Affordable Private Schools for Low and Middle Income Groups

November 2021

Indicative Return:

More than 25%

Investment Timeframe

Medium Term (5–10 years)

Market Size

Other

Ticket Size

Less than USD 500,000

Business Model Description

Establishing affordable private schools to increase the participation of low and middle income groups in quality education

Expected Impact

This IOA will accomodate the demand for affordable high-quality education services, contributing positively to education outcomes in the country

Regions

Mediterranean Region, Central Anatolia Region, Marmara Region

Sector
Education > Formal Education

Direct Impact SDGs:

Indirect Impact SDGs:

Sector
Education ED

Development need: Significant challenges remain in the provision of quality education in Turkey which has negative bearings on the relevant indicators of SDG 8 (Decent Work and Economc Growth).(1)

Policy priority: The government’s 11th Development Plan (2), the 2020 Presidential Program (3) and the Sustainable Development Goals Evaluation report (4) prepared by the Directorate of Strategy and Budget all emphaizse the importance of developing human resources to produce positive economic and social externalisites, and ensuring accessibility to education and life-long learning opportunities.

Gender inequalities and marginalization issues: The ratio of female-to-male mean years of education received is at 82.14% in Turkey, indicating that women on average complete fewer years of schooling. (8) The gender parity index expressing the total net enrolment of women versus men in primary school has a score of 0.99/1. (16) The GPI for lower secondary school is at 0.98 while the GPI for upper secondary school is at 0.96. The share of female students in secondary education enrolled in vocational programmes in Turkey was reported at 22.38 % in 2017. (18) Although women perform well on education-related GPI indices, their labor force participation in Turkey is significantly lower than men at 33.27%. (19)

Investment opportunities: COVID-19 has demonstrated the importance of investing in education technologies and remote learning systems. Moreover, due to the refugee crisis and the changing dynamics of the labor market, segments of the population are being pushed into informality. Vocational training and certification prove essential in this context.

Key bottlenecks: There are significant supply-chain constraints in some regions, especially for remote learning systems, due to the inadequacy of the communications and internet infrastructure. Moreover to translate into job market results, learning outcomes have to be certified, especially for new entrants in the domestic market such as the refugees

Subsector
Formal Education ED.1

Development need: The population of Turkey is fairly young, which makes it esssential to maintain a high level of investment in schooling. Existing private schools operate at 50% capacity; indicating that they are accomodating fewer students at higher prices. This model suggests the inclusion of lower-priced alternatives for wider access to high quality education services.

Policy Priority: 11th Development Plan: The plan draws attention to the importance of enhancing the human resources of the country and verifies the development goal of “training qualified people who will convert knowledge into economic and social benefit and are capable of using technology” (p.137). In this context, the importance of providing accessibility for all individuals to comprehensive and qualified education and lifelong learning possibilities is emphasized

Gender inequalities and marginalization issues: The ratio of female-to-male mean years of education received is at 82.14% in Turkey, indicating that women on average complete fewer years of schooling. (8) The gender parity index expressing the total net enrolment of women versus men in primary school has a score of 0.99/1. (16) The GPI for lower secondary school is at 0.98 while the GPI for upper secondary school is at 0.96. The share of female students in secondary education enrolled in vocational programmes in Turkey was reported at 22.38 % in 2017. (18) Although women perform well on education-related GPI indices, their labor force participation in Turkey is significantly lower than men at 33.27%. (19)

Investment opportunities: COVID-19 has demonstrated the importance of investing in education technologies and remote learning systems. Moreover, due to the refugee crisis and the changing dynamics of the labor market, segments of the population are being pushed into informality. Vocational training and certification prove essential in this context.

Key bottlenecks: There are significant supply-chain constraints in some regions, especially for remote learning systems, due to the inadequacy of the communications and internet infrastructure. Moreover to translate into job market results, learning outcomes have to be certified, especially for new entrants in the domestic market such as the refugees

Market Size and Environment
Critical IOA Unit

Number of private & public schools, number of students attending private schools

There are around 1 million 400 thousand students going to private school in Turkey & there are 12 thousand private schools and 70 thousand public schools in the country. (5)

Indicative Return

More than 25%

The profit margin of private schools is between 15% to 20%. However, profit varies considerably depending on the location and the reputation of the school.

Interviewed local service providers in this field estimate an IRR between 20-40% from investments in this model.

Investment Timeframe

Medium Term (5–10 years)

(Short to medium term) – Private school investments are likely to produce a cash-flow in the short to medium term depending on the quality and the speed of the marketing/branding process to attract pupils. (6)

Ticket Size

Less than USD 500,000

Market Risks & Scale Obstacles
Sustainable Development Need

The population of Turkey is fairly young, which makes it esssential to maintain a high level of investment in schooling to achieve universal participation in education.

In 2019, there were around 18 million 108 thousand 860 students in formal education in the pre-school, primary school and middle school levels (14)

Turkey has a pupil-to-teacher ratio of 16.97/1. This value is above the OECD average (15)

Gender & Marginalisation

Low education levels for low income population, female, inmigrant, rural, among others

Expected Development Outcome

Decrease the pupil-to-teacher ratio and the pressure on individual education institutions & schools, increase universal participation in education.

Gender & Marginalisation

Increase education levels of low income population, female, inmigrant, rural, among others.

Primary SDGs addressed

4.2.2 Participation rate in organized learning (one year before the official primary entry age), by sex

4.3.1 Participation rate of youth and adults in formal and non-formal education and training in the previous 12 months, by sex

4.5.1 Parity indices (female/male, rural/urban, bottom/top wealth quintile and others such as disability status, indigenous peoples and conflict-affected, as data become available) for all education indicators on this list that can be disaggregated

4.6.1 Proportion of population in a given age group achieving at least a fixed level of proficiency in functional (a) literacy and (b) numeracy skills, by sex

Current Level74.8 % – Female 75.5% – Male (in 2017) (7)

43.8 % – Female 54.1 % – Male (in 2016) (9)

Not available

Not available

Target Level100% (8)

Not available

Not available

Not available

Secondary SDGs addressed

Directly impacted stakeholders

People
Low and middle income students, teachers, staff members, familes
Gender inequality and/or marginalization
Low income, female, rural, inmigrant population with low access to education
Corporates
Private education providers/schools, partner agencies
Public sector
Public schools, the local government

Indirectly impacted stakeholders

People
Reduced pressure on existing facilities and increased coverage benefiting the wider education system
Corporates
Pedagocial content developers, education resource providers

Outcome Risks

Inclusion concerns around privatizing education as eligiblity criteria are vital to ensure education is provided inclusively.

Risk of diminishing the quality of traditional public schools by drawing away funds, motivated students and/or quality personnel. (10)

Risk of undermining improvements in public service delivery, rendering access to quality education based on the ability to pay (11)

Impact Risks

Stakeholder participation risk
Unexpected impact risk
External risk

Impact Classification

B—Benefit Stakeholders

What

Important, positive outcome: increased access to affordable quality education.

Who

The education sector is likely to benefit from this model through increased ability to accomodate the demand for higher-quality services.

Risk

(Medium Risk) There is a risk of rendering education inaccessible due to affordability issues if adopted at a wider-scale, drawing funds and resources away from the public system.

Impact Thesis

This IOA will accomodate the demand for affordable high-quality education services, contributing positively to education outcomes in the country

Policy Environment

(2019-2023 Strategy Plan of the Ministry of Education): one of the goals is to increase the share of private schools in the Turkish education system (Goal 7)

(2020 Presidential Program): The 2020 Presidential Program stresses the need to develop the human resources of the country in a way that produces positive economic and social externalities and the importance of ensuring the accessibility of education and the availability of lifelong education opportunities

(11th Development Plan): The 11th Development Plan calls for the improvement of the physical infrastructure of learning environments, the richness of teaching programs and materials, self-care skills, integration practices and the standards of guidance services

Financial Environment

Financial incentives: Within the scope of the investment incentives program, the government may allocate the real estate/land for the construction of a private school from the public domain. Upon application the government gives financial support to students wishing to go to private school. (13)

Fiscal incentives: Region 5 incentives and Region 6 incentives: VAT tax exemption, customs tax exemption, income tax reduction, interest rate support, five years of real estate tax exemption, local planning building construction fee exemption (…) (12)

Other incentives: Various banks and financial institutions such as Is Bank, Halk Bank, Deniz Bank, HSBC and Koc Finans have education credit lines for students and families wishing to finance their education expenses.

Regulatory Environment

Ministry of National Education: The area of construction for the private school facilities have to be selected in accordance with the standards of the education law #222, clause 61, and clause 4 of law #5580. The personnel will be selected according to the requirements of law #5580

Treasury Undersecretary: To invest in private schools, an investment incentive certificate can be acquired from the Treasury Undersecretary. Foreign investors wishing to establish private schools in Turkey have to do so in partnership with a Turkish investor, as required by the law

“Law #1739: is the primary law regulating the national education system. It delineates the general structure of the educational system and declares the State’s responsibilities in education and training. Article II declares that the curricula of all private education institutions in Turkey most comply with the Turkish National Education objectives ”

Law #5580: The Law on Private Education Institutions regulates the subjects on the constituting and operating private education institutions in Turkey

Private Sector

Private schools and private school chains, companies providing the necessary equipment for school investments such as Dogus Egitim, Ernur, Albedo, Biofis, Edusa, Ege Dizayn, Pikade etc. Investors: Domestic and international banks providing credit lines for education expenses

Government

The Ministry of Education’s Private Educational Institutions Directorate, the National Education Fund.

Multilaterals

Habitat Association, Unicef

Non-Profit

TOZOK, Turkish Education Fund Volunteers, Darrüşafaka, The Association to Support Modern Life, The Fund to Support Primary Schools (ILKYAR), Teachers Network, Teachers Training Fund, OMSAD

Sector Sources

1) Sustainable Development Report Dashboard 2020, OECD Members, Turkey, 

2)11th Development Plan 

3)2020 Annual Presidential Program, 

4) Sustainable Development Goals Evaluation Report from the Directorate of Strategy and Budget

IOA Sources

5) Online Interview with the Education Chamber of the Union of Chambers and Commodity Exchanges of Turkey, 21 May 2020

6) ThoughtCo, “How to start a private school”, Robert Kennedy, 02.12.2019,

7) Turkey’s Sustainable Development Gaols 2nd VNR 2019 

8) SDG Index & Dashboard 

9) Turkey’s Sustainable Development Gaols 2nd VNR 2019 

10) Education as a Private or a Global Public Good: Competing Conceptual Frameworks and Their Power at the World Bank, Francine Sara Menashy

11) Watkins, K., 2004. Private education and ‘‘Education For All’’—or how not to construct an evidence-based argument: a reply to Tooley. Economic Affairs 24 (4), 8–11

12) Denge Musavirlik, Eğitim Sektörü Yatırım Teşvikleri,

13) Devlet Destekli, Özel Okul 2020 Devlet Teşvikleri/Government Incentives for Private Schooling in 2020, 

14) Anadolu Ajansı, “MEB eğitim öğretim istatistiklerini açıkladı”,07.09.2019,

15) World Bank, 

16) SDG Tracker, 2020, 

17) Trading Economics, World Bank Turkey Statistics 2017,

18) World Bank, Labor Force Participation 2020, 

19) World Bank, Labor Force Participation 2020,