[HN Gopher] Show HN: Pay It Forward - P2P Crowdfunding for Afric...
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Show HN: Pay It Forward - P2P Crowdfunding for African
Entrepreneurs
Author : jkurnia
Score : 33 points
Date : 2021-07-15 18:28 UTC (4 hours ago)
(HTM) web link (www.zidisha.org)
(TXT) w3m dump (www.zidisha.org)
| jkurnia wrote:
| Hi HN, I'm Julia, the founder of Zidisha, a loan crowdfunding
| platform for entrepreneurs in developing countries. We've been
| doing this since 2009 and were a YC nonprofit way back in the W14
| batch. Our key approach this whole time has been to bypass the
| local banks and NGOs used by other microlending websites, and
| connect lenders and borrowers directly via a P2P community. This
| allows us to reduce the administrative cost of the loans relative
| to traditional programs and enable unfiltered communication
| between lenders and borrowers.
|
| Our model has gone through several iterations over the years, and
| I thought HN might be interested in our latest one! It's called
| "Pay it Forward" and the key idea is that entrepreneurs fund new
| projects by other entrepreneurs instead of repaying lenders
| directly. Some background on why we arrived at this iteration:
|
| With our traditional microloans, when the borrower repaid their
| loan, the money went back to the lenders, who then would choose
| new projects to fund with it. The problem was that funds often
| went unused for long periods, because many lenders don't have the
| time to choose new projects each time repayments come in. We
| built an automated relending tool to try to address this, but it
| lacks the ability to vet projects for quality or to provide the
| human connection that manual lending does. Normally, the lending
| process involves messaging, photo sharing, and so on, between
| lenders and entrepreneurs, which is more meaningful for
| everybody.
|
| The users who typically spend the most time on our platform are
| the entrepreneurs. Access to loans is often a life-changing
| opportunity for them, and many choose to give back to the
| community by serving as Volunteer Mentors - a role that involves
| vetting new applicants, conducting orientations of new members
| via WhatsApp, and mentoring newer members as they grow their
| businesses. They are often best placed to know who is most
| trustworthy and which projects are good investments. Many have
| expressed interest in "graduating" from a borrower to a lender on
| the platform, but up until now we had no mechanism for the
| entrepreneurs to fund loans. So we've built one!
|
| In the new system, projects must be repaid, just like traditional
| loans. But instead of repaying lenders, the entrepreneurs
| allocate the repayments to other projects on the platform. The
| original lenders can track the follow-on projects that are funded
| by their chosen entrepreneurs, so they get to see how their
| impact continues to multiply as funds are recycled over and over.
|
| Unlike loans, Pay It Forward projects have no fees or interest
| other than a 5% service fee to cover money transfer and operating
| costs. (First-time participants who don't have an invite from an
| existing member also pay a one-time fee of about $10, which
| covers the cost of a background check and lifetime membership.)
| Once projects are repaid, the entrepreneurs can choose to deposit
| an extra amount of between 0 and 25% of the amount raised to fund
| other projects in the platform. Their next project fundraising
| amount limit is then increased by the extra amount they chose to
| deposit, plus a matching increase from us. (For example, an
| entrepreneur who raises $100 can choose to repay the $100 then
| contribute an extra up to $25 to the community. If they
| contribute an extra $25, then their next fundraising amount is
| $150.) This enables financial sustainability and growth of the
| project funding capital, without burdening any entrepreneur who
| prefers not to make extra payments.
|
| We have opened the Pay It Forward product to the community after
| a period of beta testing. Early data suggest that repayment
| performance will be the same or better than that of our
| traditional loans. Thus far, the majority of entrepreneurs have
| opted to make some extra payment into the community at the
| conclusion of their projects.
|
| This is a departure from the traditional P2P lending concept and
| we're not aware of a similar model being tried elsewhere. I'm
| very interested to hear your ideas and feedback in the thread,
| and you are always welcome to contact me at julia@zidisha.org!
| [deleted]
| dnlll wrote:
| Cool project! Will definitely 'invest' some money.
|
| However, are the repayments by the entrepreneurs also required to
| pay the 5% service fee? This new pay it forward models seems
| mostly to be a way to keep all the money in the system and slowly
| make it yours via the 5% fee. I don't see what the benefit of
| this model is towards the lender. Or am I misunderstanding it?
| jkurnia wrote:
| The fee is paid by the entrepreneurs as a percentage of each
| project funded. It covers the cost of transferring funds
| (credit card and other payment transfer fees, Fx margin we pay
| when transferring funds internationally) and administering the
| platform (web hosting, phone and SMS communications with
| entrepreneurs, etc). At our current scale we are just breaking
| even with our operating costs covered by the 5% fee.
|
| The 5% fee does not take away from the loan funds, which are
| kept separate from operating costs and fees.
|
| For comparison, most traditional microlending programs charge
| over 20% in fees and interest, and comparable unsecured small
| business loans in the markets we serve are much more expensive,
| or not available at all. Since the entrepreneurs are acquiring
| assets and operating capital they could not otherwise afford
| and which continue to generate profits after the loan is
| repaid, the value to them is normally far higher than the 5%
| cost of the loan.
|
| Here is an aggregator of project updates posted by the
| entrepreneurs, which gives an idea of the impact of the loans:
| https://www.zidisha.org/project-updates
| oezi wrote:
| Can you share some numbers on zidisha? Is there a dashboard
| of sorts?
|
| I would imagine:
|
| - Amount of loans outstanding
|
| - delinquency rate
|
| - breakdown of country of origin of lenders. Are people
| really paying it forward?
| dnlll wrote:
| Thank you for the clear and quick response. The aggregator is
| a nice overview.
| patrickbolle wrote:
| Love it! Fantastic idea.
|
| I am checking out some of the projects now.
|
| Is there still an opportunity to get paid back, rather than
| keeping it in the system?
|
| I love the idea of the loan continuing through the system for
| myself (I don't personally need the payback), but I'd imagine
| there would be some funders / loaners that would like the
| original system of getting paid back. Is that still a
| possibility?
|
| I am sending this to a few friends that are really excited about
| African entrepreneurship (myself included). Great idea!
| jkurnia wrote:
| At the moment, we are offering both Pay It Forward projects and
| traditional loans (where lenders are repaid) to our existing
| lenders, and showing only the new Pay It Forward projects to
| new users who sign up. This makes things easier to understand
| for new users and helps us gather clear feedback on the Pay It
| Forward concept.
| donclark wrote:
| Kiva has been around for many years. I am curious if they
| inspired your service, and if so, how?
|
| https://www.kiva.org/
| jkurnia wrote:
| Yes, my experience in cofounding a Kiva field partner NGO in
| 2006 was an inspiration for Zidisha. The intent was to reduce
| the high charges to the entrepreneur inherent in the Kiva model
| by eliminating field partner organizations and connecting
| lenders and borrowers directly. This had not been feasible at
| the time Kiva was founded, due to low internet penetration in
| developing countries then. (See
| https://www.huffpost.com/entry/the-story-of-zidisha-dram_b_9...
| for more background.)
| deregulateMed wrote:
| I felt weird about kiva. I didn't really need the money repaid.
| I wanted to basically donate. Anyway I think I profited after a
| few years if I remember correctly. Anyway I cashed out and
| ended up donating the money elsewhere.
| ayewo wrote:
| 1. What percentage of your loans end up being delinquent for each
| of the countries you are in?
|
| 2. How do you handle defaults?
|
| Your FAQ mentions:
|
| _If you miss a scheduled payment, Zidisha will issue one
| courtesy reminder by text message to your mobile phone. If the
| payment still is not made, Zidisha will request mediation from
| members of your community. If mediation is not effective, Zidisha
| may determine that the loan is defaulted. The consequences of
| defaulting on a Zidisha loan include disqualification from
| funding any new loans in the future, reporting of the default to
| your national credit bureau, and legal prosecution resulting in
| confiscation of property, fines and other legal penalties._
|
| But then I noticed elsewhere on the site, mentions of a " Credit
| risk payment: Goes into a fund that compensates lenders for loan
| defaults".
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