India: NBFC Varthana raises $3m for school financing programme

Bengaluru-based school finance company Varthana has raised $3 million in funding from the Michael & Susan Dell Foundation to expand its School Transformation Program (STP). The program is aimed at improving the quality of learning in private schools by lending them credit facilities.

Through the STP initiative, Varthana provides debt financing, education assessments, hands-on support, vendor connections, and financial rewards to schools in different states. It has an in-house non-banking finance company (NBFC) for lending credit finance to schools.

It provides loans from Rs5 lakh to Rs1 crore for private schools at prevailing market rates. Apart from loans, Varthana focuses on working with schools to improve their learning outcomes by bettering their teaching quality and technology, among others.

Currently, the program counts 337 schools across five states, and is estimated to have an impact on more than 200,000 students.

The fresh funds will be used for providing loans to schools, rewarding schools that show learning level improvements, conducting third-party learning assessments, and supporting education specialists who work with the schools.

The company said that the expansion of the STP initiative would cost $10 million, of which Michael & Susan Dell Foundation has contributed $3 million via debt financing. The debt financing method allows participating schools and Varthana to be rewarded up to 10% of the loan amount for improving student learning outcomes by 5-10%.

“Through this unique initiative, the Michael & Susan Dell Foundation is helping Varthana take another step towards enhancing the educational outcomes of children attending affordable private schools. Building on this success, we hope to further expand the School Transformation Program in the coming years,” Steve Hardgrave, co-founder and chief executive officer of Varthana, said in a statement.

The microfinance industry (MFI), which Varthana is part of, has been on a plummet, post demonetisation. Mint reported recently that MFI sector’s loans disbursement rate fell by 26% quarter-on-quarter in December 2016 along with issues in loan repayments.

When asked about the effects of the slump in MFI lending, Varthana told Mint that its business has a “strong underlying fundamental” to combat any market plunges. “We don’t foresee any significant impact of demonetization on Varthana’s portfolio,” the company told Mint.

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