This investment can be seen as a positive inflow of money into the education sector. As stated in the article, Indians spend billions of dollars on college fees alone. That’s a huge amount. But the problem is that only a certain sector of the Indian population enjoys the benefits of higher education. Private schools in India are expensive and not everyone can afford them. And we all know the state of government schools and colleges in India. Hence many students, and dare I say, bright students, end up dropping out of school because of their socio-economic background.
This is where educational loans come in. Organizations like Credence provide many passionate and bright students, who wouldn’t have been able to afford higher studies, a chance to make their career. These education loans provide a huge relief to many students. Hence I see this investment as a huge positive and one that will benefit the whole education sector of India and hopefully helps thousands of students. We need more big firms like Capital India to invest in the education sector. Another big positive aspect of this investment is that since Credence is a homegrown start-up, an investment like this gives a huge push to the local start-up scene. It also gives a huge boost to many entrepreneurs and makes them see hope.
Capital India, a company that offers finance to SME and retail customers, will invest $25 million in education loan start-up Credence.
Credence is a Delhi-based technology-led education loans platform set up in 2017 and currently works with around 1,000 colleges across 17 cities. The fresh capital infused via both debt and equity will help Credence expand its loan portfolio in a sector that is booming in India, and more so after technology adoption expanded the scope in the past 18 months.
S.K. Narva, promoter of Capital India, said the annual spend on college fees in India is around Rs3.5 lakh crore, of which only 5% is financed by organized lenders. Narva said the founders will continue to run operations for Credence “as we would not want to disrupt the working of the organization and believe they know the business best."
“Our partnership with Capital India is very strategic, it will give us both balance sheet and cost of capital advantage which will help in disrupting the education lending segment by providing loans to students who were until now ignored, helping lakhs of Indian students achieve their potential," said Avinash Kumar, co-founder, Credence.
The start-up undertakes a rigorous evaluation process using a proprietary artificial intelligence (AI) model, “which tracks 15 million data points to predict the future income of students applying for loans." Lending is based on students’ potential and future income instead of the existing financial capability of the family, which is typically the primary factor considered by traditional education lenders.
Credence offers education loans covering K-12 school fees, online up-skilling courses, higher education as well as study-abroad courses and is looking to lend Rs3,000 crore by 2025.
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