25720 - Duoc

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Summary of Proposed Investment

Project Number

25720

Company Name

Fundacion Instituto Profesional DUOC UC

Date SPI Disclosed

May 8, 2007

Country

Chile

Industry

Health, Education and Life Sciences

Projected Board Date

Jun 10, 2007

Status

Completed

Sector

Colleges, Universities, and Professional Schools

Department

Gbl Ind, Manufact, Agribus & Services

Environmental Category

C - No Impact

Previous Events

Approved : Jun 22, 2007
Signed : Jun 27, 2007

Project Description

Fundacion Duoc (Duoc) is a higher education institution in Chile providing technical degrees and vocational training to a student body of approximately 40,000. Duoc sees a strong need to expand the financing options it offers to students, especially to those from lower income brackets who are not eligible for government sponsored programs.

IFC has been in discussions with Duoc and a Chilean bank (or the Bank), to jointly develop a new student loan program for Duoc (the Facility). Under the new program, loans would be made by the Bank to qualified Duoc students. The Bank would then administer and collect the loans in cooperation with Duoc. Duoc would provide a first loss reserve (First loss) for such a program in order to:

- reduce the risk of loss to the Bank and IFC, and
- help lower the interest rate being charged to its students. IFC would share the remaining risk of the Facility with the Bank.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	19.29
Loan
Equity

Development Impact

This project is expected to increase access to higher education, especially among students from lower- and middle-income households. Unlike the profile of students in higher education generally, 60% of which come from families in the two highest income quintiles, 64% of Duoc’s students come from families classified as middle- and lower-income.

The return to receiving higher education in Chile is high, including for those trained in vocational schools and technical centers, yet the World Bank has found that the relative cost of higher education in Chile is among the highest in the world. Only about 20% of the population can afford to pay for higher education without outside financing. Further, existing sources of financing through government and bank programs are mostly unavailable to the lower segment of middle income families, which the proposed Facility is meant to serve.

In addition to increasing access to higher education, the proposed facility will introduce to the financial markets in Chile an affordable student loan scheme that will demonstrate the creditworthiness of lower- and middle-income students graduating with technical and vocational degrees.

IFC’s strategy in Chile is geared towards filling the gaps in long-term financing and is seeking to address the government of Chile’s priorities for private sector development and sustainable growth with equity.

Chile is a competitive market with good availability of long-term financing due to a well-developed capital market and high levels of liquidity of institutional investors. However, access to long term finance for education is still underdeveloped, especially for the lower and lower-middle income segments. IFC’s proposed project will help address this gap.

IFC’s risk participation will allow Duoc and BCI to offer lower interest rates to students, thus making the student loan program more attractive to lower and middle-income families. In addition to playing a leading role in structuring the Facility, IFC’s participation is important in bringing the other parties into the transaction.

Contacts

For Inquiries About the Project, Contact

Francisco Gouet
Fundación Duoc
Antonio Varas 666, Providencia,
Santiago, Chile

Telephone: +56-2-3540151

Website address: www.duoc.cl

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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. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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