Investing and contributing capital to private schools is chosen by many parents. However, according to experts, this has risks if the investor loses its ability to pay like the American International School of Vietnam (AISVN).
Mr. Le Trung Nam, economic expert, Director of EPS Investing Vietnam Company had an exchange and discussion with reporters from Vietnam Women’s Newspaper about this incident, in the context of the scandal of the American International School Vietnam (AISVN) exists and has not found a final solution.
Reporter: AISVN American International School is a private school. According to a representative of the Department of Education and Training of Ho Chi Minh City, the school has the right to call for capital contributions and loans from parents. How is this understood specifically?
Nam: A private school is essentially a business, so it is not limited in mobilizing capital through capital contributions or loans. For capital mobilization, the law has regulations that when issuing shares to the public, certain conditions must be met according to the Securities Law. As for loans, it is more open, because there is trust between the lender and the borrower. For AISVN, we should review whether the capital mobilization is in accordance with the law and what the commitments are. In case the school does not comply with commitments and agreements, investors and parents can bring the case to law for consideration and settlement.
Reporter: In recent years, AISVN has had 900 parents pay money for their children to study from grade 1 to grade 12. If the child changes schools or graduates, the school can transfer them back. What precedent does this business model have in the world and in Vietnam?
Nam: In the world, raising capital for a business is very diverse, so AISVN borrowing capital, raising capital, from parents and investors is also a common form. Similar to a business borrowing capital, raising capital from employees or their families. Of course, the steps taken must comply with the law. Mobilizing capital from parents of private schools in Vietnam started about 15 years ago and this model has been implemented by many schools. So far, most schools are fine.
Reporter: Investing and lending without collateral is considered “hold a knife by the edge”. However, why do the majority of parents still accept this option, while most of them are middle class or above, with certain knowledge? In your opinion, what is the investment psychology and business psychology?
Nam: Most parents are not financial experts, so it will be difficult to see the risks of this business model. Simply calculate, a parent lends the school 4 billion VND without interest. If the average interest rate over 12 years is 7%/year, the equivalent of paying tuition is 280 million VND/year. If compared to the listed tuition fee, which is many times higher, they feel a great benefit. This benefit makes many people let their guard down without considering it thoroughly.
However, this model is only sustainable if the school invests that money in low-risk assets, such as government bonds or deposits, and earns interest to maintain operations. If they invest in risky assets such as stocks and real estate, the model can easily collapse, because there is no cash flow to operate when the market drops deeply. This is also a gap in the law, so there needs to be regulations on how capital is used for special businesses like this because its impact is too great, especially for students studying at school.
Reporter: The inability to pay to operate AISVN’s system may make this business model difficult to maintain. So, how will the sequential steps of this event take place, sir? (For example declaring bankruptcy, selling to another investor…)
Nam: Currently, the authorities are working with parents and schools to find the most appropriate direction, so we cannot say anything in advance. Currently, stabilizing the children’s education is the top priority, followed by restructuring the school’s finances, which can take many forms, such as raising more capital and transferring it to new investors. financial ability.
As for raising more capital, this is the fastest form of “firefighting” and currently some parents have agreed to contribute more money so that the school has operating expenses until the end of this school year. However, if not enough capital is mobilized, it will be difficult to maintain school operations as desired.
The form of transfer to new investors will require a lot of time to negotiate, so it will be the next solution to structure the school’s finances in the long term. And of course, the participation of financial experts is essential during this period.
Source: Dinh Thu Hien – Vietnam Women Newspaper