Business Plan

Group No.

PeerFund: Bridging the gap to Higher Education

By Group No. 9

Table of Contents
Executive Summary ......................................................................................................................... 3 Research Methods........................................................................................................................... 4 Stakeholders .................................................................................................................................... 4 Proposed Venture ........................................................................................................................... 7 PeerFund strategy ........................................................................................................................... 8 Business Model................................................................................................................................ 8 Market Size ...................................................................................................................................... 9 Marketing Plan ................................................................................................................................ 9 Risk Factors .................................................................................................................................... 12 Funding requests and next steps................................................................................................... 12 Conclusion ..................................................................................................................................... 12 Breakeven ...................................................................................................................................... 14 Financials ....................................................................................................................................... 14 Breakeven Calculation ................................................................................................................... 17 References ..................................................................................................................................... 17

Executive Summary
PeerFund is a way to help top performing college applicants at the bottom of the pyramid raise financial aid in order to attend and succeed at an accredited public university or vocational training institute in India. We aim to make this happen through an online crowd-funding platform. An estimated 80% of students drop out of school is due to financial constraints in India. There are various education loans available in India but what makes PeerFund different is that firstly it is given at a much lower interest rate compared to the market. Secondly, PeerFund does not demand any collaterals for providing loans which are a major hindrance in application of loan by the bottom of pyramid.

Introduction
India has a population of 100 million students out of which only about 12% go for higher education leaving 90 million students deprived of higher education. The present gross enrolment ratio of students to higher education is about 12%.In 2010, World Bank statistics estimate that 32.7% of the Indian population lives on less than US $1.25 per day (purchasing power parity) while 68.7% lives on less than US $2 per day; college expenses are a minimum of $40 per month. The value proposition of attending college is greatly outweighed by having to contribute to the family as soon as possible. Poverty is persistent in India and the only way out of it is through education and literacy. The government has taken the proper steps to encourage education. The most prominent examples are governmental scholarship programs, bank loans available, and a mandatory space requirement for BOP enrollment. However, most of these schemes still require the student to pay expenses to attend the schools. In addition, they need documents verification, have high interest rates ranging from 11-14% and approval rates being as low as 10% for below the poverty line applicants. We identified this need and worked to form a solution that address this need, create awareness and generates revenues for all the stakeholders involved.

Research Methods
Our research methods included meetings with our India colleagues at the SIMSR institute and an interview with a funding education start-up in India, creating a prototype and stakeholder map. Our SIMSR colleagues completed a formal interview with the principal of the VTI institute in Somaiya, shadowing of 30 VTI students, 10 contextual student interviews, and a. This deep dive research was conducted to understand 3 touch points of financing education: (1) The students background, (2) how students currently finance their education (3) the feasibility of implementing our solution. Observing customer behaviors was most valuable because it enabled us to pick-up on their reactions to taking part in the program and iterate our solutions based on the students and principals inputs.. Our goal is to create a service experience that is supportive and efficient for paying for college for students with no other option. (Appendix 1: Research Summary). A college degree would lead to better jobs and higher salaries, which is more beneficial for supporting a family.

The location chosen for primary research is VTI Somaiya College, Mumbai and a total of 130 students were interviewed. The outcome of the research:

Students do not have collaterals to offer to banks for loan grant. Families cannot afford to provide higher education to their children as their average salary per day is close to INR 300. Education loans are available at interest rates as high as 14%.

Grant of loan requires collaterals, which they do not have.

Stakeholders
VOCATION AL INSTITUTES

STUDEN T

LENDER S

PEER FUND

FAMILIE S

NGO

Students are the primary stakeholders for peer fund program as it would get them loan to continue with their higher education. Benefiting from the internship made available they can even earn while studying. NGOs are the partners for getting the needed students. NGOs working already with some underprivileged students on other verticals can get us in contact with these students. This would get them to trust on us since they are already in terms with the NGO. It would eliminate the effort of convincing students of genuine of our program. Vocational Institute would be provided with students by peer fund program. On account of providing with students, they will provide us with some commission which would be an added revenue source for Peer Fund. Lenders will provide funds for students. These lenders would help the society by children upliftment and in return would get their money back with a higher interest of what is provided by banks. Families would be benefited by their children studying which would get an upliftment to their current state. Families with educated and employed children would get more financially stable as well as would realize the value of education which is in it a help to the society.

Figure --- PeerFund believes this is an important problem. We hope to empower our applicants with the tools necessary to break the viscous cycle of students trading in education for low income jobs to support their families.

Proposed Venture From the lenders side: From the students side:
Lenders will find a student by picking Our marketing/ground team will work directly with the target high schools to gain applications from the students in senior standing (12th standard). We will analyze and decide the most qualified applicant to proceed on to the next phase. Their stories and a video will be placed on our website. Students will specify their need and the amount they need to be raised. It is then up to the lenders worldwide to support the the one story that inspires them the most on our online website. They will make a loan with 100% of the funds going directly to the university in the students name. peerFund will then update them once a semester on the students progress as they move toward the degree. Once the student graduates with a steady flow of income, the lender will be paid pack. This will happen within two years of them graduating

students and the students to perform at their institution so they can repay the lender and become financially

independent. Students have two years after graduation to repay the loan.

PeerFund strategy
It is our responsibility to choose the candidates with the greatest potential and link them with a lender. PeerFund is an easier process and 35% cheaper than traditional bank loans for higher education. There will be no requirements for students to offer collateral security to obtain a loan. We will be in direct contact with all stakeholders (university, high school, students, lenders, and the peerFund ground and online representatives. As mentioned above that peer pressure will be applied to assure payback, we decided to apply this through a system called Peer rank. If a student doesnt repay his/her loan, the high school he/she attended will be rated lower in our online ranking systems having a negative impact on future applicants from that specific community. This will make it more difficult for other students to get funding if they come from such high school making the high school responsible for the students they output into the peerFund program. This is to reduce the risk of defaults.

Business Model
Loan repayment will be in the form of 12-24 monthly installments starting immediately after the student graduates from college. Students will pay 9% interest on loans, which will then be split between the lenders &peerFund. The lenders will get paid 5% and peerFund will earn 4%.

Revenue would be the 9% of interest. Of this, 5% will be paid back to lenders (along with the principal amount) and peerFund will earn 4%.

Market Size
Expected average loans will be significantly smaller i.e. approximately $500, targeted at students applying for undergraduate programs at qualifying Indian colleges and universities. This being said, larger amounts will be available for professional programs. The total market for this is $12 Billion5. There are currently 1.2 Million schools out of which 80% are public schools and 20% are private schools5. On average, there are 30 students graduating per school. The average loans required for college are $3005. Our addressable market is over one billion dollars. This will cover sub-urban school districts with public school students.

Marketing Plan
Our target is segment is students living in the rural-suburban belt that go to high-school

but cannot pay for college. Given that these students rarely have access to computers, the internet as a marketing medium (although we will be a web-based company) will be ineffective. We will reach our target customers through affiliated channels partnerships with schools, colleges and NGOs that will help us spread quick awareness at extremely low costs. Further, we will create awareness by running information sessions at rural schools. By educating students about career options available to them and the benefits of going to college with an easy repayment plan, we expect to generate greater trust among the rural student community. We will also register our startup with government loan-assistance programs in order to provide tax rebates to companies and individual lenders.

Figure--- peerFund is the most applicable solution for helping high school seniors succeed and graduate from college due to our lowered interest rate and a market-leading payback period.

Risk Factors
There is a possibility that some students may not pay back the loans since we will not demand security at the time of disbursement. We will mitigate this risk greatly by disbursing loans directly to colleges to ensure they are not misused. Second, we will request partner colleges to withhold issuing the diploma until after the full loan amount has been repaid. Lack of awareness is a real problem. One of the greatest challenges to our success would be our ability to execute rapidly and building partnerships with institutions that will help us access students in need of aid. Since we are a relatively new concept, students may be apprehensive in signing up.

Funding requests and next steps

We estimate that we would need US $50,000 to start up. PeerFund will be rolled as a pilot project in the areas around Mumbai. We aim to target schools in a ten-mile radius in the sub-urban districts of Mumbai. If the project works well we will roll it out on a national basis around the major metropolitan cities such as Chennai, New Delhi, Kolkata and Hyderabad. As of now, Mr. Matthew, the Principal of VTI Somaiya has agreed to partner with us as an institute. As per the groundwork done by our Indian team, there has been positive feedback from the students of VTI, Somaiya. The teachers at VTI have also shown an interest to register and take loans for training courses. We believe that more schools will come forward with shared interest in our program. Detailed financials, including 5-year projections of our pro-forma income statement, balance sheet and cash flow have been included in the appendices.

Conclusion
PeerFund is a way out of poverty. It has a bright future because it serves one of the biggest needs in India i.e. education. We see a huge potential for scalability. After our pilot project, we will identify other similar communities that can benefit from peerFund. The problem of lack of funding for education is a massive socio-economic problem in

India and we believe that we can make a real difference through peerFund.

Breakeven

Financials
Year-1 Assumption: No of students month wise would be ( 10, 12 ,25, 30, 40, 45, 55, 60, 65, 68, 75, 80), average per month = Costs Amount

47.08333333

Incorporation expense Making and publishing of Website, purchase of domain etc.

7200

5000

Website and Data Maintainence Promotional activities will be done through concurrent project to MBA students,2 teams of three students, initially in Mumbai as majorly online marketing will be done. Background check on receipt of application Administrative cost, pitching in with corporates, travel, telephone cost. Staff cost to contact with corporates and maintain database. Total Cost Revenue

6000

32000 23500

10000

168000 251700 Amount

From stipend Other revenue, commission or bulk admission of students

20000

9400

4% interest Total Revenue Profit/ Loss Year-2 Variable cost remaining same Costs Amount No of Students Website and Data Maintainence

0 29400 -222300

150 6000

Promotional activities will be done through concurrent project to MBA students,2 teams of three students, initially in Mumbai as majorly online marketing will be done. Background check on receipt of application Administrative cost, pitching in with corporates, travel, telephone cost. Staff cost to contact with corporates and maintain database. Bad Debts Total Cost Revenue

32000 75000

10000

178080 81000 382080 Amount

From stipend Other revenue, commission or bulk admission of students

100000

30000

4% interest Total Revenue Profit/ Loss Cost of the previous year Profit this year

540000 670000 287920 -222300 65620

Breakeven Calculation
Breakeven
monthly costs on average in second year will be Total cost/12 Revenue/ month Breakeven is say after n months 31840 55833.33333 n*31840 + 222300(last year cost)= n *55883.33(revenue per month) n*19933.3= 222300 n= 11.15 ~ 11 months 23 months

Break even = 12(prev year)+11

References
1. Government of India ministry of human resource development, bureau of planning, monitoring & statistics. (2009). Statistics of higher & technical education. Retrieved from website:

http://mhrd.gov.in/sites/upload_files/mhrd/files/Abstract2009-10_0.pdf

2. The World Bank Group. (2012). India poverty & equity data. Retrieved from http://povertydata.worldbank.org/poverty/country/IND

3. State

Bank

of

India.

(2012).

Education

loan

scheme.

Retrieved

from

https://www.sbi.co.in/user.htm?action=viewsection&lang=0&id=0,16,393,397

4. Population Reference Bureau, (2012). Data profile india. Retrieved from website: http://www.prb.org/DataFinder/Geography/Data.aspx?loc=380

5. http://www.thehindu.com/multimedia/dynamic/01142/12isbs_opinion-tim_1142103e.jpg

6. http://www.readandknow.org/wp-content/uploads/2012/10/kids-education.jpg