Math whizz Anand Kumar, best known for his Super 30 programme that coaches economically underprivileged kids for JEE exam, could have had a very different story. In the '90s, he had received an admission letter from University of Cambridge but couldn’t make it due to poor financial condition. Despite seeking sponsors, he was left high and dry. While Kumar eventually managed to turn his luck around in India, the story does not unfold the same way for everyone. If a foreign university is knocking at the door, the call must be attended to. And, finances should not come in the way.
Meet Leap Finance. Co-founded in mid 2019 by Vaibhav Singh and Arnav Kumar, two IIT Kharagpur graduates, the Bengaluru-based start-up is a one-stop destination for Indian students to fund their overseas education. Prior to its founding, Kumar was the associate vice president at SAIF Partners where he was involved in Unacademy’s Series B funding round. Meanwhile, Singh had a two-year stint with InCred Financial Services and was involved in the disbursement of loans worth Rs.8 billion which helped over 3,000 students move abroad. “Over a million students from India are trying to go abroad every year but, due to financial problems, less than half that number makes it out of the country,” says Singh. With experience in the education and lending sector, the duo set out to build products for this “deeply underserved” category.
They identified two product gaps: First, interest rates offered by traditional financial institutions in India were very high ranging between 12-15%. Second, students were borrowing in Indian rupees instead of the destination market currency, which adds 2-3 percentage points to the overall loan value due to foreign exchange rates. These pain points helped zero in on Leap Finance’s core product, which was sanctioning student loans for graduate education in destination market currency at interest rates of 8-10% only. All this, without providing any collateral as the founders believe “merit and means do not go hand in hand”.
The process is simple – a student who has bagged an admission letter from a foreign university needs to create an account on the platform, provide 10-15 data points that include educational background, certificates, marksheets and voila! A loan offer is made to him/her in real-time. If the student accepts, within 48 hours, the loan sanction letter, which is accepted by global consulates, lands in the student’s mailbox and can be used to get the VISA.
“Our API goes through public data sources and determines outcomes on what kind of jobs and future income the student can bag after the education is complete. This is the underwriting model we use to manage risks,” explains Singh. Currently operating largely in the US market, Leap Finance also opens a US bank account for the student, which ensures that he/she is integrated into the country’s financial ecosystem while still in India. Along with that, students are given a credit card that they can start swiping the moment they land in the US and build a credit history. “After their course is over, they can get favourable terms while applying for insurance, etc. because they can show the credit history that they have built over the past few years,” says Singh.
Coming to the business model, the start-up earns from the interest income and a processing fee of 1-2% on the loan amount. Having raised funding of over Rs.400 million, led by Sequoia Capital, the start-up plans to expand its advisory vertical Leap Scholar — a platform that connects students with India’s top counsellors to help them with choosing the right course in the right university and getting the application process started.
As for Leap Finance, the team plans to expand its operations to the UK, Germany, Australia and Canada by the next academic session. But, tying up with the right banking partners, building a robust tech infrastructure and getting the regulatory compliances in place is a lot of plumbing work. However, Kumar and Singh are up for the challenge. “No Satya Nadellas or Sundar Pichais should be left behind,” they say.