Prodigy Finance, an online platform that lets lenders buy a stake in a package of debt supporting a group of students from a top school, raised the financing through Balderton Capital, the London based VC frim, Credit Suisse and various angel investors.
The financing — a combination of equity investment and a loan — will fund staffing increases and boost lending capacity.
The venture was founded in 2007 by INSEAD alumni including CEO Cameron Stevens, to address the problem of MBA students being refused bank finance despite their high expected earning potential. The median starting salary for US MBA graduates is $100,000, according to the Graduate Management Admissions Council.
Prodigy Finance has processed more than $130 million of loans for roughly 2,000 MBA students in around 90 countries. Repayment rates are in excess of 99%. Chief executive, Cameron forecast that the company will process $1 billion of loans a year by 2017.
Sixty of the world’s top-100 business schools are on the platform, including London Business School, University of Oxford, Cranfield School of Management and ESMT.
International students can struggle to secure loans to pay course fees without a US credit record. Three-quarters of Prodigy Finance’s users are from developing economies, among them Brazil, India and China, and borrowers tend to find jobs in their home countries after graduating.
“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,” Cameron told the Financial Times. Prodigy Finance could not be reached for comment.
A draw for investors on Prodigy Finance’s platform is the social return from investing in future business leaders and higher education. Many lenders are MBA alumni themselves.
Other crowdfunding platforms offer loans to pay tuition, such as US-based Commonbond, led by Wharton business school MBA David Klein, and SoFi, founded by Stanford GSB graduate Mike Cagney.