{"id":578373,"date":"2022-12-26T04:08:16","date_gmt":"2022-12-26T04:08:16","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/blackboards\/education-in-2022-macroeconomic-investment-trends\/"},"modified":"2022-12-26T04:08:16","modified_gmt":"2022-12-26T04:08:16","slug":"education-in-2022-macroeconomic-investment-trends","status":"publish","type":"blackboard","link":"https:\/\/enterpriseam.com\/egypt\/blackboards\/education-in-2022-macroeconomic-investment-trends\/","title":{"rendered":"Education in 2022: Macroeconomic + investment trends"},"content":{"rendered":"

<\/a> 2022 was the year of inflation and cost pressures \u2014 and education was no exception:<\/strong> Last week, we looked at how rising inflation<\/a>, two EGP devaluations coupled with several sector-wide shakeups and policy shifts, affected the education sector\u2019s first academic year without covid lockdowns. In part two of our year in review, we look at how 2022 piled on cost pressures for schools and parents, gave way to the rise of buy-now-pay-later services in education, and incentivized a boom in pre-K investing.<\/p>\n

For starters, Education Minister Reda Hegazy maintained the <\/strong>7% tuition increase cap<\/a><\/strong> on private schools introduced in 2019, after parents lobbied against unfair increases. Schools had hoped to see a loosening of the regulations alongside the EGP devaluations and global inflation.<\/p>\n

REFRESHER- <\/strong>The Education Ministry introduced the cap in 2017, stipulating that schools charging tuition fees of EGP 10k and over can raise their fees by 7% per year, while schools charging under EGP 10k annually face a 10-25% cap. The annual increase was set on a baseline of 2015-2016 fees \u2014 meaning the increment of increase has remained unchanged each year. This year, Hegazy agreed to let schools calculate the annual increase based on last academic year\u2019s fees, rather than the baseline year. This middle ground comes after former Education Minister Tarek Shawki previously said the ministry was meeting<\/a> with schools to review the cap and try to find a middle ground to make it feasible for private and international schools to continue operating at the same quality in light of rising costs, while also alleviating the cost burden on parents. However, schools say that this is not enough with the current FX rate rise, which far outpaces the tuition increase.<\/p>\n

There have also been other sources of <\/strong>greater cost burdens<\/a><\/strong> for school operators<\/strong>, including an increase in ins. pay at a 15% annual rate for five years starting January 2020 \u2014 a total increase of 75% \u2014 as stipulated by the Social Security Act. School operators also cited an 833% increase in the cost of renewing expat work permits, a 25-fold increase in the price of new work licenses for non-Egyptians, a 300% increase in fees charged for renewing permits for international school books, and an obligatory 1% of annual revenue<\/a> that schools now need to pay to the government\u2019s Support Education fund. One of the highest costs international schools are facing are expat teacher salaries \u2014 which make up 70-75% of budgets and are required to be paid in FX \u2014 while schools\u2019 revenues are collected in EGP.<\/p>\n

This pushes schools to push back on the cap:<\/strong> \u201cCurrently we\u2019re looking at USD 18-18.5 for next year\u2019s budget, but I\u2019d need to raise tuition by more than 7% to work,\u201d EduHive CEO and BCCIS Chairman Karim Mostafa told us in May<\/a>. Private and international schools are private businesses designed to create financial returns, Mostafa said, yet the returns are not attainable. Other sectors get government support or more leeway to adapt to market dynamics, stating that the education sector needs \u201cto be treated like other sectors,\u201d he added.<\/p>\n

Schools are attempting to be <\/strong>flexible with parents<\/a><\/strong>, and government regulations prevent schools from enforcing penalties for late payments or charging interest on the four sets of fee payment collections.<\/p>\n

So far, there hasn\u2019t been a visible trend of parents transferring their children to less <\/strong>expensive schools.<\/strong> The demand for private education is high and existing school enrollment rates reflect it<\/a>. Instead, we are more likely to see lower enrollment rates in expensive schools or shifting student body compositions in mid-range institutions.<\/p>\n

With tuition hikes, parents turned to lending solutions for financing:<\/strong> Parents looking to put their children through private school turned to banks, but for the most part the banking sector has not been an appealing avenue for tuition financing<\/a>. Traditional education loans tend to be limited to a range of EGP 2k to 1.5 mn with interest rates averaging around 18%, and require more paperwork with less flexibility than personal loans.<\/p>\n

So, what\u2019s on offer? <\/strong>We have seen a boom in the number of non-banking financial services<\/a>players<\/a> looking to plug the demand gap with alternative financing products including buy-now-pay-later, facilitated loans, and direct agreements with institutions to facilitate payments. Contact Financial<\/strong> earmarked EGP 2 bn<\/a> for education financing in 2H 2022 and their education financing options are offered at the company\u2019s lowest interest rate \u2014 currently around 9%. For EFG Hermes<\/strong>\u2019 buy-now-pay-later platform valU<\/strong>, education financing made up 3% of monthly bookings \u2014 close to EGP 15-25 mn per month \u2014 and their education plans are offered at around 50% of the company\u2019s normal interest rates. The plans can be repaid through 6-12 equal monthly installments with minimal documentation and instant approval.<\/p>\n

Tuition fee woes withstanding, the demand for pre-K centers is booming: <\/strong>Statistics indicate that while there is a demand for K-12 school institutions, the demand is three times as much<\/a> for pre-K centers \u2014 not just in the capital but across Egypt. With minimal competition and a sector ripe for entry, the platforms are looking for potential expansions in Cairo, Fayoum and Suez.<\/p>\n

And the government is on board: <\/strong>The government is looking to support companies interested in creating nurseries of a large scale, reportedly allocating EGP 50 mn<\/a> as a loan portfolio for the establishment of (importantly) licensed nurseries.<\/p>\n

The aim is a more regulated system in the early education sector:<\/strong> The current pre-K landscape lacks a standardized operational approach in terms of standards and fees. The government is interested in introducing a generalized curriculum in line with international standards. As many as 10k of an existing 16k nurseries<\/a> are currently unlicensed, as the requirements include institutions adhering to standard specs for the facility \u2014 the type of building, the degree of ventilation and the employees\u2019 qualifications.<\/p>\n

Optimizing the gateway to private and int\u2019l schools: <\/strong>Many nurseries and preschools already act as gateway institutions for top private and international schools. For education management platforms, investing in nurseries presents not only a chance to enter an underserved market, but a chance to be a part of years of a student\u2019s enrollment from the beginning.<\/p>\n","protected":false},"excerpt":{"rendered":"

2022 was the year of inflation and cost pressures \u2014 and education was no exception: Last week, we looked at how rising inflation, two EGP devaluations coupled with several sector-wide shakeups and policy shifts, affected the education sector\u2019s first academic year without covid lockdowns. In part two of our year in review, we look at […]<\/p>\n","protected":false},"featured_media":578374,"template":"","categories":[],"tags":[6481,7106,73,179,72,6482],"class_list":["post-578373","blackboard","type-blackboard","status-publish","has-post-thumbnail","hentry","tag-cost-burdens","tag-debt","tag-education","tag-enterprise-blackboard","tag-enterpriseam","tag-tuition-hikes","wpautop","entry"],"acf":{"mongo_id":"049086ff-8f2f-4965-8e79-5ba71907c835","is_powered_by":true,"section_story_id":"52963a29-1391-4abd-a8d0-db76422c7434","story_type":"2","photo_url":"https:\/\/ent.news\/2022\/12\/527.jpg","photo_position":"above","related_issue":[578346],"teaser":"","voice_url":""},"yoast_head":"\nEducation in 2022: Macroeconomic + investment trends - EnterpriseAM Egypt<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterpriseam.com\/egypt\/blackboards\/education-in-2022-macroeconomic-investment-trends\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Education in 2022: Macroeconomic + investment trends\" \/>\n<meta property=\"og:description\" content=\"2022 was the year of inflation and cost pressures \u2014 and education was no exception: Last week, we looked at how rising inflation, two EGP devaluations coupled with several sector-wide shakeups and policy shifts, affected the education sector\u2019s first academic year without covid lockdowns. 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