IFMR Digest May 2018

STUDENT ARTICLE 50

Growth prospects of Education Finance Sector
in India

An investment in knowledge pays the best interest.
-Benjamin Franklin

India, being one of the top With the help of services like
school fee loan, tuition loan, a
runners in population has an mother can send her daugh-
important place in global ed- ter to a nearby school that has
ucation industry. It consists of basic school facilities. With an
more than 1.5 million schools educational insurance in case
with over 260 million students of death or illness of guardian,
and about 751 universities. The ward’s basic education fee will
sector is currently positioned be covered so that can stay in
around USD 2 billion and is school.
expected to reach USD 5.7 bil-
lion by 2020. That being stated With an ever growing educa-
and despite of having primary tion market which is expected
education compulsory under to touch $180 billion in 2020,
national policy, only 50 % of there comes a substantial in-
children have access to educa- crease in educational entrepre-
tion according to a survey con- neurs as well, leading eventu-
ducted by SMILE Foundation. ally to a growth in demands of
loans for schools and colleges.
One of the major factors be- Like every entrepreneur needs
ing the inability of parents and support in financing most of
guardians to cope up with the the entrepreneurs have a tight
high priced education, even- budget when it comes to es-
tually resulting in increase of tablishing a brand new institu-
child labour. This is where ed- tion. Education finance plays
ucational finance comes into a vital role in it. It provides a
the picture. It provides a gold- varied range of options like
en pathway for parents and loans for infrastructure, furni-
guardians who want to send ture and school buses. With a
their wards to school.

Issue 4, May 2018

51 STUDENT ARTICLE
constant growth of entrepre-
neur there is constant demand
of loans for infra and ameni-
ties. Also, services like these
are not only availed by entre-
preneur but also by success-
fully established schools and
colleges.

Our’s in an era of technology to play schools, teacher’s loan
and with changing face of time and loan to coaching institu-
new methods should be ad- tions.
opted in order to keep in pace
with this evolving world. The Some initiatives have been a
newer techniques of study- game changer in this industry
ing and knowledge delivery and one of them is Mayer Hashi
needs equipment and specific Sure Cash Project in Bangla-
labs. These upgradations can desh. One of the major barri-
also be financed by education- ers of lack of education is the
al finance services. Apart from opportunity cost parents lose
these some financial institu- out on that the children would
tions also extend their services have been earning if they were
not in school. This happens
IFMR Digest because sometimes the chil-
dren are the bread winner of
the family. In order to tackle
situation like this, Bangladesh
government has launched a
revolutionary new scheme
on 1st March, 2017 known as
Mayer Hashi, meaning Moth-
er’s Smile. This innovative
project is about disbursing pri-

mary education stipend using STUDENT ARTICLE 52
Rupali Bank SureCash mobile quainted with the digital pay-
banking to 10 million mothers’ ment systems. This program
accounts benefitting 13 million also omits the scope of irreg-
students. Primary education ularity and error as each and
stipend is an integral part of every transaction is record-
removing education barriers ed in the system. Also a new
as the parents see some instant product has been launched by
benefit in sending their kids to Teletalk for this program pro-
school. viding mobile sims to mothers
and 20 Takas worth talk time
The mother’s keep track of the every month.
money on their mobile and re-
ceives the amount in the form In a few innovations, educa-
of digital money. This pro- tional improvement is not re-
gram covers 60,000 primary stricted to textbooks. The con-
schools and reaches to about cept of blended learning is
13 million students. The gov- coming into the picture where
ernment, on an average, is students are taught with the
disbursing around 14 billion help of various tools like pop-
takas annually for primary ed- up programs, plays and mu-
ucation stipend and each stu- sic. This can help in improving
dent’s Mother receives BDT300 learning outcomes of students
(approx. USD3.75) per quarter and building their interest in
via SureCash wallet. studies.

The benefit of this program is Apart from students, role of
that it is a combination of ed- teachers is also an integral part
ucation as well as financial in- of system. A lot of times it is
clusion. Children are able to seen in the system that due to
go to school by backing and low or poor funding the sal-
support of their parents and ary at which the schools can
parents are receiving money afford teachers is fairly mea-
in a digital wallet. This is mak- gre. Since they cannot afford
ing them well-versed and ac- quality teachers as they ask for

Issue 4, May 2018

53 CSOTUNDTENTSARTICLE
a reasonable pay, they recruit counter the major issue of this
teachers with minimum qual- sector, which is awareness. A
ifications. Due to this the deg- lot of people that comes under
radation of quality teaching low income strata thinks that
occurs and the students are taking loans would be hectic in
the one who are bearing the the future and might charge a
cost of low funding in educa- heavy interest and in turn trust
on local lenders which charge
tion sector.
them moons. Similarly, a lot

Education is one of the great- of entrepreneurs and small
est determinants of future eco- schools also are not aware of
nomic status and self reliance the education finance prod-
and that is the reason govern- ucts. This can be helped by cre-
ment is also giving it a push ating awareness camp in rural
with initiatives like Right to areas and marketing products
on different platforms as the
Education.
need to educate people about

The 2017-18 budget pegged an education finance services is
outlay of Rs.79685.95 Cr for essential as only then they’ll
the education sector which is a be able to fully avail it. Hence,
9.9% rise from an year before. future of education finance
This year, Mr. Arun Jaitley has seems sparkly bright and a lit-
announced setting up Eklavya tle push by investment in mar-
Model Residential School and keting and awareness would
premier educational institu- help it to thrive even further.

tions named RISE by 2022

with an investment of 1,00,000

Crore in next 4 years.

The future prospects of edu- Article by
cation are quite high and with Aishwarya Ranjan
this boom in the sector we can
very well say that there will be Batch 18, IFMR
an ample amount of growth in
education finance sector if we

IFMR Digest

STUDENT ARTICLE 54
Corporate Bond Market in India

Issues and Insights

Uptick in private invest- The state of Indian Corporate
Bond Market:
ment has been hard to come
by in recent times, gross fixed India as compared to its Asian
capital formation has fallen peers is a laggard in this field
to 28.5% of gross domestic of the capital market. While the
product in the year to March equities are soaring at sky high
2018, whereas the desired levels, the bond market is yet
rate is around 35% for India to see any pick up in momen-
to achieve a sustainable GDP tum. Though India has seen a
growth. This could be at- 20% CAGR in terms of bond is-
tributed to many reasons like suances , corporate debt stands
Geo political tensions, Ease at just 7.5% of GDP , whereas
of doing business, retrospec- it is 76.5% in Korea , 32.3% in
tive taxation issues, regula- Singapore , 21.23% in China.
tory framework etc. But one
significant factor is credit Factors mitigating the
availability/High real inter- efficiency of Corporate
est rates because of which Bond Market:
investments are being held
back. That has affected ca- • Fiscal Deficit: India has
pacity utilization in the man- failed to stick to its Fiscal defi-
ufacturing sector, which was cit target mandated by FRBM
in the region of 70-72% - well , where constant relaxation
below the 78-80% thresh- in norms have been happen-
old considered good for the ing. This year again the Fiscal
economy. This has plagued deficit breached 120% of the
a sector where India is yet to target. This ultimately push-
tap its huge potential. es the government to dip into
the bond market to finance its
spending. G-Secs flooding the

Issue 4, May 2018

55 STUDENT ARTICLE

market would raise the yields • Red tape in Bankruptcy

and obviously investors would laws:Fromrecoveryperspec-

prefer the risk free government tive, the corporate bonds are

bills rather than the commercial deemed risky and the pro-

paper. cedural requirement is too

lengthy. In case of resolving

• Rising Interest Rates: There insolvency, the World Bank

is an impending credit squeeze has placed India at 103 out

about to sweep the markets. Ex- of 189 countries. Delay in re-

cept for Japan , the central banks solving the dispute is a key

of US and UK have signalled of hindrance for the financial

unwinding the balance sheets entities looking to invest in

which would make interest the corporate bonds.

rates rise and make Yields shoot

up again , increasing the cost of • Cost of Debt: An AAA

raising debt for companies and rated corporate bond yields

would result in FIIs shunning about 8.5-8.7% while a BBB

the Emerging markets. rated corporate bond yields

about 11.5% and above.

• Lacklustre Regulatory frame- About 70 % of the compa-

work: SEBI has been lukewarm nies’ paper falls under the

in implementing recommen- BBB making it difficult for

dations by R.H Patil committee them to raise debt with such

which had suggested electronic high costs.

platforms for issuance, trading,

settlement and reporting. SEBI • Crowding out of Bonds:

also has a stranglehold on FIIs As we know corporate

by not allowing them to invest bonds just makes up 7.5%

in unlisted bonds and keeping a of the GDP which means

floor level of 9% in debt holding the market is dominated by

for FPIs in Corporate bond. G-secs , SDL bonds , Munic-

ipal bonds , UDAY bonds

etc. Too much of bonds in

IFMR Digest

STUDENT ARTICLE 56

the market will shoot up the The way Forward:

yields.

• Much of the corporate
• Lead Indicators: Infla- bond issues are happening in
tion , fiscal deficit , volatile private placements , which lacks
floating exchange rate etc transparency and price discov-
have all increased the pre- ery doesn’t happen to the full-
mium on the coupons of cor- est , efforts have to be taken up
porate bonds. Inching up of to spruce up public issues.
Gilt yields haven’t helped
the cause either.

Issue 4, May 2018

57 SBTeUttDerENimTpAleRmTeInCtLaEtion of • The Finance Ministry has
cut the withholding tax (a tax
• deducted at source on resi-
dents outside the country) on
credit rating system would in- interest income of such bonds
to 5 per cent from 20 per cent,
stil confidence in the corporate making it attractive for in-
vestors. Also, capital gains
debt market which is otherwise from rupee appreciation are
exempted from tax. This is a
deemed risky. step in the right direction.

• Recently after spike in cash • Protection to investors in
deposits after Demonetisation case of defaults using strin-
banks parked excess of what gent bankruptcy laws.
was required under SLR in Govt
bonds. These could be parked in • A bond connect scheme
corporate bonds albeit in highly , on the same lines of China
rated papers at least. would help FPIs and FIIs ac-
cess Indian bonds without
• Similarly a portion of in- having to open custody and
vestments of PF , Pension funds bank accounts in India.
and Insurance companies could
be exposed to highly rated cor- • An exclusive mutual
porate bonds. fund scheme for investment
in corporate bonds would do
• At least a little portion of a world of good to the private
the capital raised by companies debt market. This should be
should be compulsorily from backed by tax exemptions for
the debt market to encourage retail investors, under sec-
more issuers. tion 80C similar to what is of-
fered for equity and other MF
• Dumping ECBs , Compa- schemes.
nies should be encouraged to
tap the Masala bond market • A bond index should be
overseas , on the same lines as created to measure the per-
China whose offshore Bond
market has grown five fold. A
great way of hedging this from
forex fluctuations for the com-
panies.

STUDENT ARTICLE 58

formance of corporate bonds space for more MSME lending ,
issued in the country. Single and credit growth to other less-
or multiple indices can be cre- er penetrated sectors. Banks
ated and bonds of similar ma- could focus more on priority
turity or rating can be grouped sector lending.
together to allow investors
to gauge the performance of • Focusing on Masala Bond
bonds. issues would help internation-
alisation of Rupee as a curren-
Advantages of a cy and hence a stable exchange
vibrant Bond Market: rate with respect to SDR cur-
rencies.

• Leads to a more market • Scams like in the case of KF
based economy, with lesser and Nirav-Choksi-PNB saga
dependence on the already would be at least mitigated if
strained Banking sector. some portion of borrowing is
mandatorily through the debt
• Gross NPA is about to hit market stamped by stringent
9L crores , crippling the banks credit ratings which banks fail
of lending capacity , credit to do so.
growth in India is abnormally
inconsistent , ranging from 3%
to 8% in the span of 2 years.
A vibrant Debt market would
be win-win for both the banks
and the Private players.

• Basel 3 norms would fur- Article by
ther strangulate Banks’ lend- Sachidanand Thillai Selvan
ing capacity by imposing
stricter Capital requirement. Batch 18, IFMR

• Big players tapping the
debt market could free up the

59 FOOD FOR THOUGHT

A farmer had some puppies he needed “I’ve got thirty-nine cents. Is that
to sell. He painted a sign advertising the enough to take a look?”
pups and set about Nailing it to a post on “Sure,” said the farmer. And with that,
the edge of his yard. As he was driving he let out a whistle,”Here, Dolly!” he
the last nail into the post, he Felt a tug called.
on his overalls. He looked down into the
Eyes of a little boy. Out from the doghouse and down the
ramp ran Dolly followed by four little
Mister,” he said, “I want to buy one of balls of fur. The little boy pressed his
your puppies.” face against the chain link fence. His
“Well,” said the farmer, as he rubbed eyes danced with delight. As the dogs
the sweat off the back of his neck, “these made their way to the fence, the little
puppies come from fine parents and cost boy noticed something else stirring in-
a good deal of money.” side the doghouse. Slowly another lit-
tle ball appeared; this one noticeably
The boy dropped his head for a moment.
Then reaching deep into his pocket, he
pulled out a handful of change and held
it up to the farmer.

Photo by Alicia Jones on Unsplash Issue 4, May 2018

FOOD FOR THOUGHT 60

smaller. Down the ramp, it slid. Then
in a somewhat awkward manner, the
little pup began hobbling toward the
others, doing its best to catch up...

“I want that one,” the little boy said, Food
pointing to the runt. for
The farmer knelt down at the boy’s thought
side and said, “Son, you don’t want
that puppy. He will never be able to
run and play with you like these oth-
er dogs would.”

With that, the little boy stepped back
from the fence, reached down, and
began rolling up one leg of his trou-
sers. In doing so he revealed a steel
brace running down both sides of
his leg attaching itself to a specially
made shoe. Looking back up at the
farmer, he said, “You see sir, I don’t
run too well myself, and he will need
someone who understands.”

The world is full of people who need
someone who understands.

IFMR Digest Excerpt from : Modern Management Through
Ancient Indian Wisdom:
Towards a More Sustainable Paradigm by
Anindo Bhattacharjee, Lecturer,
School of Management Sciences, Varanasi
Vol. IV, No.1, March-August 2011

Service, anyone? The tech suggested that some-
one might try reading the oper-
When the office photo-copies ator’s manual and perform the
began to look faint, the office job themselves, since it would
manager called in a local repair cost $100.00, if he did the work.
service.

The friendly technician after
inspecting the equipment, in-
formed the manager that the
machine was in need of a good
cleaning.

Issue 4, May 2018

FUN SPOT 62

“I need someone with an ac-

counting degree,” the small

Hiring 101 business owner said. “But
mainly, I m looking for some-

one to do my worrying for

Fresh out of business school, the me.”

young man answered a wanted “Excuse me?” the accountant

ad for an accountant job.
Now he was being interviewed said.

by a very nervous man who ran
a small business that he had “I worry about a lot of things,”
the business owner said. “But
started himself.
I don’t want to have to worry

about money. Your job will be

to take all the money worries

off my back.”

“I see,” the accountant said.
“And how much does the job
pay?”

“I ll start you at eighty thou-
sand.”

“Eighty thousand dollars!”
the accountant exclaimed.
“How can such a small busi-
ness afford a sum like that?”

“That,” the business owner
said, “is your first worry.”

IFMR Digest Source: https://free-funny-jokes.com

63 ACCOLADES AND MILESTONES

Accolades & Milestones

IFMR has been ranked 25 in the 2017
Management Institutes rankings by
National HRD Network (NHRDN)
and SHINE.COM

IFMR Digest Issue 4, May 2018

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Editorial and Communication Team

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Swarnendu Biswas

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