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Cape Town founder of multi-million dollar lending platform Prodigy Finance Cameron Stevens says the “pro-business” regulation of the UK’s Financial Conduct Authority was key in his decision 10 years ago to set up his platform in London 10 years ago.
Through the platform Prodigy Finance lends to students globally via an Irish Stock Exchange listed bond. Last month the company announced a R3.19-billion fundraise from venture capital firm Index Ventures, with participation from Balderton Capital and AlphaCode and a global investment bank.
South Africa has yet to develop regulation on peer-to-peer lending or equity crowdfunding, while the UK has of late been praised for crafting rules that are fair and balanced.
“The UK’s regulatory framework appealed to us because there is a culture of being innovative and business-friendly without compromising on oversight. This meant that a company like Prodigy Finance doing something for the first time can work with the regulator to be innovative and still build a robust fintech platform,” said Stevens in response to a set of emailed questions.
The UK’s regulatory framework appealed to us because there is a culture of being innovative and business-friendly without compromising on oversight, says Prodigy Finance founder
The company has two other offices in Cape Town and New York. “Our Cape Town office is where we have our operations and technology teams, and in New York the focus is on business development,” said Stevens.
“London was a sensible place to start out given the pro-business regulation of the Financial Conduct Authority, the proximity to partner schools in the UK and Europe, and favourable time zone for international business,” he added.
He said Prodigy Finance’s model is similar to a peer-to-peer lenders’ as it enables investment in people. “It differs from pure P2P players because rather than matching lenders with individual borrowers, our platform enables lenders to invest in students (from a chosen country, or in a chosen school, not individuals) via an Irish Stock Exchange listed bond,” he said.
“Our bonds are open to anyone who believes in the potential of talented international students, including (but not limited to) alumni, family offices, high-net worth individuals, private qualified investors and institutional investors.”
Cameron said the company has previously raised about $17-million in Series A and B equity rounds (including from Balderton Capital), with a further $125-million in debt from Credit Suisse’s impact investment team.
He says the average loan taken out is about $42 000 with loans usually repaid after seven to 10 years. Interest rates vary between university, school and programme, but typically fall between the range of 5 to 8.5% above Libor (the average lending rate UK banks charge one another), he added.
“For many students this is the only option since they don’t have local options in their home country or the country where they are studying. For others this is a significant improvement on domestic bank rates — we also don’t ask for a cosigner, collateral or guarantor,” he said.
He said to date, over 7100 students from 118 countries at business, engineering, law and public policy schools around the world have been provided with more than $325-million in funding.
Featured image: Prodigy Finance founder Cameron Stevens