Alumni-Based Lending Program for MBA Students to Head to the United States
Prodigy Finance, a London-based company started in 2007 by INSEAD alumni, expects to enter the U.S. business school market later this year with new options for international students who need loans to fund their education, according to a report this week in Bloomberg BusinessWeek.
Last week, the United Kingdom’s Cranfield School of Management signed on to Prodigy’s online community-based loan program, becoming the second in that country and the sixth in Europe to adopt it.
Created by three INSEAD alumni who themselves had trouble securing funding when they were international MBAs, the Prodigy program allows alumni of a particular school to place money in community education bonds that provide loans for students who follow behind them at that school. The loans, which carry an average 8.2 percent interest rate, are competitive with other loan providers in the U.S. and Europe, and students are required to repay them within seven years.
Prodigy’s model uses a “predictive scorecard” to assess a student’s future earning potential, rather than previous income and work history, which traditional banks use. Investors can expect a six percent return on their investment and receive the names and bios of the students they invest in, Cameron Stevens, Prodigy’s chief executive officer and a co-founder of the company, told Bloomberg BW. “It’s a very transparent investment and that concept really resonates with alumni,” Stevens said.
Prodigy’s platform comes at a time when many business schools are in need of just such a solution, the Bloomberg BW article notes. Several prominent loan programs that helped international students finance study at European business schools have dried up, and many business schools in the United States have had a hard time finding options for their international students that don’t require a U.S. co-signer since the end of the CitiAssist loan program in 2008.
“There definitely is a gap out there and the market has not come back,” Kevin Moehn of Moehn Management, a company that works with banks to facilitate student loans, told Bloomberg BW.
Prodigy, which has raised about $25 million in funding for students attending European business schools and hopes to raise $150 million by the end of the year, expects to sign additional European schools in the next few months and enter the U.S. market this June, Stevens told Bloomberg BW. INSEAD, the University of Oxford’s Saïd Business School and Russia’s Skolkovo School of Management are among the schools that have already signed on with Prodigy.
For the complete Bloomberg BusinessWeek article, click here. For more on Prodigy Finance, click here.