A New Financing Option for African Students

Prior to INSEAD, I had worked for four years in financial markets advisories in the US, and by coming to INSEAD, I always hoped that I would be able to do something that I had never done and go somewhere that I had never been. A summer at African Leadership Finance Company (ALFC) in Nairobi, Kenya hit two birds with one stone with the help of the INSEAD Social Impact Award.

The reason for doing this internship was threefold:

1) Career-wise, I wanted to work on something tangible and relatable in everyday life;

2) Personally, coming from a developing country, I had been curious about the fast-changing continent and its development;

3) Lastly, I believed in the bold mission to transform Africa by developing 3 million entrepreneurial leaders by 2035 that the African Leadership Group is working on. 

The African Leadership Group is comprised of game-changing organisations.

African Leadership Academy, African Leadership University, African Leadership University School of Business, African Leadership Network, and ALX. Throughout their years of experience in providing education and life-long learning opportunities, the AL group realise that unlike students in other countries, the number one reason for Kenyan students not receiving an education is the difficulty in obtaining student financing ⁠—even for top students (1 to 5 percent acceptance rate).

Even the most conventional sources of student financing are difficult to obtain: traditional banks in Kenya don’t give out loans to an 18-year-old who has no collateral or source of income, micro-financing charges about 20 to 30 percent interest rate per year which is unbearable for students, and scholarships are rarely found.

In order to solve the critical issue that stands in the way of transforming the continent, ALFC stepped in and decided to provide student financing through Income Share Agreement (ISA).

In contrast to traditional loans, ISA participants agree to pay a certain percentage of their future income for a certain amount of years instead of the annual interest rates.

The benefit of ISA that ALFC provides is that if the student becomes unemployed, he/she only needs to pay $1 per month to keep the habit of paying back.

Although there was a range of bumps in the road along the way, working in student financing was definitely rewarding. By interacting with students and graduates, I could see and feel the impact that we had on them as individuals, and how this impact might lead to the transformation that would happen on the African continent.

(A few sets of data points for you to keep in mind when you think about the impact and our mission: Africa has the fastest-growing population in the world at 2.3 percent per year; 40 to 50 percent of the world population will be African by the end of this century; Africa has the youngest population in the world with an average age of 19.5 compared to 47 for Germany and Japan.)