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Despite having more than 7,000 higher education institutions, Southeast Asia possesses one of the lowest enrolment rates in the world. Specifically, tertiary education in the less-developed countries in Southeast Asia remains severely under-funded despite an ever-growing demand, with enrolment rates dwindling to an alarming 40%, as compared to 90% in the East Asia region.
One key factor is affordability. Financing has always been a key barrier for enrolment and retention of students in schools. With the lack of access to traditional credit and limited savings, students are forced to drop out of school. COVID-19 exacerbated this crisis. With more parents having their jobs displaced, there is an increased difficulty in meeting their children’s tuition fees, thereby causing higher education to be unaffordable.
In this month’s issue of the Heli-Pad, we spoke to 3 education lenders to access ground-level information of the education landscape in 3 different countries – India, Philippines and Indonesia – to understand where opportunities lie for investors in this segment.
Effective higher education system is vital for a country to grow and thrive. With increasing competition in the modern global economy, the demand for higher education is expected to expand. Higher education systems face an upward pressure to deliver a better standard of education to keep up with the ever-growing competition from other countries. However, one of the key barriers is affordability. The COVID-19 pandemic further widened the gap with many parents looking to supplement the limited scope of online schooling with tuitions, which meant an extra burden on their education spend.
“COVID-19’s aftermath left a major impact on certain sections of society. The parents are struggling. Many people lost their jobs or took paycuts, but they still want to make sure unhindered access to quality education for their children.”
In Southeast Asia, the responsibility of paying for education traditionally lies with the parents, as they want to provide for their children to get a decent education until they graduate. Even today, the mindset that “until one gets a job, any education is a responsibility of parents’” remains prevalent. Parents are still responsible for ensuring they offer complete freedom from any and every cost to their children until the start of their working careers.
In India, the education system is can be divided into multiple segments: K12 (Public and Private schools), Test Prep (Preparation for Competitive Exams), Undergrad/Postgraduation (UG-PG), and Vocational Courses and Upskilling courses.
At K12 level, the demand for educational loans is higher for private and IB schools than public schools, as they provide additional facilities to students.
In response to the exorbitant amount of school fees, several parents turn to educational loans to alleviate some of their financial burdens. These loans help fund tuition fees at a low or even zero interest rate with the sole focus of providing them the opportunity and accessibility to better education.
Educational loans have a higher demand in the Test-Prep segment, where students prepare to get into professional UG/PG courses; such as Engineering or Medical admissions. The fees are generally higher due to the huge competition for a chance to be admitted into a reputed specialised school.
Because of considerable competition, college students often take up additional online courses in data science, AI/ML or digital marketing to be job-ready. These upskilling courses are usually difficult to get a loan for.
One specific example is Eduvanz. Eduvanz is a market leader to provide loans for the skilling and upskilling community in India. This includes college graduates looking for vocational and upskilling courses. As they are a registered as a Non-Bank Financial Institute (NBFI) by the Reserve Bank of India, they have the ability to cater to every learner in India and they aim to make education accessible to all learners across K-12, Test-Prep, UG/PG and Upskilling segments.
In Indonesia and the Philippines, education lenders such as Cicil and ErudiFi continue to grant students access to education, with tertiary education being the main focus. This is not limited to only tuition fees but also loans for basic equipment such as laptops and books, and even providing funds to schools to help improve their infrastructure. They also provide career guidance and counselling for students who have yet to decide on their course of study.
“I believe it is here to stay but I also believe that it is going to be a hybrid of both physical and digital learning" - Leslie Lim Co-Founder, Cicil
Digitalisation has had a huge impact in providing quality education, specifically in the skilling and upskilling segment.
In Indonesia and the Philippines, schools were preparing to adopt digital education even during pre-COVID times. Hence, when the pandemic arrived, they had an easier transition to online learning. Technologies that were in early adoption phases needed to be executed faster, and this pushed the system to accelerate and innovate further. With online learning, schools realised that there are other ways to educate, not just in a physical university or college but also through digital-only class offerings. Understanding that learning can be in different forms accelerated the development of this specific segment of education.
But online learning did have its drawbacks as well. With digital education, there was a lack of social interaction between students. Whilst online education has its benefits, it is also important to recognise the social aspects of a student’s holistic development, which cannot be replicated online. This issue underpins the need to integrate both digital and physical learning.
In India, the government has opened up on providing online diplomas, which previously were not recognised as official certificates. Students can now access quality education and obtain job-worthy certifications from the comfort of their homes. This provides education lenders, like Eduvanz, the chance to partner with these institutions to finance the courses provided by them.
With the recent spike in the number of COVID-19 cases in India, many nurses and doctors were starting to feel the mental and physical stress of maintaining long and recurring shifts. This led to potential career changes amongst healthcare workers. On the other hand, due to the high demand for medical workers, the industry started paying more and the government provided incentives to medical and nursing undergraduates. Online medical courses were available and accessible for undergraduates and the upskilling population. This encouraged students to pursue medical or nursing degrees to join in the fight against COVID-19.
“In the Philippines, we’ve seen an increase in our student base from the medical and allied health field segment.” - Naga Tan, CEO Erudifi
The Philippines provides one of the most nurses to countries around the world. In 2019, more than 17,000 nurses from the Philippines left the country to work abroad. More than 85% of the nurses trained in the Philippines work overseas. This caused a visible lack of healthcare professionals in the Philippines when the COVID-19 pandemic struck. In April 2020 the government intervened by barring nurses from working overseas. This ban was later lifted in November 2020, but a restriction was set at 5,000 healthcare professionals allowed to travel overseas for work per year. This measure was implemented to maintain the number of healthcare professionals in the Philippines to cope with the COVID-19 pandemic.
From the education lender perspective, Cicil Co-founder, Leslie Lim, has seen an increase in the number of lenders looking to fund medical and nursing students. There was a much bigger focus on funding students to pursue medical or nursing degrees to provide aid to the medical industry in Indonesia.
At the primary education level in India, girls have a higher enrolment rate than boys. However, girls also have a higher dropout rate than boys. This is more prominent in the rural segment as there are still some familial expectations in certain cultures, and marriage plays a key factor. But the government is creating labour laws around equal workforce participation by women and as a result, corporates are encouraged to find talent and more women have been spurred to join the workforce.
“50% of my 270-member team at Eduvanz comprises women.”
- Varun Chopra, CEO of Eduvanz
Another positive impact of the pandemic is that Work-from-Home (WFH) has gained wider acceptance. The biggest reason for why the trained women workforce saw high job departures in the pre-pandemic era was the need to manage their families and children. But COVID-19 has now made staying at home to work possible.
Similarly in Indonesia and the Philippines, the number of female student enrolments is increasing. Almost two-thirds of the students taking up loans from ErudiFi are women. ErudiFi provides equal employment opportunities to ensure that both male and female students have the same opportunity to grow and learn.
On the investor side, there are now more lenders looking to provide funding in ESG investments and that includes women empowerment. There is an increasing number of lenders who look to fund further studies for women to provide equal access to education for both men and women.
Education is an integral factor for growth and development in society and it should be available to all. With COVID-19 gradually easing in 2022, schools are reopening, and more students are re-enrolling in schools. Students have an increased appetite for further education and the ever-growing market continues to demand for those types of skillset, especially with the restart of the economy. The education scene in Southeast Asia is growing and impacting more lives, with opportunities for investors to support this trend meaningfully.
Here at Helicap, we provided funding to education lenders in the Southeast Asia. Through education lenders like Cicil, Eduvanz and Erudifi, we can make a difference to provide accessibility to education for all students.
Eduvanz is an RBI-approved digital FinTech NBFC that helps learners discover and finance their learning & career goals with fast, convenient, and affordable no-cost financing solutions. Eduvanz was founded to offer convenient and flexible financial assistance to Students and Leaders who want Quick Results, Attractive Benefits, and Transparent Conversations. The core objective of the company is to make education accessible to all learners across K-12, Test-Prep, Upskilling & UG/PG segments.
About the CEO:
Varun has worked in various domains like Consulting, Investment Banking & Education for over 15 years, with global organizations like Genpact, Deutsche Bank, and Nomura. Varun is an IIT Madras alumni. His passion for bridging the skill gaps across the sections of the society and fuelling India’s skilling ambitions led him to co-found CurrEQlum, a non-academic skill-building platform for school students.
Founded in 2017, ErudiFi is a tech-enabled platform that helps financially underserved students in the region secure access to higher education. It operates as Danacita in Indonesia and Bukas in the Philippines. Having served over 12,000 students to date, ErudiFi continues to focus on expanding its outreach through partnerships with renowned universities and vocational schools such as President University, Untar and Wall Street English in Indonesia and Phinma Education, Far Eastern University and Mapua University in the Philippines.
About the CEO:
Naga Tan is the CEO and Co-Founder of ErudiFi. Prior to founding ErudiFi, Naga worked as a fixed income trader at Morgan Stanley and in the Hedge Fund Strategies Group at Goldman Sachs. Naga holds an MBA & MA in International Studies from The Wharton School and Lauder Institute at the University of Pennsylvania, and graduated with first class honors from the London School of Economics (LSE).
Cicil is a Google Launchpad Accelerator start-up that provides micro loans for education needs in Indonesia. These loans are used to pay for school fees, school equipment, and even to the schools themselves to help improve their school’s infrastructure. By doing so, we hope to improve both the access to education, as well as the quality of education in Indonesia. To date, we have disbursed over 96,000 of such loans, and we are active across 58 cities in Indonesia. Cicil is also fully licensed and monitored by OJK, and is also a member of AFPI.
About the CEO:
Leslie is the Co-founder of Cicil, a start-up focused on providing financial access to the underserved Indonesian university student segment. Prior to starting Cicil, Leslie worked in investment banking in Hong Kong and Singapore. Leslie holds an MBA from INSEAD, and is a Member of the Global Shapers Community, as well as the Milken Institute Young Leaders Circle. In addition, Leslie is also an Entrepreneur-in-Residence at INSEAD, and a Alibaba eFounders Fellow.