Expert Interview: NBFC and Lending Partners

Context for the Expert

Project Disha is a skill development company training 18-24 year olds from Tier 2/3 India for employment in IT services, healthcare, manufacturing, and logistics. Programs are 3-6 months long, priced at Rs 30,000-2,00,000 depending on the track. We want to offer students financing options — both traditional education EMIs and income share agreements (pay after placement). We need a lending partner who can underwrite this student profile at this ticket size.

What We're Trying to Learn

Whether education lending at Rs 30K-2L ticket sizes is commercially viable for students without income history or collateral, how ISAs can be legally structured in India (likely through an NBFC), what default and collection realities look like for this demographic, and what a training provider needs to demonstrate before a lender will underwrite their students.

Red Flags to Watch For

  • Lender has never done education lending below Rs 5L ticket size — may not understand the unit economics at our range
  • "We can do ISAs" without being able to explain the legal structure — likely hasn't actually done it
  • Assumes Tier 2/3 students are uniformly high-risk without segmenting by track, placement rate, or employer quality
  • Quotes default rates from unsecured personal loans as proxy for education loans — different product, different behavior
  • Excessive enthusiasm without asking about your placement data — not a serious underwriter

Questions

Product Design

  1. What's the minimum education loan ticket size that's commercially viable for you? At Rs 50,000 per student, does the unit economics work — origination cost, servicing cost, risk cost? What ticket size does it start making sense, and what volume do you need to justify the fixed costs?

  2. What student profile can you lend to at the Rs 30K-2L range without traditional collateral? What data points do you use to underwrite — family income, 12th marks, enrolled program, placement history of the training provider? Is a co-borrower (parent) mandatory at this size?

  3. What loan tenure and EMI structure works for a student who starts earning Rs 15,000-25,000/month post-placement? Moratorium during training, step-up EMIs, income-linked repayment — what have you seen work in practice? What's the sweet spot between affordable EMI and acceptable loan duration?

ISA Structuring

  1. How would you legally structure an Income Share Agreement in India today? Does it need to be routed through an NBFC as a loan product? Can it be structured as a service agreement? What has RBI said about this, and what's the regulatory grey area?

  2. What's the collection mechanism for ISA repayments — salary mandate (eNACH), employer deduction, or self-pay? What happens when the student changes jobs, goes to the informal sector, or becomes self-employed? What's your recovery mechanism when someone stops paying?

  3. What default rate do you model for ISA-style products by student profile? Break it down: placed in a formal job at Rs 20K+ vs. placed informally vs. not placed. What's the difference between "can't pay" and "won't pay" in your experience, and how do you handle each?

Market Reality

  1. Who are you lending to today in the education space, and at what ticket sizes? Coding bootcamps, coaching institutes, degree colleges, upskilling platforms? What's working and what's failing? What made you exit any education lending segments?

  2. What's the actual default rate you're seeing on education loans under Rs 2 lakh? How does this compare to your personal loan book? How do you collect from borrowers in Tier 2/3 cities — ground team, call center, digital, legal? What's the cost of collection as a percentage of loan value?

Risk and Partnership

  1. What do you need from a training provider to underwrite their students? Placement rate data (how many batches?), employer quality, student selection criteria, program completion rate? Would you co-invest in student selection to reduce default risk? At what placement rate does the portfolio become attractive to you?

  2. First-loss guarantee — is that what you need to start, and at what percentage? 5%? 10%? 20%? If the training provider guarantees 10% first-loss, does that meaningfully change your pricing and approval rates? How long before you'd lend on portfolio data alone without the guarantee?

  3. Have you seen any training provider-NBFC partnerships in India that actually work at scale? What did they get right? Where did others fail — adverse selection, placement rate inflation, collection gaps, regulatory issues?

  4. What's your ideal pilot structure? How many students, what ticket size, what data would you need to see after the pilot to scale the partnership? What's the timeline from first conversation to first disbursement, realistically?