EduFi, a pioneering fintech startup dedicated to providing financial support to economically disadvantaged students pursuing education, has secured $6.1 million in a pre-seed funding round led by Zayn VC. Other key contributors include Palm Drive Capital, Deem Ventures, Q Business, and various angel investors.
Based in Singapore, EduFi has introduced an artificial intelligence-powered “Study Now, Pay Later” (SNPL) lending platform and a corresponding mobile app in Pakistan. Notably, Pakistan lacks dedicated student loan products, forcing individuals to resort to high-interest personal loans with cumbersome procedures. Aleena Nadeem, EduFi’s founder and CEO, revealed this insight to TechCrunch.
The overarching goal of EduFi is to tackle two major challenges in Pakistan – high poverty levels and low literacy rates – through its fintech platform. In Pakistan, approximately 40% of students opt for private schools due to the subpar quality of public schools, resulting in an annual education expenditure exceeding $14 billion. Furthermore, over 50% of the adult population in Pakistan lacks access to essential financial services like bank accounts and insurance.
Aleena Nadeem, an MIT graduate with prior experience at Goldman Sachs and Ventura Capital, personally witnessed the financial struggles faced by many children while working at the Progressive Education Network (PEN) in Pakistan. PEN is a non-profit organization that provides free and quality education to financially challenged children.
EduFi aims to bridge the gap between high school graduation and university admission, injecting much-needed capital into this critical phase. In its two-year existence, the startup has already forged partnerships with 15 universities, making its app available to around 200,000 students covering undergraduate, Master’s, and PhD programs across Pakistan.
When users apply for loans through the EduFi app, the platform requires detailed financial information, such as the applicant’s bank statements from the past 12 months or a sustainable source of income. Upon approval, EduFi disburses the funds directly to the college’s bank. The startup claims that its credit scoring system enables the swift dispersal of student loans within 48 hours of application.
Having successfully navigated an 18-month beta phase, EduFi conducted extensive testing of its credit model against 80,000 consumer finance loans issued by banks. The startup anticipates receiving its license to make loans from the Securities and Exchange Commission Pakistan (SECP) in November.
EduFi challenges the traditional banking approach characterized by high-interest rates, a complex application process, and a prolonged approval period of three to four weeks. In contrast, EduFi’s digital lending app offers users a user-friendly, streamlined process with flexible loan terms and conditions.
EduFi plans to utilize the pre-seed capital to expand its customer base, enhance its platform, venture into neighboring countries, and introduce additional fintech products, including student credit cards. Faisal Aftab, General Partner and Founder at Zayn VC, emphasized the significance of EduFi’s innovative approach in achieving financial inclusion for middle and low-income families in Pakistan, where education expenses often comprise over 50% of family income.