Financing access to education, how to make it work

  • Maria Teresa ZAPPIA, BlueOrchard Finance Ltd. 
  • Lynn PIKHOLZ, CapitalPlus Exchange 
  • Roshaneh ZAFAR, Kashf Foundation (Pakistan) 
  • Alex AHABWE, Opportunity Bank Uganda Ltd. (Uganda) 
  • Hannah HILALI, Opportunity International 


The moderator Maria Teresa ZAPPIA opened the session and presented the panel. She explained that this was a follow-up from 2016, with both the winner and runner up of that year’s European Micro­finance Award: Kashf Foundation and Opportunity Bank Uganda. She emphasized that the session would give different perspectives on financial education, from both investees and practitioners. She added that BlueOrchard had also relevant experience in education finance as the fund and technical assistance manager of the Regional Education Finance Fund for Africa.

Lynn PIKHOLZ, CEO CapitalPlus Exchange shared results from the organisation’s market research on educational finance. It identified a market opportunity of USD 4.5 billion in 8 African cities. In these cities, private schools make up a large share of the market. She explained that fees for these ‘affordable schools’ still add up to a considerable share of income. Pikholz added that MFIs are key to improve access and quality of education, in their role as aggregators. 

Alex AHABWE from Opportunity Bank Uganda declared that he was a product of education and is very committed to educational finance as a means to change the economy of a country. He described how Opportunity Bank Uganda identified a need across the entire education value chain to improve access to education and reduce the high dropout level. The main challenges are: parents cannot afford school fees; public schools are too far away; a lack of hygienic facilities; early marriage and child labour. 

Opportunity Bank Uganda developed several interventions, including: 1) School improvement loans, to invest in new classrooms, infrastructure, supplies and teachers; 2) School fee loans; 3) Scholarships for girls to finish a cycle of education; and 4) Empowerment of girls, including also teaching girls entrepreneurial skills. Ahabwe added that the MFI also empowers parents to build their financial literacy. Improving financial literacy among parents is key to put pressure on schools which in turn can improve quality of education.

Hannah HILALI from Opportunity EduFinance, the education finance team of Opportunity International, shared the most common education finance products: 1) Loans to schools for capital; 2) Loans to schools for infrastructure; and 3) Loans for families for education-related expenses. The financial institutions that Opportunity EduFinance works with, disburse an average of 500 school improvement loans per month. An average loan amounts is USD 10,000, and is often used for new classrooms and other infrastructure improvements. As a result, enrolment increases, on average by 22%, which increases revenues for the schools. At the same time, parents also need school fee loans, to pay for the enrolment fees.

Even when MFIs do not have specific products to finance access to education, their products may still be used as such. Hilali shared an example of an MFI in Indonesia. This institution found that borrowers were diverting payments in June and July, when annual enrolment fees were due. The MFI then introduced top-up school fee loans, with a lower interest rate. As a result, borrowers stopped diverting payments to pay for education expenses, and the MFIs portfolio quality stabilised. Zappia presented a similar experience in Africa, where borrowers took out extra loans when school fees were due. However, these loans were not earmarked as education finance loans and did not have any tailored-features linked to the school year seasonality or other education finance aspects. 

Roshaneh ZAFAR from Kashf Foundation presented why the organisation includes products to finance access to education. She explained that the first thing women pay for when they have cash are school fees, so their children can find a way out of poverty. Moreover, low-cost private schools are the main schools in Pakistan, learning opportunities at these schools were better than at public schools. Finally, Zafar explained that Pakistan ranked third in the world in terms of out-of-school kids. Zafar described three main needs to improve schools. Schools need better infrastructure, e.g. classrooms, toilets and access to drinking water. In addition, capacities of entrepreneurs need to be improved as well as teacher training content.

Zafar shared a case study of a girl living in Punjab, Samina. There is a 75% chance that Samina will go to primary school, but only a 30% chance that she will end up in secondary school. She will most likely not be fully literate in terms of reading or numeracy and there is only a 20% chance that an adult at home will help her with learning. This case showed that much still needs to be done to improve access to education. 

Zappia concluded that there is a huge need for financing, both for families and for schools. She asked the panel what can be done in financial institution (FI) product design to meet those needs. Pikholz explained that there are several challenges for FIs to make use of the market opportunity in finance for education. Many FIs are comfortable in their existing market. She found that the main challenges are to change the mindset of an FI to include schools as clients, and for them to understand the needs of such customers. After that, product development is relatively easy. 

Hilali shared this view, stressing the importance of understanding school entrepreneurs, as lending to schools is very different from lending to other SMEs. She added that Opportunity EduFinance developed several technical assistance modules that can be customised to a particular MFI’s needs. Alongside traditional modules such as market research, product development and capacity building of FI staff, Opportunity EduFinance has developed an EduFinance algorithmic scoring tool, called EduFAST that predicts rate of defaults on loans based on thousands of cases of client data. 

In her experience, Pikholz found that educational finance interventions should be embedded into other financial services of an FI to keep down costs and ensure sustainability of the intervention. She shared three routes that CapitalPlus takes: 1) Adding conditions to loans, such as testing learning outcomes and requiring separate toilets for girls; 2) Embedding incentives, such as discounted loan repayments for improvements in test scores or merit-based scholarships for girls; and 3) Transformative interventions, by strengthening market provision of equal interventions or introducing new interventions. 


The moderator asked the panellists to share some results of their work on financing access to education. Zafar shared that in 85% of the 3,000 schools they worked with, revenues have gone up. Overall, enrolment increased by 18% and more girls enrolled, one of the main objectives of Kashf Foundation. They found three main drivers for education attainment: 1) Infrastructure, which is necessary for the school to function; 2) Teacher quality; and 3) Role of the parents. The majority of parents are also not literate. In order to engage them, the Kashf Foundation invites parents to join their regular training programme. 

Hilali described how Opportunity EduFinance reduced the risk of school borrowers by training them. In 9 countries, Opportunity EduFinance’s EduQuality programme trains over 1,600 school borrowers and covers three elements: 1) Training school leaders on management best practices; 2) Foundational teacher training; and 3) Pathways to excellence, a self-assessment test with 30 domains that tests the quality of the school and action plans to improve. 

Ahabwe shared that 484 of Opportunity Bank Uganda’s school loan clients are part of the EduQuality training programme. This has resulted in improved repayments on loans with the PAR 30 of loans in the EduQuality programme being consistently lower by 2-3% over the past 4 years. Ahabwe explained that alongside the 484 schools, the programme has also trained 968 school leaders, formed 53 school clusters, sensitised 7,000 parents and gave out 589 bursaries. 

Zappia concluded the session by sharing the results from the audience vote on access to education. Audience members valued affordability of education over quality of education. Zappia added that the definition of quality of education is very broad, ranging from facilities, toilets, availability of fire exits and the quality of education itself. Pikholz added that before schools think about the quality of education, their basic needs need to be met. The audience voted high number of teachers per student as the most important indicator of quality, although Zappia explained that research does not support this view systematically. All audience and panel members shared the view that an increase in enrolment of girls in schools increases the participation of women in the workforce. Zappia shared a recent IMF Working Paper providing statistical evidence of this in the case of Senegal education system and increase of women’s enrolment in the work force.