Sampoerna Student Financing Facility

completed

The proposed project is a risk-sharing facility in Indonesia between Sampoerna Foundation, Bank Internasional Indonesia (BII), and IFC that will extend loans to parents and students who have difficulty affording tuition and/or University entrance fees. The project will be the first private student loan financing facility in Indonesia and the first facility in the world using a risk sharing mechanism to leverage contributions from an education foundation into a portfolio of student loans. The total amount of student loans disbursed could reach approximately $20 million, with IFC’s total risk up to $10 million. Sampoerna, to the extent permitted by the prevailing law, will be providing funds to cover set up costs and the first losses on the portfolio of loans. The remaining losses will be shared equally between IFC and BII. BII will also administer and fund the portfolio. Loans will be available for all educational purposes, but initially will target undergraduate and graduate university students.The project will make a contribution towards expanding access to tertiary education for low-income students. According to World Bank data, the higher education enrollment rate in Indonesia is only 16.4%, compared with 29.3% in Malaysia and 30% in the Philippines. The country’s comparatively low enrollment is due in part to the financial difficulty that many students have in paying tuition for tertiary education. Entrance fees and up-front costs are significant in Indonesia (sometimes more than 1.5 times annual tuition for undergraduates). In addition, access to credit is constrained in Indonesia, and consumer loans are prohibitively expensive for most families. In contrast, the Facility will price loans to students and parents at an attractive rate. By leveraging Sampoerna’s funds, the Facility will help economically disadvantaged students to attend university.