Cosami and Crezcamos: Knowledge Exchange between EduFinance Partners in Guatemala and Colombia

Opportunity EduFinance continues to expand our Financial Institution partner network around the globe, with 123 cumulative partners to date. This growth is particularly increasing in Latin America and the Caribbean, where we now work with 13 Financial Institution partners from 8 countries.

Recently, EduFinance facilitated a virtual knowledge exchange between one of our committed and established partners, Cosami Guatemala, and newer partner Crezcamos based in Colombia. They had an open and frank discussion about Cosami’s experience of delivering education finance products to schools and families.

With the support of technical assistance from EduFinance, Crezcamos is in process of implementing School Improvement Loan (SIL) financing with an ‘education ecosystem’ approach in Colombia and wanted to hear Cosami’s experiences and lessons learned to better focus their own strategy towards the education sector in Colombia.

EduFinance worked with Cosami during the Covid-19 pandemic to develop School Fee Loan (SFL) with a rapid approval process which was an adaptation of their consumer loan product. Cosami has now expanded its EduFinance offerings and is providing schools a system for school fee collection and financial literacy programs.

Cosami’s Approach to the Education Ecosystem

Cosami started the knowledge exchange by presented their business model. As the biggest cooperative in Guatemala, they have 56 years of experience in the market. They started with only US$64 and 113 clients, and have grown to reach over 211,000 clients (which are also partners of the credit union) with a total savings portfolio of US$383M and a loan portfolio of US$359M.

Cosami is based in the south-west of Guatemala and has a mixed distribution model which includes physical branches as well as and on-line banking and digital wallets to cater for rural settings.

Cosami has developed a special division dedicated to education and development. This division oversees running financial literacy, capacity building and entrepreneurship programs among clients, including school proprietors, teachers and students.

Transforming consumer loans with a focus to education has been the entry ticket to the education market niche. Cosami started their social impact vision by offering their clients a quick loan for education needs. At the beginning of the pandemic when students were sent home for remote learning, Cosami helped families who did not have enough devices to access digital classes. They offered quick financing options of up to Q.10,000 (US$1,243) with only a 30-minute approval time. Cosami also worked in partnership with internet providers to include internet access into the financing package for families.

Through the alliance with EduFinance, Cosami discovered a larger education ecosystem to leverage (parents, teachers, schools) and a window of services they could be offering to schools such as “Collector empresarial” – a new fee collection platform.

The “Collector” is a tool that enables schools to administer, monitor and optimize their financing. There is a commercial strategy behind this, as a school with better financial management is a stronger partner for Cosami. Knowing schools’ income and expenditure allows Cosami to conduct a better risk assessment and offer financing options at better rates.

Cosami offers the Collector to schools for free, beating big bank competitors  that charge a fee for the use of it. The gratuity approach is part of Cosami’s social vision of improving communities. The Collector offers a view in real time of the schools’ funds and parent payments – allowing them to use Cosami’s larger network of payment points. The Collector also decreases the risk of maintaining cash at the institution.

Knowledge Exchange: Crezcamos & Cosami Q&A

Crezcamos: How did you overcome resistance to financing from small, low-income schools with limited resources?

Cosami: It is not easy. Schools are afraid to take a loan. Cosami is overcoming this barrier by offering the schools a package of services, including the collector tool, which enables us to know the real cash flow, number of students, teachers pay, school fee payments. We know the real borrowing capacity and what we can offer with minimum analysis. Our goal is to achieve a School Improvement Loan disbursement speed of 1-day and we are collaborating with schools to create their cash flow awareness.

The model works very well. Another initiative has been entrepreneurial breakfasts where we invited these schools to share their experiences. Some small school proprietors’ feedback has been that this tool allowed them to control parents’ arrears and cash leakage: “With this control, it’s not that my revenues have increased, it’s that it is my real income!”

It is about growing, having the control and knowing your strength – without data, schools do not know where their strength is and cannot market and position themselves.

Can small schools obtain a loan without the “collector”?

Of course! Small schools for us are under 200 students so our loan officers will need to spend more time with a school proprietor to construct their cash flows and their financials. We work in rural areas; our loan officers are familiar working with micro-entrepreneurs who do not have strong accounting records.

Are the school loans only for infrastructure?

Correct. We finance construction and technology. We finance all types of educational centres, from early childhood to technical schools.

Are school fee loans for technology disbursed to the parents directly or through a technology partner?

It is disbursed to the parents, and it is not only for technology. Parents can borrow for school fees and pay one year in advance to the school, for example. However, we have experienced more seasonal demand for technology, for example, when there are three children in a family and one laptop.

How did you address seasonality and low-income periods in this sector?

We take this in consideration in our risk analysis. Our Portfolio at Risk -30 days (PAR>30) is very low at 0.40%, demonstrating that these sectors have been very safe for us. One recommendation from EduFinance was to introduce a 2-month grace period during school holidays and we have not had any problem with that.

How do you differentiate yourself from competitor banks?

We aim to build a reciprocal relationship, which for commercial banks is a bit difficult. As a cooperative we share dividends with our partners/clients.

 One of the most important strategies has been data analysis. EduFinance helped us with data mining using the Monitoring and Evaluation database, and we know exactly how many schools are present in our area of interest. We mapped them and geo-referred in Google maps and will be delivering targeted visits. We also mirror what the government does for public school teachers. Having a loan with Cosami opens the doors to five additional free services which offer credit as well as life and health insurance.

Did you reach parents and students directly?

At Crezcamos we are hoping to reach the schools first with a financial literacy campaign and through these campaigns engage with the parents.

We reached parents first as existing clients as this was during Covid-19. We have now developed the relationships with schools using an ecosystem approach. One EduFinance recommendation has been to reinforce our sales force. We had only one loan officer specialized in education and now we are hiring a senior officer EduFinance champion who will nourish these relationships.

The model that EduFinance is promoting is to access the ecosystem using the financial education courses that the cooperative already has, such as the financial and digital business training modules. Leveraging this valuable resource helped to enter the educational ecosystem.

How do you disseminate your financial education with schools, parents, etc?

At Crezcamos we think that financial education can be the nexus to strengthen relationships.

We have a management team dedicated to education, which is an advantage we have as a cooperative. Our team is dedicated to this relationship and being able to establish links with the community through our educational system. Last year we trained 20k children. We have a US$ 250k budget to run these courses in-person and online.

It's important to maintain the relationship above interest rates, terms and conditions, and benefits. One thing I would like to mention for education literacy is that we should adapt it to the institution, as customization is key.