Global Practices of Higher Education Financing: Approaches and Models

Abstract

The primary purpose of this paper is to determine the model of higher education financing that is the most effective, flexible and easiest to adapt to the market demands. The most successful HEIs of the world have the best practices for attracting and managing additional funds to finance the educational and research activities of the HEIs. The objective of the article is to summarize the existing progressive practices of attracting and managing additional funds to finance HEIs’ activities. The object of the study is the framework for the formation of endowment funds to support the activities of HEIs. Using comparative and system analysis methods, we looked at the most common models of funding for higher education and the mechanisms for attracting additional funds. It was discovered that most countries use three main models of financing higher education – bureaucratic, collegial and market models. Based on the experience of the OECD countries we determined that at the moment the share of private funds varies but tends to increase. The most successful HEIs use the market model to manage their finances and use additional sources of funds to supplement government support. The most wide-spread instruments of attraction additional funding are issuance of bonds, private equity and donations. The most effective ways to manage additional financing are asset management, securitization and endowment funds. Based on the best practices of the HEIs we proposed a general model of managing the endowment funds that uses such principles and provisions that can be applied in the activities of the HEIs, which will allow them to use fundamentally new source of financing.