Michael & Susan Dell Foundation pumps $1mn into Shiksha Finance

Chennai-based school financing company Shiksha Financial Services India Private Limited has today raised $1 million (Rs 6.7 crore) from the Michael & Susan Dell Foundation in a round that also saw participation from the Aspada Investment Advisors.

Incorporated in 2014, Shiksha Finance is an award-winning NBFC that provides loans in the range of Rs 5 lakh– Rs 1 crore to affordable private schools, as well as smaller loans to middle- and lower-income families that find it difficult to fund their children's education. They finance school-going children from kindergarten to Class XII, with the objective of reducing school dropouts. Schools use these loans for education infrastructure development. These loans are secured through a unique social collateral — much like microfinance — which can be paid back through a manageable repayment schedule.

Currently present in three states, Shiksha has so far disbursed over 200 loans to educational institutions. This round of funding will be used to further strengthen its technology backbone, launch more innovative products, and expand into newer markets. This investment will enable the organisation to provide loans to 2,300 schools over the next three years.

VL Ramakrishnan, Director and CEO, Shiksha Finance, elaborates on their proposition of "making money available where it is otherwise not available." "Our two biggest differentiators are speed and simplicity. We raise money through equity and debt, for which we pay interest. We give loans to parents and to schools, for which we receive interest. We make a profit when our income from loans given exceeds interest on debt, our operating costs and bad debts. In most cases, the interest that we charge is half of what the customer is currently paying," he adds.

This investment reiterates the Michael & Susan Dell Foundation’s commitment to increasing access to quality education for the poor. While the foundation has invested in market-based solutions to increase the supply of high-quality service providers for the affordable private schools, the schools still struggle with the availability of finance to invest in the improvement of infrastructure and quality. Shiksha is a compelling solution to improve education quality in the sector and become a full-service solution for the schools and parents of the children studying in these schools.

“We are glad to have Aspada and the Michael & Susan Dell Foundation invest in Shiksha. While education loans for higher education are quite common in India, Shiksha is addressing the vacuum in school financing through an innovative go-to-market solution. Enhancing financial inclusion in the education sector will eventually lead to more inclusive growth. We believe that improved education infrastructure at our schools will eventually translate into enhanced learning outcomes for our children,” says Ramki.

Prachi Windlass, Education Director, India, Michael & Susan Dell Foundation, said, “The recent investment in Shiksha supports the Michael & Susan Dell Foundation’s belief that a market-based, scalable financing sector can contribute to improving access to high-quality education for students who are at the bottom of the pyramid.”

Tom Hyland, Co-founder and Partner, Aspada, said, “Access to essential services is a key investment theme for Aspada, and we view education as a particular area of interest because of its unparalleled ability to unlock opportunities for lower income segments. Operating in a sector which has insufficient formal financing available, Shiksha has a tremendous opportunity to catalyse infrastructure upgradation and capacity increase necessary for schools to meet the demand for a good quality, yet affordable, private education in India.”