SDG Impact Initiative with the support of Convergence awarded Chancen International (CI) a USD 300,000 grant for their expansion of the Future of Work Fund 1.0 (FWF 1.0), which is designed to provide fair and ethical financial solutions to enable access to high-quality vocational training and tertiary education for traditionally excluded populations in sub-Saharan Africa. The grant will assist Chancen to scale their fund to expand from USD 21 million to USD 40 million. The fund's first close included commitments from the US International Development Finance Corporation (DFC), Ceniarth LLC, UBS Optimus Foundation, Kaizenvest, Drelindin and the Kellet Group.
Accessing affordable financing for high-quality education and skills development remains a significant barrier to pursuing livelihood opportunities in developing countries, especially in Africa, where over 200 million young people are entering adulthood. Many of these individuals face challenges transitioning from secondary school to productive employment, with women being disproportionately affected. While the global average for tertiary education access stands at 38%, this number drops to 9% among African women.
Despite current government spending and foreign aid for skills development and tertiary education, there is a pressing need for solutions to be embedded into the private sector. Student lending in Africa, particularly for individuals from lower-income backgrounds lacking collateral, presents a financing demand that is too large and long-term for MFIs to address while at the same time being too small and too risky for traditional banks to accommodate.
Chancen International aims to provide excluded youth in Africa with access to high-quality skills development programs that can lead to employment. The FWF uses an Income Share Agreement (ISA) model, a new asset class for youth development in sub-Saharan Africa, to finance 10,000 excluded youth in Rwanda, South Africa and Kenya by 2025. Under the ISA, the need for collateral is removed, making education financing more accessible. Students will sign contracts to repay a percentage of their income after graduation, with repayment rates evaluated by CI to ensure fair and ethical repayment terms.
The expansion grant will help Chancen de-risk the vehicle and lay the foundation for raising more capital, particularly from the private sector.
Design question and learning potential for the market: How can a blended fund fill the gap of financing tertiary education in Africa?
The FWF 1.0 employs a blended finance structure to attract patient capital from impact investors.Through Income Share Agreements (ISAs), FWF will extend uncollateralized micro-lending based on group risk-sharing principles. Grant funding is integrated into the capital pool to mitigate risks and facilitate an inclusive approach to offering access to high-quality skills development for low-income individuals. Under the agreement, education costs are covered at one of CI’s partner education institutions, with CI providing guarantees to the Partner Education Institutions (PEI) and agreeing to cover tuition fees in cases where students are unable to fulfill their educational debt obligations. Upon signing the ISA, students are required to repay a percentage of their income as loan repayment. The amount is capped at a specified threshold assessed by CI to ensure repayment does not deplete the students’ income. Selection for participation in the ISA program is based on a list of criteria including financial, socio-demographic, geographic/household, and basic education. The solution will fund at least 10,000 excluded youth in Rwanda, South Africa, and Kenya by 2025.
