Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

paulbuchheit.blogspot.com

Post reply on HN
Print view View original

51–60 of 90 posts

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

#51

Post by jkurnia »

lukasm wrote: post #44

Loans are way much better form of helping, but investing with a partnership and advisors is a better option. Money is the key ingredient, but the some ventures do require lot of knowledge. Are loans preferred due to regulatory issues? How do you overcome "This is just money from rich western guys to dump the guilt" mentality? Are you going to build alumni network in similar vein to YC?

Hi lukasm, an online investment / advising service that bridged the international wealth divide would add immense value. We did not attempt it at Zidisha due to the difficulties in monitoring and policing such a system at scale.

Most of our borrowers seem to feel a strong obligation to repay their lenders despite the disparity in wealth and culture. Maybe this is because they see the lenders as individuals like them.

Our members, borrowers and lenders, communicate with each other regularly through the website, and sometimes meet in person as well - for example, Zidisha members in Nakuru, Kenya, held a conference last week. It would be interesting to try to develop that into a network more focused on sharing advice and help, like YC.

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

#52

Post by phantom_oracle »

jkurnia wrote: post #32
phantom_oracle wrote: post #29

Interest is the worst thing you can use in a continent like Africa. Why didn't you guys opt for the profit-sharing philosophy? Contract laws in some countries can turn some entrepreneurs insolvent because of interest, but profit-sharing won't have such a devastating impact. I'd help, but not under compound interest restrictions.

Hi phantom_oracle, we've investigated profit-sharing models, and consulted with some experts in Islamic microfinance about the feasibility of implementing a profit-sharing form of financing for Zidisha. This was attractive to us because it addresses the unfairness of being left to repay a debt when one's business investment has failed. We did not end up introducing profit-sharing at Zidisha because even in consultati…

>Zidisha is purely an online service, without local loan officers, and our understanding is that applications of profit-sharing models to microfinance rely on extensive personal monitoring of the funded businesses.

Based on this, I would think that giving entrepreneurs money isn't the only way to help them become successful. Most successful startups in the US(especially SV) rely on much more than just money to be successful. Those "old boy" networks, mentors, etc. all play a big role in building successful companies. So why not give stranded African entrepreneurs the same opportunity?

I'd be more than happy to make out a profit-sharing loan and nurture an entrepreneur who hasn't had the luxury to get an advanced education in some field.

Perhaps money isn't all they need...

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

#53

Post by GFK_of_xmaspast »

jkurnia wrote: post #41
rdl wrote: post #40

I love the idea, but I have one concern, which may or may not be real. I think 5% is below market rate for what you are doing. By establishing 5% as the rate, you crowd out any local investment options which would need to charge above 5% (but not 60%). By making the subsidy non explicit, you make it even harder for local lenders to compete. I don't know what a market rate for this kind of loan would be, but in the US…

Hi rdl, the question of which interest rate will result in the best social impact is one of the most frequently debated topics among Zidisha users. We allow borrowers to offer any interest rate they wish, up to a maximum of 25%. Lenders are then free to fund the loans at any rate up to the maximum offered by the borrower. Many lenders opt to fund loan applications at well below the offered rate, resulting in an overa…

25% is still pretty usurious.

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

#54

Post by jkurnia »

kanamekun wrote: post #47
jkurnia wrote: post #37

Earlier quoted context omitted.

Hi nowarninglabel, I did publish a post last week comparing our service with Kiva Zip: http://www.huffingtonpost.com/julia-kurnia/zidisha-vs-kiva-z... I wrote this to provide greater clarity to our users and the public, who frequently asked how our services were different. Some readers had the impression that the post was meant to attack Kiva Zip. That was not my intention. In fact, Kiva Zip and Zidisha have helped e…

Was just reading up on Kiva and Zidisha on Wikipedia, and noticed this on the Kiva talk page. Looks like someone at Zidisha (from a Mountain View IP) edited Kiva's Wikipedia page to add criticism of Kiva and plug Zidisha. Is this part of the "help" you're referring to above? Removed the lengthy section spotlighting a known competing organization, Zidisha from the interest rates section. The information is consistent…

Hi kanamekun, thanks for bringing up the point about Zidisha being a competing organization with Kiva. Do you think it would be better for readers if they were not aware of Zidisha as an alternative way of addressing the high interest rates charged by Kiva partners?

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

#55

Post by kanamekun »

jkurnia wrote: post #54
kanamekun wrote: post #47

Earlier quoted context omitted.

Was just reading up on Kiva and Zidisha on Wikipedia, and noticed this on the Kiva talk page. Looks like someone at Zidisha (from a Mountain View IP) edited Kiva's Wikipedia page to add criticism of Kiva and plug Zidisha. Is this part of the "help" you're referring to above? Removed the lengthy section spotlighting a known competing organization, Zidisha from the interest rates section. The information is consistent…

Hi kanamekun, thanks for bringing up the point about Zidisha being a competing organization with Kiva. Do you think it would be better for readers if they were not aware of Zidisha as an alternative way of addressing the high interest rates charged by Kiva partners?

That's not how Wikipedia works. Everyone always thinks that readers should be made aware of their own service, so they're constantly editing promotional info into various pages.

At the very least, you should always disclose your affiliation with Zidisha when making edits:

>

http://en.wikipedia.org/wiki/Wikipedia:Conflict_of_interest

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

#56

Post by jkurnia »

GFK_of_xmaspast wrote: post #53
jkurnia wrote: post #41

Earlier quoted context omitted.

Hi rdl, the question of which interest rate will result in the best social impact is one of the most frequently debated topics among Zidisha users. We allow borrowers to offer any interest rate they wish, up to a maximum of 25%. Lenders are then free to fund the loans at any rate up to the maximum offered by the borrower. Many lenders opt to fund loan applications at well below the offered rate, resulting in an overa…

25% is still pretty usurious.

I think many people would feel the same way. We usually see 25% rates offered for small loans for new members, which are only held for a short time. For example, a new borrower may request $50 at 25% interest and hold it for one month, and total interest payments would be $1.04. Even then many lenders normally opt to fund the loan at less than the rate offered.

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

#57

Post by jkurnia »

jkurnia wrote: post #54
kanamekun wrote: post #47

Earlier quoted context omitted.

Was just reading up on Kiva and Zidisha on Wikipedia, and noticed this on the Kiva talk page. Looks like someone at Zidisha (from a Mountain View IP) edited Kiva's Wikipedia page to add criticism of Kiva and plug Zidisha. Is this part of the "help" you're referring to above? Removed the lengthy section spotlighting a known competing organization, Zidisha from the interest rates section. The information is consistent…

Hi kanamekun, thanks for bringing up the point about Zidisha being a competing organization with Kiva. Do you think it would be better for readers if they were not aware of Zidisha as an alternative way of addressing the high interest rates charged by Kiva partners?

I see now that somebody has removed the mention of Zidisha as a lower-interest alternative and left a discussion of Kiva Zip in its place.

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

#58

Post by kanamekun »

jkurnia wrote: post #57
jkurnia wrote: post #54

Earlier quoted context omitted.

Hi kanamekun, thanks for bringing up the point about Zidisha being a competing organization with Kiva. Do you think it would be better for readers if they were not aware of Zidisha as an alternative way of addressing the high interest rates charged by Kiva partners?

I see now that somebody has removed the mention of Zidisha as a lower-interest alternative and left a discussion of Kiva Zip in its place.

It looks like someone reverted your conflicted edits, and posted about the edit to the Talk page:

http://en.wikipedia.org/w/index.php?title=Kiva_(organization...

http://en.wikipedia.org/wiki/Talk:Kiva_(organization)#Zidish...

That's pretty much spot on policy for Wikipedia.

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

#59

Post by JumpCrisscross »

GFK_of_xmaspast wrote: post #53
jkurnia wrote: post #41

Earlier quoted context omitted.

Hi rdl, the question of which interest rate will result in the best social impact is one of the most frequently debated topics among Zidisha users. We allow borrowers to offer any interest rate they wish, up to a maximum of 25%. Lenders are then free to fund the loans at any rate up to the maximum offered by the borrower. Many lenders opt to fund loan applications at well below the offered rate, resulting in an overa…

25% is still pretty usurious.

25% is close to a U.S. angel investor's cost of capital. Capping rates across a market does not lower the cost of capital, it depresses capital availability.

For a lending charity, rate caps reduce interest income. This, in the long run, depletes the charity's capital base. An interest rate (>5%) lower than the expected default rate (~10%), as it appears to be here, amplifies the effect. That said, the decision could make sense. If "non-usurious lending" increases donor interest enough, it could offset the capital depletion effect.

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

#60

Post by jkurnia »

pratyushag wrote: post #50
lincolnq wrote: post #15

Earlier quoted context omitted.

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…

For some discussion about Zidisha vs GiveDirectly search "Zidisha" in the comments of these two articles: 1) http://blog.givewell.org/2012/04/26/microfinance-and-cooksto... 2) http://blog.givewell.org/2013/01/04/cash-transfers-vs-microl... Would love to hear Kurnia's thoughts on this.

Hi pratyushag, in general, I am not a fan of handout-based approaches to charity. In my experience the negative psychological effects of handouts outweigh the short-term economic benefits. See http://www.huffingtonpost.com/julia-kurnia/about-to-send-a-d... for a more thorough presentation of my views.
Post reply on HN