Nairobi, Kenya/ Washington D.C., December
7, 2006—The International Finance Corporation, the private sector
arm of the World Bank Group, will support private education in Kenya, including
low-income schools, through a partnership with Kenya’s K-Rep Bank. IFC
has signed a risk participation agreement with K-Rep Bank to support its
lending to private primary and secondary schools.
Strong demand for private education in
Kenya has led to tremendous growth in the number of private schools. IFC’s
help through this structured risk-sharing facility will support the private
sector’s efforts to invest in and ensure delivery of high-quality education.
IFC is providing K-Rep Bank with a partial guarantee of up to 120 million
Kenya shillings (about $1.7 million equivalent) on loans extended to eligible
private schools to finance construction, purchase of educational materials,
and other capital expenditures.
In parallel with the risk-sharing facility,
comprehensive technical assistance will be provided to eligible schools.
The program is designed to strengthen the schools’ financial, management,
and educational capacities. It will also foster the development of an independent
provider of educational services to private schools. In addition, technical
assistance will help K-Rep Bank build its capacity to conduct due diligence
of educational institutions and monitor their portfolio.
Loans available to Kenya’s private education
sector are generally short-term and not appropriate to building facilities
and acquiring equipment. The short tenor of the loans also puts a strain
on the cash flows of schools and limits their ability to operate effectively.
IFC’s risk-sharing facility will help K-Rep provide longer-term local
currency loans to schools. K-Rep’s risk will 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 Kenya.
This is the first such initiative in
Kenya’s education sector and is modeled after IFC’s pilot school financing
facility in Ghana, committed in June 2005, where IFC mobilized local currency
financing to improve the business environment for private education.
Thierry Tanoh, IFC’s Director for Sub-Saharan
Africa, noted, “This initiative with K-Rep Bank demonstrates the effective
combination of IFC investment and technical assistance in undertaking small-scale
projects that have a high development impact.”
Guy Ellena, IFC’s Director for Health
and Education, said, “The launch of this unique facility marks a real
innovation in education sector financing, an approach that we hope can
be expanded in Kenya and throughout Sub-Saharan Africa.”
Kimanthi Mutua, K-Rep Bank’s Managing
Director, added, “This partnership 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 expand their scale of operation.”
The International Finance Corporation,
the private sector arm of the World Bank Group, is the largest multilateral
provider of financing for private enterprise in developing countries. IFC
finances private sector investments, mobilizes capital in international
financial markets, facilitates trade, helps clients improve social and
environmental sustainability, and provides technical assistance and advice
to businesses and governments. From its founding in 1956 through FY06,
IFC has committed more than $56 billion of its own funds for private sector
investments in the developing world and mobilized an additional $25 billion
in syndications for 3,531 companies in 140 developing countries. With the
support of funding from donors, it has also provided more than $1 billion
in technical assistance and advisory services. For more information, visit
IFC’s portfolio in Kenya is one of the Corporation’s largest in Sub-Saharan
Africa. It totals $170 million and includes projects in financial markets,
tourism, agribusiness, infrastructure, and the chemicals, transportation,
housing, pulp and paper, and utilities sectors. Reflecting the new Strategic
Initiative for Africa, IFC’s activities range from direct investment to
advisory services, development of small and medium enterprises, and technical
assistance. Through the SME Solution Center, IFC plans to offer an integrated
package of fit-for-market solutions to drive sustainable development of
Kenya’s smaller businesses. IFC’s Private Enterprise Partnership for
Africa is also developing a program in partnership with the African Development
Bank to provide SME financing through local banks to Kenya’s female entrepreneurs.