IFC Investing in Student Lending November2009

Agenda Overview of IFC’s Health & Education Department Student Lending Programs DUOC and IFC Student Loan Program Other Examples of IFC Student Loan Facilities

IFC Health and Education Department Health and Education Department (CHE) was established in FY02 Health and Education Sectors are Pillars of IFC’s Strategy Approximately 60% annual commitment growth since FY03 CHE has 2 health and 1 education specialists Health Sector: 78 private health projects in 18 countries US$ 3,013 mln of total project value US$ 901 mln of CHE total investments Education Sector: 52 private education projects in 18 countries US$ 1,013 mln of total project value US$ 281 mln of CHE total investments CHE Portfolio by Product* CHE Portfolio by Country* * Data as of March 2009 3

Areas of Private Education Investment Primary/Secondary Technical & Vocational Tertiary/Post-Secondary Sub Saharan Africa Latin America Europe & Central Asia Middle East Middle East East Asia & Pacific South Asia IDA Countries Direct investments Schools Facilities Student Loans

Types of Education Investment Student Loan facilities are the fastest growing type of commitment in the education portfolio, representing 8/16 of new investments since FY07 as well as 7/13 of those made at the tertiary level Declining direct investments also have been offset by the emergence of school facilities, which represent 3/5 primary and secondary level investments originated since FY05 Type of Education Investments (Active Projects Only) As of June 30, 2009

Student Loans in Emerging Markets There is strong market demand but few successful experiences Most programs are run by governments and have issues Highly dependent on government subsidies Inefficient collecting system Not all players are accountable Student loans have a negative reputation Collection difficulties Lack of credit reporting Adequate funding is generally not available and financial structures are inefficient

IFC Student Loan Facilities CHE has committed $89 million in loan guarantees to leverage a maximum portfolio of $286 million in student loans across 8 countries An anticipated +175,000 loans, averaging +US$2,200 will support tertiary and post-secondary students Countries include: Indonesia, Mexico, Chile, Brazil, Kenya, West Bank/Gaza, Jordan and Egypt Foundation & institutional partners assume first loss risk. IFC’s senior risk position has never been exercised As of July 31, 2009

Structure of an Unfunded Student Loan Program Role of IFC: Risk taker (senior losses) Engages banks and universities Arranger. Uses prior experience to assist in: developing loan criteria designing loan features creating portfolio scenarios structuring risk sharing arrangements providing tested legal documentation Role of First Loss Provider: Contributes capital to cover the first loss and possible interest subsidy 100% Fin’l Partner Senior Tranche IFC x% University 1st loss provider First loss 0%

DUOC Loan Program with IFC Risk-sharing facility between IFC, local commercial bank (BCI), and DUOC DUOC: acts as provider of first loss IFC: participates as senior risk guarantor BCI: acts as senior risk guarantor and servicer Potential portfolio of US$50 million Product features: Target Interest Rate: below 10% Tenor: Study + up to 7 years First-loss: university will fund a reserve account Co-signer required (typically parent) Bank and Institute share in screening and monitoring

Structure of Unfunded Student Loan Facility IFC DUOC (1st Loss) First Loss Reserve Risk Protection Student A Disbursement Made to University Repayment by Families / Students BCI (bank) Student B Student C

Benefits of a Student Loan Program Students: Improves access and affordability of higher education Universities: Enables enrollment of all academically qualified students Increases enrollments Improves financial position of Universities and shifts financial managemnt to Banks Banks: Increases banks’ access to new customers First Loss Provider: enables education spending to be leveraged seven to ten times

Other IFC Student Lending Programs

Funded Student Loan Programs: IFC’s Experience Project Key Features FINEM (Mexico) Specialized non-banking institution focusing on education financing IFC participating with US$15 mm debt financing In-depth analysis on student’s study-area and related employment/salary probabilities, family size and income, etc. Product features: Product Interest Rate: 9.75% Tenor: up to 10 years Grace on principal during studies First-loss: University takes 100% of the loss by repurchasing all loans past 90 days due Co-signer required (parent) Finances up to 80% of tuition costs Eduloan (South Africa) Institution financing student tuition since 1996 – IFC debt-financed since 2001 Targets low-wage government employees (automatic deduction from payroll) Short-term maturity: 12-24 months Receives substantial discounts (~15%) from universities to supplement the return (student still repays the full face-value of tuition)

Unfunded Student Loan Programs: IFC’s Experience Project Key Features Real Student Fin (Brazil) Risk-sharing facility involving IFC, ABN AMRO’s subsidiary in Brazil, Banco Real, and multiple universities IFC participating as senior risk guarantor and will share second loss 50/50 with Banco Real Potential portfolio of US$50 mm Product features Interest Rate: 20% Tenor: up to 5 years, immediate amortization Only final three years of tuition are financed (high drop-out rates in first year) Co-signer required (parent) First-loss: Universities (10%) Universities help in marketing/screening/collection Palestine Education Fund (West Bank & Gaza) Risk-sharing facility involving IFC, Palestine Education Fund (“PEF”) and the Bank of Palestine IFC participating as senior risk guarantor and will share second loss with Bank of Palestine Potential portfolio of US$40 mm Product features: Tenor: three years after one year grace period PEF will contribute funds to cover the interest expense during studies Co-signer required (parent) First-loss: PEF (20%) Universities help in marketing/screening/collection

Unfunded Student Loan Programs: IFC’s Experience Project Key Features Student Loans (Kenya) Risk-sharing facility involving IFC, Commercial Bank of Africa (local commercial bank) and Strathmore University, a private university specializing in commerce and information technology Similar facilities are expected between IFC, Commercial Bank of Africa and other tertiary educational institutions, who will provide a first loss IFC participating as a senior risk guarantor Potential portfolio of US$4.5 mm Product features: Interest Rate: 12% (vs. rates in excess of 25% on credit cards) Tenor: 1 year First-loss: Strathmore (5%) Parent is the primary borrower Finances up to 100% of tuition Strathmore helps in marketing/collection (Jordan) Risk-sharing facility between IFC, Cairo Amman Bank (local commercial bank) and Omnix International, a provider of software, networking and security solutions in the Middle East IFC participating as senior risk guarantor Potential portfolio of US$25mm Variable Interest Rate: ~11% Tenor: 8 years Only interest payments during study First-loss: Omnix International will fund a reserve account (20%) Co-signer required (typically parent)

Unfunded Student Loan Programs: IFC’s Experience Project Key Features Sampoerna (Indonesia) Risk-sharing facility involving IFC, Bank International Indonesia (local commercial bank), and an Indonesian charitable foundation (Sampoerna) focusing on student scholarships IFC participating as a senior risk guarantor and structuring agent Potential portfolio of US$20 mm Product features: Product Interest Rate: 19% (vs. ~ 40% rates on credit cards) Tenor: 1-3 years, repayment before graduation First-loss: Sampoerna Foundation (12%) Co-signer required (parent) Finances up to 100% of tuition Universities help in marketing/screening/collection