26477 - KE Student Loans

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Summary of Proposed Investment

Project Number

26477

Company Name

STRATHMORE UNIVERSITY

Date SPI Disclosed

Mar 28, 2008

Country

Kenya

Industry

Health, Education and Life Sciences

Projected Board Date

Apr 28, 2008

Status

Completed

Sector

Colleges, Universities, and Professional Schools

Department

Regional Industry - MAS Africa

Environmental Category

C - No Impact

Previous Events

Approved : Jun 23, 2008
Signed : Jun 25, 2008

Project Description

The proposed project is a risk-sharing student fee financing facility in Kenya. Under the project, loans will be made by a local bank called Commercial Bank of Africa (CBA) to eligible students and parents/guardians of students studying at Strathmore University to enable them to meet the cost of tertiary education. The loans will be of 12 month maturity and the students, their parents/guardians/sponsors will take out a loan amount to cover the annual tuition costs and will be required to repay the loan over the year in equal monthly installments. CBA will administer and collect the loans in cooperation with Strathmore University. To ensure minimal defaults on the loans, the University and CBA will need to communicate effectively.

Once the facility is established, further developments are to offer long term loans to needy students with excellent secondary examination results whose families do not have the means to service loans.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	7.40
Loan
Equity

Development Impact

This project is expected to have a strong developmental impact by expanding access and boosting demand for tertiary education for low-income students. The loans will result in a manageable payment schedule of tuition fees for the student and their families. In addition, the project will assist with the development of consumer lending and demonstrate to other banks that student loans are viable. As CBA and other banks become comfortable with the product and obtain data on loan performance, student loan products with longer maturities may be offered. This will enable more students with limited means to attend university, thus increasing access to higher education.

IFC’s primary role in this project has been in bringing all the parties together and structuring the program. IFC has developed and launched similar risk sharing facilities in Indonesia, Chile and Brazil and this experience in both structured finance products and higher education has placed IFC in a unique position to take the lead in structuring this Facility. CBA has not had prior experience in student financing products, and IFC’s senior risk participation is therefore seen as crucial to provide comfort to the bank and also to significantly reduce the interest rate to the student.

Contacts

For Inquiries About the Project, Contact

Mr. Daniel Kiilur, Registrar
Strathmore University
E-mail: dkiilur@strathmore.edu

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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.

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