The Independent Uganda: You get the Truth we Pay the Price
Kampala, Uganda | NEBERT RUGADYA & LOUIS JADWONG | Uganda’s education system dictates that tuition fees are paid at the start of every term of three months, or in a lump sum, for the full year.
The opening days of school therefore often turn out to be very stressful for parents — and head teachers too — as research indicates that due to the financial challenges with these terms of payment, only 30% of children have their fees cleared on day-one of the school term.
With many parents and guardians across Uganda not having guaranteed stable or regular revenue streams, borrowing becomes a necessity. Until the entry into the country of fin-tech company Furaha in September last year, options to borrow on “friendly terms”, or from made for purpose education schemes, were very limited.
Furaha Co-Founder, Yustus Aribariho told the press today at 1 Kololo Hill Drive in Kampala that, “The current narrative around financial inclusion is focused on providing small loans, but these loans hardly make a dent in people’s lives. In Africa, people face real challenges that technology can solve.”
He added that, “Our goal is to create an ecosystem that solves real problems. We’re starting with education, specifically school fees. Our platform assesses creditworthiness and provides loans that are paid directly to schools.”
Situation in Uganda today
Commercial banks, microfinance institutions and micro-lending financial technology (fintech) firms have various products for lending.
However, school fees being short term and yet is a constant expense till the child completes education, lenders prefer to give short-term credits, which may also be handy for the client.
The challenge is that short-term credit products, especially micro-loans, come with high interest rates for a typical short period, making a payment within three months a challenge.
Microloans by telecom companies and banks carry interest rates ranging from 9.5% to 15% per month. Banks and other lenders put the school fees and other short loan products at high interest rates claiming that it is because they are risky.
The high rate result in many children failing to go to school altogether.
Furaha’s Aribariho told the media that Uganda and Africa have the highest concentrations of children failing to complete school because of a lack of proper financing mechanisms. In Uganda, only about 10 percent of children enrolled in Primary One are able to complete Senior Six 13 years later, with the biggest cause of this dropout rate being parent’s inability to pay fees in time.
“The numbers are staggering. UNESCO estimates that the education funding gap is $97 billion, with $70 billion of that in Sub-Saharan Africa. Banks have the resources, but traditional lending practices have failed to evolve. We at Furaha are using data-driven models to assess creditworthiness and provide loans that meet people’s real needs,” he explained.
Enter Pegasus Technologies Limited
Furaha is a fintech company that targets education financing in Africa. The fin-tech company has partnered with platforms like PegPay of Pegasus and MoMo of MTN to not only make lending for tuition easier and convenient but also cheaper, with a loan being at 5% per month. Repayment in any amount is accepted during the period.
What is different with this loan however is that the money is paid directly into the school’s fees bank account, making it a safer option — protected from losses or misuse. That’s where PegPay’s infrastructure comes into play.
Through its Platform and Furaha Finserve Uganda Limited, Pegasus Technologies Limited today announced its strategic partnership, a groundbreaking move to revolutionize education financing. The partnership aims to enhance accessibility to school fee financing and promote financial literacy among parents and students in Uganda.
“For us, the partnership was a no-brainer. One of the challenges we’ve had in this industry is that everyone tries to do everything by themselves, and that’s not sustainable. It’s not something that can be done while we may have the product, we will never, ever be able to serve the parents without a bank. We will never be able to serve the parents without the technology of Furaha,” Ronald Azairwe, Managing Director at Pegasus.
“Furaha has the product, we have the technology, and the banks have the financing, and the schools get their money in real-time, and everyone’s happy. So, really, for us, it’s a product that we will do everything to support in every way. We believe that this is a solution that will help not just the parents, not just the schools, but the entire education ecosystem in Africa.”
The collaboration combines Furaha Finserve’s expertise in technology built for purpose-based financing with Pegasus Technologies Limited’s innovation, digital payments experience, and commitment to education to create a seamless, user-friendly product for education financing. Opportunity Bank Uganda provides the financing.
How Furaha Education Loan works
Azairwe, Managing Director at Pegasus stepped in to explain how the school fees facility will work.
“So, the way this product works is that a parent who would like to pay – and by the way, it’s not that the parents can’t afford. The parents are willing to pay the fees, but they needed to smooth out what they call consumption smoothing to be able to smooth out the way payments are made.”
School fees come three times a year, and that leaves many parents struggling.
“What Furaha has come in to do is to say, ‘We know you want to pay this money, we will make it available to you now, and then you can pay it over time.’ So, throughout the term, rather than you having to find this money all at once, we will help, with our partner, the bank, find it for you. Then, during the three months of the term, you are able to pay it back, obviously, over time. And for any parent that’s working here, salaried or non-salaried, that helps you not only to plan but also to have this money available.”
Furaha Chief Executive Officer, Denis Musinguzi, says processing a school fees loan and having the money banked into the school fees account takes just a few minutes because they already have data of the borrower. It however needs a smart phone, that many parents are adapting to since school fees pay went digital in past five years.
This collaboration will allow us to reach more children and families with the financial tools they need to access quality education.
Read more via this link: https://t.co/lDHYislBmj— Furaha Financial (@FurahaFinancial) February 7, 2025
Furaha’s data source, which is primarily provided by the National Identity Card, makes it easy to verify one’s creditworthiness, instead of requiring the filling of forms and writing letters of recommendation, as has been the case with traditional banks.
Furaha’s CEO, added, “With Pegasus Technologies Limited, we are not just building Africa’s premier purpose-driven financial platform, we are rewriting the story of education access. Our collaboration of cutting-edge solutions and grassroots commitment ensures that school fees no longer stand in the way of dreams but instead drive hope and generational progress”
Improving education quality
According to Azairwe, the partners are mixing inclusivity by providing finances, instantaneous payments where the money goes to the bank account of the school in real-time. And so, the school is also able to operate very well.
“The challenge the schools have had, are parents who bring their children and they delay to make fees available. What that does for the school is the school somehow has to find the money to feed that child, pay the salaries of the teachers, educate the child, provide the facilities for the learning, all on a promise that the parent at some point will find money to pay.”
He warns that, “what do they do when they struggle like that? They’ll either hire teachers who were not demanding much money, they will feed the children on bad meals. The lodging facilities will be bad for boarding schools, because the school is trying to work within the money they have available to them.”
Azairwe explained that the solution doesn’t just help the parents, it also helps boost the country’s level of education.
“The schools have the money on time, are able to put facilities in place, are able to pay their teachers, feed the students, so everyone in the value chain is happy. And so, for us, this product is not just about the parent and the child going back to school. It’s also about school sustainability and the ability to be able to offer services to the children. So, it’s, for me, a solution at just the right time.”
The solution – Furaha. Furaha is a Swahili word for “Joy” or “Happiness”.
A milestone moment for Furaha! 🌍
We’re thrilled to announce that SC Ventures by Standard Chartered, @stanchart, and Yabx, a Tech Mahindra Group company, have invested $10 Million in Furaha to accelerate our mission of expanding purpose-driven financing across Africa. pic.twitter.com/OkNHhwiVBT— Furaha Financial (@FurahaFinancial) January 30, 2025
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✳ Key features of this partnership include:
- Affordable financing with low interest rates.
- Simplified loan application process.
- Real-time, direct-to-school payments.
- Flexible repayments of up to 90 days.
The service is available to the public through the Google and Apple App Stores. Customers can sign up using only their National Identity Card by going to http://bit.ly/furaha-app on their smartphones.
