Accra, Ghana, June 21, 2005—The International
Finance Corporation, the private sector arm of the World Bank Group, has
signed a structured risk sharing agreement with The Trust Bank Limited
to support its lending to private schools in Ghana. The project is the
first such initiative in Ghana’s education sector.
A strong demand for private education in Ghana has resulted in tremendous
growth in the number of private schools. IFC’s support through this structured
risk sharing facility with TTB will support efforts by the private sector
to invest in and ensure delivery of high-quality education.
IFC is providing TTB with a partial guarantee of up to 9.5 billion Ghanaian
cedis (about $1.1 million equivalent) on loans extended to eligible private
schools to finance construction, purchase of educational materials, and
other capital expenditures.
In parallel with the structured risk sharing facility, a comprehensive
technical assistance program will be provided to eligible schools. The
program is designed to strengthen the schools’ financial, management,
and educational capacities; and foster the development of an independent
provider of educational services to private schools. Technical assistance
will also be provided to TTB to build its capacity to conduct due diligence
of educational institutions and monitor their portfolio.
Loans available to the private education sector are generally short term
and not appropriate to construct additional facilities and acquire equipment.
The short tenor of the loans also puts a strain on the cash flows of schools
and adversely affects their ability to operate effectively. IFC’s risk
sharing facility is aimed at encouraging TTB to provide longer-term loans
to schools. TTB’s risk would also be reduced by the technical assistance
provided directly to individual schools before and after receiving loans.
This initiative is expected to be replicated in other African countries
and scaled up in Ghana.
TTB’s acting managing director, Mr. Isaac Owusu-Hemeng, said, “This groundbreaking
partnership between IFC and TTB affords us the unique opportunity to expand
our support to the education sector while minimizing risk. We will be able
to increase our education portfolio, develop further expertise in the sector,
and help private schools to expand their scale of operation.”
IFC director for Sub-Saharan Africa, Richard Ranken, noted, “This initiative
demonstrates the effective combination of IFC investment and technical
assistance in undertaking small-scale projects that have a high development
impact. If successful, this new approach will make it possible for
IFC to support the education sector in other countries.”
Guy Ellena, IFC director for health and education, added, “The launch
of this unique facility marks a true innovation in education sector financing
that we hope can be expanded in Ghana and throughout Sub-Saharan Africa.”
The mission of IFC (www.ifc.org)
is to promote sustainable private sector investment in emerging markets,
helping to reduce poverty and improve people’s lives. IFC finances private
sector investments in developing countries, mobilizes capital in the international
financial markets, helps clients improve social and environmental sustainability,
and provides technical assistance and advice to governments and businesses.
From its founding in 1956 through FY04, IFC has committed more than $44
billion of its own funds and arranged $23 billion in syndications for 3,143
companies in 140 developing countries. IFC’s worldwide committed portfolio
as of FY04 was $17.9 billion for its own account and $5.5 billion held
for participants in loan syndications.