India has a population of 572 million people between the ages of 0-24 years (Census of India, 2015). This has led to significant government and private spending in education sector. The current K-12 school system in India is one of the largest in the world with more than 1.5 million schools that have more than 250 million students.
According to India ratings, India’s education market is USD 133 billion with USD 56 billion in private spend, out of which USD 40 billion is in K-12 Education (Kaizen Education (KE), 2014).
Market Dynamics for Social Enterprises in K-12 Education
There are two major channels for sales for enterprises in K-12 education in India.
Social enterprises are looking for following avenues to sell their product/ services:
Schools
Based on the differential geography and income-levels of Indian population, three different submarkets have emerged within private school segments:
- High-End Schools – Schools having fees more than INR 60,000 (USD 1,000) per annum. Parents of students studying in this segment have high aspirational value on student outcomes
- Mid-Market Schools – Schools having fees between INR 12,000 (USD 200) to INR 60,000 (USD 1,000) per annum. These schools are based especially in Tier-2 cities and are expected to double its market share in coming years.
- Affordable Private Schools – Fees under INR 12,000 (USD 200) per annum. These schools mainly cater to low-income population.
Government
It is very difficult for social enterprises to sell directly to government schools. The decision is taken by government and is implemented in all the schools. While it is very lucrative to sell to government because of the sheer size of the sale, the sales cycle is very long and can go up to years together. Most social enterprises are staying away from selling directly to government because of delay in payments.
Corporate Social Responsibility (CSR)
This is one channel that is becoming popular among social enterprises. Indian government has passed a law that large organizations have to donate 2% of the profits towards social causes every year as part of their Corporate Social Responsibility (CSR). Education has been part of mandate on many Corporations. Some social enterprises are looking to sell their product/ services to them that in turn is donated to government schools.
Current trends in India’s education sector are focused on three broad market segments.
Core education that comprises K-12 schools, undergraduate and graduate colleges
Parallel education that includes child care, preschools, tutoring and test preparation classes, teacher training and other vocational training services
Ancillary education that includes products and services provided to core and parallel segments such as ICT and multimedia, books, stationery, etc.
Core Education The core education has always been the prime focus of policy making. Private spending in this segment is approximately US$35 billion annually with CAGR of 12%. (Kaizen Education (KE), 2014) However, one important barrier to attracting quality entrepreneurial talent to K-12 education is the fact that this segment highly regulated. Educational Institutions in India are required to be non-profits. Enterprising entrepreneurs have to find a work-around this regulation by setting up infrastructure companies that provide the school (which is registered as a nonprofit) with services such as land, teachers, supplies, etc.
Due to poor quality of education arising from lack of teacher accountability and insufficient infrastructure in government schools, private schools have been able to drive growth by focusing in their resources on teaching and better infrastructure. This, in turn, has resulted in high fees for the students that people from low-income segment are unable to afford. To cater to the need of parents who can’t afford high fees of the private schools but want to give their children best education, there has been rise of Affordable Private Schools (APS) or budget schools that charge fees under INR 12,000 (USD 200) per annum. Even though the quality of these APS is not as good as high or mid-market private schools, parents still prefer to send their children to these schools as compared to government schools. However, even these APS are registered as non-profit and are very highly regulated.
Some entrepreneurs have attempted to solve this issue by starting school Management Company that leverage existing school infrastructure and take over day-to-day operations of school. Their services include content/curriculum development, teacher training, recruitments, transportation, online courses, school management software, etc. that are sourced out to different schools. Last year Acumen supported one such initiative called Standard of Excellence in Education and Development (SEED) to improve current state of low-cost private education in India. SEED works with underperforming low-cost private K-10 schools to institute a standardized curriculum, teacher training and other operational processes to improve efficiency and help these schools deliver the best quality education at the most affordable levels. They also provide teachers with detailed lesson plans and comprehensive support to deliver the best possible instruction in classrooms.
