Funding and Loans

Introduction
Rationale

Education has been regarded as the major responsibility of governments. Up until recently, higher education is free in most countries, and public institutions of higher education (traditional and distance teaching universities included) depend heavily on direct government funding. Even private institutions benefit from public grants.

Diminishing public funds have changed the picture everywhere. Governments began the move to privatize higher education, and the concept of tuition fees for higher education where there used to be none was introduced. Even institutions or universities in countries with no tradition of cost recovery for education are finding ways to augment their dwindling resources.

Open universities and other types of ODL providers are no exemption to the global trends in the financing of higher education. While less dependence on government funds and more reliance on shared resources are encouraged, the power of government funding to influence ODL development can not be ignored. Government funding to start up activities and sustain them is still crucial to support open and distance learning initiatives especially those that require significant development costs. Likewise, the support of international and country donor agencies is vital in these efforts.

Objectives

This section has been set up to:

• Present the current trends in government spending for ODL institutions.

• Present national and institutional reforms, strategies, recommendations and guidelines for funding ODL and its related forms in higher education.

• Discuss the role of international and national donor agencies in ODL development.

• Provide resources for donor policies, country reports and directories on financing higher education and ODL in particular.

Trends in Funding ODL Institutions

The research findings from Perception of administrative styles of open and distance learning institutions in Asia - a comparative study claimed that apart from China, India and Japan, most Asian governments allocate a minimal amount of recurrent funding to open and distance learning institutions. Receiving 75 per cent of their funds from the government, Japanese institutions are at the high end of the Asian spectrum for public funding on ODL for higher education. At the other end of the spectrum is Hong Kong, which is completely self-financing, drawing revenues entirely from student fees and donations.

Asian countries therefore tend to rely heavily on private initiatives to meet growing demands in education. The issue then is whether Asian governments are providing sufficient funding and support to open and distance learning.

The observed diversity in the degree of government spending for ODL institutions reflects the way countries tend to use distance education and their intended targets. It has been argued that in countries where distance education is used to meet the needs of lifelong learning, continuing education and the labour market, there is justification to shift the burden of paying for education to the learners, who are usually older and earning salaries. However, this may not be the case in developing countries, where distance education is often used for mass education and higher education learners are usually fresh graduates of secondary schools.
 

National Funding Strategies
General strategies in financing higher education

In the 90s, major reforms in the financing of higher education took place worldwide. ODL institutions were equally affected by these reforms. Sometimes they were seen as pioneers in the move towards self-financing, but many of them were and continue to be dependent on public funding.

According to the World Bank paper, The Financing and Management of Higher Education: A Status Report on Worldwide Reforms (1998), three major categories of reforms have emerged in financing higher education:

• Supplementation of public or governmental revenues with non-governmental revenues
• Reform of public sector financing
• Restructuring of universities and other institutions of higher education

:: Supplementation. Governmental revenues could be supplemented by non-governmental revenues by shifting the burden of higher education costs from the general taxpayer to parents, students, philanthropists and purchasers of university services. The five primary vehicles of supplementation to maintain accessibility and provide equity in higher education are as follows:

• Introduction of, or substantial increases in, tuition and full or more nearly full-cost fees into higher education sectors hitherto supported primarily or wholly by public revenues
• Introduction of means tested grants and loans
• Encouragement of private higher education supported mainly through tuition fees
• Encouragement of entrepreneurial activities on the part of the faculty and/or the university
• Encouragement of philanthropy - for endowment, for direct operations, and for scholarships to students

:: Reform of public sector financing. The financing of public and private higher education will remain substantially dependent on public revenues even highly developed countries. To make more efficient use of these public revenues calls for two basic reforms:

• devolution of spending authority from the central government to regional units of government to the higher educational institutions
• budget reforms, especially the introduction of performance and other forms of more incentive-sensitive budgeting

:: Restructuring of higher-education institutions. Restructuring has often occurred as an outcome of grave financial constraints, and on the other hand it can also be undertaken to merge institutions, consolidate tertiary education, and to promote inter-institutional economies of scale.

Role of Donor Agencies
General role in ODL support

:: The World Bank raises four general questions on international agencies and funding in the context of distance education:

	Should they be reactive or proactive?
	Should they develop and deliver programmes or serve merely as facilitators?
	Should projects be government to government, government to institution, or institution to institution and funded by an agency-or should they follow some other structure?
	What part should national governments play in regulating development projects? International agencies must answer these questions as they draw policies for financing distance education.

Basic guidelines for promoting distance education

The speech Distance education: Crossing the distance in the Commonwealth delivered by COL President Professor Gajaraj Dhanarajan in 1997 identified the need to educate and urge many international and national donor agencies to channel a proportion of their assistance in promoting distance education. He also specified in what ways governments, international and other donor agencies can be helpful in the development of distance education:

	Create a policy framework that will enable open and distance learning to become an important pillar of a nation's educational initiative.
	Encourage minimal standards of good practice for those involved in the delivery of open and distance learning.
	Create pathways for the free and easy movement of credits and credentials across the educational system.
	For international donor and lending agencies: Require recipient governments to include open and distance learning provisions into the educational planning framework of a country.

References
Financing higher education

Donor agencies

Asian Development Bank
:: Financing higher education in Asia: Patterns, trends, and policies (2002)
Higher education is among the domains that received attention in ADB’s
efforts to develop a new policy framework in education. To provide background information for policy formulation, ADB commissioned this paper which highlights education financing in the region, particularly fees in public
institutions, grants and loans, institutional revenue-earning schemes,
privatization, and future directions (distance education being one of the trends).

Japanese grants
:: Distance education for Asia with World Bank and Japanese
government grants
This presentation discusses limitations and opportunities
surrounding current public projects to provide distance education from Japan to developing countries in Asia. It also alerts those with more distance education expertise to find out about and to apply for grant opportunities. The World Bank recommends that Global Development Learning Network (GDLN) grantees use WebCT as well as teleconferencing. Participants can see GDLN Japan course contents utilizing WebCT, ask questions about public grants for distance education, and brainstorm how to collaborate to improve educational outcomes.

World Bank
:: The financing and management of higher education: A status report on worldwide reforms (1998)
This report views this finance and management reform agenda in five themes: a) expansion and diversification; b) fiscal pressure; c) orientation to the market; d) accountability; and e) quality and efficiency. In the context of the themes, three major categories of reforms have emerged in quite divergent countries: supplementation of public or governmental revenues with non-governmental revenues; reform of public sector financing; and radical change (restructuring) of the universities and other institutions of higher education.