Varthana provides loans from Rs5 lakh to Rs1 crore for private schools at prevailing market rates.Bengaluru: Bengaluru-based school finance company Varthana has raised $3 million in funding from the Michael and Susan Dell Foundation to expand its school transformation program (STP).

The programme is aimed at improving the quality of learning in private schools by extending credit facilities.

Through the STP initiative, Varthana provides debt financing, education assessments, hands-on support, vendor connections, and financial rewards to schools in different states.

It has an in-house non-banking finance company (NBFC) for giving credit finance to schools.

It provides loans from Rs5 lakh to Rs1 crore for private schools at prevailing market rates. Apart from loans, Varthana focuses on working with schools to improve their learning outcomes by bettering their teaching quality and technology, among other things.

Currently, the programme covers 337 schools across five states, and is estimated to have an impact on more than 200,000 students.

The fresh funds will be used for providing loans to schools, rewarding schools that show learning-level improvements, conducting third-party learning assessments, and supporting education specialists who work with the schools.

The company said that the expansion of the STP initiative would cost $10 million, of which the Michael & Susan Dell Foundation has contributed $3 million via debt financing.

The debt financing method allows participating schools and Varthana to be rewarded up to 10% of the loan amount for improving student learning outcomes by 5-10%.

“Through this unique initiative, the Michael & Susan Dell Foundation is helping Varthana take another step towards enhancing the educational outcomes of children attending affordable private schools. Building on this success, we hope to further expand the School Transformation Program in the coming years,” Steve Hardgrave, co-founder and chief executive officer of Varthana, said in a statement.

The microfinance industry (MFI), which Varthana is part of, has been on a downward trajectory since the demonetisation last year.

Mint had reported recently that the MFI sector’s loan disbursement rate fell by 26% quarter-on-quarter in December 2016.

When asked about the effects of the slump on MFI lending, Varthana told Mint that its business model has a “strong underlying fundamental” to combat any market plunges.

“We don’t foresee any significant impact of demonetisation on Varthana’s portfolio,” the company said.

“The Michael & Susan Dell Foundation is committed to improving the educational outcomes of children living in urban poor households. Increasingly poor families in urban areas are enrolling their children in affordable private schools with the hope that they would get access to a high-quality education. The foundation will work with Varthana to ensure that we support and help school leaders to focus on the key drivers of improvement,” said Rahil Rangwala, Program Director, Michael & Susan Dell Foundation.

[“Source-livemint”]