The Triple Impact Guarantee Facility

This is an invitation to other foundations to join us in unlocking additional private capital for education financing. Thanks to the convening power of the MIT Kuo Sharper Center for Prosperity and Entrepreneurship, the IDP Foundation, Inc., in partnership with TLG Capital, has created a financing model that enables affordable, local currency lending to Jackfruit Financein Kenya without costly FX hedging or inflated interest rates.

This structure allows foundations to support marginalized students in Kenya, improving education quality and conditions, without committing any new funding

The Challenge

Foreign exchange volatility is one of the greatest barriers to affordable foreign investment for SMEs in Africa. Early-stage financial institutions like Jackfruit Finance cannot access sufficient local bank debt and are therefore dependent on foreign capital. That capital introduces FX risk that materially increases cost and constrains growth.

Jackfruit Finance requires capital to expand its school lending portfolio. Local banks have not stepped in. Traditional USD investment would impose FX costs that strain a young institution.

IDP Foundation believes Jackfruit Finance is commercially viable and therefore does not want to deploy philanthropic capital where private capital should operate.

TLG Capital views Jackfruit Finance as a strong business, but at too early stage for its fund risk profile. A properly structured guarantee resolves that constraint.

The Solution

This facility elegantly addresses these challenges simultaneously, while also tripling the impact of the foundation’s investment.

A Standby Letter of Credit issued by Morgan Stanley on behalf of IDP Foundation provides a principal guarantee to TLG Capital without requiring cash collateral. The foundation’s corpus remains fully invested.

In addition, IDP Foundation and TLG Capital share FX risk. TLG absorbs first loss of currency depreciation. IDP Foundation covers losses that would impair principal recovery beyond that threshold.

This structure protects Jackfruit Finance from the burden of FX volatility, unlocks private capital, and preserves philanthropic resources.

The Opportunity for Foundations

The primary objective of an endowment is financial growth. When deployed strategically through guarantees, the same invested dollar can also unlock private capital and accelerate mission impact without sacrificing investment exposure. We believe SBLC issuance is typically achievable at approximately a 50-70% loan-to-value ratio on liquid security portfolios.

This structure allows foundations to:

• Support education outcomes in underserved Kenyan communities without committing grant funding.

• Keep their endowment fully invested while using balance sheet strength to unlock private capital.

• Bring genuinely new capital into low-income school finance, including from investors without an impact mandate.

• Maintain strong downside protection. Capital is only drawn in the event of default after recovery efforts or if currency depreciation exceeds agreed thresholds.

• Rely on rigorous due diligence conducted by both IDP Foundation and TLG Capital.

• Participate in a fully structured, legally completed, and replicable model.

An Invitation to Participate

IDP Foundation has guaranteed the first $500,000 dollars to validate the model and intentionally structured the documentation to accommodate additional guarantors. TLG Capital has committed to lend up to $5 million dollars to Jackfruit Finance under this guarantee-backed framework.

Additional foundations can participate efficiently by leveraging shared due diligence, standardized legal agreements, and an operational structure already in place. With expanded guarantees, Jackfruit Finance can scale responsible lending to low-fee private schools, supporting investments in infrastructure, safety, and measurable improvements in learning outcomes across Kenya.

Why Jackfruit Finance

Specialized lenders serving low-fee private schools remain scarce despite growing demand. IDP Foundation has supported school financing for over sixteen years in Ghana and since 2022 in Kenya. Repayment data from comparable portfolios, combined with rigorous due diligence and years of sector experience, underpin confidence in the credit profile.

In partnership with Jackfruit Finance, the foundation has helped design loan products that incentivize and reward improvements in learning outcomes, not only infrastructure upgrades. With additional capital, Jackfruit Finance can expand access to affordable, responsible financing for low-fee private schools and support investments in classrooms, transportation, and improved learning environments for children across Kenya. For every $500,000 in new financing unlocked, an estimated 85,909 children across 228 schools will benefit from improved learning environments.

How the Structure Was Built

IDP Foundation, in collaboration with TLG Capital, Jackfruit Finance, RPCK, and Hannaford Turner LLP developed and executed a guarantee backed local currency investment structure. The process was intentionally designed to be replicable, legally robust, and efficient for additional foundations to join.

Due Diligence on Jackfruit Finance

Both IDP Foundation and TLG Capital conducted independent due diligence. TLG assessed commercial viability and risk profile. IDP Foundation evaluated financial health, impact alignment, target school demographics, safeguarding standards, ethical lending practices, loan product design, and commitment to improving learning outcomes.

This diligence is available for prospective guarantors, reducing the need for duplication and accelerating participation.

Engaging the Issuing Bank

IDP Foundation instructed Morgan Stanley, manager of its endowment, to issue a $500,000 Standby Letter of Credit using a securities-backed line of credit. This preserved invested capital, maintained market exposure, and avoided opportunity cost.

Key steps included:

• Establishing the SBLC under the existing securities backed facility.

• Setting conservative collateral coverage to manage market volatility.

• Confirming fees and conversion mechanics in the event of a draw.

• Completing required counterparty diligence on TLG Capital.

• Aligning structure, risk management, and documentation across all parties.

Legal Architecture

IDP Foundation engaged RPCK, a specialty legal firm with expertise in structuring guarantees for impact-led organizations, to structure documentation so that any payment triggered by a guarantee call could qualify as a mission-related expense and charitable giving under U.S. tax law. TLG engaged Hannaford Turner LLP to ensure legal compliance and safeguard its interests. The partners drafted and coordinated the full legal framework, including:

Standby Letter of Credit

• Issued by Morgan Stanley for the benefit of TLG Capital. Covers principal losses arising from default or severe currency depreciation (beyond 14% depreciation). Auto renews annually for up to five years. Issuance cost was $2,500.

Facility Agreement

• The core lending agreement between TLG Capital and Jackfruit Finance defining loan terms, reporting obligations, default triggers, and enforcement mechanics. Designed for reuse with minimal amendments.

Guarantee Agreement

• Drafted by RPCK to reflect IDP Foundation’s mission alignment, compliance requirements, and risk tolerance. Structured to accommodate a group of guarantors, reducing customization for additional foundations. The Guarantee Agreement defines demand procedures, recovery thresholds, treatment of recoveries, allocation of currency risk, and shared reporting obligations.

As a commitment to transparency and replicability in other sectors we have made all three of these documents available for review here.

Foundation Investment in Replicability

IDP Foundation absorbed the initial legal and structuring costs to create a reusable framework. Follow on foundations can participate by relying on existing documentation, shared due diligence, and an established operational model, significantly reducing time, cost, and complexity.

Alternative Structures: DAFs and Portfolios

The guarantee model pioneered by IDP Foundation is not limited to institutional endowments. Donor-Advised Funds (DAFs) and high-net-worth individual securities portfolios offer equally viable pathways to participate. A DAF held at a mission-aligned sponsoring organization may explore using securities as collateral by issuing a guarantee as a Program-Related Investment (PRI), provided the guarantee is structured to further a mission aligned purpose and, if unused, securities revert back to the DAF for redeployment. This preserves the fully invested value of the DAF while deploying its balance sheet strength for impact, precisely mirroring the endowment model used here. Similarly, a high-net-worth individual with a liquid securities portfolio can instruct their wealth manager – as IDP Foundation instructed Morgan Stanley – to issue a Standby Letter of Credit against their portfolio, without immediately liquidating any holdings. In both cases, the guarantor bears no cash outlay unless a draw is triggered and the underlying assets remain market exposed. Given that the legal architecture, due diligence, and facility documentation are already in place and designed for replication, the barrier to entry for DAF holders and individual guarantors is substantially lower than for the founding guarantor – making this an accessible and capital-efficient way for a broader range of philanthropically minded investors to unlock education financing for Kenyan schools.