Pencil Finance, incubated by Animoca Brands, has completed a $1 million on-chain student loan cycle, covering the process from raising investor capital to tracking repayments and generating returns.
The educational financing company ErudiFi issued these loans, while Pencil Finance, functioning as a decentralized lending protocol, bundled them into on-chain private credit investments. This enabled fund providers to use the blockchain to record funding and monitor repayments.
Pencil Finance describes this as the first fully on-chain student loan cycle, though this claim has not been independently verified. Animoca Brands, Open Campus, and NewCampus supplied funding for this package in July 2025.
The protocol operates on the EDU chain, an Ethereum-based education-focused network built using Arbitrum Orbit. Pencil Finance was jointly incubated by Animoca Brands and the developer community HackQuest.
ErudiFi deployed most of the package’s funds through student loans and tuition financing in Southeast Asia, including Indonesia and the Philippines. According to the company, the funding provided loans for more than 6,600 students across 118 institutions over 12 months, with about 1,050 students directly receiving funds attributable to Pencil Finance.
Investors are 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.
Based on ErudiFi’s portfolio, half of the borrowers are female, 93% come from low-income families, and 52% are first-time users of formal credit.
“Education borrowers in emerging markets are creditworthy, but invisible. Global capital cannot verify their performance, so capital never reaches them,” said Pencil Finance co-founder Frank Li in a statement. “Putting the loan cycle on-chain changes this: every repayment is recorded and can be audited in real time by anyone. This package builds a public track record, making it easier to finance the next package.”
