Kenya / IFC Helps Launch First Private Student Loan Program in Kenya
NAIROBI, Kenya, July 14, 2008/African Press Organization (APO)/ — IFC, a member of the World Bank Group, is partnering with Commercial Bank of Africa Ltd. and Strathmore University in Kenya to introduce a new student loan product. This will reduce the financial burden on students at the university, including those from lower- and middle-income families who are eligible to attend university but cannot pay the entire tuition costs upfront.
Kenya has seen a growing demand for tertiary education, with a steady rise in enrollment and an increase from three private universities in 1985 to 21 in 2008. But a quarter of eligible applicants are denied admission because they are unable to pay tuition upfront.
The Commercial Bank of Africa will manage the overall program, which will consist of a 280 million Kenyan shillings ($4.5 million equivalent) portfolio. Strathmore will contribute funds to cover potential initial losses on the loan portfolio, and IFC will provide a structure to reduce the remaining risk. The loans will be priced at 12 percent a year and will cover annual tuition. Repayments will be in equal monthly installments over a 12-month period, enabling students to meet annual tuition costs. The loans will also provide the university with a stable flow of funds.
Once this pilot is established, new products will be offered, including loans with repayments deferred until students find jobs. Similar products will also be introduced at other universities in Kenya, with the aim of extending up to 1.1 billion shillings ($16.9 million equivalent) in student loans.
Isaac Awuondo, CEO of the Commercial Bank of Africa, said, “The proposed facility, the first for Kenya and the region, will demonstrate that financing education can be profitable. It is in line with our strategy to be at the forefront of product innovation within the financial services sector. This partnership with Strathmore and IFC is a step in the right direction toward achieving our business strategy.”
Professor John Odhiambo, Vice Chancellor of Strathmore University, said, “The project will make higher education more accessible for students of all income levels and help attract academically superior students who are unable to meet tuition costs.”
Jean Philippe Prosper, IFC Senior Manager for East Africa, said, “IFC strives to do more to expand access to finance and improve lives in Kenya.
This project creates a link between local financial institutions and universities, using private sector innovation to improve educational opportunities.”
Guy Ellena, IFC Director for Health and Education, said, “This student loan program will help distribute the economic benefits of higher education more evenly by increasing access to university education for students from
lower- and middle-income backgrounds, opening the door to better jobs.”
IFC, a member of the World Bank Group, fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing private capital in local and international financial markets, and providing advisory and risk mitigation services to businesses and governments. IFC’s vision is that poor people should have the opportunity to escape poverty and improve their lives. In FY07, IFC committed $8.2 billion and mobilized an additional $3.9 billion through syndications and structured finance for
299 investments in 69 developing countries. IFC also provided advisory services in 97 countries.
SOURCE : The World Bank