The further education market is growing apace, and it should come as no surprise that the associated student loan business is capturing major investor interest.
Launched in 2007, the U.K.-based startup Prodigy Finance recently secured $750 million in financing from North American investment giants, helping it to offer more loans to foreign student borrowers who are underserved by traditional lenders and typically require a co-signer or credit history to qualify for a loan in their country of study.
The funding round was led by Canadian private equity fund CPP Investments, which has pledged up to $500 million in financing, while the U.S. government’s development finance institution (DFC) has committed another $250 million facility covering loan grants to female students and those from lower-income countries.
“This $750 million raise, which is one of the largest of the year for a U.K.-based firm and more than we’ve raised in 10 years of being in business, showcases the levels of trust and faith in our business model that our investors have in us,” Prodigy Finance founder Cameron Stevens reportedly told the Evening Standard.
Read more: Prodigy Finance Raises $240M for US Expansion
The loan startup previously raised $240 million in 2017 and already has the backing of the U.K. government via the Chancellor’s Future Fund, which has invested more than £1 billion (the equivalent of about $1.58 billion) in startups to date, and holds stakes in over 150 of them.
The private student lender operates a “future earning potential” credit model, and has provided over $1 billion in loans to more than 20,000 students from over 100 countries, studying at some of the highest-ranked institutions in the world, including Harvard, Oxford, Columbia and the Wharton School.
Trailing the Footsteps of SoFi?
The huge investment in Prodigy may be putting the company on a path similar to the one that Social Finance — more commonly known as SoFi — has recently taken, going from a student loan provider when it launched in 2011 to a digital bank offering traditional banking products and services, such as checking, credit cards, and home and auto loans. The firm currently boasts more than 2.6 million members, $50 billion in funded loans and over $22 billion in paid-off debt.
Read more: SoFi-Social Capital Merger Will Fuel Growth of One-Stop-Shop Financial Supermarket
In May of this year, PYMNTS wrote that SoFi merged with a special-purpose acquisition company (SPAC) known as Social Capital Hedosophia Holdings in an $8.6 billion deal. It soon after went public, raising $2.4 billion when it began trading on the Nasdaq in June.
Related news: Financial Services Platform SoFi Plans IPO via SPAC
The San Francisco-based FinTech, now SoFi Technologies, is now a one-stop-shop for digital financial services for former student clients who have since secured roles.
Last year, the company acquired payments firm Galileo in a deal valued at over $1 billion, and expanded outside the United States for the first time with the acquisition of Hong Kong investment app 8 Securities.
Also see: SoFi Spends $1.2B to Buy FinTech Galileo
And similar to SoFi Technologies, Prodigy Finance could be towing the same path with the announcement that the new cash injection will be used to expand into key markets including China, South Korea and Singapore.
You might also like: SoFi IPO Underscores the Rise of the Purpose-Built Bank
Zimbabwean national Diana Nleya said the lender was one of the “only two options” she had when she arrived in the U.S. to pursue an MBA at Columbia University in New York.
And she is of the view that the firm “has the intrinsics to be a digital lender” given its loan repayment history and large books, “and the fact that a good portion of their customers probably still struggle to get access to credit [while] working in foreign countries,” said Nleya, who has since secured a role as an associate in McKinsey’s New York office.
In July, the neobank moved into the fixed-income market, issuing a $288 million investment-grade student loan asset-backed security backed by its loan portfolio.
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