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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

#61

Post by jkurnia »

notahacker wrote: post #49
kanamekun wrote: post #25

Earlier quoted context omitted.

Actually I just looked at Zidisha's website to see how it works, and their terms of use [1] basically state that once you make a loan, the money is no longer yours: > So basically, I make a loan and then if the entrepreneurs makes a repayment, Zidisha can choose to give me my money as a "promotional gift." But wouldn't lenders have to pay taxes on their "promotional gifts"? And aren't I getting taxed on my entire loa…

Presumably to avoid liability issues associated with representing the loans as investments, particularly relieving themselves of any obligation to chase missed repayments on behalf of creditors. In some respects, having the up-front option to to waive any right to withdraw repaid loans might be better for people who actually have no intention of doing anything with repayments other than loan them to other Africans, a…

Hi notahacker, a few of our lenders have requested non-withdrawable accounts. The idea is that the full amount credited to these accounts would be tax-deductible, and lenders would retain control of how the funds were lent out. Informal consultations among our lenders did not reveal strong enough demand to justify the cost (mainly in additional complexity for newcomers to our platform to take in), so we refrained from introducing this option for now.

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

#62

Post by jkurnia »

marquis wrote: post #34
jkurnia wrote: post #27

Earlier quoted context omitted.

Hi nanijoe, we have not yet had the chance to offer a program in Nigeria, but hope to soon. We chose Kenya as the first country to pilot Zidisha, largely because it was the world leader in mobile phone-based payments, which we use to disburse the loans and receive payments electronically. Also, internet and Facebook penetration was especially high in Kenya, and that made it easy for many people to adopt and share our…

Kenya is also fairly unique on the continent, outside of South Africa, in that you can access pretty good internet. We pay attention to emerging markets for online services and we've noticed recently that Kenya is coming up strong in terms of demand.

In the past year especially, many of the loan uses we are seeing in Kenya are computer or internet-related. The internet is spreading fast among young adults. Here is a pretty typical account, posted a few days ago by one of our new members:

"Despite being born and raised in the rural parts of Kenya, I have managed to train and get tech savvy. I grew up with no electricity and i first saw a computer when i was 19years old when i enrolled for further studies. I put in long hours after classes just to be able to catch up with my peers. I learnt to create programmes and i had my first commercial software in the second year of campus. In my fourth year of campus, I had to drop out of school because of lack of school fees. I got a job that enabled me to save up enough money to clear my studies."

https://www.zidisha.org/microfinance/loan/anana/5997.html

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

#63

Post by rdl »

jkurnia wrote: post #56
GFK_of_xmaspast wrote: post #53

Earlier quoted context omitted.

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.

I don't think the percentage rate is that big a deal, even at 25% (although I'd probably go for ~15-20%, assuming 10% default rate and 5% cost of capital) -- the area where I'd try to subsidize or otherwise avoid passing through cost/profit is fees.

I'm fine with short term loans at 25%. As you say, $50 at 25% for a month is $1.04. The problem is when a $1-5 fee is applied on top of that, giving interest rates >100% annualized. That's the kind of usury which has been common in the US payday advance industry (although better now in most states after regulatory action), rent-to-own, etc.

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

#64

Post by jkurnia »

btilly wrote: post #19
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…

Hi btilly, I am not an expert in property law in general. I understand it is a contentious issue in much of Latin America, Hernando De Soto's area of focus. I can tell you that many Zidisha borrowers do have formal legal title to farming plots and homes, but they do not use this property as collateral for loans because they cannot afford the risk of losing it.

More broadly, I do not think any one service - property reform, or business growth capital, or health or education for that matter - is a cure-all. All of these services are needed, and each works optimally when the others are present.

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

#66

Post by iiiears »

kanamekun wrote: post #25
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…

Actually I just looked at Zidisha's website to see how it works, and their terms of use [1] basically state that once you make a loan, the money is no longer yours: > So basically, I make a loan and then if the entrepreneurs makes a repayment, Zidisha can choose to give me my money as a "promotional gift." But wouldn't lenders have to pay taxes on their "promotional gifts"? And aren't I getting taxed on my entire loa…

You found more information than me.

Tried to "read terms of service" > redirected to the main page.

Whois returned "not found"

dig returned a GoDaddy dns proxy.

Two Emails sent to me by them. The first a email confirmation. Zidisha, Inc. 21900 Muirfield Circle #302 Sterling, Virginia 20164

The second thanked me for joining their email list.

My profile page has several links like "Lend Fund", "Join a group". Not sure what to do next... Basically this meant i signed up for a mailing list

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

#67

Post by jkurnia »

janj wrote: post #18
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 bas…

Hi janj, I am not familiar with any place where debt is not used in some form or another. (See http://www.amazon.com/Portfolios-Poor-How-Worlds-Live/dp/069... for a really thorough exposition of the variety of debt strategies low-income households use to manage their finances.)

The main alternatives to debt that I am aware of are forms of Islamic financing, such as rent-to-own and profit-sharing models. We have explored the possibility of offering a profit-sharing financing product, but failed to come up with a feasible way of implementing such a model. The successful implementations of profit-sharing models seem to rely on strong information verification systems and intensive interaction with local staff, which we as an online service cannot offer.

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

#68

Post by jkurnia »

iiiears wrote: post #66
kanamekun wrote: post #25

Earlier quoted context omitted.

Actually I just looked at Zidisha's website to see how it works, and their terms of use [1] basically state that once you make a loan, the money is no longer yours: > So basically, I make a loan and then if the entrepreneurs makes a repayment, Zidisha can choose to give me my money as a "promotional gift." But wouldn't lenders have to pay taxes on their "promotional gifts"? And aren't I getting taxed on my entire loa…

You found more information than me. Tried to "read terms of service" > redirected to the main page. Whois returned "not found" dig returned a GoDaddy dns proxy. Two Emails sent to me by them. The first a email confirmation. Zidisha, Inc. 21900 Muirfield Circle #302 Sterling, Virginia 20164 The second thanked me for joining their email list. My profile page has several links like "Lend Fund", "Join a group". Not sure…

Hi iiiears, thanks for giving Zidisha a try and for this feedback. I'm so sorry our website gave you a redirect when you tried to view our terms of service. Would you mind letting me know which browser you are using so that we can try to replicate and fix the bug?

We'll try to make the next steps after creating a new lender account clearer. If you would like to make a loan, you can do this via the "Lend" page.

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

#69

Post by jkurnia »

wehadfun wrote: post #65

Why not just give the entrepreneurs the $200? The money they would be paying back they could use to build up their business. I doubt anyone would do this investment for a return.

Hi wehadfun, that is a valid question. There are a few reasons we facilitate loans instead of gifts:

1. Loans once repaid can be lent out repeatedly, thereby helping many more people.

2. Repaying a loan at a reasonable interest rate puts lender and entrepreneur on a more equal footing, and is therefore more dignified for both.

3. Loans encourage a proactive and independent mentality on the part of the entrepreneur, rewarding success rather than neediness.

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

#70

Post by jkurnia »

netcan wrote: post #10

I like the idea of p2p financial services. However everything development related is complicated qnd the stories describing projects are often romanticised. There was a great podcast recorded during the initial microfinance boom. One surprising conjecture is that most small like ans are for consumption, not seed capital and that this is rational. http://www.econtalk.org/archives/2011/04/munger_on_micro.htm...

I think the use of loans depends a great deal on the location and microfinance program in question.

At Zidisha, we don't restrict the purpose of loans (other than requiring that it be legal and ethical). The vast majority of applications nevertheless feature small businesses. This may be because the applicants are simply telling the lenders what they think the lenders want to hear, but the business uses of the loans have usually been confirmed when our volunteers visit the borrowers. (See this blog kept by an intern in Kenya last year for some good examples http://talkingstorykenya.wordpress.com/.)

When funds have not been used for revenue-generating purposes, this is usually due to an unplanned contingency, such as a health emergency in the family or a time of financial scarcity coinciding with school tuitions falling due.

I personally would not object to more loans being used for purposes such as tuition or home improvements, but understand that it is often too risky for individuals without regular sources of income to use debt to finance assets that do not generate revenue.

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