International Impact Investing Summit: Impact theme: Education

I'm attending an International Impact Investing Summit in New York and will be attaching my raw notes from the conference. here are my raw notes from the 2:45 a.m. panel titled "Impact theme: Education."

2:45 p.m. Impact theme: Education

Moderator: Steve Hardgrave, Senior Managing Direcor, Gray Ghost Ventures

Panelists
Francisco Vizcaya, CEO, FINAE
James Tooley, Ph.D., Professor of Education Policy, Newcastle University
Tom Vander Ark, Managing Partner, Revolution Learning

Francisco Vizcaya
Dropout rate means that only 25% of kids within the ages of 19 to 24 years old are actually attending university now. The problem is that the system in Mexico and universities. There is a system of public universities. The tuition cost is almost zero, but these universities are overcrowded, and not all students applying area accepted. At one school, 110,000 students apply each year, and only 8,000 are accepted. There is no financial program or student loan program established for Mexico. Some high-end universities have programs, but nothing universal. 350,000 students try to get into the public universities each year but are not accepted, so we are talking about a potential market of 350,000.

Out of 2.6 million students attending university in Mexico, two-thirds are attending public, and one third are attending private universities. The private universities are funded by investment funds. The model that we are operating with has as its first challenge finding an equilibrium between the problem of profitability and affordability for the students. We developed a model through which we distribute the operational cost among all the parties that are participating. Not just the cost in terms of money but in terms of risk and labor. Universities are absorbing an important part of the risk and providing some kind of subsidy. It is a model whose promotional cost is also absorbed by the universities. We can through this model have a financial cost for the student that is affordable.

James Tooley
In development, the holy grail is sustainability and scalability. There is an existing market of low-cost private schools that are serving the poor in every country you can look at. They're already scalable. In India, there are at least 300,000 of these schools. There is already a sustainable, scalable market. I'm not talking about a new market. It is already there, and entrepreneurs from these schools are already doing something that is an improvement over the public schools. In India, they're charging $2-4 dollars per month.

Poor parents/students are offering something better than the government alternative, but we can provide something that is better still. Omega Schools (sp?) is one of the companies that I've set up as a low-cost… This chain, I've been using a very constrained amount of capital, $250,000, creating a chain of 5 schools, 10 by the end of next year, which will be profitable in the 2011-2012 school yet. It proves that you can have a chain of low-cost private schools that will outperform anything that is out there and is achieving profitability very, very quickly.

For poor parents, a fee of $5/month is a big deal. Not because they can't afford it, but because they can't save it. We have a daily payment system. There are no hidden costs, so the one CD per day covers the lunch, exercise books, etc. There are no hidden costs. A school opens. Within a week it's full, with 500 students. Many of the children are coming from the government schools, which of course are free, because this is an affordable thing for them.

Question
Suppose I were to want to invest $5 million of senior debt? What could I expect as a return?

James Tooley
15 to 20 percent.

They're talking about using internet and mobile techologies as education delivery systems.

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