Connecting the Dots on the Other Global Pandemic
This is a guest post from Andrea Pizziconi, CEO of Girls First Finance.
Girls First Finance (GFF) supports young women's education and professional development worldwide, starting in Africa, through student loans and personal empowerment tools. Girls can apply for affordable higher education loans through the GFF mobile app. The eligibility criteria ensure that vulnerable girls are not excluded from consideration due to poverty. The pilot phase of the app launched in Kenya in 2022 and will expand to other African countries and regions after 2023.
Sex for education is bigger than you think.
In 2018, the World Bank declared that higher education yielded the highest return on investment at 13% annually, but paying for most of this education in poor countries fell on families and students, creating a pernicious rite of passage for women worldwide with higher education aspirations known as “sex for fees.” While policymakers focused on making the classroom equally accessible to girls and young women, they ignored how this nexus of forces would create a situation where women had no practical alternative but to face pressures to engage in sexual acts in exchange for education funding.
This situation became so common that popular culture devised several nicknames for the twin issues. Within the classroom, the presence of teachers and professors pressuring young women to perform sexual favors for passing marks became known as "sex for grades" or "sexually transmitted grades." Outside the classroom, the proliferation of older men offering to cover education fees and living expenses in exchange for sexual favors or relationships became known by various titles, including sponsors, sponyos, sugar daddies, blessers, and godfathers, all summarized here as “sex for fees.” Few studies quantified the scope of the problem, but media like the BBC and private enterprises, including those that capitalize on the demand for “sugar babies” by older men, estimate that it impacts up to 50% of young women in Africa.
We recently released the first-ever known global survey to quantify the scope of this exploitation across various geographies on International Women’s Day to quantify the scope of the crisis concretely. This is part of a broader report we will release later this summer in partnership with the UK Government, unpacking the issue of sex for fees, grades, and jobs. One thing we do already know is that this is not exclusively a global south issue. Even in the US, three million sugar baby students have signed up for one website that connects them to older, wealthier men for whom they serve as escorts and sexual partners in exchange for school fees. That’s roughly 15% of US college students.
Consensual Behavior or Exploitation?
Exchanging sexual favors for financial support or better grades often isn’t considered exploitation by academics and policymakers who perceive the girls to be consensual. Little research explores how voluntary the participation of young women is in such transactions. But let’s consider the reality for these girls. On one hand, without an education, she faces the absolute certainty of abject poverty, which likely brings domestic violence, reproductive abuse, and the constant risk of early mortality. On the other hand, she could make this one uncomfortable compromise to trade the one asset society seems to universally value—her body, for a period of time, and get her education paid with a chance to find work after graduation and build her own financial sovereignty. Yes, she faces the risk of pregnancy, HIV, and depression, not to mention the risk that her “sponsor” rejects her before she has finished paying for her studies. But those risks are lower than the certainty she faces if she doesn’t obtain a higher education. Some may say she’s making a choice, but it seems, when you’re choosing the only option that isn’t complete destitution, that doesn’t seem like much of a choice. At the very least, it’s a choice I would make myself if I too had no other option to be educated. This is why I founded Girls First Finance. To create a better option for these vulnerable young women.
I learned no one is exempt, not even me.
I learned about this crisis and how the girls are judged for it rather uncomfortably. At the other company I founded, Africa Integras, we were months away from starting to hand over a massive assemblage of buildings we had developed at the University of Ghana as part of a $64 million investment in expanding their classrooms and dormitories by nearly 20,000 students, bringing opportunity to families and communities across West Africa. The Vice-Chancellor retired, and his replacement wanted to change the contract terms. The plot twist came in his logic. He claimed that the contract was not legally enforceable as it was obtained under the duress of my seductive womanly prowess. The absurdity of this argument was revealed when he lost a London arbitration in our favor with a nine-figure judgment. Incensed, he lashed out in the media, repeating the lie that I seduced his predecessor into selling Ghana’s crown education jewel. I couldn’t believe such defamatory attacks, which failed when tested before judges and arbitrators, could nonetheless be spread so easily.
But it was exactly these difficult times that served as divine intervention and the genesis of Girls First Finance. I asked a Ghanaian diplomat what he made of the situation. He explained that those spreading lies about me were expected to be believed. When I asked why, he explained that as many as half the girls in Ghana were pressured to trade their bodies for education fees, grades, or career advancements. In this context, it was easy to claim that a groundbreaking project initiated by a woman could only have advanced by “sex for signature.”
I suddenly realized that I had to shift how to deploy our resources to optimize the mission to uplift young people in Africa. Building education infrastructure was not enough. We needed to create a mobile super app with multiple empowerment tools and a student loan platform that could help vulnerable girls avoid sexual exploitation just to get an education. Because that becomes one very expensive education.
There’s a high price of accepting sex for fees, grades, or jobs as a social norm.
Despite women earning one-third of what men earn during their economic lifetime, the list of known causes for this inequity has historically excluded sex for fees as part of that problem. The rationale for the exclusion is that the decision to engage is perceived as consensual, and violence against girls in and through schools is not widely recognized as a root cause. But the global cost of violence against adolescents in schools, which affects girls disproportionately, is $11 trillion, and the additional cost of by-products of transactional sex like depression and anxiety, teenage pregnancy, and HIV increases the cost by several more trillion dollars. Coupled with the average lifetime cost of sexual assault, which is at least, on average, $120 thousand per victim in the US, with 25 million affected, implying an economic burden of over three trillion. When applied globally, the loss to society is in the tens of trillions. When applied to a single young woman, the cost of trading her dignity for an education and a chance to escape poverty is devastating.
No one connects the dots on the true root cause of this issue: follow the money.
Most studies suggest the solution to sex for fees is educating young people about healthy gender norms, empowering them with free education, enhancing social networks, building their self-esteem, and offering them mental health support. Only a few have studied cash transfers, particularly conditional cash transfers, as a solution. However, where access to funding was studied, the results were powerful, with a reduction of sex for fees by up to 30% in Tanzania. It’s important to note that families are uncomfortably complicit in sex for fees, recognizing it may be the only means for their children to obtain a secondary school education. In one Kenyan study, when school uniforms were distributed for free, adolescent and teen pregnancy went down demonstrably.
When the system is broken, fix the system, not just the girl.
Education is a human right, yet it is still inaccessible to most young women worldwide due to government budget constraints. Banks could provide a continuous source of funding to address this issue, but the public sector plays a pivotal role in either incenting or deterring them from offering student loans, particularly to young women. Recent studies show that interest capping in over 76 countries worldwide often results in decreased access to credit for underprivileged borrowers, nullifying the intended benefit of lower interest rates. Kenya's example, which implemented an interest rate control in 2016, led to the student loan market almost drying up, with some extortionate fintechs proliferating across the market, offering 30-day loans at sky-high interest rates. These mobile lenders implemented predatory recovery processes, leading to numerous defaults and even youth suicide not to mention further exploitation of girls lured by offers to pay down their debts. This chain of events was largely directly created by the government policy to cap interest rates.
While scholarships and grants can help, they rarely cover the entire cost of education, leaving sex for fees as the elephant in the room, even for well-funded donor projects. At St. Therese Vocational Training Center in Kenya, although tuition is free, 30% of girls drop out because they can’t afford the $100 government exam fee at the end of the course. The head nun relayed stories to me of girls giving birth to babies on the classroom floor, hiding their pregnancy to try to graduate with a certificate before it was too late. 20% of girls are young mothers not by choice but because tuition is only half the expense of attending a course, and raising the rest of the cash needed puts them in harm’s way.
The overlooked elephant in the room is that by eliminating the option to borrow, even if at market interest rates, most young women are left trading sex to cover their education expenses. This is a grotesque, unintended, but quantifiable consequence of donor policies that crowd out market-driven student loans in favor of scholarships or concessionary rates. Indeed, it may well be concluded with further research that the largest form of private financing of higher education and even secondary education worldwide and especially in the global south, is the financing that stems from older exploitative men. Even worse is the second likely conclusion: without scalable student loan financing, many higher education institutions are so reliant on the tuition fees paid by these exploitative men that many would have to declare bankruptcy if the funding were removed through interventions or policies that stigmatized the behavior broadly. Therefore, considering the greater good and the other students they serve, education institutions may not be aligned to safeguard students more effectively or speak up against this abusive practice unless another form of financing is made accessible at scale. This is not the fault of the institutions or the young female students. The culprit of this calamity is the banking sector and the governments that regulate it within each country. But policymakers also need to get out of the way of the private sector from creating commercially sustainable loans that ensure that education is accessible to all without bankrupting the government.
For banks to finance young women, it costs them a simple change of mind.
Private sector financing, particularly through banks, is the most effective evergreen solution to this crisis. Banks have a direct financial incentive to lend to educated young women as these graduates become bank customers with savings accounts generating transaction fees and interest income. Working with banks, Girls First Finance calculated that the average net present value of future income for a woman customer with a higher education degree exceeds $20k USD based on their lifetime of transaction fees and interest income. Therefore, banks can afford to absorb reasonable default rates (noted by FSD to fall between 7% and 17% in Kenya) for modest student loans of less than $1,000 each that transform unbanked, vulnerable girls into educated, high-quality women bank customers.
However, banks are risk-averse when it comes to lending to young women, especially for school. They often require 100% collateral coverage on loans or high-income earning guarantors to consider lending along with a robust credit history, which prevents vulnerable young women from borrowing. Yet it’s proven that credit scores that do not rely on bank history can lower the risk premium on loans to first-time borrowers. Credit scores for credit-invisible young adults can be calculated using proxies from alternative digital data footprints, especially with digital solutions like super apps. Banks also offer such short tenors that loans are unaffordable to repay for all but the middle class.
Finally, banks exhibit internal cultures that often tolerate and even encourage the exploitation of young women. “Sex for loans” is a rampant practice that still contributes to women’s financial exclusion. Bank employees in Kenya are often proud sugar daddies themselves. Banks need to promote more progressive interventions to support vulnerable girls and eliminate any culture that supports exploitative practices.
If dinosaur banks don’t wise up, fintechs will make them extinct to young women.
Fast at the heels of traditional banks are a crop of neobanks like Umba and Fingo, disrupting the traditional banking system with digital-only services that are more accessible and youth-friendly. They offer an easy account opening process and an interface that invests in young people with a long-term horizon. Fingo's partnership with Ecobank enables it to reach youth seamlessly in 36 countries across Africa, making it easier for young women to access financial services. Girls First Finance is also partnering with Fingo to offer revenue-sharing for borrower accounts, making loans more affordable for students and less risky for investors. These partnerships finally recognize and redistribute the potential value of investing in young women equitably.
Nothing can work at scale unless it starts with access to a smartphone.
The final essential ingredient to lending at scale is the gender gap in digital access, a problem the UN notes must be addressed. Telecom companies are increasingly facilitating the inclusion of vulnerable young women into the digital landscape by implementing effective policies to uplift them through their smartphone devices. In Kenya, Safaricom, with 99% market share and 97% coverage across Kenya, has pledged to remove the cost of data bundles for special gender empowerment apps like Girls First Finance, which provides holistic support, including access to counseling, mentorship, job-seeking support, safeguarded networking, budgeting tools, educational empowerment content, and loans. Safaricom’s success is another example of a positive public intervention, as it is attributed to the success of the M-Pesa cash app seeded by a UK government grant.
Safaricom and Vodaphone have also launched affordable 4G smartphones at $50 per device with financing schemes to ensure that more vulnerable youth can join the digital revolution more affordably. A study in Tanzania showed that women given smartphones increased their monthly income by 20% on average, providing a first-year return to the women of over 3x. Such interventions can create transformative changes worldwide but also make enormous business sense.
Knowledge is Power.
Encouraging sustainable lending to young women is the next crucial step in a multi-pronged solution. Donors in particular can multiply their impact 5x to 10x by transforming scholarships into guarantees or investments in student loan facilities like Girls First Finance.
But much more data is required to analyze this issue objectively, and governments, NGOs, and donors should commit to understanding the scope of the issue rather than continue to avoid this uncomfortable subject. And data should also disaggregate for gender among borrowers. An internal analysis of Kenya’s government student loan program known as HELB showed that young women default at only a third of the rate of their male peers. Such information should be shared widely to dispel myths that women are not credit-worthy enough to bet on their educations.
Ultimately, a solution that enables young women to access smartphones, money, a safe, professional network, and safeguarding support is the holy grail to ensure young women are removed from harm’s way. The ray of light amidst the dark clouds is that the cost of flipping the script on this crisis could be fully borne by the market, making student loans a profit-generating business for banks and investors and the best lifelong investment young women, benefitting not only themselves but all of society.
About the Author
Andrea Pizziconi, CFA is an artist, impact investor, and serial social entrepreneur with over 15 years of active investment experience in Africa. She is also the founder of Girls First Finance (“GFF”). GFF is a fintech and mobile “super app” with character-building empowerment support through 13 different features, including mentorship, counseling, budgeting tools, networking, career empowerment, and an affordable student loans platform that prioritizes vulnerable girls as borrowers using behavioral underwriting connected to their use of the app. GFF is a blended capital family of companies with two social enterprises and a 501(c)3 starting in Kenya with intentions to roll out across Africa and worldwide.
