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Social Impact and Fintech: The Prodigy Finance Story

Creating a global company with social impact at its heart doesn’t happen overnight. But, as Prodigy Finance demonstrates, it can definitely happen within a matter of years.

Cameron Stevens, like any recently-accepted INSEAD candidate, was looking forward to his MBA experience in France. And, like most other grad students, began looking for the financing needed to accept his seat.

This is when he realised that after all the time spent preparing for the GMAT and revising essays, getting into a top-ranked business school was actually the easy part. Getting a loan as an international student was near impossible.

His first stops were the same as most – the banks. The problem? Cameron had been working in Malaysia at a corporate advisory firm; he didn’t have the requisite credit history in his home country of South Africa and, not being Malaysian, wasn’t eligible for loans in that country either.

International students across the globe face the same circumstances all the time. In some places, you can secure a loan, but the amount of money you can transfer out of the country is heavily restricted. In other countries, collateral worth far more than the educational costs is necessary to secure financing – and you’ll still pay a small fortune in interest. And in other countries, loans are only extended with a cap at the cost of securing the same degree locally. Sadly, those amounts are nowhere close to the actually cost of attendance at a school like INSEAD.

To compound these issues, traditional lenders assess loans on historical data; that is, after all, what they have available to them. The prestige of any given school or the increased salary a student is almost guaranteed to receive after graduation simply don’t factor into the occasion. The result is small loan sizes (that often fail to cover total expenses) accompanied by high interest rates. Students from emerging economies are usually disproportionately affected.

It was precisely these troubles that Cameron and his INSEAD colleagues discussed over beers at their Fontainebleau local.

Why is it so difficult for international students to secure funding?
And, more importantly, what can we do to make it easier for top talent across the globe, regardless of their existing financial resources, to ensure everyone has equal access to high-quality education.

It was there that the foundations for Prodigy Finance were laid.

Building a global, socially-responsible enterprise
Cameron and his co-founders launched Prodigy Finance in 2007 as a borderless student loan provider. The aim was to provide loans based on the future potential earnings of MBA students at competitive interest rates – and to ensure that as many emerging market students could benefit from access to the company’s financial products as possible.

To date, Prodigy Finance has lent approximately $500 million to over 10,300 students. Nearly 90% of Prodigy Finance-funded students would find it difficult (if not impossible) to secure the funding needed to complete their master’s degree. And, 80% of borrowers hail from emerging economies.

Getting to this point, however, was no easy feat. Having received seed money from placing in an INSEAD startup competition, plans for the company and its proprietary lending model were well underway – and discussions were in place with UK banking institutions to provide the capital.

Then the recession hit and banks across the globe began reducing or completely foregoing educational loans in an attempt to rectify the market. Cameron and his Prodigy Finance co-founders had to think outside of the banking institution box to achieve their goals.

They turned to the one place all MBA grads turn to – their alumni networks. In turn, Prodigy Finance created a platform for alums, impact investors, and even universities to invest in bonds that would not only attract returns, but also provide funding for student pursuing top international business degrees at select universities.

With INSEAD as the pilot school, the company soon expanded to other European business schools, then into American programmes. With low default rates, Prodigy Finance extended its reach to engineering, law, and public policy programmes. And, through the past decade has raised institutional funds to ensure greater numbers of students secure their dream education.

Recently, Prodigy Finance updated their Future Earnings Potential (FEP) model for MBA students with huge and improved amounts of proprietary data, which allows the company to extend larger loans to MBA candidates.

Prodigy Finance collaborates with more than 200 universities. And, the continuing development of data sets across students at these institutions opens future financing options beyond masters-level education.

And, with increasing data and a decade of experience under the company’s belt, these opportunities signify the ways in which Prodigy Finance will continue to disrupt the education loan space.

*Sponsored Article


April 9, 2018
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