Leap Finance, a fintech platform for overseas Indian students, announced it has raised US$5.5 million in a round led by Sequoia India.
InCred founder and CEO Bhupinder Singh and Cred chief exec Kunal Shah were also among the leading angels that participated in the round, according to a statement.
The reason why these Indian students — or anyone else moving to a different country — have to abide by a higher interest rate is that they don’t have a credit score with any local credit bureau. So for banks and other financial institutions, there is more risk when they engage with foreigners. So they charge more.
An Indian student studying in the U.S., for instance, borrows money at an interest rate over 13%, compared to their local peers who can secure the same amount of credit, if not more, at less than half of that interest rate.
Serving the credit needs of students is a big addressable market in itself. “Indian students make up 25% of a class in many top graduate programs in the U.S. These are smart, hard-working students who got in the best programs and have a great future ahead. Yet, the education loans they avail of are at interest rates twice as high as their American peers,” said Singh.
“This disparity stems from systemic inefficiencies and lack of innovation. We have innovated on multiple dimensions — technology, financial structuring, and risk — to bring down the interest rate and improve customer experience,” he added.
The startup, which currently employs more than two dozen people and is hiring for a number of technology roles, began to disburse loans in recent weeks and said more than 100 students are already benefiting from the service.