What happens when a small business owner in Maasai Mara, Kenya, wants a loan to grow his business? In many cases, restrictive political and economic conditions and geographic remoteness make it expensive for local banks to lend to small business owners like him. Meanwhile, the collateral and interest requirements of microfinance institutions are often too high. As a result, the business owner can’t take out a loan and his business doesn’t grow.
Zidisha.org works to solve this by letting ordinary web users make microloans to entrepreneurs. Once repaid, the loan funds are returned to lenders who can re-lend to a new applicant on the site. What makes Zidisha unique is that there are no intermediaries. Borrowers post loan applications themselves and communicate directly with lenders on a “profile page.” To ensure that borrowers are able to repay their loans, Zidisha only accepts clients with perfect credit histories, which are verified by local microfinance institutions for a small fee. Bypassing intermediaries allows Zidisha to dramatically lower their interest rates. The average Zidisha rate is 7–8 percent, in comparison to the 40 percent average that prevails in the microfinance industry.
Zidisha was launched in late 2009 in Kenya by then 26 year-old Julia Kurnia. She came up with the idea of a peer-to-peer lending platform devoid of intermediaries while working in Senegal. She then spent time in Kenya where she put her idea into action. Most Kenyan borrowers are able to access the Internet at local village schools where they use it to apply for loans and respond to lenders. Kurnia further streamlined the process by allowing borrowers to send and receive funds through the mobile phone banking system M-PESA. This gives borrowers access to credit no matter their geographic location.
David Kamau (left) is one of Zidisha’s Kenyan beneficiaries. To take care of his nine children, he applied for a loan of $260 to purchase additional dairy goats for his herd. Together, lenders from around the world lent him small amounts of money and completed his loan.
Riding off the success in Kenya, Zidisha began operating in Senegal. Within no time, borrowers applied for loans from the capital Dakar to the farmlands of the Casamance. One borrower, Ndèye Niang, primarily works as a spokeswoman for her women’s association. She then began selling fuel-efficient stoves in response to Senegal’s rising gas prices. Ndèye applied for a loan from Zidisha to purchase more stoves and has used the profits to protect her house from the frequent flooding that plagues her neighborhood.
This month, Zidisha has realized its goal of expanding to Burkina Faso and Indonesia. Peace Corps volunteer James Megivern took the lead in outreach in Burkina Faso. Megivern helped borrower Siaka Tou finalize his business plans. Now his loan application to start an auberge at Burkina Faso’s most visited waterfall is live to lenders. In Indonesia, two interns are working to build Zidisha’s borrower base. The first applicant, Dewi Yogasari, has posted an application to grow her accessory kiosk.
Zidisha’s success is also due in part to the help of unpaid college and graduate student interns. Interns are not always in the field, but when they are, they meet with borrowers at their workplace and are invaluable in helping to prevent delinquent payments.
In the past two years, 123 businesses have been funded with $72,790 from over 270 lenders on all six continents. The loan repayment rate to date is 100 percent. The delinquent loan rate in Kenya, where most of the loans are disbursed, is 6.6 percent of the portfolio, which is lower than the country median of 7.7 percent, according to MIX.
But that is not to say the ride has been completely smooth. In Senegal, current political conditions cause power outages that reach up to eight hours a day. This slows down business for those who rely on electric appliances such as sewing machines and refrigerators. Zidisha is responding to this and taking precautionary steps to make sure borrowers are able to repay their loans.
Despite such hardships, Zidisha’s direct lending system has improved the lives of lenders and has bettered the communities of borrowers.
Microfinance risk specialist Daniel Rozas has written that, “Zidisha deserves attention for its own achievement.” These sentiments are echoed by lenders and borrowers alike. Kenyan cyber café owner and Zidisha borrower Benard Murage wrote to his lenders that, “assistance from Zidisha is the best thing that has happened to my business and my entire family.” Meanwhile, a lender from Germany writes that he loans through Zidisha to “do something which really makes sense.”
Founder Kurnia says that Zidisha will have reached its goal once it gives entrepreneurs access to credit “regardless of their geographical location.” This process has been urged on by a young Senegalese borrower who recently wrote to his lenders, “I hope that before long Zidisha will cover Africa, but that depends on [the lenders] lending to us.” Hopefully, Zidisha will not only be able to spread throughout Africa, but worldwide.
Clarissa Perkins is a student at the University of Rochester and is a communications associate for Zidisha.
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