In its recent quarterly board meeting, the US International Development Finance Corporation (DFC) approved several investments including a $7M investment into the Future of Work Fund (FWF). The Future of Work Fund is an impact-orientated financing vehicle with the purpose of giving 10,000 excluded youth access to high quality tertiary education through the Chancen Income Share Agreement (ISA) model. The fund, which is domiciled in Rwanda at the new Kigali International Finance Centre, will initially focus on three countries – Rwanda, South Africa, and Kenya.
After three years of piloting its model in Rwanda with more than 1400 students at Akilah Institute and Kepler, Chancen launched the Future of Work Fund to support the next phase of growth in Sub-Saharan Africa. The FWF will partner with at least 10 tertiary education providers over the next three years to provide sustainable financing through tuition and fees for 10,000 traditionally excluded youth. Impact targets include a minimum of 70% women, 50% from rural/excluded areas, 5% diversity (including LGBT and disabled). Partner education institutions must successfully complete a rigorous due diligence process to ensure they are providing market-relevant skills that lead to employment as graduates only repay once they are earning above a minimum income threshold.
The FWF has an initial target of 21 Million USD and uses a blended finance approach providing investment opportunities to senior and junior notes holders. Organisations that focus on providing catalytic type funding can invest in the equity tranche by becoming a shareholder or donating to the Chancen Community Association, allowing the student-led organisation to participate in the fund as shareholder too.
One of the biggest barriers to accessing good quality higher education in Africa is access to finance. Chancen International is committed to solving the student finance problem as emerging economies work towards building a skilled workforce. However, the journey from learning to earning should be derisked to ensure excluded youth only repay when there is value in their education. The Chancen ISA model allows for this by aligning outcomes between investors, education providers and students. Chancen is committed to ensuring that student finance stays fair and ethical and adheres to the following guidelines:
Monthly repayment terms – In their contracts, students agree to pay a set percentage of their net income over a certain number of years once they graduate and secure employment.
These terms vary based on the program but the maximum monthly percentage is 20% of net income and the maximum number of repayment months is 120. Most average around 60 months.
Minimum income threshold – A minimum income threshold is established (specific to the country) to ensure graduates can cover basic needs first. Graduates only make repayments when their earnings exceed the minimum income threshold. This means that graduates will only start repaying once their earnings rise above the threshold but it also means that there can be pauses in the repayment period if there is a break in employment for any reason. Because students only repay when they are earning above the threshold, students are protected from unreasonable debt burdens.
Pooled risk – CI raises funds to finance cohorts of students. Repayments from individual students vary based on earnings so the risk of recovering the initial funds is spread with higher earners offsetting potential losses from lower earners.
Repayment cap – To protect higher earners, maximum total repayment is set at 20% simple annual interest.
Chancen Co-Founder and CEO says, “It is imperative to solve the student finance problem now and at the same time ensure we do not have over-indebted graduates or individuals paying for education where quality and likelihood of stable income generation is low.”