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WASHINGTON, D.C., January 8, 2000 —
The International Finance Corporation is helping to launch student loans in India through the creation of the first large-scale private sector student loan program amounting to US$90 million with Citibank and NIIT, one of India’s largest and most reputable information technology education firms.
The NIIT student loan program will be the largest in India and will help fill an urgent need, since very few Indian financial institutions currently provide such loans. The loans will be offered to information technology students following the three-year iGNIIT curriculum—NIIT’s flagship graduate course—over the coming five years. Using Citibank’s consumer lending standards, the program will be based on the student’s future earning capacity, thereby making loans accessible to lower-income families that could not otherwise afford tuition fees.
In the pilot program, which was launched by Citibank in January 2000, 50 percent of the students who took loans will be earning more than their parents after they graduate from iGNIIT, and 30 percent will be earning more than twice the income of their parents.
Mr. Bernard Pasquier, IFC director for South Asia, said that student loans will provide access to higher education and more job opportunities to a broader range of people. By promoting financially sustainable student loans with no public subsidies, this project is designed to encourage similar initiatives in India and other countries, he added.
Applying the methodologies of securitization, the program uses an innovative financial structure that shares the risk across three different levels—junior, mezzanine, and senior. IFC will provide a partial credit guarantee for 10 percent of the program at the mezzanine level in local currency. The structure of IFC’s investment has been assessed by Standard and Poors. IFC has also provided technical assistance financed by its trust funds to develop the legal framework for this project.
NIIT was founded in 1981 with a mandate to successfully bring computers and people together. Since then, it has trained over 1 million Indians in computer skills. NIIT currently has about 2,000 education centers across India and has enrolled about 320,000 students. It is among the largest education and training organizations in the world. With half its revenues generated by its software business, NIIT is the fourth-largest publicly listed IT company in India.
Citibank, a member of Citigroup, has been in India since 1902 and is the largest foreign bank in India, with a strong franchise in retail and corporate banking. Citibank is a pioneer in consumer and electronic banking. Its consumer-lending activities in India cover a wide range of products including auto finance, share finance, personal loans, mortgages, and credit cards.
The mission of IFC, part of the World Bank Group, is to promote private sector investment in developing countries, which will reduce poverty and improve people’s lives. IFC finances private sector investments in emerging markets, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses.
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