Feb. 7, 2010: Microfinance Focus, Incorporated as a peer-to-peer lending service, which enables a direct deal in between loan providers and customers, with no intermediaries, Zidisha is all set to scale P2P fundraising to more recent heights. With a Swahili name suggesting ‘& lsquo; broaden & rsquo;, the organization connects low income business owners of developing countries to lenders around the world and helps them in broadening their businesses and breaking out of poverty. Its distinct funding model which includes no middlemans allows it to lower interest rates sharply and made microfinance even more affordable to the poor. Its average yearly interest rate for the lenders is just 8.78 % as against the double number figures for many of the MFIs.
In an exlcusive interview with Microfinance Focus, Zidisha Director Ms. Julia Kurnia ponders on peer-to-peer microfinance and its development.
Microfinance Focus: What inspired you to go ahead with this task?
Julia Kurnia: Peer-to-peer lending has huge capacity to open up better economic opportunities for determined people in low-income countries. Africa, Asia and Latin America are house to a growing class of entrepreneurs who, while economically disadvantaged, are computer-literate and have proven credit report with regional microfinance institutions – all of which can be tapped to provide many of the interaction and record-keeping services traditionally performed by regional banks and microfinance institutions. Zidisha is designed to serve this type of business owner.
The genesis of Zidisha returns to 2006, when I was operating in Senegal with a field partner of the peer-to-peer microfinance loaning platform Kiva.org. Zidisha” s first loans were paid out in Kenya, where we took advantage of the virtually universal access to the smart phone banking service M-PESA to handle loan transactions through the Web as electronic payments. To our knowledge, Zidisha is the only peer-to-peer loaning service to link individual lenders straight with microfinance borrowers in low-income countries, without middlemans. We make use of Web and smart phone innovation to provide the essential services had to conquer the geographic barrier between loan providers and borrowers –– regional credit history confirmation, low-priced electronic cash transfers, independent tracking of customer efficiency history –– then gets out of the way and lets web users and entrepreneurs communicate directly. As an outcome, entrepreneurs on the planet’& rsquo; s most separated, impoverished locations can access the investment capital they need to grow their companies into substantial sources of income for their families.
Microfinance Focus: How do you prepare to promote your organization in a continent which still has got low levels of IT penetration and you’& rsquo; ll discover the bad to be mainly computer system illiterate? You are not even depending upon any middlemans.
Julia Kurnia: It holds true that just a minority of business owners in Africa meet the computer-literacy requirement required to access Zidisha” s services, but this is nonetheless a huge and rapidly growing minority. We anticipate the population of computer users in developing countries to remain to broaden far more rapidly than Zidisha itself. In the meantime, business owners who do not have access to computers are very well served by regional loan providers, who may raise funds through intermediated peer-to-peer financing platforms such as Kiva or MyC4. Orientation for Zidisha” s preliminary pilot loans is being supplied on a volunteer basis by local microfinance and non-profit employees in Kenya and Senegal. Going forward, we anticipate promotion amongst customers to be primarily by word of mouth, as existing clients can best advise our service and discuss to brand-new applicants how Zidisha works.
Microfinance Focus: Isn’& rsquo; t screening your prospective borrowers a tough job given limited and often undependable sources of creditworthiness?
Julia Kurnia: Direct peer-to-peer financing platforms in the United States and Europe count on standardized credit scores to evaluate the credit-worthiness of applicants. Zidisha makes up for the absence of official credit history in African countries by requiring customers to have successfully paid back loans to regional banks or microfinance organizations, and having their self-reported credit histories independently verified by a trusted personal credit bureau or banks prior to the customer” s can make an application for a bad credit business loan. The regional loan payment record then ends up being the basis for the customer” s”feedback rating””, a system much like that made use of by company platforms such as eBay and Amazon, where each Zidisha loan provider is welcomed to post a comment and approval score upon conclusion of a loan, and customers with high, positive feedback scores find it easier to raise bigger quantities at lower rate of interest in the future.
Microfinance Focus: What are your advertising prepare for approaching the lenders?
Julia Kurnia: We are currently focused on building a great product, by boosting the site in response to user feedback and developing a strong performance history of effective loans. We hope that lenders whose experience with Zidisha is favorable will remain to utilize our service, and recommend it to others.
Microfinance Focus: P2P Fundraising has been around the corner for some time now for different functions. How responsive the online neighborhood will be towards this idea of ‘& lsquo; Microfinance
& rsquo;? Julia Kurnia: Services such as Kiva have actually done a lot to establish the credibility of nonprofit P2P microfinance financing. People have a natural desire to aid others in such a way that connects them on an individual level. Zidisha” s innnovation is to put individual web users in touch with individual business owners directly, so loan providers can really see on their own how lives are changed by their actions. We anticipate this possibility to appeal strongly to web users, specifically those with an interest in other nations who do not have the opportunity to travel
Microfinance Focus: You are targeting individual borrowers and not Self-Help Groups or MFIs, which could have offered you, ensured returns. Exactly what is the underlying reason for that?
Julia Kurnia: Zidisha relies on individual obligation and incentivizes establishment of favorable track records by customers – a model that is best applied to individuals rather than groups or organizations, whose composition might change gradually. In addition, regional microfinance organizations currently tend to focus their services on self-help groups, while business development loans for individuals are frequently less readily offered.
Microfinance Focus: Exactly what obstacles you dealt with in the process of crystallizing this project?
Julia Kurnia: Setting up a quick, low-priced system for moving loan funds between individual lenders and borrowers was a major challenge. Up up until recently there was no feasible way to transfer small loan amounts straight between African borrowers and international lenders without a regional intermediary. This ended up being possible for the very first time when Kenya launched its mobile phone-based cash transfer service, M-PESA, which permits Kenyans to send money making use of cell phone text messages. Zidisha partners with M-PESA for domestic cash transfers in Kenya, so that customers get loan disbursements by means of safe SMS messages to their cellular phone, which they exchange for money from the regional M-PESA outlet. They send their repayment installations back to Zidisha’& rsquo; s account through M-PESA also, so that there is no have to outsource loan funds management to regional middlemans. Extra obstacles included ensuring that our service was compliant with United States securities regulations, and proving the viability of the principle with a privately funded set of test loans prior to opening the site to loan providers from the general public.
Microfinance Focus: What future prospects do you see for ZIDISHA?
Julia Kurnia: As mobile phone banking ends up being prevalent outside Kenya, we plan to make Zidisha available in more countries in Africa, and eventually Asia and Latin America. Zidisha is developed to operate at scale, and we aim to help with a high volume of loaning on the platform while maintaining adequate incentives for responsible use by loan providers and customers. We are a not-for-profit company, and our main purpose is to help with win-win deals in between lenders and customers in a manner that advances the economic opportunities of extremely motivated entrepreneurs in impoverished locations. We will certainly have reached our goal when Zidisha develops into a commonly readily available ladder to success for any deserving entrepreneur, regardless of geographic place.
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