Novel Idea: Microcredit Tuition in Africa

Taken in the grand scheme of need, $1,000 to give someone a college or university degree is a drop in the bucket.

But it's an important drop and late last month a fascinating organization using microfinance for higher education announced an ambitious new initiative at the nerd rockfest that is the Clinton Global Initiative.

Vittana is earmarking $1,000 for 10,000 African students to finish the 'last mile' of their education, that final year standing between them and the degrees that qualify them for marketable jobs. It’s the next step in the non-profit’s experimental Kiva-style lending system in which individuals can directly lend $25 or more to would-be college graduates. The graduates are then expected to pay the loan back to Vittana, which passes on the repayment to the original, individual lender.

There is of course that other little thing: interest. Vittana says it doesn’t charge interest on its loans, but its microfinance partners do. Vittana students get a grace period during their studies in which they’re expected to pay only the interest. Vittana that given the lack of a credit bureau or IRS-like body in many countries, there is often little incentive to repay a loan, so their interest-first approach helps students to “develop a regular repayment habit."

The model seems to work. Vittana’s repayment rates are averaging 96 percent in Paraguay, Peru, Nicaragua, Mongolia and Vietnam.

Vittana will mark its entry into African higher education by offering small loans to 10,000 students. No word yet, though, on which countries will get the cash.

Photo credit: Thomas Sly (flickr)