Education-focused startup EduFi has secured $6.1 million in financial commitments in a pre-seed round to make education more affordable and accessible for students in Pakistan through quick disbursal of student loans.
The funding round was led by Zayn VC, with participation from Palm Drive Capital, Deem Ventures, Q Business, and angel investors.
EduFi is an AI-powered platform headquartered in Singapore but operates in Pakistan. The startup enables financially strapped students to secure loans for their education.
Established in 2021, EduFi uses a proprietary credit scoring system to assess students’ academic performance, future earning potential, and additional factors, allowing for the disbursement of student loans within 48 hours after receiving the application.
“This is a product that doesn’t currently exist,” says Aleena Nadeem, CEO and founder of the business, which was launched in 2021. “The only alternative until now for families who need to borrow to pay education costs has been expensive commercial loans.”
The fintech startup collaborates with educational institutions, enabling them to provide students with financial access during course enrollment and fee payment periods. So far, the company has partnered with 15 universities, extending the availability of the mobile app to about 200,000 undergrad, Master’s, and PhD students across Pakistan.
Study now pay later
By collaborating with EduFi, students can break down their semester or annual college fees into monthly fees, a facility that colleges and universities don’t offer, Ms. Nadeem said. EduFi applies an annual equivalent rate of 29% on its loans, offering a substantial cost advantage compared to traditional bank loans, she added. “We think EduFi can be a trigger for change in the lives of people as we lift one of the biggest burdens on aspiring families.”
Lead investor Zayn’s general partner and founder Faisal Aftab commended Nadeem’s vision of creating a profitable business that also drives social good. “This is a significant step towards achieving financial inclusion for middle and low-income families,” Aftab says.
“In Pakistan, families are spending more than half of their income on their children’s education, which has become increasingly challenging due to inflationary pressures. EduFi’s innovative approach will help alleviate this burden and empower families to invest in their children’s future.”
The startup has already received approval for a Securities and Exchange Commission of Pakistan’s license to extend loans. The license is expected to be granted in November.
In Pakistan, approximately 40% of students opt for private schools, driven by the poor quality of public schools. This leads to an annual expenditure of over $14 billion on private education, according to UNESCO data. Additionally, more than 50% of the adult population in Pakistan lacks access to essential financial services like bank accounts and insurance.