While conducting fieldwork for a microfinance organization in West Africa in 2006, Zidisha Microfinance founder Julia Kurnia noticed something startling. Loans that were funded at zero interest by well-meaning participants at popular microlending websites were costing the impoverished beneficiaries more than 35% on average in interest and fees. The exorbitant rates were charged by the local intermediary organizations that administered the loans, in order to cover their operating costs.
It is generally assumed that such high interest rates are a necessary cost of making small loans in isolated and impoverished areas. Microlending websites that administer “crowd-funded” loans through local intermediaries assume that the borrowers not only lack the necessary computer skills to communicate with lenders themselves, but also that they cannot be trusted to repay loans without constant visits by loan officers.
Kurnia believed these assumptions were outdated, and to test her theory she founded Zidisha.org, a peer-to-peer microlending platform that turns the traditional approach to microfinance lending on its head. First, there are no intermediaries: instead, the entrepreneurs themselves post loan applications and communicate directly with lenders via facebook-style profile pages. Zidisha does not outsource loan disbursements and repayment collection to local organizations either, but rather uses grassroots technology like mobile banking to conduct financial transactions with borrowers directly. The result? Radical transparency, and lower cost to borrowers than has ever before been possible in the developing world – even though Zidisha.org lenders earn interest as well.
Zidisha is tapping into the growing population of computer-literate, but still economically disadvantaged, small business owners and explosive growth of internet access that have transformed developing countries in recent years. Borrowers log in to Zidisha.org to share business updates with lenders from cheap internet cafés, old laptops donated to local schools, and solar-powered smartphones shared by entire villages.
Today, loans funded through Zidisha.org surpassed the $100,000 mark. Since making their first microloans – to three nomadic herders in Kenya’s remote Masai Mara – in October 2009, Zidisha lenders from around the world have financed 181 small business ventures in Burkina Faso, Indonesia, Kenya and Senegal. Zidisha’s average lender interest rate is 2.96%, and the repayment rate to date is 99.5%.
Zidisha believes in transparency. So ask questions, meet our remarkable entrepreneurs, and become part of the conversation.