Mexico's FINAE to expand student loan offerings, allowing more low-income students to get degrees and training that will lead to better jobs and brighter futures
College degrees are hard to obtain in Mexico, especially for students from low-income families. Public universities have been unable to meet demand and many aspiring students do not earn enough to pay for tuition at private universities. As a result, only one in four Mexicans between the ages of 19 and 24 is enrolled in college—a number that drops to one in 30 for young people at the base of the pyramid.
FINAE, a Mexican non-bank financial institution, is helping close this gap with support from the Inter-American Development Bank. A $ 2 million loan from the IDB’s Opportunities for the Majority ( OMJ ) initiative is paving the way for FINAE to expand its student loan offerings, allowing more low-income students to get degrees and training that will lead to better jobs and brighter futures.
FINAE’s loans finance between 20 and 100 percent of the total cost of a university degree, or from US$2000 to US$20,000 per borrower, depending on the students’ earning potential after graduation. Loan recipients must maintain higher than average grades and must be pursuing a degree in a field for which there is demand in the job market.
Because Mexico has little history with student loans, FINAE works hard to educate potential clients about how its loans work and the advantages of financing higher education. The program also establishes formal credit histories, which will help students access a variety of financial services in the future, from bank accounts to mortgages and business loans.
“Our plan is to support them financially so they can pursue their dream and have a professional career,’’ says Francisco Vizcaya, FINAE’s Chief Executive Officer, who expects to triple the number students receiving financing from the company to about 3,000 this year.
The company has partnered with top private universities so when students graduate they have a degree from a recognized institution. It developed a payment schedule in which the student only pays a minimum amount while in college, concentrating most of the repayments after they leave school.
Moreover, FINAE has developed an effective, computer-based system for managing relations with its borrowers and receiving their repayments after they leave school, allowing it to reduce operating costs and offer loans at affordable conditions.
FINAE is among the companies participating at BASE, the First Forum for the Development of the Base of the Pyramid, taking place in São Paulo on June 27-28. During the event, business executives, development professionals, entrepreneurs, government officials as well as impact investors, will discuss successful ways to provide high-quality goods and services to Latin America’s base of the pyramid, a market that consumes $500 billion a year.
At the BASE Forum, Vizcaya will speak on a panel titled “Ending the Talent Blackout: Equipping the Workforce for Regional Growth.” He and his fellow panelists will discuss the regionwide shortage of skilled workers, which is one of the biggest challenges for Latin American businesses today. Without the ability to find and hire qualified employees or to increase the productivity of their existing workforces, companies cannot reach their full potential and economic growth may suffer as a result. By making it possible for bright young Mexicans to prepare for careers in the information economy, FINAE is playing a leading role in solving this problem.