What does "Zidisha" mean?
"Zidisha" is the Swahili word for "grow" or "expand", as in a business or a quality such as freedom or prosperity.
How does Zidisha compare to other peer-to-peer lending websites?
Zidisha is the first international peer-to-peer lending service to allow lenders to interact with borrowers directly, without intermediaries. Since the cost of lending through intermediaries is high, Zidisha offers lower interest rates to borrowers than other international peer-to-peer lending sites while still allowing lenders to earn interest on their loans. And the peer-to-peer connection allows for direct dialogue between lenders and borrowers about the impact of the loans.
How does Zidisha work without intermediary parties?
Zidisha itself controls each individual loan disbursement and repayment collection; management of Zidisha funds is not outsourced to intermediary parties. Loan applications and business updates are posted on the website by the borrowers themselves, or by local friends and family of the borrowers.
Why do borrowers choose Zidisha?
Zidisha borrowers are located in low-income countries where small business loans are often unavailable, or carry prohibitively expensive interest rates (often above 40%) along with collateral requirements. Zidisha offers an alternative that allows the borrowers to access business expansion loans on flexible terms and at interest rates they can afford. The lower interest rates allow borrowers to keep a majority of their profits to either invest back into their businesses or to support their families.
Why do lenders choose Zidisha?
Lending through Zidisha is a way to help disadvantaged, but highly motivated, borrowers improve their lives through their own efforts. Lenders do this by providing access to loan capital at interest rates that the borrowers can reasonably repay. In addition, Zidisha's direct peer-to-peer lending model maximizes transparency by allowing lenders and borrowers to communicate directly.
How does Zidisha find loan applicants?
Anyone who lives in a country serviced by Zidisha may create an account at Zidisha.org, and potential borrowers themselves must take the initiative to apply for loans. The majority of Zidisha applicants find us by word of mouth, as current borrowers recommend Zidisha to other members of their communities. Zidisha Client Relationship Interns and Volunteers also offer informational presentations to the membership of local organizations and cooperatives.
What background information is collected for Zidisha borrowers?
Applicants to join Zidisha provide personal data, including links to Facebook profiles to verify online identity, national identity nubmer, home location, personal contacts and the contacts of family members and neighbors. Applicants must also provide the contacts of a local community leader, such as a school principal or leader of a place of worship, who agrees to mediate in the event of difficulty recovering the loan. The local banks and payment services that process Zidisha loan disbursements also check the loan recipients's national identity cards.
Borrowers may optionally provide additional verification credentials, such as scans of their national identity cards, letters of recommendation from local community leaders and public endorsements from online contacts. The provision of these optional additional verification credentials is displayed on each loan profile page.
Does Zidisha assess the credit-worthiness of borrowers?
No. Zidisha is not a bank or credit bureau, does not offer any guarantee of the accuracy of information presented by borrowers, and does not conduct any assessment of the incomes, debt levels or credit-worthiness of borrowers.
What is the total cost to the borrower?
The total cost to the borrower for each loan is the 5% transaction fee, plus the weighted average interest rate bid by lenders financing the loan. For example, if lenders bid to finance a 12-month, $100 loan at 3% weighted average interest, then the total cost to the borrower will be 5% + 3% = 8%. The borrower in this example would repay $8 in fees and interest on the $100 loan.
In addition, borrowers in most countries pay a one-time new member registration fee, which is applied only if the new member succeeds in raising a loan through Zidisha.
Why is there a wide range of interest rates proposed for loans on Zidisha?
Unlike with other microlending programs, Zidisha borrowers have the right to set the maximum interest rate they'll pay. Lenders can then choose whether or not to fund that particular loan either at or below the borrower's proposed interest rate.
Is Zidisha an investment broker?
Absolutely not. Zidisha is a nonprofit organization dedicated to fighting poverty by advancing the business financing opportunities of disadvantaged entrepreneurs. As such, Zidisha does not make any representation or promise that lenders will recover their investment or earn a positive rate of return.
How are funds transferred between Zidisha and the borrowers?
In Kenya, loan disbursement and repayment transactions are conducted via M-PESA
, a revolutionary money transfer service that allows Kenyans to receive and send cash via mobile phone messaging. In Ghana and Zambia, funds are transferred via a similar mobile phone payment service called MTN Mobile Money. In other countries, loans are disbursed via electronic payment order from a local currency bank account, and borrowers deposit cash repayments to the same checking account at the branch located nearest them.
How does Zidisha fund its operating costs?
Zidisha is a nonprofit organization. We rely on voluntary contributions from our lenders and supporters to help cover operating expenses such as web hosting, bank fees, telephone costs, regulatory fees and ongoing development of our web platform.
Borrowers pay a %fee%% fee on each loan they take out through Zidisha in order to cover the money transfer costs incurred as a result of their loan. Borrowers also pay a one-time new member registration fee upon successfully raising their first Zidisha loan.
We do not charge any service fee to lenders to cover Zidisha's operating costs, but instead ask that those who participate contribute what they can afford to support Zidisha's growth.
What is the role of the Client Relationship Managers?
Client Relationship Managers (CRMs) are volunteers and interns from all over the world, who travel to countries where Zidisha has lending programs and work with borrowers for periods of two to six months. CRMs are required to have extensive experience working independently in developing countries, proficiency in the local language, high levels of initiative and integrity, and strong interpersonal skills. While working with Zidisha, CRMs typically stay with local families and spend most of their time visiting applicants and borrowers at their homes and businesses. CRMs assist new users with the application process and aid borrowers in using the Zidisha website, including posting loan requests, accounts of their businesses, and ongoing progress updates.
Please visit our Volunteer or Intern
page to learn more about the Client Relationship Manager program and to view blogs kept by the interns.
Do borrowers really interact directly via Zidisha.org?
Yes. Everything you see posted in a borrower's name on profile pages, loan applications and borrower comments is written directly either by that borrower, or by a computer-savvy local acquaintance who may assist the borrower in posting content onto the website. Although Zidisha volunteers provide English translations of borrower postings, we do not edit borrowers' content or write it on their behalf.
How are interest rates defined at Zidisha?
Why does Zidisha use flat interest rates rather than APR?
Are lenders or borrowers exposed to a risk of fluctuating currency values?
Under Zidisha's lending model, loan values are fixed in local currency upon disbursement, and the lenders assume currency risk. Exchange rates fluctuate and this can cause the US Dollar value of the loans to either increase or decrease during the course of the repayment period, leading to monetary gains or losses for lenders. Since exchange rate fluctuations often go both ways for multiple currencies during the same time period, spreading lending activity across multiple countries may help lenders hedge against currency risk.
How are loan transaction values converted between US Dollars and the borrower's local currency?
The exchange rates applied to all transactions on the Zidisha website are the interbank value of one US Dollar in local currency, as posted on the foreign exchange conversion website www.oanda.com
. We update the website exchange rates on the first day of each month, so that the exchange rates in effect on the first of each month are applied to all transactions during that month.
When borrowers create a loan application, the local currency amounts they request are converted to US Dollars, and the loan amount remains fixed at that US Dollar value throughout the fundraising period until the loan is disbursed. At the time of disbursement, the US Dollar amount raised is converted back into local currency at the exchange rate in effect on the date of disbursement. At disbursement, loan amounts are fixed in local currency, so that borrowers' repayment obligations are not affected by exchange rate fluctuations. Each time a borrower makes a repayment, the amount received in local currency is converted to US Dollars at the exchange rate in effect at the time the repayment is received. The resulting US Dollar value of the repayment becomes the basis for the amounts credited to the lenders who funded the loan.
In which countries does Zidisha offer loans?
We currently offer loans to residents of Benin, Burkina Faso, Ghana, Guinea, Indonesia, Kenya, Niger, Senegal and Zambia.
How does Zidisha protect the rights of its clients?
We have adopted the following Code of Ethics, to which everyone who works with Zidisha must adhere.
1. We will treat every applicant and client with courtesy and respect, and will serve them as timely and conveniently as possible. We will provide every client with a channel of communications through which they can give feedback on service quality, and will do our utmost to respond timely and effectively to any client complaints.
2. We will provide all applicants and clients with complete and understandable information regarding the cost of our loans and terms of repayment.
3. We will do our utmost to avoid causing over-indebtedness by doing our best to ensure that those who raise loans through our platform do not hold other debt, by limiting loan amounts based on past repayment history, and by verifying proposed total and monthly repayment amounts with clients before their loan applications are posted for funding.
4. We will do our utmost to ensure that the business endeavors financed with our loans do not become a vehicle for child labor, or any other abusive or illegal practice.
5. We will strive to prevent abuse of our lending platform through energetic pursuit of willful defaulters. At the same time, we will treat all clients regardless of repayment status with courtesy and respect, and will not deprive them of their basic means of livelihood in order to repay a loan.
Acceptable repayment collection practices include reminders, mediation involving local community leaders, and judicial process.
Unacceptable repayment collection practices include abusive language, threats, harassment of borrowers at their place of work or worship, forcible entry to homes, and seizing property without court order or in violation of the law.
6. We will protect client information from those not legally authorized to see it.
7. We will price our services at fair rates, with fees set at levels just sufficient to ensure the sustainability and growth of our organization. As a nonprofit organization, all revenue will be used to finance our lending program operations and to invest in their further development.
8. We will avoid conflicts of interest by recusing ourselves of any involvement in organizational decisions that may result in personal benefits to ourselves or to our family members.
9. We will not accept payment or gifts of substantial value from applicants or clients.
10. Should a violation of any of these principles come to our attention, we will notify Zidisha management immediately. Management will ensure that violators of our Code of Ethics are sanctioned.
How does the loan bidding process work?
When a Zidisha entrepreneur posts a loan application, he or she specifies the maximum interest rate he or she is willing to pay. Lenders may then place bids to fund portions of the loan at or below the borrower's proposed interest rate. If the total amount of bids received exceeds the amount requested by the applicant, then only the bids with the lowest offered interest rates are retained. In other words, the bidding process works like a reverse auction, in which loans are funded at the lowest rates that are acceptable to both parties.
Once a loan application is fully funded, the borrower has the option to accept the bids received immediately, or to wait until the end of the fundraising period in the hopes that the interest rate will be bid down. The final interest rate is fixed and the loan is disbursed when the borrower accepts the bids.
What is the minimum amount I can lend? Is there a maximum?
The minimum amount for a loan bid is one US Dollar. Lenders may bid to fund anywhere between one dollar to the full amount requested by the applicant.
What happens if a loan application is not fully funded by the expiration date?
If a loan is not fully funded by the expiration date, then funds that had been pledged are returned to lenders, and the applicant may start over with a new loan proposal.
How do lenders deposit funds to their Zidisha accounts?
Lenders worldwide may credit their accounts instantly using a PayPal account, or with a credit or debit card as a PayPal guest.
Lenders worldwide may also transfer funds to their accounts via bank wire. Fees for wire transfers usually range from $50 to $100.
Lenders who hold US bank accounts may also deposit funds into their Zidisha accounts by mailing a paper check to Zidisha, or by using their bank's Bill Pay service to have a check mailed to Zidisha. There is no fee deducted from lender funds uploads made via paper check from a US bank account.
How do lenders withdraw funds from their Zidisha accounts?
For lenders located within the United States, after a fund withdrawal request, a check for the requested amount is mailed to the lender's home address. For lenders outside of the United States, withdrawals are sent via PayPal.
for more information.
Does Zidisha guarantee repayment of loans?
No, Zidisha does not guarantee repayment of loans. Lenders fund loans at their own risk, with the understanding that they may lose part of all of the funds lent. Lenders should never lend funds that they cannot afford to lose through Zidisha.
What happens when a borrower repays?
Each time Zidisha receives a repayment installment from a borrower, your share of the amount received is credited to your Zidisha funded balance. You may then use it to finance new Zidisha loans, or request a withdrawal of all or part of your balance.
for more information.
How is my share of loan repayments determined?
Your share of each loan repayment you receive is equal to the percentage of the loan you financed, plus the interest rate previously agreed upon between you and the borrower. Please note: since loan amounts are fixed in local currency, the exact dollar value of each repayment will depend on the current exchange rate when the repayment installment is made.
When a borrower makes a repayment installment, how is the dollar value of my share calculated?
Each repayment installment is composed of principal and interest in a ratio that remains constant throughout the loan repayment period. At the time of disbursement, the value of loan principal and interest is fixed in local currency. The total amount of loan principal due to be repaid to each lender is equal to the percentage of the loan principal funded by that lender, multiplied by the local currency value of the loan principal. The total amount of interest due to each lender is equal to the local currency principal amount due to that lender, multiplied by the interest rate bid by that lender.
When a repayment is received, the principal portion of the repayment is divided among lenders in amounts corresponding to the percentage of the loan funded by each. To determine each lender's share of the interest payment received, the percentage represented by the value of the repayment installment received divided by the total amount to be repaid by the borrower is applied to the total interest amount due to that lender. The local currency principal and interest amounts due to each lender are then converted to US Dollars at the exchange rate in effect as of the date the repayment is received. The resulting US Dollar amount is credited to the lender's account.
What happens if a borrower fails to repay?
We first prevent repayment problems to the extent possible by doing our utmost to ensure that credit amounts are commensurate with borrowers' demonstrated credit-worthiness, as evidenced by successful repayment of gradually increasing loan amounts.
Despite these efforts, borrowers may experience disruptions in income due to unexpected circumstances, resulting in inability to make a loan repayment installment on the date it is due. When a borrower misses a payment, we issue a courtesy reminder by email and text message to the borrower's mobile phone within one week of the missed payment's due date. We do our best to get in touch with the borrower, understand the circumstances that caused the missed payment, and agree to a reasonable repayment plan. If needed, we may request mediation from the local community leader who recommended the borrower to Zidisha. As a last resort, we may opt to pursue legal action following local regulations in each country.
Zidisha adheres to the Smart Campaign's Client Protection Principles
for fair and respectful recovery practices. Our repayment recovery methods include reminders, mediation involving the local community leaders who referred borrowers to Zidisha, and judicial process. We will never engage in harassment, abusive language, threats, or seizure of property without court order. We will also not deprive borrowers of their basic means of livelihood in order to repay a loan.
What happens when a borrower's repayment schedule is modified?
Borrowers may modify their repayment schedules if unexpected circumstances prevent them from making payments according to the original schedule. Repayment schedules may be modified to either reduce or increase monthly installment amounts.
Whenever a loan is rescheduled, the total interest due to lenders is adjusted so that lenders earn the same monthly interest rate over the new loan period. For example, a lender who was due to receive $1 per month in interest for a twelve-month loan would be owed $12 in interest for that loan. If the loan is rescheduled to repay in 18 months, then the lender would be owed a total of $18 in interest.
Can I forgive a loan I made to a Zidisha borrower?
In exceptional cases, Zidisha offers lenders the option to forgive their shares of individual loans they have funded for humanitarian reasons. When this option is activated for a loan, all lenders who are owed repayments for that loan are notified by email. If a lender chooses to forgive his or her share of a loan, the remaining amount owed by the borrower will be reduced by the amount that would have been paid out to that lender, and the lender will receive no further repayments for that loan. Lenders who choose to forgive their shares of loan repayments will remain anonymous, and borrowers will be notified only of the amount by which their remaining balances have been reduced. The loan profile page will display the reduced repayment schedule and a note indicating the number of lenders who have forgiven their shares in repayment of the loan. Other lenders' decisions to forgive loans will not affect amounts owed and repaid to lenders who do not elect to renounce repayments.
Will my name, address or other personal details be disclosed to borrowers?
No. Only your Zidisha username, city and country, and photo if you upload one will be displayed on our website, and no information not publicly displayed will be communicated to borrowers. Borrowers may communicate with lenders via the comment forum on each loan profile page.
Are the amounts I lend through Zidisha tax-deductible?
We do not recommend treating loan amounts as tax-deductible donations because they may be returned to you if you choose to request withdrawal of the repaid loan funds from your lender account.
Donations made to Zidisha are tax-deductible in the United States.
Why does the Zidisha website not track the precise financial returns earned on my loans?
Zidisha is a nonprofit microlending service whose value proposition is primarily social impact. We are not intended as a financial investment platform, and are not licensed to market loans as financial securities. We do not display tracking of financial returns in order to avoid giving the impression that our service is a good place to store financial assets or to make for-profit investments, and in order to ensure that we are in compliance with United States regulations governing the marketing of financial securities.
Who is eligible to apply for loans?
Zidisha loan applicants must fulfill the following eligibility criteria:
1. Be of good reputation and have the support of a local community leader (such as a school principal or leader of a place of worship).
2. Not currently hold any debt or outstanding loans from other sources.
3. Have an active business or employment with sufficient income to ensure repayment of the loan in regular installments.
4. Have access to the Internet on a regular basis, and be able to fill out borrower profile and application forms and respond to lender comments at the Zidisha website.
5. Hold an active personal Facebook account with extensive social connections.
6. Be able and committed to posting frequent updates regarding use of the loan and progress of the business on the Zidisha website.
7. Reside in a country where Zidisha currently operates.
For which purposes may I take out a Zidisha loan?
Zidisha members may take out a loan for any purpose, as long as the purpose is legal and ethical.
How are the loans financed?
Zidisha loans are not financed by a bank, or by donations. Instead, individual Internet users from around the world visit the Zidisha website and choose loans to fund. When borrowers repay the loans, repayments are sent to the individual lenders who financed the loans.
How is my interest rate determined?
The interest rate is the weighted average of all lender bids, plus a 5% transaction fee which is used to cover Zidisha's money transfer costs. Since lender bids must be either less than or equal to the rate proposed by the borrower, your interest rate will not be greater than what you requested and will often be less. It is an annualized rate, a flat percentage of the loan principal amount per year the loan is held.
The final interest rate will always be somewhere between 5% (the minimum transaction fee) and the maximum interest amount proposed by the borrower. The exact rate is determined by the weighted average interest rate bid by the lenders on each loan.
What are my repayment amounts?
To find out your repayment schedule, log in to your borrower account on the Zidisha.org website and click on the link View Repayment Schedule. The repayment amounts and dates will be listed on that page.
Why do lenders choose to fund loans for small business owners in other countries?
Lenders choose to fund loans for various reasons. Many lenders are curious to meet people and learn about life in other countries. Lending through Zidisha gives them the chance to get to know a small business owner on the other side of the world, and to learn about daily life and culture in that country. In addition, lenders wish to help entrepreneurs have the chance to succeed in growing their businesses, and lending through Zidisha allows them to hear directly from the borrower how their loan funds have helped. The direct connection between lender and borrower improves transparency, so lenders can be sure that all of their funds are going to their intended beneficiaries. Though lenders can earn interest through Zidisha, making money is not the main reason most lenders participate. The interest earnings allow lenders to compensate for credit risk and for costs such as money transfer fees and changes in currency exchange rates, so they can preserve the value of their loan funds over time.
How much can I borrow?
If this is your first loan through Zidisha, you can borrow up to 50 US Dollars. Each time you repay a loan on time while maintaining a 95% repayment rate for all weekly or monthly installments, your credit limit will increase.
The current loan size progression is as follows:
Maximum Loan Size:
1. USD 50
2. USD 150
3. USD 450
4. USD 675
5. USD 1,013
6. USD 1,519
7. USD 2,278
8. USD 3,417
9. USD 5,126
10. USD 7,689
11 and thereafter. USD 10,000
Please note that the minimum time period for progressing to the next maximum loan size is 1 month for loans under USD 200.
What are the fees and interest?
Zidisha does not set an interest rate on its loans. Instead, applicants propose their own preferred interest rate, which may be between 5% and 30%. If lenders find the proposed credit terms reasonable, they may choose to fund the loan at or below the interest rate proposed by the applicant.
Interest includes a service fee of 5% of the original loan amount per year the loan is outstanding (any interest above the 5% is paid to lenders). Zidisha is a nonprofit organization, and the service fee is used to pay for necessary operating costs such as bank fees and money transfer charges.
New applicants also pay a one-time, fixed registration fee upon funding of their first loan. The registration fee is paid upon disbursement of the first loan, and is used to pay for the credit history verification that is conducted before a new borrower account is activated. If a prospective borrower's loan application is not funded, then no fee is charged.
What are the terms of repayment?
Repayments are made in weekly or monthly installments, depending on your country. Applicants propose their own preferred amount to repay in each installment, based on their expected income. If lenders find the proposed repayment terms acceptable, they may choose to fund the loan. There is no penalty or reward to repaying a loan early; the total amount of principal and interest due is determined by the original repayment schedule, and does not change based on actual date repaid.
What are the consequences if I repay late or default on my repayment?
Late repayments damage lenders and other borrowers, because they are deprived of funds that could be lent to other deserving borrowers if they were repaid when due. Late repayments also damage a borrower's reputation and ability to earn confidence from lenders, who had trusted the borrower's commitment to make loan repayments on or before the date promised. This damaged trust may make it harder for a borrower to fund new loans at favorable interest rates through Zidisha in the future.
Borrowers are responsible for managing their business in a way that ensures they will be able to pay loan installments in full on the date they are due each month. If unexpected circumstances make it impossible to deposit a payment in full when it is due, it is the borrower's responsibility to notify Zidisha.
If a borrower misses a payment and fails to notify Zidisha, Zidisha will issue one courtesy reminder by text message to the borrower's mobile phone. If the borrower fails to respond, Zidisha will report the delinquency to the community official who recommended the member to Zidisha. If mediation is not effective
, Zidisha may determine that the borrower has defaulted. The consequences of defaulting on a Zidisha loan include disqualification from funding any new loans in the future, reporting of the default to local credit bureaux as well as all organizations that have previously lent to the borrower and/or lend in the borrower's area, and legal prosecution resulting in confiscation of the borrower's property, fines and other legal penalties.
What happens when I repay my loan according to the agreed schedule?
Once your loan is fully repaid, you will be eligible to post a new loan application for funding on the Zidisha website. If lenders' experience is positive, they will likely be engaged and willing to lend to you again to support growth of your business. In this case you will likely find it possible to fund a larger loan, or to propose a lower interest rate for your second loan.
How is my performance recorded?
The on-time repayment rate of all installments that have been due is displayed in your loan profile page, and prospective lenders use this as a basis for evaluating any loan applications that you post.
In addition, all lenders who participated in funding the loan post a “feedback rating” on their lending experience to the Zidisha website. The feedback rating can be either Positive, Neutral, or Negative. Each borrower's profile displays his or her feedback rating as two numbers: the first is the percentage of all feedback ratings that are positive, and the second is the total number of feedback ratings given so far. For example, a borrower that has received 18 positive scores out of 20 total feedback ratings would display the score 90% positive (20). Lenders in the United States and Europe are accustomed to using this feedback rating system for financial transactions with unknown individuals over the Internet. It allows them to assign higher levels of trust to individuals who have already established an extensive history of similar transaction (as demonstrated by the high total number of feedback ratings), with a consistently high degree of customer satisfaction (as demonstrated by the high percentage of positive feedback ratings).
Zidisha lenders generally assign positive feedback ratings to borrowers who repay loans on time, and also engage lenders by posting frequent, interesting messages and business updates on the Zidisha website.
How do I communicate with lenders?
Each borrower's profile page contains a comment forum, in which the borrower as well as registered Zidisha lenders may post text messages and photos. Borrowers and lenders may use this forum to ask and respond to questions, share information and news about the progress of the business and get to know one another. Lenders highly value the chance to communicate directly with entrepreneurs whose loans they have funded or are considering funding, and borrowers are encouraged to post comments in the forum as often as possible.
Why is the amount I received in my loan disbursement payment different from the amount originally requested?
First, currency exchange rates may have changed since the loan was originally requested. Zidisha converts all funding amounts between local currency and US Dollars using the international exchange rates posted on www.oanda.com
.We update the website exchange rates on the first day of each month. If a loan application is posted in September, it was converted to US Dollars for fundraising using the September 1 exchange rate. If that same loan is disbursed in October, it is converted back from the US Dollar amount raised to Kenya Shillings using the October 1 exchange rate.
Second, a new borrower registration fee is paid upon disbursement of first-time loans. This covers the cost of the borrower verification needed to activate a new borrower account. This fee is deducted from the disbursement amount so that it does not need to be paid separately by the borrower.
Examples: A loan funded on our website at USD 779 will be converted to Kenyan Shillings (KSH) using the oanda.com rate at October 1, which was KES 77.1494 to one dollar. USD 779 multiplied by 77.1494 is KSH 60,100. From this we deduct the new borrower registration fee of KSH 1,000, yielding a net transfer amount of KSH 59,100.
How do I know my repayment is received?
Repayments received are posted on your loan profile page within 3 business days.
Whom should I contact with questions or concerns?
Please feel free to contact us by email to firstname.lastname@example.org
or send a text SMS to +001 703-468-4795 if you have any questions or concerns. We provide support to clients in English, French and Indonesian.