The cost of opportunity: a Colombian social entrepreneur takes on the education deficit.

Author:Sutter, Mary
Position::FEATURE: LUMNI
 
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Mexico City resident Alberto Gutierrez Garcia was certain a foreign degree was the way to expand his horizons and land a better job, so he cobbled together his savings, help from relatives and other financing to study in Spain. But Gutierrez had extra aid from an unusual source--a social capital firm that invests in students instead of lending to them.

Gutierrez is one of hundreds of carefully selected Latin America and U.S. Hispanic students who receive cash from Lumni, a novel educational funding company whose investors hope to make a return on their investments while contributing to progress in Latin America.

Lumni is the brainchild of business consultant-turned-social entrepreneur Felipe Vergara and his partner Miguel Palacios, both Colombians, who wanted to apply "human capital" funds to the problem of finding money to finance higher education in Latin America. The type of funding they employ is known as "income-contingent" because the recipients agree to pay a fixed percentage of their future earnings for a set period--as long as they are employed. A conventional loan would require the student to repay the principal, plus interest. By focusing on top students with high earnings potential, Lumni aims to provide richer returns to investors.

Although experts caution that the results of some income-contingent programs are mixed, Lumni has produced a relatively high return of more than 7 percent and has had a low drop-out rate in its seven-year history.

Gutierrez is one of the Lumni success stories so far. The funds from the company helped cover his living expenses--"something the banks do not offer," he said in an e-mail interview. Gutierrez was 26 when he headed to Madrid in the fall of 2008. He finished his master's degree in political action in a program offered by three universities a year later, and in late 2009 he landed the position of head of documentation in the chief of staffs office of Mexican President Felipe Calderon Hinojosa.

"I am currently meeting my obligations to [Lumni]," said Gutierrez, who credits his international education with helping him meet the pressures of the job.

Lumni's Vergara said the company is looking for a profit on its investments in deserving students, but does not lose sight of the goal of making a contribution to progress in the region.

"Lumni is a company with a clear social purpose," Vergara said, noting that greater access to university education has a lasting impact on students and society.

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