What happens when a micro-entrepreneur in rural Kenya forty miles away from a town needs a loan to grow his business and in turn support his family? Or when a single mother in Senegal has ambitions to start a business and support her children, but no credit? Or perhaps, when a disabled young man wants to prove himself and help support his family. Their options are typically few, since restrictive political and economic conditions and geographic remoteness make it expensive for local banks to lend to small business owners. To add to that, local microfinance organizations often charge upwards of 40% interest rates.
Zidisha is a peer-to-peer microfinance organization with a internet based platform. It offers a new cheaper and more efficient way for micro-entrepreneurs in Senegal, Kenya, Burkina Faso and Indonesia to receive credit, grow their businesses, and bring their families to a higher earning level. Zidisha’s on-line platform allows ordinary web-users to make small loans to entrepreneurs in developing countries at drastically low rates. The borrowers post their loan applications themselves and communicate directly with lenders through their “profile,” updating lenders as their businesses grow. Avoiding a middleman allows Zidisha’s interest rates to be 8% on average, in comparison with the industry average of 40%. In Kenya, the funds are disbursed through a mobile-phone banking service, and borrowers repay through the service as well. To prevent defaults on loans, borrowers must have successfully repaid loans to local banks or microfinance institutions.
Developing countries are home to a growing class of entrepreneurs who, while economically disadvantaged, are computer-literate and have verifiable credit histories with local microfinance institutions. Zidisha is designed to serve this type of entrepreneur in a way analogous to eBay, which greatly 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.
In July 2011, Zidisha expanded into Burkina Faso and Indonesia after two years in Senegal and Kenya, resulting in 130 businesses financed and a repayment rate of 100%. Zidisha’s entrance into Indonesia has been especially exciting. Various lenders from six continents have already funded the first two Indonesian borrowers’ microbusinesses.
Most impressive is Indonesian Ahmadi Admadi, our first severely disabled lender. A birth defect rendered his arms and legs abnormal. Indonesia is a country where social rights are not yet highly enforced, and an Indonesian, Cornellia Widistuti, who worked with Zidisha and Ahmedi, says, “disabled people are left behind [in Indonesia]…[they] are often perceived like a disease to be avoided…[and] have little or no chance to work in a regular environment.” Ahmadi educates other disabled people in handicraft skills and develops women’s skills as well. Now that he has a loan, he wants to supplement educating disabled people by focusing on his catfish farm. With his own income, he will truly feel like a member of society, and a member of his own family. Not being able to help his parents financially, like his other siblings, has been one of the toughest part of being disabled for Ahmadi.
Zidisha’s loans have empowered countless microentrepreneurs like Ahmadi. Women in Kenya can help their husbands provide for their family, single mothers Senegal are able to pay for their children’s schooling without having to lean on a man. People in all the countries Zidisha operates in have been affected by the low cost loans, and they let lenders know how grateful they are. Many comments end in “Long live Zidisha,” and as one young Senegalese borrower says, “Africa has talented youth with interesting projects, so a big thank you to Julia [the founder] and I hope that before long Zidisha will cover Africa.” Hopefully, as this entrepreneur says, it will not only cover Africa soon, but the entire world, and allow entrepreneurs to finance their dreams no matter their geographical location.