Lumni creates an efficient global market for investing in human capital, while revolutionizing sustainable investments in higher education and student talent.
Focus: Education, Financial Inclusion
Geographic Area of Impact: Mexico, Colombia, Chile, Peru, USA
Model: Social Business
Number of Direct Beneficiaries: 3,500
Percentage Earned Revenue: 100%
Recognition: Regional Social Entrepreneur of the Year, Latin America, 2011
Education is estimated to account for approximately 70% of a country’s wealth, contributing to a productive labour force and leadership that steers the country on a path of economic growth. However, many developing countries suffer from chronic under-investment in the education sector. For example, in Mexico only 2% of college students have access to student loans. Globally, around 88% of the world’s youth do not attend a higher education institution. Of those who are able to enrol, dropout rates among the poor are very high, with 60% of dropouts citing inability to pay as the primary cause for abandoning their studies.
Innovation and Activities
Lumni is the first organization to successfully bring to market the concept of human capital contracts. Whereas student loans require students to pay back both the full principal of the loan plus interest payments and fees, human capital contracts only require graduates to pay back a percentage of their income after graduation. Lumni students are required to pay a fixed percentage of income during a predetermined number of years. In most cases, the income differential for attending university more than offsets these payments, representing a win-win solution for both the investor and the student.
Nearly 80% of Lumni students are from low or very low-income families, and are often the first generation to attend college. The indirect beneficiaries are several-fold, assuming low-income families depend on the most highly educated person for household income. On average, students’ incomes have increased 50-300%, and investors have received an average of 11.4% return on their investment, compared to the Dow Jones Industrial Average return of 4.18%.
Lumni has set a target of raising US$ 200 million from impact investing capital markets, and reaching 32,000 students by 2015, in the countries where it currently has operations.
Felipe Vergara received an MBA from Wharton, worked formerly as a McKinsey consultant, and has been passionate about access to higher education since he was young. Growing up in Colombia, he became acutely aware of educational inequality when a top student in his class was unable to attend university due to an inability to pay. Vergara realized the education financing market was inefficient, and that investment in the education of a high potential future worker would more than compensate for the educational cost. Years later, when Vergara met Miguel Palacios, who was perfecting the model for human capital contracts and human capital investments, this innovative model emerged and Lumni was born.
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