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.”
About IFC
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
www.ifc.org
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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.
