Privatising & Franchising Indian Education

It is difficult to ignore the spicing up that India’s education sector is undergoing. Ubiquitous private coaching centers, front-page ads inviting franchise expansion of schools, and landmark reforms allowing foreign universities to enter India all underscore the changing face of a sector that could best be characterized as lackluster just a few years ago, especially for private entrepreneurs and profit-mongers.

With India’s burgeoning middle-class, mouth-watering demographics and fast-changing government regulation, however, this once boring sector has managed to captivate the attention of capitalists from all corners of the world. From small-town tuition centers to globally renowned universities, from shrewd corporate pundits to leisurely housewives, and from private-equity suits to social-enterprise tweeds, the race to have some sort of stake in the growth of India’s education industry has become almost fashionable.

This year, in particular, has seen a massive inflow of capital and interest into the education sector, with Reliance Equity Advisors’ recent announcement to snap up a 1 billion rupee stake in Pathways Global School, a K-12 education provider; Azim Premji’s decision to invest 2 billion rupees in Manipal Global Education, a education resource provider; and Matrix Advisors’ decision to buy 1 billion rupees into FIIT-JEE, a private coaching provider.

Kapil Sibal, India’s education minister, too, gave an emphatic slap-on-the-back to the sector by comparing its future potential to that of India’s now red-hot telecom sector a decade ago.

While there is no denying the potential upside for investors in India’s education sector, it is worth considering the effect that massive entry of private capital into a traditionally not-for-profit sector can have on the Indian education sector as a whole and especially on parents, students and teachers.

First and foremost, the entry of a greater number of privately managed institutions will automatically translate into greater competition in the education sector, as more organizations compete for a limited number of students. Consequently, schools and colleges will no longer be able to rely on students filling their classrooms term after term, something that is common in high population-density areas with few private schools.

Instead, schools will have to lower fees, improve teaching quality, hire better teachers and use efficient technology as ways of distinguishing themselves from competitors and remaining operational. This is similar to what transpired in India’s telecom sector a few years ago, when private firms slashed costs, improved customer service and emphasized innovation to differentiate themselves from their competitors.

This operational model, which challenges the “recession-proof” tag that educational organizations in India have perpetually had associated with them, will transfer greater power to student and parents, for if a school cannot offer its students a cheaper and better educational experience than the school next door, it is most likely going to shut down.

Even for employees such as teachers, a greater sense of competition among educational organizations could spell better payment terms, training facilities and employment benefits. This is because the quality of teachers and education administrators will determine the success or failure of a school. Like it is for for-profit corporations, talent will be a rare resource and one which educational organizations are willing to invest in more intently.

Another benefit of the growing influence of private investments in the education sector is likely to be the bridging of the large gap dividing the resourceful private sector from the resource hungry education sector. As it stands today, education-focused organizations are largely cut-off from the talent, the innovation and the leadership that characterize for-profit companies in India.

Also, the potential for not just better principals or counselors but also for better education entrepreneurs—managers with an expertise in financial analysis and budgeting, strategy planning, human resources management and technology—is tremendous in India’s economy.

This vacuum in education management promises to be filled by private entrepreneurs who can utilize their business training and their vision for education reform more effectively. Corporate best practices like performance-based pay for teachers or inventory management of fixed assets like furniture or computers, which are everyday practices in educational organizations around the world, would also be better planned and implemented under guidance from the for-profit world.

There is only so much funding in India’s capital-starved economy that the government can provide to education ventures like schools and colleges. Eventually, like has been the case for power, infrastructure or telecommunications, financial support from the private sector will be crucial in leading the growth and progress of educational organizations in the country.

For this reason, the influx of greater capital into the sector should translate into its more comprehensive development and help convert the ‘education for all’ motto into reality. For instance, if public finances can target the development of rural education models and private funds can help growth in more urban areas, a greater number of educational institutes can become available for students.

The idea of private-sector investments in the education sector has its share of critics too and, often, for good reason. It can be argued that the private sector has little knowledge on the intricacies of the education sector as most private investors are neither trained in education management or non-profit work. Can such investors really improve the quality of education in India?

There is also the issue of the over-commercialization of education where profit-mongers ignore quality improvement and work on amassing more money. Finally, how easy is it for regulators to keep private institutes in check, ensure quality control and enforce policies?

Despite these drawbacks, the ability of students and parents to make independent decisions, discern education quality and aim for best quality per rupee spent should endear privately sourced investments to India. Also, there is no question that better training for teachers and education managers will have to take center-stage in efforts to improve quality and ensure policy enforcement.

In the end, the fact remains that for all the changes that private capital promises to bring into the education industry, perhaps the most challenging will be altering the age-old mindset of everyday citizens for whom education is simply a non-profit service, not a money-making business.

Tags:franchise expansion, entry foreign universities, tuition franchise, coaching franchise, Education Franchise, Training Franchise, English Franchise, India Education Sector,FIIT JEE,Manipal Education,

Source:Wall Street Journal,Mayank Maheshwari,Friday, May 21, 2010