EduFinance: Andrew McCusker and Opportunity International’s Role in Educational Change

Many of our readers are interested in low-fee private schools so we caught up with Andrew McCusker, Head of Education Finance at Opportunity International. He told us about what motivated him to work with schools and families and some of the challenges of trying to create a scalable model.

I started my career in the financial market industry. I interned with US-based investment banks Goldman Sachs and JP Morgan before landing a job with Goldman’s Investment Research division just as the global financial crisis was kicking off in February 2008. During that time, there was a lot of cost-saving through firing senior people and replacing them with fresh grads like me. This was a real learning curve, providing me with many take-aways from working within a very competitive bank, including a huge focus on performance and results. 

However, over the 8 years I spent in my role at Goldman Sachs, I began to value the excitement of financial markets less and less and became disillusioned with working for income alone. So, I did what every 30-year-old Aussie in the same position always does – I left the bank and hit the road for some travel. I headed to East and Central Africa for the first time in 2015, camping for 4 months across 9 countries. In almost every village I camped in, there were so many kids out of school. Even when they were in school, classrooms seemed hectic and under-resourced.

Andrew visiting schools in Malawi, 2015

One particular school stands out in my memory. I visited a primary school in central Malawi where 150 pre-school kids were in one classroom with no desks, chairs or books. It was completely empty. Despite this, every single kid wanted to be inside that empty room learning. It made me think back to my school days and how I couldn’t wait to leave the classroom for cricket or soccer. At this point I started to suspect my own story — grounded in finance, markets and leverage — and the stories of these kids, without functional classrooms but a desire to learn, could merge together. I wanted to use my financial training to encourage more capital into the education sector to increase access to learning. This is where my involvement in the independent low-fee school sector began.

After my travels, I moved to Nairobi to work for Bridge International Academies as part of the Global Corporate Finance team where I learned the capital requirements and economics of low-fee schools. I was able to use my experience to build a company-wide financial model for cash-flow budgeting alongside setting up budgeting processes and impact analyses. Then two years ago, I was recruited by Nathan Byrd at Opportunity International to take over his role as Head of EduFinance.

Here at EduFinance, our goal is to get more kids into better schools. We know that 6 out of 10 children around the world aren’t learning today. Our EduFinance model works to stimulate investment to finance the growth of the low-fee school sector in low and middle-income countries. Working through local financial institutions to ensure financial sustainability and scalability, our technical assistance model provides significant leverage for our funders, with a small amount of grant funding unlocking substantial capital for the low-fee school sector. 

Through our Education Quality program, we also support school borrowers to improve conditions for learning and run their schools as better businesses. From the financial institution perspective, school borrowers that benefit from professional development training on management best practices and strategic improvement planning are more likely to increase their revenue resulting in higher loan repayment rates.

We are currently digitizing a version of our Pathways to Excellence tool, which enables school leaders to diagnose the quality of education across measurable indicators and then develop a school development plan to improve the areas of greatest need. We anticipate that the digital version with allow us to further scale our capacity building support to a greater portion of the over 9,000 school leaders currently borrowing from our partner financial institutions. 

Some things that set our EduFinance model apart from other lending organization is that it is framed around three key pillars: scalability, financial sustainability and leverage

When we first launched the EduFinance program we provided capital to partner financial institutions to pilot the education loan products for school owners and parents. This allowed us to build a strong business case, demonstrating that education lending products were in demand by the local market, low risk when designed with an understanding of schools’ cash flow, and ultimately profitable. Using these proof points, we have been able to significantly scale EduFinance, moving away from partner financial institutions’ previous reliance on grant funding for capital. 

Over the last two years, we have exclusively leveraged local financial institutions’ own capital to fund their EduFinance portfolio, with a low-cost initial engagement by our technical assistance team. Partner financial institutions also provide a portion of cost share for the technical assistance, ensuring strong up-front buy in and increasing the financial sustainability of the model. 

When I was recruited to take over this role, EduFinance was well-positioned to transition from growth stage to global scale, engaging new financial institution partners outside of Opportunity International’s legacy network in new low-income countries. Since 2017, we’ve achieved rapid expansion, growing from 12 partners in 10 countries to where we are now — with 45 partners in 20 countries. Cumulative school improvement loans disbursements have increased from 4,469 to 11,590 (Aug 2019). 

We’ve also expanded our footprint into new high need markets, including Pakistan, Nigeria, Ethiopia and Democratic Republic of Congo. I’m personally very keen to see how we can benefit school owners, parents and communities in these markets where the need is highest and demand for education access is only expected to increase. 

However, this growth does not come without its challenges. As a team, we are made up of a unique mix of finance, education and operations staff with expertise across markets and regions. This has been essential to manage the multi-dimensional aspects EduFinance, and also sometimes leads to conflicting aims. Overall, I’ve found that different perspectives ultimately benefit the quality of our work. I focus on hiring smart people who care. The rest looks after itself. 

A significant external challenge is the sometimes volatile operating conditions in the markets we work in. Everything from turnover in partner financial institutions leadership, changes in Central Bank or Ministry of Education regulations, political elections, civil conflict – all of this can impact our work. As a leader, I try to encourage our team to only focus on what we can control. We might not be able to control the timeline of our work in a specific market, but there are plenty of opportunities globally to help link school owners and parents to the capital they need to invest in education. That is another reason why creating a scalable model has been essential.  

One of the most successful stories of EduFinance’s impact on school leaders is of Ms. Berthe, school owner of Busy Bees Foundation school. Ms. Berthe started her school in 2013 in her village in the Gasabo District of Kigali, Rwanda. The village is home to more than 500 families, most of whom are low-income. And due to the proximity to the capital, there are varied cultural norms and languages throughout the village, which can be challenging to navigate in the best of circumstances.

Ms. Berthe recognized the challenges, but also the potential. After building a basic school structure and hiring teachers, Ms. Berthe sought additional financing. She used her first School Improvement Loan from a local partner financial institution to build a new brick classroom and gender-separated toilets and handwashing stations. 

Then in 2016, Busy Bees school was invited to join a school cluster in our EduQuality program. Together with other schools in her cluster they collaborated, shared best practices, and participated in professional development trainings, focusing on topics including financial management, teacher retention and child-centered teaching practices. Ms. Berthe also completed a self-assessment of her school’s quality across measurable indicators, using our Pathways to Excellence tool. Using the outcomes of her assessment, she worked with other school stakeholders to draft a school development plan, focusing on improving aspects of selected conditions for learning – health, hygiene and child protection; Environment, physical setting and culture; and, financial and business management. 

Using the plan to guide their activities and stay on track, Ms. Berthe and her staff were able to successfully implement a large number of solutions that have significantly improved the learning environment at Busy Bees school. Improvements included:

  • Adopting a child protection policy with formal procedures and rules for staff and parents to protect students’ safety;
  • Adding a water filtration system to ensure safe drinking water and reduce the number of sick days that cause students and staff to miss school;
  • Starting new clubs to support cultural cohesion, helping parents, staff and students learn about cultural differences and community challenges to bridge cultural misunderstandings; and,
  • Implementing Quickbooks, the accounting software, to manage the school’s finances more effectively.

EduFinance was pleased to recognize Ms. Berthe and Busy Bees school as the winner of the 2018 EduQuality Awards, sharing her effective strategies to implement their school development plan and ultimately increase students’ conditions for learning as a powerful example for other low-fee schools. 

So, what comes next? We have already built a strong pipeline for further expansion of EduFinance lending products to new financial institutions in new markets over the next three years. By the end of 2022, we aim to partner with over 100 financial institutions globally. 

Through the EduQuality program, we will also continue supporting quality improvements at the school level, digitizing self-assessment and training tools to increase our capacity to scale and engage harder-to-reach schools. We’ve also built a data collection system which allows us to capture educator feedback and learnings, analyzing aspects of quality impact and rapidly iterating the EduQuality program content and model to ensure it aligns with the largest drivers of education quality improvements.   

Our key objectives are directly aligned with the United Nations’ Sustainable Development Goal 4, focused on improving both access and quality of education. In terms of access, our technical assistance team equips financial institutions to lend effectively across all education levels, from early childhood to secondary schools, as well as tertiary and vocational training centers (SDG 4.1, 4.2, 4.3) Financing is essential for all low-cost private schools to build new classrooms, add more seats, and hire additional teachers. 

Our EduQuality program is also directly aligned with SDG 4.6, providing professional development for school instructional leadership, and foundational and domain specific training for teachers – all of which are essential to improving and sustaining the delivery quality education that ultimately results in improved student outcomes in literacy and numeracy skills. 

We are grateful to Andrew for sharing his safari ( safari means  journey in kiswahili). You can learn more about Andrew and the exciting work of the Edufinance division of Opportunity International here

Maxie and Paula

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