Washington, D.C., July 15, 2007 — IFC is preparing to launch a new Africa Schools Program, a landmark project that was approved by the Corporation's Board in June 2007. The program, based on its successful school projects in Ghana and Kenya, will help IFC increase its impact significantly in Africa by financing a larger number of private schools through local banks.
In the past, IFC was unable to invest in many schools in Africa because our traditional lending instruments exposed them to foreign currency risk. Also, most schools had relatively small financing needs that IFC could not address directly. Today, amid a boom in private education, IFC is finding innovative ways to invest in African schools.
In Ghana, this boom reflects the higher quality of private school education. Of 3.5 million students aged six to 15, about 20 percent are enrolled in private schools. But the ability of these schools to expand operations and upgrade facilities has been constrained by a lack of medium- and long-term financing.
In June 2005, IFC partnered with The Trust Bank Limited to set up a $2.1 million (9.5 billion Ghanaian cedis) risk-sharing facility, which supports local currency lending to private schools to finance construction, other capital costs, and purchase of educational materials. As the schools need help to reach more students and enhance the quality of education offered, IFC has also stepped in to provide a range of advisory services.
To date, the bank has disbursed $1.8 million (in local currency equivalent) to 13 schools in Ghana with a combined enrollment of over 5,000 students. More than 10 other schools are preparing to access funding. The combination of investment and advisory services is proving effective in meeting the demand for private education, especially among lower-income families. The program has considerably expanded school enrollment.
In 2006, IFC applied this approach to Kenya through a partnership with K-Rep Bank. In Kenya too, more and more students are turning to private schools, with a subsequent rise in demand for affordable medium- and long-term financing from private educational institutions that need to expand their facilities.
IFC extended a partial guarantee of up to 120 million Kenya shillings (about $1.7 million) on loans to eligible private schools, including low-income schools. A comprehensive advisory services program is helping strengthen the financial, management, and educational capacities of the schools and also helping develop an independent provider of educational services to private schools. The partnership enables K-Rep Bank to expand and monitor its education portfolio, while developing further expertise in the sector. The bank's risk was reduced by the advisory services provided directly to individual schools.
IFC's Approach Goes Regional
The three-year, $50 million integrated investment in the Africa Schools Program and $6 million in advisory services will cover about 500 schools and over 100,000 students across the continent. It will provide local partner banks with unfunded risk participation facilities in local currency to address the financing constraints of private primary, secondary, vocational, and tertiary schools. Based on IFC's earlier experience, individual loans to schools are expected to range from $1,000 to $500,000 in local currency equivalent.
Commenting on the program, Guy Ellena, IFC Director for Health and Education, said, "IFC is not lending money to banks but sharing their risk, thereby motivating banks to increase lending to schools."
The program has established eligibility criteria for banks and countries, based on existing relationships and other factors. The initial focus will be on 11 countries—Cameroon, Ghana, Kenya, Madagascar, Mozambique, Nigeria, Senegal, South Africa, Tanzania, Uganda, and Zambia—eight of which may not meet the Millennium Development Goal of universal primary completion by 2015.
IFC will design and implement a two-year advisory services program in each country. It will be tailored for each market and include workshops to market the program. Advisory services will provide individual and group training sessions for schools. Topics will include self-diagnostics, business planning, human resources and training management, curriculum and learning management, and marketing.
A local services provider will be taught to deliver school development services and individual training. Partner banks will also be qualified in marketing, credit assessment, and loan screening and monitoring.
World Bank Collaboration
IFC and the World Bank will collaborate to implement the program, ensuring compliance with education sector policies in each country. They will jointly evaluate its impact, increasing the recognition of private schools as valuable stakeholders and contributors to the sector.
Health and Education Department, IFC