Education Finance could help millions of children in India to access quality education, but is still far from reaching its full potential, a Senior Advisor at Opportunity EduFinance says.
Education has a transformative role to play in shaping the future of India, which, with a total population of 1.3 billion people, has the world’s largest, youngest, and most illiterate workforce.
The South Asian giant has made impressive progress with its education, reducing the number of out-of-school primary age children, between 2006 and 2011, from 6.2 million to 2.9 million though lower secondary age jumps to 11.1 million. But education quality remains a major issue, and India still has one of the world’s largest out-of-school populations.
Affordable private schools are filling this gap, with student numbers growing at about 5 percent each year, fuelled by population growth, urbanisation, and a rapidly growing middle class.
“When families in India escape from abject poverty, the first thing they do is to secure the best education they can afford,” said Jayesh Jain, Opportunity EduFinance’s Senior Advisor in India.
“Most affordable private schools are bursting at the seams,” he added.
India has 1.2 million government schools and less than 300,000 private schools, but the two sectors have the same amount of students.
“We have a humongous gap between demand and supply in the affordable private sector,” Jain said.
“There is an urgent need to build more classrooms, train more teachers, purchase better facilities and materials,” he added
Lack of access to finance is a major constraint. Microfinance has a long history in India, but banks and microfinance institutions (MFIs) lack experience in the education sector and are nervous to lend. They have minimal capacity to assess the risks, and are bound by government regulation, which limits the size and number of loans.
Besides, many of the schools are run as community projects, not as a professional business. Accounting can be misleading and unreliable.
In 2017, Opportunity EduFinance hired a Senior Advisor, Jayesh Jain, who began with market research. Opportunity EduFinance has established partnerships with ESAF Microfinance, Adhikar, Indian School Finance Company, and is currently talking to other potential partners through its Technical Assistance facility (ETAF).
Through partnering with ESAF, Opportunity EduFinance is encouraging newly crafted legal entities - small finance banks (SFB) - to focus on School Improvement Loans and School Fee Loans. Through working with ISFC, Opportunity EduFinance is supporting exclusive non-banking finance (NBFC) to: (a) help expand across the value chain with teacher training; (b) identify new focus areas such as working with small scale private schools; (c) establish Social Performance Management metrics. Through working with medium sized MFIs such as Adhikar, Opportunity EduFinance: (a) helps serve small affordable schools with teaching aids (learning instruments, projectors, teaching materials, trainings) backed by finance, and (b) helps women borrowers access School Fee Loans.
Alongside supporting financial products Opportunity EduFinance is making efforts to appropriately identify how best to launch its Education Quality programme in India. This is done through developing a greater understanding of the eco-system through existing partnerships and informal collaborations with stakeholders, such as Gray Matters Capital.
By collaborating with a variety of Financial Institutions and leveraging its experience from other countries, Opportunity EduFinance will demonstrate the sustainability of Education Finance in India. A recent analysis by Opportunity found that the potential market for Education Finance in India is worth US$11.1 billion. In this way, Opportunity EduFinance will attract more private finance to the sector, increase access to finance, increase and share knowledge management of the sector, and most importantly support more children in accessing a quality education.