Project: Future of Work Fund
State of development: Current
Stage of development: Final negotiations
Type of instrument — Impact Bond: No; Outcomes Fund: Yes; Social Impact Incentives (SIINC): No; Social Impact Guarantee: No; Payment-by-results (no pre-financing): No; Technical Assistance and Market-building program: No; Other: 
Rationale for using outcome-based finance: An outcomes based instrument for access to tertiary education is not only innovative, but vital.  Access to education without alignment to employment outcomes or private sector needs can be detrimental to financing. An example of this is the oversupply of Kenyan BA graduates. Outcomes based funding instruments for student finance ensures that stakeholders in the ecosystem, i.e.young people, education providers and employers, are aligned as it is only successful when these stakeholders work together.  

By 2030, an estimated 137M  secondary school graduates in SSA will be in need of tertiary opportunities.  Scaling ISAs will require uptake from other financial service providers.  Our north star is proving that this financial product can be ethical, sustainable and profitable. Our initial results show that African youth are indeed investable and expansion in SA and Ghana will further serve as proof points for the recognition of the ISA as an asset class.
Key challenges to launch: To scale up the Future of Work Fund, we need of additional capacity to engage the growing interest in South Africa and Ghana.  There is also need for additional legal and professional services as the set-up/expansion of an investment vehicle requires upfront costs and a high level of expertise to ensure success. For the first round of funding, there were direct set-up costs of $200 000, and indirect costs of $400 000. We anticipate that for the expansion of FWF to include Ghana and additional investment in South Africa and/or the set up of local funds will cost up to $400 000.  This includes design, structuring, fundraising and local market development.  We currently have $200,000 committed in our 2024 budget.  An additional $200 000 grant along with targeted expertise and support will significantly impact our ability to scale up ISA funding in South Africa and Ghana.
Social/developmental challenge: The Education Commission costing model (2016) estimates a $25B gap in the demand for financing tertiary education in Africa.  This gap follows current government spending and foreign aid initiatives and highlights an urgent need to develop solutions that can be embedded in the private sector. 

Student lending faces similar challenges to those of SMEs.  The financial need is too large and long term for MFIs but too small and too risky for traditional banks.  Accessing loans to finance tertiary education is particularly difficult for women and  those from lower income families without collateral to guarantee loans.  Student lending is considered very high risk, particularly given the proliferation of low quality programs.

There is a critical need to align the outcomes and incentives for key stakeholders in addressing youth unemployment and ensure access to high quality, market relevant tertiary education under terms that are fair and ethical.
Expected intervention model: Chancen International is a social impact organization focused on the intersection of education, livelihoods, and financial inclusion in Africa, with a particular emphasis on empowering women. Through its FAIR and ETHICAL solution known as the Chancen Income Share Agreement (ISA), Chancen provides financing to traditionally excluded populations to enable access to high-quality education that leads to employment. 

In 2021, Chancen launched the Future of Work Fund 1.0, a $21M blended investment vehicle designed to finance 10,000 youth in Rwanda, Kenya and South Africa by 2025. Through this innovative financing mechanism, incentives are aligned such that returns to investors are healthy when traditionally marginalized youth are successful in transitioning into meaningful employment. 

Chancen has already achieved a first close of $11 million in commitments and has a pipeline of education providers that would lead to approximately $5 million in ISAs disbursed annually. We have noted an increasing interest for investment into this structure and in parallel have developed a strong pipeline for growth in both South Africa and Ghana. We are requesting funding to support the feasibility, design and implementation of our next large round of financing which will support expansion in these two markets.
Policy sectors — Employment and private sector development: Yes; Education: Yes; Social protection: No; Criminal justice: No; Health: No; Agriculture: No; Environment and climate change: No; Water, Sanitation and Hygiene: No; Energy: No; Humanitarian: No; Early Childhood Education: No; Other: 
Primary SDG goal: 4, 5, 8
Country income classification of beneficiaries — Low-income: No; Lower-middle-income: Yes; Upper-middle-income: Yes; High-income: No
Notes: Data for this pipeline project was last updated in July 2023
Delivery location: South Africa, Ghana