Investment Offering: $700,000 (Investment minimum: $10,000 USD) 

Use of Proceeds: Investors invest in the future earnings of a diversified cohort of high potential students in developing countries. Once students secure employment they make monthly income dependent repayments to Brighter Investment. Funding from this investment round will support approximately 425 new students from Ghana and will allow small pilots in South Africa and Kenya.  

Investment Structure: The Brighter Investment offering is structured as a Promissory Note.  

Investment Opportunity: The offering has a term of 12 years with a projected annualized 9% IRR distributed semi-annually (see projected distribution schedule below). 5% of repayment amounts will be extracted as a management fee if an annualized ROI of less than 8% is achieved. Above 8%, 20% of repayment amounts will be extracted as a management fee. 

Please note that this is not a complete investment summary. Investors should read all associated documentation including the investor package and associated securities agreements before considering or making any investment.  Please contact us via email at info@svx.ca or fill in the Ask a Question box for more information. 
 

Brighter Investment has developed a data driven underwriting algorithm to select the brightest students that pursue degrees with the best career potential. Investors invest in the future earnings of a diversified cohort of high potential students that pursue degrees in different fields, but all degrees share that their graduates are in high demand and that they create value for both the student and the investors. Once students secure employment they make monthly income dependent repayments to Brighter Investment. Distributions to investors are made on a semi-annual basis with the anticipated distribution schedule in y1-12 as depicted by the yellow bars in the graph below.

Repayments from students are not calculated on the basis of interest from the loan, with inflexible monthly payments. Instead they are akin to royalty payments of increased earnings after graduation. Graduates pay a fixed percentage of their income calculated on a monthly basis, typically 25% for approximately 6 years. Why this percent-of-income repayment model is beneficial to students as well as investors is described in this blog post by Brighter Investment.

Historic data for factors that drive investor return, factors like income, unemployment and exchange rates, are easily obtainable. Availability of this data that goes back 20 years doesn't only make investor return predictable, but also shows the expected level of volatility. Student loan terms are set such that based on this historic data for average students, and subject to a conservative 15% default rate, investors can expect a 9% ROI. Because Brighter Investment’s selection picks high potential students that perform above average, students are graduating faster, earning more, unemployed less and repaying more than the historic data projected. Read more about the performance to-date in this blog post by BI.

One way of investing with Brighter Investment is to invest directly in the next cohort of students for a predictable return, and clear exit in the form of a percentage of graduate earnings. Funding from this investment round will support approximately 425 new students from Ghana and will allow small pilots in South Africa and Kenya. Brighter Investment has termed their promissory note as a subordinated variable payment debt obligation (SVPDO) where the variable payment is tied to cohort performance.

Conservative projection for the student investment distribution schedule based on 20 years of historic labor market and economic data for average students combined with conservative figures for dropouts, unemployment, defaults etc. High potential Brighter Investment graduates have outperformed these projections to-date, as expected.

Underwriting: To select the most promising students, BI has developed a proprietary quantified algorithm that includes character based lending and focuses on early predictors for academic success, career success and likelihood of repaying. Examples of relevant factors are:

• Demonstrated financial need
• Positive teacher recommendation
• Guarantor for the loan contract
• Admission to a degree program that offers good career prospects
• Strong academic grades
• Character traits like motivation, proactiveness, resilience and more
• Social ties

Returns for average students can be reliably estimated based on historic graduation, income and employment information. Brighter Investment’s selection method picks high potential students that perform above average.

• For the first six years of employment, when a graduate earns over 3.6x the national minimum wage, they are required to begin repayments to BI of 25% of their income. These terms ensure a decent post-repayment income.
• While BI’s model is income dependent, instead of the traditional model based on an inflexible monthly payment, BI has established a maximum repayment amount such that graduates with exceptionally high earnings will have a shorter repayment period.
• In the case of non-repayment, BI’s collection includes well-evidenced methods based on social ties.
• In the case of continued non-repayment by both a graduate and their guarantor, BI's methods include engaging traditional debt collectors. So far this approach has not been needed/tested.

Context:

Ghana has seen considerable growth in various macroeconomic factors, including a moderate inflation rate and growing GDP across numerous industries. This has led to salary increases for educated and skilled graduates in business, STEM and IT which outpaced the devaluation of the Ghanian cedi (GHS) compared with the US dollar in recent years.

While more students than ever are attending tertiary education institutions, there is a clear disparity in opportunities afforded to the wealthiest and the poorest of Ghanaian students. UNESCO’s Global Education Monitoring report shows less than 1% of the poorest of students enroll in tertiary education while over 20% of the wealthiest students do, due to the cost of education, not due to a lack of ability. There are scant viable financial options for most students.

The situation in Ghana is representative for many developing countries. Brighter Investment estimates that 60 million global high school graduates will require at least $600B in funding for tertiary education.

In Ghana the main options for student loans are as follows:

Support From Friends and Family: Students may have access to some degree of support from their network, but it is likely that this will vary over the course of their degree program. BI targets students who are the most marginalized and have the lowest funding prospects from their existing community. The cost of one year of higher education is often 5X+ the family’s annual income for BI students.

Ghana Student Loan Trust Fund: A recent increase was made to the maximum annual loan amount to 2000 GHS which does not even cover the cost of tuition. Furthermore, the loan guarantor must have contributed to Ghanaian Social Security programs through prior employment in the formal sector. This discriminates against the students who need funding the most. 90% of Ghanaians are employed in the informal sector.

Kiva: Microfinance is a powerful tool, but current lenders through Kiva are not well suited for funding tertiary education. Two of their largest partners have interest rates between 31-58% and loans are short term. This makes them suitable for tuition fee payment or the purchasing of a laptop, IF the family can afford to repay the loan over the course of the next few months. Not to pay for a degree.
BI’s model shows promise with the following competitive advantages:

• Income dependent repayment method to avoid heavy financial burdens of regular interest based student loans, supporting repayment ability and reducing loan aversion;
• Long term, holistic support to students (such as mentorship, support to find internships) throughout the study period to better prepare them for employment;
• Unique student identifier and underwriting process, drawing upon multiple character-based, social and academic factors to find the best candidates.
• Focus on degree programs that have proven to offer graduates good career prospects.
• Utilizing live student data sets to improve the underwriting of cohorts over time.
   

- Bright Frimpong, Brighter Student

Brighter Investment has demonstrated their ability to build sound partnerships with academic institutions, select students who have above average academic performances, mentor students and collect loan repayments. Since 2015, Brighter Investment has received over $750,000 infunding, which has supported 221 students at 6 partner universities, from freshmen to seniors. 49 students have graduated, completed their internships and started repaying.

• 0% of their students have dropped out of university so far compared to a 6% dropout rate for the average student at the 6 partner universities.
• For graduates with a degree, the unemployment rate is 5%. This is 6X less than the Ghanaian average for the same age group.
• On average working graduates earn 5 times as much as high school graduates without a degree.
• Of the students that have secured employment, 100% are making repayments.
• Repayments, and thus investor distributions have been 6.4% higher than projections

In Ghana, there is no shortage of qualified students applying for financing. To expand beyond the borders of Ghana there is a partnership with World University Services Canada, which has offices and relationships with higher education institutions all over the developing world. The only limiting factor thus far is the availability of loan capital to administer.

“I believe that if Brighter Investment would have been available to Ghanaians in earlier years, Ghana would have been classified a developed country by now and not a developing nation...”
- Evans Omane-Boateng, High School Teacher
 

Brighter Investment’s work directly supports the attainment of Sustainable Development Goal 1, 4, 5, 8 and 10:

1. No Poverty: BI’s students increase their income 5X, their children are more likely to be educated and their families benefit from better health and housing. A degree is a proven pathway out of poverty.

4. Quality education: Not only does Brighter Investment provide students with access to quality education, the market driven approach also incentivises education providers to improve the job relevance of their programs.

5. Gender equality: Women are disproportionately affected by lack of access to higher education, Brighter Investment is actively working to remove these barriers, financial and non-financial.

8. Decent work and economic growth: Brighter Investment focusses on degrees that are in high demand by employers and offer good career prospects. Through economic growth one graduate also results in 3 jobs for less educated people.

10. Reduced inequalities: In emerging markets, access to higher education is mainly determined by a student’s family background. Brighter Investment provides students with an equal opportunity to a degree.

According to the Brighter Investment model, an initial investment of $100,000 in support of 13 students can yield returns that if redistributed over 25 years, will result in 37 students supported and $617,000 repaid.

• 100%: Amount of senior students to date that have graduated from their programs.
• 95%: Amount of graduates who have found employment. Students currently not employed are working with their mentors to secure a job in their field.
• 5X: Forecasted increase in revenue generated by Brighter Investment graduates.
• Impact Indicators to be assessed in the future:
  • Jobs created through accelerated growth of local businesses
  • Improved quality of education at supported programs due to market feedback
  • Economic impact from supported graduates

All private securities listed through online investment platforms and Exempt Market Dealers (EMDs) like SVX are likely to carry more risk than those available on the public markets. Our goal it to make you aware of those risks before making an investment.  The following risks have been identified for investors:

• Foreign market risk: Nationalization, expropriation, confiscatory taxation or political changes within the foreign market upon which Brighter Investment operates in could adversely affect this investment. Brighter Investment seeks to establish operations within stable countries with high long term potential and low political risk, such as Ghana. Principal investment amounts will be insured with EDC.
• Default risk: To acquire a higher rate of investment returns, Brighter Investment operates in developing countries where degrees result in a larger income increase but higher default risks are also possible. Brighter Investment’s model of employing income based loan repayment ensures that graduates will not default for a lack of income. A combination of social and legal measures coerce students to make their monthly repayments.
• Inflation and exchange rate risk: Due to operations within developing markets, the investment may be prone to volatile inflation and exchange rates of the foreign currencies. Over the last 20 years graduate wage levels that determine investor returns have been significantly less volatile (5.4%) than local currencies (20%) or the S&P 500 (18%). See graph below.
• Liquidity risk: This debt loan offerings is an illiquid exempt market investment. The investment is designated as an illiquid investment due to the holding period of 12 years during which semi-annual distributions from student repayments result in the principal being repaid with interest. While a transfer of the securities to another accredited investor is possible, there is no secondary market for the security.

Expected return and risk. Risk is calculated as the return standard deviation based on 20 years of historic data projected for a cohort of 100 average university students repaying a percentage of their income for 6 years. Historic data and projections also include historic fluctuations in exchange rates between developing countries and investors' currency. As described, Brighter Investment students perform above average.

This type of investment has substantial risk.  Investors should make an investment only if you are prepared not to receive any return on your investment and to lose your investment in its entirety.

Jana Svedova: Director, UBC Impact Fund

Maurin Efua Odai: Registrar, Kwame Nkrumah University of Science and Technology

Katherine Im-Jenkins: Chief Programs Officer World University Services of Canada