Parents willing to send their children to the school of their choice but unable to afford the fees can now breathe a sigh of relief. Taking inspiration from the zero-cost consumer durable finance model, NBFCs are now exploring a similar product for school fees.
According to industry insiders, rising cost of living, inflation and increased cost of education in urban and semi-urban areas gives a huge scope to launch a product that covers not only the annual entry fee but also the tuition fee. Will do Schools, which generally range between ₹50,000- ₹1 lakh per year.
NBFCs have tied up with schools and educational institutions to assist in payment of fees. The fee is usually borne by the schools or institutions, which in turn get the benefit of upfront cash flows which they can deploy for their working capital requirements. This is usually a short tenure loan of between six to twelve months. The product is likely to gain traction as many parents have either lost their jobs or have had to take pay cuts in the wake of the pandemic.
‘huge potential’
For example, education-focused NBFC Avanse Financial Services (AFS) recognized school fee financing as a separate vertical about two-three years ago, seeing the “huge potential” in the segment. “What happened in the case of retail credit and consumer credit will now happen in education. We had identified this place about two and a half years ago but the development has been slow due to Covid (due to school closure). Today the numbers are in the low single digits but that’s because the range is forming. There is a huge potential,” said Amit Ganda, CEO of Avanse Financial Services, business Line, As of September 30, 2021, AFS had an AUM (Asset Under Management) of ₹3,800 crore.
Change
According to Rhinoceros, assuming that there would be around 3.5 lakh unaided and private schools in the country, the estimated market size for funding school fees would be above Rs 1.75 lakh crore.
EnableCap, a Kolkata-based tech-enabled NBFC, is in talks with several schools in Kolkata and Durgapur for such tie-ups. It currently has tie-ups with coaching institutes and edtech companies in West Bengal and Bihar for similar offerings.
“The consumer goods industry has undergone rapid transformation following the availability of finance. We expect a similar transformation in the education sector with this product which is collateral free, simple and seamless and allows customers the convenience of spreading their payments,” said Absolute Kumbhat, Co-Founder, EnableCap.
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