While youth unemployment in many developing countries exceeds 30%, employers report that they can't find enough qualified graduates to hire. The problem is so large that many companies even resort to hiring expensive expats from abroad.
Properly educating the most talented local high school graduates, so they can fulfil this labor market demand, clearly creates a lot of value. The increase in income from a quality degree often provides the student with an ROI of 50-80%. Despite these returns, 60 million talented students graduate from high school every year without a viable way to pay for higher education. They can't get a loan and scholarships are rare. This discrepancy provides a huge opportunity for economic growth and investment.
What if, instead of limiting these young students’ futures because of their family financial reality, we provide investors with the opportunity to back the future leaders in engineering, science, medicine, and business for a stake in their future income? Such a partnership benefits both student and investor, socially and financially.
Our solution is simple, we invest in diversified cohorts of the most talented students that pursue degrees with great career prospects. After graduating, students repay a fixed percentage of their income for a limited duration (typically 25% for 6 years). These repayments provide our investors with an attractive return.
We have developed a data driven and proprietary selection algorithm that predicts students’ career potential. This allows us to partner with the brightest students most likely to generate returns on their education investment. We also provide students with a mentor to further enhance their career success. A combination of social, practical, and legal incentives are in place to ensure that students make their monthly repayments after graduation.
"I am currently working on a genetically modified cotton variety which produces an insecticide to bollworm..."
- Godslove Asare Boadu, Graduated Brighter Student
Historic data for factors that drive your return, factors like income, unemployment and graduation rates, are easily obtainable. Availability of this data that goes back 20 years doesn't only make your return predictable, but also shows the expected low volatility of this return. Because this historic data is based on average students, and our selection method picks students that are expected to perform above average, our first graduated cohort is graduating faster, earning more, unemployed less and repaying more than the historic data projected.
Where for students, the advantage of our percent-of-income repayment model is that no student ends up with insurmountable debt, for investors the advantage of our percent-of-income repayment model is that it provides a natural hedge against exchange rate risk. Because, over longer periods, local salaries tend to go up during periods of inflation, percent-of-income repayments are more value proof in the investor's currency than a traditional loan. In fact, over the last 20 years, wages in developing countries have grown 5% faster year on year than they were diluted by inflation and sinking exchange rates. The volatility of these wages converted to investor currency has been 5.4% over the last 20 years. (the volatility of large company equity has been 22% in this same period).
Youth unemployment in many developing countries already exceeds 30%, and 2bn additional people will be born in Sub-Saharan Africa and South-East Asia in the next decades. Together, we can pioneer a model that prepares these students for the jobs of the future and breaks the cycle of poverty. Because, if properly educated, students in the developing world increase their income 3-5x, live longer, pay more taxes, are more likely to educate their children, and create 3 jobs on average for people with less education.
The social return of our investment easily outperforms any scholarship charity: an equivalent investment in Brighter Investment, with distributions reinvested for 12 years, results in 3 times as many graduates as the scholarship charity AND provides the investor with an attractive ROI.
The future is bright!
“I wish there was a way to extend the mentorship program to the whole university. I can boldly speak in public now and I do more extracurricular activities...”
- Bright Frimpong, Brighter Student