Oikocredit and Opportunity International partnership

Education underpins social progress by reducing poverty and inequality while providing the basis for sustained economic growth. Research shows that based on income alone, each additional year of schooling leads to a 9% increase in hourly earnings.

However, with just five years to achieve the UN Sustainable Development Goal (SDG) of ensuring inclusive and equitable quality education for all, a quarter of a billion children and youth remain out of school worldwide, UNESCO reported in October. Only 110 million children have enrolled in school since the SDGs were adopted in 2015. In lower-income countries, a third (33%) of school-aged children and youth are out of school. That’s more than 10 times higher than high-income countries, where the proportion is just 3%.

Providing quality primary and secondary school education for every child is one of the 17 SDGs. Education can also move the needle on other goals, according to Mauricio Rincon, Managing Director of Capital Solutions, Opportunity International.

“Many people don’t realise how critical the education sector is to meet any development initiatives that move nations forward and drive progress, because education is the cornerstone of a life with dignity and purpose for each individual,” says Mauricio. “When people are educated, other development goals become achievable.”

A solid educational foundation in literacy, numeracy and civic understanding supports several SDGs: Full and productive employment for all (Goal 8); Reducing inequalities (Goal 10); Responsible production and consumption (Goal 12); Climate action (Goal 13); and Peaceful and inclusive societies (Goal 16).

In 2021, Oikocredit and Opportunity International partnered to improve access to education for an estimated 1.6 million children in 16 countries across Africa, Asia and Latin America. The two organisations committed a headline USD 100 million in impact investments and related technical assistance to address the chronic underfunding of affordable, non-state education.

The multi-year collaboration is expanding access to education in lower-income countries through funding for financial institutions that currently benefit from Opportunity International’s EduFinance programme.

As Mirjam ’t Lam, Managing Director, Oikocredit, says: “Oikocredit’s ambition is to empower people with lower-income with the choices they need to build a life of dignity. A key enabling element for this is access to education. We’re proud to be partnering with Opportunity International to improve access to education for low-income people via training and financing new initiatives together with financial inclusion partners.”

Driving impact with a dual approach

In response to on-ground needs, the two organisations combine direct capital investment with capacity building programmes. This dual approach enables financial institutions to develop targeted loan products for schools and parents. Such products can include school improvement finance, to help upgrade facilities, as well as school fee loans so parents can manage tuition costs.

An early collaborator is Kenya’s Ed Partners. With values and a mission deeply aligned with Opportunity International and Oikocredit’s objectives, the non-banking education finance company works exclusively with affordable non-state school owners and currently lends to more than 400 schools in the Nairobi, Nakuru, Meru, Nyeri and Kisumu regions in Kenya.

Last year, it received USD 1.5 million in funding from Oikocredit. Additionally, Opportunity International’s EduFinance Technical Assistance Facility (ETAF) supported the institution with market research and training.

Families in partner schools spend up to 30% of their income on tuition, ETAF research shows. It’s a heavy burden that increases risks for schools and lenders.

As a result of the collaboration, Ed Partners has been able to launch new instalment-based tuition loans. These products are aimed at easing family finances and reducing default risks.

Pairing funds with targeted support

“Combining financial outreach with market-focused technical assistance ensures maximum impact,” says Andrew McCusker, Global Head of Opportunity, EduFinance.

“Many financial institutions lack the expertise to create these types of loans independently. Through our technical assistance programmes, we guide them to develop products that meet the sector’s unique needs,” he adds.

Andrew: “Providing a loan isn’t enough.” Equally important is embedding experts to help financial institutions design, research and refine education loan products. This approach ensures that funds are not only disbursed but also used effectively.

“The core innovation of this model lies in intentionally pairing Oikocredit’s funding with Opportunity International’s technical expertise,” Mauricio adds.

Like Ed Partners, the model’s impact is evident in institutions such as Fortune Credit, also in Kenya, and Varthana in India. These institutions have not only expanded their education loan portfolios but have also improved their operational capabilities, creating a model for others. Such examples show how impact investors can work together with financial institutions to develop the education sector.

Addressing a USD 36-billion market gap

EduFinance reveals a USD 36 billion gap in education financing for low- and middle-income countries. Families requiring school fee loans make up more than two-thirds of that amount, at USD 26.4 billion. The rest (USD 10.1 billion) is needed for school improvement loans to affordable non-state institutions.

South Asia has the largest disparity at USD16.6 billion, driven by its substantial population size. East Asia follows with USD 7.9 billion, and sub-Saharan Africa and Latin America represent USD 4.3 billion each. “These figures underscore significant opportunities for targeted interventions in education financing,” says Mauricio.

Targeted investment is crucial to ensuring equitable quality education and delivering sustainable economic development. “The education sector is an essential investment in driving economic progress,” Mauricio says. “You won’t accomplish much if you don’t start by educating children.”

Challenges and lessons learned

As of December 2024, the partnership between Oikocredit and Opportunity International has supported 22 financial institutions since it launched in October 2021. Early estimates indicate that over 600,000 children will benefit from the investments and corresponding improvements in school facilities and access to school.

An early challenge was the immediate aftermath of the Covid-19 pandemic. Financial institutions were hesitant to extend credit to schools, perceiving them as high-risk borrowers, partly because of pandemic-related closures and economic volatility. Over time, however, the programme has demonstrated its value, proving that with the right support, schools can be reliable borrowers – particularly if lenders share a common social development focus.

“We’ve learned that mission alignment is critical. Not just between Oikocredit and Opportunity International, but also with the financial institutions we partner with,” Mauricio says. “Without this shared commitment, achieving meaningful results becomes much harder.”

With commercial lenders continuing to prioritise other sectors above education, microfinance and financial technology (fintech) enterprises have been valuable partners.

Another key lesson is the need for flexibility and adaptability. Volatility in some outreach markets underscores the importance of tailoring approaches to local contexts. Whether adjusting loan terms or refining technical assistance programmes, staying nimble has been a cornerstone of the initiative’s strategy.

Mauricio: “Such partnerships cannot have rigid, set-in-stone rules because new complexities or angles are always emerging. So, the ability to adapt and streamline processes while staying focused on the main objective is another important consideration.”

Equally important are robust monitoring and evaluation mechanisms. The collaboration makes the most of synergies between Oikocredit’s established evaluation processes and Opportunity International’s field-level expertise, Mauricio explains.

Oikocredit’s best-in-class monitoring at the portfolio and financial institution level is complemented by Opportunity International’s grassroots intelligence insights into the education lending book, which tracks performance metrics such as portfolio growth and credit quality on a monthly basis.

Planning the next chapter

The two organisations will continue to harness those synergies as they look to tackle the scale of the opportunity ahead. More than USD 30 million remains to be disbursed, but the size of the education finance gap means finding effective solutions that achieve the biggest results.

Andrew restates the crisis in simple terms: “Imagine going to your local school and finding that there are 10 kids but only four seats available. This is the reality for 244 million children worldwide who are out of school. On top of this, 600 million children are in school but failing to meet basic academic standards,” he says.

That’s why it’s imperative that more funds are made available so a greater number of children can be educated.

“Even if we stayed within Southern and East Africa and the countries in Latin America where we already operate, there is much more to be done,” he says.

However, the largest education finance markets are in places like India and Southeast Asia. “Oikocredit’s global network – including its Indian subsidiary Maanaveeya – will provide the basis here, with the two organisations currently exploring opportunities,” explains Mauricio.

Beyond new markets, the next frontier is technological innovation. Fintech has shown its transformative potential in impact finance and will likewise support education finance initiatives.

“Technology is changing everything. Fintech solutions and AI are just scratching the surface of what’s possible,” Mauricio says. He also emphasises the importance of regulatory compliance to ensure stability for educational finance partners and avoid market distortions.

Scaling up with a mission-driven approach

Innovation will be essential to scaling up the initiative’s success on a global level. With the aim of giving every child the opportunity for a quality education, Oikocredit and Opportunity International are now working more closely with educational sector stakeholders.

Through in-depth research built on school proprietor surveys and direct interviews with education-focused lenders, the two organisations will be better equipped to understand the needs of financial institutions amidst the current uncertain macroeconomic environment, and to adjust their collaborations accordingly.

Mauricio highlights the need for a mission-driven approach to address the global education crisis. “We cannot allow the pursuit of outsized returns to undermine the goal of providing sustainable, impactful solutions for education. The focus must remain on the people we serve,” he says. “If we continue to emphasise the importance of education, while equipping financial institutions and schools with the tools they need, we can create lasting change. The key is to remain intentional and strategic as we move forward.”