K-12 education ain’t cheap — but NBFS players are plugging the gap with tuition financing services: Parents looking to put their children through international school from kindergarten to 12th grade face hefty bills, especially with added pressure from record high inflation pushing schools to raise tuition fees. At the top end of the spectrum, one year of tuition fees can cost EGP 638k-845k, while the lower end for international schools runs between EGP 84k-118k, depending on the grade. Non-banking financial services (NBFS) have responded to school fees — which have risen significantly y-o-y in EGP terms, thanks to the devaluation of the local currency — by introducing more diverse funding options for parents.

REMEMBER - This academic year has already been off to an uncertain start, making it difficult for some parents to budget,as tuition fee announcements came late while schools waited for final sign-offs from the Education Ministry . International schools regulated by the Education Ministry are required to get ministry approval each year on their tuition fees before announcing them to parents. The ministry issued a decree at the beginning of this month introducing a new tiered system of caps on annual hikes of tuition fees at privately-owned schools teaching both local and international curriculums, limiting the annual increment for top-tier international schools to 6%.

Beltone’s consumer financing arm seven is one NBFS player offering alternative education loans: Seven — previously known as Belcash — is partnered with 18 schools to offer tuition loans, including El Alsson, Misr Language School, and the British School of Egypt, Seven’s CEO Magd Darwish told Enterprise. Seven offers loans of “up to EGP 5 mn and more with exceptions,” with “competitive interest rates” and repayment tenors of between six and 60 months that can be made through Seven’s mobile app, website, or Fawry, Darwish added.

More parents are looking to finance their children’s tuition through loans, Darwish told us. With education financing approaching EGP 221 mn for 2H 2023, Seven’s education loans represent 10% of its monthly bookings, clocking in some EGP 37 mn in bookings per month. Demand has been driven by “seasonality of education and tuition programs along with changing interest rates creating large hikes and drops in the education financing industry,” Darwish said.

We could see new types of offerings in the future: Seven is in conversations with its partner schools to understand how they can accommodate parent demands into their offerings, such as the introduction of 0% interest programs.

We’ve seen similar operations in the past: Back in 2021, Seven (operating at the time as Belcash) signed a partnership with education outfit CIRA Education to offer parents whose children attended CIRA Education schools tuition fee loans with a 12-month repayment period. The loans served as an optional payment method in addition to the current payment models that CIRA Education provides.

ValU x GEMS also provide education financing options: Consumer finance platform valU was the first to make the move into offering parents education financing solutions, signing an agreement with private sector education provider GEMS in 2020 to provide tuition fee payment solutions to parents, including low-interest bridge loans that would give parents breathing space to pay in installments.

What else is out there? Education lender Edupay covers tuition fees, supplies, transport, and extracurricular activities through its loans, and students can obtain a digital wallet in which parents can deposit pocket money. Abgad also lets parents apply for multiple loans that can be directed to a different child’s education or to different purposes. Abgad claims to cut out a lot of the hassle for schools, allowing parents to make fee payments directly to the institution, reducing the need for schools to collect or chase fees. The average repayment plan tenor ranges from six to 12 months, while One Finance offers the longest repayment plan we found, with payments up to 60 months with a 0% down payment.

Traditional education loans are on offer, but appetite has historically been low: The majority of Egypt’s banks offer products to facilitate tuition loans, from private banking players like HSBC and CIB, to state-owned institutions like Banque Misr and Dubai’s NBD Egypt. Yet, demand for educational or personal loans from banks has been low in the past, which we previously reported is due to a lack of familiarity and flexibility, little publicity from the banks for their programs, and the unappealing fine print and paperwork putting parents off.

And personal loans could offer better rates: NBD Egypt offers a selection of specific loans, including education loans of up to EGP 100k with a flexible repayment tenor of up to 36 months, the bank says. However, it also offers personal loans of up to EGP 1 mn with flexible tenors of 36 months that don’t require guarantors.

NBFS players have a clear advantage over traditional banks when it comes to education loans: A host of non-banking financial services companies offer parents tuition loans, which given Central Bank of Egypt interest rate rises should provide an attractive alternative to traditional bank offerings. The CBE’s deposit rate currently stands at 19.25% with the lending rate at 20.25%, compared to the NBFS deposit rate of 11.25% and lending rate at 12.25% in June 2022, when we last took a look at traditional bank and NBFS education loans on offer.

Your top education stories for the week:

• CIRA Education had a 25% increase in net enrolment numbers of around 5k students across its facilities for the 2023-2024 academic year.
• The American University in Cairo (AUC) received a USD 85 mn grant from USAID.
• Funding from Korea: The Korea International Cooperation Agency (KOICA) signed an agreement with the ministries of higher education and international cooperation to invest USD 8 mn in Beni Suef Technological University.
• Private schools are hiking tuition fees for the coming school year by up to 40% above the Education Ministry’s 25% permitted hike for schools with the cheapest fees. The ministry was criticized on the airwaves for not enforcing the tuition fee limit.