Zidisha provides low-income entrepreneurs in developing countries with the capital that they need to grow their business. Such entrepreneurs are often locked out of banks. Zidishas cuts out the bank—and all the other middlemen typically associated with small business loans—altogether, thanks mainly to the rise of mobile services that make sending and receiving money as simple as dialing a phone.
Since it was founded in 2009, Zidisha has issued about .5 million worth of loans—15,000 altogether. Zidisha is straight-up philanthropy. And while it’s not the first platform of its kind to offer microloans to entrepreneurs where capital can be hard to come by, Zidisha founder, Julia Kurnia argues that Zidisha’s minimalist approach sets it apart. The system cuts out intermediary banks and loan officers altogether, relying instead on cheap, bare-minimum tech such as cellphone money transfer systems.
“We’ve built a decentralized marketplace that has no offices, no employees or loan officers in borrower countries,” Kurnia told WIRED magazine. “So our only cost is the salaries of a couple engineers, including myself—I program—and the very low costs of money transfer fees and automated SMS services. That’s about it.”
In the mid-2000s, Kurnia was working with another micro-lending nonprofit and saw how high costs could get for the borrowers who sorely needed loans. A big part of the problem, as Kurnia puts it, was actually managing the funds. “Even if we successfully raised capital, we had to hire a loan officer and get an office in order to manage the funds,” she says. The cost of lending, she said, went up to more than a third of the value the loans were making. The ordeal was frustrating.
“We were trying to help people, but the profit margins would be wiped out by the exorbitant interest of managing loans,” she said.
A few years later, Kurnia witnessed what she described as an “explosion” in the use of the Internet in the Kenya, especially among young people. These direct connections, she said, inspired her to figure out how to build a crowdfunding platform where borrowers and lenders could connect as directly as possible.
Kurnia recognized the Internet as a powerful tool. “Borrowers wouldn’t even need us anymore—they could crowdfund directly,” she says. “But no one was giving them the chance.”
The missing piece of the puzzle hit just as Zidisha was coming together: mobile phone payments. “Everyone has a cellphone now, even in the most remote villages,” Kurnia says. “When phone companies offering a way for people to maintain cash balances on their SIM cards, it transformed things.” The technology allowed Zidisha to send small sums cheaply across borders.
Another attractive feature of Zidisha, says Kurnia, is that lenders do not earn interest.
The platform also fosters relationships between lenders and borrowers. “We have retired people in Norway becoming friends with single mothers in Kenya, and exchanging life stories,” Kurnia says. “I think that’s really special, and that attracts lenders.”