Investor update March 2022 - The Recovery Continues
Anonimized version of the update shared with our investors - Accra, March 2022
Dear Investor,
This year promises to be an exciting year for Brighter Investment. With the pandemic gradually waning and global economies rebounding, we are eager to engage new investors who have expressed profound interest in us and at the same time generate good returns for our already existing investors. Our persistent outreach efforts last year have produced some amazing results: we have signed new investors such as ADAP Capital who have years of experience in investing in startups in Africa. We have also formed an affinity with some local foundations in Ghana such as Aeguitas and the Otumfuo Osei Tutu Foundation who will provide internship and mentorship opportunities for our students. We are continuously engaging relevant stakeholders to give great value to our investors and students. We know that you are eager to meet our students in person if not for the pandemic, as such we plan to host our first Investor-Student Engagement Forum. This is an initiative for our investors to meet with our students virtually to interact with them. Our metrics continue to impress:
0% default rate
Student dropout is still less than 1%
Repayment is up by 30%
Unemployment is down by 9%
ASK FOR INVESTMENT: Our ambition is to grow Brighter Investment into a Pan African education finance institution so we are not limiting ourselves to Ghana only. We intend to expand into East Africa in the 3rd Quarter of this year. We are currently undertaking our market entry research into which country in East Africa has the brightest prospect for us and have been offered various partnerships to do this. Our fundraising target is $1.5m, which we plan to raise before the start of the new academic year in September 2022. We currently have 180 students and we want to increase that number by 300%.
Our portfolio has been diversified to both undergraduates and postgraduate students to minimize our risk of increased unemployment and delayed repayment. The pandemic restricted our ability to travel to meet some of our prospective investors but this year we intend to do so as part of our fundraising approach. We anticipate signing some new investors soon but we would still need your support with our current round. Investing in our students' future earnings has proven to be a reliable investment, even if because of the pandemic our unemployment rate was high as we are beginning to see that decline. This means that repayments have been delayed but not forfeited. Distributions are up impressively which further proves that our model can withstand shocks and uncertainty. As indicated earlier unemployment is down by 9% and soon our investors can expect to receive more from our distributions. Further investments from you would be channeled into new cohorts both in Ghana and abroad to widen our student portfolio.
Your support is crucial to the success of our company and we believe you are convinced by our indexes that your investments are in safe hands and would be invested prudently. We look forward to your kind generosity and your determination to making education accessible to all. Indeed the future is truly bright.
Kwame Nimako-Boateng
Chief Growth Officer
1. Your investment value
Last update we wrote to you about delays our students faced with respect to graduation and finding employment due to school closures and the economic impact of the pandemic. The numbers below will show that overall, the current performance and projections are very similar to the last one. Earlier investments are impacted more by these delays due to a larger portion of the supported students graduating and entering the job market in these most affected years.
The good news is that real results are showing our projections to be conservative indeed. As further described in the next chapter, unemployment has gone down, and we expect that trend to continue in the long run. Continued higher than normal unemployment has resulted in a slight downward correction of projected returns for the 2017-2020 investments. However, the investments in the 2016-2017 year, the worst affected by the pandemic, have actually been revised upwards. With the largest portion of supported students working, the 2016-2017 investment year’s numbers are less determined by conservative projections and more determined by better than projected real life repayments than the other investment years. And as depicted at the end of chapter 3, those real repayments have shown a strong rebound. The 2016-2017 investors can expect to earn 16-18% of their investment value in distributions this year.
The table below provides details on the book value of your investment, which is the minimum amount we need to repay to you without BI defaulting on its obligations. The second higher valuation is the net present value of projected future cash flows discounted by the expected total IRR:
Investment amounts, distributions paid out or reinvested in later cohorts, projected values, and book values for an investor who invested $50,000 in every cohort.
2. Performance of the student cohorts
The performance of student cohorts have seen immense improvements from the uncertainty-ridden months of the last two years. Continuing students are back to studying full time on their respective university campuses with required resources provided to ensure a minimal disparity between planned and actual graduation dates. Employability metrics are also beginning to look good as more students have found new jobs or moved on to better jobs. Students in the job-hunting phase are also beginning to get more interview invitations than they did in the last two years - an indication of a potential increase in student employment by the end of the next quarter.
Currently, the size of the BI student portfolio sits at 439 students out of which 180 students are still enrolled in different levels of their degree programs. Although a total of 258 students have graduated since 2015, 87 students are currently enrolled on the mandatory one year National Service program while 163 students are in the repayment phase of the program where they are either working and making repayments or following through with a specialized employability program to increase their chances of landing a job. The total number of students who have completed their repayment has increased by 1 student. This puts the total number of students who have completed the repayment phase of the program at 8.
Our supported programs are still viable despite the challenges of the post-covid labor market. Currently, we have 37% of students pursuing engineering programs and 30% in the sciences with 27% and 6% pursuing business and technology related degrees respectively.
The table below represents the current status of all the students we have supported so far.
Current study progress for all investor cohorts.
3. Key performance indicators
Various KPIs are important for your ROI. For the most relevant of these variables, we compare the values used for the projections to the values as observed to date. Based on these results we use conservative estimates to provide you with an updated ROI projection.
Relevant Key Performance Indicators and values used for our financial projections.
Unemployment: Through the BI Career Support program, more students have been able to find jobs in the last quarter. This has resulted in a reduction in the percentage of unemployed students by about 9%. Although we have a target to bring this number down to about 14% by September, we expect that this figure will go up again with the addition of 87 students who will be completing the mandatory National Service Program by then. However, with the continuing recovery of the economy, constant improvement of the BI mentorship and career support program and the continuous pursuit of industry alliances for job placements, we are positive of relatively competitive employment rates quarter on quarter.
Dropouts: Our current dropout rate is 0.91% which is five of our students dropping out. This dropout rate is still 5X lower than the average rate recorded by our partner universities. One of the students who dropped out has finished making repayments and the other four are in the repayment phase.
Defaults: All graduate students are reporting their employment status, and all working graduates are making their monthly repayments as required. To be conservative in our projections, we have modeled a rate of 10% to cover the number of students we expect to not repay.
Salary levels: Graduates mostly earn what we expect in the local currency, and are once again earning what we projected in USD despite covid. Our graduates have increased their income 5X on average with their degrees. That said, a subset of graduates that haven’t been able to find employment yet have taken lower-paid jobs. Our student success manager is working with these graduates to find them employment at their education level.
Repayments: Our working graduates are making repayments as expected. The total amount of repayment received this semester was 33% higher than what we received in the previous semester. We expect that as more students find jobs, distributions will be higher again in the coming year. Due to the structure of the sponsorship contract, for every month a student is unemployed, their repayment period goes up by 0.25 months. This means that longer unemployment periods result in slightly longer total repayment periods that ensure that the same ROI is maintained for investors.
Below is a graph that shows how repayments received from students are growing despite Covid.
Total repayments are recovering from covid and are expected to continue to grow.
4. Cash flow projections
The graphs on the next page show how an investment of $50,000 in the various cohorts is expected to perform. These cash flow projections are based on increased unemployment and more time required to find work for graduate students in the near future. Our goal is to engage our partner recruitment agency and implement an improved student success mentorship program to help students find jobs faster. As the real life results for the 2016-2017 investments show, once students find work, and our bright students with good degrees will find work, distributions start to come in and so we hope that in a year from now we’ll be able to revise other projections back upwards as well.
Projected distributions and paid out distributions per academic year for a $50,000 investment in the 2016/2017 cohort.
Projected distributions and paid out distributions per academic year for a $50,000 investment in the 2017/2018 cohort.
Projected distributions and paid out distributions per academic year for a $50,000 investment in the 2018/2019 cohort.
Projected distributions and paid out distributions per academic year for a $50,000 investment in the 2019/2020 cohort.
Projected distributions per academic year for a $50,000 investment in the 2020/2021 cohort.
Projected distributions per academic year for a $50,000 investment in the 2021/2022 cohort.
5. Conclusion
As we witness a rebound from the pandemic globally and nationally the outlook for BI looks impressive. Our metrics are falling in line with our targets and expectations. We have gotten off to a good start by signing some new investors while some existing investors have reinvested in our fund. We are optimistic that we would be successful in our fundraising and that we would be able to admit more students and expand internationally. We are positive that we will continue to see a decline in unemployment and an increase in distributions and repayment.
Your belief in BI continues to inspire us to persist more and we hope that we can count on your continuous support in making BI into the next unicorn in Africa. Thank you and we look forward to our next update where we can share our progress with you.