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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

#71

Post by jkurnia »

bliti wrote: post #42

This is a fantastic thing to do. I do have one question. Do you plan to do the same thing (maybe in a smaller scale) in the US? Say, help people in some impoverished area of the country with some small funding to help them get micro businesses going. Not arguing against the choice to do so in Africa (its great), just interested if there would be a push to do it "locally".

Hi bliti, we do not have any plans to offer lending services in the US. Not because Americans are less deserving, but simply because it is not our area of expertise or focus.

If you would like to lend to entrepreneurs in the US, I would recommend checking out Kiva Zip, which does lend to Americans as well as Kenyans. https://zip.kiva.org/

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

#72

Post by jkurnia »

phantom_oracle wrote: post #52
jkurnia wrote: post #32

Earlier quoted context omitted.

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 suc…

I certainly agree that entrepreneurs need more than money to succeed.

Our concern with a profit-sharing model is that there seems to be no practical way to enforce truthful reporting and sharing of the profits. Relying on self-reporting alone would result in a system where honest people are penalized (by having to make payouts based on their honestly reported profits) and dishonest ones are rewarded. At best, it would degenerate into a simple handout program.

If we at Zidisha had a way to provide advice and contacts that are sufficiently localized as to be useful to the entrepreneurs, we certainly would do so. However, my experience is that Western business advice is useless or nearly so to most people surviving on a dollar or two per day in Africa or Asia. The best results I have seen come about when people are connected with resources in a market system, and allowed to decide for themselves how to leverage those resources.

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

#73

Post by yunfang »

I think this is a great idea. (Disclosure I have been a supporter for Zidisha for a while). This is a great best-of-two world approach of GiveDirectly (pro borrower) and traditional Microfinance (pro intermediary/lender).

The traditional microfinance has been a mess because it creates a lot of over powerful institutions and the usurious rates don't necessarily make lives in Africa better.

The GiveDirectly's direct handout model can be easily abused on the borrower side.

Zidisha bridges the gap between the two with technology. I think it's great disruption.

I do think the international aid microloans need to be subsidized so their rate is affordable but it's good for borrowers. I think even American small business loans need to be subsidized too. It would be very expensive if you make everything determined by market forces. That's why OnDeck and Kabbage get away with their 50% APR loans. But I think it's bad for the small businesses and bad for the economy.

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

#74

Post by lzecon »

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…

Have you thought about establishing a minimum interest rate lenders can set to avoid indirectly contributing to the traditional trap of foreign aid?

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

#75

Post by dror »

Julia,

Awesome work.

Paul, great that you recognized it and contributed.

I sometimes despair about how much negativity and nit picking there is around people who are doing, or at least trying to do, things that really change the world.

In my mind this is way ahead of Whatsapp getting all the money, yet there was very little negative reaction to that event.

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

#76

Post by smithm9 »

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...

Hi Julia,

Before I get to my questions, I want to applaud your and Paul's efforts. It's great to see resources being spent in pursuit of causes that really matter.

First, what basis do you have for believing that micro lending is an effective means of poverty alleviation? I've yet to come across a well-respected study that proves it is, but have read a few [1] that question its efficacy.

And second, given your stance on aid, I'm curious why you structured Zidisha as a non profit? Couldn't an argument be made that the same negative effects you claim handouts have on the poor [2], also negatively impact Zidisha if you accept donations to run your organization?

Thanks for your responses.

[1] https://www.givedirectly.org/pdf/DFID_microfinance_evidence_...

[2] http://m.huffpost.com/us/entry/4623503

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

#77

Post by davidw »

You could try sending some email around. Something like this:

"Hi, please allow me to introduce myself. My name is Paul, and I have recently come into a large amount of money that I would like invest in your country as soon as possible. Due to unforeseen circumstances, I am unable to invest this money myself, and seek your partnership in order to invest the money profitably. I ask your complete discretion so that the money does not fall into the wrong hands.

Please, sir, kindly treat as urgent and strictly confidention. I assure you that this is a 100% risk free transaction."

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

#78

Post by [deleted] »

jkurnia wrote: post #70
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…

[deleted]

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

#80

Post by rjtavares »

yummyfajitas wrote: post #31
David wrote: post #8

Earlier quoted context omitted.

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…

In the pilot studies, about 10% of people who would otherwise be working choose not to work and instead become dependent on the BI. So the BI pilot studies do agree with Julia's impression. https://decorrespondent.nl/541/why-we-should-give-free-money...

That is a gross misrepresentation of the results:

> The total amount of work hours decreased by only 13%. Breadwinners hardly cut down on their hours, women used the basic income for a couple of months of maternity leave and young people used it to do some extra studying.

> Forget’s most remarkable discovery is that hospital visits went down by 8,5%. This amounted to huge savings (in the United States it would be more than $200 billion a year now). After a couple of years, domestic violence rates and mental health also saw improvement. Mincome made the entire town healthier. The basic income continued to influence following generations, both in terms of income and health.

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