Amid an uncertain investment climate, education-backed peer-to-peer loans could be the answer, says Rishi Zaveri, co-founder and chief executive of Lendwise
Education-backed loans could become an increasingly attractive option to peer-to-peer investors, as the impact of the Covid-19 pandemic continues to weigh on traditional P2P markets.
Currently, Lendwise is the only UK-based platform that specialises in P2P student loans, offering competitively priced funding for postgraduate students across the UK. To date, the platform has recorded an average return of eight per cent per annum for its investors – a mix of high-networth-individuals, retail investors and family offices – while allowing students to access the funding they need to further their career prospects.
“I think one of the impacts of Covid-19 might be the fact that people may have to reskill or upskill from where they are so education should be in demand,” says Rishi Zaveri, co-founder and chief executive of Lendwise. “And alongside that you’ve got the competition for jobs, so in many cases it helps to stand out by having a masters degree, MBA or specialist training.
“All of that tells us that education will increase in need. And ultimately, we’ll be a beneficiary of that because the cost of education is high, and there needs to be a way to fund it.”
Lendwise was founded by Ioannis Georgiou and Kypros Mouzouros alongside Zaveri, who spotted a gap in the market. “There wasn’t a private student loan offering which we felt was serving the market correctly, especially for the postgraduate market,” he says.
“If you’re eligible for a government loan you can get just over £11,000, but that just about covers tuition fees if you’re lucky and is well-short of it for some of the higher-ranking universities. So where else do you turn? The banks are not handing out many consumer loans at the moment, or if they do, they expect some collateral. But your average mid- to late-20s postgraduate student is unlikely to have collateral in the form of a property.
“We felt the market was under served. So that’s why Lendwise was formed, looking through the very specific lens of educational finance.”
Zaveri knows that most postgraduate students will not yet have had the opportunity to build up a good credit score, which then excludes them from many mainstream funding channels. But as Zaveri points out: “if you are doing an MBA or a masters, your best earning years are still ahead of you.”
Lendwise analyses each student’s future earnings potential by looking at the course they are doing, where they’re doing it, and the average employment rate amongst a host of other factors.
All of that data is analysed, and the outcomes are applied to each individual borrower and factored into the lending decision. And then there is the social element. Lendwise attracts investors who want to make good returns while investing in the future of the economy by helping to train our future doctors, lawyers, business owners, and engineers.
“I think everyone’s particularly looking to achieve two things – one is diversification of their investments, and the other thing is the social impact,” says Zaveri. “You’re changing someone’s life for the better. That’s what an investor gets – returns, while making a difference.”