Student Loan NBFCs – Need Of The Hour
India’s growth Story:
The past decade has seen a lot of technological advancement in various fields including education and the pandemic hastened the adoption of new ways of thinking and working. As India stands on the cusp of becoming a formidable global power which can be attributed to factors like:
- Out of the total population of 1.38 crores, a massive 67% is under the age of 35. It makes us a nation with the highest population of young people.
- In its 75th year of independence, India took over Uk to become the 5th largest economy of the world, at the brink of taking over Germany’s 4th place in the next few years.
- An accelerated adoption of technology bringing in an increasing number of population into the mainstream. There are various statistical indicators pointing to a state never achieved before, UPI transactions hitting a humongous 10.7 lakh crore 2 months back being just one of them.
Rise of aspirational youth of the country:
We as a nation has grown in our ambitions in proportion to all the progress we have made in the past century. Despite of a massive brain drain leading to highest number of world’s unicorns having Indian Origin Executives at the helm, we are being looked upon by the world as the greatest destination for digital and tech talent. Education is the most important tool that can meaningfully change the economic and financial state of every Indian Household.
Accretive interest in higher education:
83% students want to study abroad as per a latest report, as they believe that it help them land better jobs, carve out better careers for themselves leading to a superior quality of life. There is a discernible shift in the Indian mindset reflected by the willingness of almost 57% of middle class households inclined towards spending money to study abroad. There is a marked increase in the level of comfort and trust towards taking education loans to fulfill their higher education dreams. Over 62% Indian household prefer taking student loans.
These stats tell that almost 2 million students might be flying abroad for higher studies spending almost a $100 billion education for international studies. The hybrid from of education has taken over conventional formats widening the scope and breadth of access to education for vocational/ upskilling/ certification programs to enhance employability and job potential of young graduates and working professionals. This is reflected in the how the investment in India’s ed-tech companies went up to $2.2 billion in 2020, further growing to $4.7 billion in 2021. This makes the ed-tech sector the third financially supported segment of Indian start-ups.
Financial Infrastructure in the Student Loan Domain:
As much as we see exponential rise in the interest and spend towards education and upskilling, the financial ecosystem congruous to support the needs of the people seems to lack the requisite robustness.
Reserve Bank of India data show that in July 2022, banks had just ₹85,098 crore of education loans in a mammoth ₹35.9 lakh crore retail credit book. A key reason for this seems is the higher rate of delinquencies. As of March 2022, banks carried Non-Performing Assets (NPAs) of just 1.8 per cent on their retail loan portfolios but education loan NPAs were markedly higher at 6.7 per cent. Hence banks are holding themselves when it comes to giving student loans.
Current policies of the banking system requiring third party guarantees, collaterals and minimal moratorium period act as major barriers for students looking to avail student loans.
The WAY Forward:
Private players and NBFCs focused on the student loans can play a critical role in bridging the gap in demand and supply in the education loan sector. Through a clear focus on this domain, it is important to build a significant expertise and understanding of education as an industry in order to build credible underwriting models which would help reduce the NPAs and allow financial institutions to have a profitable growth.
Recognizing this lacuna, Kuhoo has focused its expertise to utilize tech innovation and create student friendly loan products. By reducing the need for collaterals and guarantees through effective underwriting, they are trying to broaden the reach and access to financial assistance to middle class and lower class families genuinely in need.
With a dedicated focus on technology. Kuhoo is constantly striving to make the entire customer journey fully online, easy and quick where in some cases disbursals can happen in less than 3 days.
Through a variety of products for formal higher education as well as upskilling and specialization courses, Kuhoo is on its way to help students nationwide by building effective strategic partnerships with the various stakeholders like Ed Tech Companies, Consultants, Test Prep Centers, Counsellors and Colleges.