 465) Oxford Advanced Learner’s Dictionary of Current English. Sally, Wehmeier et al.

(Eds.) Seventh Edition, Oxford and New York: Oxford University Press.

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Figure 4: Eclectic Approach to Financing Higher Education

Grants/Subsidies

Loan grants and

Repayment loans

Pay for education cost

Scholarships Financial

Assistance

Payment for services

Payments for services and Donations

Source: Adapted from OECD Education Database and Statement of Financial Performance for Tertiary Institutions in New Zealand

The diagram shows a variant of sources to financing higher education. These include:

individual, private, and government sources. Ordinarily, the approach suggests that an individual student will be able to explore to the fullest all available opportunities. Government sources are direct (such as grants and loans) and indirect (as in case of subsidies or subventions). Direct sources go to students and institutions while indirect source goes to institutions. For example, government pays grants to public institutions to cover various costs such as salaries, researches, etc. Again, subsidies are provided to institutions to developing accommodation, library, lecture rooms, and other facilities deemed important. Grants and loans provided to students are means-tested. The purpose is to assist only those who do not have enough money to pay for the education costs. It is assumed by this approach that means-testing is able to identify students who come from low-income threshold. One and most reliable way to determine students’ economic status is to evaluate individual’s/family’s financial income statement monthly. This is possible where there are records on income and expenditure. Arguably, in absence of accurate determination of students’ economic status

All levels of government

Higher

Education

Institutions Households and students/

families

Private Sector (Business corporations, NGOs, Individuals, etc)

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many poor are ousted from accessing higher education. On the other hand, private sources include: individual income¹⁴², scholarships/grants, donations, and loans. Scholarships are given to students depending on the objective of private provider. For example, private provider may distribute scholarships for purposes of encouraging students to study hard as in case of merit scholarships. Other reasons are private contribution to development projects and charity.

The problem with private scholarships is multifarious. They are very limited in number, only a few students would have access to these scholarships, leaving aside its competitive nature.

They are not reliable in terms of consistence. For example, there may be scholarships this year but not the following year. At most time, information on their availability is not open to the general public. Therefore, for a poor rural resident student in Tanzania or Kenya for that matter, it is difficult to obtain such information hence access private scholarships. On the other side loans from private institutions¹⁴³ are deemed available for students. The assumption is that students may borrow from banks and other credit institutions to cover the cost of education, however, only students/families from high income-threshold would have access to bank loans. Philanthropy or donations are provided to institutions. It is a dominant feature in the US Higher Education Institutions (HEI) but almost absent in Europe and developing countries. With exceptions, private universities which are religious-based/founded have constant marginal flow of donations. Generally, the usefulness of subsidies/subventions or philanthropy/donations is on application of tuition fee and user charges. Institutions that receive any of the above are most likely in a position to impose low tuition and fees. For example, tuition and fees at public universities (receiving subsidies) is lower than those charged by private universities. Moreover, introduction of dual-tuition policy and/or parallel programmes have increased access to higher education on one hand and generated revenues to higher education institutions to the other.

Eclectic approach is useful in explaining two main issues under this study. First, the role of government in financing higher education is critical. Second, equity and equality of access to higher education is a pillar to economic growth and development. Diversification of financing sources becomes precedence to accessing commoditified higher education. The application of

142 Income from employment, business, agriculture, and all other activities that lead to earning money.

143 Financial Banks and Credit Institutions.

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this approach succinctly benefits all people in the society without discrimination of any kind.

The practicability of private loans (by poor) is almost doomed not only in Africa but also the rest of the world. The only challenge Africa face to the implementation of eclectic approach is a designing of loan formula and its pursuit. Most of African countries have copied the existing experiences of the Western (Europe and America) loan formulas. However, the environment (culture, legal system, technology, civilization, etc) differs significantly among the three. If it may be recalled, one of the prerequisite to the functioning of loan scheme is determination of individual economic status. This is done through means-testing formula. The formula needs existence of reliable and up-to-date records on income and expenditure. While record keeping is not a big problem in the Western countries it is a predicament in Africa. In complementary, Tekleselasie and Johnstone (2004) mention five factors complicating the functioning of means-testing in poor countries of Africa and elsewhere. These include: (a) there may be no effective taxation of income (outside, perhaps, of civil service). (b) many adults may be employed in second and third jobs in cash economies where relatively few accurate records may be kept and even fewer may be shared routinely with government. (c) many families use banks seldom or not at all. Banks may also have little or no ability or inclination to link either deposits/withdrawals or interest paid on accounts to individuals and to share this information with authorities. (d) the market value of real property may not be clearly known. (e) finally, to the extent that real property might be included in assessing financing means, there may be a few ways to convert this assert to cash instead of selling it. Examining the five impeding factors to the functioning of means-testing in Africa, three conclusions may be drawn.

First, governments in Africa collect marginally revenues from taxes. It is either a deliberate or thoughtless policy implementation to fulfilling personal interests (e.g. corruption). The repercussion of inadequate revenues is to asphyxiate constant availability of adequate loans to students. In order to overcome such a situation governments to design stringent mechanisms that will limit loan beneficiaries. Second, in absence of accurate records the means to verifying information submitted by students in a standardized form is paralyzed. Usually, determination of individual’s economic status is mischievous. Probably, those who get access to the lion’s share are the most privileged. They have information and know the technicalities of how to manipulate information while filling up the forms. The most critical hurdle is ineffective legal infrastructure. There are very good laws in place with very minimal

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enforcement. Third, means-testing in Africa does not work and thus the right to access higher education by many poor is repudiated.