Supporting Private Education
in Emerging Markets
September 2010
International Finance Corporation at a glance
History, ownership and vision
IFC Portfolio as of June 30, 2009, by Region
• Founded in 1956 to foster private sector
investment in the developing world
• Part of the World Bank Group and owned by
its 179 member countries
• Vision: That poor people have the opportunity
to escape poverty and to improve their lives.
South Asia
12%
East Asia and
the Pacific 14%
Total Commitments: US$10.5 billion for own account,
US$4.0 billion mobilized
Syndications
$16
$14
$12
US$ billions
Europe and
Central Asia 26%
Middle East and
North Africa 11%
IFC Financing as of June 30, 2009
IFC's own account*
Sub-Saharan
Global 1%
Africa 11%
$10
Latin America and the
Caribbean 25%
Total US$32.4 Billion
IFC Portfolio as of June 30, 2009, by Industry
Health and Education
Private Equity and 2%
Investment Funds 5%
Subnational Finance
Global ICT 4%
1%
Global Financial Markets
Agribusiness
Group 36%
7%
Oil, Gas, Mining, and
Chemicals 10%
$8
$6
$4
$2
$0
2002
2
2003
2004
2005
2006
2007
2008
2009
*Includes loans, equity, guarantees, risk management products
IFC FY09 Annual Report data
Global Manufacturing
and Services 18%
Infrastructure 17%
Total US$32.4 Billion
IFC has a well established franchise in Latin America
Historical Commitments
Fiscal Year 2009 Commitments
US$ millions
US$ millions
IFC syndications
Syndications
US$670
IFC loans, equity, guarantees, risk mgt.
$5,000
$4,300
Guarantees and
RM US$824
$3,600
$2,900
Loans
US$ 1,648
$2,200
$1,500
$800
Equity US$250
$100
($600)
FY02
FY03
FY04
FY05
FY06
FY07
FY08
US$ 3,392 million
FY09
Regional Portfolio
IFC Portfolio by Country (largest exposure)
US$ millions
US$ millions
Total Committed Portfolio
US$12,201
Committed portfolio for IFC’s
account
US$8,776
Committed portfolio held for others
(loan and guarantee participants)
US$3,425
IFC FY09 Annual Report data
3
Argentina
US$1,054
Colombia
US$873
US$ 12,201 million
Brazil
US$ 2,364
IFC Investment Strategy: 3 Fundamental Principles
4
•
Commercially viable investments
― Market based
― Must produce returns
•
Value added beyond capital
― Opportunity to help clients achieve higher standards of
management and social responsibility
•
Strong development impact
― Support projects that will expand much needed services
in a socially and environmentally responsible way
Summary of IFC Investments in Education



The Education Sector is a pillar of IFC’s Strategy
IFC has invested in 64 projects in 31 countries
Total project value: US$1,577 million
Education CHE Portfolio by Country*
Chile
23%
The rest
29%
West Bank &
Gaza
7%
Education CHE Portfolio by Product
Guarantees
33%
Antigua &
Barbuda
13%
Egypt
7%
Brazil
10%
Mexico
11%
Loan
65%
Equity
2%
* Total education portfolio size US$316 million
5
Examples of IFC Investments in Education
Education
US$8mm Equity Investment
Mexico
US$30mm Senior Loan
Mexico
US$5mm Senior Loan
Trinidad Tobago
Education
US$39mm in Senior Loans
Brazil
US$8mm Senior Loan
Argentina
US$8mm Senior Loan
Lebanon
Education
Education
Education
US$30mm Senior Loan
US$50mm Guarantee
Chile
US$30mm in Senior Loans
US$1mm Capital
Mexico
US$14mm Student Loan
Guarantee
Brazil
US$7.3mm Senior Loan
Vietnam
US$5mm Senior Loan
Uruguay
US$12mm Senior Loan
Turkey
US$2.5mm Senior Loan
Ghana
US$18.4mm Guarantee
Pakistan
US$30mm Bond Guarantee
Chile
Global Trends in Education
Demand Side:
Supply Side:
• Demographic Factors:
• <25 year old -- over 2 bln in emerging markets
• 0,7% annual growth
• Rising income levels and increasing
expectations
• Economic growth fueling need for educated
labor force
• Increasing demand for secondary, technical and
vocational education and training (TVET)
• Significant growth in primary/secondary
education (Education for All)
• Highly fragmented industry
• Franchise model gaining traction esp. in tertiary
education
• Governments unable to meet demand and keen
to pursue PPPs
• Technology aiding distance learning
Major Regional and International Players
Anhanguera
Educacional
Participações S/A
7
IFC has a Full Range of Financing Capabilities
Senior Loan
•
•
•
•
Up to 12 years final maturity and 2 to 3 years grace period for principal on average
Security package typical: physical assets, pledge of shares, leases, etc.
Market based pricing
Available in fixed / floating and, depending on market conditions, local or USD currency
B Loan /
Syndication
•
•
•
IFC syndicates portions of loans in order to mobilize additional financing partners
Commercial banks take comfort in IFC due diligence and structuring experience
Over 150 commercial banks and other institutions currently participate in IFC’s B loan program
•
Hybrid featuring characteristics of both debt and equity
– Subordinated, convertible, income participation, bullet repayment and others
Mezzanine
•
•
Typically in the form of common or preferred stock
Denominated in local currency
Structured
Products
•
•
•
Securitizations: asset-backed securities, including future revenues, receivables, etc.
Guarantees: partial credit guarantees enhancing credit worthiness of client's financing
Risk-sharing facilities: allowing for alternative risk allocation
Advisory
Services
•
•
•
IFC provides technical assistance / advisory services in support of its clients
Country and sector specific
Funded by donor governments and other multilateral institutions
Equity
8
IFC’s Teams Work Closely with Clients
Identification &
Review
•
•
Identify project
• Analyze and
discuss with
company
business plan
and sources
and uses of
funds
Obtain
management
approval to
formally consider
investment
2 – 4 weeks
9
Investment
Review
Meeting
Appraisal
•
•
In-depth
business review
Senior
management
interview and site
visit
2 – 4 weeks
•
Obtain approval
to negotiate final
transaction terms
Negotiation
&
Documentation
•
•
1 – 2 weeks
Negotiate final
investment
terms
IFC lawyers
initiate draft
investment
documents
3 – 5 weeks
Board
Approval
•
•
•
Final approval
Sign legal
documents
Disbursement
4 weeks
Supervision
•
IFC monitors the
project closely
• Consults
periodically with
project managers
• Field missions to
enterprise
• Requires
progress reports,
annual audited
statements, and
other material
information
As appropriate