Education is crucial to the development of nations. It fosters innovation and creativity, which are essential to thrive in an ever-evolving environment. As Gemma Wild, HSBC’s Regional Sector Head, Education, CMB, MENAT, explains, the sector’s importance in the region has been recognised by governments, which has led to greater international interest from investors as well as education providers.
Globally, the education sector is recognising the need to pivot in response to technological innovation and industry’s changing skill requirements. In the Middle East, North Africa and Turkey (MENAT) region, the education sector remains a top priority for governments, many of which are transitioning towards sustainable and knowledge-based economies.
National budgetary allocations for education continue to strengthen the sector even as rising population, high per capita income and an increased preference for private education causes fundamental changes in the dissemination of learning.
The MENAT region has an increasing population base of school- and college-age students. The Gulf Cooperation Council (GCC) nations alone are expected to see a total student population of 14.5 million in 2022, registering a CAGR of 2.3% from an estimated 12.9 million in 20171. In the UAE, the 2019 federal budget of AED 60.3 billion allocates 17% for education development2.
In Egypt in 2016/17, the total enrolment at the K-12 level reached 20.6 million, and total enrolment at the higher education level touched 2.4 million students3.
Key trends that are shaping the sector include:
At the same time, the sector is witnessing intense competition, gaps in supply and demand in sub-sectors, high operational costs and a shortage of educators, putting operators under increased pressure.
With private equity investors banking on this sector, there has been an increase in mergers and acquisitions (M&A) activity owing to realistic price expectations. Key examples of these are Nord Anglia Education, a Hong Kong-based operator of K-12 premium schools across China, Europe, Middle East, South East Asia and North America, acquiring the British School of Kuwait (BSK) in 20174.
Dubai-based Amanat Holdings, which focuses on healthcare and education investments in the GCC, acquired the real estate assets of NLCS Dubai for AED 360 million in June 2018, with an additional commitment of up to AED 45 million towards the school’s expansion plans5.
More recently, the UAE-based, Nasdaq-listed GEMS Education acquired Ma’arif Education Group, the largest private school owner and operator in Saudi Arabia, through a joint venture with Hassana Investment6, in May 2019, with plans to build 50 schools in the kingdom.
A sector-based approach enables HSBC to develop a proposition that takes into account the needs of the whole educational ecosystem. At the individual level, this translates into parent and student loans, financial capability training, and solutions providing international financial mobility to teachers.
At the investor level, there is funding support to build schools and universities. Investor interest allows education platforms to be asset light in terms of balance sheet in a sector that is capital intensive at the start with return on investment (ROI) being long-term. A financial institution with a sector-based approach can be a key part of this strategy by lending to the investors while supporting the operators. HSBC’s international presence allows investors to take advantage of cash pooling at the parent company level, while pursuing expansion opportunities in the MENAT region.
At the institutional level, school and college treasury teams can deploy more efficient and safe platforms such as HSBCnet to manage cash and reconcile student fees using virtual accounts.
Products that are particularly relevant to the sector include:
A financial institution can be supportive in expansion of global education platforms as well in improving facilities.
At the same time, the HSBC’s active community initiatives help school and university students develop real-world skills via financial literacy and entrepreneurship programmes at its Innovation Labs. The bank taps into its extensive client network to facilitate programme development in emerging fields such as cyber security, digital technology and future skills.
It’s an exciting time for a financial institution like HSBC to provide support and financing option to a sector that is increasingly being viewed in the MENAT region as a crucial pillar in socio-economic development.
HSBC is helping foster MENAT’s education sector to help drive a knowledge-based economy.
Tatawwar, is an exciting, interactive programme sponsored by HSBC which brings together students, schools, parents and the business community to help innovate for a shared future.
The COVID-19 pandemic has shaken up traditional models of learning in schools and universities. Although online learning has so far proven to provide certain benefits, this method of learning presents certain challenges. As such, educators need to find a middle ground.