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TTB School Facility
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.
Ghana School Finance Facility
Elementary and Secondary Schools
Date SPI disclosed
April 2, 2007
Projected board date
May 2, 2007
Signed: May 17, 2007
Approved: May 11, 2007
The proposed project is follow-on investment to provide local currency financing and technical assistance to private K-12 and vocational schools in Ghana. IFC would provide risk participation of up to GHC22 billion ($2.4 million) to The Trust Bank (TTB, the Bank, or the company) on loans extended to eligible private schools. These loans will be used to finance construction, purchase of educational materials, and other capital expenditures. In parallel with the financing facility, a technical assistance program will be provided:
- to strengthen schools’ financial, management, and educational capacities;
- to improve the business environment for private education; and
- to foster the development of an independent provider of educational services to private schools.
Currently, few local banks are lending to private primary, secondary and vocational schools, and those that do, generally lend for less than two years. Thus, even if schools are able to secure bank financing, the tenor of that financing is generally not long enough to support expansion or modernization projects. Such projects thus proceed in a piecemeal fashion, resulting in a great deal of inefficiency and lost potential revenue. Further, expansion by such means cannot keep pace with the huge growth in demand for private schooling. IFC’s risk participation would be structured to encourage the Bank to extend maturities to 3-5 years, tenors more appropriate for financing capital investments.
Despite the impressive growth of private schools in Ghana over the past 15 years, most remain fundamentally weak in their financial and managerial capacities, as well as in their ability to develop more effective educational delivery mechanisms. The majority of schools has minimal financial expertise, weak information systems, if any, and limited opportunities for teacher training and curriculum development. The technical assistance program designed in conjunction with the financing facility is intended to address many of these shortcomings for participating schools, and, in addition, to strengthen the environment for private school operators.
Project sponsor and major shareholders of project company
The Trust Bank Limited was established in November 1, 1996 to take over the assets and liabilities of the liquidated Meridien BIAO Bank. It is currently owned by six institutions: Belgolaise Bank (35%), Social Security & National Insurance Trust (33.09%), Holding Cofipa (10%), FMO (10%), African Tiger Mutual Fund (6%), and Ghana Reinsurance Company Limited (5.91%). TTB, a licensed commercial bank, provides general financial intermediation with a focus on universal retail banking services. The core of TTB’s customers are in the middle-tier market segment, mainly SMEs and corporate bodies engaged in sectors such as agribusiness, commerce, construction, manufacturing and services. TTB is considered one of the most SME friendly banks in Ghana. It is also one of the few banks that lends to schools; its school portfolio is currently the best performing of all its SME sectors.
Total project cost and amount and nature of IFC's investment
This transaction would be structured as a risk-sharing guarantee with TTB. IFC’s guarantee will cover 50% of the principal credit losses that are in excess of a 5% first loss threshold up to a maximum of 22 billion cedis (equivalent of $2.4 million) with respect to the credit performance of a pool of loans to schools originated by TTB. The Bank’s first-loss position would have to be fully exhausted before IFC would have to pay any guarantee claims under the program. The portfolio is expected to reach a size of 46 billion cedis ($5.1 million) over the next 24 months. Individual loan sizes are expected to range from 180 million cedis ($20,000) to 2.7 billion cedis ($300,000).
Under the proposed structure, IFC would reimburse the Bank for half of the principal credit losses of the underlying loans (but only when credit losses exceed 5%). IFC’s 47.5% share of the second loss guarantee represents our maximum potential liability under this structure. IFC’s partial guarantee would be denominated in local currency.
IFC investment as approved by Board
2.37 million (USD)
IFC Investment (million USD)
* These investment figures are indicative
Location of project and description of site
The participant private schools will be located throughout Ghana.
Anticipated development impact of the project
The proposed project will have a strong development impact in helping to improve the educational quality and financial and managerial capacity of private K-12 schools in Ghana. In doing so, the project will widen access to much-needed quality education. Illiteracy in Ghana is still close to 40%, and government spending on basic education has not kept up with population growth. According to World Bank estimates, Ghana is unlikely to meet the Millennium Development Goal of universal primary completion by 2015 at current enrolment and spending rates. The poor quality of public education has given rise to enormous demand for private schools. This demand is currently unmet, in large part because schools have little access to affordable, long-term financing, and little training in financial management. This project will address both shortcomings. The project’s technical assistance component will also help schools, by building their management capacity, to improve the quality of education provided, thus setting a standard for the private sector, where quality is highly variable and unregulated by the government. Finally, this project supports a successful and replicable model for reaching small education providers - which comprise the vast majority of private providers - throughout Africa (and other regions). Due to the success of this model, IFC continues to expand education financing to other African countries with similar markets and constraints.
IFC's expected development contribution
IFC’s risk participation will enable the Bank to expand the reach of its medium-term lending program for private schools, which are in critical need of such financing for development. Further, the use of a risk participation instrument will help improve options for local currency financing in Ghana. The accompanying technical assistance program will provide comfort to the Bank, and prepare schools to borrow from the formal sector. It will also improve the business environment and the educational quality of schools, which, apart from the obvious social benefits, will make them less risky borrowers. Thus, this project is helping to promote the basic conditions for medium-term lending in the education sector.
Environmental and social issues - Category FI
This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. The Trust Bank (TTB) will be required to manage environmental and social risks and to establish and maintain a Social & Environmental Management System (SEMS). IFC may suggest Supplemental Actions to address any gaps in the SEMS such as:
- Develop and/or upgrade, if necessary, any existing Social & Environmental Management System (SEMS), prior to disbursement to the satisfaction of IFC;
- Identify responsible, qualified persons to manage and implement the SEMS;
- Commit to implement the SEMS , to ensure that its investments/activities in the school sector are in compliance with the applicable national environmental and social laws and regulations, with special emphasis on life and fire safety and general environmental and social requirements;
- Commit to take action to remedy any gaps in SEMS implementation on an ongoing basis;
- Submit a periodic report to IFC as per a format to be provided by IFC.
For inquiries about the project, contact:
Isaac Owusu-Hemeng, Managing Director
The Trust Bank,
68 Kwame Nkrumah Avenue
P.O. Box 1862,
For inquiries and comments about IFC, contact:
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
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