US based non-profit Vittana.org wants to use the power of p2p lending to bring student loans to the developing world.
It works like Kiva. For as little as 25 US$ a lender can hellp to fund a loan. Vittana partners with local MFIs who evaluate students for past academic achievement, commitment to success, and ability to repay.
All 3 listed loans in Paraguay are already fully funded, but I intend to fund loans as soon as new loan applications are listed.
TuitionU.com, a wholly owned subsidiary of Cology Inc., today announced the acquisition of GreenNote (see earlier description), a p2p lending service for student loans. The agreement enables TuitionU.com to add peer-to-peer lending technology to its student loan options. TuitionU says not-for-profit credit unions that are currently featured will be joined in the future by foundations, charities, corporations and other community lenders to further enhance the network.
Prodigy Finance has an elitist approach. Only MBA students of selected schools are eligible as borrowers:
We have built our model with the specific profiles of top international MBAs in mind. Our close partnerships with the schools means that we are able to approve the vast majority of applications and are able to lend to participants from most countries (…). Provided you are accepted at one of our partner schools, it is very likely that we will be able to approve your loan in principle. However at this stage it is important to remember that we are still in pilot stage and thus our ability to provide funding is limited by the size of the funding pool that we have.
But that’s not all. Lenders are required to be alumni of the school, too. Minimum investment amount is 10,000 Euro. Loan term is 7 years with a 16 to 18 month grace period. Interest rates are tied to the underlying base rate.
Currently only borrowers and lenders from INSEAD are accepted.
The interesting part is that Prodigy Finance aims for cross-border, multi-currency lending:
The currency of the loan balance is determined by the currency in which tuition fees for the university are paid. If you are only lending to one university, your funds will be held in that currency alone. If you choose to spread your funds to other universities, we will convert your funds at the best available rate (and with your consent).
Prodigy Finance was founded by Cameron Stevens (CEO), Ryan Steele (COO) and Miha Zerko (CTO).
Q: Is there any collateral for the loan? Does the student go through a credit check?
No collateral is provided. This is an unsecured loan. And there is no credit check for the student. You are making this loan because you are helping your student and believe in his or her potential. It’s an investment in someone’s future. At the same time, this is not a handout and you will receive a return on your money.
However, as with any loan, there are risks involved. GreenNote cannot guarantee the repayment of any loan. If a student is unable to repay the loan and defaults after leaving school, GreenNote will provide collections services. We will report delinquencies to credit agencies, which will impact the student’s ability to get credit in the future.
The terms sound certainly attractive for students, especially for those with a low or no credit grade. Students can defer payments while in school:
Payments begin six months after the student finishes (or leaves) school. The student can also defer payments for the entire time he or she is enrolled in school, for up to a maximum of five years.
Student then have 10 years to pay back the loan. They can pay it back early any time without a penalty.
Whether this model appeals to lenders remains to be shown. A slogan on the site says: "Help students you know" – so Greennote is targeting relatives and friends who lend to students.
According to TechCrunch, Greennote raised 4.2 million US$ venture capital from Menlo Ventures and Glenbrook Partners last year.
Zopa plans to launch a student loan feature in July. Students can already use peer-to-peer lending sites to apply for a personal loan. At Prosper.com, education loans account for less then 2% of its 135 million US$ in loans. (Sources: Smartmoney, WSJ)