Social Impact Investing

Impact Investments:
An emerging asset class
Global Research
29 November 2010
brackets within the BoP since these schools will be affordable to them 80 . This leaves
us with Brackets A – E. We then narrow our focus to urban areas as the starting point
for our target population, since the success of the school is dependent on its
proximity to a significant student population. Gyan Shala, for example, had opened
two rural clusters with donor support. Although they delivered similar education
results to the urban program, they were shut down due to resource constraints 81 .
UNESCO also cites that urban for-profit education provision cannot be extrapolated
to rural areas with more dispersed and often much poorer populations 82 . So we
restrict our target market to the urban population.
Table 22: Target population
Brackets A–E, Urban,mm
Population
Africa 31
Asia 148
Eastern Europe 15
Latin America 45
Total 238
Source: WRI
Target market: Primary school age children, ages 5–14 yrs
Within the urban income brackets A – E, we then concentrate on the primary school
age population– the percentage of the population aged 5–14 in 2010, as estimated by
the United Nations Population Division 83 . Applying these percentages to the
population in our urban income brackets brings us to the target market of 238 million
primary school age children, broken out in regions in Table 22.
Penetration rates are high in some regions, but lower elsewhere: We assume 40%
In India, studies have found that up to 80% of urban children aged 5 – 14 attend
private school, including children from low-income families 84 . More broadly,
surveys across cities in the developing world conclude that as many as 75% of
students attend private schools paying fees of less than $10 a month 85 . By contrast, in
the urban areas around Lima, Peru only 38.2% of children attend private schools,
although the numbers have been increasing 86 . Given this range of penetration rates,
and our assumption that we will include income brackets A and B, we assume a
penetration rate at the low end of the range: 40%. This brings our Anticipated
Customer Base to 95 million children.
Revenues, margins, capital and profits
Using the pricing from our case studies, we obtain a price range of $50–$103 for one
year of primary school. We then multiply this price range by the 10-year time frame
we consider and the size of our anticipated customer base over that period, which
gives us a revenue opportunity of $26–$54bn.
In order to estimate the types of profit margins that could be realized from these
kinds of schools, we compare the pricing used by the schools studied by Gray
Matters Capital with the costs analyzed by Monitor in their work on Gyan Shala. The
Hyderabad schools charge between $50 and $103 per student per annum, while the
80 We include them in the Target Market, though we will haircut the penetration rate to
account for the fact that they may not choose to use these kinds of schools.
81 http://www.gyanshala.org/Introduction.html.
82 Education for All, Global Monitoring Report, UNESCO, 2009.
83 http://esa.un.org/UNPP/
84 India: Development and Participation, J Dreze, A Sen, (2nd ed.) New Delhi/Oxford: Oxford
University Press as cited in The Relative quality and cost-effectiveness of private and public
schools for low-income families: a case study in a developing country, , J Tooley, P Dixon, Y
Shamsan, I Schagen, School Effectiveness and School Improvement, September 2009.
85 Private Education for Low-Income Families, J Tooley, P Dixon as cited in Private Schools
for the Poor: Development, Provision and Choice in India, R Baird, Gray Matters Capital,
May 2009.
86 Affordable Private School Initiative Research in Latin America, A Faulhaber, Gray Matters
Capital, 2008.
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