Lend to the Student, Collect from the Professional

> 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

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