Shiksha Finance, a non-banking financial company focused on the education sector, has attracted an investment of ₹55 crore from Zephyr Peacock. Shiksha provides loans to affordable private schools and parents of students from low-income families to meet tuition fee expenses.
Mr. V.L. Ramakrishnan and Mr. Jacob Abraham are co-founders of Shiksha Finance, an education finance company that provides loans to affordable private schools and low-income students in India.
After a three decade long wait, the National Education Policy (NEP) 2020 was a welcome change for the Indian education sector. The NEP is a set of policies formulated by the Government of India to guide the development of the education sector and promote quality education for its citizens. The first education policy was introduced in 1968 and a second was formulated in 1986, which was subsequently revised in 1992. The 2020 policies aim to transform education in the country and equip students with the right tools to enter the dynamic and technologically advanced workplace. These policies are India’s step towards the United Nations Sustainable Goal 4: Quality Education.
There is no better investment towards a society’s future than the high-quality education of the youth. Rightly so, the new policy commits to significantly raising educational investment. The Centre and the States will work together to increase the public investment in the education sector to reach 6% of GDP from around 4% of GDP currently.
Financial support will be provided to various critical components of education and decent service conditions at schools will be ensured so that teachers and students are comfortable and inspired to teach and learn in their schools. Adequate and safe infrastructure, computing devices, internet, libraries, and sports and recreational resources will be provided to all schools to ensure that teachers and students have a safe, inclusive, and effective learning environment.
Inclusion for children of all genders and for children with disabilities will be a priority. NEP 2020 has introduced the “Gender Inclusion Fund” and “Special Education Zones” to build the nation’s capacity to provide equitable quality education for all girls as well as transgender students, differently-abled students, and students from socio-economic disadvantaged groups. The Fund will help improve access to sanitation and toilets, bicycles, and conditional cash transfers. It will also provide for special hostels in dedicated regions, bridge courses, and financial assistance through fee waivers and scholarships among others.
There is an impending need to improve Gross Enrolment Ratio (GER). The GER is a measure used in the education sector to determine the number of students enrolled in school at several different grade levels Many states and districts of India, like Bihar (13.6%), West Bengal (19.3%), and Jharkhand (19.1%), have a GER below the national average of 25%. The Higher Education Finance Corporation can grant long term loans for this purpose with a goal to bring the GER of these districts and states to the national average of in 10 years. The NEP 2020 focuses on increasing the national GER to 50% by 2023.
The Government’s National Scholarship Portal (NSP) can be modeled as a Public-Private-Partnership, with a private-sector board to oversee the organization. 50% of the funding can be raised from citizens all over India on a 100% tax exemption, with the government putting in 50% of the total.
Innovative devices such as social impact bonds present an interesting alternative by which purpose-driven investors can focus on impact delivery, even if it generates lower returns than a purely commercial investment would.
As education shifts to digital mediums, schools, colleges, and institutes will increasingly require financing to improve their digital infrastructure. In recent years, many NBFCs and private financing companies apart from banks have emerged to offer fund Infrastructure loans for schools, colleges, and institutes providing vocational and professional courses.
The cost of higher education is increasing gradually, and aspirants search for good options to avail education loans. These students serve as an attractive target market for financial services providers. Financial service companies have the opportunity to collaborate with the National Scholarship Portal to support students receiving scholarships. These companies can also partner with educational institutions to offer loans and financial support to the students enrolled in such institutions. Increased focus on vocational education in NEP 2020 would also result in the need for financing such vocational courses. The increased technology adoption that the NEP 2020 would bring about in areas of online learning, e-program delivery, teacher training, or e-assessments will serve as a challenge for low-income students in terms of affordability, access to devices, and the internet. Such students would require financing, not only for their tuition fees but also for the equipment and supplies required for their education.
In a country like ours where the scale of requirements is this large, such partnerships can support purpose-driven institutions and help transform the education system.
About V.L. Ramakrishnan (Ramki), Founder and CEO, Shiksha Finance
A Chartered Accountant, Ramakrishnan (Ramki) is the CEO of Shiksha and oversees the broad strategy and overall business. Before Shiksha, Ramki was the co-founder and the CFO of a Suryodaya Microfinance (a leading microfinance institution that transformed into a small finance bank). Ramki has extensive experience on the ground and has over 25 years of experience in the financial services space with extensive experience in retail lending at organizations such as Development Credit Bank, GE Capital, and Cholamandalam Finance.
About Jacob Abraham, Founder, and COO, Shiksha Finance
Jacob is the Chief Operating Officer at Shiksha and oversees finance, operations, and IT. A Chartered Accountant, Jacob has over 18 years of experience across finance and insurance companies, with significant expertise in finance, strategy, credit, and underwriting. He has worked with Royal Sundaram Insurance, Chola Insurance, Cholamandalam Finance, and PwC.
In conversation with V.L. Ramakrishnan, CEO and Co-founder of Shiksha Finance
What new technology has come up since the last year in the education sector?
Big Data, Machine Learning, and the Internet of Things (IoT) were the biggest educational technology trends of 2019. However, distance learning has become the one trend that rules them all. The COVID-19 pandemic has drastically changed the way we teach and learn. Students now have to get used to distance learning via digital platforms due to social distancing. Even though some schools are reopening, this trend may continue until 2021.
What are the challenges you are facing since Covid?
The nationwide lockdown in India had adversely impacted our customers who own and operate schools, and parents from low-income backgrounds, due to closure of schools and reduced incomes. Our disbursements were subdued during this period.
We launched new short term loan products for our existing school and student loan customers. These short-term loan products were designed to provide assistance to our customers and help them overcome the challenges from impaired incomes and cash flows due to COVID-19 disruptions.
What are your expansion plans?
Shiksha started operations in Tamil Nadu and we are now present in Pondicherry, Telangana, Andhra Pradesh, Karnataka, Maharashtra, and Tamil Nadu, operating out of 38 branches. We plan to deepen our presence in the existing geographies and intend to expand to three other states in the next 18 to 24 months.
What is the current loan book size and the way forward in 2021?
Since Zephyr Peacock’s investment in FY19, we have grown our loan book by 70% to INR 1.8 billion as of March 2020. We have disbursed loans worth over INR 3.5 billion to serve the needs of low-cost private schools and students from low-income backgrounds. Shiksha expects to disburse loans worth INR 7.5 billion in the next 24 to 30 months.
What is the impact of the NEP on education financing?
The Policy commits to significantly raising educational investment, as there is no better investment towards a society’s future than the high-quality education of our young people.
Impact on School Financing
As education shifts to digital mediums, schools, colleges, and other educational institutes will increasingly require financing to improve their digital infrastructure. In recent years, many NBFCs and private financing companies apart from banks have emerged to offer infrastructure loans for schools, colleges and institutes providing vocational and professional courses.
Financial support will be provided to various critical elements and components of education, such as decent and pleasant service conditions at schools. Adequate and safe infrastructure, computing devices, internet, libraries, and sports and recreational resources will be provided to all schools to ensure that teachers and students, including children of all genders and children with disabilities, receive a safe, inclusive, and effective learning environment and are comfortable and inspired to teach and learn in their schools.
Impact on Student Financing
The cost of higher education is increasing gradually, and aspirants search for good options to avail education loans. These students serve as an attractive target market for financial services providers. Financial service companies have the opportunity to collaborate with the National Scholarship Portal to support students receiving scholarships. These companies can also partner with educational institutions to offer loans and financial support to the students enrolled in such institutions.
Increased focus on vocational education in NEP 2020 would also result in the need for financing the fees of such vocational courses. Additionally, the increased technology adoption that the NEP 2020 would bring about in areas of online learning, e-program delivery, teacher training or e-assessments will serve as a challenge for low-income students in terms of affordability, access to devices and internet. Such students would require financing, not only for their tuition fees but also for the equipment and supplies required for their education.
The Government of India will constitute a ‘Gender-Inclusion Fund’ to build the nation’s capacity to provide equitable quality education for all girls as well as transgender students. This will help in gaining access to sanitation and toilets, bicycles, conditional cash transfers, special hostels in dedicated regions, bridge courses, and financial assistance through fee waivers and scholarships etc. to be offered under National Education Policy 2020
Northern Arc Capital, a leading debt platform for financial inclusion focussed institutions, and Triodos Investment Management, Netherlands-based impact investment fund, have together invested ₹30 crores in non-convertible debentures issued by Chennai-based school finance company Shiksha Financial Services.
Shiksha offers loans to educational institutions and education loans to parents.
According to a press release, Shiksha will use the money to grow its loan portfolio, to deepen presence in south India and expand to Madhya Pradesh, Gujarat, and Rajasthan.
Founded by VL Ramakrishnan and Jacob Abraham in 2014, Shiksha provides loans to educational institutions for their working capital needs, to improve infrastructure and create new assets. Its study loan is designed to ensure uninterrupted education for children. It is present in five States in the South, serving more than 2,000 schools and over 2.2 million students.
Northern Arc Capital, a debt platform for financial inclusion focused institutions, and Netherlands based impact investment fund, Triodos Investment Management today announced a Rs 30 crore investment in Non-Convertible Debentures (NCDs) issued by Chennai-based education finance company Shiksha Financial Services.
Shiksha offers business loans to educational institutions and education loans to parents. The company will use the funds for growing its loan portfolio, to deepen presence in South India and expand to new states such as MP, Gujarat, and Rajasthan.
Kshama Fernandes, MD & CEO of Northern Arc said,
“Education financing is emerging as an important sector of focus at the Northern Arc. The financial inclusion landscape is expanding and we are noticing opportunities beyond traditional sectors like microfinance.”
Founded in 2014 by V L Ramakrishnan and Jacob Abraham, Shiksha offers business loans to educational institutions for their working capital needs, to create new infrastructure, and to purchase new assets. While its study loan is uniquely designed to partner with parents to deliver uninterrupted education for their children. The company is currently operational in five states in the South and is serving more than 2,000 schools and over 2.2 million students.
V L Ramakrishnan, CEO of Shiksha, said,
“Education finance has so much unmet demand in India. Our goal is to support the educational needs of 200+ million school student population in the country. We see a massive opportunity to expand across the country and debt financing will play a critical role in enabling us to scale faster and grow our books.”
With total assets under management of Rs 165 crore, Shiksha is backed by private equity investors like Aspada Investment, Michael and Susan Dell Foundation, and Zephyr Peacock India.
Sagar Thakar, Senior Investment Officer at Triodos Investment Management said,
“Shiksha plays an instrumental role in improving access to quality education in India. Education is an empowering force as it creates knowledge and equips children with the qualities and skills to shape and build their future. Parents from low-income families see education as a path out of poverty. With our loan, Shiksha can further expand its outreach, especially in semi-urban areas.”
Shiksha Financial Services, the Chennai, India-based student and educational institutions nancier, will initiate its Series C round of about USD 20m in the last quarter of FY20 ending March, Founder Director and CEO VL Ramakrishnan said.
It will mandate an advisor closer to the timeline, he said, adding that the company prefers investors that are education-centric.
Funds raised will be used predominantly for lending. A part of the proceeds will also be used to expand geographically to more states in the country and also to make its tech processes more seamless, the CEO said.
Shiksha’s promoters are Ramakrishnan, who previously co-founded Suryoday Micro Finance, and Jacob Abraham. Its other backers are Zephyr Peacock, which led the company’s Series B round of INR 550m (USD 7.87m) earlier this year. The round also saw participation from earlier investors Aspada Investment and Michael & Susan Dell Foundation. The investors together own a majority stake in the company, cited the CEO.
Shiksha began operations in mid 2015 as a South India-focussed lender and currently has 48 branches across ve states – Tamil Nadu, Telangana, Andhra Pradesh, Karnataka and Maharashtra. It aims to add 12 more branches this year and spread operations to Odisha, Rajasthan and Madhya Pradesh soon, Ramakrishnan said.
The company offers student loans to borrowers from the bottom of the pyramid. These are mainly parents working in the unorganized sector, such as roadside tailors, shermen, auto rickshaw drivers, those working as security guards, electricians, plumbers, etc. The typical borrower earns income in cash and therefore has no proof of income, Ramakrishnan said.
Shiksha has developed a good understanding of this segment’s pro le and behavioural pattern. The sizes of the student loans it offers range from INR 15,000 – INR 30,000, with a tenure of up to 12 months.
The school loans are given to educational institutions. Unsecured loans for working capital needs range from INR 100,000 – INR 1m, whereas secured loans for building infrastructure and purchasing assets vary from INR 1m – INR 25m.
The lender’s loan book stood at INR 1.1bn (USD 15.75m) at the end of FY19. Of this, INR 200m comprised student loans made to 21,000 borrowers and INR 900m were school loans offered to nearly 1,900 schools.
Shiksha’s current net worth is INR 780m and it has 220 employees. Its objective as a lending institution is to reduce school dropout rates and increase quality infrastructure in education, Ramakrishnan stated.
ISFC, Varthana are other domestic players lending to educational institutions. ISFC, as recently reported by this news service, is aiming an INR 2bn (USD 28.75m) capital raise, following an unsuccessful acquisition attempt by Manappuram Finance [NSE:MANAPPURAM] In the student loan segment, the company believes it has no competition.
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City-based education finance company Shiksha Financial Services India Pvt. Ltd. has raised ₹55 crore to provide financial aid to educational institutions and school children, said a top official.“We have raised successfully ₹55 crore, at a time when the fintech start-ups are finding it difficult,” said V.L. Ramakrishnan, founder director and CEO, Shiksha Financial Services India Pvt. Ltd. “The funds would be used to provide working capital to educational institutions and to parents as non-collateral loans to pay school education fees,” he said.
“Besides, we will use the funds for expanding our distribution presence to States, including Maharashtra, strengthening the management team and work on new product offerings within the education finance sector,” he added.
According to Mr. Ramakrishnan, this is the third time the fintech start-up had raised funds. Till 2017, it had raised ₹21 crore. Zephyr Peackock India Growth Fund and existing investors Aspada Investment Company and Michael & Susan Dell Foundation had invested in the second round.
Till date, Shiksha Finance had disbursed business loans aggregating ₹170 crore to 1,700 educational institutions benefitting 6.5 lakh students and education study loans to parents of 15,300 children.
“Within the next 18-24 months, our aim is to increase our offerings to 4,000 educational institutions to cover 16 lakh students and school education fees to one lakh students. Currently, we have a loan book of ₹102 crore against 10 crore some two years back,” he said.
“Shiksha Financial operates in 23 districts of Tamil Nadu, Puducherry, Karnataka, Andhra Pradesh, Telangana and Maharashtra. It is also planning to enter new territories,” said Jacob Abraham, founder-director and COO, Shiksha Financial Services.
Chennai-based Shiksha Financial Services India raised funding Rs 55 crore from Zephyr Peacock India Growth Fund and existing investors Aspada Investment Company and Michael & Susan Dell Foundation. With the current funding, Shiksha Finance is looking at expanding its distribution presence to new states, including Maharashtra, financing the company’s growth plans and strengthening the management team.
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Chennai-based Shiksha Financial Services India Private Limited on Friday said it has raised Rs 55 crore from Zephyr Peacock India Growth Fund and existing investors Aspada Investment Company and Michael & Susan Dell Foundation.
Chennai-based Shiksha Financial Services India Private Limited on Friday said it has raised Rs 55 crore from Zephyr Peacock India Growth Fund and existing investors Aspada Investment Company and Michael & Susan Dell Foundation.
According to Founder Director and CEO VL Ramakrishnan, the funds will be used to finance the company’s growth plans and strengthen the management team. With the current fund raise, Shiksha Finance is also looking at expanding its distribution presence to new states, including Maharashtra.
The company had raised its Series A round of Rs 21 crore in 2017, and continues to work on new product offerings within the education finance sector. Speaking on the growth Shiksha Finance has achieved, VL Ramakrishnan said,
“Shiksha has cracked an innovative lending model centered around the education sector and has disbursed 1700 business loans to education institutions and 15,300 school education study loans to parents. The company is now present in 40 locations across five states with cumulative disbursement of Rs 170 crore.”
According to the company, its student loan product is designed to ensure uninterrupted education for children. The product’s perpetual design enables a child to continue education, eliminating the fear of drop-outs on account of lack of access to financial resources. The company’s credit assessment model has been developed to address the needs of customers who have income, but are not able to produce financial records like balance sheets and income tax returns.
Speaking on the investment, Pankaj Raina, Managing Director, Zephyr Peacock said,
“Shiksha is uniquely placed in the education financing ecosystem as a lender to both schools and students. Its product offerings help improve the quality of affordable private schools and help children from low-income backgrounds access quality education. Access to quality education is an aspiration for most lower and lower middle income households in India and we believe this is a multibillion dollar market.”
Kartik Srivatsa, Managing Partner, Aspada said, “We are delighted that Shiksha’s unique business model has demonstrated a sustained ability to raise both debt and equity at scale. Equity infusion in a challenging market environment is a strong reaffirmation of the fundamentals of Shiksha’s business model and the role the company plays in offering much needed capital to India’s educational institutions.”
In November of 2016, Shiksha Finance had raised $1 million (Rs 6.7 crore) from the Michael & Susan Dell Foundation in a round that also saw participation from Aspada Investment Advisors.
Vikas Verma, Director at Michael & Susan Dell Foundation (MSDF) said on the current investment,
“We are delighted to see the progress that Shiksha has been making since 2016 and are confident that the Shiskha team will continue to build on the progress that it has made till date.”
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