The Power of Portfolio Analysis: Partner Perspective from Musoni Bank
Portfolio Analysis is a key function the Opportunity EduFinance Technical Assistance Facility (ETAF) performs to provide in-depth assessments of our financial partners’ education loan portfolios. Effective and timely analyses (known as “Edpacks”) empower our partners to build and grow productive, high-quality and sustainable education finance portfolios through improved management and risk mitigation. Our ultimate aim, through providing better financial products and services for schools and parents receiving EduFinance School Improvement and School Fee Loans, is to ensure more children are able to access, and remain within, high-quality schools.
Edu-Explainer: The EdPack
When? Each month EduFinance partner financial institutions submit portfolio positions for their School Improvement Loans and School Fee Loans using a template which takes approximately 15 minutes to fill out.
How? Our Data and Business Intelligence team then aggregate the data and conduct time series analysis.
What? Our EdPacks are the product of this analysis: custom, nine-page dashboards displaying historical trends in portfolio outstanding, disbursements, risk, sustainability and impact, presented in an accessible and visual format.
Why? The EdPacks facilitate on-going dialogues with our partners by highlighting areas of strength and flagging potential problems. This enables timely data-driven decision making from designing specific interventions to altering product design characteristics. Broader benefits include increased internal capacity in which new ideas are tested and the facilitation of valuable exchanges between financial institutions in different geographies to address common problems facing Education Finance managers globally.
Who? Our team works closely with partner financial institutions, often on a one-to-one basis with Education Finance Managers as well as CEOs.
Kenyan bank Musoni’s CEO, Stanley Munyao, is one such example. Scott Sheridan, EduFinance, Director of Operations managing “EdPack” analyses, recently took stock of the progress of our partnership with Musoni over the last two years. Their conversation highlights the benefits of collaboration - from EduFinance Portfolio Analysis and our range of other technical services to the EduQuality program and knowledge-sharing platforms we provide.
Partner Spotlight: Stanley Munyao, CEO of Musoni Kenya
Musoni, a technology-driven micro-finance institution, is an EduFinance partner financial institution based in Kenya. Prior to taking up his role as CEO of Musoni, Stanley Munyao worked for Opportunity International, Tanzania. He learnt first-hand about the huge potential of education finance - in Tanzania and but also at a continental and global level. As CEO of Musoni, Stanley has been able to share his market-leading knowledge and experience, making it a personal priority of his to increase the size of the institution’s education finance portfolios.
Musoni’s target population represents almost 80% of Kenyans: rural-based whose main economic activity is agriculture. Three years ago, when Stanley moved to Musoni, he realised much of the loans extended to these clients as working capital loans for their small business and farms, were being re-directed towards school fees due to seasonal incomes and unreliable cash flows. Since then, Musoni has been able to address the core needs of many parents by providing separate School Fee Loan products, tailored to the specific profile and characteristics of school fees.
Active involvement in the education finance market through parents made it immediately clear to Stanley that there was a strong demand for private schools within the communities Musoni operated. In many cases there was low access to quality, government schools without over-crowding. Stanley tells Scott:
“When dealing with empowered parents with a desire for their children to go to good schools, we realised we needed to partner with existing schools to provide them with School Improvement Loans for additional infrastructure, such as laboratories, and equipment, such as computers”.
Since partnering with EduFinance two years ago, Musoni’s education finance portfolio has rapidly scaled. Their recent EdPack shows growth to as high as $2.5m with a fast-growing School Improvement Loan portfolio with 115 school clients and a vast School Fee Loan portfolio serving 8,229 parents. Stanley believes there are three key drivers of this achievement:
Strong institutional commitment to the product, from management to the board
Stanley makes a clear business case for education finance: “Schools are less risky because they are permanent with visible cash flows that are easy to monitor. School entrepreneurs are very serious clients since setting up a school is a massive investment”. Now, Musoni has 20 dedicated staff to education finance and intends to increase this number, deploying regional staff in new markets to reach more schools.
Strategic approach to prospective clients
Musoni has migrated from a mainly door-to-door marketing method after partnering with the umbrella organisation: the Kenya Private Schools Association (KPSA). Musoni and KPSA now convene forums to market their products with specific schools from a large database of KPSA partner schools.
Musoni’s mission and vision to alleviate poverty
Educated communities are key to sustainably breaking the poverty cycle. Stanley explains: “Empowered communities add value to society by becoming teachers, lecturers, doctors, contributing to holistic society improvement and better quality of livelihoods”.
The impact of Portfolio Analysis (the “EdPack”) and beyond
So impressed with the benefits of the Edpack, Musoni now aims to integrate a similar dashboard of reporting and analysis across all their products.
EduFinance also works with Musoni to provide a range of other services: Market Research, Product Development, Staff Training as well as EduQuality. Stanley shared his experience in these areas with Scott:
Market Research: “It was not easy to convince my board of the potential education finance has without providing market evidence. The highly detailed research report from EduFinance did exactly this. It was the initial step towards opening the portfolio within our institution”.
Product Development & Staff Training: “It is much simpler to give small loans to small-scale entrepreneurs than a $30,000 loan to a school where cash flows are completely different. There is a need for technical training to ensure the product is a success when deployed in the market. EduFinance helped develop the product and trained our loan officers and trainers – aligning the schools’ cash flows to prevent arrears”. He adds “We insisted on a second staff training to increase staff performance, operation and processes for loan underwriting. After the trainng we saw improved quality of underwriting, greater completeness of loan files and better decisions on funding amounts”.
EduQuality: “Reaching out the end user is also fundamental. The EduQuality program helped build capacity in the schools as professional businesses by training entrepreneur school leaders and teachers in financial, as well as employee, management where Musoni did not have this capacity. Many schools have been trained by EduFinance directly and now by our own trainers which were trained by EduFinance. The schools have higher student populations, securing revenue generation and repayments. Our loans are therefore paid without challenges”.
Beyond Musoni
Stanley commented on the broader benefits of being part of an organisation such as EduFinance with 39 other partners in the education finance sector. We are able to facilitate platform-sharing and business connections with similar organisations across the world. At our Global Education Finance Confeence 2019, for example, Stanley met with OBUL bank who shared their experience with hiring a Head of EduFinance. Musoni will continue to learn from and work alongside OBUL, gaining valuable advice regarding this new role.
Scott wrapped up their conversation with a personal question for Stanley:
“If you could give one piece of advice to a CEO wanting to start up an Education Loan portfolio within their organisation, what would it be?”
Stanley responded passionately:
“The potential for any FI within education sector is unlimited - it all depends on your willingness to deploy resources into the sector. The sector is one safest to invest in: in terms of both school fees and school improvement loans. You also have the right product-offering to make a real impact to communities and society. It therefore has the dual impact of addressing your financial institutions’ bottom-line needs and a social impact. While still growing your balance sheet, you can help many people out of poverty”.