NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, July 15, 2015

Zidisha is a non-profit startup that acts as an online microlending community connecting lenders with entrepreneurs no matter the distance or disparity. As of right now, Zidisha allows individuals worldwide to lend to tech-savvy entrepreneurs in the slums of Africa and Asia where even a few dollars can go a long way. Over 20,000 people are using Zidisha today. Recently, I spoke with Zidisha founder and CEO Julia Kurnia to learn more about the company.

“We’re riding on a huge, mostly unnoticed trend – young adults in the world’s poorest places are going online and connecting with the global community,” Kurnia said. “And when given the chance, they participate responsibly in web-based marketplaces. Zidisha has no loan officers or physical presence in borrowers’ countries, yet our repayment rate is comparable to that of small business loans in America.”

Unlike earlier microfinancing websites such as Kiva, Zidisha does not use local intermediary banks to manage the loans. Kurnia says that the average interest rate charged for microfinance loans worldwide is about 40% and even charitable loans funded through Kiva are passed on to the end borrower at an average interest rate of 35%. By eliminating intermediaries, Zidisha has been able to reduce cost to the borrower to just 5% of the loan amount. For transparency purposes, Zidisha displays the full cost so you will know how much the entrepreneur will pay for your loan. The entrepreneurs post their own loan proposals, answer questions and share updates regularly.

Young adults in developing countries may have a lack of essential resources, but they do have access to the Internet. And the lack of resources makes them resilient and ambitious. Formal jobs are not available so young adults in developing countries are turning to the Internet for self-employment purposes.

There are many positive stories about how entrepreneurs in developing countries have benefited from using Zidisha. Theresia Kabiti, a teacher and principal at a school in Kenya, used Zidisha to renovate a school and prevent it from flooding in the future to help educate local children. Siaka Traore, a farmer in the desert country of Burkina Faso, was able to buy a set of machines that grinds and presses manioc into a food called attièke — which was previously done manually by women working day and night. And Ndeye Bineta Sarr, a cloth dealer in Senegal, utilized Zidisha to buy an electric sewing machine, rent a boutique workshop and turn a profit that helped send her children to school.

Kurnia came up with the idea for Zidisha on Thanksgiving Day in 2008 when she was on a trip to Niger managing overseas grants on behalf of the U.S. government. Rather than booking an expensive hotel, she decided to stay in a cheap hostel. The cost of the expensive hotel per day was more than what some of the Nigeriens earned in a whole year. When Kurnia was eating porridge at the marketplace, she was immediately surrounded by kids. One of the bigger kids grabbed the leftovers after she was done while the rest of them starved.