Student Financing Informal Presentation to World Education Market Workshop 21 May 2003 with European Investment Bank by Ron Perkinson International Finance Corporation Washington DC

IFC Student Financing Projects Student financing – private schemes are more recentStudent financing – private schemes are more recent 2 projects to date * India * South Africa2 projects to date * India * South Africa Technical Assistance – institution-based schemesTechnical Assistance – institution-based schemes

Some Issues For IFC Banking sector experience – experience & performance of consumer/ individual credit – consumer/ individual lending systems and processes Cost of credit – local interest rates – affordability of loan repayments vs. GNI per capita Who takes the risk? – Sponsors – first loss – local bank? – IFC – other risk levels

Structuring The Risk Who Participates?  Education Institution – First loss – Debt admin and support systems  Student Loan Facility (lending banks) – local bank – also first risk – Security (Guarantees? Funds?) – Structuring risk sharing  The Student – Incentives (discounts vs. penalties) – Alumni benefit?

IFC Participation Guarantee – any currency Technical assistance Structuring – securitization and investment Loan – in selected currencies Cap or limit financial exposure

Why Some Student Loan Schemes Can Perform Poorly  Inadequate underwriting criteria  Difficulty in servicing loans across borders  Mobility of Students  Government sponsorship – (social resistance to pay back)  Poor servicing and systems