The education gap within India is considerable, with 29 percent of children dropping out of school before completing their full cycle of elementary education. The COVID-19 pandemic has exacerbated this issue, especially for women and girls; in 2020, 1.5 million schools in India closed, and many students are unlikely to return to their classrooms as schools reopen. From primary schooling to university, many students can’t obtain a formal education due to the high costs of schooling. The Indian education loans market aims to bridge this affordability gap and help more students stay in school. While this industry is estimated to be worth over $10 billion, traditional lenders only address five percent of this market – presenting a large opportunity for fintech companies to meet students’ financial needs.
To tackle the affordability challenge in the education industry, startups at the intersection of fintech and education focus on driving cost efficiencies for schools and affordably financing education for students. Schools seek solutions that help them improve their payment collection and tracking processes, apply for and receive loans with sector-specific underwriting to go toward facilities and curriculum, and obtain insurance to mitigate risks associated with school infrastructure. Families with students attending these institutions need a way to finance tuition costs across the spectrum of education levels, including vocational school, as well as start education savings plans for their children.
At Accion Venture Lab, we’re increasingly focused on unique business models that address education affordability for historically underserved groups. Three of our recent seed-stage fintech investments within India, Latin America, and Southeast Asia take innovative approaches to support education:
As schools in India continue to contend with low enrollment and other challenges from the pandemic, many institutions struggle to manage their financial and administrative operations. Anthem, previously called Finwego, is an education sector lender in India that provides a money management platform to schools and educational institutions to digitize and streamline their banking and finance functions so they can focus on providing high-quality education in their communities.
The company launched as a fintech lender in January 2019, providing credit products to institutions and educators. After working closely with educational institutions and realizing the need to digitize their fee collection processes, the company launched Radius, a revenue management tool that allows educational institutions to collect and track tuition payments and send reminders to their students. The Radius tool enables Anthem to gain a deep understanding of fee collection trends and underwrite loans tailored to meet the needs of an institution’s “customers”: students, families, institutions, vendors, and educators.
One such product is the zero percent interest, “buy now, pay later” option offered to families to pay students’ tuition fees through Anthem’s digital platform. Families often struggle to pay schooling fees in large lump sums twice per year, but Anthem’s product allows users to pay fees in equal monthly installments, helping to smooth cash flows of households and reducing their dependence on expensive personal loans. This product also addresses schools’ need for short-term working capital credit by enabling consistent, predictable inflows of tuition payments.
As the tech industry grows in Latin America, so does the demand for software development and coding skills within the workforce. Henry is a coding bootcamp in Latin America that offers financing for technology courses through an Income Sharing Agreement where students take Henry’s coding courses at no cost until they secure a job in their chosen field.
The company launched their full-stack developer course in March 2020. Through this model, young adults can gain a technical education without upfront costs that typically make formal schooling inaccessible. Henry also builds relationships with top tech companies in the U.S. and Latin America to help students find high-paying jobs after graduation, and students only start making payments to Henry once they get jobs after graduating. Although the company is headquartered in Argentina, its 100 percent remote method has allowed them to expand to Colombia, Uruguay, and Chile. Overall, Henry’s zero upfront cost, job security-focused, remote model allows anyone – including those without the financial means – to acquire a thorough technical education that is relevant and sought after in today’s labor market.
While access to education in Indonesia has improved significantly in recent years, many students and schools still struggle to get what they need to invest in high-quality education. Pintek is a specialized education lender that provides financing to schools and families in Indonesia.
The company offers financing options to help schools smooth cash flows, fund repairs in their facilities, purchase equipment for their classrooms, and finance other working capital needs. Once a school onboards to their platform, Pintek also provides the enrolled student body with access to student loans that help break large school-related expenses, such as tuition payments, books, and uniforms, into more manageable monthly payments. This allows lower-to-middle income households to access education more affordably — more than half of Pintek’s students and families are first-time formal borrowers. Also, as the company recognized a push for schools to go digital amid the COVID-19 pandemic, Pintek developed a software platform called TataSkola to help schools digitize their internal functions. Pintek offers TataSkola to schools for free to support their operations, like tracking receivables and requesting and accepting bill payments through online or digital channels. For Pintek, the plan is to utilize TataSkola to reach more customers, increase data insights, and improve their lending decisions.
These three business models are at the forefront of education lending within their geographies, and we expect the market to continue evolving quickly. Looking forward, Accion Venture Lab plans to continue investing in new innovations at the intersection of fintech and education that are driving affordable education and reaching more students in developing markets.