Once a student has been accepted to receive HCP financing, they will enter into a four-way contract with HCP, their sponsor, and the university:
- HCP will commit to providing the university fees and maintaining the HCP alumni.
- The university will commit to providing the degree and abiding by the MoU.
- The student (“HCP scholar”) will commit to completing their degree, and then contributing 10% of their income back to HCP for a fixed period of time, starting from the time they enter the job market. The period of time for repayments will depend on how much HCP financing they need, with a maximum of 10 years.
- The sponsor will ensure that the student follows their commitments, and if the HCP scholar is deemed to have cheated then the sponsor will be required to make HCP payments.
HCP financing is only for students who have no other option. It is a last resort. Students who are able to afford University on their own, or through alternative scholarships, should pursue those options.
HCP finance is not a charity. Students who receive financing agree that if they receive above $50/month income in the future, they will contribute back into HCP and that money will be used to help other poor Cambodian students.
HCP finance is not a loan. Repayments are not linked to the original size of the scholarship, but are linked to the income of the scholar. If a scholar gets a high income then they will pay significantly more than the original cost of the degree. This is why it is better to self-finance if possible. This approach is called “personal equity”.
HCP is non-government and non-profit. All of the financing is made available by private donations, and payments from HCP graduates. There is no profit, no wages for HCP volunteers, and all other expenses (eg travel and accommodation in Cambodia) is paid by the volunteers, not by HCP.
How does “personal equity” work?
Hypothetical cost of a degree = $1000
Average Income/year Repayment/year Total repayment (10 years)
$0 $0 $0
$500 $0 $0
$1000 $100 $1000
$4000 $400 $4000
$10,000 $1000 $10,000
HCP is taking the risk of failure and also receives the benefits from success. Students who succeed and become relatively rich will pay more, while students who do not succeed and remain relatively poor pay less. Students with an income below $100/month do not have to make any payments.
The money paid to HCP is used to re-invest in more students, thereby helping more Cambodian students to get an education and a better job.
Why use “personal equity” instead of a loan?
Personal equity is different to a loan because the supplier of the funds (HCP) is taking on the risk of failure. This has two obvious advantages for the recipients of the finance:
– It can be difficult for poor families to get credit at market rates because they can provide no collateral and they therefore offer a bad risk.
– Under a loan approach, if a student fails for any reason (ie if they do not finish the degree, cannot find a job, or can only find a low-pay job) they must still re-pay the debt, sometimes resulting in a debt trap. Under personal equity the student only repays if they succeed in obtaining a job above the non-university income level.
What happens if somebody doesn’t pay?
For many Cambodians the honour of the contract, the recognition of the benefits they’ve received and the chance to help other people will be sufficient to ensure their voluntary compliance with the contract. However, it is also necessary to have sanctions against those who would be dishonest.
HCP and the university will pursue multiple avenues for ensuring the honest repayment of dues from HCP scholars.
– Additional fees for fraud/deceit
– Legal & political action to force payment
– Pursuing money from the student’s sponsors
– Suspension from the HCP & university alumni
– Public notice of refusal to pay
– Blacklisting of the school/village
– Withholding of the degree (the university will only provide photocopies until the obligation is complete)
Which Universities do you deal with?
At the moment HCP only deals with the University of Management and Economics (UME), at their Battambang campus and their Kampong Cham campus. Both campuses have signed a Memorandum of Understanding with HCP.
In the future, depending on finances and time, HCP would like to expand to other campuses, other Universities, and other countries.