Measurable impact in India –through education

13 March, 2021

I never let schooling interfere with my education – Mark Twain

If Mark Twain were born a girl in a median-income Indian family, she would probably never get to see the inside of a school. Today, even in rural India, girls have a much better shot at primary education, due to the considerable improvements in education infrastructure. Yet, it is nowhere near enough.

Volume of impact investments made in India in 2019 & 2020

Sustainable development goals

On the global SDG Index, India’s rank is an unflattering 117 out of 193 countries. To develop a roadmap for improvement, the Modi government has created a domestic SDG India Index. This index is designed to provide a holistic assessment of all Indian states’ performance to direct policies and spending programs. The status of the 16 development goals is measured on a set of 100 indicators that include, among others, maternal mortality ratio, pupil teacher ratio and households with toilets.

Every state is ranked on each SDG goal. It follows that impact per dollar is greater in states with a lower ranking in SDG. This is particularly true for SDG 4 – quality education, since education is the key that allows other SDGs to be achieved.

In an ideal world, every child would have access to affordable and quality education. According to the United Nations Sustainable Development Goal (SDG) charter, obtaining a quality education is the foundation for sustainable development. And in India, education is closely linked to nutrition since the state-funded schools are also a source of one daily meal. Approximately 120 million children get a free midday meal at the state-run schools. This goes a long way in achieving SDG 2 – zero hunger.

The education sector

India has the world’s largest population of young people, with more than 65% below 35 years, including 260 million children enrolled in 1.5 million public and private schools. While access to schooling has been achieved at scale, learning outcomes have been abysmally low, and the employability gap high. For example, only slightly over half of all children enrolled in standard five can read at the level of standard two.

In a country like India, with GDP per capita of $2,100, education enables socioeconomic mobility upward and is a key to escaping poverty. Encouraging the young to access educational opportunities not available to the previous generation translates into meaningful long-term impact. Access to a primary school for children of those below the poverty line can be a life-changer.

It is universally accepted that the state alone cannot meet the demand for quality education. The private sector has a significant role to play and profitably so. In India, and in most emerging markets, parents are choosing affordable non-state education to realise the dream of a better life for the next generation. It is not uncommon for middle-class parents to spend as much as 10%-15% of their disposable income on children’s school fees.

Impact investing

Impact investing has been around in India for nearly two decades in various forms, but it has gathered structured momentum only in the past five years. During 2010-2019, various impact enterprises in India collectively raised $10.8bn. Their activities have positively impacted 490 million individuals, from mostly low-income communities who are underserved by traditional businesses and governmental systems. A vast majority of this impact has been through the microfinance route. Education remains an under-served sector in India with insufficient access to funding.

In 2020, given the disruption caused by the pandemic, impact investment volume fell to $2.6bn, but education was a big gainer. It attracted investment of approximately $660m. Remote learning, tech-based business models garnered the most attention.

There was an urgent need to keep the children engaged, and the lockdown created an opportunity for edu-tech platforms. Education as a sector offers tremendous opportunity to do good without necessarily compromising on profitable returns. Our investment experience in India demonstrates how sound commercial lending can intersect with positive, measurable impact.

Measurable impact

Presently, there is no standard template for creating, measuring and reporting impact. Every sector and situation offers a differing opportunity for improvement, making impact measurement complex and idiosyncratic. Therefore, it varies in approach and rigour across practitioners.

At UTI Capital, the private markets investing arm of UTI AMC, we have developed a proprietary model based on conducting regular ESG audits on our investee companies. These audits are both quantitative and qualitative and assign each company an ESG score. We actively engage with the companies and incentivise them to improve their ESG score progressively.

This improvement of ESG score is only possible by adopting inclusive and

sustainable practices that serve the greater good of all stakeholders.

Educational institutions in India typically have profit margins of 25%- 40% with predictable cashflows from student fees. Giving expansion capital to such schools achieves social good with lucrative financial returns.

Through our investment  framework, we have been able to impact the children, teachers, and their ecosystem.

While the scope for improving the school’s environmental footprint is limited, our chief contribution is the introduction of robust social and governance practices. These include induction of independent directors on the board, gender parity, health and safety issues and stakeholder disclosures.


The vibrant education sector of India offers tremendous opportunities for measurable ESG progression alongside

financial returns. Focusing on the backward states of India offers greater impact potential. Successful investments require evaluation of not only credit risk but also the SDG orientation and philosophy of the promoters. There is a large enough universe of positive-minded promoters that agree to have ESG objectives hard-coded alongside financial performance parameters in the contractual investment obligations.

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