Varun Chopra, CEO & Co-founder, Eduvanz

Varun Chopra With over 15 years of experience in debt and change initiatives across Investment banking, consulting, and outsourcing industries. Varun’s extensive experience and the network have been gained from handling key roles in areas such as portfolio management, program management, testing, business process re-engineering, transitions, target operating model design, and strategy consulting. Prior to co-founding Eduvanz, Varun worked in the leadership team for Nomura as a Vice President. In this strategic role, his key task was business growth, client management, project deliveries, and overall program management.

 

Over the past decade, education has evolved and moved beyond the walls of traditional classrooms. A new-age student today has more to learn – be it an extra coding class or an upskilling course or a new-age AI or ML module that goes above and beyond the curriculum. The pandemic, which has disrupted every other aspect of our lives, also delivered new and easier modes of education in the form of e-learning. Unfortunately, all this is also coming in times of stressed household budgets, a tough job market, and thinning wallets.  

The types of education have expanded and so have classes of learners – children to professionals and other knowledge seekers. Yet, traditional financing methods have not evolved as quickly to cater to extra spending. The non-conventional avenues of learning including the increased costs of school and coaching fees are also barely considered. Also, there is little chance that banks would consider them anytime soon since they are already saddled with an education loan book that is going rancid rapidly. The non-performing assets (NPAs) data indicate that almost 9.5% of all the education loans are going bad due to a frozen job market, slashed salaries, and more such pandemic-related pain.

The good news however is that this makes room for focused fintech with a good understanding of the sector, and a good risk assessment mechanism. Added to that, innovation within the financing domain can be a game-changer in the sector where millions of loans originate every year. 

Widening the Base

Currently, education loans are sought out mostly for studying abroad, and the rest are usual suspects like high-priced MBA courses, engineering, and medical courses. Yet, these are not the only ones that need financing.

Internationally, 80% of college courses are supported by financing. It is slightly lower in South Asian countries – at around 30%. But, in India, it is as low as 7% – hence there is a large potential for growth. 

The popularity of e-learning has added another dimension. More and more professionals are looking to add new skills be it AI, ML, or data analysis which cost anywhere between Rs 1.5 – 15 lakhs. Graduates too are looking to acquire employable skills to add to their CVs, beyond their college courses. 

Digital MIP for School Financing

Since the onset of the pandemic, parents of many young children are finding it tough to pay school fees which averages to Rs 1 lakh per annum for a first-grader, in most urban schools. Coaching class fees is another pain point that also averages to over and above Rs 1 lakh for pre-engineering and pre-medical entrance exams. 

In the past parents had to rely on traditional financing options such as friends, families, or money lenders, where the interest rates were really high. Digital MIPs (Monthly Installment Plans) such as the one Eduvanz provides are zero-cost, paperless, branchless, friction-less, and straight-through financing facilities for parents.

Assessing and underwriting parents beyond the conventional methods of bureau checks by considering not just parent’s payment history and digital footprints but also the student’s grades, school’s ranking, etc, has led to the evolution of innovation in school lending. There are varied needs within the sector that have to be serviced with a niche understanding of borrower needs — which fintechs are able to with the help of technology. 

At Eduvanz, we also help parents who require an extra gadget to support the new normal of online learning. We have tied up with Apple to provide loans for devices and recently forged a partnership with Flipkart to extend easy EMI loans to purchase all e-learning tools. 

Technology Embedded Financing

The next problem is the ticket size of loans, which is around and above Rs 10 lakhs as most banks tend to lend to professional courses. More such loans are preferred; and not just because they make for better credit than a graduate course. Banks prefer to disburse one large loan than a bunch of smaller loans – due to a lack of enough manpower to service them all. 

The solution for this lies with digital lending which fintechs have adopted. Technology makes it easy for fintechs to integrate their database with that of a university, which means a large part of the admission process data of the student can be used for background checks. The entire loan process can be approved within a matter of days if not minutes without the need for excessive documentation that can be done right on the campus. At Eduvanz, 70% of our loans are no-cost loans where interest rate is borne by the institutions and students can just pay the course fees. 

Data Versus Risk

Yet another problem is the way traditional methods assess the risk of education loans. Since the odds are stacked up against the sector, banks would reduce the number of loans and increase interest rates to match the heightened risks. 

New modes of underwriting require data that can be collected from schools, universities, and institutions – like fee payment behaviour, the course, its relevance to the industry, course dropouts, placement history, and much more. This can tell the story of the repayment ability and due to changed perception interest rates could be adjusted accordingly. At Eduvanz, our NPAs are at 0.7% which is starkly different from the industry average. 

Changing Lending Landscape through Innovative Financing

Apart from innovative financing, fintechs in the education sector can also reach the unbanked and the underbanked. Around 500 million of India’s population is under the age of 25 which means they are engaged in some form of learning. A large chunk of these bright and ambitious learners reside in tier-2 and tier-3 cities. Without financing, they would not be able to reach their potential. Now, more than ever, financing is important as UGC and National Education Policy is now expanding digital learning where students residing anywhere can access quality education. This makes them quality students and quality earners – the fintech target market – who can add to their books and ours. 

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