Financial markets have also rebounded this year but we are nevertheless treading carefully and ensuring we give students more information about exactly when their loans will be confirmed and disbursed.
1. Brief us about your business model like how did the idea came to start and how does it work (step-by-step procedure)?
We established Prodigy Finance with a philosophy that funding shouldn’t be a barrier to education. It was 2007 when three MBA students recognised that traditional banks don’t serve the needs of international borrowers. They demand collateral, co-signers, guarantors or documentation that most of the students simply don’t have. This was when we thought of using fintech to redefine the student loan market and make quality education accessible. Prodigy Finance is not a bank. We raise money from impact investors and institutions (who get to invest in tomorrow’s leaders whilst earning a financial and social return), and turn them into education loans for international students.
2. What are the unique key points of your company?
We follow a simple and modern loan process based on the future potential of students and not their current circumstances. Our innovative and borderless model means we do not ask for collateral or a co-signer and whilst we do ask for the credit history of an applicant, it is also possible to get our loans without submitting the same. We are more interested in what college/university the students are going to and what course they will study.
3. How are you different from the existing competitors?
What sets us apart from other lending platforms is our potential-based credit model and global footprint that enables us to lend to students that other lenders ignore. In fact, 89% of our customers said Prodigy Finance was the only way they could fund their degree. Moreover, our loan process is entirely online – all the application, verification and documentation are done through a secure portal on our website. The loan amount is then disbursed directly to the school (who retain the tuition fee and pass on any requested living expenses to the student). We also have a team of agents available to chat with for any assistance.
4.What is the funding status and monetization model?
Last year, we secured a landmark deal with the U.S. International Development Finance Corporation, which is essentially America’s development bank. We also have facilities with Goldman Sachs and Deutsche Bank and have raised funds from our community of private investors. So we are in a good position this year. However, we are continuing to explore further funding deals in a bid to add even more growth next year.
Our monetisation model works 2 ways: a one-off admin fee that covers our origination process and a servicing fee, which is paid by our investors for us to manage the student repayments. We do not make money based on the rates of our loans.
5. What challenges are you facing in running your business?
2020 was a tough year for many. The effects of COVID forced the financial markets to condense, which in turn limited the amount of capital we could supply in a timely manner to students last year. We also saw severe uncertainty in students traveling abroad for higher education. While we initially saw a significant portion of students defer their studies to 2021 or beyond, we have seen a strong pickup of student demand this year. Financial markets have also rebounded this year but we are nevertheless treading carefully and ensuring we give students more information about exactly when their loans will be confirmed and disbursed. In addition to that, whilst India is not affected there are other markets where we have had to limit our business due to either regulatory or funding restrictions.
6. How has been the people’s response so far?
At Prodigy Finance, we understand higher education. Unlike most of our competitors, we fully appreciate and understand the challenges that a student faces when he or she embarks on a journey of studying abroad. The idea of Prodigy Finance germinated from our founder’s personal struggles while securing a study loan for his MBA at INSEAD Business School in France. Our team comprises a good mix of people who have studied abroad and keep the customers at the core of everything we do. As a result, we have been able to create a unique position for ourselves in this competitive market. Our brand is now well known among the study abroad aspirants in India and a lot of our current borrowers end up recommending us to their friends & juniors, which has been one of the core drivers of our growth.
7. What are the traction details (like users, app downloads & other achievements of the company etc)?
The year 2020 was very difficult for everyone and it was no exception for Prodigy Finance. However, we are proud to have come out of 2020 stronger and more resilient than ever before. We crossed some major milestones last year, the first and foremost being that we crossed the $1Billion threshold in terms of loans disbursed, and we passed an overall total of 20,000 students funded – from 130 nationalities. India, obviously, was a very strong contributor towards helping us achieve these significant milestones. Apart from this, we also successfully raised funding from DFC (U.S International Development Finance Corporation), a US government owned development bank focused on solving the most critical challenges facing the developing world.
8. How do you look at expansion?
In the last 18-24 months we have seen growth in the number of course types we support (we initially only funded Business related courses but as of 2019 have been funding STEM and Health courses), number of schools we work with (over 800 so far), and countries of study (we are looking to expand our schools in Canada & even add Australia very soon).
India is a very important market for us and we are doubling down our focus on it. Our loans do not require a collateral (guarantee / security) or a co-signer and are rather based on the future earning potential of the student, which is established by virtue of having an admit from a leading school / university. This approach fits very well with an average Indian student, who comes from a middle-class background but dreams of constructing a better life. So, we are aiming to grow our reach beyond the tier 1 cities in India and in order to do so, we are actively building and scaling our study abroad partner network across India. We aim to closely work with admission consultants, test preparation companies and loan counsellors from deep pockets of India, so as to be able to serve the needs of deserving Indians, who might not yet know about Prodigy Finance.
9. What are your marketing plans?
We at Prodigy Finance focus on three key areas while creating marketing strategies:
· Partners and third parties – We work with schools directly with referral partners within the sector, as well as a couple of influencers.
· Direct engagement with students – We have Whatsapp and Telegram groups to be in touch with students in real-time, we host regular webinars, and ensure that our potential customers can chat with students we’ve already funded via our website.
· Owned channels – Obviously we have our website, and are active on Instagram and LinkedIn. We are working hard on putting out more content this year and improving its quality for the students. Watch this space!
10. What has been the biggest learning’s so far?
Overall, in 2020, we saw a huge demand for our loans, which meant that there were specific segments of students we were unable to serve. While 2020 was a very difficult year for the student community in general, we’ve tried to support them in the best way we possibly could. Indian students for instance experienced a lot of uncertainties in terms of securing their student visas. They also faced challenges in terms of adapting to online classes, since travel to study destinations such as the US were not fully open. We’ve had a fair share of learnings coming out of the storm that 2020 was. First and foremost, we’ve developed a greater appreciation for the impact we can have on our student borrowers. For a lot of our Indian students, Prodigy Finance is the only option they have in terms of securing a student loan. We’ve become more sensitive to this and are working hard to ensure that we can serve more and more deserving students. We’ve also learnt the importance of timely communication and transparency and have made some changes in our process to incorporate these aspects.
11. What is the market size and opportunity?
The market opportunity for international student loans stands at $100 billion, based on projections that by 2025 there will be 8 million international students globally. India and China have historically led the charge in terms of sending the highest number of students to study abroad annually. There were almost one lakh Indian students that went for higher studies in 2020, which was slightly lower from 2019, largely due to the uncertainties thrown in by the pandemic. Overall, we operate in a large and growing market, even if you only consider India as a segment.
Source: Business World
