NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, August 27, 2014

Banks in the U.S. are still leery of issuing loans to local small businesses, but one nonprofit says it has figured out a way of getting a 90% repayment rate on business loans to the types of people no financial institution would trust–young people in poor African countries without as much as a permanent address.

“You are sending hundreds of dollars to low-income 22-years-olds living in shacks in the slums of Nairobi. It sounds like a scam,” said Julia Kurnia, founder and director ofZidisha, a nonprofit that hosts an online peer-to-peer lending platform that funds small loans to entrepreneurs, mostly in Africa. Ms. Kurnia says the repayment rate for loans issued in 2014 is more than 90%.

The repayment rate has risen significantly as Ms. Kurnia deployed technology she said she learned about in Silicon Valley. Ms. Kurnia participated in Y Combinator’s accelerator this past winter, after the program began accepting nonprofits.

Ms. Kurnia said that Y Combinator and several prominent technology entrepreneurs and investors have just donated about $234,000 to her nonprofit.