Digital Dollar? An exploratory study of the investments by IFC in the Indian educational technology sector

The report is a critical review of IFC investments in EdTech with recommendations to IFC, Union and state governments and civil society on EdTech funding, policy and program. It has been produced by India IT for Change Social Services as a part of a consulting agreement with Oxfam India.

Executive Summary:

EdTech 1 in India got funding of 3.8 billion from venture capitalists in 2021 and has a future valuation of USD 30 billion. Accordingly, this study examines the World Bank International Finance Corporation’s (IFC) investments in this sector, particularly the extent of investee companies’ compliance with the IFC’s mandate and the aims and priorities of Indian education. These companies include two of the five Indian EdTech privately held startup companies with a value of over $1 billion in existence. The study is largely based on desk research, complemented with interactions with select experts in the education and EdTech spaces. Five of the 20 investments made in the education sector in India were in EdTech companies.

The study identifies the following issues with IFC investments:

  1. Inadequate disclosures on project performance which fail to provide information salient to the educational sector like improvements in access, quality, equity and inclusion.
  2. Inconsistent standards for assessing EdTech projects over time with the recent biggest investments not consistently and inadequately capturing educational impact.
  3. Inadequate monitoring and assessment of social risks by excessively relying on corporate self-declaration; in so doing it appears to assume that the existence of policies is equivalent to compliance, and it is unclear how the IFC is responding to information related to consumer complaints, court orders, labor practice reports etc. or whether it is cognizant of the high externalities associated with the rapid scaling of technological solutions in education.
  4. Lack of transparency on investments through financial intermediaries make project tracking for accountability impossible. A review of the investee companies reveals that there are serious gaps between the work of these companies, and the priorities of Indian education, with respect to questions of access, affordability and inclusion; adherence to labor, environment and child protection standards, and quality of services. The larger impact of mainstream EdTech risks diluting the role of the teacher and weakening the public education system.

The report recommends that IFC needs to conduct a serious evaluation of its protocols and processes for funding EdTech companies. It needs to be more transparent about the design, monitoring, and assessment of its funding, in line with its role as a public institution, to ensure that such funding does not harm its development mandate. Thirdly, it needs to institute monitoring mechanisms that can regularly and adequately assess if the funded entities conform to the funding norms and exit if they are not.

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