June 22, 2007— IFC’s Board of Directors approved a landmark project June 12 that will help the Corporation significantly increase its impact by financing private schools through local banks. The three-year Africa Schools Program will cover about 500 schools and enroll over 100,000 students across the continent, thereby helping countries that are not on track to meet the Millennium Development Goal of universal primary completion by 2015.
In the past, IFC was unable to invest in many schools in Africa because its traditional lending instruments exposed schools to foreign currency risk. Moreover, most schools had relatively small financing needs that IFC could not administer directly.
Guy Ellena, IFC Director for Health and Education, said, “The Africa Schools Program builds on the successes of smaller IFC projects in Ghana and Kenya. This new initiative will help IFC increase its operations and boost its development impact. With its multi-country approach, the program will help us respond more promptly and efficiently to market demand from low- and middle-income people across the region.”
“IFC is not lending money to banks but sharing the risk. By mitigating the risks, IFC’s participation provides incentives to banks to increase their lending to schools,” Mr. Ellena added.
The new $50 million integrated investment and $6 million advisory services program will provide local partner banks with unfunded risk participation facilities in local currency to address these constraints. It will also encourage local banks to finance private primary, secondary, vocational, and tertiary schools and grow their education portfolios.
While all countries are eligible, the program will initially focus on 11 countries—Cameroon, Ghana, Kenya, Madagascar, Mozambique, Nigeria, Senegal, South Africa, Tanzania, Uganda, and Zambia. Criteria will include countries where there is high student enrollment in private schools and where IFC has existing school financing programs or local offices, and could quickly develop investment opportunities. Countries would also need to have a good banking sector. Eight of the 11 countries in the list are off-track in meeting the MDG of universal primary completion by 2015.
Based on IFC’s earlier experience, individual loans by partner banks to schools are expected to range from $1,000 to $500,000 in the local currency equivalent. To be eligible for financing, schools will need to meet the originating bank’s underwriting criteria and comply with local environmental, social, and safety standards.
IFC will also design and implement a two-year advisory program to improve the operating efficiency of schools and the ability of partner banks to lend effectively. Advisory services will be tailored for each market, and will include workshops aimed at preparing schools to develop strategic business plans and training a local services provider to deliver school development services. Partner banks will also be trained in marketing, credit assessment, and loan monitoring.
IFC and the World Bank will actively collaborate in implementing the program in each country, ensuring its compliance with education sector policies in respective countries and jointly evaluating its impact, thereby increasing the recognition of private schools as valuable stakeholders and contributors to the sector.
Health and Education Department, IFC