Our Indian working student Soundar Sellamuthu has just returned from a business trip to India with CHANCEN International founder Batya Blankers. In our interview, we speak to Soundar about the reasons for doing this trip, the possibility to offer Income Share Agreements in India and how he got involved in this project.
Soundar, you have spent almost one month in India for CHANCEN. What was the purpose of your trip?
I am currently writing my Master thesis about an “Evaluation of the Indian market for the implementation of the Income Share Agreement.” The goal of my trip was to conduct field research for the thesis and for its practical implementation – a potential foundation of a CHANCEN International office in India!
Wow, what an amazing opportunity for a Master thesis! How did you end up with that topic in the first place?
That’s a long story! I came to Germany in 2017 for my graduate studies in Business Administration and Engineering at “Hochschule für Technik und Wirtschaft Berlin”. After the third semester of my studies, I decided to gain some practical experience in the German work-culture through an internship. Ideally, I wanted to work for a startup because they offer the freedom to work in multidisciplinary areas of a company. While searching through online job boards, an internship ad of CHANCEN eG intrigued my interest. I had never heard of CHANCEN or Income Share Agreements before and started to research the idea of ISAs. The background of CHANCEN, the drive for impact and the diverse team, as well as the job description checked all of my boxes, so I applied for the job and got selected. I joined CHANCEN as a Business Development and Financial analyst intern in March 2019.
At CHANCEN, you are known as an Excel-expert (only second to our CFO Olaf Lampson). What was the content of your internship and how did it lead to the thesis?
I worked closely with Olaf, mainly with the business plan of both CHANCEN eG and CHANCEN International. Besides, I also conducted projects within controlling and dashboard creation. The projects involved different team members, just as I had hoped. CHANCEN has a flat hierarchy system, and everyone from CEO to interns is easily accessible and friendly. I also improved a little bit of my German by listening and speaking with my colleagues. It was a great experience working and learning new financial and accounting concepts together.
During my work for CHANCEN, I had gained in-depth information about ISAs and saw a huge potential for ISAs in India. Therefore I decided to write my Master thesis about it. Currently, 78% of tertiary education institutions in India are either private or privately aided and charge high tuition fees. Especially outside large cities, public universities are scarce. Most students depend on their parents to finance their fees. Other popular financing sources are scholarship and bank loans. However, most scholarships cover only 10-15 % of the fees. Furthermore, education costs in India are continuously increasing and more and more institutions demand fees that exceed the usual bank loans accessible without collateral. Consequently, many people have no access to tertiary education because of financial difficulties or have to drop out of their studies. I am convinced that implementing the ISA model in my home country could benefit many students.
It is unusual to travel to other countries for a Master thesis. Why didn’t you simply conduct research from Germany?
That was the initial idea of course. However in December, the CEO of CHANCEN eG, Florian Kollewijn, came across a pitch competition for German companies who want to initiate social impact projects in India. We thought it was the perfect opportunity to test our idea of Indian operations and applied for the competition. Two days later, on 5 December 2019, we got selected to present our pitch in India for the semi-finals on 3 January 2020! So we decided to use the opportunity to pitch our idea and within the same trip conduct an on-field feasibility study with educational institutions and some potential stakeholders. In the few remaining weeks, we organized meetings with various stakeholders and Florian and Batya trained and guided me on how to deliver the pitch.
Awesome! How did you experience the competition? And how far did you get?
The competition was held by the prestigious Indian Institute of Management in Calcutta, TATA Social Enterprise Challenge and GINSEP, the German Indian Startup Exchange Program. Over 1,000 startups applied for the competition, from which 63 companies passed the initial screening. Out of these, 23 teams were selected for the semi-finals: 20 startups from India and three startups from Germany, one of them CHANCEN.
It was overall a great experience. All the startups were so friendly, and each one has a revolutionary idea to help society in its way. The judges liked the ISA model and asked many questions about our unique selling point, the use of technology in our processes and how we plan to adapt ISAs to the Indian market. Only ten teams shortlisted for the finals, but unfortunately, we did not make it. Still I was able to network with many academics, incubators and investors.
So then you continued your field research?
Exactly. Prior to our trip, we worked closely with the CHANCEN research team to create a list of data points which were needed to collect for our feasibility study. We decided to conduct our first on-site research in The Nudge Foundation, a vocational training center for students from a lower economic background. We got in touch with them through the Mulago Fellowship program which supports CHANCEN International founder Batya.
In the second week of January, Batya and I conducted interviews with students and alumni of the Nudge Foundation. The students were very open and honest and helped us gain clarity about their perception of the model. Their financial literacy knowledge was awe-inspiring; when we started to explain the ISA model, they quickly captured the financial implications. During the period, one of their batches was graduating, and we were invited to the graduation ceremony. Batya was requested to issue the certificates to the students. It was a beautiful moment for us all since the graduates have all found work in the formal job sector.
Sounds great! Did you also speak to other stakeholders? And how was their feedback?
In the third week, I had the opportunity to gather further feedback from other educational institutions and their students, the Indo-German Chamber of Commerce, auditors and lawyers. While most institutions and students saw the model as an interesting opportunity, some students were concerned with the income-based repayment structure and were reluctant to share a percentage of their income instead of making “classical” loan repayments. An interesting finding is that girls seemed more willing to share a part of their income for a good education. However, in reality Indian women have more social responsibilities which make repayments difficult for them. Some students also considered tuition-fee payments a duty of parents, not students. Furthermore, they were concerned how family emergencies would affect their repayment. Lawyers and auditors mainly raised risk-related concerns, were worried about the lack of guarantees and the large informal job market in India which could incentivize repayers to report wrong income data.
We would love for our community to grow and for Income Share Agreements to contribute to educational justice and equal opportunities all around the world. Tell us, can we expect the foundation of CHANCEN India in the near future?
ISAs are an excellent alternative for educational financing in India. Many underprivileged students could benefit from the model and would finally get a chance to pursue their dreams. Most of the students we interviewed asked us when CHANCEN would start their operations and were keen to recommend ISAs to their siblings. Also the educational institutions seemed eager to find a model that gives equal access to education to all students. On the other hand, as mentioned, we also encountered obstacles and open questions, mainly about the optimal and feasible solution for repayment.
This trip gave us a lot of energy and motivation to work towards making this dream become a reality, but we will know we need more time to gain a deep understanding of how to adjust the model for this region. It is a very organic process, we look forward to seeing how these initial seeds will blossom over time.
