We have all heard of the crowdsourcing organisations that allow people to do things with the assistance of strangers. Now imagine doing that for someone in a remote African village. A small amount, with a large impact on their quality of life. Blending modern technology with good causes. This is what Zidisha Microfinance does. Heavy Chef chatted to their communications associate, Laura Stanley, about their fascinating venture that links people from across the globe.
Hi Laura. Can you explain how Zidisha works?
Zidisha Microfinance uses Internet and mobile phone technology to connect entrepreneurs in the world’s most isolated, impoverished areas with the international P2P lending market. Africa in particular is home to a growing class of entrepreneurs who, while economically disadvantaged, are computer-literate and have verifiable credit histories with other local microfinance institutions. Zidisha is unique because it provides a direct connection between lenders and borrowers. Unlike other microfinance organizations, we don’t use intermediary banks or loan institutions to disburse loans and collect repayments.
We have client relationship managers, usually college and graduate students from the US and Europe, who relocate to the borrowers’ countries and volunteer their time to liaise and assist borrowers.
To get a loan profile online, an entrepreneur must first apply to have his or her credit history checked by one of Zidisha’s credit reference partners. Any past successful microloan repayment would do. Once verified and approved for borrowing, a desired loan amount is selected. The maximum loan size depends on an applicant’s previous verified credit history of loans repaid to local lenders. He or she will also post a maximum interest rate he or she is willing to pay. Lenders may then place bids to fund portions of the loan at or below the borrower’s proposed interest rate. If the total amount of bids received exceeds the amount requested by the applicant, then only the bids with the lowest offered interest rates are retained. In other words, the bidding process works like a reverse auction, in which loans are funded at the lowest rates that are acceptable to both parties. On average, Zidisha borrowers pays 8% on loans—far lower than any other microfinance organization can offer.
How is peer-to-peer lending different to other business funding organisations?
Zidisha’s peer-to-peer lending is different from other funding organizations because it allows anyone with an Internet connection to act as a direct lender to an economically disadvantaged entrepreneur in another country. The world is smaller than ever, and Zidisha is helping to connect lenders and borrowers across borders.
We are not a bank or an investment broker. Zidisha is a nonprofit organization dedicated to fighting poverty by advancing the business financing opportunities of disadvantaged entrepreneurs.
Compared to other microfinance organizations, we’ve drastically cut costs by taking away the branches, the loan officers, and the institutional funding. Zidisha supplies only the key services needed to overcome the geographic barrier between lenders and borrowers. We provide three basic services. We conduct local credit history verification, facilitate low cost electronic money transfers, and provide independent tracking of borrower performance history (similar to the feeback rating system seen on eBay or Amazon). Otherwise, we are just there to let lenders and entrepreneurs interact directly. If you look at our website, it’s remarkable to see the interactions between our users. For example a dairy farmer from Wisconsin discussing number of livestock with a dairy farmer in Kenya.
When we started, we were the only international peer-to-peer lending service that allowed lenders to interact with borrowers directly. Since proving that this model of microlending works, other organizations have started to use what we’ve done and incorporate direct P2P microfinance into their own models of lending.
We see that many of your staff are distributed across the globe. How do you unite your brand?
Zidisha is actually run completely on a volunteer basis. On this alone is it safe to say that everyone involved in the organization is highly motivated and dedicated to the cause. With such geographic variety, it is absolutely necessary that the client relationship manager in rural Senegal has access to the same information that the director had in the US, or the communications associate in Canada has.
It is important to make sure that there is a central hub. To keep costs down, we utilize free services such as Google sites. This acts as an online wiki that allows all Zidisha staff to access and edit all universally useful information pertaining to Zidisha. For new interns or volunteers, our online Google site is the first point for background reading, specific job guides, and Zidisha policies. This is one of the best ways that we unite the Zidisha team, even while scattered all over the globe. Frequent emails and mobile communications are also a must.
How do you use social media to promote your cause?
We have never needed to advertise our platform to attract new borrowers. In Africa we generally spread through grassroots moments like word of mouth, or through the outreach work of our fantastic client relationship Interns. To attract new lenders worldwide we have come to find that social media is enormously important for our organization.
Zidisha rests on the belief that there should be open communication within the Zidisha community, both between lenders and borrowers, and between Zidisha users and Zidisha staff. That’s why we need to have such a strong online presence. You can’t visit our offices because we don’t have any. But you can find us, and hear back from us pretty quickly, through our online platforms. We have user forums and comment boards on Zidisha.org. We have a communications associate dedicated to managing our Facebook page, Blog, and Twitter account. We’ve also found that Wikipedia is a huge source for our online traffic. We continually keep up with microfinance, media, and development blogs, and are working to strengthen our online presence. It’s certainly been a learning curve, but by keeping an open line of communication between our communications team and director, and constantly trying new things, we’ve been able to start learning what works for our organization and what doesn’t. We have just recently begun toying with the idea of launching a Google+ page, so look for that in the future.
How does mobile influence your company, especially in the emerging markets?
A key criterion in establishing new lending locations is the ability to transfer funds to and from borrowers quickly and cheaply, without outsourcing control of financial transactions to intermediaries. In that respect, Kenya’s M-PESA mobile phone-based payment service has really contributed to Zidisha’s success there; allowing us to transact instantly with clients in even the most remote rural locations.
Mobile phones are one of the foremost ways in which Zidisha loans are distributed in Kenya. This allows a web user in the US to upload twenty dollars via PayPal and have it sent electronically to a small business owner in Olooloimuitia; a remote settlement in Kenya’s Masai Mara game park with no paved roads or electricity other than small generators; or banks for a day’s journey in any direction. A few years ago, none of this would have even been possible. Our director, Julia Kurnia, completely innovated the way in which microfinance organizations can be structured and she found a strategy to blend new technology with traditional microfinance.
As mobile phone banking becomes a commonplace outside Kenya, we intend to make Zidisha available in more countries in Africa, and eventually Asia and Latin America as well.
Keep in mind that Zidisha is designed to serve a particular type of borrower; an entrepreneur who has access to the Internet, and who has established a positive borrowing history. In this sense, it is complementary to services such as Kiva and MyC4, which allow more marginalized borrowers without computer or mobile access to fund loans via local intermediary microfinance organizations.
We will have reached our goal when Zidisha becomes a universally available lending platform, whereby highly motivated entrepreneurs, regardless of geographic location, can access the capital they need to grow their businesses and improve their standards of living, limited only by their own performance and track record of responsible credit repayment.
Thank you for sharing your great cause with us, Laura. It is easy to forget that technology can also do phenomenal things for nonprofit causes and enhance lives that may not have had the opportunity otherwise.