Zidisha
Posted in Helping the Poor, Nick's Posts 0 comments
In the past week, I’ve been reading a fantastic book called
7:An Experimental Mutiny Against Excess by Jen Hatmaker. There will likely be
more posts regarding this book in the future.
For now, I’d like to introduce you to one of the spectacular concepts
she shares in her book.
I was oblivious to this concept, but perhaps you’ve heard of
it before – it’s called microlending. Basically, it involves giving a loan to
someone in an impoverished country in order to help them build a business and
therefore increase the wealth in their community. There is not much wealth in these countries
to begin with, so it can be difficult to get a loan, especially since borrowers
have no collateral to offer.
Microlending helps them get a loan anyways and helps them build wealth
and collateral. Brilliant.
As Hatmaker shares, “The poor don’t lack ambition,
imagination, or intelligence; most simply lack resources. We have what they require and more than we
need. We could share.”
There are several websites that participate in this
endeavor, but many of them share an unfortunate flaw. The money that you loan doesn’t go directly
to the person who needs it. Instead,
your money is given to a bank which then lends it to the borrower. This in itself is not bad, but while your
money is offered to the bank for zero interest, the bank DOES charge interest
to the borrower. And those interest
rates can be pretty ridiculous – like 30% to 40% ridiculous. Needless to say, this carves away at the
profits that the borrowers could be making and negates the effect of helping
them climb out of poverty.
Luckily, there is one website I’ve found that cuts out the
middleman – Zidisha. It connects actual people in impoverished
countries who need loans with actual people who have the means to help them
(you!). The people who need loans can
apply to Zidisha directly. They get a
credit check from a local bank and, once approved, post their need on
Zidisha. They choose what they feel is
an acceptable interest rate (usually well below the local standard) and if you
decide to help fund them, you can offer your money at that interest or
less. You can even offer them your money
at zero percent interest if you feel so inclined. Oh!
And because there is no middleman, you can actually connect with the
person borrowing your money. You can ask
them questions about their business and they can post updates. Awesome!
Of course, with any investment there is a level of
risk. What if the borrowers don’t pay
the money back? Well, if that
unfortunate event happened, you would lose your money. However (and these two points are important),
Zidisha has a 98% repayment rate and you can lend as little as $1. My wife and I have decided to give Zidisha a
try and in order to minimize our risk, we’re planning to invest smaller amounts
but to invest in several borrowers. We’ll
start small to see how it works in practice and go from there. I’m excited to see this money (that would
normally be sitting in an American bank helping some banker earn money to put a
down payment on a yacht) affect real change in real people’s lives.
