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Zidisha

Peer to peer microfinance in developing markets

Sector: Futurebank
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Zidisha is a non-profit organisation that matches African entrepreneurs with peer to peer loans from around the world, keeping interest rates low by cutting out intermediaries and using simple technology.

zidishaZidisha is the world’s first direct peer-to-peer lending service for disadvantaged individuals in developing countries.  Founded by Julia Kurnia, it stands out for reducing the cost of microfinance by eliminating local intermediary organizations. Starting initially in Senegal, the business connects web-savvy entrepreneurs in the world’s most impoverished regions with the chance to improve their family’s incomes through fairly priced business growth loans.

Kurnia describes her insight: “Entrepreneurs in low-income countries often face a dilemma: their business activities don’t earn enough to support their families, whilst they also lack the investment capital needed to make the businesses grow. Restrictive political and economic conditions and geographic remoteness make it expensive for local banks to lend to small business owners. Many of these borrowers turn to microfinance institutions, but individual business expansion loans usually require prohibitive collateral and interest requirements due to high administrative costs.  So the businesses don’t grow, and the families they support remain impoverished.”

Whilst focused on Africa, and other emerging markets, Zidisha is actually a USA-based non-profit organization where Kurnia previously worked with the US African Development Department. It lets ordinary web users make microloans to individuals in the world’s poorest countries. The loans allow the individuals to start small businesses to help them escape poverty, and once repaid the loan funds are repaid with interest.

“What makes Zidisha unique is that there are no intermediaries.  The borrowers themselves post their loan applications and communicate directly with lenders as their business investments grow”.

Linking entrepreneurs directly with the international peer-to-peer lending market gives them the chance to source business growth capital far more easily and affordably than has ever before been feasible in their locations.  The global average interest rate for microfinance loans is around 40%.  The average rate paid by Zidisha entrepreneurs is around 9% according to Kurnia.

“Africa, Asia and Latin America are home to a growing class of entrepreneurs who, while economically disadvantaged, are computer-savvy 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”.

Kurnia was inspired by her admiration of eBay “for revolutionizing the concept of trust in strangers and building a practical system powered by the new concept of trust”, Wikipedia “for showing the world the heights that can be reached by a community of virtual volunteers”, and Amazon “for pioneering the integration of customer reviews and independent sellers to better serve customer needs”.

Zidisha uses every type of technology to connect the world, fast and at low cost – for local credit history verification, low-cost electronic money transfers, independent tracking of borrower performance history, and to build a community of local entrepreneurs. “In Kenya we use M-Pesa to send loans from our PayPal account directly into the mobile phones of a Masai entrepreneur in the photo, instantly and cheaply.”

Unlike the postings on other microlending platforms, the loan applications and comments posted on Zidisha’s loan pages are written by the borrowers themselves. This opens the way for dialogue between lenders and borrowers, so that lenders can receive answers to their inquiries about the loan and business directly from the entrepreneur they are funding. It builds genuine interest too, For example, a lender who is a dairy farmer in Wisconsin may discuss cattle rearing with a dairy farmer in a small village in Kenya’s Rift Valley Mountain

Pivot points for Zidisha in “changing the game” of business loans include

  • Explore: Insight from previous African development role, spurred her into action
  • Disrupt: Redesigning the market model to eliminate intermediaries, and their costs
  • Design: Simplifying process using basic technologies for developing markets
  • Mobilise: Building a community of real interest, between entrepreneurs and lenders

From Senegal, Zidisha has spread across the entrepreneurial communities of Africa, and now looking to Asia and South America too.

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