Malengo

In our 10th episode, we take a deep-dive into Malengo, an organization that facilitates international educational migration. Malengo helps students from low-income countries with admissions and financing for a bachelor’s degree in a high-income country. We discuss why migration is an important lever for development, and how income-share agreements can make supporting it a worthwhile impact investment.

Our guests bring in 3 different perspectives. Johannes Haushofer is a development economist who founded Malengo based on findings from his research. Richard Nerland is an economist with a passion for academic economics and international development. Convinced by Malengo’s potential for impact, he invested USD 3.5 M into the organization. Along the way, he helped develop a tax-efficient financial model to make Malengo attractive for other investors to follow suit. Gladys Amule is a student from the first cohort of Malengo scholars. She shares her experience with the program and her motivation to pay it forward through Malengo’s income-share agreement.

• There is sound academic research suggesting that incomes are largely determined by where you live. Based on this research, Malengo aims to help high school graduates from low-income countries to study in a high-income country. The organization estimates that the incomes of the students should increase by a factor of 16 by participating in the program. There are several academic studies embedded in Malengo’s work, to independently evaluate to what extent these impacts will materialize.

• To make opportunities accessible to the largest number of students possible, the Malengo model relies on an income-share agreement. Upon graduation, Malengo scholars repay a sum once they cross a certain income threshold. This threshold is the same whether scholars stay abroad or move back home. There is thus no financial pressure to stay abroad to make repayments for those who wish to return home (given that students are less likely to reach the threshold for repayment with an income in their home country). The income-share agreements enable Malengo to offer financial returns to impact investors. Richard has built detailed financial models for what financial returns can be expected under what assumptions (% of scholars graduating and reaching the repayment threshold).

• If scholars remain abroad, brain drain should not be a concern, says Johannes. First, remittances are an important means to have an impact on home communities from abroad. Second, there are role model effects: learning about the potential opportunity to study abroad can motivate students to apply themselves harder in school. Third, business and job connections for home communities can be forged from abroad, since foreign direct investment and business partnerships flow along the lines of personal connection.

• Malengo’s website
• Johannes’ Twitter thread explaining the academic path that led him to found Malengo
• Richard’s Twitter thread explaining why the decided to become Malengo’s inaugural investor, including his take-aways from academic literature

• Johannes ‘ paper on general equilibrium effects for cash transfers

Egger, D., J. Haushofer, E. Miguel, P. Niehaus, and M.Walker. 2022. “General Equilibrium Effects of Cash Transfers: Experimental Evidence From Kenya” Econometrica. https://doi.org/10.3982/ECTA17945

 

• Michael Clemens economic argument that friction from migration restriction is enormous

Clemens, Michael, A. 2011."Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?" Journal of Economic Perspectives, 25 (3): 83-106. DOI: 10.1257/jep.25.3.83

• Chris Blattman’s paper on cash transfers wearing off:

Blattman, C.,N. Fiala, N. and S. Martinez, 2019. “The Long Term Impacts of Grants on Poverty: 9-Year Evidence from Uganda's Youth Opportunities Program”. http://dx.doi.org/10.2139/ssrn.3223028

• On brain gain, evidence from nursing programs in the US:

Abarcar, P., and C. Theoharides; C. 2021. “Medical Worker Migration and Origin-Country Human Capital: Evidence from U.S. Visa Policy”. The Review of Economics and Statistics. https://doi.org/10.1162/rest_a_01131

• On brain gain and spill-over effects

Khanna, G., E. Murathanoglu, C.B. Theoharides and D. Yang, 2022, “Abundance from Abroad: Migrant Income and Long-Run Economic Development”, National Bureau of Economic Research, Working paper 29862, DOI 10.3386/w29862

 

• Migrants, Ancestors, and Foreign Investments

Burchardi, K. Chaney, T. and Hassan, T. 2018, Migrants, Ancestors, and Foreign Investments, The Review of Economic Studies, Volume 86, Issue 4, , Pages 1448–1486, https://doi.org/10.1093/restud/rdy044

• Lant Pritchett on labor migration

Financing Impact is a podcast about funding and scaling societal impact. This podcast is brought to you by SciFi, the Societal Impact Financing Initiative at ESMT Berlin. SciFi is supported by the Bill & Melinda Gates Foundation, among others.

For feedback on the show or to suggest guests for future episodes, contact us at scifi@esmt.org