Dealflow | September 25, 2018

Prodigy tops $1 billion in debt for international student lending

Jessica Pothering
ImpactAlpha Editor

Jessica Pothering

ImpactAlpha, September 25 – Prodigy, based in the U.K., launched in 2007 to help international students secure education loans to attend university outside of their home countries.

“The world is increasingly global and connected, yet the banking industry has not kept pace,” Prodigy’s Cameron Stevens said. “Traditional lenders are bound by local legal constraints, local data, as well as local repayments and collections, which ties an applicant’s credit profile to their location.”

That’s a problem for many students, but particularly students in emerging markets where rates of unbanked adults are higher, credit is harder to secure, and student lending is less prevalent than more advanced markets.

Student lending is, of course, a controversial space if you’re sitting in the U.S. There’s more than $1.5 trillion in outstanding student debt (250% more than 10 years ago) and 30% of borrowers face serious struggles in repaying their debt.

Internationally, however, lenders like Prodigy Finance offer an opportunity for students who otherwise might not be able to afford post-secondary education to attend university. Prodigy has provided loans to more than 11,200 students from 132 countries, 80% of whom come from emerging markets. They have collectively borrowed almost $540 million from Prodigy. Most of these students study in high-skill education tracks, like business and management and increasingly, science and engineering. 

Prodigy Finance has raised $1 billion in debt with backers including institutional lenders like Deutsche Bank, Goldman Sachs, M&G Investments and Sumitomo Mitsui Banking Corporation, who collectively committed $900 million. The remaining capital was provided by a group of family offices, individuals and schools via Prodigy’s international “education note.

Prodigy pegs its loan interest rates based on factors including “the [individual] school’s requirements, student’s credit history, outstanding liabilities, savings, pre-study salary and expected salary post-graduation,” a Prodigy spokesman told ImpactAlpha. Students begin repayment six months after their course has completed.

Prodigy kicked off its debt raising push with a $240 million injection last September.