Education offers a pathway out of poverty – yet for many, higher education is out of reach. In sub-Saharan Africa, only about five percent of the population attends university.

University education is paid for through personal funds, scholarships, and financial aid. However, in developing countries few have the money to pay for university, and scholarships and financial aid are grossly insufficient to meet the level of need.

Banks do not typically give out student loans, because uncertainty about inflation makes unsecured loans very risky, and because students are evaluated on their current credit ratings rather than their future potential. Yet in developing countries, a university degree multiplies a young person’s earning potential by three to five times. This means that after graduating, students should earn more than enough to pay for their degrees.

A new approach to funding higher education

Our Vancouver-based social enterprise startup, Brighter Investment, is approaching higher education funding in a new way.  We enable private investors to fund the university degrees of students in developing countries, in return for a percentage of these students’ future income.

Qualified students receive full funding for university, including tuition, student fees, accommodation, and a living stipend. In exchange, they repay a fixed percentage of their income for a set period of time after graduation (typically six years or less). Our company manages the investment, provides mentorship and career support to help students maximize their potential, and charges a fee to cover these operations.

Our team at Brighter Investment is gearing up to support its first cohort of students in Ghana this September. Ghana was selected as a country with significant financial needs, a relatively stable government, and a high return on investment for higher education. On August 4, we launched a crowdfunding campaign to support our first cohort of students.

The ethics of private investment in education

Not everyone agrees that private investment in education is the way to go. For some, expecting students from disadvantaged backgrounds to repay wealthy investors raises ethical questions.

However, few people take issue with the notion of student loans, and our team believes a model with income-dependent repayment carries advantages over a traditional loan. Graduates of our program only repay for the duration of their contract (typically five to six years), and are free to choose their line of work. They are not required to repay the full amount if they end up with low-paying work, nor are they required to make repayments if they are unemployed or if their wages fall below a minimum earnings threshold.

Since a university degree can increase a young person’s earning potential by up to five times, on average, student repayments are sufficient to incentivize investors with a nine percent targeted return. Our team at Brighter Investment believes this system empowers students, because they are participating in the creation of value rather than receiving charity.

Impact investing vs. charity

Our model reflects a new wave of thinking on how to address social issues such as income inequality. Historically, investing was about making money, while philanthropy was about helping others. The growing movement known as impact investing challenges this dichotomy, and strives to identify areas where social impact can accompany financial return.

Some may question whether it is appropriate, even ethical, for an organization to target both social and financial returns. However, our team believes our model is more powerful than charity because it is self-sustaining (not reliant on donations) and scalable. Why not enable investment in something with real social benefit?

Shouldn’t education be equally accessible to the rich and the poor? Thijs Mathot, founder of Brighter Investment, says: “I enjoyed free university education in the Netherlands, and am very aware of the benefits that has provided me. Unfortunately I don’t have the money to pay for these students, nor does the Ghanaian government. With our model, we can help growing numbers of students to realize their dreams.”

Getting off the ground

On August 19, I will be travel to Ghana to launch the program alongside Richard Adarkwah, the company’s Ghanaian representative. Adarkwah, a fourth-year applied physics student born and raised in Ghana, is confident that Brighter Investment’s model will benefit young people in his country.

“In the end, the empowerment is about seeing people as equals,” says Richard. “I want to help other young people help themselves.”

Our team, which also includes Adan Uribe and Bruno Lam, raised an initial capital round from friends and family to support our operations. On August 4, we launched a crowdfunding campaign on Indiegogo with the goal of raising $20,000 CAD to fund our first cohort of 10 students in Ghana. Learn more on our campaign page.