The client
An education lender with a large student-loan book, a significant share of which was classed as high risk.
The challenge
The lender needed to reduce its exposure to the existing book, restart lending to students, cap the risk taken on by new lending and bring in outside investors to fund future loans — all at once. Traditional securitisation was slow and opaque, and investors had no way to see the quality of the individual loans they would be funding.
What we built
We designed a structure that separates the legacy book from the operating business and lets investors price risk loan by loan:
- The existing portfolio is transferred to a special purpose vehicle (SPV), taking problem loans off the operating company’s books and keeping future lending separate from its core business.
- Loans in the SPV are tokenized as education-loan-backed tokens. Each token, or group of tokens, is tagged to its underlying loan using key parameters, so exposure can be traded at token level.
- The SPV runs a security token offering where investors can assess loan quality, price tokens accordingly and buy rights to the loan cash flows.
- New student loans are funded through recurring token offerings.
Token life cycle
- Lenders and investors register and are approved by the platform admin
- The lender registers each loan; the admin approves it
- Tokens equal to each loan’s principal are minted to the lender’s wallet
- The lender groups tokens into a pool or portfolio and lists it for sale
- Investors review pools and bid; a smart contract selects the best bid for the lender to accept
- The contract validates the trade and tokens move against payment confirmed by the custodian (delivery-versus-payment)
- EMI repayment data from the custodian is uploaded to the platform
- Principal and interest are distributed automatically to holders as redeemable tokens, pro-rata
- The SPV pays fiat against redeemed tokens; tokens for repaid or written-off loans are retired
Who does what on the platform
- Lender (asset manager) — registers loans, builds pools, buys and sells portfolios, receives cash against repayments; sees assets digitised, tokens traded and total asset value
- Investor — bids for pools, lists holdings for resale, receives repayment cash flows; sees holdings, payments and history
- Platform admin — approves users and loans, distributes tokens, confirms escrow transfers, enters EMI data and runs distributions
- Custodian — confirms investor payments and receives settlement reports; sees each loan’s current holders and percentages
How success is measured
Success is tracked through capital released from the legacy book, funding raised for new loans, time from listing to settlement, distribution accuracy and servicing cost per loan.
Technology stack
| Ledger | Blockchain ledger with smart contracts |
|---|---|
| Tokens | Asset-backed tokens per loan with fractional holding; redeemable principal and interest tokens |
| Smart contracts | Minting, bid selection, trade validation, delivery-versus-payment, pro-rata distribution, retirement |
| Wallets & escrow | Lender and investor wallets; loan escrow account |
| Marketplace | Pool creation, listing and bidding for primary and secondary trades |
| Application | Role-based web portal for lender, investor, admin and custodian; settlement file upload |
Client identity and commercially sensitive figures are withheld under confidentiality agreements. References can be arranged for qualified prospects under NDA.
