Financing for technical, undergraduate and graduate education with affordable rates

Financing for technical, undergraduate and graduate education with affordable rates

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Financing for technical, undergraduate and graduate education with affordable rates

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Country

Paraguay

Sector

Financials

Sub Sector

Corporate and Retail Banking

Indicative Return

10% - 15% (in IRR)

Investment Timeframe

Medium Term (5–10 years)

Market Size

1,931,000 people between 15 and 29 years of age in the second quarter of 2020

Direct Impact

Indirect Impact

Business Model Description

Provide long-term financing of technical, undergraduate and graduate education for students outside the formal banking system and with limited credit history, with low interest rates through direct financing to students and / or companies seeking to improve their human capital

Expected Impact

Increase financing alternatives for education to decrease unemployment and improve income prospects

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

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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.

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Country

Paraguay

Region

Paraguay: Central
Paraguay: Alto Paraná
Paraguay: Itapúa
Paraguay: Caaguazú
Paraguay: Paraguarí

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Sector

Financials

Development need
Paraguay has the highest financial vulnerability index in Latin America due primarily to a lack of income, which, in turn, stems from economic and social vulnerabilities. Furthermore, its extensive territory and low population density result in limited or non-existent financial penetration in remote areas (I).

Policy priority
The National Financial Inclusion Strategy represents a policy priority for Paraguay, as it lays out the country's strategic guidelines for enhancing financial inclusion. This document outlines key indicators, quick achievements, and specific actions across seven thematic areas (II).

Gender inequalities and marginalization issues
According to the 2020 World Economic Forum's Global Gender Gap Index, Paraguay holds the 100th position out of 153 countries, ranking third to last in Latin America and last in South America. The most substantial disparities exist in economic and political participation, with women earning 53.8% less than men for performing equivalent task (III).

Investment opportunities introduction
Paraguay's success with electronic money stems from factors such as low population density in underserved areas where mobile phone usage is widespread. This sector offers an attractive investment opportunity, as it has demonstrated strong growth and shows potential for further expansion (I).

Key bottlenecks introduction
Despite progress in physical access through electronic money, Paraguay, like the rest of Latin America and the Caribbean (ALC), still faces challenges in providing economic access to formal financial products. Notably, Paraguay has the highest costs and fees for savings, credit, and payment services (I).

Sub Sector

Corporate and Retail Banking

Development need
Development need: Paraguay has the highest financial vulnerability index in Latin America due primarily to a lack of income, which, in turn, stems from economic and social vulnerabilities. Furthermore, its extensive territory and low population density result in limited or non-existent financial penetration in remote areas (I).

Investment Opportunity Area

Financing for technical, undergraduate and graduate education with affordable rates

Business Model

Market Size and Environment

Market Size (USD)

1,931,000 people between 15 and 29 years of age in the second quarter of 2020

Approximately half of young people between the ages of 15 and 24 (50.4%) attend a formal educational institution, with higher attendance in urban areas than in rural areas (54.8% vs. 41.9% ) (2).

Labor market indicators show that for the second quarter of 2020 the workforce (economically active population) was made up of 1,151,000 people between the ages of 15 and 29, of which 692,000 were men and 459,000 women (2).

In 2017, almost 10,000 young applicants submitted to the 1,000 full scholarships that will be awarded by the Itaipú Binational Entity (3).

Indicative Return

IRR

10% - 15%

The interest balance of a loan for graduate students in the city of Asunción ranges from 10% to 20% of the balance of the operation (4).

Estimated rate of return on Financial Services (Consumer Finance) for an investor is 10.53% (5).

Investment Timeframe

Timeframe

Medium Term (5–10 years)

The period of educational credits can be up to 10.5 years (6).

Market Risks & Scale Obstacles

Capital - Limited Investor Interest

High risk and low interest rates could discourage investors

Sustainable Development Need

Students finance their studies themselves with their work or their families. When unemployed, in many cases, they must leave their studies (7).

Dropout occurs mainly because at the beginning or mid-career the student realizes that he cannot continue paying, or cannot keep up with the study (7).

Gender & Marginalisation

There is a gap related to gender issues. It can be concluded that the guarantee of the right to education for girls and women compared to boys and men is conditioned by both economic and cultural barriers (8).

Rural education gaps

Expected Development Outcome

> Increase the proportion of youth and adults with tertiary education and increase the national quality workforce

Improve income levels and reduce the gap of inequalities in access to tertiary education

> Improve economic growth and improve the human capital of Paraguay

Gender & Marginalisation

Reduce inequalities in the access to education for women and vulnerable population

Primary SDGs addressed

4 - Quality Education

4.3.1 Participation rate of youth and adults in formal and non-formal education and training in the previous 12 months, by sex

4.4.1 Proportion of youth and adults with information and communications technology (ICT) skills, by type of skill

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

8 - Decent Work and Economic Growth

8.6.1 Proportion of youth (aged 15–24 years) not in education, employment or training

Secondary SDGs addressed

1 - No Poverty

5 - Gender Equality

10 - Reduced Inequalities

Directly impacted stakeholders

People

Students and their families in lower-middle-income communities, particularly those without access to a bank account or a loan, or workers who wish to improve their job skills through additional training with the support of their company to obtain financing

Gender inequality and/or marginalization

Low income women and people in rural areas without access to financing alternatives for education

Indirectly impacted stakeholders

Public sector

Public tertiary education, backing funding for tertiary education will allow the public education system to meet demand and cope with some of the worst performing regions in the country

Corporates

Companies that will have a more qualified staff; Private education system

Outcome Risks

Over-indebtedness of students, which can totally compromise the stability of their studies. Failure to repay debt can have a negative impact on the quality of your school and personal life (9).

Impact Risks

Stakeholder risk: The high credit risk presented by students and the low rate of return on investment (7).

Drop Off: Lack of knowledge about the existence of student loans (4).

Impact Classification

B—Benefit Stakeholders

What

The outcome is likely to be positive, because access to finance could allow students to access or complete higher education and inclusion in the financial system

Who

low and middle income students who have completed secondary education are underserved due to a lack of affordable credit schemes to finance their higher education , and workers with skills gaps

Risk

External factors, such as low financial literacy and limited financial means of beneficiaries, can increase risk

Impact Thesis

Increase financing alternatives for education to decrease unemployment and improve income prospects

Policy Environment

The National Development Plan 2030 - Its goals include, among others, a strong investment in the human capital of vulnerable groups, especially in tertiary education (10).

The 2020 Strategic Education Plan - Prepared in 2008 by the Ministry of Education and Culture (MEC) had the following objectives, among others: improvement of the quality of education; in the acquisition of scientific, technical, humanistic, historical, and aesthetic knowledge among others (11).

The National Education Plan 2024 - has the general objective of “Guaranteeing access to education, improving the quality, efficiency and equity of education as a public good” (12).

Financial Environment

Financial Development Agency (AFD) - provides financing for higher education, through intermediary financial institutions. Postgraduate, master or doctorate courses can be financed (16).

The IDB offers loans that promote and finance sustainable and market-based business models that facilitate the participation of private sector companies, local governments on the delivery of quality products and services for the majority of the population of Latin America (17).

Regulatory Environment

Law N ° 4758. National Fund for Investment and Development and Fund for Excellence in Education and Research - the fund for excellence in education and research is created (13).

Law N ° 1,264 / 98 General Education Law - Guarantees the right to learn and equal opportunities to access the knowledge and benefits of humanistic culture, of science and technology, without any discrimination (14).

Law 5,136 On Inclusive Education - This law aims to establish the corresponding actions for the creation of an inclusive educational model in all public, private and state-subsidized educational institutions at all levels and in all forms of education. national educational system (15).

Private Sector

Banco BASA (Paraguay), Vision Bank (Paraguay), Banco Regional (Paraguay), Banco Atlas (Paraguay).

Government

National Development Bank, Central Bank of Paraguay, BECAL

Multilaterals

IDB, European Union (EU ), World Bank (WB), Development Finance Agency