Market model

The market model says that the return on a security depends on the return on the market portfolio and the extent of the security's responsiveness as measured by beta. The return also depends on conditions that are unique to the firm. The market model can be graphed as a line fitted to a plot of asset returns against returns on the market portfolio. This relationship is sometimes called the single-index model.

Introduction

1.0. Introduction

The current system of financing (public) higher education in Tanzania is flawed and lopsided to such an extent that it has generated controversies, partisan debates among different stakeholders and crises in higher education sector as manifested by perennial students’ strikes in public higher education institutions and budget deficits.  The Tanzania government-despite of the existence of cost sharing in higher education policy for the past 15 years and its limited financial ability to finance public higher education because of many competing needs- still shoulders the burden of financing both public and private higher education through disbursing interest free loans and grants through the Higher Education Students’ Loans Board (HESLB) and the Tanzania Education Authority (TEA). The current system of financing public higher education is in dire need of being revisited to avoid further looming crises in the higher education sector.

2.0. Basic Facts about Higher Education in Tanzania

Tanzania with the current total population of around 37.6 million people has ( as of November 2008) a total of total of 44 higher education institutions distributed as follows: twelve (12) public universities and university colleges/institutes; 21 private universities and university colleges; and eleven (14) non-university higher education institutions (including technical colleges, but excluding non-university institutions in Zanzibar), most of these currently offering degrees in professional fields. In 2006/07 total student enrollment in both private and public universities and university colleges and institutes was 49,967, with public universities enrolling a total of 39,218 students or 78.4% of the

total students.  Private universities, despite of the fact that they outnumber public universities, enrolled a total of 10, 749 (21.5%) of the total student population. Table 1 below shows a list of Tanzania Commission for Universities (TCU) recognized universities and university colleges in Tanzania as of April 2008, including their geographical location which has an implication for their financing.

Table 1: TCU-Recognized Public and Private University Colleges and their Geographical Location, 2008

Public Universities/University Colleges and Institutes
Institution	Location
University of Dar es Salaam	Dar es Salaam
Ardhi University	Dar es Salaam
Muhimbili University of Health and Allied Sciences	Dar es Salaam
Open University of Tanzania	Dar es Salaam
Sokoine University of Agriculture	Morogoro
Mzumbe University	Morogoro
University of Dodoma	Dodoma
State University of Zanzibar	Zanzibar
Dar es Salaam University College of Education	Dar es Salaam
Moshi University of Cooperative and Business Studies	Kilimanjaro
Mkwawa University College of Education	Iringa
Institute of Journalism and Mass Communication	Dar es Salaam
Private Universities and University Colleges
Hubert Kairuki Memorial University	Dar es Salaam
International Medical and Technological University	Dar es Salaam
St. Augustine University of Tanzania	Mwanza
Mount Meru University	Arusha
University of Arusha	Arusha
Muslim University of Morogoro	Morogoro
Zanzibar University	Zanzibar
St. John’s University of Tanzania	Dodoma
Teofilo Kisanji University	Mbeya
Aga Khan University Tanzania Institute of Higher Education	Dar es Salaam
Tumaini University Dar es Salaam College	Dar es Salaam
Iringa University College	Iringa
Makumira University College	Arusha
Kilimanjaro Christian Medical College	Kilimanjaro
Stefano Moshi Memorial University College	Kilimanjaro
Mwenge University College of Education	Kilimanjaro
Weil University College of Health Sciences	Mwanza
Sebastian Kolowa University College	Tanga
Ruaha University College	Iringa
University College of Education Zanzibar	Zanzibar

3.0. Current Higher Education Funding Formula/Model and Its Limitations

Financing of public higher education in Tanzania in the context of cost sharing policy is (ideally) supposed to be a shared responsibility between different stakeholders and beneficiaries of higher education products. But practically this is not happening. The Government-despite its declining financial ability to finance public higher education- is not only financing public higher education institutions  through subventions to cover recurrent and capital development budgets; but is also financing tuition-dependent private higher education institutions (the majority of these have disguised for profit motive manifested by the high tuition fee they charge-  through providing interest-free loans to cover tuition fee and related cost to students enrolled in private universities and those enrolled in privately sponsored programs in public universities through the Higher Education Students’ Loans Board (HESLB) and the Tanzania Education Authority leading to inequities in higher education financing. Despite of the existence of a plethora of beneficiaries of higher education products, their contribution to higher education remains insignificant mainly limited to welfare costs. Table 3 shows trends in Government financing by source from 2000/01-2005/06. Data presented in Table 3 shows that while domestic revenue increased by 55% from 2000/01-2005/06, during the same period Government finance registered consistent deficits between revenue and expenditure implying the Government’s inability to adequately finance critical sectors including higher education and also inability to control its expenditure. The consistent deficit pattern between government revenue and expenditure also explains why Tanzania continues to depend on donor financing for education, health and infrastructure and why public higher education institutions consistently receive less funds they request from the Government for both recurrent and capital development budgets (See Table 2).

Table 2: UDSM Recurrent Expenditure Budgetary Requests vs. Government Approval, 2000/01-2006/07 (TZS mill.)

Institution	Year	Request	Approval	Request/Gov Approval Ratio (%)
Main Campus	2000/01	26,971,097,194	22,295,585,316	82.6
	2001/02	23,950,500,000	12,962,933,600	54.0
	2002/03	22,703,220,309	13,112,908,820	54.7
	2003/04	29,442,119,596	16,869,293,885	57.0
	2004/05	30,142,200,195	17,861,103,881	59.0
	2005/06	44,524,155,229	28,416,449,520	64.0
	2006/07	76,600,000,000	28,800,000,000	38.0
UCLAS	2000/01	4,211,566,222	2,587,680,510	61.4
	2001/02	4,060,795,959	2,829,670,520	69.6
	2002/03	4,927,370,176	2,842,827,422	57.6
	2003/04	4,002,679,505	3,078,483,303	77.0
	2004/05	4,601,509,400	3,508,311,103	76.2
	2005/06	5,103,194,896	3,375,885,576	66.1
	2006/07	5,209,246,445	3,503,421,145	67.0
MUCHS	2000/01	12,306,194,720	6,072,368,200	49.3
	2001/02	13,862,429,628	6,072,368,300	43.8
	2002/03	10,903,237,118	6,204,186,800	56.9
	2003/04	11,391,441,768	6,824,605,480	60.0
	2005/06	6,345,249,546	4,448,233,700	70.1
	2006/07	14,484,458,344	7,681,458,144	53.0

Source: Adapted from UDSM (2006 & 2007) Facts and Figures 2005/06, 2006/07 Dar es Salaam: UDSM pp. 164-165; 168-169

4.0. Towards a New Model/Approach of Financing Public Higher Education in Tanzania

Although in the Tanzanian context it is almost impossible to propose a viable model or framework for financing higher because of intense and deliberate politicization of financing of higher education and because of the entrenched mindset of “free higher education” among the majority of Tanzanians, unfortunately including the educated, this paper proposes the market model which seem to have been successful in Kenya and Uganda higher education sectors. The market model for higher education financing is proposed in the context of two major trends that have characterized the changes in higher education sector in Tanzania since the 1990’s when the Government liberalized the provision of higher education: these are some limited privatization of public higher education and the emergence of the private higher education sector.

The market model also advocated by Oketch (2003) and Lamptey (1994) stresses the injection of the market principles and market driven approaches into the financing of higher education to make it completely self-financing. While Oketch views marketing model of financing higher education in terms of financial diversification and partial privatization of public universities; Lamptey advocates for the adoption of the contemporary marketing concepts of product, price, place and promotion (the 4 P’s) in higher education.

The market model for financing public higher education in Tanzania is justified when we consider higher education sector to be composed of market segments and therefore it can be marketed using an effective marketing mix through opening up dialogue with potential markets ready to finance higher education because they are beneficiaries and consumers of higher education products.

In the context of Tanzania the market is also justified in the larger context of the market economy which has been adopted since late 1980’s in wider context of improving the efficiency, accountability and quality. This proposed model is guided by three principles: shared costs, equity and human resource development.

While the market model of financing higher education has been criticized and branded as academic capitalism driving universities into entrepreneurial competition (Levidow, 1998); the model if cautiously adapted can turn around the finances of Government and donor dependent public higher education institutions. The model has worked at Makerere and Nairobi universities and there is no reason why it should not work in Tanzania’s public higher education institutions.