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Growing up in Himalayan City, Philippines, Stephen Lumanog helped his mother sell food around their neighborhood to earn extra money. At 22, Stephen was earning about US$160 per month as a junior welder at a local sugar company. A promotion to certified welder would help him earn a raise and provide a more comfortable life for his family, but the required training was too expensive. Fortunately, Stephen’s mother is a client of the Negros Women for Tomorrow Foundation (NWTF).  After NWTF partnered with Vittana to develop a student loan product for post-secondary education, Stephen borrowed US$160 to attend a three-month welding course. He is now employed as a certified welder, earning US$210 per month, a 130% income change just six months after graduating from his training program.

Stephen is not unique. Millions of young people around the world cannot complete post-secondary education, leaving valuable, income-generating skills unlearned, and years of higher wages permanently out of reach. As financial service providers to hundreds of millions of poor and low-income[1] families, microfinance institutions (MFIs) are uniquely positioned to reach the 100 million youth worldwide who lack the resources to complete higher education. But until recently, MFIs had done little to tap into this market, discouraged by a set of common misunderstandings: we like to call them the Five Myths of Student Lending.

Check out Vittana's presentation to see how the organization has debunked those myths by creating high-performing student loan products at 20 MFIs in 12 countries.

Now that Vittana and its partner MFIs have shown that student loan products are viable, we believe that as the products evolve to reach more and more students, a hyper-data-driven approach will allow MFIs to simultaneously reduce risk and amplify impact. Vittana is already noticing some interesting trends: for example, women studying accounting in Nicaragua repay at a better rate than their counterparts in Mongolia. The average projected change in income for Filipina women between the ages of 20 and 24 is 900%, more than three times the Vittana average. The sample sizes are far too small to draw conclusions, but we’re excited to continue to explore these trends as our portfolio grows.

As the next generation of borrowers comes of age, they will look for more than an opportunity to run a small business. Education will give them the skills they need to compete, to create jobs, and to find work that will support their families. But without financial assistance, even low-cost vocational training will remain out of reach for many poor students and their families. In most markets, very few financial service providers, if any, have stepped in to fill this need; the institutions that make up the microfinance industry can and should be the ones to do it.

If you’d like more information on Vittana, please visit their website at http://www.vittana.org.