SMS Small Business Lending Shrinks Wealth Gap

Photo Credit: ZidishaEvery entrepreneur has to ask themselves the same questions when they start their businesses.  Should I take out a small business loan and how do I go about doing it?  This can be a daunting decision, especially when you don’t have a credit history.  Loans are especially harder for entrepreneurs from the developing world, where access to banks is limited.

The lending gap may be getting smaller with Zidisha, a peer-to-peer micro-lending nonprofit specifically geared towards small business owners in developing countries.  Zidisha, which is Swahili for “grow” or expand,” was founded by American Julia Kurnia, a development specialist who managed overseas grants on behalf of the U.S. government.

“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,” said Kurnia.

Here’s how it works: Entrepreneurs can submit a loan request to Zidisha.  Online users can go to Zidisha’s website and learn more about why the entrepreneur is seeking funding.  If users like the business idea, they can chip in some money online.  All first time loan applicants receive only US$50 by text.  Once it is repaid, the applicant can apply for more money.  Loans are used to pay for items that can make a difference in a business operation like computers or sewing machines.  The average loan is between US$200 to US$300 with a low service fee and no interest.  Repaid loan money is recycled to help other entrepreneurs.

This business model supports the growing interest in the development community to move towards “trade, not aid”.

Posted in Africa, Tech Disparities, Text Mesaging and tagged , .

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