Manu Smadja, chief executive and co-founder of MPower, said the company, which raised $6 million in equity funding in October from Zephyr Peacock, will also look to raise additional equity financing of $10-20 million around the middle of 2017.
Other investors such as University Ventures, 1776 Ventures, Goal Structured Solutions, VilCap Investments and Fresco Capital also participated in the October round.
“In 2017, we expect to do about 10 times the lending that we did last year. We are aiming for $100 million in overall volume," Smadja said over the phone, adding that the company’s loan book has been growing at a rate of more than 30% month-on-month.
So far, MPower has approved education loans worth $10 million to close to 500 students, with an average ticket size of $18,000.
The company has obtained lending licences in 15 states in the US and is currently working with 145 universities.
Smadja started MPower Financing in 2014, after quitting his previous employer McKinsey and Co. Inc.
He had himself faced problems in financing his higher education in the US around 15 years ago and had heard of similar experiences of students from his alma mater University of Virginia.
“It is a huge social issue and also a big business opportunity. The aim behind starting MPower was to remove financial barriers to higher education," he said.
According to Smadja, international student financing is an underserved market.
“Most big financial institutions are worried about the mainstream in their country. So an American bank such as Wells Fargo will want to focus on Americans going to American schools and Indian banks will want to focus on Indians going to Indian schools," he said.
MPower Financing sees India as a key market for its business and has established an office in Bengaluru to tap the growing interest in Indian students to study in US universities.
“One in four of our customers is from India. Indian students are the fastest growing customer base. Indian students going to the US have grown at 25% year-over-year for the past two years. So that’s a big opportunity," said Smadja.
Apart from being the fastest growing set of students to US, Indian students are also a model group from a financing point of view, he added.
“Eighty per cent of the Indian students going to the US are going at the graduate level, where the employability is higher. Most Indian students are also into very lucrative areas of studies such as business. A lot of these students want to stay and work in the US at least for a few years. They also have strong work ethics and high aspirations," Smadja said.
MPower differentiates itself from other lenders in several ways, some of them being a paperless process, elimination of need for cosigners and collaterals and its credit approval process, which looks beyond credit history.
MPower also helps international students build a credit history in the US, as payments made by students to MPower are reported to the US Credit Bureau.
“One advantage for the students is that we disburse directly through the university at the time the student needs the money and not at the time when the student essentially gets the approval. That way the students are not liable to exchange-rate fluctuation," said Smadja.
Another differentiator of MPower is that it can service and collect internationally.
“We have integrated with global collection agencies so we can collect payments from over 180 countries. Students can pay from their phones, can make payments online with their local banks," he said.
For the near future, the company will continue to focus on the US market, given the size of the opportunity.
“The US is more than one-third of the global market. So, right now, we are 100% focused on the US market. There might be opportunities down the line, but what we have found is that not everything in our model is easily portable," he added.