Student loans have become a controversial subject in the past decade as a generation of graduates came to terms with the very long and onerous path to repaying their debts. In many developed nations, student debt can be crippling to individuals starting out in their career and the financial world has been slow to adapt to a changing job market where they no longer understand the creditworthiness of their clients. Where there are old established businesses resisting a changing environment, the stage is set for disruption. Enter Prodigy Finance - a new approach to student loans. As with all of the best innovation stories, the startup was born from personal experience.
“The idea for Prodigy Finance came in 2005, lamenting over a beer about the challenges faced by international postgraduate students in financing business school. I knew my INSEAD classmates were ideal candidates for low-interest loans. Most had exceptional credit track-records in their home countries and were successful prior to commencing postgraduate studies. Despite this, traditional lenders use credit history to assess risk which varies from country to country, and is rarely transferable,” says Stevens.
“The issue was in the assessment metrics and processes used by traditional lenders, with the solution being to transform the way financial institutions assess risk,” he explains.
Prodigy takes advantage of this situation to offer student loans in a truly global world. The company doesn’t require co-signers or collateral on debt. It offers the competitive interest rates that it knows its clients are worthy of, and repayments only have to start six months after graduation. Prodigy also doesn’t penalise early repayments.
Prodigy Finance’s loans are collectively funded by a community of alumni, institutional investors and qualified private investors who receive a financial and social return.
“Students moving abroad are often unable to access the most basic banking facilities, let alone a traditional loan. This is where Prodigy Finance come in: we provide funding through a borderless credit model and can support 150 different nationalities. We use numerous elements such as pre-study salary, university acceptance and future income, to ensure individual loan affordability whilst removing the need for guarantors or co-signers,” says Stevens.
“To date, we’ve helped over 6200 students; over 80% of our borrowers have no alternative means of financing.”
Building the world’s first global credit model for student loans was not easy, however, especially with lending being a highly regulated industry, and regulation varying by jurisdiction. Stevens said that creating this model to meet the needs of clients globally was the biggest challenging in getting Prodigy Finance up and running.
Running a global team also means appreciating cultural differences.
“We have offices in London, Cape Town and New York, as well as a satellite office in Mumbai, and sometimes things get lost in translation. I’d recommend reading Erin Meyer’s Culture Map to address the challenges that arise with hiring people from different backgrounds and the mindsets they bring,” says Stevens.
“Maintaining culture over multiple locations can be very difficult - our South African team don’t always understand why the American team on Skype don’t take a couple of minutes for personal interaction before getting down to business. To address this, we would advocate bringing the entire team together, so they’re physically in one place and able to share ideas,” he advises.
To date, Prodigy Finance has loaned over $250 million to students in 118 countries and been featured by top media outlets globally, including The Financial Times and The Economist. The company was also featured in the Fintech50 for 2016. As globalisation continues and traditional lenders ignore the new requirements of their customers, we expect Prodigy Finance to go from strength to strength.