Colombia needed a customized loan that the national student loan agency, ICETEX, could on-lend to low- income students. IBRD structured a loan with a longer grace period, longer than average maturity, disbursement-linked repayment schedule, and disbursement in Colombian peso. This loan was the first under a new IBRD policy that extended average repayment maturities. Tertiary school enrollment remains low for the The Colombian Government sought flexible lending poorest Colombians. A government of Colombia terms that would: 1) reduce the students’ annual study identified lack of access to private capital as financial burden and allow ICETEX to manage cash one of the key impediments to accessing higher flow risk by stretching out repayment terms according education and promoting human capital to the students’ repayment schedule, and 2) reduce development. Upon further examination, the study currency risk by matching the currency of funding with found that students did not earn enough after student loans denominated in Colombian pesos. graduation to repay loans with maturities less than 16 years. In Colombia, it takes students an average of five years to complete education plus a year to The World Bank Treasury customized a loan that find employment –beyond the limits of grace periods would meet ICETEX’s needs of lending to low-income normally granted with traditional loans. students: Given Colombia’s longstanding relationship with the  longer grace period (six years) to enable students International Bank for Reconstruction and to complete their studies and find employment Development (IBRD) and the Bank’s experience with education initiatives in the country, the  longer final maturity (22.5 years) to spread government approached IBRD for a customized repayments over a longer period loan that would help Colombia scale up student  disbursement-linked repayment schedule to lending through its national student loan agency, the help ICETEX manage cash flow risk Instituto Colombiano de Crédito Educativo y Estudios Técnicos en el Exterior (ICETEX).  conversion of loan currency to Colombian a relevant solution for the client. peso upon disbursement (IBRD executes currency swap transactions to transform ICETEX’s interest and principal obligations into Colombian peso for the full maturity of the loan) Amount US$300 million Approval Date March 2008 The Bank provided Colombia with a solution that Maturity 6-year grace period; met its unique requirements. In the past, the 22.5-year final maturity maximum maturity available on an IBRD loan was Lending Instrument 25 years. In this case, a longer average maturity and IBRD Flexible Loan grace period was approved by the Bank’s Executive Lending Terms Adaptable Board under a new extended maturity policy on Programmatic Loan March 4, 2008. These terms would not typically be available to Colombian students borrowing from the private markets. The World Bank Treasury customizes financial solutions to meet clients’ unique financing or risk management needs at the project or portfolio level. The financial terms of on-lending projects can also be customized for other sectors. Even if the required product or service is not currently offered by the Bank, the Treasury can use creative ways to design Miguel Navarro-Martin, Head of Banking Products, mnavarromartin@worldbank.org, +1 (202) 458 4722 Photo Credits Front: Charlotte Kesl / World Bank