Knowledge Is the Best Investment
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Knowledge Is the Best Investment

Benjamin Franklin nailed it: "An investment in knowledge pays the best interest." It certainly does. Metaphorically and literally speaking. INSEAD, the international business school, in a partnership with Credit Suisse, published a white paper "Higher Education: Investing in Future Leaders" presenting higher education as an untapped investment opportunity with positive social impact.

Sandeep from India, Oleg from Ukraine, Maria from California, Farai from Zimbabwe, or Amelia from Argentina. Five students, five different continents, one dream – to get an MBA from a respectable university and make a difference. How hard can that be in the ever shrinking world? The world where everything, because of globalization, seems accessible and within reach. As it turns out, certain areas remain inaccessible. For a number of reasons. While our five students named the main one – the lack of funding – the INSEAD white paper highlighted a few more.

It is estimated that studying for a year at Harvard costs what an average Sierra Leonean makes in over 100 years.

Higher Education: Investing in Future Leaders

Rising Inequality Gap

Today, the distribution of wealth is far from even and the income gap is rising. At the start of the millennium the richest 1 percent of our population owned around 40 percent of global wealth. Over the last fifteen years it has increased by 10 percent. According to the Credit Suisse's Global Wealth Report of last year, half of all household wealth is in the hands of the richest 1 percent. One of the cures for the rising inequality and income gap is higher education. Students who attend tertiary higher education at prestigious universities not only stand a better chance of entering a promising career path, but also have an opportunity to build influential networks. Something not to be underestimated by future leaders. Now, the question is: how to enable citizens of low-income regions to access top quality higher education and trigger changes in their homelands?

Students from Low-income Countries in Two Prestigious Universities, by Nationality

Students from Low-income Countries in Two Prestigious Universities, by Nationality

Source: Credit Suisse

A Degree Makes a Difference

The INSEAD-Credit Suisse white paper presents data confirming the link between education, employment prospects and the standard of living. The research conducted in the US over 2011 and 2012 shows that the unemployment rate among university graduates was 7 percent lower than among high school graduates, and that they earned on average 60 percent more than their less educated peers. What is even more important is the correlation between higher education and social mobility, despite of the student's financial and social background. And it is precisely the lack of social mobility that makes it so difficult to unlock new life opportunities from one generation to another.

Global Education Funding (USD)

Global Education Funding (USD)

2.5 trillion is spend annually on education

Source: Credit Suisse

Doing Well by Doing Good

Impact investing has been present in various shapes and forms for a while now. Also, sponsoring a protégé is nothing new. There wouldn't be so many talented artists, scientists or influential politicians in the developed world, if it wasn't for scholarships or other types of financial support. The INSEAD researchers stress, however, that existing solutions do not cater to growing needs and call for new funding options. They see potential in marrying impact investing with education. While impact investing has grown into a 60 billion-dollar market, only a tiny fraction of it is related to education. As the researchers suggest, there is room for expansion to address the demand for high-quality tertiary education from students in low-income countries.

Investing in Higher Education

Investing in Higher Education

Souce: Credit Suisse

"Many investors are sensitive to the topic of education. They can relate to it and many themselves benefitted from higher education. On the other side there are talented students, from all over the world, who went through the usual admission process at the most recognized universities but are unable to fund their studies. Public funding is diminishing and student loans available at their countries, most often do not cover studying abroad. And if they do, the interest rate is very high, 20-25 percent, and banks require collateral, which of course, a student cannot provide," Olivier Rousset, Head of Impact Investment Specialists, explains the reasoning behind the investment program designed to satisfy the needs of both investors and students.

"Everybody has a dream. The best thing in life is to have a chance to fulfill your dream," says Sandeep Siwach, the beneficiary of education investment program, MBA student at INSEAD.