Entechpreneur: InvestEd

For every five Filipino kids who finish high school, two will be unable to enter college because they can’t afford the tuition and additional miscellaneous expenses like supplies, food, and commute fare.

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For the other three who can afford to enroll, there is still no guarantee that they would make it all the way to their college graduation day. On top of the expected academic and social pressures at that level, each student would also need at least 59 thousand pesos per year to sustain their schooling. As a result, around 600,000 Filipino students drop out of college annually.

Current financial support systems are lacking

For families that earn no more than P95,000 to P190,000 per year, sending one child to college may already be a pipe dream. Sending two or more kids? Practically unimaginable.

While mechanisms to provide financial support for college education exist, they are sorely lacking in their current iterations.

Scholarship programs are perhaps the best-known means to seek financial aid, but they tend to be too competitive. Achievers are favored, leaving middling yet capable students grasping at straws. Even for those who do earn academic scholarships, the grade requirements can prove too challenging, especially when the students need to split their time between their studies and supporting themselves (and their families) through part-time jobs.

Government support is likewise limited. For every peso that a college student needs, state loans can only shoulder eight centavos. Financial institutions like banks and microfinance institutions, meanwhile, tend to be membership-based, or may demand too much from low-income families in terms of credit history, collaterals, and high interest rates. In addition, borrowers are often pressured to pay loans too soon.

A solvable problem

Carmina “Carbs” Bayombong and her peers believe that while providing financial support for under-resourced Filipino students is an urgent problem, it’s a solvable one.

“I used to lead three youth organizations that had large memberships of financially in-need youth,” says Carbs, CEO of InvestEd Philippines. “My job then was to ensure that members succeeded in college, which had a lot to do with finding funding opportunities.”

“It took a lot of effort, even though help was available if you looked hard enough and in the right places. In short, it was a brick-and-mortar process.”

From these seeds of experience grew InvestEd, a FinTech (financial technology) startup that “envisions a Philippine nation wherein all students have the opportunity to earn a college degree.” Driven by a team of young social entrepreneurs, engineers, bankers, and corporate professionals, InvestEd’s technology-enabled solution makes these “right places” more visible and within reach for economically disadvantaged students.

“We want to bridge the gap between [low-income college students] and the Philippine impact investment market,” Carbs adds, explaining that philanthropy and impact investing in the country has huge potential.

“We saw how ripe the market was for our initiative: the Philippines’ philanthropy and impact investing market have a combined present worth of 33.6 billion pesos. We even have the potential to grow regionally, as Southeast Asia also ranks first in impact investing, with education as the top investment choice.”

InvestEd launched in August 2016, hitting the ground running and racking up milestones and accolades almost immediately. Within its first three months, the startup helped finance the education of 12 students, piloting its student loan program in partnership with one of the country’s top universities.

The organization’s efforts would soon gain the attention of social innovation champions. Before the close of 2016, InvestEd won a P1-million grant from Philippine startup incubator and accelerator, the IdeaSpace Foundation, ranking among the top 10 out of 600 startups that applied. More recently, InvestEd earned a spot on the “SE100 Innovations and Social Entrepreneurs” list, put together by global social enterprise platform, Social Enablers, from a selection of 2,500 startups from around the world.

InvestEd also has the support of major corporations like UnionBank, Maynilad, Meralco, and Pepsi Cola.

Innovating student loans

InvestEd’s game-changing model features distinct platforms that facilitate the loan process on both ends—that is, the student’s and lender’s.

The student platform simplifies the process of securing financial assistance for qualified beneficiaries. It covers the whole process—application, screening, disbursement, and repayment—and even includes analytics on student data and machine learning on credit scores.

The process is likewise streamlined for donors—philanthropic individuals, employers, and foundations. (InvestEd stands in as a fund manager for foundation and employer lenders. In addition, the student loan program can be a corporate social responsibility opportunity for employers.) The lending platform provides an intuitive and efficient system for lenders to navigate InvestEd’s database of student borrowers and manage their lending portfolio.

Through InvestEd, students are able to receive financial support from practically anyone, anywhere in the world. This way, more Filipino youth are connected to impact investors, those who have the means—and genuine interest—to make a difference.

By building a student loan program on a technology-enabled platform, InvestEd is able to provide application-to-repayment services at a lower cost compared to those of traditional financing institutions like microfinance organizations. This model also makes loan opportunities more accessible.

Rounding out the innovative approach are targeted development training and career programs packaged as the Investee Program. Through these initiatives InvestEd also develops students’ grit and resiliency in the face of challenges and failure, their ability to collaborate towards productivity, and their financial literacy and propensity for career development. An employment security program, meanwhile, improves the investees’ job prospects—InvestEd’s goal is to help borrower’s secure jobs within three months after graduation or less. Partnering with a network of employers also helps InvestEd facilitate a convenient loan repayment system through an automatic salary deduction system.

Protected investments

InvestEd’s model carves a distinct niche among student loans programs across the country by adding measures that protect the investments of the lenders. Take for instance the attached financial literacy and employment security programs. These well-thought-out inclusions add more incentive for lenders, as they know that their social investments are “future-proofed” and not just one-off donations.

In addition, the loans are facilitated and administered through a carefully calculated process.

For starters, loan opportunities are extended to students already at the latter stages of their college journeys. This is based on research that indicates that students are most at-risk of dropping out in the last two years of college, plus the fact that students at the junior and senior levels are less likely to shift and change their educational paths. For now InvestEd serves only senior students, but as part of its three-year growth plan they will eventually include junior students, as well.

Lenders are also assured that their funds are used properly. As soon as InvestEd receives the full amount required by a borrower, the money is paid directly to the school. Stipends are disbursed once every three weeks throughout a semester to ensure regulated spending.

InvestEd also extends the following lender incentives:

• Per annum interest, which allows lenders to grow their principal loan amount to reinvest for the benefit of more students in the future.
• Site visit and opportunities to meet and interact with the students through scheduled Investee Program sessions.
• Inclusion in InvestEd’s growing philanthropy/impact investing network.

A promising start

Barely a year old, InvestEd is already blazing a trail in the educational financing space—the students benefiting from the inventive approach are seeing the difference:

“Very helpful talaga sa akin personally yung InvestEd kasi nape-prepare ako sa kung ano talaga yung idea paglabas ng school; kapag nandun ka na talaga sa adult world,” shares Abbie, one of the students in InvestEd’s first cohort. She is on her way to an accounting degree.

“Natutunan ko po yung importance ng proper planning at financial well-being. Dati hindi ko po alam kung ano yung mga goals ko hanggang sa pinasulat sa amin kung ano talaga yung dreams namin. Hindi ko rin po alam dati kung paano mag-manage ng finances. So maliban sa studies, yung practical learnings, kung paano magiging financially capable, natutunan ko rin po from InvestEd.”

At the same time, the startup is earning its share of encouraging, positive impressions from the stakeholders it aims to grow with:

“Investing in our country’s youth is investing in our country’s future,” says Eugene Acevedo, UnionBank senior executive vice president and head of Retail Banking & Corporate Banking.  “The returns are far greater than what the markets can provide. Truly, InvestEd is one of the very best ideas launched, and it is our obligation to ensure that it gains altitude.”

In five years’ time, InvestEd aims to directly support 100,000 low-income college students through student loans. In addition, the organization aims to impact the financial and education industry by launching a credit scoring product for students.

Riding its strong initial momentum, InvestEd is primed to spur change beyond its principal intentions. On top of improving college education outcomes, the success of its technology platform promises greater opportunities and applications for the impact investing market.

Want to be an InvestEd lender? Email info@InvestEd.ph to learn how.