This Startup Provides Collateral-Free Loans To Indian Students Studying Abroad
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Studying abroad is still one of the dreams that Indians hold close to their hearts. Sending their children overseas, to get a better education and later get placed with a hefty package, way above what he/she would’ve earned in India, is still a picture that brings tears of joy to both parents as well as the child. India is the second-largest source of international students after China. As per UNESCO, in 2018, of the 5 million international students, 750,000 were from India. From 2000 to 2016, Indians going abroad to study has gone up by 22 per cent.
With all that said, going abroad is not like planning a vacation. It takes years of planning, figuring out colleges, applying for multiple tests and more importantly gathering humongous amounts of funds that are no match to even premium institutes in India, which is a taxing task. To address these tasks and provide a solution under one roof, two IIT alumni built Leap Finance. In an interaction with Entrepreneur India, Vaibhav Singh, co-founder of Leap Finance and Leap Scholar talks about what inspired them to build the startup and whether pandemic has killed the interest in overseas education.
Heading Towards Fintech
Singh after graduating from IIT-Kharagpur, spent the first few years of his career at Deutsche Bank, working across teams and geographies. After returning to India from Sydney he chose to be a part of India’s startup ecosystem with an eye on the fintech space.
After having worked at Capital Float, and then as a founding team at InCred, Singh along with Arnav Kumar (co-founder) figured out a gap that was always there, but nobody bothered. It was a time-consuming process that went behind to process loans to students who want to study overseas. While looking at these problems the duo also realized the importance of other services that help students to further shape their choices while it comes to going abroad.
“While building the educational lending product for international students at my previous company, we helped 3,000+ students secure funding for their study abroad dream. I realised that there was a real need for a truly full-stack solution that meets the requirements of a student aspiring to study abroad,” Singh saidHe continued that the study abroad market is still largely offline, incredibly fragmented, with several providers serving each step of the value chain, which eventually makes the experience very disjointed for students.
“Studying abroad is probably the most important decision that a 22-23-year-old student makes in their lifetime, and the need for a one-stop-shop platform that solves all their problems is still unmet. That’s the vision my co-founder Arnav and I had for Leap - wanting to build a truly digital, all-encompassing community and platform for Indian study abroad aspirants that provided specialised products at every stage,” he added.
Collateral Free Loan
Leap Finance is an overseas education-focused guidance and financing platform founded in 2019 and is headquartered in Bengaluru. The startup offers students loans in dollars based on their future income. The startup at present is disbursing collateral-free loans at an interest rate between 9-11 per cent.
Leap Finance apart from helping with the finance also is building a community where students discuss their plans, ask their questions and find a peer support group as they navigate their study abroad journey.
“Our community of students has very specific needs, and we’ve built out customised products to address those needs - across all our products, we have served over 20,000 students in their study abroad journey,” he claimed.
The startup uses a blend of publicly available and proprietary data, over 300 data points on each student, which allows them to build a unique profile for every student’s credit application, based on several factors including their academic grades, their choice of university and program. The startup then utilizes this information to assess the student’s repayment capabilities and provide the loan.
This enables students from lower financial strata to avail loans. However, the startup did not reveal how it plans to recover bad loans from students.
The startup has been backed by Sequoia Capital India and it recently raised $17 million in a Series A round led by Jungle Ventures.
Shedding light on its competitors, Singh said that at each stage of each product they have competitors like for study abroad admissions counseling, IDP is the biggest player in the market. In terms of educational loans, Singh considers Credila as their competitor.
Pandemic Killed Abroad Study Interest?
The pandemic has brought the world to stand still. It has crushed almost all the plans that people across the world have thought of before 2020. Traditional education converged with technology and delivered online learning. When the international borders were closed and education seemed to have moved permanently, it's an obvious conclusion that the eagerness to study abroad must have subsided for some years to come. Surprisingly, that's not the case with India. According to a survey by iSchoolConnect Inc, 91 per cent of Indian want to study abroad.
Singh said that demand in the study abroad market continues to be strong and the migration of high-potential students from emerging countries to Anglo-Saxon nations is a trend that is just starting.
“We believe it’s here to stay, and while the pandemic may have caused blips in the sector, we have seen that demand from aspirational Indian students continues to remain strong.”
The pandemic has wreaked havoc in businesses across the sector barring few spaces. Ed-tech is among the spaces which saw significant growth as classes moved online.
Singh said that the slight slowdown and deferral of demand in study abroad last year, allowed them to double down on their products and hiring, and lay down a strong foundation. He further added that the shift from offline to online teaching helped them capitalise on their online test prep products.