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Help me distribute $100,000 to new entrepreneurs in Africa

paulbuchheit.blogspot.com

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Re: Help me distribute $100,000 to new entrepreneurs in Africa

#11

Post by paul »

OoTheNigerian wrote: post #9

Hi Paul, First of all, I would like to commend your worthy contribution to the good work the people at Zidisha are doing. There is something I want to draw to your attention to(searched and did not find your email) I am wondering how to balance the stereotyping to the "African Entrepreneur" while at the same time not forgetting the millions of small scale business owners in Africa. When I first saw the headline, I wa…

Part of what I like so much about YC is that we are open to entrepreneurs from anywhere in the world. In fact, the latest batch has founders from 23 different countries: https://twitter.com/paulg/status/411897120572989440

I think we've had Nigerian founders in the past, and I'd love to see more African entrepreneurs in the program. I believe it benefits everyone to have a more diverse set of perspectives in the batch.

Obviously the big problem for many is getting past the American immigration system. We'd all like to reform that system, but unfortunately those changes take a long time. Maybe some day we'll expand the program to a location that has better international accessibility.

Re: Help me distribute $100,000 to new entrepreneurs in Africa

#12

Post by jkurnia »

David wrote: post #8
jkurnia wrote: post #2

Dear all - I'm Julia, the founder of Zidisha. I'd welcome comments and questions from anyone who would like to learn more about our P2P microlending platform. If you'd like to hear more about my own journey and the experiences that lead to the founding of Zidisha, see http://www.huffingtonpost.com/julia-kurnia/why-i-founded-zid...

In the Huffington Post article, you wrote: "Years of working with NGOs and government aid programs were convincing me that handouts are a dead end, temporarily soothing the acuteness of the injustice but taking donor and recipient down a path of dependence that ultimately makes the international wealth divide even wider." Do you feel that way about a universal basic income? Does your statement only refer to single-re…

Hi David, this is a complex question and I agree with you that a lot depends on the circumstances and details.

My understanding is that many cash transfer programs have had measurable positive economic effects, both when they are targeted and when they are offered to an entire community. And there are obviously situations of humanitarian catastrophe, such as a natural disaster or a famine, where direct distribution of aid is the right answer.

My objection to most handout programs is based on the negative psychological effects I experienced time and again while working with development assistance grants in Africa and Asia. The resources we distributed would certainly result in an economic boost, but they also fundamentally changed the way the recipients saw themselves, and the way we saw them. Handouts caused the recipients to view themselves as dependents whose fortunes were subject to the whims of luck and on pleasing donors, rather than on themselves as drivers of their own lives. When repeated enough, this psychological side effect can be devastating not only for the individual recipient, but for the broader community that has come to depend on the handouts.

The dynamics in microfinance loans are much healthier in my experience - especially in a market-oriented community like Zidisha, where borrowers offer their own loan terms and lenders base their lending decisions on the borrowers' own demonstrated performance with past loans. It feels more like a business partnership than a handout.

Re: Help me distribute $100,000 to new entrepreneurs in Africa

#13

Post by minimax »

jkurnia wrote: post #2

Dear all - I'm Julia, the founder of Zidisha. I'd welcome comments and questions from anyone who would like to learn more about our P2P microlending platform. If you'd like to hear more about my own journey and the experiences that lead to the founding of Zidisha, see http://www.huffingtonpost.com/julia-kurnia/why-i-founded-zid...

On the Zidisha statistics page† it says you have roughly 10% default rate but only 5% average interest rate. So if I make 10 loans of $1000 each, I expect to make $450 in interest and lose $1000 in principal to a default. That is a negative expected return. Why are Zidisha lenders willing to accept such terms? It seems like the interest rates should be higher given the risk of delinquency or default.

†https://www.zidisha.org/index.php?p=43

Re: Help me distribute $100,000 to new entrepreneurs in Africa

#15

Post by lincolnq »

minimax wrote: post #13
jkurnia wrote: post #2

Dear all - I'm Julia, the founder of Zidisha. I'd welcome comments and questions from anyone who would like to learn more about our P2P microlending platform. If you'd like to hear more about my own journey and the experiences that lead to the founding of Zidisha, see http://www.huffingtonpost.com/julia-kurnia/why-i-founded-zid...

On the Zidisha statistics page† it says you have roughly 10% default rate but only 5% average interest rate. So if I make 10 loans of $1000 each, I expect to make $450 in interest and lose $1000 in principal to a default. That is a negative expected return. Why are Zidisha lenders willing to accept such terms? It seems like the interest rates should be higher given the risk of delinquency or default. † https://www.zi…

According to their FAQ [1], Zidisha is a charity, not a place to put your money if you want to get a return.

(It would be interesting to compare social-impact-per-dollar of Zidisha versus, e.g. GiveDirectly [2], one of the best-known ways of doing good in the developing world [3].)

[1]: https://www.zidisha.org/microfinance/faq.html - look for the question "Why does the Zidisha website not track the precise financial returns earned on my loans?"

[2]: http://givedirectly.org/

[3]: http://www.givewell.org/charities/top-charities

Re: Help me distribute $100,000 to new entrepreneurs in Africa

#17

Post by jkurnia »

minimax wrote: post #13
jkurnia wrote: post #2

Dear all - I'm Julia, the founder of Zidisha. I'd welcome comments and questions from anyone who would like to learn more about our P2P microlending platform. If you'd like to hear more about my own journey and the experiences that lead to the founding of Zidisha, see http://www.huffingtonpost.com/julia-kurnia/why-i-founded-zid...

On the Zidisha statistics page† it says you have roughly 10% default rate but only 5% average interest rate. So if I make 10 loans of $1000 each, I expect to make $450 in interest and lose $1000 in principal to a default. That is a negative expected return. Why are Zidisha lenders willing to accept such terms? It seems like the interest rates should be higher given the risk of delinquency or default. † https://www.zi…

Hi minimax, you are correct - if you lent at 5% interest with a 10% default rate, you would lose money.

Note that most borrowers offer interest well above 5%, and lenders are free to fund the loans at or below the offered rate. In my experience, many lenders have opted to fund at low or even zero interest because they wish to offer their selected entrepreneurs low-cost loans, rather than make a profit. The rate paid by the entrepreneur is more important to them than their own rate of return.

We don't interfere in our users' interest rate decisions, other than to limit the maximum interest to no more than 25%. Our platform accommodates all lending philosophies, from those who do not believe in charging interest to those who believe the best way to help entrepreneurs is to structure transactions in a way likely to generate positive financial returns for both lender and borrower.

Re: Help me distribute $100,000 to new entrepreneurs in Africa

#18

Post by janj »

jkurnia wrote: post #2

Dear all - I'm Julia, the founder of Zidisha. I'd welcome comments and questions from anyone who would like to learn more about our P2P microlending platform. If you'd like to hear more about my own journey and the experiences that lead to the founding of Zidisha, see http://www.huffingtonpost.com/julia-kurnia/why-i-founded-zid...

Have you experienced any places or cultures that have not yet adopted a debt based economy? I don't know if any still exist but if so is there any concern for introducing a debt based economy in an area that has so far resisted it? I guess your service wouldn't have much value in an area that doesn't already have a debt based infrastructure in place. Do you have any particular thoughts or opinions about economies based on debt? Can other modals exist?

Re: Help me distribute $100,000 to new entrepreneurs in Africa

#19

Post by btilly »

jkurnia wrote: post #2

Dear all - I'm Julia, the founder of Zidisha. I'd welcome comments and questions from anyone who would like to learn more about our P2P microlending platform. If you'd like to hear more about my own journey and the experiences that lead to the founding of Zidisha, see http://www.huffingtonpost.com/julia-kurnia/why-i-founded-zid...

I have an unrelated question, which you might have strong opinions on or information about.

I just finished reading http://www.amazon.com/exec/obidos/ASIN/0465016154/ which espouses the theory that the root of a lot of problems is that countries set up formal property systems that exclude most of their population, and then fail to capture the contracts that people actually live by. Because of this, people are unable to secure loans because they can't prove to the broader world that "their" property is theirs.

It is a classic, "Here is the problem, fix this and all else gets better" kind of prescription. I'm always suspicious of those.

But as an expert in this area, what do you think of this one? Is it as big an issue as they claim? How much would fixing it help?

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