In the context of financial inclusion, fintech holds boundless potential. Fintech players, who use software and digital platforms to deliver financial services to consumers, are helping in making financial products and services more attainable than ever.
According to Julia Kurnia, founder and director of peer-to-peer lending platform Zidisha, the proliferation of Internet and communication technology has made it possible to connect people and markets that were previously isolated.
“People need no longer be constrained by their physical location,” Kurnia told Fintechnews. “This means it is no longer inevitable that someone’s physical location should determine his or her opportunities.”
Kurnia founded Zidisha in 2009 after spending several years working for the US African Development Foundation as a portfolio analyst.
In 2006, she co-founded the Senegal Ecovillage Microfinance Fund, one of Kiva‘s first field partners and the world’s first microfinance organization built using capital crowdfunded over the Internet.
Essentially, Zidisha is an online platform that allows people to lend small amounts of money directly to entrepreneurs in developing countries.
Lenders can join the community simply by providing an email address and can contribute as little as a dollar to the fundraising loan projects of their choice via PayPal or credit card.
Loan applicants on the other hand, fill out a form on the website and if they pass the vetting process, they are invited to post their photo, story and first loan application for funding.
Zidisha offers a reserve fund service to compensate lenders if a borrower defaults.
Kurnia said that Kiva was a big inspiration for Zidisha. Both of them are philanthropic, non-profit platforms where lenders around the world can contribute funds for specific microloans. Also, neither platform offers interest to lenders.
“What we’ve learned over the years is that philanthropy is a more attractive incentive for online microlending to combat poverty than profit,” Kurnia said.
“Some of the most successful ‘business models’ in recent years, like Wikipedia and open-source software, were built by volunteers motivated simply by the desire to make a positive difference in the world. And the most meaningful activities in our lives have nothing to do with financial gain.”
But unlike Kiva, Zidisha doesn’t use local intermediary organizations. Instead, borrowers write their loan applications and liaise directly with the lenders.
By cutting out expensive local organizations, Zidisha can avoid charging borrowers the exorbitant interest. On Zidisha, loans cost only a 5% service fee, most of which is used for money transfer charges. In comparison, Kiva partner organizations typically charge borrowers about 35% on average to cover management expenses, and sometimes even more, Kurnia said.
Y Combinator as a non-profit organization
In 2014, Zidisha relaunched as one of the first seven non-profits funded by notorious seed accelerator Y Combinator.
According to Kurnia, the experience was “transformative.”
“Originally, we were much more like a traditional microfinance organization, with a cumbersome vetting process and substantial resources spent on collections efforts for loans in arrears,” Kurnia said.
“Y Combinator helped us develop a much leaner, more scalable lending model, with more of the decisions decentralized to our users so that we could grow while maintaining our low cost structure. We also became a much better tech company, thanks to Y Combinator.”
“These changes set the stage for unprecedented growth; our lending volume tripled in the year following our participation in Y Combinator,” she said.
Today, Zidisha lends in nine countries including Indonesia, Haiti and seven African countries. In Kenya, Ghana, Zambia and Indonesia, Zidisha uses mobile phone-based payment transfer services for loan disbursements and repayments.
Kurnia said the platform has experienced notable growth from Kenya – partly because it is a world leader in mobile payment penetration – and most recently Ghana, which is catching up with Kenya in mobile payments.
Last year, Zidisha helped raised US$2,390,479 in 11,662 projects. Nearly 80% of loans disbursed in the last year are repaid or repaying on time. Its community counts over 52,000 members who are representing 155 countries.
When asked about Zidisha’s long-term goal, Kurnia replied:
“There is massive injustice in the reality that someone who happens to be born in Kenya or Haiti has nowhere near the same opportunities as someone born in a wealthy country like the US or Norway. This injustice has always been present to some extent, but in the past, it was a largely unsolvable problem.
“Our aim is to help build a world where a responsible, ambitious person can access the resources they need to achieve their goals and prosper regardless of their geographic location – a world where one’s fate is determined by one’s own efforts and decisions, not one’s circumstances. We’re incredibly lucky to live at a point in time where this vision is actually becoming achievable.”
Featured image: Bineta, a talented seamstress in Senegal, West Africa, and a member of Zidisha.
