A DISCUSSION PAPER ON THE NATIONAL

HIGHER EDUCATION FINANCING MODELS

THE IMPLICATIONS ON THE DEVELOPMENT AND

THE RETENTION OF THE NEXT GENERATION
ACADEMICS

PREPARED BY

MR. BENJAMIN C. CHEBOI

CHIEF EXECUTIVE OFFICER
HIGHER EDUCATION LOANS BOARD, KENYA

TO THE UNIVERSITY LEADERS FORUM ON

DEVELOPING AND RETAINING THE NEXT GENERATION
ACADEMICS.

NOVEMBER 2008
 INTRODUCTION
Higher education in Africa has witnessed tremendous
growth since the advent of independence. In the recent
decades, a growing number of countries have sought
innovative solutions to the substantial challenges they
face in financing higher education. One of the principal
challenges is that the demand for education beyond
secondary school level in most countries around the
world is growing faster than the ability or willingness of
governments to provide public resources that are
adequate to meet this demand.

There are three broad reasons for this rapid increase in

demand:-
Economic value of attaining higher education.

Social pressure to move beyond secondary level of

education for non monetary reasons such as greater
social standing and prestige in the community.

Demand driven curricular in Higher Education.

RESPONSE TO INCREASED DEMAND

Countries and institutions of higher education have

responded to the mismatch between available resources
and the growing demand in several ways.
The most frequent response has been to mobilize more
resources principally by introducing or raising tuition fees
as away of increasing cost sharing.

Additional private resources through commercialization

of research and other private uses of institutional
facilities and staff.

Emerging financing through issuance of bonds and other

instruments of financial markets that allow greater public-
private-partnership in providing Higher Education.

A trend towards innovative financing mechanisms that

allow both public and private funding are needed.
Allowing of financing model that insulate funding
decisions from political pressure and encouraging
positive institutional behaviour.

Creation of demand-side vouchers systems, in which

institutional operating subsidies are distributed through a
voucher given to undergraduates.

Performance based financing, setting a side a portion of

funding to be distributed to institutions on the basis of a
series of performance measures, performance contracts
negotiated between governments and institutions:
competitive funds that encourage innovation, great
academic quality and strengthening institutional
managed capacity; and financing model that directly pay
for results.
Expansion of financial aid to students with high levels of
financial need and or academic merit to allow for
financial strategies that anticipate higher fees. Provision
of student aid in the form of vouchers as a means of
stimulating greater competition among institutions.

Growth of students loans to help students pay for the

higher tuition fees entailed in cost recovery strategies.

The response documented above has not entirely

translated into a globally accepted model of financing
higher education which will not only promote access and
equity but will guarantee quality. In addition it is
expected that a model of funding higher education
should also generate the development and retention of
the next generation of academics.
The issue of National Financing of Higher Education is
therefore critical for realization of quality, access and
equity in higher education institutions. It is therefore
important that there is a clear understanding of the
National Higher Education Financing models especially
with reference to its effect on the development and
retention of the next generation academics.

The Challenges posed by the rapid growth in higher

education requires Governments, Policy makers,
academics and Stakeholders in higher education to re-
examine the models of financing higher education with a
view to ensuring that they are modified to create the
necessary environment for the development and retention
of the right caliber, and numbers of the next generation
academics.

This discussion paper seeks to shed light on the model of

financing education in Africa using the Kenyan context with
particular attention to how they affect the next generation
academics.
2.0 MODELS OF FINANCING HIGHER EDUCATION

At independence, the models of financing higher

education in African countries were largely adopted from
the colonial governments. However, in the recent past,
countries have adopted different models or have since
modified the original models as practiced during the
period prior to and immediately after independence. The
models can be summarized as follows:-

2.1 FULL GOVERNMENT FUNDING & SUPPORT

During the period after independence, there was a

general need to train the human resource who were
expected to take over the responsibilities and functions
performed by expatriates and staff from the colonial
governments.
While a large share of public support of higher education in
most countries is provided directly to institutions, most
countries also provide some portion of support for higher
education to students and their families. One of the more
innovative student-based approaches is demand side
vouchers which finance the recurrent expenses of
institutions indirectly through vouchers provided to
students.

More typically some portion of public funds is allocated

directly to students in the more traditional grants and
scholarships and government subsidized student loan
models.

Most countries invested heavily in the construction of

institutions of higher learning, equipping and providing
learning facilities, including lecture halls, libraries,
accommodation and recreation facilities to meet this need.
Governments also provided funds for payment of staff
salaries. Staff emoluments and other costs were financed
with funds from the state coffers.
There were also funds set aside for staff development.
Staff was to a large extent sent oversees to train and
prepare academics to take over from a largely expatriate
faculty.

Students were also fully supported and had an opportunity

to reside in the university hostels. Food and
accommodation was fully catered for. In addition, students
were also paid pocket money. Students in institutions of
higher learning were enjoying what one would describe a
five star accommodation.

Institutions of higher learning would normally prepare a

budget, like any other government department and present
to the relevant Ministry, treasury and parliament for
approval. State bureaucrats would therefore decide what is
appropriate for the institutions and approve as they deemed
fit.
2.2 RESEARCH FUNDING

Basic and applied research is an essential function of a

comprehensive university. The responsibility of
government with respect to academic research is to help
to ensure that the public funds allocated for this are
spent efficiently and effectively to meet policy objectives
of generating relevant findings and improving the quality
of research capacity and academic offerings.

A number of arrangements exist around the world for the

funding of university based research including the
payment of overhead costs. These comprise instances in
which instruction and research are funded together,
project based funding and block grant funding for
research.

The sources of funding research are varied and include-:

 National research bodies/councils
Government departments
Charities
Industry and commerce

Combined funding of instruction and research is the most

common approach for funding university based research.

Research project funding is another common approach to

allocate public resources for research, it occurs when
faculty or other staff are funded for specific projects,
usually based on peer reviews of proposal. By measuring
the quality and potential of proposals in an objective way,
the process is insulated from inevitable political
pressures. Funding is sometimes provided on a matching
grant basis where the government funds are
complemented by institutional or private sources.
Block grant funding for research is a less traditional
mechanism for allocating research funds, institutions
receive a block grant allocation that is not differentiated
or earmarked by project. Institutions or faculties
therefore have a wide latitude in setting their own
priorities for expenditure of these funds. This can be an
effective way to meet important policy objectives.
Centers of research have a potential of improving the
relevance of research if the focus of the centres
accurately reflects national and regional needs.

Demand side funding of research, where university-

based research is funded indirectly through the provision
of scholarships, fellowships, research and teaching
assistantships provided to graduate students. To the
extent the government or private sector are the sources
of this assistance it reduces the financial burden on the
institutions themselves and thus viewed properly as an
indirect source of support for institutions.
In this model, funds for research would be factored in the
overall budget to be approved by government. Since
research is an integral part of any higher education
institution especially universities, it is expected that the
institutions would set aside funds to meet that need.
Under circumstances of limited resources, not much
attention would be paid to research budgets.
Consequently academics may not engage in research
resulting in low quality and undermining the development
of the next generation academics.

2.3 IMPLICATIONS FOR STAFF DEVELOPMENT

AND RETENTION OF NEXT GENERATION
ACADEMICS
In this model of full government sponsorship, funds
would normally be set aside for staff development in the
university. In addition, support for staff development
would be sought from sponsors including agencies such
as DAAD, the commonwealth, full bright scholarships,
JICA and British Council etc
 The challenge, however, is that when resources diminish
as is often the case, institutions of higher learning tend to
cut down on staff development funds.

When this happens, the institutions will not give sufficient

support to staff training and development. Considering the
fact that natural forces will lead to attrition of academics, it
becomes difficult to replace retiring academics and much
more difficult to develop new ones to cope with increasing
demand.

3.0. COST SHARING MODEL

This model provides for a cost sharing arrangement where

government provides part of the funds for financing the
cost of education in institutions of higher learning while the
institutions supplement the grants with subsidized tuition
fees.
This model started operating in most African Universities in
the late eighties and early nineties when there was the
realization that governments could not afford to finance
higher education institutions from their own budgets without
compromising on the quality of education, and without
limiting access. Indeed, the World Bank policies required
that governments embrace cost sharing in higher education
and even supported the setting up or strengthening of
student loan schemes in a number of African countries.

The introduction of student loan schemes is premised on the

notion that since the private rate of return for participation in
higher education is higher than the social rate of return,
beneficiaries should pay.

Those who cannot afford to pay should be accorded the

opportunity to access education but pay through a deferred
payment model of student loans.
The model would guarantee access and equity in higher
education irrespective of the socio-economic status of
participants since it is assumed that those who cannot
afford to pay will be given loans to be repaid upon
graduation and employment.

The challenge which this model faces is that government

support gives it the right to impose controls on amounts of
tuition to be levied on students. Consequently, institutions
would still be constrained in raising sufficient financial
resources to meet their operational and infrastructure
development costs.

3.1 IMPLICATIONS FOR DEVELOPMENT OF THE

NEXT GENERATION ACADEMICS

As in the case of fully government supported model, due to

the rapid expansion of higher education systems, without a
commensurate increase in resources, very important
aspects of staff development tend to be relegated to the
bottom in terms of resource allocation.
 Staff who desire to enroll for graduate
programmes would normally have to solicit for
scholarships or raise funds from own sources.

The consequence of this is that the development

of the next generation academics takes a back
seat with the likely impact on quality of education
in future, not least the lack of researchers

4.0. DUAL TRACK TUITION MODEL

18
The cost sharing model in some countries has
been modified to what has been referred to as
dual track tuition system of financing higher
education.
In this system, governments decide on the numbers of
students it would like to support and pays full tuition for them
as in the case of Makerere University in Uganda. Any other
student seeking admission is expected to pay for the full cost
of education. This is where households shoulder the
responsibility of paying the full tuition.

In Kenya, the dual track system is structured in such a

manner that government also decides on the number of
students it can afford to sponsor while the others get
admission to the self sponsored programs.

Students to be sponsored by government would normally be

selected on the basis of academic merit.

The idea of full cost tuition is debatable because more often

than not, the cost is significantly subsidized because the
fees charged do not normally include infrastructure
development costs. The students on the second track would
normally use facilities developed using government funds
The dual track system of financing has generally created
opportunities for institutions to generate additional revenue
and has resulted in most universities getting resources to
complete infrastructure projects like in the Kenyan case.

It has also enabled institutions of higher learning to spare

some funds for staff development and for research. In
addition, this revenue has enabled institutions to increase
remuneration for faculty hence increase chances of
retention of staff.

4.1 IMPLICATION ON DEVELOPMENT AND

RETENTION OF NEXT GENERATION ACADEMICS

This model of financing higher education is better than the

fully government supported system in the development of
the next generation academics .
UNIT COST TUITION FEE BASED MODEL

This model of financing higher education assumes that

governments will let institutions of higher learning be
autonomous in decision making and operate like
business. All services provided by the institutions are
provided for at cost and are borne by the consumer.
Market place practices in which break even points are
the norm, marketing of institutional products such as
research results and consultancies take centre stage in
the operations of the institutions. Institutions are
expected to raise funds to meet their costs of
operations and infrastructure development and
maintenance.
Like any other business concern, the human resource is
treated as the most important resource and investing in
them becomes very important.

In this model funds are set aside for continuous staff

development and research. In addition salaries and staff
emoluments are given due consideration so that they are
rewarded sufficiently to ensure optimum staff retention.

This model also ensures that the working environment is

conducive for research and delivery of quality education
by ensuring that equipment, learning materials other
infra structure including libraries is up to date
CONCLUSION

A primary lesson from international experience in recent

decades with resource mobilization and financing of
higher education is the importance of not relying on a
single source of funding government. The growing
diversity of funding sources has been an important and
effective response by many governments and institutions
to the mismatch between demand and resources. It
seems clear that most countries should rely on a mix of
funding models to achieve the objectives they seek for
their higher education systems. Student loans often are
the best mechanism to help promote better access and
equity, but they should not be entirely relied on for
achieving this important objective.
Many financing reforms, including establishing or
increasing tuition fees, replacing grants and
scholarships with student loans or authorizing
private higher education institutions to operate
are controversial measures. While linking
financing to improving equity, quality and
performance, it should be used as an
intervention measure and must depend to a large
extent on the balance of policy objectives being
sort. Political difficulty should not be used,
however to delay implementing important and
necessary reforms.
Reforms in the models of financing higher
education should take cognizance of the
development and retention of the next generation