Last week, I wrote about Kiva’s new pilot program for direct peer-to-peer microlending — called Kiva Zip — which differs from their current system of indirect microlending. The new program struck me as pretty innovative. The commenters on my post and on Twitter conveyed excitement for the new pilot, mixed with skepticism about whether it will work.

Well, let’s toss the skepticism aside. Direct peer-to-peer microlending works. And the pioneer wasn’t Kiva, but a smaller organization called Zidisha Microfinance. Their stats are impressive: in two years of operation, Zidisha has a 99.6% repayment rate. Borrowers typically pay 8% interest. So far, Zidisha is small: just $109k in loans raised, 385 lenders, and 200 businesses financed in Kenya, Senegal, and elsewhere.

Zidisha’s basic model is simple. They provide a platform where borrowers can create profiles and request loans, specifying the maximum interest rate they’d be willing to pay and their proposed repayment schedule. Lenders can bid to fulfill a portion or the entirety of the loan. Funds are transferred electronically to the borrower. As borrowers repay, lenders receive the funds in their Zidisha accounts. Throughout the whole process, borrowers and lenders can communicate through the Zidisha platform.

It’s simple enough. But there’s always more to what makes something work. This morning I had the chance to speak with Zidisha founder Julia Kurnia about their successes and remaining challenges. Here’s what I learned.

Low, low rates

Did you catch the part about 8% interest rates for borrowers? That’s really low for microfinance. Typical rates are more like 30-40%. So how does Zidisha do it? First, their operations are very low budget. They rely on volunteers for communications, client relationship management, and financial management. Even the founder runs Zidisha part-time for free, while also working part time for a U.S. government agency. This is only feasible up to a certain scale, but for now it seems to be working for them. Small donations cover Zidisha’s phone calls, website, and other expenses.

Second, they don’t have intermediaries of any kind. From an 8% interest rate, 3% goes to the lender and 5% goes to transaction costs for PayPal, M-PESA and the like. Borrowers also pay a one-time registration fee to cover a credit check (more on that below). There are no loan officers to pay and no local infrastructure to build.

What this means is that their system works, but it hasn’t reached a level of sustainability. It doesn’t self-fund. Even if Zidisha added a few percent onto interest rates to cover its own operating expenses, they haven’t yet reached a scale where that would make a dent. They’ve been pursuing grants through Echoing Green and other sources in order to reach that scale.

Who are the borrowers?

Zidisha is very selective about who can borrow through the platform. Although they don’t have intermediaries for the loans, Zidisha does partner with private credit bureaus or local charities to do credit checks prior to approving new borrowers. This means borrowers must have some form of verifiable credit history, either with a local bank or other microfinance institution. Kurnia estimates that 40-50% of applicants fail to pass this check. For those borrowers who are approved and join the Zidisha system, their first loan can only be half the value of the largest previous loan that s/he successfully repaid.

Internet connectivity is another limiting factor: borrowers have to live someplace where they can post a profile and interact with lenders online. Kurnia pointed out that their model wasn’t feasible just half a decade ago. That may explain why Kiva (founded in 2004) started out with indirect lending.

Despite this selectivity, Zidisha has no problem lining up new borrowers. Most of them come through word-of-mouth. Zidisha’s own budget isn’t a binding constraint either. The biggest obstacle to growth that Kurnia sees? Not enough lenders. So if you’ve got a few extra bucks this holiday season, you might consider checking them out.

A new model for microfinance?

Zidisha’s success stands as a challenge to the standard microfinance model, but not because they’ve demonstrated that loan officers or local intermediaries are unnecessary, or that interest rates can be kept low. Rather, they’ve shown that different target populations can be served in different ways. Zidisha’s borrowers are not the “poorest of the poor” that many microfinance advocates target. Zidisha borrowers are aspiring middle class. Many of them are small business owners who form the backbone of a nation’s economy. Once they’ve demonstrated their credit worthiness, they should be able to access funds at lower interest rates. As their business becomes more successful, this will have outsized impacts on their communities. Zidisha makes that possible.


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  1. Hey, quick follow-up. Julia contacted me after seeing this post to comment on the issue of sustainability and the part where I said that it doesn’t self-fund. Her comment is worth sharing in full, but a bit large to insert above, so I’ll add it here. She writes:

    “This might give readers the impression that we are able to charge such low interest and fees because we are offering the loans at below cost. In fact, the 5% borrower fee plus the registration fees fully cover the cost associated with making the loans – from money transfer and bank fees, to our telephone and communications costs, to legal registration fees. It actually generates a very thin surplus, which combined with small donations allow us to fund things that are desirable but not required for us to continue our lending operations, such as ongoing quality enhancements to our website. We project that this surplus will reach the level needed to begin paying a modest salary / stipend for one full-time staff by the time our lending volume reaches $1 million. Before that point, our processes are lean and automated enough that I can comfortably manage Zidisha while also working part-time at a paid job.”

    “Of course, if we were to be awarded a grant we could go ahead and invest in one or more paid staff now. But the bottom line is that our operation is sustainable, fully covering its costs with program income, at both the current scale and at a larger scale in the future.”


  2. See also, Wokai (, a peer-to-peer platform that operates in China (disclaimer: I used to work for Wokai in Beijing). It bears a lot of similarity to Zidisha, and has also been operating for a couple of years. So far, it has distributed over 1,000 direct loans through two Chinese microfinance institutions, which were originally set up with UNDP support. Interest rates are about 15-20%, and the repayment rate is 99.5%. Wokai also needs more lenders, and gift cards can also be purchased. What I now found even more interesting, as I am no longer there, is their ambition to find new and innovative fundraising avenues. For example, see the Gallery (; their attempts to make it a sustainable ‘china-helps-china’ platform; and these ‘gift card codes’, which allows you to create codes and fundraise using any items, from cruise ship holidays to pens.


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