Lendwise chief executive Rishi Zaveri explains how his education finance platform filled a gap in the market
Lendwise launched in 2018 as a peer-to-peer lending platform specialising in education loans. It was founded by Rishi Zaveri, Ioannis Georgiou, Kypros Mouzouros and Evangelos Skianis, all of whom wanted to use their experience working in banking and technology to improve access to education and help people fund graduate studies.
More than four years on, the platform has also launched the first education-backed Innovative Finance ISA (IFISA).
Zaveri explains the role the platform can play to Marc Shoffman.
Marc Shoffman (MS): What have been your highlights since launch?
Rishi Zaveri (RZ): The highlight has been the take-up from the borrower’s perspective, as well as the ability to bring this impact investment category to our lenders who are able to earn a positive return whilst making a real difference to people’s lives through the power of education.
We exist to enable access to education and the rate at which our borrowers have increased has had a great impact. Individuals are able to improve their salary and career progression through education as a method of upskilling or even re-skilling.
The way we have been accepted by borrowers and in educational institutions such as universities and business schools as well as other course providers speaks volumes for our product, proposition and end-to-end delivery.
We couldn’t have that without the investors. This type of investment just isn’t available anywhere else on the retail side where you can invest in educational finance. Providing that access to the retail market has been a great thing, we have had a lot of positive feedback.
MS: How did you spot the education funding gap in the market?
RZ: All of the Lendwise founders had the influence of further education and understood the benefits it brought. Education can address a lot of issues in the world – it is no surprise that it is one of the UN’s sustainability measures. The higher you go in education, the better off you can be from an earnings perspective.
Banks were pulling out of unsecured lending, there wasn’t a product that was dedicated to a student, and furthermore, this type of investment exposure was not available in the retail market.
Read more: Special report on consumer lending
Our investment process is different. We don’t just look at an applicant’s credit score, we also consider a range of education-related variables.
We all have a background in finance and banking but we wanted to do something entrepreneurial as well and to find a way to make an impact. You can solve a lot of the world’s ailments through education.
MS: Who are your typical borrowers?
RZ: We have a big stable of UK borrowers. For certain universities we will look at overseas nationals both in the UK and abroad.
The dynamics of that question are based on where you get government funding and the need to fill any gaps. For example, a graduate diploma in law isn’t an MSC or masters so you can’t get a government loan on that. You also can’t get a second government loan if you want to do another MA after already completing one.
Read more: How Lendwise is putting the S in ESG
It isn’t for us to say who should study what and we aren’t elitist. We are not funding undergraduate courses but we do professional qualifications and short training courses, which are becoming more popular.
These can be expensive, ranging between £5,000 to £10,000, such as bootcamps that train you in areas such as IT and software coding.
MS: Are you worried about dropouts?
RZ: Dropouts happen but we aren’t particularly worried. Our process identifies individuals who are high achievers.
Nobody takes a post grad course unless they want to so you are already ticking the driven box.
MS: How has your loanbook grown this year?
RZ: Our loanbook has already gone beyond the £25m mark. We have some loans that can be as high as £100,000.
We have a strict policy of 90 days in arrears for defaults and have 1.6 per cent of the gross loanbook in default. Of that default number, a larger number are just behind and may still end up repaying.
We find our borrowers are driven and want to repay but people can have problems. Nobody wants to be chasing or be chased so it is about engagement.
MS: Are you worried about the cost of living crisis hitting demand?
RZ: I am not overly concerned but we are mindful of it.
Statistically it can be seen that individuals with postgraduate education earn significantly more over their lifetime.
There is an argument that now is a good time to increase your skills and move ahead in your career to cope with the higher costs.
MS: How have you navigated the pandemic?
RZ: We were very prudent in our approach and weren’t impacted too much.
We allowed payment holidays, especially where courses were delayed, which meant people couldn’t graduate or get a job to repay the loan.
MS: How are you sourcing borrowers?
RZ: Our main areas are referrals – we do well from Trustpilot reviews.
Our delivery end-to-end is something we pay a lot of attention to. We are becoming accepted into the academic community and can be found on noticeboards, in business schools and on university websites. We also have offline routes such as postgraduate fairs.
MS: Are you worried about future Financial Conduct Authority (FCA) regulations?
RZ: My view has always been that we want the right kind of investor on the platform and that is what the FCA is trying to do. We want to avoid the wrong type of investor who doesn’t understand the risks. The sector hasn’t been helped by bad operators but every industry has those who operate below the line.
P2P holds a place in an investment portfolio. The rules should never be so prohibitive that the industry cannot attract investors.
MS: How was the reception to your IFISA launch?
RZ: Our IFISA has been very popular. It’s early days, but uptake has been great.
From a pooled loan exposure on our platform you are making, on average, up to nine per cent returns.
Our platform is slightly different to other consumer loan platforms as you define your own risk pool. Each loan is shown individually and you can create your own portfolio and risk level. If you couple that with the different type of exposure and the impact investment, it is very attractive.
MS: What is your view on Zopa’s and Funding Circle’s P2P exits?
RZ: They left for their own business reasons. If the message that’s gone out is that it is something to do with the P2P lending concept then that’s incorrect.
It was a commercial decision. Only a small amount of Funding Circle’s lending was retail and Zopa was getting its money from retail deposits so it was a natural evolution for them.
P2P lending has a vital role to play.
It’s important for us to make sure we fulfil our mission. We want to enable access to education. As long as we can convince people to do it through retail means then there is no need to go elsewhere.
MS: What are your plans for the year ahead?
RZ: Our plan for this year is to continue to grow, continue to provide market-beating returns and make more people aware of our offering.