CDC Group and the OPEC Fund for International Development (OFID), as well as renowned private investors have invested over $20m in the Regional Education Finance Fund for Africa (REFFA). 

Sara Taylor, CDC’s Director and Head of Impact Fund, said: “As many as 40% of the children at school in Africa attend private schools. Limited access to finance is a key challenge, particularly for lower-cost schools and CDC’s investment will help bridge that finance gap.” 

“By providing capital to one of the continent’s fastest growing sectors REFFA can play an important role in helping banks develop tailored products for the education sector and in helping affordable schools improve the quality of their education,” she said.

The blended finance structured fund is the first fund to exclusively support the development of the education sector in Africa.

Initiated by KfW Development Bank with funding from the German Federal Ministry for Economic Cooperation and Development (BMZ), REFFA aims to provide customized financial services for the education sector and increase equal access to primary, secondary, vocational and higher education as well as enhance the quality of education.

REFFA’s capital structure consists of a junior, mezzanine and a senior tranche. 

The junior tranche, funded by BMZ, has been catalytic in attracting additional investors, blending public concessional capital with investments from development finance institutions and from private sector impact investors. 

CDC has committed in total $15m and already invested $4m in the mezzanine tranche. 

OFID has committed $5m and already invested $2m in the mezzanine tranche. 

“OFID is very focused on helping its beneficiary countries make progress in achieving the Sustainable Development Goals – the fourth of which focuses on education. We are therefore pleased to support this innovative initiative which aims to catalyze private financing to help develop human capital in Africa,” said Tareq Alnassar, OFID Assistant Director General, Private Sector and Trade Finance Operations.

Alongside CDC and OFID, BlueOrchard has invested $600k in the Fund’s mezzanine tranche. 

The two private investors have invested in the senior tranche, which benefits from a significant credit enhancement and risk mitigation as portfolio losses are firstly absorbed by junior and mezzanine investors.

Maria Teresa Zappia, CIO of BlueOrchard, said: “2018 is an important year for REFFA as the expansion of its shareholders across the mezzanine and senior tranches demonstrates how good quality and affordable private sector education in Africa is a priority not only for DFIs, but also for private impact investors.” 

As of 30 June 2018, REFFA has disbursed in excess of $25m to eight financial institutions in seven countries in Western, Eastern, and Northern Africa. 

REFFA supports through its funding more than 700 schools and over 4,000 students. 

School fee loans are extended to more than 45,000 families and loans to private schools represent 49% of the Fund’s portfolio.

Furthermore, REFFA provides its investees with capacity-building through a Technical Assistance Facility (TAF), which serves the main goal of creating and enhancing institutional capacity for sustainable education finance across Africa. 

To achieve this, potential or existing REFFA investees will be strengthened in their capacity to develop and implement demand-oriented education loan and savings products, while pursuing economic as well as social goals. 

Furthermore, the TAF contributes to market intelligence for education finance and promotes innovation in this field. 

BlueOrchard is manager of the Fund and the TAF.