Pencil Finance Completes First Fully On-Chain Student Loan Cycle

Pencil Finance, incubated by Animoca Brands, has made significant strides in providing student loans through its decentralized lending protocol. The company recently completed a $1 million on-chain student loan cycle, marking what it claims is the first fully on-chain student loan cycle. Pencil Finance partnered with ErudiFi to issue loans to over 6,600 students across 118 institutions in Southeast Asia.

The funding provided by investors from Animoca Brands, Open Campus, and NewCampus was used to deploy most of the package's funds through student loans and tuition financing in Indonesia and the Philippines. This included loans for more than 1,050 students directly receiving funds attributable to Pencil Finance.

According to ErudiFi, half of the borrowers are female, 93% come from low-income families, and 52% are first-time users of formal credit. Investors in Pencil Finance's on-chain private credit investments were divided into senior tranches, which offer fixed returns and priority on repayments, and junior tranches, which provide variable returns and bear the first loss in case of default.

Pencil Finance co-founder Frank Li stated that 'education borrowers in emerging markets are creditworthy, but invisible. Global capital cannot verify their performance, so capital never reaches them.' He added that putting the loan cycle on-chain changes this by recording every repayment in real-time and making it easier to finance future packages.