$100m Raised by Crowdfunded Student Loan Platform

A crowdfunded startup that provides MBAs with student loans has raised $100m. Prodigy Finance was cofounded by three INSEAD business school graduates after they grew concerned about the number of prospective MBAs who had been refused bank finance to study an MBA.

Despite their future earnings potential, students who wished to study MBAs at top schools were being turned away because they lacked US credit records. According to the latest QS Jobs & Salary Trends Report, the average starting salary (including bonus) for US MBA graduates is US$128,600.

Therefore, they decided to create a globally-accessible platform that gives funding to international postgraduate students who would otherwise find it difficult to enroll onto a top MBA in the US and Europe. The money comes from alumni, institutional investors and qualified private investors who enjoy a return on their investment, while students – who largely come from developing countries – can fund their studies

Since Prodigy Finance was launched in 2007, it has processed more than $130m of student loans for approximately 2,000 MBA students around 90 countries. The company website boasts that the repayment rates of these student loans are in excess of 99%.

The South African born CEO, Cameron Stevens, forecasts that the company will process US$1 billion of student loans a year by 2017. Around 60 of the world’s top business schools are on the platform, including Oxford Saïd, Wharton, Chicago Booth and London Business School.

Prodigy provides funding for students from developing world

Three quarters of Prodigy finance’s borrowers come from developing world countries, with about a third from Brazil, Russia, India and China – the BRIC nations.

“We don’t care if you move from Shanghai, Dubai or New York because it is a global market,” CEO Cameron Stevens said in an interview with the Financial Times.

“In the past, someone coming from China to study in London would have to stay in the UK to find work. Now they can return to work for Google in Shanghai.”

It is believed that London-headquartered Balderton Capital and Swiss bank credit card Credit Suisse led the US$100m funding campaign, with sources speculating that Balderton provided as much as $12.5m.

Tim Bunting, the partner of Balderton Capital leading on the Prodigy finance deal, commented in a press release that, "Cameron and his team have created a global execution platform that gives investors the opportunity to fund international students in a meritocratic fashion that positively challenges the status quo. This is a huge win for the students."

The scheme also received investment from other high-profile names, including Betfair cofounder Ed Wray, who is currently a director at financial services LMAX Exchange and Funding Circle.