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Empowering India’s youth population through education finance

By, New Delhi
Oct 13, 2023 01:52 PM IST

For the institutions offering higher education, lack of financial and infrastructural resources and quality teaching staff are the foremost challenges.

India is home to the largest youth population in the world, estimated at around 60 crores. While many countries are witnessing a decrease in the youth population, this is one demographic advantage that India possesses that could potentially steer the country to become an economic powerhouse.

Both students and institutions providing higher education face many challenges. For the students, especially those living in smaller towns, cities and rural areas, the most immediate challenge is access to quality education.
Both students and institutions providing higher education face many challenges. For the students, especially those living in smaller towns, cities and rural areas, the most immediate challenge is access to quality education.

However, not everyone in this large cohort is equipped to contribute optimally to national growth.

There are some impediments on their path to progress — the lack of quality education, and the lack of financial resources to acquire such education that force many of them to drop out of the education stream and move into the workforce pool.

Unfortunately, they enter the job market with little to no skills necessary to land good jobs and climb the career ladder.

So, what can be done to alleviate this situation?

Dropouts and Gross Enrolment Ratio

School education lays the foundation for a good career. Though education has been provided the status of a fundamental right In India, the enrolment of students in schools and institutions providing higher education is rather low. The reasons, which differ from state to state, include financial, social, and cultural, among others.

One important tool to analyse this issue is the Gross Enrolment Ratio (GER), as calculated by the Department of Higher Education with the Ministry of Education.

The GER measures the number of students enrolled for higher education, as a percentage of the eligible population aged 18-23. While this number has inched up over the years, it is still a long way away from being satisfactory. From 24.1 percent in FY2016-17, GER has climbed to 27.3 percent in 2020-21.

Going forward, the government is aiming to push it up to 50 percent by 2035.

Challenges

Both students and institutions providing higher education face many challenges. For the students, especially those living in smaller towns, cities and rural areas, the most immediate challenge is access to quality education.

For the institutions offering higher education, lack of financial and infrastructural resources and quality teaching staff are the foremost challenges. As a result, students lose out on gaining skills that are necessary to land them rewarding jobs.

Borrowing their way to a better life

In such a situation, many parents take out loans to fund their children's education and give them better prospects. These loans are typically obtained from banks or non-banking financial companies (NBFCs).

While NBFC loans can be a little more expensive than bank loans, the former are curated products that meet the unique requirements of a wide spectrum of customers, chiefly from the unbanked, rural and financially constrained families. These loans help finance school education, diploma courses, skill enhancement programs and higher education.

Also, NBFCs leverage technology to enhance the customer experience, simplifying the application process, and enabling online submission of necessary documents.

Tackling the challenges

While the government has set an ambitious GER target for 2035, the progress has been slow, albeit steady. To speed it up, there is a need for all the stakeholders to collaborate.

One effective way could be for the government to partner with NBFCs specializing in education loans.

These education-focused NBFCs play a critical role in bringing to life the aspirations of India’s youth. Their deep subject knowledge and experience with dealing with various segments of the population enable them to innovate tailor-made financial solutions that satisfy the distinctive requirements of students. The government could help through budgetary allocations and interest subsidies on loans.

Also, these NBFCs can help popularize government-run skill development programs, helping bring youths from financially constrained backgrounds to the job market with the required skills.

As India eyes becoming the world’s manufacturing base, thanks to the China+1 view of global multinational corporations (MNCs), the youth, empowered with the job skills attained through requisite funding from education-focused NBFCs can contribute handsomely to the growth of the national economy, while ensuring a better future for themselves.

(Mr Steve Hardgrave is the Co-Founder and CEO of Varthana. Views expressed here are personal)

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