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Summary of Proposed Investment
This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.
Colleges, Universities, and Professional Schools
Date SPI disclosed
May 8, 2007
Projected board date
June 10, 2007
Signed: June 27, 2007
Approved: June 22, 2007
Fundacion Duoc (Duoc) is a higher education institution in Chile providing technical degrees and vocational training to a student body of approximately 40,000. Duoc sees a strong need to expand the financing options it offers to students, especially to those from lower income brackets who are not eligible for government sponsored programs.
IFC has been in discussions with Duoc and a Chilean bank (or the Bank), to jointly develop a new student loan program for Duoc (the Facility). Under the new program, loans would be made by the Bank to qualified Duoc students. The Bank would then administer and collect the loans in cooperation with Duoc. Duoc would provide a first loss reserve (First loss) for such a program in order to:
- reduce the risk of loss to the Bank and IFC, and
- help lower the interest rate being charged to its students. IFC would share the remaining risk of the Facility with the Bank.
Project sponsor and major shareholders of project company
The project sponsor is Duoc. Duoc was founded in 1968 as a department of the Pontificia Catholic University of Chile (Universidad Católica) with the purpose of providing training in technical skills. In 1973 Duoc was established as a separate independent institution -- Duoc Foundation -- a private non-profit institution.
In 1990, the government of Chile reconfigured the country’s education system, establishing 3 distinct types of institutions: universities, vocational institutes and technical training centers. Duoc was recognized as an autonomous institution with two academic charters, a vocational institute and a technical training center.
Given its non-profit status, the institution is presided over by a Board of Directors with regulatory and oversight functions.
Total project cost and amount and nature of IFC's investment
The proposed size of the facility is $50 million equivalent, which covers expected student loan demand for three student cohorts.
The proposed IFC investment is a $ 18.75 million equivalent risk participation, which would be drawn on after the First loss is utilized.
IFC investment as approved by Board
19.29 million (USD)
IFC Investment (million USD)
* These investment figures are indicative
Location of project and description of site
The student loan program will be applicable to students attending any of Duoc’s campus locations in Chile, including its campuses in Santiago and its regional campuses in the cities of Viña del Mar, Valparaiso and Concepción. The program will be administered from the Bank’s headquarters in Santiago.
Anticipated development impact of the project
This project is expected to increase access to higher education, especially among students from lower- and middle-income households. Unlike the profile of students in higher education generally, 60% of which come from families in the two highest income quintiles, 64% of Duoc’s students come from families classified as middle- and lower-income.
The return to receiving higher education in Chile is high, including for those trained in vocational schools and technical centers, yet the World Bank has found that the relative cost of higher education in Chile is among the highest in the world. Only about 20% of the population can afford to pay for higher education without outside financing. Further, existing sources of financing through government and bank programs are mostly unavailable to the lower segment of middle income families, which the proposed Facility is meant to serve.
In addition to increasing access to higher education, the proposed facility will introduce to the financial markets in Chile an affordable student loan scheme that will demonstrate the creditworthiness of lower- and middle-income students graduating with technical and vocational degrees.
IFC's expected development contribution
IFC’s strategy in Chile is geared towards filling the gaps in long-term financing and is seeking to address the government of Chile’s priorities for private sector development and sustainable growth with equity.
Chile is a competitive market with good availability of long-term financing due to a well-developed capital market and high levels of liquidity of institutional investors. However, access to long term finance for education is still underdeveloped, especially for the lower and lower-middle income segments. IFC’s proposed project will help address this gap.
IFC’s risk participation will allow Duoc and BCI to offer lower interest rates to students, thus making the student loan program more attractive to lower and middle-income families. In addition to playing a leading role in structuring the Facility, IFC’s participation is important in bringing the other parties into the transaction.
Environmental and social issues - Category C
This project will be engaged in the business of financing student loans and has been classified as a Category C project according to IFC’s Environmental and Social Review Procedure. No further review is required. The project is required to inform IFC in the event of any change in nature or scope of its contemplated business.
For inquiries about the project, contact:
Antonio Varas 666, Providencia,
For inquiries and comments about IFC, contact:
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
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