Pencil Finance, a decentralized lending protocol incubated by Animoca Brands, has completed a $1 million student-loan cycle entirely on-chain. The process included raising investor capital, recording repayments, and returning funds with yield.

Education-financing company ErudiFi issued the loans, which Pencil Finance packaged as an on-chain private-credit investment. This allowed funders to supply capital and monitor repayments via blockchain records. The bundle was funded in July 2025 by Animoca Brands, Open Campus, and NewCampus.

The protocol operates on EDU Chain, an Ethereum-based network built using Arbitrum Orbit. ErudiFi deployed most of the bundle through student loans and tuition financing in Southeast Asia, specifically in Indonesia and the Philippines. While ErudiFi supported loans for more than 6,600 students at 118 institutions over 12 months, approximately 1,050 of those received funding directly attributable to Pencil Finance.

Investment structure

Investors were divided into two distinct groups:

• Senior tranche: Offered fixed returns and repayment priority.
• Junior tranche: Offered variable returns and absorbed the first losses from defaults.

ErudiFi reported that across its portfolio, 52% of borrowers are using formal credit for the first time, 93% come from lower-income households, and half of the borrowers are women.

"Education lenders in emerging markets are creditworthy but invisible. Global capital can't verify their performance, so it never reaches them," Frank Li, co-founder of Pencil Finance, said in a statement. "Putting the lending cycle on-chain changes that: every repayment is recorded and auditable by anyone, in real time."