Singapore-based fintech startup, EduFi, has successfully raised $6.1 million in a pre-seed funding round. Leading the investment is Zayn VC, along with participation from Palm Drive Capital, Deem Ventures, Q Business, and angel investors. EduFi has developed an AI-powered study now, pay later (SNPL) lending platform and mobile app, aiming to address financial constraints faced by students seeking education.
Key Takeaway
Singapore-based EduFi has raised $6.1 million in a pre-seed funding round, led by Zayn VC, for its AI-powered student loan platform. The startup aims to address the lack of student loan products in Pakistan, where students often resort to high-interest personal loans. EduFi’s goal is to bridge the gap between high school graduation and university admission, providing affordable education to underprivileged students. The funding will be used to expand EduFi’s platform, introduce new fintech products, and reach a wider customer base.
Focusing on Education in Pakistan
EduFi has initially launched its platform in Pakistan, a country where there is currently no dedicated student loan product category. Consequently, many students resort to high-interest personal loans with lengthy approval processes. EduFi aims to tackle two major issues in Pakistan — high poverty levels and low literacy rates — through its fintech platform. In the country, approximately 40% of students attend private schools due to the poor quality of public schools, resulting in an annual expenditure of over $14 billion on education. Additionally, more than 50% of adults lack access to financial services, such as bank accounts and insurance.
The founder and CEO of EduFi, Aleena Nadeem, an MIT graduate with experience at Goldman Sachs and Ventura Capital, witnessed the financial barriers that children face in accessing quality education while working at Progressive Education Network (PEN), a nonprofit organization providing free education to underprivileged children in Pakistan.
Filling the Gap in Higher Education
EduFi’s focus lies in bridging the gap between high school graduation and first-year university admission, as many students struggle financially during this period. The startup has already formed partnerships with 15 universities in Pakistan, allowing its platform to be accessible to approximately 200,000 students pursuing undergraduate, Master’s, and PhD degrees.
To apply for loans through the EduFi app, students or their parents must disclose financial information, such as bank statements from the previous 12 months or proof of income, such as salaried employment, a small business, or freelance work. Once a student loan is approved, EduFi directly transfers the funds to the college’s bank account.
Over the past 18 months, EduFi has conducted beta testing of its credit model against 80,000 consumer finance loans issued by banks. The company claims that its credit scoring system enables student loans to be disbursed within 48 hours of application, a significant improvement over the traditional bank approach that involves high interest rates and a lengthy approval process of three to four weeks. EduFi is expected to receive a license to make loans from the Securities and Exchange Commission Pakistan (SECP) in November, as it continues to refine its product and service based on feedback and data.
Expanding Financial Inclusion
EduFi aims to disrupt the traditional banking approach and offers a digital lending app that provides users with a convenient and straightforward application process, as well as flexible loan terms and conditions. The company’s ultimate goal is to empower aspiring families by relieving them of the financial burden associated with education expenses.
The $6.1 million raised in the pre-seed round will be utilized to reach more customers, optimize the platform, expand to neighboring countries, and introduce other fintech products, including student credit cards. EduFi’s innovative approach is seen as a significant step towards achieving financial inclusion for middle and low-income families in Pakistan, where families spend more than 50% of their income on their children’s education, making it increasingly challenging due to inflationary pressures.
