Congratulations to Zidisha for reaching the finalist round for the Echoing Green grant, which provides early seed funding for innovative social enterprises. Echoing Green is known for its ability to discover highly successful models of social change at the early start-up phase. Continue reading
P2P-Banking.com: What is Zidisha about?
Julia Kurnia: Zidisha uses internet and mobile phone technology to connect entrepreneurs in the world’s most isolated, impoverished areas with the international P2P lending market. Zidisha supplies the key services needed to overcome the geographic barrier between lenders and borrowers – local credit history verification, low-cost electronic money transfers, independent tracking of borrower performance history – then gets out of the way and lets lenders and entrepreneurs interact directly. Zidisha’s philosophy is similar to that of eBay, which really advanced the opportunities of small entrepreneurs in the US by supplying a regulated venue in which business growth is limited only by entrepreneurs’ own creativity and track record of responsible conduct.
P2P lending has vast untapped potential to open up better economic opportunities for motivated people in low-income countries. Africa in particular is home to a growing class of entrepreneurs who, while economically disadvantaged, are computer-literate and have verifiable credit histories with local microfinance institutions – all of which can be tapped to supply many of the communication and record-keeping services traditionally performed by local banks and microfinance institutions. Zidisha is designed to serve this type of borrower. In this sense, it is complementary to services such as Kiva and MyC4, which allow more marginalized borrowers without computer access to fund loans via local intermediary microfinance organizations.
P2P-Banking.com: How do African Entrepreneurs react to the possibility of posting a loan application online and getting it funded by strangers?
Julia Kurnia: I think this is best answered by Ms. Ndeye Sarr, a lady in West Africa who single-handedly supports a family of five sewing clothing by hand. She is raising a loan on Zidisha to buy an electronic sewing machine, which will allow her to meet client demand faster and grow her business to where she can support her household comfortably and keep her kids in school through college. Last week Ms. Sarr stopped by a local cybercafé to check on the progress of her loan application and upload some photos of the traditional clothing she produces, and she posted the following comment:
“I have just visited the Zidisha website, and see that the lenders are still continuing to support me, so that I can really start up a proper business activity. I would like to thank all those who are helping to finance my enterprise. I’m so happy to see that people on the other side of the world are willing to lend a hand to those who do not have the resources to earn their own honest living.“ (translated from the original French) Continue reading
Based on her experience in founding SEM Fund, Kiva’s oldest filed partner in Senegal, Julia Kurnia believes there is a vast untapped potential for p2p lending in microfinance.
To tap it she launched Zidisha.org, a non-profit that makes two changes in the process. First: There are no intermediaries. Lenders lend directly to computer literate entrepreneurs in Africa (currently Senegal and Kenya). Second: Only entrepreneurs with a credit history that have in the past paid back a loan by a bank or a financial institution successfully are eligible (this is verified).
Julia Kurnia told P2P-Banking.com:
Lending through local intermediary microfinance organizations creates high costs for borrowers (Kiva borrowers pay an average of 35.25% in interest to Kiva field partners, according to the Kiva website statistics). Outsourcing loan management to local intermediaries also puts P2P platforms at risk of pyramid schemes, in which unscrupulous partners use funds disbursed for new loans to mask embezzlement of repayments due to lenders. Kiva and MyC4 did very well when they operated at small scale, but as time passed and they added large numbers of partners, the cost of controlling intermediary fraud ballooned and may make their models unsustainable at a large scale.
Lenders at Zidisha upload money via Paypal (fees apply) and then can browse listings, written by the entrepreneurs themselves. Lenders do get paid interest, whoever “the principal purpose of Zidisha’s lenders in funding loans is to help finance these entrepreneurs, and not to make a profitable investment.” according to the FAQ. During bidding lenders can underbid each other with the result of the entrepreneur profiting from a sinking interest rate.
I am looking forward to use Zidisha. I plan to publish an interview with Julia Kurnia next week. If you have a question you want asked you are invited to email it to me or post it as comment below.