Experts Speak: Education Micro-lending in Ghana and Dominican Republic

Edify(www.edify.org) is breaking the cycle of poverty through microfinance loans to Christian schools in the developing world, affordable to even the poorest of the poor. Enterprising Schools explores the micro-lending for education space in Ghana and Dominican Republic in an interview with Edify's CEO Chris Crane and CIO Reuben Thiessen.

ES: How does school lending in Ghana compare to that in Dominican Republic?

Edify:Our Microfinance partner in the Dominican Republic, ASPIRE, has focused primarily on the city of Santo Domingo, and funded 130 school loans to date. Our MFI partner in Ghana, Sinapi Aba Trust,has funded 30 loans over the past 9 months and emphasizes school proprietor training modules prior to schools receiving a loan. The modules focus on preparing school owners for making the best use of the school loan and managing their schools as well as possible.

ES: What is the typical profile of an Edify loan recipient?

Edify:In Ghana, client schools typically charge between $5 to $10 USD per month. In the Dominican Republic, schools typically charge $5-$15 USD per month for school fees. Costs for school uniforms and lunches are an additional charge.School sizes range from 150 students to 900 students, and typically, school parents make on average $2-$4 USD per day.

ES: What are the terms for an Edify loan?

Edify:Loan sizes in each country vary from $1,000-$20,000USD, with repayment terms set between 1-3 yrs. Loans in the Dominican Republic average $1,500USD, while loans in Ghana are average $2,850USD.

ES: What can school owners use Edify loans for?

Edify:We have identified over 25 different uses of proceeds for loans including infrastructure, computer labs and school buses.Most loans are used for infrastructure, but often, 20% to 25% of the loan is used for working capital.We have not seen a significant difference in what the loans are used for between the two countries, although in Ghana we have advocated for our schools to invest in computer labs.

ES: What is Edify's target impact goal for disbursing loans (long-term and for this year)?

Edify:Our goal is to provide loans to 5,000 schools having an average of 200 students in five years. This would mean 1 million children will be impacted with better academic education and life skill training.In order to achieve this goal, we will have to raise $20 million from donors. We plan to disburse $1,800,000 USD to schools in 2011.

ES: Does Edify provide Technical Assistance or products outside of loans?

Edify:We has recently piloted projects in Ghana focused on providing schools with computer labs, fully financed through an Edify school loan. Proprietors often only have students in the labs 3 hours per day for the entire school. We believe students should have 10 hours per week of face time on computers. We've purchased computer systems manufactured by N Computing (www.ncomputing.com) that offers schools a low-maintenance technology lab at an affordable cost. This system costs USD$4,000 and includes a server which drives 11 thin clients. Because it is purchased new, it should be relatively maintenance free for three years as opposed to used computers in schools which have a lifespan of only 12 months.

ES: How can APS sector avoid the issues that Microfinance is now facing with over-indebtedness??

We reimburse each MFI partner for a full-time, dedicated accountant whose sole job is to work with Edify APS clients only. This is important to put the schools’ accounting in good order and for understanding the schools’ cash flow. By having the accountant go to the schools each month to review the books, Edify and the MFI receive early warning signs of the borrowers inability to repay or if they have taken a second loan.

ES: What other areas is Edify exploring?

Edify: We are researching education software in order to introduce interactive instruction in subjects such as Math, English, and Science. We are also working with Junior Achievement in two schools in Ghana, and hope to expand this program to more schools. The goal of Junior Achievement is to teach children business and entrepreneurship skills. These life skills are vitally important as there are so few jobs when students graduate high school that they need to be job creators rather than job seekers. We wish graduating students to be able to identify a market opportunity, differentiate their product, provide good customer service, and be able to do simple budgets and cash flow forecasts for their businesses.

ES: What are Edify’s expansion plans for Edify?

Edify: Edify plans to expand to other countries in Africa and Latin America. The organization is only one year old and has adopted a strategy to work in only two countries during the first two years in order to validate the model before rolling it out to other countries.