Key facts
- Global Financing for Education's 'Pay It Forward' scheme provides students with funding in exchange for 3-10% of their future income for 1-10 years.
- Over 60% of Southeast Asians have outstanding debt, with Malaysia and Vietnam showing the highest levels.
- 37% of Southeast Asian respondents incurred debt to cover cash shortfalls, often due to pandemic-related job losses and reduced incomes.
- Education is highly valued in Southeast Asia, leading many families to incur debt for quality education.
- ErudiFi, which offers tech-enabled education financing solutions, has served over 12,000 students in Indonesia and the Philippines.
- Helicap has facilitated over $100 million in investments to improve financing access for underbanked populations in Southeast Asia.
A Singapore-based education financing program is testing an income-linked funding model to address the growing problem of student debt in Southeast Asia. Global Financing for Education's (GFE) 'Pay It Forward' scheme, launched in September, offers students funding for their education in exchange for a percentage of their subsequent income over a set period.
According to a study by Milieu Insight, over 60% of Southeast Asians carry outstanding debt, with Malaysia and Vietnam showing the highest levels. A significant driver for this indebtedness is the need for immediate funds, with 37% of respondents reporting borrowing to cover cash shortfalls, often exacerbated by the COVID-19 pandemic's impact on jobs and incomes. The desire to purchase property and sustain small and medium-sized enterprises also contributes to rising household debt.
Education is highly valued in the region, prompting many families to take on loans for higher education. However, graduates often face a mismatch between their earnings and their incurred debt, leading to repayment difficulties and long-term financial strain. ErudiFi, a startup offering tech-enabled education financing solutions, has secured a $15 million debt facility from Helicap to provide tuition instalment plans in the Philippines and Indonesia, having already served over 12,000 students. Helicap, a fintech company, has facilitated over $100 million in investments aimed at improving access to financing for underbanked populations in Southeast Asia.