Private schools in India are gradually moving towards collecting fees on an annual, half-yearly and quarterly basis, as against the traditional way of monthly payments. The new practice helps schools manage their cash-flow better.
However, a significant section of the middle-class is not capable of meeting the lumpsum payment requirement of schools. A Bengaluru-based financial startup, NeevFinance is stepping in to allow children education to continue unhampered.
Founded in June 2015, NeevFinance, a RBI-registered non-banking financial company (NBFC) provides loans to parents for K-12 education. The startup can begin processing loan applications from parents once it completes the formalities for association with the educational institution, after which the parents are eligible to apply for a loan, varying in amount from Rs 30,000 to 2 lakh p.a.
When a parent applies for a loan, Neev offers an amount equal to the total annual amount due to the school, for a particular term at the beginning of the period, at a pre-agreed cost. The parent then repays the loan to Neev in equated monthly instalments (EMIs) over the period of the loan term.
Neev provides the school with the entire fees upfront on behalf of the parents, and, in return, the school supports Neev in timely collection of dues from the parents.
The formation process of Neev
Neev Finance was the brainchild of Rishi who prepared a detailed business plan and shared it with his cousin, Nikhil Saraf, a chartered accountant (CA) by profession. Nikhil connected Rishi with his childhood friends Samir Agarwal, Amit Jaiswal and Kavita Agarwal. The 5 teamed up to bootstrap Neev Finance and establish the infrastructure to go live.
First they approached schools to pitch their idea and to gauge their response. Expectedly, the founders received a positive response, as Neev Finance was solving a major cash flow management problem for the schools. Not only the schools, even the parents responded well during the awareness sessions conducted in a few schools to spread the idea.
How is Neev making money?
According to the founder’s calculations, Neev Finance gains 3 to 5 % margin from every loan as interest, which is sufficient to make this NBFC profitable. Just to give you an idea, SBI’s student loan scheme charges 2% above Marginal Cost of Funds based Lending Rate (MCLR) for loans upto Rs 7.5 lakh.
That the government is eager and proactive to provide education loans is evident from the website launched last year – vidyalakshmi.co.in – where students could seek education loans via SBI, IDBI Bank and Bank of India. Though education loans for higher education have always been available, education loans for private K-12 schools is yet to make its presence felt.
Currently, NeevFinance has 30 employees spread across Bengaluru, Kolkata, Mumbai and Nagpur. So far, it has signed up a healthy figure of 45 schools and disbursed around 300 applications across Bengaluru, Nagpur and Mumbai. In the next one year, this NBFC hopes to reach out to at least another 12 cities. Its 3 year plans are to touch the lives of 20,000 students across 400 schools and colleges.
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