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In this interview, Sandeep Wirkhare, MD & CEO of Indian School Finance Company (ISFC) spoke about how their innovative financing approach is transforming education by providing tailored financial solutions to budget private schools, and enabling them to enhance their infrastructure and educational quality.
Read the complete interview:
TechGraph: Could you please provide an overview of ISFC’s role in financing schools and educational institutions in India? What specific services or financial products does ISFC offer to these institutions?
Sandeep Wirkhare: ISFC is the first sector-specific NBFC financing school in India. Set up in 2008, it was envisaged as an enabler for smaller unorganized schools, which were facing challenges in getting funding from the formal financial sector.
These institutions had to meet their requirements by borrowing from the unorganized market at a higher cost or delaying/shelving their projects till accumulations from internal accruals could support the same.
ISFC’s products and services include school Infrastructure improvement loans, Digital infrastructure development loans (Tech Vidyalaya), Fee Hypothecation loans and zero-cost EMI, and Parent Fee Financing.
Our plans also include skill financing, coaching classes, and STEM labs.
TechGraph: Financing educational institutions can have a significant impact on the quality of education provided. How does ISFC ensure that the funds it provides are being utilized effectively and contribute to the overall improvement of educational outcomes in India?
Sandeep Wirkhare: Without financing, no school can build the requisite hard and soft infrastructure needed to offer quality education. 70% of private school students in India are enrolled in budget private schools (BPSs). Many of them lack access to mainstream banking.
Consequently, they struggle to upgrade, and this adversely impacts the quality of education they provide. By finding innovative ways to offer capital so that schools can upgrade, we are contributing to the improvement of educational outcomes in India.
TechGraph: Education in India encompasses a diverse range of institutions, including government schools, private schools, and non-profit organizations. How does ISFC tailor its financing solutions to meet the unique needs and challenges faced by different types of educational institutions?
Sandeep Wirkhare: The majority of privately-run schools in tier 2 and tier 3 cities in India operate as non-profit organizations, established with the primary objective of developing the education sector. These schools may receive aid or operate without assistance.
However, those lacking sufficient funds face limited options, as mentioned earlier. This is where the Indian School Finance Company (ISFC) comes into play. It is crucial to recognize that the fiscal strength of these schools often goes beyond what is reflected in their stated financials.
Many parents make cash payments for fees, and vendors are also settled in cash, which is not captured accurately in the balance sheet. Due to this, rather than relying on a digitized one-size-fits-all system, we offer a ‘personalized credit assessment’ of these schools. Large banking institutions, constrained by their policy structures, are unable to engage at this level. Hence, ISFC holds a distinctive advantage. Our credit assessment process is tailored specifically to this segment of the education industry.
TechGraph: As education evolves, technology integration and infrastructure development become crucial. How does ISFC support schools and educational institutions in adopting new technologies and improving their infrastructure through its financial services?
Sandeep Wirkhare: Since its inception, ISFC has traditionally followed a transactional approach to lending. However, after the COVID-19 pandemic, we have adopted a relationship-based approach. We call this version ISFC 2.0. Under this new model, ISFC aims to invest in the growth of its partners and assist them in focusing on technological advancements, diversified product offerings, and enhanced offerings to students.
To support the digital transformation of schools, ISFC has established partnerships with Edtech players who specialize in content management, feedback systems, assessments, and other related areas. This collaboration allows ISFC to leverage the expertise of these Edtech specialists on the asset side of its operations.
On the liability side, we have tied up with large financial institutions, so that these institutions get the best of funds at optimal costs.
We are committed to continuous innovation, constantly introducing new products to meet the evolving needs of schools. One such product, called ‘Tech Vidyalaya,’ offers loans to schools (at a rate of 9.9%, significantly lower than the prevailing market rates of 14-20%).
These loans are specifically designed to assist schools in acquiring digital products and upgrading their digital infrastructure. For instance, it has content partnerships with various stakeholders such as KREEDO for preschool content, Chrysalis, and LEAD for school content.
Further, to facilitate assessments, ISFC has tied up with Singapore-based LittleMore innovation labs. To help children prepare for competitive exams, we have a tie-up with Inlustro Learning. All these elements become available to budget private schools via a subscription model. ISFC’s reimagining of education is evident.
TechGraph: Financial sustainability is vital for any educational institution. Could you shed some light on how ISFC assists schools in managing their finances effectively, ensuring long-term viability, and maintaining affordability for students and parents?
Sandeep Wirkhare: Our vision is to collaborate with schools and become the largest ecosystem enabler in education, through financial intervention. The COVID-19 pandemic caused financial constraints for parents, resulting in their children dropping out of school.
To address this issue, ISFC developed an ERP in-house, an app called ‘TuTo.’ This app, available on the Play Store, offers parents the convenience of zero-cost monthly installments (0%) for an amount equivalent to their child’s school fees.
To make the transaction seamless, the TuTo app is given free of cost to schools. It helps to maintain the database of students and teachers and also segregates them as per their grades. Parents are further facilitated to pay their child’s school fees regularly, ensuring no payment default in the school’s books.
Additionally, it empowers schools to enhance their financial stability by digitizing their fee collection process and offering digital loans to parents who opt for zero-cost EMI. By receiving immediate payments through TuTo, schools can operate efficiently and effectively, bolstering their balance sheets and overall functioning.
TechGraph: Impact measurement and social outcomes are crucial considerations in the education sector. Can you say how ISFC’s financing has positively impacted schools or educational institutions, leading to improved educational opportunities for students?
Sandeep Wirkhare: Our impact on schools, particularly in Tier 2 and Tier 3 towns is significant. Not only do we take pride in helping schools upgrade their technology, but also in reducing student dropout rates, and ensuring timely fee collection. These achievements may seem easy, but they are very challenging in tier-2 and tier-3 towns.
Furthermore, through our CSR program, we have funded the fees of several deserving students up to INR 10,000/-, provided career counseling to 4,278 students, and supported the establishment of four STEM labs to enhance educational quality. We plan to expand this program by forging partnerships with other institutions that have CSR obligations, creating a broader impact.
TechGraph: Looking ahead, what are ISFC’s plans and aspirations in financing schools and educational institutions in India? Are there any innovative strategies or new initiatives on the horizon that can further enhance the company’s impact on the education sector?
Sandeep Wirkhare: We want to be a universal loan provider, across the education spectrum. As of now, we have only been able to reach 5,000 schools. The untapped market is enormous, with an estimated 200,000 schools yet to join the formal banking system for financing.
To address this, we focus on tailoring our product, strengthening distribution networks through direct and indirect channels, digitizing relevant offerings, and automating the processes. By doing so, we aim to create greater fluidity within the educational sector, making a significant contribution to nation-building. Our focus remains on expanding our reach, enhancing accessibility, and empowering schools across the country.