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| KE Student Loans |
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| Summary of Proposed Investment |
| This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
| Project number | 26477 |
| Company name | Strathmore University |
| Country | Kenya |
| Sector | Education Services |
| Environmental category | C |
| Department | Health and Education |
| Status | Pending Disbursement |
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| Date SPI disclosed | March 28, 2008 |
| Projected board date | April 28, 2008 |
| Previous Events | Signed: June 25, 2008
Approved: June 23, 2008 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
The proposed project is a risk-sharing student fee financing facility in Kenya. Under the project, loans will be made by a local bank called Commercial Bank of Africa (CBA) to eligible students and parents/guardians of students studying at Strathmore University to enable them to meet the cost of tertiary education. The loans will be of 12 month maturity and the students, their parents/guardians/sponsors will take out a loan amount to cover the annual tuition costs and will be required to repay the loan over the year in equal monthly installments. CBA will administer and collect the loans in cooperation with Strathmore University. To ensure minimal defaults on the loans, the University and CBA will need to communicate effectively.
Once the facility is established, further developments are to offer long term loans to needy students with excellent secondary examination results whose families do not have the means to service loans. |
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| Project sponsor and major shareholders of project company |
| The project sponsor is Strathmore University, a leading not-for profit private university operating in Kenya, which specializes in commerce and information technology. The University currently enrolls 4,400 students of which 1,200 are undergraduates. Strathmore College began as an Advanced-level Sixth Form college in 1961. In 2002, the Commission of Higher Education awarded Strathmore College a Letter of Interim Authority to operate as Strathmore University. Strathmore submitted its draft charter in July 2004 and has been informed that it has been approved by the Commission for Higher Education. Formal communication is expected by the end of the year. |
| Total project cost and amount and nature of IFC's investment |
| The maximum portfolio size will be Kes 280 million ($4.4 million equivalent) based on a contribution of Kes 14 million ($0.2million equivalent) by Strathmore University, which will cover the potential initial losses on the portfolio of student loans. Assuming a first loss protection of 5%, IFC’s maximum expected commitment to the senior risk on the portfolio of student loans will be approximately $2.1 million equivalent. |
| Location of project and description of site |
| Strathmore University is situated at Madaraka which is in Nairobi, Kenya. CBA, who will be administering and working alongside the University, has headquarters based in downtown Nairobi. |
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| Anticipated development impact of the project |
| This project is expected to have a strong developmental impact by expanding access and boosting demand for tertiary education for low-income students. The loans will result in a manageable payment schedule of tuition fees for the student and their families. In addition, the project will assist with the development of consumer lending and demonstrate to other banks that student loans are viable. As CBA and other banks become comfortable with the product and obtain data on loan performance, student loan products with longer maturities may be offered. This will enable more students with limited means to attend university, thus increasing access to higher education. |
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| IFC's expected development contribution |
| IFC’s primary role in this project has been in bringing all the parties together and structuring the program. IFC has developed and launched similar risk sharing facilities in Indonesia, Chile and Brazil and this experience in both structured finance products and higher education has placed IFC in a unique position to take the lead in structuring this Facility. CBA has not had prior experience in student financing products, and IFC’s senior risk participation is therefore seen as crucial to provide comfort to the bank and also to significantly reduce the interest rate to the student. |
| Environmental and social issues - Category C |
| This project has been classified as a Category C project according to IFC’s Environmental and Social Review Procedure. No further review is required. |
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| For inquiries about the project, contact: |
Mr. Daniel Kiilur, Registrar
Strathmore University
E-mail: dkiilur@strathmore.edu |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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