Low-Fee Private Schools
Low-Fee Private Schools
Business Model Description
Establish or operate a branch of low-fee private primary, middle and high schools based on one of the three ownership structures, defining the scale: (i) owned by a local proprietor with skills in education and school development or business administration; (ii) cooperatives with established or discussed fundraising partnerships; (iii) corporate chains. Set fee affordability benchmark in terms of minimum wage, household income, or national poverty line such as less than 10% household income of families at twice the national poverty line, while ensuring accountability and quality of the education through government and third-party oversight.
Expected Impact
Improve educational outcomes, skills development, and employability, introducing innovative teaching methods and creating a learning ecosystem favourable for extracurricular activities.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Iraq: Countrywide
Sector Classification
Education
Development need
Achieving quality education in Iraq is undermined by limited government education spending, which represents less than 10% of the public budget that is below the MENA average of 14% and the international benchmark of 15-20% for achieving SDG 4, quality of education staff, outdated curriculum, weak school infrastructure, skills mismatch, and limited time spent at school (3,4).
Policy priority
Building human capacity is the first of the five sustainable development priorities set out by Iraq’s Vision 2030. The government envisions the domestication of the SDGs through the Ministerial Curriculum (2022-2025) which stipulates the adoption of a plan based on 23 axes, including the improvement of human capital endowment and efficiency in education as the 14th axis (1, 2).
Gender inequalities and marginalization issues
Female labor force participation in Iraq is the second lowest in the world, at 10.6% as of 2021 (cf. 68% for males) as an outcome of numerous factors that hinder entry, including educational inclusion, prevalence of child marriages, and societal norms. In Iraq, mostly girls make up the 3.2 million children that are out of school (6, 8). Marginalized communities, including the estimated 200,000 displaced households and people living in more than 470 informal settlements in Iraq, have significant challenges in accessing physical education facilities or bear the brunt of overcrowding, inadequate school facilities, and long distances to school, which disproportionately impact the girls’ transportation to the educational facilities. Lack of civil documentation and the need to work to provide extra income for their families impede displaced children’s inclusion in the education system (7).
Investment opportunities introduction
Iraq is a conflict-affected upper-middle income country, endowed with one of the most youthful populations globally as 40% of the Iraqi population is under 15, with opportunities to invest in school buildings, technology-based distance learning, early childhood development, private schools, and higher education facilities such as laboratories (2, 5).
Key bottlenecks introduction
Sourcing skills amidst high employee turnover and access to finance need to be addressed given the banks’ limited loan portfolio and public mistrust in the banking system, owing to bank failures during domestic insurgency and external shocks, and currency auction practices among others (9).
Education Infrastructure
Development need
School infrastructure is an urgently needed investment in Iraq given that almost half of the 14,032 existing school buildings need rehabilitation or significant design improvements to ensure basic safety and hygiene standards. The deficit in school buildings results in double- and multiple-shift schools which represent 45% of the total schools in 2018/2019 academic year (3, 4).
Policy priority
The National Development Plan (2018-2022) sets the rehabilitation, expansion, and development of new school buildings as a means of achieving its Human and Social Development pillar. In 2023, Iraqi government established a fund of funds (FOF) with a capital of about USD 765 million, including the education sector, and aims at constructing 1,000 new schools immediately (10, 11).
Gender inequalities and marginalization issues
In Iraq, girls are more likely to be out-of-school than boys at all education levels. The urban-rural divide in school completion rates is prevalent at all education levels and as high as 12%. In Southern Iraq, notably in Al-Muthanna and Missan, gaps in completion rates for primary and lower secondary education levels are the widest. Lacking adequate mobile devices and internet, displaced children have been the most vulnerable to pandemic conditions and some lost around two years of schooling, without access to remote learning. In rural areas, female teachers may not work due to cultural barriers that refrain them from instructing in mixed and overcrowded classrooms (6, 7).
Investment opportunities introduction
Post-crisis reconstruction and demographic dividend vouch for lucrative investments in education infrastructure and inter-sector linkages between education and agriculture. Federal Budget 2023-2025 grants contractual privileges to private sector for construction of pre-university schools and higher education facilities such as teaching hospitals (12).
Key bottlenecks introduction
Sourcing well-educated teachers is hard as only about one third of teachers in Iraq have bachelor’s or higher degree. Low salary and conflict hinder the practice of teaching. Lack of synergies between administrative units and limited flow of educational data undermine the long-term strategic and corporate planning amidst the conflict-induced uncertainty (4, 9).
Pipeline Opportunity
Low-Fee Private Schools
Establish or operate a branch of low-fee private primary, middle and high schools based on one of the three ownership structures, defining the scale: (i) owned by a local proprietor with skills in education and school development or business administration; (ii) cooperatives with established or discussed fundraising partnerships; (iii) corporate chains. Set fee affordability benchmark in terms of minimum wage, household income, or national poverty line such as less than 10% household income of families at twice the national poverty line, while ensuring accountability and quality of the education through government and third-party oversight.
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
Students enrolled in primary and secondary private schools in Iraq represent about 5% of the total and pay an average school fee that falls between USD 1000 to 2100 annually, vouching for a market size estimate above USD 300 million (29, 30).
The number of private primary school in Iraq increased by 131% between 2015/2016-2018/2019 academic years. During the same period number of private secondary schools increased by 86% (4).
The demand for private schools in Iraq is high where the rate of students attending a public school per each student in private school is 21 nation-wide -while the figure is higher than 45 in some governorates, including Ninevah, Salah ad-Din, and Missan (4).
Indicative Return
10% - 15%
With a growing investment appetite and ecosystem for chain private schools in the Gulf and Middle East and North Africa regions, a benchmark private equity investment generated 11 to 13% in IRR (13).
Investment Timeframe
Medium Term (5–10 years)
The investment timeframe for private school investment in the region are expected to be longer than established timeframe, such as three years. A private equity investment in the region paid back in six years (13, 14).
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Market - Highly Regulated
Pricing and Scaling Up
Impact Case
Sustainable Development Need
The projected cost of delivering SDG 4 - Quality Education in Iraq for the period of 2022-2030 would be about USD 120 billion from a developing country base scenario, albeit the limited public spending on education, representing less than 10% of the government budget -below the MENA average (3, 18).
Quality of education, physical education facilities, and skill levels in Iraq remain low amid high dropout rates (highest at the end of upper secondary education with 12%, in 2020) and repetition rates (over-aged children make up about one-third of the secondary school children) (3, 4, 6).
The curriculum in Iraq is memorization-based and outdated, therefore does not allow students to develop the highly-demanded skills in the modern jobs market or improved socioemotional capacity (4).
Gender & Marginalisation
Multi-shift schools in Iraq make up about 45% of the schools in Iraq, while putting those in the evening shift in a disadvantaged position, as pass rates between morning shift students and evening shift students may differ as much as 20% (4).
Enrolment is a key issue for an inclusive education sector in Iraq where the rate of females who are out of school (11.4%) is double that of males (5.4%), leaving out-of-school children vulnerable to child labor and child marriage (4).
Expected Development Outcome
Increasing private investments in schools and public-private partnerships could help Iraq deliver SDG 4 - Quality Education by deploying more capital.
Private schools may improve the quality of education in Iraq by offering different subjects and utilizing modern teaching methods.
Private schools may offer a more productive and modernized teaching curriculum and provide children with dedicated areas for extracurricular activities.
Gender & Marginalisation
Increasing the number of new private schools in Iraq could decrease the pressure on public finances, and help the Government of Iraq (GoI) reduce the multiple-shift practice in education.
New private schools, especially in urban areas, could narrow down the gap in school buildings and decrease the number of out of school girls.
Primary SDGs addressed
4.1.2 Completion rate (primary education, lower secondary education, upper secondary education)
4.a.1 Proportion of schools offering basic services, by type of service
In 2020, 76%, 46%, 32% (primary education, lower secondary education, upper secondary education) (6).
Proxy: around half of the schools need rehabilitation and 45% run with multiple shifts (4).
Universal primary and lower secondary completion rates by 2031 (19).
Ending multiple shift practices in education and completing 8,000 new school buildings (10).
8.5.2 Unemployment rate, by sex, age and persons with disabilities
15.7% in 2023 (20).
The National Development Plan (NDP) for 2018-2022 sets out the objective -for private sector- of reducing unemployment by 0.5% every year throughout the five-year NDP period (10).
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Outcome Risks
Investments can lead to increased resource consumption in the construction of new school infrastructure and urban sprawl, which impact local ecosystem and increases pressure on land use.
Impact Risks
The low-fee aspect could be in direct correlation with low-cost schools, which decrease costs by personal relations, meagre teaching quality and unregistered business operations.
If the low-fee aspect is not integrated in the business model, vulnerable communities and poor households risk being left behind.
Impact Classification
What
Leveraging education sector opportunities reduce multidimensional poverty, flourish productivity and economic growth, and advance post-conflict reconstruction.
Who
Students, teachers, and parents benefit from enhanced opportunities while the public gains from the long-lasting improvement in productivity and social cohesion.
Risk
If the affordability aspect of private schools is not well integrated into the business model, vulnerable communities might be left behind, aggravating the existing social cleavages.
Contribution
In addition to low-fee private schools, improving pre-university education could be facilitated by investments in e-learning, pre-school education, and school infrastructure.
How Much
Narrowing down the gap of public to private student ratio in Iraq, which is 1:21, and the need for additional schools that is estimated to be around 12,000 (4, 26).
Impact Thesis
Improve educational outcomes, skills development, and employability, introducing innovative teaching methods and creating a learning ecosystem favourable for extracurricular activities.
Enabling Environment
Policy Environment
The Iraqi National Education Strategy, 2021-2031: lays the foundation for increasing financial commitments to achieve universal primary and secondary education, pledging to increase the share of public spending on education from below 10% to 16% before 2030 (19).
Ministerial Curriculum of the Government of Mohammed Shia Al-Sudani, 2022-2025: presents the vision of the government with respect to SDG priorities, including for the achievement of SDG 4 - Quality Education and improving efficiency in the educational system (2).
The National Development Plan, 2024-2028: is set to include a priority program that is designed to complete the public sector projects with a social dimension related to human capital development (31).
Republic of Iraq National Development Plan, 2018-2022: Sets out the government’s five-year objectives for the Human and Social Development pillar, including the construction of new schools to reduce overcrowding in the classrooms and to end multiple shift schooling practice (10).
Financial Environment
Financial incentives: The Central Bank of Iraq (CBI) launched the 1 trillion dinar initiative in 2015 to support SMEs with concessional financing. Bloom project, implemented by Cihan Bank, provides collateral-free loans of up to about USD 110K for SMEs in the Kurdistan Region of Iraq (KRI) (22, 23).
Fiscal incentives: Investment projects are exempt from non-custom taxes for 10 years and are subject to exemption of import duties for raw materials, equipment and devices, though implications and provision of incentives by the two different investment laws in the country may differ (24, 25, 28).
Other incentives: Iraq Development Fund is established as a fund of funds (FOF) to manage USD 2.4 billion to be spent on sustainable development in six priority sectors including education and digital transformation (26, 27).
Regulatory Environment
The Revised Investment Law No. 13 of 2006 in Iraq: sets out fiscal incentives for the Iraqi and foreign investors, including tax exemption for imported assets for educational projects, and establishes the National Investment Commission (NIC) for promoting and facilitating investments (24).
Investment Law of the Kurdistan Region of Iraq (KRI), Law No.4 of 2006: grants equal rights to foreign and local investors and offers tax incentives for investments, including special clauses concerning education projects under the article 6 (25).
Marketplace Participants
Private Sector
More than 2,300 private schools, Maarif Schools, International School of Choueifat - Erbil, Al-Mobdioon Primary Private School, GroFin, SABIS, GEMS.
Government
Ministry of Education (MoE), Ministry of Higher Education and Scientific Research, Ministry of Labor and Social Affairs (MoLSA), Kurdistan Regional Government (KRG), the National Investment Commission (NIC), Newton Live Online Learning Platform.
Multilaterals
United Nations Development Programme (UNDP), United Nations Children's Fund (UNICEF), European Union, Korea International Cooperation Agency (KOICA), Nuffic - Orange Knowledge Program, the Swedish Development and Aid Organization (SWEDO).
Non-Profit
Adyan Foundation, Oxfam, Rashad Center for Cultural Governance, REACH Iraq, Rwanga Foundation, Save the Children, Re:Coded, the Station.
Target Locations
Iraq: Countrywide
References
- (1) Ministry of Planning, Republic of Iraq. 2019. The Future We Want: Iraq Vision for Sustainable Development 2030. https://planipolis.iiep.unesco.org/sites/default/files/ressources/iraq_vision_2030_en.pdf
- (2) Prime Minister's Office, Republic of Iraq. 2022. Ministerial Curriculum of the Government of Mohammed Shia Al-Sudani (2022-2025).
- (3) Lahire, Nathalie; Sedmik, Elisabeth; El Ghali, Hana Addam. 2021. Building Forward Better to Ensure Learning for All Children in Iraq : An Education Reform Path (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/430241627636852041/Building-Forward-Better-to-Ensure-Learning-for-All-Children-in-Iraq-An-Education-Reform-Path
- (4) Munir, Essam; Selim, Safwa; Ramadani, Hanguin and Mohammed Jamal. 2021. Iraqi Education Sector Overview. Kapita Business Hub. https://kapita.iq/storage/app/media/Research/Iraq%20Education%20Sector%20Overview%20EN.pdf
- (5) Denselow, James. 2023. Iraq’s Young Population – A Challenge or an Opportunity? Arab News, Research and Studies. https://www.arabnews.com/sites/default/files/rsu_iraq_young_population_2.pdf
- (6) UNICEF. Iraq Education Fact Sheets, 2020: Analyses for learning and equity using Multiple Indicator Cluster Surveys (MICS) data. https://data.unicef.org/wp-content/uploads/2019/07/2020-IRAQ-Education-Factsheets_UNICEF_final.pdf
- (7) Norwegian Refugee Council (NRC). 2022. Twice displaced: The unmet needs of Iraq’s children in informal settlements. https://www.nrc.no/globalassets/pdf/reports/iraq-informal-settlements-children/twice-displaced---english.pdf
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- (9) UNDP SDG Financing in Iraq project team consultations with Iraqi firms and other private sector stakeholders in September 2023.
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- (25) Kurdistan Regional Government (KRG) Board of Investment. 2006. Investment Law. https://govkrd.b-cdn.net/OtherEntities/Board%20of%20Investment/English/Publication/Investment%20Law/Law%20No.%204%20of%202006%20-%20Investment%20Law%20in%20Kurdistan%20Region-Iraq.pdf
- (26) UNDP SDG Financing in Iraq project team consultations with Iraqi public sector stakeholders in July 2023.
- (27) BasNews. 2023. Iraqi Parliament Allocates IQD1 Trillion to Boost Private Sector, Investment. https://www.basnews.com/en/babat/807181
- (28) National Investment Commission. 2016. Legal Guide to Investment in Iraq [Access: October, 2023]. https://investpromo.gov.iq/wp-content/uploads/2016/10/legel-guide%20-final.pdf
- (29) American University of Iraq, Sulaimani-Institute of Regional and International Studies. 2022. The Iraq Economic Review Vol 2 Issue 1, The Business of Education: Examining the Growth of Private Schools and Universities. https://auis.edu.krd/iris/sites/default/files/iris_iraqeconomicreview_vol2issue1_english.pdf
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- (31) UNDP SDG Financing in Iraq project team consultations with Iraqi public sector stakeholders in November 2023.