> Posted by Jeffrey Riecke, Communications Assistant, CFI
Between 2000 and 2007, college enrollment in low-income countries increased from just 5 to 7 percent. In 2003, the World Conference on Education Partners articulated the severity of this situation by stating, “At no time in human history was the welfare of nations so closely linked to the quality and outreach of their higher education systems and institutions.” It’s exciting to share, then, that the Higher Education Finance Fund (HEFF), the first microfinance fund working in student lending, is launching its first program.
A US$ 34 million fund and a parallel donor-funded technical assistance facility, HEFF lends to and provides technical assistance to microfinance institutions and other financial intermediaries who then use the HEFF financing to fund student loan portfolios. The fund targets low-income students who wouldn’t otherwise be able to take advantage of scholarship programs and/or publically-funded universities.
HEFF is built around a model that’s sustained by the success of its students. The fund provides long-term loans that are to be repaid by the students as professionals who have entered the job market. The HEFF’s business model is based on analysis of careers that position students as capable of repaying their loans. HEFF offers loans to students whose career paths are in high-demand in their respective countries and offer suitable salaries for new-entry employees with those skills.
HEFF helps ensure that the students indeed achieve professional success by providing guidance to better prepare them for their studies, for future job markets, and for the demands of their loans. Financial seminars, career workshops, and job fairs are all made available. Additionally, student monitoring and mentoring systems comprised of local education experts oversee the students’ ongoing progress and provide support as needed.
The brainchild of Juan Carlos Pereira and Alex Silva, HEFF and its facility received structural, operational, and fundraising support from Omtrix, a Costa Rica-based fund manager and financial consultancy specializing in microfinance. In addition to Omtrix, the fund is capitalized by CAF, CALVERT, KfW, LMDF, Deutsche Bank, and IADB, among others. Grant funding for the fund’s facility is being provided by KfW, MasterCard, and USAID.
HEFF will launch its programs in select Latin American countries, including Bolivia, the Dominican Republic, Guatemala, Honduras, Paraguay, and Peru. Its first program is already underway at Genesis Empresarial, a Guatemalan MFI. Genesis Empresarial’s staff has already begun receiving technical assistance to learn the new student lending methodology. The MFI will receive a nine-year, US$ 3 million loan.
Image Credit: HEFF
Have you read?
Child and Youth Finance – Governments Step in
Youth and Financial Inclusion: A Head Start to Financial Citizenship
Youth and Financial Inclusion: How Can We Give Them a Head Start?
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October 1, 2012 at 4:23 pm
Chris Dunford
Well, not really “the first microfinance fund working in student lending.” Check out Vittana.org, a Kiva-like approach to mobilizing financing for tertiary education (including technical schools). The website is geared toward “lenders” (individuals donor/lenders select individual students to support), but underlying are a number of arrangements with MFIs to create higher education lending portfolios with Vittana technical assistance and financing. I’m familiar with one of these arrangements in which Vittana is collaborating with MicroCredit Enterprises (an MIV) to make a loan to an MFI in the Philippines. There are already several such arrangements up and running, represented by the faces of individual students on the Vittana website. A very different animal than HEFF, for sure, but still a viable approach geared perhaps to more modest expectations.
October 3, 2012 at 2:38 pm
erhyne
Thanks for the info, Chris. I’d really like to see this field take off. I understand Kiva is trying to go into this in a big way.
Also in education but at a different level, I am excited about school finance initiatives, like the one in India: the Indian School Finance Company, and Equity Bank’s school loan program in Kenya.
October 3, 2012 at 5:03 pm
Kate Cochran, COO, Vittana
Great to see the attention on student loans and thanks for the recognition, Chris, for the work that Vittana has been doing in this space. We launched publically three years ago and now we have helped 23 MFI partners in 12 countries to develop programs that have delivered 5,000 student loans so far. As you mentioned, in addition to crowd-funded capital from our website, we have also moved into larger sums of social investment to help these portfolios grow. But there’s much more to do! We love connecting with our friends at ISFC and HEFF and sharing learnings. Keep the attention coming:)