Following a Proven Path to Success


Hello Lenders,
My name is Andrew Weber and I recently served as a Zidisha Client Relationship Manager in Kenya. There I paid a visit to James at his business in a town on the outskirts of Nairobi. For years James watched as a friend consistently maintained a healthy profit operating a clothing store. James was already doing ok with his existing businesses selling charcoal and operating a motorbike taxi, but he wanted a little something extra to help support his wife and 3 children aged 12, 8 and 5. So he has decided to follow the proven copycat path to business success and has opened his own clothing store now.

James used his Zidisha loan to enable this new business to get off the ground. He now has store fully stocked with clothing for men, women, and children. He has only been open for about a month but the early returns are strong. He is on pace to make about $140 on each large been of clothes he sells. If the business continues to do well he hopes to move his family into a large home. James’ plan to emulate his friend’s success appears to be perfectly on course right now. 

Make a Difference

Growing up in Mombasa, Kenya’s second city and major port, I could always feel the bustling sense of small business activity. When I think of a small business in Kenya, I think of the open air market opposite Nakumatt mall where hawkers sell their clothing goods; I’m thinking of the tuk tuks  (auto rickshaws) roaming around Mombasa old town, always one cell phone call away an, skillfully navigating around the narrow streets of Old Town and Fort Jesus.

Growing up, I always sensed the Kenyan people’s natural entrepreneurial spirit fostered by a jovial and optimistic demeanor.  When I think of entrepreneurship in Kenya, I think about the maid who left our family to enroll in a catering class; I think about our first driver, who always strove to achieve, and who now is part of the transportation team of Kenya’s Vice President. But among these feelings of joviality and optimism, I did also feel Mombasa’s dark side. Poorly maintained roads, the spread of diseases such as malaria, and issues of crime and safety, all combine to put a significant damper of people’s potential. And Kenya has such great potential; its people, its strategic location and natural resources all make it a land of vast opportunity.

This is personal for me. In Mombasa, our family had a maid for more than a decade. We saw her raise a son and work hard to provide him with an education. Isn’t that what anyone would want in a parent; a mother who works hard to give her son a better life? She recently passed away; she was HIV positive though we didn’t come to know until just a few weeks before. She was on medication; apparently that wasn’t enough. I know that people like her deserve better, they deserve a chance to start up their own small business or trade, or to get an education and strive further and do better.

So, there I was, crying after hearing the news of our maid’s passing; feeling that a huge injustice had been done. She had been there when I was growing up; she was part of our family. And she deserved better. So, I decided to do somethingAnything, to give back, in her name. And that’s how I found Zidisha.

Initially, I was skeptical about microfinance. I remember writing a letter to the editor to my college newspaper contending that ‘any credit system requires the creditor to pay back what they owe’. How could poor borrowers with little material possessions repay their microloans if their endeavor does not work out? The financial success of a borrower is not guaranteed. So, to make up for this weakness, commercial microfinance institutions charge high interest rates to compensate for the risk and make a profit. But Zidisha’s model is different.

Zidisha’s non-profit, crowdsourcing microfinance approach allows multiple individuals to contribute to a single small business loan while charging low interests rates on the loan. This crowd-sourced loan allows you, the lender, to diversify your philanthropic lending portfolio over different people, businesses and locations, which helps reduce the risk of losing your entire lending capital. So, loans in the hundreds and thousands of dollars will find funding from many different individual contributing to the loan. Additionally, Zidisha’s network of borrowers and volunteer relationship managers give us Zidisha members insight into how our money benefits that small business in Kenya. Lastly, Zidisha requires that potential borrowers go through at least one credit check, which helps establish some loan repayment capacity. Zidisha allows me to recycle my charitable capital; as my loans get paid back, I will continue lending out money thereby magnifying the effectiveness of my charitable giving. It’s a great model.


And while I may be motivated by the past, by the death of our maid; I look to the future, to her son, and think what else can be done to help. Maybe one day we can crowdsource educational loans and help young children in Kenya get more funding to pursue higher education or help fund the construction of libraries in rural neighborhoods. Maybe we can find a way to support democracy and good governance. Maybe we can make a difference.

Crowdfunding Transforms The Charity Landscape

While charity organizations have been around for decades to assist those in need, the rise of the internet and crowdsourcing websites has transformed how charity is handled today. Microfinancing sites play an especially huge role in this as they allow donators to get their money directly to those who need it. Instead of donators placing their money in the hands of a charity that may never end up diverting the funds to where it is intended, donators can feel safe and confident in knowing that their money is directly handled by recipients in need.


Helping Businesses with Microfinance
Besides helping individuals gain access to things like education or an increased amount of savings, microfinancing also does a fantastic job at helping many businesses to grow. Around the world and in many poorer areas, many individuals who run their own businesses may be running into problems because of factors such as broken equipment or lack of resources and, therefore, cannot afford fixed price recruitment in order to hire others to help run their business. For most business owners in these rural areas, microfinancing is the only source of income for both them and their family.
If they have to end up shutting down their business, problems can soon occur. Microfinancing helps these owners with things like a new vehicle for their business, new fabric for a clothing company, or even money to produce additional food for a restaurant.
By helping these businesses, you aren’t only helping the owners and their families, but also the local economy. After all, one of the best ways to help a city’s economy to grow is to support the local businesses in the area. If a local business ends up having to close, this leaves a huge economic void for the area. Money spent at these local places will typically go straight back to the economy as much as two or three times over.

Microfinancing Helps Increase Savings of the Poor
As this article by AllAfrica.com says, microfinancing has helped to destroy the myth that the poor do not save their money and is instead showing that most are credit worthy and do intend on saving. Microfinancing loan institutions are an essential part in helping those in rural communities to gain access to the financing they need. The only challenge right now seems to be that many citizens have trouble accessing these forms of credit. However, many microfinancing services around the country are working hard to implement this infrastructure and bring it into the hands of more people so that they can be helped. According to AllAfrica.com, a World Bank report has said that the number of people living on less than $1.25 per day is over 1.4 billion. With unfortunate statistics like these, it becomes apparent how important infrastructure like microfinancing is along with access to things like fresh food and water.

Microfinancing May Help To Solve Academic Issues
Thanks to budget cuts within education sectors throughout the world, research projects are getting cut, and tuition continues to rise. In many parts of the world, education is not even an option and many people can only work without ever having the chance to get a higher education. Microfinancing sites are increasing the ability for many throughout the world to be able to get an education.
Since many children have to work for their families each day, many are not able to go to school because they must help their families. Along with this, education is often expensive and is not free in all cases. Regardless, extra money that families receive can help to keep children in school and help them get an education. 

Why Is Microfinancing Better Than A Traditional Charity?
While it is true that there are plenty of fantastic charities out there, many of them are major for-profit corporations, and only a fraction of the money you end up donating will actually go to where it needs to go.
While not all microfinancing institutions are like this, a majority of them are non-profit, and their main goal is simply to get the donated money from you directly to the person that needs it. The existence of a company that handles your donation and distributes it when they feel it is necessary is eliminated by p2p microfinancing; it allows you to help many individuals around the world in a major effort to get out of poverty and improve the lives of both themselves and those around them.


Guest post by Eve Jamieson