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Parents aspiring to send their wards to a school of their choice but finding the fees unaffordable can now heave a sigh of relief. Taking cue from the zero-cost consumer durable finance model, NBFCs are now exploring a similar product for school fees.
According to industry insiders, the rising cost of living in urban and semi urban areas, inflation and the increased cost of education gives a huge scope for rolling out such a product, which would not only cover the annual admission fee but also the tuition fees of schools, which typically range between ₹50,000-₹1 lakh a year.
NBFCs tie up with schools and educational institutions to assist payment of fees. The charges are typically borne by the schools or institutions, who in turn get the benefit of upfront cash flows which they can deploy for their working capital requirements. It is usually a short tenure loan ranging between six-twelve months. The product is likely to gain traction given that many parents have either lost their jobs or have had to take salary cuts in the wake of the pandemic.
‘Huge potential’
Avanse Financial Services (AFS), an education focussed NBFC, for instance identified the school fee financing as a separate vertical about two-three years back given the “huge potential” in the segment. “What happened in case of retail credit and consumer credit, will now happen in education. We identified this space about two and half years back but the growth has been slow due to Covid (as schools were shut). Today the numbers are in low single digit but that is because this category is getting created. There is a huge potential,” Amit Gainda, CEO, Avanse Financial Services told BusinessLine . As on September 30, 2021, AFS had an AUM (Asset under Management) of ₹3,800 crore.
Transformation
According to Gainda, assuming that there would be close to 3.5 lakh unaided and private schools in the country, the estimated market size for school fee financing would be upward of ₹1.75-lakh crore.
EnableCap, a Kolkata based tech-enabled NBFC, is in talks with a number of 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 underwent a rapid transformation post the availability of finance. We expect a similar transformation in education space with this product which is collateral free, simple and seamless and offers convenience to customers to spread out their payments,” Nirpeksh Kumbhat, Co-Founder, EnableCap, said.
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