Lessons Learnt From Financing the Non-State Education Sector During the Pandemic


Hannah Hilali

Lessons learnt from financing the non-state education sector during the pandemic


8 min read

We all know the impacts of COVID-19 have been devastating. But what will be documented as actionable learning from this crisis, what innovations will we carry forward, and how do we share and benefit from one another’s learnings?

Opportunity EduFinance took steps to document and share critical learnings for the greater good. These shared learnings will better equip us all to collectively meet the financial needs of those on the front lines of education going forward – educators, parents, and students.

Risks of permanent school closures

The non-state education sector has been badly hit by COVID-19, with full and partial lockdowns causing many affordable private schools to close permanently. This has left children without access to education or to digital devices to continue learning remotely. The financial effects on schools have been well documented. In previous research, EduFinance found that in 2020, 4 out of 5 affordable private schools in India collected less than 20% of school fees, while over 10,000 affordable schools closed and 700,000 teachers lost their jobs in Pakistan.

Despite these COVID-19 related challenges, the growing, unmet demand by parents for affordable non-state education is expected to resume. At the same time, public spending on education has reduced as governments struggle with the economic burden of the pandemic.

Filling the education funding gap

Financial institutions can play an important role in filling the funding gap for education. In an earlier study, The State of the Non-State School Sector, we found that there is an estimated US$36 billion market for edu-finance school improvement and school fee loans worldwide, with the largest demand in India (US$11.4 billion). South and South East Asia are the two largest regions at US$23.4 billion .

Leveraging shared learnings

After working with more than 71 financial institution partners who are supporting the affordable non-state school sector, we wanted to leverage this incredible network. We brought together over 120 members of senior management from 54 financial institutions for a series of virtual interactive workshops to discuss their experiences, challenges, and solutions in providing edu-finance products and services during the pandemic and beyond. Participants came from a range of countries across Africa, Asia, and Latin America, with over a third of the participants representing financial institutions in South and Southeast Asia.

In Asia, the decrease in disbursements to schools was the most pronounced amongst all the regions, with a decrease of 96% in Q4 2020 compared to six months prior. However, disbursements have begun to pick up, and by the end of Q1 2021, disbursements have reached 66% of pre-COVID-19 levels.

We documented three key recommendations to scale and regrow education finance portfolios, so that we can get children back into school and support the recovery of the non-state sector. These came from analysing primary data EduFinance collected from thousands of interviews with parents, schools and teachers across India, Indonesia, Pakistan, and the Philippines, alongside the insights from our qualitative discussions with financial institutions in these workshops.


1. As not all schools were affected equally, market segmentation is needed to properly serve different schools with the right financial products:

  • Many of the financial institutions in Asia noticed that schools in different areas were affected differently. Schools in larger cities found it easier to adapt and could seek financing for digital transformation. In contrast, most rural schools have been unable to provide digital learning as they lack access to the internet. In fact, most of their pupils do not have access to communication devices. Studying the market will help financial institutions grow or rebuild education finance portfolios.
  • It is important to understand which school segments have adapted their business model and maintained financial sustainability. We have seen schools adopt different hybrid ways of teaching in both low-tech and high-tech environments. The increased emphasis on the importance of teachers, schools and students having access to data and digital devices is a market opportunity for financial institutions. There are also other opportunities to finance alternative revenue streams for schools, such as retail or small-scale agriculture projects where rural schools can diversify their sources of revenue during periods of low school fee collection.
  • Alternative credit scoring is needed to assess the viability of schools as businesses, given that most of them would have suffered significantly reduced income over the past 15 months. We recommend using alternative indicators to assess the credit worthiness alongside the school owner’s current capacity to repay a loan. Psychometric modelling can also be useful to assess the personality and resilience of the client. This includes assessing the client’s locus of control, impulsiveness, perceptions of others, and trustworthiness.

2. Digital financial services can enhance customer relationships and reduce risk:

  • In the early days of the pandemic, financial institutions not only focused on payment collections, but also on supporting the health and safety of their staff and clients. We know from previous studies on the Ebola crisis that maintaining good client relationships, even when clients can’t repay, improves collections and sustainability when economies do eventually reopen.
  • We saw financial institutions in South and South East Asia offer differ digit ised services, from webinars to software and apps designed to help schools increase resilience, and manage cash flows and school fees . An additional advantage of software and app-based solutions are that they provide insight into a school’s cashflow. These products can help institutions acquire new clients, and assess their risk profile and repayment capacity using data-driven decision making methods before any loan has been disbursed.
  • Training content disseminated through webinars and social media is a useful and cost-efficient way to support clients while simultaneously creating opportunities to market new products to larger audiences virtually. These trainings can help to build trust with clients in the absence of face-to-face interactions.

3. Typically, at EduFinance, we think of education finance as loan products to affordable private schools, or to parents to pay for school fees. However, the pandemic has increased the opportunity to diversify product offerings for the education ecosystem:

  • Savings products: Demand for s avings products for education has increased as the pandemic increased client perceptions on the importance of safety nets. Additionally, clients may be apprehensive about repaying a fixed loan repayment every month, and instead might be more willing to put aside money to help save for education in the future.
  • Supplier financing: Beyond financing schools directly, supplier financing can increase outreach by creating partnerships between financial institutions and the suppliers to the school (uniforms, canteen food, books, and technology). By partnering with suppliers, there is an opportunity to source cheaper equipment for the education sector. Partnerships with EdTech companies could be leveraged to create products that bundle electronic devices pre-loaded with education apps, which can be marketed to schools, parents, and teachers.
  • Other products: Diversification of products enables financial institutions to continue to support the education needs of clients while diversifying risk during school closures. Other products that cater to the entire education ecosystem are insurance products and financial services for teachers, suppliers, and vocational and skill development institutions.

Our 2021 report, “Lessons Learned & Future Strategies for Education Finance”, discusses these points in greater detail. Through our report, we hope to encourage more public and private investment into the ecosystem of affordable private schools. If we want to nurture our next generation, we need more investors to come on board and fill the education funding gap.

The full findings and recommendations of the report are available to read here.


A. Environmental Stewardship
To protect the environment, we organize programmes like mangrove nursery and Reforestation, Coastal and River Clean-Up, Community Based Environmental Solid Waste Management, Environmental IEC Campaign and Eco-Academy

B. Food Security and Sustainable Livelihood
To ensure a sustainable livelihood for the community, eco-tourism include Buhatan River Cruise Visitor Center Buhatan River Mangrove Boardwalk are run by the community. Others include Organic Vegetable and Root crops Farming, Vegetable and Root crops Chips and by-products Processing and establishing a Zero waste store.

C. Empowered Communities
To empower the community, we provide product and Agri-Enterprise Development Training, Immersion and Learnings Exchange Program, Earth Warrior Training and Community Based Social Entrepreneurship Training


Hannah Hilali

Hannah Hilali is a Technical Assistance Advisor for Asia at Opportunity International EduFinance, and organisation working to address the global education crisis by increasing access to quality education using social finance. Hannah oversees EduFinance technical assistance implementation and expansion in Asia and has experience working with financial institutions across Sub-Saharan Africa and South and Southeast Asia. Her work focuses on deepening industry understanding of the education finance market and developing client-centric financial products and credit scoring methodologies to build sustainable and impactful education lending portfolios which increase access to education. Hannah holds degrees and professional certificates from the University of Leeds, King’s College London, Frankfurt School of Finance and Management, and the Microfinance Association UK.

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