GyanDhan plans to raise education loan penetration rate from 6-7% to 30-35% in next few yrs

GyanDhan seeks to revolutionize education financing in India and is on a mission to equalize and expand access to education. Ankit Mehra, Founder and CEO GyanDhan, in an exclusive interview with Bizz Buzz, recalls how he and Jainesh Sinha the other co-founder conducted an in-depth analysis of the market and found gaping holes in the education loan processes of major lenders. "The in-house GyanDhan score that assigns a credit score to the student after assessing the risk involved in the case. It was a major step forward as we moved beyond the traditional marker of eligibility of pledging collateral, which is still in rampant use," says Ankit Mehra

How was GyanDhan conceptualized and how has it evolved?

After the harrowing experiences of trying to fund our higher education, we conducted an in-depth analysis of the market and found gaping holes in the education loan processes of major lenders. We began our journey by resolving the key issue - accurately calculating the creditworthiness of an applicant. It was achieved with our in-house GyanDhan score that assigns a credit score to the student after assessing the risk involved in the case. It was a major step forward as we moved beyond the traditional marker of eligibility of pledging collateral, which is still in rampant use. Furthering our aim, we partnered with different types of lenders in the market to facilitate loans with and without collateral. We have replaced most of the hurdles, like procedural delays, archaic documentation systems, product limitations, with credible solutions such as low turnaround time, online document submissions, and in partnership with lenders, came up with new financial products to cater to a wider audience. The initial focus of the company was to service abroad educational financing needs. We began financing domestic loan needs after acquiring our NBFC license this year.

What are the types of services that the company offers?

GyanDhan is India's first and largest education financing marketplace, facilitating easy and affordable education financing needs. Our education loan counsellors are well-versed with different loan products and processes, assisting students at every step from applying for an education loan, documentation process, loan sanction, to disbursement of the loan amount. Students can apply for loans with collateral, without collateral, and without a cosigner. Apart from meeting the financial needs, the company also offers counselling services in partnership with multiple organizations such as admission counselling and visa counselling. There are several in-house tools such as SOP review, university compare tool, Admit predictor that are free of charge, helping students with the initial application phase of overseas education. On the domestic front, we have launched microloans and zero-interest EMI loans in partnership with numerous institutes.

What is the revenue model for the company?

In layman's terms, the company gets a percentage of every service that is offered on its platform from its partners and lenders. The major services that are offered on the platform are loan disbursals and counselling services, such as admission and visa counselling. For every education loan that is disbursed through the portal and for every counselling service that is availed of by the students, the company receives a share of the total amount. The focus is education loans as that generates higher revenue for the company. Coming to the NBFC operations, the main revenue is generated through interest income and processing fees. In addition to this, we have partnered with several institutions where we provide zero-interest EMI loan products and receive a revenue share from this income model.

What are the steps that the company takes to help the less privileged?

We have introduced microloans in the domestic segment for salaried professionals, made possible after assessing the disposable income of the individual. Specific tools were developed to assess the repaying capacity of an individual from a low-income group so as to not overburden them with loan repayments. These loans are designed according to the repaying capacity and other parameters into account. Since it is difficult to assess the income in a gig economy, the tool has helped us tremendously to come up with loan products for audience groups that do not own eligible collateral and cannot arrange for a co-applicant.

What is the company policy to manage distressed loans?

In the case that an applicant defaults, the company tries to decipher the reason behind the non-repayment of the loan. The reason in many cases is genuine wherein the applicant faced either income loss or job cut that resulted in the non-repayment of the loan. In these cases, we provide students with a proposal to restructure the loan to make the repayment easier and waive off the penalty. However, if the applicant is defaulting wilfully, then we pursue legal action to the maximum extent as permitted by the law.

What is the nature of the relationships with banks? What special benefits do the banks offer for students?

GyanDhan is an education financing marketplace that works in tandem with other lenders like public sector banks, private banks, Non-Banking Finance Companies, and international lenders. The relationship with our partners enables us to come up with new and innovative loan products that cater to ignored customer bases. The company's strength is more on the acquisition and assessment of the application side, whereas our partners are more competent in covering the cost of funding.

However, since acquiring our NBFC license, another dimension has been added to our relationship with our partners. In addition to cooperation, there is also an element of competition. There is a synergistic relationship between the company and the lenders, with some inherent competition. With regards to the benefits offered by the banks to the students, banks offer lower interest rates that significantly reduce the repayment burden. With several of our lenders, we come with new financial products to provide swift financing options to students.

What are the future plans of the company?

The company has just started actualizing the vision of providing easy and affordable financing options to a larger segment. The education loan penetration rate is still limited to 6 per cent to 7 per cent, which we plan to upraise to 30 per cent to 35 per cent in the next couple of years. Fulfilling the educational financing needs for the abroad and domestic segment remains the central plan of the company. The vision of the company, the one we started with, remains the same - a capable, credible student should be able to finance their education without hassles that distress or demotivate them. Since the main focus of the company is the end customer, we want to grow with them. We will be launching new financial products that match the financial needs of the customers. Since the company has the ability and authority that comes with the NBFC license, we will be able to cater to our target audience enthusiastically and fulfill the growing financial needs in the educational financing segment.

Do you see the company evolving into a bank?

If it aligns with our vision and is needed, then the company will definitely head in that direction. Evolving into a bank is not the end goal. The end goal is to provide seamless banking services. As Bill Gates once said in 1994, "Banking is necessary, banks are not".

We worked to get the NBFC license since we believed that there are places where we could provide a much better financing experience. Our business model enables us to assess and process applications at an accelerated rate. To provide this experience across the spectrum, we may evolve into a bank, while complying with the rules and regulations of the land. This feat will be achieved while maintaining our relationship with our partners, without hampering the already set mechanism.

What are some of the digital technologies that are being employed by the company?

GyanDhan is a data-driven company that employs digital technologies at every stage of the loan process and for every tool that is contrived. For example, we have a tool to shortlist universities according to the student's profile. Other tools that employ digital technologies include our Statement of Purpose Review tool, Grade Converter, and the GyanDhan Score.

We started with streamlining the education loan process that employs end-to-end digital technology. Students can apply for the loan, upload requisite documents on the portal, track the status of the loan application, and more. Customers that apply for an unsecured education loan can get approval without any interaction with the bank official.

How has the company progressed pan India?

The company operations started pan India. However, in the first two years of inception, we were limited to tier-1 cities, like- Hyderabad, Bangalore, Mumbai, Delhi, Pune, and Chennai. Steadily, we moved to tier-2, tier-3, and tier-4 cities. Now, we get applications from remote areas like villages in District Haryana. This is just one example of the way the company is realizing its vision. There are still geographical biases, meaning there are cities from where we get the maximum applications for education loans, such as Hyderabad, Bangalore, and Mumbai. These cities tend to dominate every year.