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Affordable higher education student financing

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Affordable higher education student financing

Compare IOA
Country
Brazil
Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Education
Sub Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Formal Education
Indicative Return
Describes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
Loans offered at 2.5-3% interest rates
Investment Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Short Term (0–5 years)
Market Size
Describes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
Required credit amount of at least 6 billion USD (15)
Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.
> USD 10 million
Direct Impact
Describes the primary SDG(s) the IOA addresses.
Quality Education (SDG 4)
Indirect Impact
Describes the secondary SDG(s) the IOA addresses.
No Poverty (SDG 1) Gender Equality (SDG 5) Decent Work and Economic Growth (SDG 8)

Business Model Description

Provide higher education financing to students through non-predatory credit schemes

Expected Impact

Allow lower/medium income students to access higher education and include them in the financial system

How is this information gathered?

Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.

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Disclaimer

UNDP, the Private Finance for the SDGs, and their affiliates (collectively “UNDP”) do not seek or solicit investment for programmes, projects, or opportunities described on this site (collectively “Programmes”) or any other Programmes, and nothing on this page should constitute a solicitation for investment. The actors listed on this site are not partners of UNDP, and their inclusion should not be construed as an endorsement or recommendation by UNDP for any relationship or investment.

The descriptions on this page are provided for informational purposes only. Only companies and enterprises that appear under the case study tab have been validated and vetted through UNDP programmes such as the Growth Stage Impact Ventures (GSIV), Business Call to Action (BCtA), or through other UN agencies. Even then, under no circumstances should their appearance on this website be construed as an endorsement for any relationship or investment. UNDP assumes no liability for investment losses directly or indirectly resulting from recommendations made, implied, or inferred by its research. Likewise, UNDP assumes no claim to investment gains directly or indirectly resulting from trading profits, investment management, or advisory fees obtained by following investment recommendations made, implied, or inferred by its research.

Investment involves risk, and all investments should be made with the supervision of a professional investment manager or advisor. The materials on the website are not an offer to sell or a solicitation of an offer to buy any investment, security, or commodity, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction.

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Country & Regions

Explore the country and target locations of the investment opportunity.
Country
Brazil
Region
  • Brazil: Maranhão
  • Brazil: Piauí
  • Brazil: Ceará
  • Brazil: Pernambuco
  • Brazil: Alagoas
  • Brazil: Sergipe
  • Brazil: Bahia
  • Brazil: Acre
  • Brazil: Amapá
  • Brazil: Amazonas
  • Brazil: Pará
  • Brazil: Rondônia
  • Brazil: Roraima
  • Brazil: Tocantins
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Sector Classification

Situate the investment opportunity within sustainability focused sector, subsector and industry classifications.
Sector

Education

Development need
Brazil faces critical challenges in education: 40% of Brazilians between ages 18 and 29 have not completed high school; 67.3% of black youths (18-29) terminate studies prematurely; 25% of students are not in their intended school year by 14 years of age, creating fundamental obstacles for improving inequality, raising living standards, and driving economic growth (3)

Policy priority
Brazil invests a relatively high share of both its gross domestic product (GDP) and its total public expenditure on education, yet expenditure per student still lags behind most OECD and partner countries (4)

Gender inequalities and marginalization issues
Racial and geographic inequalities persist despite aggregate improvements; girls 13-16 years of age in the Southeast and South are more likely to attend school than those in the North, Northeast, or Center-West regions. (5)

Investment opportunities introduction
Access to finance could allow millions of lower/lower-medium-income students to access or complete higher education, as well as include them in the financial systemInvestment opportunities introduction: Access to finance could allow millions of lower/lower-medium-income students to access or complete higher education, as well as include them in the financial system

Key bottlenecks introduction
Insufficient digital and financial literacy, high interest rates impeding loan availability.

Sub Sector

Formal Education

Development need
The number of Brazilians attending higher education has also dropped in previous years, from 18.5% in 2016 to 17.8% in 2017 (7) (13) There is a market failure around higher education financing including high interest rates, no grace periods for repayment (loans to be repaid over a 12-month period), and high collateral or guarantees demanded (8)

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Pipeline Opportunity

Discover the investment opportunity and its corresponding business model.
Investment Opportunity Area

Affordable higher education student financing

Business Model

Provide higher education financing to students through non-predatory credit schemes

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Business Case

Learn about the investment opportunity’s business metrics and market risks.

Market Size and Environment

Critical IOA Unit
Describes a complementary market sizing measure exemplifying the opportunities with the IOA.

Required credit amount of at least 6 billion USD (15)

FIES program has over US$ 6 billion outstanding debt from lack of repayment of nearly 0.5 million students, representing over 57% of all students with FIES loans. These numbers have been growing since 2014 (15) (16)

While the number of FIES loans approved for 2018 was 310K, it still represents under half of the amount of loans provided by FIES at its peak in 2014 (nearly 700K) (11) (13)

Indicative Return

GPM
Describes an expected percentage of revenue (that is actual profit before adjusting for operating cost) from the IOA investment.

Loans offered at 2.5-3% interest rates

While investors have not disclosed direct return information, alternative lenders to FIES, notably regional banks in the North and Northeast of Brazil, are offering loans at 2.5-3% interest rates (vs. mainstream banks like Itau who are looking for 7-8% annual interest [20])

Investment Timeframe

Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.

Short Term (0–5 years)

The FIES and similar credit provision programs for higher education offer a grace period until the student has completed education, usually four years. However, there are thousands of students with financing needs at different stages of their higher education given the downsizing of FIES

Ticket Size

Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.

> USD 10 million

Market Risks & Scale Obstacles

Market - Highly Regulated

Presence of government-provided financing required less of a potential role from (and opportunity for) private innovations

Market - Volatile

High interest rate volatility could make it less attractive for investors and financial institutions to lend to students at competitive rates

Business - Supply Chain Constraints

Low financial literacy may affect loan uptake due to lack of understanding of terms
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Impact Case

Read about impact metrics and social and environmental risks of the investment opportunity.

Sustainable Development Need

Public austerity measures have led to the number of students enrolling in Brazilian universities with government funding to drop from 21.3% in 2014 to 5.7% in 2017, putting over 500,000 students at risk of not being able to afford higher education (6)

The number of Brazilians attending higher education has also dropped in previous years, from 18.5% in 2016 to 17.8% in 2017 (7) (13)

Market failure around the predatory financing banks provide to higher education students - high interest rates (e.g., Bradesco offers annual interest rates of over 25%), no grace periods for repayment (loans to be repaid over a 12-month period), and high collateral or guarantees demanded (8)

Gender & Marginalisation

Racial and geographic inequalities persist for women's access to education (5) affecting women's employment rate

Expected Development Outcome

Ensure accessibility to higher education for lower- and middle-income students by allowing them to meet their financial demands

Broaden access to finance to university students by offering alternative and tailored credit lines

Kickstart credit provision to millions of students, giving them the opportunity to grow financially

Gender & Marginalisation

Increasing women's access to education through new financing options, creating new employment opportunities

Primary SDGs addressed

Quality Education (SDG 4)
4 - Quality Education

4.5.1 Parity indices (female/male, rural/urban, bottom/top wealth quintile and others such as disability status, indigenous peoples and conflict-affected, as data become available) for all education indicators on this list that can be disaggregated

Current Value

Gender parity index for participation rate in organized learning 0.96089 (2017), rural to urban achievement rate ratios: reading 0.431, math 0.311 (2018), native parity index math 0.2056, reading 0.2058 (2018) (21)

Target Value

N/A

Secondary SDGs addressed

No Poverty (SDG 1)
1 - No Poverty
Gender Equality (SDG 5)
5 - Gender Equality
Decent Work and Economic Growth (SDG 8)
8 - Decent Work and Economic Growth

Directly impacted stakeholders

People

Lower/ lower-middle-income students who have completed secondary education (9)

Indirectly impacted stakeholders

Public sector

Higher education and technical institutions: Increased revenue from fee payments could allow them to invest in additional resources and improve their offering

Outcome Risks

Low financial literacy may put students in a position of indebtedness after their studies

Impact Risks

Alignment risk: model is still unproven and external factors such as low financial literacy and limited economic means of beneficiaries may decrease impact

Impact Classification

C—Contribute to Solutions

What

Access to finance could allow millions of lower/lower-medium-income students to access or complete higher education, as well as include them in the financial system

Who

Lower/ lower-middle-income students who have completed secondary education are underserved due to a lack of affordable credit schemes to fund their higher education

Risk

The model is still unproven and external factors such as low financial literacy and limited economic means of beneficiaries may increase risk

Impact Thesis

Allow lower/medium income students to access higher education and include them in the financial system

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Enabling Environment

Explore policy, regulatory and financial factors relevant for the investment opportunity.

Policy Environment

(The Ministry of Education): has announced a 30% budget cut for federal universities to be reinvested in basic education (17)

Financial Environment

Financial incentives: FIES offers 310K credits: 100K at 0% interest candidates with up to three minimum wages,150K at 2.5-3% interest for candidates with up to five minimum wages (private banks in North, Northeast and mid-West), 60K credits by BNDES for students with up to five minimum wages (11)

Other incentives: Other funding mechanisms available include PROUNI (Program University for All), and high-interest loans given by banks such as Bradesco (8)

Regulatory Environment

(Legislation for federal university fundings): has reduced federal funding to lower-income students (whose family incomes are 3-5 minimum wages), while prioritizing students and universities in the North, Northeast and mid-West, and working with private banks to manage the loans (19)

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Marketplace Participants

Discover examples of public and private stakeholders active in this investment opportunity that were identified through secondary research and consultations.

Private Sector

Ideal Investe, Kroton, Lemann Foundation, Itaú, IFC, EOS Investimentos, Victoria Capital, Ribbit Capital, PraValer, PROVI (18)

Non-Profit

Abmes (Associação Brasileira Mantenedoras do Ensino Superior)

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Target Locations

See what country regions are most suitable for the investment opportunity. All references to Kosovo shall be understood to be in the context of the Security Council Resolution 1244 (1999)
country static map

Brazil: Maranhão

Of the 6.2 million Brazilians enrolled in university, 28% are in the North and Northeast, vs. nearly 50% in the Southeast, even though the population of the Southeast is 38% and that of the North and Northeast is 33% of the country's (5) (9)

Brazil: Piauí

Of the 6.2 million Brazilians enrolled in university, 28% are in the North and Northeast, vs. nearly 50% in the Southeast, even though the population of the Southeast is 38% and that of the North and Northeast is 33% of the country's (5) (9)

Brazil: Ceará

Of the 6.2 million Brazilians enrolled in university, 28% are in the North and Northeast, vs. nearly 50% in the Southeast, even though the population of the Southeast is 38% and that of the North and Northeast is 33% of the country's (5) (9)

Brazil: Pernambuco

Of the 6.2 million Brazilians enrolled in university, 28% are in the North and Northeast, vs. nearly 50% in the Southeast, even though the population of the Southeast is 38% and that of the North and Northeast is 33% of the country's (5) (9)

Brazil: Alagoas

Of the 6.2 million Brazilians enrolled in university, 28% are in the North and Northeast, vs. nearly 50% in the Southeast, even though the population of the Southeast is 38% and that of the North and Northeast is 33% of the country's (5) (9)

Brazil: Sergipe

Of the 6.2 million Brazilians enrolled in university, 28% are in the North and Northeast, vs. nearly 50% in the Southeast, even though the population of the Southeast is 38% and that of the North and Northeast is 33% of the country's (5) (9)

Brazil: Bahia

Of the 6.2 million Brazilians enrolled in university, 28% are in the North and Northeast, vs. nearly 50% in the Southeast, even though the population of the Southeast is 38% and that of the North and Northeast is 33% of the country's (5) (9)

Brazil: Acre

Of the 6.2 million Brazilians enrolled in university, 28% are in the North and Northeast, vs. nearly 50% in the Southeast, even though the population of the Southeast is 38% and that of the North and Northeast is 33% of the country's (5) (9)

Brazil: Amapá

Of the 6.2 million Brazilians enrolled in university, 28% are in the North and Northeast, vs. nearly 50% in the Southeast, even though the population of the Southeast is 38% and that of the North and Northeast is 33% of the country's (5) (9)

Brazil: Amazonas

Of the 6.2 million Brazilians enrolled in university, 28% are in the North and Northeast, vs. nearly 50% in the Southeast, even though the population of the Southeast is 38% and that of the North and Northeast is 33% of the country's (5) (9)

Brazil: Pará

Of the 6.2 million Brazilians enrolled in university, 28% are in the North and Northeast, vs. nearly 50% in the Southeast, even though the population of the Southeast is 38% and that of the North and Northeast is 33% of the country's (5) (9)

Brazil: Rondônia

Of the 6.2 million Brazilians enrolled in university, 28% are in the North and Northeast, vs. nearly 50% in the Southeast, even though the population of the Southeast is 38% and that of the North and Northeast is 33% of the country's (5) (9)

Brazil: Roraima

Of the 6.2 million Brazilians enrolled in university, 28% are in the North and Northeast, vs. nearly 50% in the Southeast, even though the population of the Southeast is 38% and that of the North and Northeast is 33% of the country's (5) (9)

Brazil: Tocantins

Of the 6.2 million Brazilians enrolled in university, 28% are in the North and Northeast, vs. nearly 50% in the Southeast, even though the population of the Southeast is 38% and that of the North and Northeast is 33% of the country's (5) (9)
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References

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