Two big hurdles await Indian students who wish to go abroad to pursue higher education: interrupting the admissions process and getting a loan to pay the exorbitant tuition fees.
If the first is in the hands of the applicant, the second is largely dependent on the approval criteria of institutional lenders such as banks or NBFCs (non-bank financial companies). Education loan approval rate shows revealing numbers: India’s finance ministry last year said student loan approvals decreased to 164,000 applications for the year in 2019, compared to 216,000 declared in 2018.
Enter GyanDhan, a New Delhi-based student loan startup that operates an online marketplace to ensure students don’t compromise their education goals due to lack of funds.
Launched in 2016 by Ankit Mehra and Jainesh Sinha, the company partners with banks and NBFCs to facilitate the process of obtaining loans for students who have been accepted by foreign universities or colleges.
Students looking for study loans through GyanDhan have access to all lenders available on the platform, as well as details of the application process such as required documents, each bank’s eligibility criteria, periods moratorium and interest rates.
In its early days, when GyanDhan was a pure marketplace, the company was not involved in the candidate application process and had no impact on loan approval rates. GyanDhan was simply acting as an aggregator; it was up to the students to identify the right lender for themselves.
“For every loan application approved through our platform, three applications were rejected by the banks even if the applicants had the right profile,” said Mehra, co-founder and CEO. KrASIA.
Indian lenders assess risk by looking at the home ownership and land of an applicant’s family as well as their parents’ background, such as job stability, household income, and number of family members. who work. Mehra argued that this was not the ideal way to judge a candidate’s eligibility for the loan. Instead, he said, lenders should look at factors such as the likelihood of the student getting a job depending on what course of study they plan to pursue, the average salary in that industry. , his academic record and his professional experience.
To further involve the business in the loan application process, GyanDhan created its own model to assess applicants’ default risk level and now provides the scores to lenders.
“Over the past four years, we’ve been able to increase the approval rating from when we were just a market. We have seen approval rates increase 2.5 times over lender approval rates, ”Mehra said.
Once the company started to manage the entire customer experience (digital upload of documents, sending to banks for approval, and processing for final approval or rejection), turnaround time became faster. .
“Once the requester has completed the form, our algorithm in the back-end suggests a list of partners best suited to their needs. With the consent of the applicant, we send their contact details to the partner. If for some reason the loan was not sanctioned by one partner, we put them in touch with another partner, ”Mehra said.
There have been instances where GyanDhan fought for lower interest rates for his candidates. Currently, banks and NBFCs listed on GyanDhan offer guaranteed loans with interest rates between 8.75% and 9.5%. Interest rates for unsecured loans start at 10.5% and can go up to 15%.
The company charges lenders a certain percentage of each loan approved for applicants using GyanDhan. Through its partnerships with banks and NBFCs, the company has paid INR 800 crore (USD 107 million) to more than 2,800 students seeking funds to cover tuition fees while studying abroad. Canada, UK, Australia and USA are the top four destinations for students using GyanDhan services.
GyanDhan obtained an NBFC license from Indian regulators earlier this year to lend money to students using his own cash reserves. “The ability to make loans on our own means that we can offer structures that traditional lenders wouldn’t have. We intend to generate 700 crore INR (94 million USD) in 2022 through the market. Almost INR 60 crore ($ 8 million) will be on our NBFC, ”Mehra said.
In January 2020, the company conducted trials with students seeking loans to continue their education at home in India. The pilot project became a lifeline for the company when the pandemic cut off international travel. Still, the income was slim. GyanDhan has managed to identify a few lenders willing to provide distance education loans with colleges overseas, but the concept has not received much appeal.
It was important for the company to enter the local market to diversify its business, Mehra said. Now, GyanDhan is helping students get loans before they graduate to college or as they prepare to develop new skills by taking online courses. This year, the company branched out to issue loans for K-12 students.
“We want to be in a place where we can help students with all types of educational needs. We will soon be covering the whole educational space, ”Mehra said.
This article is part of KrASIA’s “Startup Stories” series, where the authors of KrASIA speak with founders of tech companies in South and Southeast Asia.