This start-up has put its money on education loans for short-term courses

When Rakesh Patnaik didn't land a job after completing his engineering course, he wasn't as unhappy. "I saw this as an opportunity to go back to becoming a fitness trainer," he says. But when his parents refused to fund another course for him, he had no other option but to look for loans. Though banks didn't help him, the institute where he rolled-in assisted him in securing a loan from an NBFC. 

Education loan for short-term professional courses wasn't possible a few years back, but now lenders have started to see the opportunity in this space. One such platform, Eduvanz Financing, raised $2 million from Unitus Ventures and Michael and Susan Dell Foundation recently. 

Founded in 2016 by Varun Chopra, Raheel Shah and Atul Sashittal, the tech-driven NBFC offers educational loans for skill training and development. 

Business model and market potential 

The company relies on data points and technology for efficient lending. It has tied-up with over 150 institutes in India, mainly for two reasons — to expand its reach and cut down on the interest rate. Chopra says the partnerships allow Eduvanz to provide interest-free loans as many of the institutes have chosen to pay the interest amount themselves. 

With more and more people looking to acquire or upgrade their skills for a better job, the skill training market is expected to grow in the coming years. Chopra says around 40 million people get skilled every year in India. Going by this figure and assuming that even 10 per cent of them start taking loans averaging Rs 1 lakh, a back-of-the-envelope calculation shows a market size of Rs 40,000 crore. 

Unitus partner Srikrishna Ramamoorthy says they chose to bet on Eduvanz seeing the huge demand-supply gap in the credit sector. “In an industry where the bulk of the new-age NBFCs are focused on the consumer and the MSME finance segments, Eduvanz stood out for us as it targets an untapped segment,” he says. 

Road ahead 

There’s a good market potential but for Eduvanz, the key to success, like for most lenders, will depend on its ability to recover the loans. 

“The challenge ahead will be to ensure that the credit quality remains top notch by putting a strong system and technology in place,” says Ramamoorthy. 

Parents in India continue to choose and fund their children's education, and Chopra feels that if this mindset changes, the market potential will rise exponentially. On the other side, the company's future will also depend on where it itself gets the credit and at what interest rate. 

The company, according to Chopra, has zero NPA as of now. He says they are working to maintain this record by improving data points and the lending technology.