In 2013 an ambitious new company called Varthana was founded in response to one of India’s most intractable problems: education. India’s school system has the distinction of being the world’s largest and also one of the world’s worst; a 2017 article in the Economist described the quality of India’s schools as “a scandal.” At 450 million, India has the largest youth population in the world – for context, this exceeds the entire U.S. population by 125 million – and with one third that population not enrolled in any school at all, education is a massive and urgent problem.
Varthana’s solution? Provide financing to the growing number of affordable private school owners allowing them to expand their infrastructure, invest in teacher training, and introduce new learning methods into their classrooms, reaching more of India’s low-middle income student population, where there is an extraordinary need and demand for education.
There was just one problem – no bank would lend them money. Private schools for low-income families? Too risky. Too specialized. No precedent. Not a fit with existing product lines like small business or real estate lending. Too much work.
Thankfully, there is a world of finance that exists precisely to fund businesses like Varthana: impact investing. Impact investing is the way in which companies that are seeking to create financial return and sustainable social and/or environmental outcomes access capital. These companies are often challenging the status quo, disrupting systems that don’t fully or equitably serve populations or the planet, changing how critical services — like education– are provided and importantly, who they are provided to. Varthana successfully raised capital from social investment pioneers like Elevar Equity and affiliates of leading microfinance networks like Oikocredit and Women’s World Banking, kicking off a strong growth trajectory that continues today.