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What’s next for low-cost private schools in India?

By Surabhi Vaidya & Hannah Hilali



Here’s what we know…

Low-cost private schools in India need more access to capital to invest in their schools, and professional development training to continue improving quality of education being delivered.

Why low-cost private schools in India?

92 million children. That’s how many children are being educated in these schools today. By 2031, an estimated 162 million children will attend low-cost private schools in India.[1]

The National Independent School Alliance (NISA) estimates that there are over 400,000 low-cost private schools servicing children across India.

That’s a massive opportunity to have an impact on children’s education. India is one of the biggest markets in the world for low-cost private schools.

Here’s what we want to know…

  • What are the barriers to finance for low-cost private schools?
  • What are the most relevant professional development needs of low-cost private schools and what limits their access to training?
  • What challenges do service providers, including financial institutions and professional development organizations, face while seeking partnership with schools, especially during COVID-19 school closures?
  • How will COVID-19 and National Education Policy 2020 (NEP 2020) change the ecosystem of education finance in India?
  • What are the gaps in the market to address the challenges faced by low-cost private schools and service providers?

In December 2020, Opportunity EduFinance, in partnership with KPMG India, conducted a market research study to assess these themes and examine potential opportunities to increase access to quality education for children attending low-cost private schools.

As part of the study, KPMG interviewed:

  • 100 low-cost private schools (LCPS) across nine states where EduFinance operates
  • 16 professional development organizations working with government schools and LCPS in India
  • 13 financial institutions lending or planning to lend to LCPS
  • 6 regional school associations

Here’s what we learned…

The study found the following key barriers that make it difficult for schools and financial institutions to access each other:

Schools struggle to access finance because:

  • 73% stated that ‘identifying a financial institution who gives loans to schools’ is one of the top three challenges to access finance. Lack of knowledge with respect to filing paperwork was also identified as a challenge.
  • 72% reported ‘poor fit of products’ and 70% ‘high interest rates’ as top areas of concerns for accessing finance.
  • Three quarters (75%) reported the need for loans for school infrastructure. However, there is a strong lender preference for lending for ICT equipment and vehicle loans since the equipment and vehicles can be used as collateral.
  • 70% of schools reported fee collection from parents of <50% during school closures, making maintaining income and strong credit history a major challenge during COVID-19.

Financial institutions struggle to access schools because:

  • High customer acquisition cost: Most financial institutions rely on field staff for customer acquisition. Customer acquisition costs amount to 3-4% of the total loan amount, which is higher compared to other sectors.  
  • Conversion rate: Only 1 of 10 leads get converted and receive finance as compared to 1 of 2 leads getting converted in other sectors.
  • Given these factors, 87% of financial institutions reported ‘accessing schools to finance’ as a top challenge, despite 80% of schools in total wanting finance.
  • Given recent prolonged school closures, low school fee collection and schools’ loss of income, school borrowers defaulting on their loan payments has increased. This has caused financial institutions to deprioritize education loans and focus on more traditional small-business (SME) income-generating loans. This, combined with high costs of credit for financial institutions for further on-lending, high customer acquisition costs to attract school borrowers, and lack of school credit history – further impacted by COVID-19 – makes financial institutions hesitant to lend to the education sector.

The study also found barriers to accessing training on the topics school leaders and teachers identified as key to their professional development:

  • India’s National Education Policy 2020 emphasizes new areas of learning schools where schools will need support, including integration of early childhood education, school infrastructure planning, and accreditation.
  • Teachers reported a need for subject-linked training (English, maths, and science), more focus on learning outcomes-based teaching, lesson planning, and classroom behavior management.
  • COVID-19 has also increased the demand for digital upskilling of teachers to ensure uninterrupted teaching practices during school closures. There is also a significant focus on addressing learning loss and managing social-emotional needs of students and teachers as schools and families deal with the effects of multiple waves of the pandemic.
  • School leaders identified a wide range of priority training topics, including strategic planning, vision building, marketing, staff retention, parent engagement, school fee collection strategies, and loan application procedures.
  • School leaders reported struggling to identify the right professional development organization that fits their training needs. In addition, lack of funds to pay for professional development, trainings not being customized to vernacular languages, local organizations not having qualified training teams, and lack of structured training to meet the school’s needs stood out as key challenges to accessing professional development.
  • Leaders also communicated a challenge in institutionalizing changes in classroom instruction practices following teacher participation in training programmes.

Professional development organizations’ confirmed similar challenges:

  • ‘Customer acquisition and retention’ was identified as a major challenge. Organisationsnoted the high level of outreach expenses to generate demand in schools for professional development training.
  • Low impact: Schools preference for training for only 6-10 days annually makes it difficult for organizations to showcase impact.
  • These challenges, combined with a lack of incentives for teachers to fully engage in training, makes overall school engagement more difficult for organizations working on the ground.
  • Organizations also reported that impacts of COVID-19 have further restricted schools’ ability to devote funds to professional development trainings, making sustainability of such programmes a challenge.

Where do we go from here?

As part of the study, EduFinance wanted to look at potential challenges faced by organizations on both sides of the table – with low-cost private schools on one side, and service providers like financial institutions and professional development organizations on the other.

What we found was:

  • Everyone ‘at the table’ is listing similar barriers that ultimately keep them distanced from one another.
  • There are potential opportunities for both sides to create partnerships to address these challenges.
  • The sector will need to undergo change to overcome the effects of COVID-19 and implement NEP 2020.

Over the next few months, EduFinance will engage in discussions with stakeholders in this ecosystem to gain a deeper insight into these challenges, understand the changes in education in India due to COVID-19 and NEP 2020, and explore how organizations can work together to create solutions to navigate these changes.


[1] Faces of Budget Private Schools in India (2018), Centre for Civil Society



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