Oikocredit and Opportunity International collaboration will support affordable quality education for under-served families [interview]
Oikocredit has been working with stakeholders to develop a new multi-year strategy for launch later in 2022 with an innovative approach to meeting low-income communities’ needs in education, housing, health and public infrastructure. In November 2021 we launched a new education partnership with Opportunity International in Nairobi, Kenya, attended by more than 30 financial institutions. We recently interviewed Hans Perk, Oikocredit’s Regional Director Africa, about the new venture.
Why is Oikocredit exploring investment possibilities in education?
Oikocredit is venturing into education as a result of listening to our financial inclusion partners and their clients. Microfinance institutions (MFIs) and banks that support small to medium enterprises (SMEs) in low-income countries tell us how widespread ‘learning poverty’ is in their societies and that there’s an urgent need for better access to low-fee, quality education and for loans to families for school fees. In many countries, publicly funded primary and secondary education is limited and of poor quality, especially in rural and semi-rural areas. This leaves huge scope for private social and developmental investment to meet the funding gap and help provide affordable schooling in low-income communities. It is, however, challenging for local MFIs and SME banks to generate sufficient liquidity to lend to schools and to families with school-age children and to build up an education portfolio that delivers social impact while managing risk and return.
We also know this from Oikocredit’s past experience when we financed education projects directly. For some years we decided not to focus on education, because we could not carry out all the necessary monitoring and technical assistance for education partners, including schools. But education is a crucial social development sector offering massive potential benefits in Africa, Asia and Latin America if effectively supported. Equal access to schooling for girls, in particular, is well known to result in important benefits in terms of incomes, gender equality and the environment.
How is Oikocredit taking forward its work on education?
Just as we are also doing in the housing sector, we have started to look for potential education partners to help empower low-income people with the choices they need for a life of dignity. Our first major pilot venture in education is a collaboration with Opportunity International, a global leader in affordable non-state school finance in low-income countries and a natural partner for this new approach. Opportunity International have a longstanding education programme supporting financial institutions and schools with funding and technical assistance. In the context of today’s global education crisis, our new collaboration aims to increase access to, and the quality of, low-fee primary and secondary education for families and children in developing countries.
Opportunity International’s monitoring shows that their work achieves impact. The MFIs, SME banks and schools they support increase their income, and the financial institutions achieve better performing education finance portfolios. Schools’ use of funding to build more classrooms, toilets, outdoor facilities and playgrounds and for transportation vehicles enlarges enrolment, incentivises children’s attendance and punctuality, brings more girls into school and improves attainment. Professional development for school personnel improves educational outcomes. Loans to parents help pay for fees, uniforms and books when household income is low or volatile, thus reducing absenteeism and education failure.
What is different about this approach from Oikocredit’s ‘business as usual’?
Oikocredit will continue to invest much of its development financing in its longstanding focus areas of financial inclusion, agriculture and renewable energy. But one key difference with our new approach is working with strategic partners that are sector specialists. Opportunity International, for example, have more than 12 years of experience of successfully investing in education in specific local contexts.
Another difference is that we are both reaching out to our current local partners to identify financial institutions to work with and conducting joint due diligence to clarify opportunities, risks, and financial and technical assistance needs. Oikocredit will then provide the funding to the financial institutions, while Opportunity International provides technical assistance to both the financial institution partners (‘EduFinance’) and each education provider (‘EduQuality’) (see diagram). The fact that the education venture aims to be financially self-sustaining is also innovative: financial institutions and schools will be asked to pay for technical assistance out of the additional revenue they generate from successful implementation.
Education finance collaboration between Oikocredit and Opportunity International
Oikocredit has for some years prided itself on being a catalyst in impact investing and development financing. We see our new approach as building on this role with the potential to generate multiplier effects that will help the world achieve the Sustainable Development Goals.
What are your future plans for the collaboration with Opportunity International?
As with our other community-focused projects, we are adopting a ‘minimum viable product’ (MVP) strategy. This is an incremental approach to designing and testing new initiatives without necessarily knowing what the end-product or final business model will be. We will start and test our education work in Africa – initially in Ghana, Kenya, Nigeria, Senegal and Uganda. After making any required adjustments, we aim to roll out the approach in other regions and to seek additional funding partners among our investor peers. The collaboration with Opportunity International is expected to eventually reach up to 1.6 million children by increasing access to finance for schools and for families with students in Africa, India and Latin America.
How can MFIs and SME banks participate in the programme with Opportunity International?
We’re currently looking for financial institutions with or without a current education portfolio that are active in Ghana, Kenya, Nigeria, Senegal and Uganda. They can write to us or reach out to one of our local offices for further information. We can then explore together what their needs are for funding their education portfolio and how they could benefit from the capacity building that the programme offers.
Arkiv > 2022 > januari
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