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Algorithm use makes student loans viable

ING and UNICEF offered equity-free investments, along with technical and business mentorship for one year under the initiative



Fintech start-up is one of five companies that received equity-free investment and technical and business mentorship under the ‘Fintech for Impact’ program of ING Bank and UNICEF. / Photograph courtesy of ING

When Carmina Bayombong was studying industrial engineering in college, she saw a lot of her peers from low-income families struggle.

They would work part-time jobs on top of their heavy academic workload or drop out due to financial difficulties.

This prompted her and her friend Melissa Dee to set up InvestEd Philippines, a financial technology (fintech) solution that provides loans to qualified students through a proprietary credit rating algorithm.

Starting in 2016 by providing small loans of P12,500 each to 12 students in one university, InvestEd has served 544 students to date.

It offers not only student loans to young people in need but also an education-to-adulthood coaching platform to guide them toward job security and financial freedom.

By showing it can empower people through digital solutions, InvestEd emerged as one of the five early-stage, open-source startups that joined the “Fintech for Impact” initiative of global financial institution ING Bank N.V. and the United Nations Children’s Fund (UNICEF) in 2020.

ING and UNICEF offered equity-free investments, along with technical and business mentorship for one year under the initiative.

Tech-powered lending
Through its AI-powered credit scoring algorithm, InvestEd can predict if an unbanked student will pay their loan or not, even in the absence of credit history and collateral. The algorithm’s success has enabled banking institutions and individuals to invest their money in InvestEd’s student loan program.

The loan products address every stage of college life, including fees around tuition, allowance, laptop, dormitory, project/thesis, internship or on-the-job training, graduation, board exams, and vocational study. They help families avoid the pitfalls of high-interest lending; 21 percent of InvestEd’s investees, for instance, had parents who borrowed from predatory money lenders before they knew of InvestEd.

To date, InvestEd has helped 163 graduates land jobs. Its job placement rate currently averages at 34 days, significantly lower than the 180-day national average.

For InvestEd, giving young people the right environment, values, and skills to master financial, career, and life risk management increases the likelihood of high loan repayment rates.