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Education Finance Perspectives of parents in Uganda By Christine Kobugabe, Geoffrey Muzigiti and Oliver Schmidt

Education Finance Perspectives of parents in Uganda By Christine Kobugabe, Geoffrey Muzigiti and Oliver Schmidt. Presentation Outline. Introduction: Mountains of the Moon University In a nutshell: Education sector in Uganda Deciding investment into offspring’ education

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Education Finance Perspectives of parents in Uganda By Christine Kobugabe, Geoffrey Muzigiti and Oliver Schmidt

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  1. Education Finance Perspectives of parents in Uganda By Christine Kobugabe, Geoffrey Muzigiti and Oliver Schmidt

  2. Presentation Outline • Introduction: Mountains of the Moon University • In a nutshell: Education sector in Uganda • Deciding investment into offspring’ education • Improving education finance • An emerging research agenda

  3. Mountains of the Moon University Lake Saaka Campus – SBMS building School of business and management studies (SBMS) – front side view

  4. 1 Introduction: Mountains of the Moon University (MMU) • 5 schools (= faculties); - agriculture - business and management studies (SBMS) - informatics and computer sciences (SOIC) - education, - public health [and nursing][- environmental studies] • about 1,700 students; out of which approx. 900 SBMS ,, ,, 100 postgraduate ,, ,, 45% female • 25 programs at academic certificate (1 year), diploma (2 years), bachelor (3 years) as well as postgraduate level • Research and other outreach programs in, agricultural value chains, education, entrepreneurship, microfinance, natural resource management, public health

  5. Lake Saaka Campus – SBMS building Backside view (from the crater)

  6. 1 Introduction: Mountains of the Moon University (MMU) MMU was registered in 2004 and received a provisional license from NCHE in 2005. It was conceived and founded by leaders of the business, faith-based and civic communities of the region. Together with the representatives of the 8 districts of the region, they are represented on the university board and council. MMU is registered as a private company; however it is non profit. It is one of the most important employers (about 150 staff) in the region. MMU’s vision and mission are a challenge under the condition of a. tuition-based business model (Kobugabe 2011). Whereas MMU endeavors to offer academic programs most relevant to development issues of the region, these may not ‘sell’ best (e. g. agriculture, microfinance, public health). MMU has been relying on international donors (and in early years GoU) for its capital formation.

  7. 2 In a nutshell: Education sector in Uganda – Structure and years Level of education Tertiary Secondary - Advanced - Ordinary Primary Nursery Age In years 13 19 24 17 3 6 12 15 18 21

  8. 2 In a nutshell: Education sector in Uganda – Enrollment rates by levels Level of education Tertiary 35% Secondary - Advanced - Ordinary 45% 70% 92.5% Primary 20% Nursery Age In years 13 19 24 17 3 6 12 15 18 21

  9. 2 In a nutshell: Education sector in Uganda – Government financing Level of education Tertiary 7% Secondary - Advanced - Ordinary 0% 80% 90% Primary 0% Nursery Age In years 13 19 24 17 3 6 12 15 18 21

  10. 3 Deciding investment into offspring’ education High Expectation = Investment objective Private school Access to a high paying (formal) job Minimum qualification to perform in the informal and/or agricultural sector; May be lucky to achieve government scholarship for higher education Low Expectation = Investment objective Government School

  11. 3 Deciding investment into offspring’ education Source of income Seasonality / Volatility of sources of income ,PEST’ Assuredness of property rights Financial Capacity Labor market Information Financial obligations (e. g. other children) Education sector / education institution Inflation Investment objective Probability that the child ‘repays’; once grown up Risk Appetite Risk Probability that environment changes render the investment unprofitable Probability that the child survives Probability that the investor survives

  12. 3 Deciding investment into offspring’ education The education investment decision is a function of information, risk, risk appetite, and financial capacity (investment theory usually assumes that information and financial capacity are subsumed under risk) EID = f (I, R, RA, F). The independent variables are not independent from each other, though. They influence each other in various way, i. e. multi-collinarity is likely to be high. We may assume that all four independent variables are shaped by the educational attainment of the investor. All other things equal, the more educated investor will apply more information, assess risk and financial capacity more differentiated and will form a different risk appetite than the less educated investor. Hence (2) EID = f (I(E), R(E), RA(E), F(E)) => EID = f (E)

  13. 3 Deciding investment into offspring’ education However, it might be doubted if parents act exclusively like rational investors (as e. g. Gary Becker seems to imply). Maybe the most sought after influence is culture. (3)EID = f (E, C) Culture is, at least to the economist, a rather vague concept. E. g. in Uganda, it is argued that attitudes towards education vary systematically between tribes. However, it has so far not been shown that the resulting EID (a) does indeed vary systematically and (b) that it can not be explained by I, R, RA and F. Hereafter, we consider sex of respondents as a proxy for culture, because the male and female sexes constitute gender, i. e. socially (culturally) constructed roles, attitudes and behavioral pattern (e. g. Hamaus/Meier zu Selhausen 2012).

  14. 3 Deciding investment into offspring’ education Overview of the data-sets Number of respondents GBPD = Gender-balanced product development project; 493 purposively (‘snowball’) sampled semi-urban respondents; 491 valid questionnaires ; June-July 2011 Central, Western and Mid-Northern regions of Uganda RFG = Rural Farmers’ Groups cash flow & credit use assessment; 414 respondents from 42 randomly sampled groups; Oct 2012 Western and South-Western regions of Uganda

  15. 3 Deciding investment into offspring’ education Respondents’ profile, by educational attainment and gender RFG GBPD GBPD; low education = less than O-level; medium education = O-level; higher education = beyond O-level RFG; low education = Primary; medium education = Secondary; higher education = Tertiary

  16. 3 Deciding investment into offspring’ education Respondents’ number of children, by educational attainment and gender low education medium education high education

  17. 3 Deciding investment into offspring’ education Amount spent per child per term Euro

  18. 3 Deciding investment into offspring’ education Education spending as% of respondent’s income %

  19. 3 Deciding investment into offspring’ education Relationship (R2) between education spending and respondent’s education

  20. 3 Deciding investment into offspring’ education Relationship (R2) between education spending and respondent’s education + Low education Medium education High education - R2 with total education spending Female Male

  21. 3 Deciding investment into offspring’ education Summing up The investment choices of Ugandan Parents’ for their children’s education are shaped by their own educational attainment and by their gender. Many women invest a large portion of their income into their children’s investment. Contrary to Ugandan myth, this is often absolutely larger than men’s contribution. Higher educated women invest more into education than less educated women. Institutions matter: Investment decisions of both men and women differ between rural and urban settings. In particular, more educated urban women have less children than less educated urban women. Rural men want many children; rather than better educated children.

  22. 4 Improving education finance: Available options Sale of property Government Financing (primary and secondary level) Sources of Funds School fees Loans from both regulated and Unregulated institution (emergency in nature) Parents Income

  23. 4 Improving education finance: New product concepts Accumulated Savings Purely school fees commitment savings account FI Product Development Savings Loan Combined annual savings and loan product

  24. 5 Education Finance: An emerging research agenda Would the findings of the exploratory study stand in a robust setting? What is the impact of risk and risk appetite towards investment in children’s education; and what shapes risk and risk appetite? What is the impact of time-inconsistent choices; and (if problematic) how might it be contained? What is the impact of financial product interventions; what are the alternatives? Can better education finance lead to better education quality? What is the potential (and potential design) of combined financial instruments?

  25. Thank you very much for listening We are looking forward to questions and discussion Dr. Oliver Schmidt Ag. Dean, School of Business and Management Studies (oliver@mmu.ac.ug) Christine Kobugabe, Head of Department, Business and Management (ckobugabe@gmail.com) Geoffrey Muzigiti Head of Department, Banking and Microfinance (gmuzigiti@gmail.com)

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