Peer to Peer Microlending With Zidisha

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The peer to peer lending model has been around even before Lending Club and Prosper joined the scene in the US. This type of peer to peer lending, often called micro finance is what the general public is most aware of when you talk about p2p lending.  The first company, Kiva launched in 2005 to provide micro loans across the world, but since then a new company has emerged looking to further develop the micro finance model.

Zidisha was originally inspired by Kiva.org who popularized the concept of philanthropy through a peer to peer model. Zidisha, like Kiva is a non-profit micro finance company that launched in 2009. They launched believing that they could improve on the traditional model due to the increase of technology in developing countries in recent years. I spoke to Julia Kurnia, Founder of Zidisha to learn more about the platform and how they are helping borrowers access credit worldwide.

Zidisha’s platform facilitates loans to those in developing countries, but their differentiator is that they don’t use bank intermediaries. Julia stated that the benefits of this are twofold. By cutting out the bank intermediary, borrowers and investors can connect and interact directly. An investor can directly message the people that they have lent money to, leading to a closer relationship between borrowers and lenders if desired. This model also lowers the cost of borrowing significantly. Julia stated that it is common for interest rates to be in the 35% range on Kiva and other micro finance providers due to the bank intermediaries. On Zidisha, borrowers simply pay a 5% service fee and potentially a security deposit depending on loan size.

This model of directly connecting investors and borrowers wasn’t possible in 2005 due to the limited access to the internet in the countries that Zidisha now operates in. Julia noted that today even poor people can go to cyber cafes to access the internet. Borrowers come to Zidisha in two ways. They can come to the website directly or they can come via volunteer mentors. Volunteer mentors can refer up to 50 borrowers and consists of borrowers who have successfully repaid their loan. As a benefit, the mentor receives a small credit limit bonus and also has the opportunity to increase their credit limit faster than other borrowers. Julia noted that there is a community spirit behind this model and these incentives serve as more of a “thank you” than a motivator. The mentor serves as a point of contact that speaks the native language and also adds credibility to Zidisha as a way to access credit to other local borrowers.

Zidisha is currently open to 9 countries, 7 in Africa as well as Indonesia and Haiti. Julia said the borrower application process is similar to that of filling out a Facebook profile, but is a little bit more extensive. Every borrower provides 7 people as references who are contacted via text message. Using this approach, Zidisha can actually build a social graph to see whether those connected to the borrower have taken out a loan with Zidisha. Loans start at $10, with no fee and no deposit. Borrowers can also choose a loan amount between $50-$150 by putting down a security deposit which can be withdrawn any time the borrower doesn’t have an outstanding loan. As borrowers continue to repay loans and prove their propensity to repay, Zidisha will gradually increase the amount credit a borrower has access to. The borrowers tend to be in their twenties since borrowers this age are more tech-savvy.

The repayment schedule is designed by the borrower and there is no financial penalty to extend the loan term. Most borrowers however pay quickly since doing so will allow them to access larger loans in the future. The platform has seen a 80% repayment rate, which doesn’t include refunds from the security deposits held on defaults. Zidisha has facilitated $4.5 million in loans over the last 5 years. They have 45,000 users, of which are made up by 16,000 lenders and 29,000 borrowers. The lenders who invest receive principal only payments from the borrowers which can be recycled to other borrowers on the Zidisha platform.

The peer to peer lending model lends itself well as a way to provide access to credit across the world. We’ve seen this with Kiva and now with Zidisha. Looking at Zidisha projects you’ll see that a small amount of money can make a big difference for people in developing countries. Those who like to see the direct results of donations and want to give back in a unique way may want to consider lending on Zidisha.

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lascott
lascott
Jan. 13, 2016 10:48 pm

Great article and explanations. I am a fan Zidisha and have been using them over a year. Moved there from Kiva. Like the more direct connection. I mainly do loans for farming or livestock. To me feels like your are making a bigger difference. They also have an “Receive advance repayment” option where they will give you back your principle if the loans is going late. I’ve used this to then give out money to another person.

Ryan Lichtenwald
Ryan Lichtenwald
Jan. 13, 2016 10:53 pm
Reply to  lascott

Great to hear you’ve had a positive experience with the platform. It seems much more powerful to see directly how your money is helping someone.

Peter Eagle
Peter Eagle
Jan. 17, 2016 12:42 am
Reply to  lascott

The Advance Payment option is sold as a way of preserving lender capital. However, some believe the purpose of the advance repayment is to increase Zidisha capital. When Julia encoutages lenders to take that option, it actual transfers capital from the lender to Zidisha, increasing Zidisha’s value at the expense of the lender.

This is far from an honest way to do things.

Julia Kurnia
Jan. 18, 2016 8:46 am
Reply to  Peter Eagle

Hi Peter,

I’m Julia, director of Zidisha, and would like to respond to your comment.

I do not understand what you mean by capital being transferred from the lender to Zidisha, and would welcome further clarification.

When a lender opts to receive advance repayment, capital is transferred from Zidisha’s reserve fund (the Members Loan Fund) to the lender’s account, in the full amount the lender had paid to fund that loan, minus any repayments the lender has already received. The advance repayment funds are treated in the same way as any other funds in the lender’s account: they may be used to fund another loan, or they may be withdrawn as cash.

The purpose of the advance repayment option is to help lenders preserve the value of their lending funds over time, in the absence of interest. Zidisha holds the Members Loan Fund in trust for our members, and no part of this fund goes to Zidisha organization.

Gladys Wangeshi
Gladys Wangeshi
Mar. 1, 2017 7:51 am
Reply to  Julia Kurnia

Hi am gladyswangeshi l apply aloan and you aproved my loan but l cant remember my password

Laurie
Laurie
Jan. 15, 2016 4:02 pm

Re: “I am a fan of Zidisha and have been using them over a year. Moved there from Kiva. Like the more direct connection. I mainly do loans for farming… feels like you are making a… difference. They also have an “Receive advance repayment” option where they will give you back your principal if the loans is going late. I’ve used this to then give out money to another person.” DITTO, although not for over a year, but for almost exactly one year, so far. 🙂 I mainly do loans for organic vegetable farming and for university tuition & fees.

Tess West
Tess West
Jan. 23, 2016 11:47 pm

Hi. I have been following and researching Zidisha for a few months now, trying to understand whether it delivers benefits or not. I believe, from wider reading, that the jury is still out on the efficacy of microfinance. I am also not sure that there is a better or worse model. The Kiva model obviously has it’s supporters as does the Zidisha one. What I would say however, is that there has not been significant development in the way Zidisha communicates about itself. The story you wrote is the same as the Founding story essentially from 2012 and it was repeated last year in the Huffington Post, in TechCrunch and YouTube without development or significant change. There are always lessons learnt from engaging in business activity. This relentless repetition of the same ideas over time does not engender confidence. Rather it suggests a model that is not responsive or evolving. I liked the idea of Zidisha originally but I am much less captivated now.

Oluseun
Oluseun
Feb. 2, 2016 11:45 pm

Does Zidisha consider Nigerians? I am very interested in this P2P lender

Ryan Lichtenwald
Ryan Lichtenwald
Feb. 3, 2016 8:27 am
Reply to  Oluseun

Zidisha is currently available to residents of Burkina Faso, Ghana, Guinea, Haiti, Indonesia, Kenya, Niger, Senegal and Zambia.

Gladys Wangeshi
Gladys Wangeshi
Mar. 3, 2017 2:32 am

Hi am gladyswangeshi l apply aloan and you aproved my loan but l cant remember my password

Elizabeth N . Onyango
Elizabeth N . Onyango
Sep. 23, 2017 5:16 am

How ca I join Zidisha