It’s great to see the work of Malengo continuing! What a fascinating, ambitious project. Some questions.
What share of the costs do you expect to be recovered through the income sharing agreements? You seem to think this is quite high, and that seems plausible. But I’d be curious to think how this should be reflected in the current cost per person if it isn’t already.
Out of curiosity I did a BOTEC of Malengo in WELLBY terms. The cost-effectiveness depends strongly on the assumption of cost coverage through the ISA. I make some other assumptions that are conservative:
Assumption: That the wellbeing benefits don’t increase over time, but last the rest of life. As I explain below, we might expect these to increase as students integrate. On the other hand, if these are driven by receiving counselling, then these would decrease over time (how many receive counselling and what’s the dosage?) – to be clear I think this would be strange if true. Overall, I think this is the most conservative assumption.
Assumption: that the spillover benefits last until parents pass away. I assume the mechanism is remittances and these will last until parents pass away. I also assume no further emotional spillover benefits to the family that the beneficiary will form if they stay in Germany. This is hard to think about but seems consistent with assuming a relatively efficient mating market.
Clarification: is the cost per person the presumed cost to support someone all the way through their (7 years hopefully less?) of schooling?
What is the effect on SWB / MH disaggregated by measure? Also, what were the absolute values for the SWB / MH measures at baseline? I’ve recently been doing some work comparing the difference between happiness / affective measures and satisfaction. This has led me to think the difference between a country’s happiness is much less than their satisfaction. So my guess is that the effects on satisfaction are larger than happiness / mood / MH.
Most evidence about immigration and SWB suggests convergence towards the host country SWB. It’s hard to tell, because of the aggregation, but this seems to tentatively point against that. But a year isn’t that much time, so I guess prior evidence would suggest to me that the effects grow with more time.
That said, this could also show something weird / interesting about SWB scales. What you have is just about the only causal effects of immigration on wellbeing outcomes (I think there’s one other study but I remember being unsatisfied with it). While this seems like pioneering work by itself, it’s also maybe a way to crack open the black box between cross-country wellbeing comparisons and what drives them. It’d be really interesting to ask the Malengo beneficiaries something like how they remember their wellbeing back in Uganda. I wouldn’t be totally surprised if their scales are also changing in response to moving.
I think immigration may be one of the single greatest ways to increase human wellbeing, and (a hotter take) ultimately will be critical to maintaining the balance of power of democracies against autocracies—which seems important for the future to me. Now the awkward question. The programme on a small scale seems like it shouldn’t raise concerns about wider societal spillovers, but I doubt you’d be doing this if you wanted it to remain on a small scale! What are your thoughts on the potential negative political side effects of increasing immigration in Germany?
This may be my skittishness as an American, but immigration seems to fuel anti-immigration parties which tend to be more illiberal in other ways unrelated to their immigration policies. This seems also to be true in the case of Germany.
Here’s the expected rejoinder:
“This may be the case for lower skilled (I know there must be a better term than this) immigration, but these individuals will be college graduates – and not only that they’ll be educated in Germany so they’ll be better able to navigate Germany’s proclivity towards certifications. The data on the economic integration (as proxied by unemployment) of immigrants that are German college graduates is much higher (see this OECD report, 2024). Furthermore, much of the cultural backlash is based on religion, given that Uganda is 80%+ Christian, Ugandans may be better at supporting traditional German values than natives!”
Would be curious to know your thoughts, but I get the discussion of immigration poitics is a difficult topic, so I understand if you don’t want to opine publicly.
Again, fascinating, and very cool work! I wish it to succeed.
Thanks for this incredibly thoughtful comment and the BOTEC work! It is exciting to see someone digging into the implications for the WELLBY impact.
Here are my thoughts on your questions:
1. ISA Recovery & Cost per Person You are right that the cost-effectiveness depends heavily on the recycling of funds. I built two related Monte Carlo simulations to assess the sensitivity of IRR, impact, and students educated to our input parameters. For the sake of brevity, I won’t paste the full methodology here (it helps explain the logic behind the sheer number of variables), but I’ve attached a takeaway screenshot below. It shows how many students would be supported over the next 55 years with $1m in recycling investment.
The assumptions in our GiveWell sheet align with the p25 Scenario, which could be interpreted (539 student on an initial $1m investment, recycled) as a ~$2k cost per student.
I want to caveat that this has optimistic and pessimistic assumptions. There are some indivisibilities that could make expenses higher if the program runs at a smaller scale than a budget (explained below) of around $5m a year.
On the other hand, this represents completely unleveraged investment. With a stable underwriting model, Malengo (or similar lending with an educational migration approach) could eventually be lending against the contracts. A reasonable rule of thumb, if we are successful, would be achieving 5:1 leverage. In that scenario, $1m in the first-loss guarantee would unlock $5m in capital that would send at least 5x as many students, knocking the cost per student to $400. (Note: We might be able to swing something like 2:1 leverage at the moment, but it is a lot of work!)
In the true optimistic case, Malengo has infrastructure-like financing where donors wouldn’t even need to donate to Malengo, they only offer a guarantee backed by assets in their DAF or Foundation or it is offered by a DFI and that unlocks bank loans that are serviced by the ISA obligations. In this scenario, philanthropy covers the fixed cost of building the “flywheel”, while the scaling capital itself comes from credit markets.
I am hoping that our new CIO, Chad Sterbenz, will be able to post to the EA forum soon to do more justice to how this type of fund would work in practice with examples.
2. Cost Duration To answer your clarification: Yes, the model accounts for 1-year stipend and then wrap-around support through the full duration of schooling. The “cost per person” is an all-in figure. It is derived from a conservative strategic plan: it represents the total dollars spent per student to sustain the entire organization for 20 years at a minimum viable scale (covering tuition, living cost gaps, and operational overhead), with a buffer in case a wind-down is required.
3. Disaggregated SWB/MH Measures This is a great point about the difference between life satisfaction and affective happiness. I don’t have that breakdown on hand, but I believe you are correct about the divergence. I will inquire with the research team about sharing those exact measures.
Regarding your BOTEC assumptions: Your spillover duration assumption (pegged to parents’ lives) strikes me as reasonable, though perhaps conservative in scope. In practice, scholars send remittances to many family members, particularly to fund younger siblings’ schooling. (We don’t currently expect them to facilitate additional migration via their own funds). I actually incorporated a taper reflecting this into the impact simulation shared above after reading your comment. Thank you for that nudge!
Second, regarding the assumption that wellbeing benefits represent a flat line: I agree that is conservative. If the economic integration works as intended (see point 4), we should expect the convergence toward host-country wellbeing levels to be faster and stickier for these scholars than for the average migrant.
4. The Political Question & The OECD Graph You anticipated the rejoinder perfectly. I’m with Alexander Kustov on this: migration has to be demonstrably beneficial to receiving countries. Migration will happen either through chaos or competence. Money can buy competence if the contract lets it.
The ISA is that contract: it pays for language, skills, and placement quality, and then pays itself back. We are betting that competence and successful integration are the best counter-arguments to populism.
As shown in your OECD chart, there is a massive gap in Germany between immigrants with foreign degrees and those with host-country degrees.
By ensuring our scholars get German degrees, we bypass the primary friction point. Our scholars face a lower “immigrant penalty” in the labor market sense; they (hopefully) perform almost identically to native-born graduates (We model 20% discount decaying as they integrate for 10 years of working). Malengo wants to demonstrate that deep economic integration can happen with sufficient resources.
I’m going to focus on the funds recycling since this seems like it may be the most important bit.
Since you’re assuming $1mil recycled for a budget of $5mil does this imply that you will recycle 20% of costs? If so, that seems low given everything else you’ve said, so I assume I’m missing something.
The leverage point is really interesting. Do you have any current prospects for making the leverage work? I would guess you have to wait (how long?) to see if the default rate is sufficiently low for the ISA?
What has to be true for this to work out financially? Something like the real rate of return on $ / euro invested in students has to be equal or greater than the interest rate on the loan?
It’d be great to hear more about this!
When you mention $2k and $400 per student, could you explain how this differs from the $30k listed as the best guess in the spreadsheet. Sorry for all the questions, I just want to understand!
The mechanics of the fund are counter-intuitive compared to standard grant-making, so let me break down the math behind the $2k and $400 figures and how they relate to the $30k cost.
1. The Recycling vs. The Multiplier Effect I think the confusion here stems from a coincidence of numbers in my previous comment. I mentioned a $5m budget and a $5m leverage target, but those are distinct concepts.
The Recycling Math (p25 Scenario): In this scenario, we start with $1m in philanthropic capital and invest at a gross cost of 30k per student, that sends ~32 students immediately.
Over the next 40 years, as those students repay, the money is lent out again. Each student funds about 1.5 new students every 10 years (ie 150% recovery). In the simulation, that single $1m pot eventually funds a total of 539 students.
This implies a multiplier of roughly 16x: For every 1 student funded by the initial donation, the returns eventually fund ~15 more.
$30k (Gross Cost): This is the “sticker price.” It is the total cash budgeted to send one student (tuition + living stipend + operational overhead) → given our small size stays at this size.
~$2k (Net Philanthropic Cost): This is the unrecovered cost per student in a 40-year period. If $1m of philanthropy eventually educates 539 students (via the recycling described above), the effective cost to the donor per student is $1m / 539 = $1,855.
~$400 (Leveraged Cost): This assumes we achieve the 5:1 leverage ratio. If a donor provides the $1m philanthropic capital and we build a fund with it as first-loss capital, and we raise $5m in commercial debt, the system has $5m to deploy ($1m in reserve). The donor’s “cost per student” drops because their single dollar unlocked five dollars of capacity. → Note, this is quite simplified because we become much more sensitive to assumptions while leveraged. Returns are either much greater or the risk capital is all lost.
2. Financial Viability & Blended Capital You asked: “Something like the real rate of return on $ / euro invested in students has to be equal or greater than the interest rate on the loan?”
Yes, exactly. In nominal terms, the Net Portfolio Yield (after defaults/expenses) must be greater than Weighted Average Cost of Capital (WACC).
In the p25 scenario, the Net Portfolio Yield is 3.8% (Listed under the IRR column).
This is too low to attract pure commercial capital (Even with data, European rates for this risk profile might be 4–7%). However, this is where Blended Finance comes in. We don’t need 100% commercial capital; we can stack different tranches:
Tranche A (Philanthropy/DFI): 33% of the fund. Target return: 0%.
Tranche B (Commercial): 66% of the fund. Target return: ~6%.
Result: The blended Cost of Capital drops to ~4%, which makes the 3.8% return viable (or very close to it).
I have initiated talks with impact funds, DFIs, and banks to structure this. It is difficult to achieve, but within reach, so we hired a CIO. While lenders naturally want years of repayment data, there are creative ways to use philanthropic guarantees to de-risk them early on. We hope to share a more detailed write-up on the structuring of these capital stacks soon!
This is super helpful to have explained and makes more sense now.
So what is your best guess of the cost per student educated given Malengo’s expected ability to recycle costs and leverage? What is the cost per person Malengo educates / facilitates the immigration of that you would put into my BOTEC?
I am comfortable recommending a rule that is internally valid with all our presented assumptions. Our analysis operates in the 25th percentile of outcomes; that implies a cost per student of $1,855. (This lines up with the ~95% cost coverage in your row 39, though that is a happy coincidence!)
However, if you choose to weight across the distribution, here is how the cost per student evolves based on recycling performance and leverage assumptions:
p10: $3,472 (Zero leverage)
p25: $1,855 (Zero leverage)
p50: $353 (Assuming 2:1 leverage)
p75: $377 (Assunming 2:1 leverage; note: more Master’s students in this scenario compensates for lower dropout rates, leading to the flatness here)
p90: $141 (5:1 leverage)
Note: These figures are derived from the distribution in the top comment: $1m / (num_students * leverage).
If you want my personal “best guess”: I believe management will react to the data. If we are able to iterate for a decade, we will push toward p90. The team will find cost reductions using partners and tech, optimize contract specifications to ensure we achieve the target leverage, and refine the underwriting model to find the students most likely to succeed.
So, for your BOTEC, I would put $141 per student (implying ~99.5% effective cost coverage via recycling + leverage). But bear in mind, you are speaking to the person who already made that wager!
First based on other income sharing agreement orgs, i think it’s very likely they will recover close to all the money so I think that’s a reasonable assumption.
A couple of comments/questions on this take here
“I think immigration may be one of the single greatest ways to increase human wellbeing, and (a hotter take) ultimately will be critical to maintaining the balance of power of democracies against autocracies”
Can you explain the pathway that immigration “may be one of the single greatest ways to increase human wellbeing”. I can see how it has the potential to do good in many cases but “one of the single greatest” is a big call.
Also this...”immigration ultimately will be critical to maintaining the balance of power of democracies against autocracies”. How would this work? my instinct would be in the other direction at the moment. I would say anti-immigration sentiment is one of the biggest drivers of the global trend towards autocracy around the world at the moment. The anti immigration sentiment has been a huge source of support for Trump, and in England/many European countries there’s a similar dynamic. Do you think that immigrants are more likely to vote against autocratic leaders? That seems less and less the case, naturalized immigrant voters seem to be about 50/,50 on Trump last election, and even if we assume immigrant voters generally favor less authoritarian candidates, I really doubt that would overcome the harm the anti—immigration sentiment is bringing.
Germany is a decent test case too, where after bringing in 1 million immigrants,(which i support for the record) anti immigration sentiment has soared and has given the AFD a foothold.
My impression in Uganda is that there is increasing support for authoritarian regimes. many of my friends are huge fans of the West African Coups, and Africans might be the strongest Trump supporting countries in the world. just a few months ago 79 percent of Nigerians had at least some confidence in Trump, which is pretty mind-blowing
I was secretly hoping you’d show up given your past comments about brain drain.
Can you explain the pathway that immigration “may be one of the single greatest ways to increase human wellbeing”. I can see how it has the potential to do good in many cases but “one of the single greatest” is a big call.
Right, this comes from Sam and I’s previous look into immigration. Based on this work, our working model is that immigrants adapt to the level of wellbeing (proxied by satisfaction) of the host country. If we take this seriously, then there’s no known intervention that is more powerful than immigration. We can imagine this is plausible because immigration is a super intervention where you are getting tens to hundreds of potentially positive economic, health and psychological interventions altogether. Now, I also take this as a bit of a puzzle. Is it really the case that immigrating from India to the USA is ~2x better than moving from moderate to minimal depression symptoms?
One further thing is that this depends on preferring measures of satisfaction to happiness / mood. In some ongoing work it seems like the Kenya / Nigeria are about as happy as the UK even though they’re less satisfied.
I’m curious what you think about this, since you’ve supposedly made the move down the ladder of life satisfaction by going from NZ to Uganda (but this is I assume a relatively smaller dip in terms of daily happiness).
Also this...”immigration ultimately will be critical to maintaining the balance of power of democracies against autocracies”. How would this work?
I could have spoken more precisely here—I meant that immigration is critical if we can do it right and not have it undermine our democracies (which is arguably what’s happened in the USA).
This topic is outside of my happiness wheelhouse, and involves putting on my much smaller hat of geopolitics dilettante. But I buy the argument that to compete economically and deter militarily autocracies like China the west will need to be constituted by much larger countries, or have tighter alliances. Both prospects seem bleak at the moment. This is of course assuming we don’t have an AI singularity and the world looks relatively normal by 20th century standards.
Do you think that immigrants are more likely to vote against autocratic leaders?
I’m not super familiar with the literature but I lean towards “yes”, but I imagine this could depend quite a bit on the country of origin and the filter (e.g., Cuban Americans tend to be very anti-communist and Republican).
There’s so much here to think about, which I think reflects the complexity of immigration as a topic, both as a debate about benefits/harms and the challenges measuring outcomes, especially if we throw wellbeing in there.
Immigration benefits/harms I think Immigration is unusual as a GHD intervention, because it has the almost unique situation where there are many potential benefits and potential harms. Most global health charities like AMF/New Incentives/ just don’t have this problem. An exception might be GiveDirectly where there were a lot of potential harms touted at first, but their research has put to bed a lot of the initial concerns about inflation/dependency/jealousy.
The main benefits of immigration are personal and measurable, whereas the potential harms are diffuse and hard to measure, although there have been attempts to model brain drain harms. I still think CEAs should at least discount a bit for these potential harms, but its tricky to be sure.
PotentialBenefits (Some Included in CEAs) - Improved Wellbeing of immigrant - Remittances - Migration opportunities for families (often not measured) - Immigrants who return to the country with improved skills (often not measured)
Potential Harms (I’ve never seen included in CEAs) - Loss of high impact country builders. The most talented, and motivated people who might go on to become politicians/innovators/business leaders and influence thousands of people are the ones leaving. These people aren’t necessarily replaceable like regular workers. Malengo might be taking some of these, as their pool includesthat passed senior 6 well, which is the top 5%-10% of Uganda’s talent - Negative psychological/emotional effect on migration on the population remaining. “Japa” syndrome in Nigeria has been well documented, I’m scared of Uganda becoming like Nigeria, with everyone’s eyes abroad, and people not investing in their own businesses/future in country but instead always thinking about/talking about/trying to leave. This would not make for a nice workplace! - Fueling support for authoritarian regimes (hard to argue against at this point) - Brain drain in general, which despite protestations does exist although it can be mitigated.
Scales and Surveys and Wellbeing “Now, I also take this as a bit of a puzzle. Is it really the case that immigrating from India to the USA is ~2x better than moving from moderate to minimal depression symptoms?”. Yeah this is either implausible or absurd. I wonder if you could find even one person who would consider this plausible. This incongruous issue should trigger a hard look into where the data problem is exactly. Different countries almost certainly have different scales, and that migrants will scale-adjust. This makes it hard/impossible to track wellbeing accurately when people move countries/. Also I wonder if you’ve considered that its more well off people who will generally be immigrating so they will on average be far happier than the average person before leaving. Its probably best to take the top quartile (or higher) of home country happiness statistics as baseline.
As I discussed in some of my first forays into the forum, going head to head with the mighty Michael, I have huge doubts about the veracity of before/after surveys in development. I straightforwardly buy point surveys of happiness/satisfaction surveys of the first order. But I don’t put a lot of trust in before/after satisfaction surveys in where you do an intervention first, then survey satisfaction later. This concern cuts across including GiveDirectly, StrongMinds and here. I think Malengo is doing the right thing in doing before/after surveys as it is standard practise, I just don’t buy it myself. I’m going to quote myself from 3 years ago
“Self reporting doesn’t work because poor people here in Northern Uganda at least are primed to give low marks when reporting how they feel before an intervention, and then high marks afterwards—whether the intervention did anything or not. I have seen it personally here a number of times with fairly useless aid projects. I even asked people one time after a terrible farming training, whether they really thought the training helped as much as they had reported on the piece of paper. A couple of people laughed and said something like “No of course it didn’t help, but if we give high grades we might get more and better help in future”. this is an intelligent and rational response by recipients of aid, as of course good reports of an intervention increase their chances of getting more stuff in future, useful or not...
You also said “Also, we’re comparing self-reports to other self-reports”, which doesn’t help the matter, because those who don’t get help are likely to keep scoring the survey lowly because they feel like they didn’t get help.
So Back to your question… “Our working model is that immigrants adapt to the level of wellbeing (proxied by satisfaction) of the host country. If we take this seriously, then there’s no known intervention that is more powerful than immigration.
I don’t think that immigrants adapt to the satisfaction level of the host country (survey/scaling issues make this almost impossible to measure), although I do think there will be improvement. Then I think you also don’t consider the potential harms which mitigate the power of immigration.
On my life... ”I’m curious what you think about this, since you’ve supposedly made the move down the ladder of life satisfaction by going from NZ to Uganda (but this is I assume a relatively smaller dip in terms of daily happiness). I’m afraid my case is too weird, I’m extremely happy and satisfied, but that won’t help this discussion at all :D
On the political question… “I could have spoken more precisely here—I meant that immigration is critical if we can do it right and not have it undermine our democracies (which is arguably what’s happened in the USA).” I agree with this in principle (And Richard’s link on how to make immigration more appealing to host countries), but when it comes to considering interventions we need to observe the evidence of what is actually happening, not what we hope to happen. Right now (see my previous links) I think immigration isn’t helping democracy, unfortunately...
On happiness vs. satisfaction I must confess I’m a bit confused here, but its super interesting. I struggle to understand why these measures would be so different after looking at the questions. I think the jury is still out and I await the final authoritative report from HLI ;).
Hi Johannes and Richard,
It’s great to see the work of Malengo continuing! What a fascinating, ambitious project. Some questions.
What share of the costs do you expect to be recovered through the income sharing agreements? You seem to think this is quite high, and that seems plausible. But I’d be curious to think how this should be reflected in the current cost per person if it isn’t already.
Out of curiosity I did a BOTEC of Malengo in WELLBY terms. The cost-effectiveness depends strongly on the assumption of cost coverage through the ISA. I make some other assumptions that are conservative:
Assumption: That the wellbeing benefits don’t increase over time, but last the rest of life. As I explain below, we might expect these to increase as students integrate. On the other hand, if these are driven by receiving counselling, then these would decrease over time (how many receive counselling and what’s the dosage?) – to be clear I think this would be strange if true. Overall, I think this is the most conservative assumption.
Assumption: that the spillover benefits last until parents pass away. I assume the mechanism is remittances and these will last until parents pass away. I also assume no further emotional spillover benefits to the family that the beneficiary will form if they stay in Germany. This is hard to think about but seems consistent with assuming a relatively efficient mating market.
Clarification: is the cost per person the presumed cost to support someone all the way through their (7 years hopefully less?) of schooling?
What is the effect on SWB / MH disaggregated by measure? Also, what were the absolute values for the SWB / MH measures at baseline? I’ve recently been doing some work comparing the difference between happiness / affective measures and satisfaction. This has led me to think the difference between a country’s happiness is much less than their satisfaction. So my guess is that the effects on satisfaction are larger than happiness / mood / MH.
Most evidence about immigration and SWB suggests convergence towards the host country SWB. It’s hard to tell, because of the aggregation, but this seems to tentatively point against that. But a year isn’t that much time, so I guess prior evidence would suggest to me that the effects grow with more time.
That said, this could also show something weird / interesting about SWB scales. What you have is just about the only causal effects of immigration on wellbeing outcomes (I think there’s one other study but I remember being unsatisfied with it). While this seems like pioneering work by itself, it’s also maybe a way to crack open the black box between cross-country wellbeing comparisons and what drives them. It’d be really interesting to ask the Malengo beneficiaries something like how they remember their wellbeing back in Uganda. I wouldn’t be totally surprised if their scales are also changing in response to moving.
I think immigration may be one of the single greatest ways to increase human wellbeing, and (a hotter take) ultimately will be critical to maintaining the balance of power of democracies against autocracies—which seems important for the future to me. Now the awkward question. The programme on a small scale seems like it shouldn’t raise concerns about wider societal spillovers, but I doubt you’d be doing this if you wanted it to remain on a small scale! What are your thoughts on the potential negative political side effects of increasing immigration in Germany?
This may be my skittishness as an American, but immigration seems to fuel anti-immigration parties which tend to be more illiberal in other ways unrelated to their immigration policies. This seems also to be true in the case of Germany.
Here’s the expected rejoinder:
Would be curious to know your thoughts, but I get the discussion of immigration poitics is a difficult topic, so I understand if you don’t want to opine publicly.
Again, fascinating, and very cool work! I wish it to succeed.
Thanks for this incredibly thoughtful comment and the BOTEC work! It is exciting to see someone digging into the implications for the WELLBY impact.
Here are my thoughts on your questions:
1. ISA Recovery & Cost per Person
You are right that the cost-effectiveness depends heavily on the recycling of funds. I built two related Monte Carlo simulations to assess the sensitivity of IRR, impact, and students educated to our input parameters. For the sake of brevity, I won’t paste the full methodology here (it helps explain the logic behind the sheer number of variables), but I’ve attached a takeaway screenshot below. It shows how many students would be supported over the next 55 years with $1m in recycling investment.
The assumptions in our GiveWell sheet align with the p25 Scenario, which could be interpreted (539 student on an initial $1m investment, recycled) as a ~$2k cost per student.
https://malengo.org/impact_simulation/
I want to caveat that this has optimistic and pessimistic assumptions. There are some indivisibilities that could make expenses higher if the program runs at a smaller scale than a budget (explained below) of around $5m a year.
On the other hand, this represents completely unleveraged investment. With a stable underwriting model, Malengo (or similar lending with an educational migration approach) could eventually be lending against the contracts. A reasonable rule of thumb, if we are successful, would be achieving 5:1 leverage. In that scenario, $1m in the first-loss guarantee would unlock $5m in capital that would send at least 5x as many students, knocking the cost per student to $400. (Note: We might be able to swing something like 2:1 leverage at the moment, but it is a lot of work!)
In the true optimistic case, Malengo has infrastructure-like financing where donors wouldn’t even need to donate to Malengo, they only offer a guarantee backed by assets in their DAF or Foundation or it is offered by a DFI and that unlocks bank loans that are serviced by the ISA obligations. In this scenario, philanthropy covers the fixed cost of building the “flywheel”, while the scaling capital itself comes from credit markets.
I am hoping that our new CIO, Chad Sterbenz, will be able to post to the EA forum soon to do more justice to how this type of fund would work in practice with examples.
2. Cost Duration
To answer your clarification: Yes, the model accounts for 1-year stipend and then wrap-around support through the full duration of schooling. The “cost per person” is an all-in figure. It is derived from a conservative strategic plan: it represents the total dollars spent per student to sustain the entire organization for 20 years at a minimum viable scale (covering tuition, living cost gaps, and operational overhead), with a buffer in case a wind-down is required.
3. Disaggregated SWB/MH Measures
This is a great point about the difference between life satisfaction and affective happiness. I don’t have that breakdown on hand, but I believe you are correct about the divergence. I will inquire with the research team about sharing those exact measures.
Regarding your BOTEC assumptions: Your spillover duration assumption (pegged to parents’ lives) strikes me as reasonable, though perhaps conservative in scope. In practice, scholars send remittances to many family members, particularly to fund younger siblings’ schooling. (We don’t currently expect them to facilitate additional migration via their own funds). I actually incorporated a taper reflecting this into the impact simulation shared above after reading your comment. Thank you for that nudge!
Second, regarding the assumption that wellbeing benefits represent a flat line: I agree that is conservative. If the economic integration works as intended (see point 4), we should expect the convergence toward host-country wellbeing levels to be faster and stickier for these scholars than for the average migrant.
4. The Political Question & The OECD Graph
You anticipated the rejoinder perfectly. I’m with Alexander Kustov on this: migration has to be demonstrably beneficial to receiving countries. Migration will happen either through chaos or competence. Money can buy competence if the contract lets it.
The ISA is that contract: it pays for language, skills, and placement quality, and then pays itself back. We are betting that competence and successful integration are the best counter-arguments to populism.
As shown in your OECD chart, there is a massive gap in Germany between immigrants with foreign degrees and those with host-country degrees.
By ensuring our scholars get German degrees, we bypass the primary friction point. Our scholars face a lower “immigrant penalty” in the labor market sense; they (hopefully) perform almost identically to native-born graduates (We model 20% discount decaying as they integrate for 10 years of working). Malengo wants to demonstrate that deep economic integration can happen with sufficient resources.
Thank you for the response Richard!
I’m going to focus on the funds recycling since this seems like it may be the most important bit.
Since you’re assuming $1mil recycled for a budget of $5mil does this imply that you will recycle 20% of costs? If so, that seems low given everything else you’ve said, so I assume I’m missing something.
The leverage point is really interesting. Do you have any current prospects for making the leverage work? I would guess you have to wait (how long?) to see if the default rate is sufficiently low for the ISA?
What has to be true for this to work out financially? Something like the real rate of return on $ / euro invested in students has to be equal or greater than the interest rate on the loan?
It’d be great to hear more about this!
When you mention $2k and $400 per student, could you explain how this differs from the $30k listed as the best guess in the spreadsheet. Sorry for all the questions, I just want to understand!
The mechanics of the fund are counter-intuitive compared to standard grant-making, so let me break down the math behind the $2k and $400 figures and how they relate to the $30k cost.
1. The Recycling vs. The Multiplier Effect
I think the confusion here stems from a coincidence of numbers in my previous comment. I mentioned a $5m budget and a $5m leverage target, but those are distinct concepts.
The Recycling Math (p25 Scenario): In this scenario, we start with $1m in philanthropic capital and invest at a gross cost of 30k per student, that sends ~32 students immediately.
Over the next 40 years, as those students repay, the money is lent out again. Each student funds about 1.5 new students every 10 years (ie 150% recovery). In the simulation, that single $1m pot eventually funds a total of 539 students.
This implies a multiplier of roughly 16x: For every 1 student funded by the initial donation, the returns eventually fund ~15 more.
$30k (Gross Cost): This is the “sticker price.” It is the total cash budgeted to send one student (tuition + living stipend + operational overhead) → given our small size stays at this size.
~$2k (Net Philanthropic Cost): This is the unrecovered cost per student in a 40-year period. If $1m of philanthropy eventually educates 539 students (via the recycling described above), the effective cost to the donor per student is $1m / 539 = $1,855.
~$400 (Leveraged Cost): This assumes we achieve the 5:1 leverage ratio. If a donor provides the $1m philanthropic capital and we build a fund with it as first-loss capital, and we raise $5m in commercial debt, the system has $5m to deploy ($1m in reserve). The donor’s “cost per student” drops because their single dollar unlocked five dollars of capacity. → Note, this is quite simplified because we become much more sensitive to assumptions while leveraged. Returns are either much greater or the risk capital is all lost.
2. Financial Viability & Blended Capital
You asked: “Something like the real rate of return on $ / euro invested in students has to be equal or greater than the interest rate on the loan?”
Yes, exactly. In nominal terms, the Net Portfolio Yield (after defaults/expenses) must be greater than Weighted Average Cost of Capital (WACC).
In the p25 scenario, the Net Portfolio Yield is 3.8% (Listed under the IRR column).
This is too low to attract pure commercial capital (Even with data, European rates for this risk profile might be 4–7%). However, this is where Blended Finance comes in. We don’t need 100% commercial capital; we can stack different tranches:
Tranche A (Philanthropy/DFI): 33% of the fund. Target return: 0%.
Tranche B (Commercial): 66% of the fund. Target return: ~6%.
Result: The blended Cost of Capital drops to ~4%, which makes the 3.8% return viable (or very close to it).
I have initiated talks with impact funds, DFIs, and banks to structure this. It is difficult to achieve, but within reach, so we hired a CIO. While lenders naturally want years of repayment data, there are creative ways to use philanthropic guarantees to de-risk them early on. We hope to share a more detailed write-up on the structuring of these capital stacks soon!
This is super helpful to have explained and makes more sense now.
So what is your best guess of the cost per student educated given Malengo’s expected ability to recycle costs and leverage? What is the cost per person Malengo educates / facilitates the immigration of that you would put into my BOTEC?
At the risk of being pedantic, the answer depends heavily on your decision rule regarding uncertainty (relevant: Noah Haber’s work on GiveWell’s uncertainty problem).
I am comfortable recommending a rule that is internally valid with all our presented assumptions. Our analysis operates in the 25th percentile of outcomes; that implies a cost per student of $1,855. (This lines up with the ~95% cost coverage in your row 39, though that is a happy coincidence!)
However, if you choose to weight across the distribution, here is how the cost per student evolves based on recycling performance and leverage assumptions:
p10: $3,472 (Zero leverage)
p25: $1,855 (Zero leverage)
p50: $353 (Assuming 2:1 leverage)
p75: $377 (Assunming 2:1 leverage; note: more Master’s students in this scenario compensates for lower dropout rates, leading to the flatness here)
p90: $141 (5:1 leverage)
Note: These figures are derived from the distribution in the top comment: $1m / (num_students * leverage).
If you want my personal “best guess”: I believe management will react to the data. If we are able to iterate for a decade, we will push toward p90. The team will find cost reductions using partners and tech, optimize contract specifications to ensure we achieve the target leverage, and refine the underwriting model to find the students most likely to succeed.
So, for your BOTEC, I would put $141 per student (implying ~99.5% effective cost coverage via recycling + leverage). But bear in mind, you are speaking to the person who already made that wager!
I appreciate the caveat and you sharing your best guess!
First based on other income sharing agreement orgs, i think it’s very likely they will recover close to all the money so I think that’s a reasonable assumption.
A couple of comments/questions on this take here
“I think immigration may be one of the single greatest ways to increase human wellbeing, and (a hotter take) ultimately will be critical to maintaining the balance of power of democracies against autocracies”
Can you explain the pathway that immigration “may be one of the single greatest ways to increase human wellbeing”. I can see how it has the potential to do good in many cases but “one of the single greatest” is a big call.
Also this...”immigration ultimately will be critical to maintaining the balance of power of democracies against autocracies”. How would this work? my instinct would be in the other direction at the moment. I would say anti-immigration sentiment is one of the biggest drivers of the global trend towards autocracy around the world at the moment. The anti immigration sentiment has been a huge source of support for Trump, and in England/many European countries there’s a similar dynamic. Do you think that immigrants are more likely to vote against autocratic leaders? That seems less and less the case, naturalized immigrant voters seem to be about 50/,50 on Trump last election, and even if we assume immigrant voters generally favor less authoritarian candidates, I really doubt that would overcome the harm the anti—immigration sentiment is bringing.
https://www.cato.org/blog/naturalized-immigrants-probably-voted-republican-2024
Germany is a decent test case too, where after bringing in 1 million immigrants,(which i support for the record) anti immigration sentiment has soared and has given the AFD a foothold.
My impression in Uganda is that there is increasing support for authoritarian regimes. many of my friends are huge fans of the West African Coups, and Africans might be the strongest Trump supporting countries in the world. just a few months ago 79 percent of Nigerians had at least some confidence in Trump, which is pretty mind-blowing
https://www.pewresearch.org/global/2025/06/11/confidence-in-trump/
I’m not an expert on this though and you might well have another mechanism for this statement.
Howdy Nick,
I was secretly hoping you’d show up given your past comments about brain drain.
Right, this comes from Sam and I’s previous look into immigration. Based on this work, our working model is that immigrants adapt to the level of wellbeing (proxied by satisfaction) of the host country. If we take this seriously, then there’s no known intervention that is more powerful than immigration. We can imagine this is plausible because immigration is a super intervention where you are getting tens to hundreds of potentially positive economic, health and psychological interventions altogether. Now, I also take this as a bit of a puzzle. Is it really the case that immigrating from India to the USA is ~2x better than moving from moderate to minimal depression symptoms?
One further thing is that this depends on preferring measures of satisfaction to happiness / mood. In some ongoing work it seems like the Kenya / Nigeria are about as happy as the UK even though they’re less satisfied.
I’m curious what you think about this, since you’ve supposedly made the move down the ladder of life satisfaction by going from NZ to Uganda (but this is I assume a relatively smaller dip in terms of daily happiness).
I could have spoken more precisely here—I meant that immigration is critical if we can do it right and not have it undermine our democracies (which is arguably what’s happened in the USA).
This topic is outside of my happiness wheelhouse, and involves putting on my much smaller hat of geopolitics dilettante. But I buy the argument that to compete economically and deter militarily autocracies like China the west will need to be constituted by much larger countries, or have tighter alliances. Both prospects seem bleak at the moment. This is of course assuming we don’t have an AI singularity and the world looks relatively normal by 20th century standards.
I’m not super familiar with the literature but I lean towards “yes”, but I imagine this could depend quite a bit on the country of origin and the filter (e.g., Cuban Americans tend to be very anti-communist and Republican).
Thanks @JoelMcGuire for that wonderful response.
There’s so much here to think about, which I think reflects the complexity of immigration as a topic, both as a debate about benefits/harms and the challenges measuring outcomes, especially if we throw wellbeing in there.
Immigration benefits/harms
I think Immigration is unusual as a GHD intervention, because it has the almost unique situation where there are many potential benefits and potential harms. Most global health charities like AMF/New Incentives/ just don’t have this problem. An exception might be GiveDirectly where there were a lot of potential harms touted at first, but their research has put to bed a lot of the initial concerns about inflation/dependency/jealousy.
The main benefits of immigration are personal and measurable, whereas the potential harms are diffuse and hard to measure, although there have been attempts to model brain drain harms. I still think CEAs should at least discount a bit for these potential harms, but its tricky to be sure.
Potential Benefits (Some Included in CEAs)
- Improved Wellbeing of immigrant
- Remittances
- Migration opportunities for families (often not measured)
- Immigrants who return to the country with improved skills (often not measured)
Potential Harms (I’ve never seen included in CEAs)
- Loss of high impact country builders. The most talented, and motivated people who might go on to become politicians/innovators/business leaders and influence thousands of people are the ones leaving. These people aren’t necessarily replaceable like regular workers. Malengo might be taking some of these, as their pool includesthat passed senior 6 well, which is the top 5%-10% of Uganda’s talent
- Negative psychological/emotional effect on migration on the population remaining. “Japa” syndrome in Nigeria has been well documented, I’m scared of Uganda becoming like Nigeria, with everyone’s eyes abroad, and people not investing in their own businesses/future in country but instead always thinking about/talking about/trying to leave. This would not make for a nice workplace!
- Fueling support for authoritarian regimes (hard to argue against at this point)
- Brain drain in general, which despite protestations does exist although it can be mitigated.
Scales and Surveys and Wellbeing
“Now, I also take this as a bit of a puzzle. Is it really the case that immigrating from India to the USA is ~2x better than moving from moderate to minimal depression symptoms?”. Yeah this is either implausible or absurd. I wonder if you could find even one person who would consider this plausible. This incongruous issue should trigger a hard look into where the data problem is exactly. Different countries almost certainly have different scales, and that migrants will scale-adjust. This makes it hard/impossible to track wellbeing accurately when people move countries/. Also I wonder if you’ve considered that its more well off people who will generally be immigrating so they will on average be far happier than the average person before leaving. Its probably best to take the top quartile (or higher) of home country happiness statistics as baseline.
As I discussed in some of my first forays into the forum, going head to head with the mighty Michael, I have huge doubts about the veracity of before/after surveys in development. I straightforwardly buy point surveys of happiness/satisfaction surveys of the first order. But I don’t put a lot of trust in before/after satisfaction surveys in where you do an intervention first, then survey satisfaction later. This concern cuts across including GiveDirectly, StrongMinds and here. I think Malengo is doing the right thing in doing before/after surveys as it is standard practise, I just don’t buy it myself. I’m going to quote myself from 3 years ago
“Self reporting doesn’t work because poor people here in Northern Uganda at least are primed to give low marks when reporting how they feel before an intervention, and then high marks afterwards—whether the intervention did anything or not. I have seen it personally here a number of times with fairly useless aid projects. I even asked people one time after a terrible farming training, whether they really thought the training helped as much as they had reported on the piece of paper. A couple of people laughed and said something like “No of course it didn’t help, but if we give high grades we might get more and better help in future”. this is an intelligent and rational response by recipients of aid, as of course good reports of an intervention increase their chances of getting more stuff in future, useful or not...
You also said “Also, we’re comparing self-reports to other self-reports”, which doesn’t help the matter, because those who don’t get help are likely to keep scoring the survey lowly because they feel like they didn’t get help.
So Back to your question…
“Our working model is that immigrants adapt to the level of wellbeing (proxied by satisfaction) of the host country. If we take this seriously, then there’s no known intervention that is more powerful than immigration.
I don’t think that immigrants adapt to the satisfaction level of the host country (survey/scaling issues make this almost impossible to measure), although I do think there will be improvement. Then I think you also don’t consider the potential harms which mitigate the power of immigration.
On my life...
”I’m curious what you think about this, since you’ve supposedly made the move down the ladder of life satisfaction by going from NZ to Uganda (but this is I assume a relatively smaller dip in terms of daily happiness). I’m afraid my case is too weird, I’m extremely happy and satisfied, but that won’t help this discussion at all :D
On the political question…
“I could have spoken more precisely here—I meant that immigration is critical if we can do it right and not have it undermine our democracies (which is arguably what’s happened in the USA).” I agree with this in principle (And Richard’s link on how to make immigration more appealing to host countries), but when it comes to considering interventions we need to observe the evidence of what is actually happening, not what we hope to happen. Right now (see my previous links) I think immigration isn’t helping democracy, unfortunately...
On happiness vs. satisfaction
I must confess I’m a bit confused here, but its super interesting. I struggle to understand why these measures would be so different after looking at the questions. I think the jury is still out and I await the final authoritative report from HLI ;).