We educate our customers about responsible borrowing: Neeraj Saxena, Auxilo Finserve

India’s overseas education loan market currently stands at over Rs 1 lakh crore and has registered a year-on-year growth in the number of students seeking finance for foreign education. As per industry estimates, over 1 million students are expected to travel abroad by the end of FY24, compared to 7,50,000 students in FY23 and 4,44,000 students in FY22.

Auxilo Finserve, a leading education loan-focused NBFC, has doubled its revenue to Rs 191 crore in FY23 from Rs 93 crore in FY22 and is set to achieve Rs 350 crore in FY24. With over 10,000 students financially enabled to seek admission across 1,100 Universities and education institutes in over 25 countries, the company is also expanding its domestic Education Institution Loan (EIL) segment with a target to provide financial access to over 10,000 schools and education institutes across India in the next 5 years.

Money9 spoke to Neeraj Saxena, Managing Director and CEO of Auxilo Finserve, about the education loan universe and the advancements made in technology in the education loan sector.

What technological advancements have transformed the education finance sector, enhancing accessibility and efficiency for both borrowers and lenders?
At Auxilo, we recognize the transformative impact that technological advancements have had on the education finance sector. The introduction of data-driven credit assessments, digital Know Your Customer (KYC) procedures, the integration of fintech solutions, and the automation of direct customer interactions have profoundly optimized our operational efficiencies. Automation and digital solutions have significantly expedited the loan processing time, thereby enhancing the accessibility of loans for customers.

How do Non-Banking Financial Companies (NBFCs) specialising in education loans navigate the regulatory framework to ensure compliance while meeting the growing demand for credit?
At Auxilo, we diligently comply with all regulations. Our policies are updated regularly to mirror the evolving regulatory framework and published online as required, demonstrating a commitment to transparency.
In parallel, we educate our customers about responsible borrowing, simplifying the borrowing process while encouraging financial wisdom, which in turn supports compliant and sustainable lending practices.
Adhering to all compliances and catering to the growing demand for credit go hand in hand for us.

 To what extent does the availability of education finance influence enrollment rates and overall accessibility for overseas students?
About a decade back, overseas education was primarily opted by the affluent strata of the society. With access to finance, we are witnessing brilliant and aspiring students belonging to low-income families also aspiring to go for higher education abroad.

This is further evidenced by the incremental student loan disbursements for overseas education, showcasing a remarkable increase in the quantum of student enrollment. Thus, through our efforts, we are actively partaking in the democratisation of education, enabling a broader spectrum of students to fulfil their academic aspirations.

 What role do credit scoring models and alternative data sources play in assessing the creditworthiness of students and educational institutions seeking loans?

For Students:
The credit scorecard complements quick, qualitative assessments with a detailed breakdown of an application, including student, co-borrower, and university profiles. Integrating the scorecard with human oversight accelerates decision-making and reduces turnaround time. Moreover, the use of external and alternative data enhances the understanding of a university’s future employment prospects and ranking.

For Educational Institutions:

Assessing the creditworthiness of educational institutions requires a multifaceted approach. Cash flow analysis alone may not fully capture an institution’s financial health or potential risks. Therefore, a comprehensive scoring system is introduced to evaluate institutions from various angles, including financial health, experience, social behaviours, and location. This holistic evaluation helps identify potential risks and forms the basis for risk-based pricing, making credit scoring a proficient tool for underwriting in the education sector.

What are the key trends shaping the future of education finance in India, and how are industry players adapting to meet evolving student needs and dynamic market conditions?
As education finance companies are getting well recognised now for their asset quality and financial performance, they are attracting more capital, giving them more thrust and stability. This will enable them to support the aspirations of more students.

For us, the focus now is on technology, which enables better efficiencies, customer experience, and better risk controls. Implementation of digital on-boarding of customers, Credit scoring models to support credit decision making by the team, automation of operational processes to reduce the turnaround time, and putting in place enhanced risk controls is a key priority in the near future.

The domestic education landscape for skilling, upskilling education through classroom and digital mediums is shaping up quite well. This can be a good financing opportunity for the education finance companies going forward. But it’s worthwhile to say that focus on job orientation for students in credit underwriting and better risk controls, is the mantra for success here.