EduFi: AI-Powered Loans Bridge the Higher Education Gap for Pakistani Students

In Pakistan, the dream of higher education often collides with the harsh reality of limited financial resources. Unlike in the United States where student loans are readily available, Pakistani families often face high-interest personal loans, requiring collateral such as land or homes, making college inaccessible for many. According to ICEF Monitor, only about 13% of Pakistani students attend college due to these financial barriers.

EduFi, short for “education finance,” is changing this landscape. Founded by Aleena Nadeem ’16, EduFi offers low-interest student loans to a broader range of Pakistani students. By leveraging an artificial intelligence-based credit scoring system, EduFi qualifies borrowers and pays colleges directly. Students then make monthly payments to EduFi, along with a service fee of 1.4 percent—significantly lower than prevailing market rates.

“The fees for college are extremely unaffordable for the average middle-class person right now,” Nadeem explains. “With our ‘Study Now, Pay Later’ system, we’re breaking that big upfront cost into installments, which makes it more affordable for both existing college students and a new group of people that never thought higher education was possible.”

Incorporated in 2021, EduFi gained regulatory approval and began disbursing loans across Pakistan last year. Within the first six months, the company disbursed over half a million dollars in loans. The success of their inclusive approach is evident, with less than 1 in 10,000 loans going unpaid.

Nadeem believes EduFi’s growth can contribute significantly to Pakistan’s modernization. “We are accepting so many more people that would not have been able to get a bank loan,” Nadeem says. “That gets more people to go to college. The impact of directing cheap and fast credit to the educational sector on a developing country like Pakistan is huge.”

Nadeem’s journey to EduFi began at MIT, where she learned about auctions, risk, and credit. After graduating, she worked in the credit division at Goldman Sachs in London, but her concern for the barriers to higher education in Pakistan persisted.

EduFi’s innovative approach focuses on leveraging technology to streamline the loan qualification process. By using an algorithmic credit scoring system that assesses a borrower’s financial history and working directly with colleges to consider students’ academic performance and payment history, EduFi has made the loan process more efficient and inclusive.

“We are the first movers in student lending and currently hold the largest student loan portfolio in the country,” Nadeem says. “We’re offering extremely subsidized rates to a lot of people. Our rates are way cheaper than the bank alternatives. We still make a profit, but we’re impact-focused, so we make profit through disbursing to a larger number of people rather than increasing the margin per person.”

EduFi received its non-banking financial license in February 2024 and plans to expand to Saudi Arabia. Nadeem envisions EduFi becoming the SoFi of Pakistan and the Middle East, modeled after both SoFi in San Francisco and Grameen Bank in Bangladesh.

“Education is the core pillar from which a country stands,” Nadeem concludes. “You can’t progress as a country without making education as accessible and affordable as possible. EduFi is achieving that by directing capital at what is frankly a starving education sector.”