The most important event of the year was the conclusion of the first round of funding for the Future of Work Fund (FWF). In addition, four new education partners were acquired, two of them in South Africa. The joy over this development is somewhat dampened by the gloomy labor market.
In mid-May, after long preparations, the time had finally come: the Future of Work Fund plc, or FWF for short, celebrated its launch with the closing of its first round of funding. “After the tough and sometimes very small-scale preparations, we were really happy,” says Batya Blankers, managing director of the fund.
Born in South Africa, she and the UBS Optimus Foundation came up with the idea of using this fund to “really get the wheels turning,” namely: to make mostly unaffordable academic education possible for many young people from sub-Saharan Africa.
The fund, which has so far collected USD 10 million, uses it to finance the fees for studying at one of the partner universities. This unique structure benefits today’s students who later pass on their benefits to the next generation by signing an “Income Share Agreement” (or ISA for short) with the fund. Also they agree to pay back a percentage of their later income over three to eight years once they have entered the workforce, if this exceeds a limit of the equivalent of around 80 euros per month.
It took several years of hard work to set up this opportunity. After an initial field survey in 2016, CHANCEN International gGmbH (CI for short), a wholly owned subsidiary of CHANCEN eG, was founded. Later, for regulatory reasons, CHANCEN Rwanda ltd. by Guarantee was added, which manages the operations of the Fund and received a license as a Financial Institution from the Central Bank of Rwanda for this purpose in spring 2022.
CI has a one-third stake in the 2021 founded FWF; the other two shareholders are social investors – such as the Swiss UBS Optimus Foundation and the German Klett Group – and the students themselves.
Set up this way on the balance sheet, the fund raises outside capital, for example from the US development bank DFC. The advantage of this is that it creates a so-called blended finance structure, in which different impact and social investors share risks, and thus more funds can be activated for education. In the second round of financing, USD 4 million in equity will be raised; this will be followed by a further USD 6 million in debt capital that has already been committed. This will allow the fund to finance up to 10,000 students. Also helpful this year is support from the agency US-AID to optimize IT systems that can serve students well and efficiently manage the multi-million dollar ISA receivables portfolio. Governance structures have also been adjusted to reflect the new structure.
After a cumbersome start, Blankers and her team are pleased that their concept is catching on: “So much positive feedback, it just feels good.” In the meantime, around 2,200 students have already received training funding through an ISA from CHANCEN International or the FWF; this is around 40 percent more than a year ago.
Demand is also increasing among universities: Four new education partners were acquired this year. In Rwanda, these were INES Institute for Applied Sciences with 160 new students and RICEM with a focus on further education. In South Africa, where CI started last year with partner WaFunda from Cape Town and BluLever, a craft training center, Codespace for coding training from Woodstock/Cape Town and Signa for microfinance and crafts were won.
However, Blankers and her team had to pour some cold water on their success story: Due to Covid-19, the war in Ukraine and global price increases, the economy in Rwanda is no longer booming. This decline is also noticeable on the labor market. Of the approximately 200 students in the first cohort at the Kepler Institute, about half are currently without jobs. This leads to lower repayments than initially expected.
However, since the ISA is designed for the long term with a repayment period of 15 years, such dampers are part of the calculation. Nothing Blankers had not expected: “It was already clear that not everything would just run smoothly. And that’s why our most important credo is: ‘Lessons learned’. And we continue to learn – that’s an imperative part of a setup.” She looks ahead: “Next year, we will start planning our launch in Kenya and Ghana. In these countries there is a lack of quality AND affordable education as well. This will be a lot of work again – but we can’t wait to get started!”
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Batya Blankers is looking forward to hearing from you: batya@chancen.international
