Why $200,000 is a huge deal for this DC startup

An amount like $200,000 may seem shrugworthy in a tech world where funding rounds tend to come in the millions and the north star for every startup seems to be the $1 billion “unicorn” label. But for local microfunding platform Zidisha, it’s definitely a big deal.

Zidisha, which recently participated in the DC Women’s Startup Challenge, just surpassed the $200,000 milestone for monthly loans, thanks in part to piecemeal funding of about the same amount raised last year.
That funding, which came via Y Combinator and a handful of tech entrepreneurs, was enough to help Zidisha scale its platform successfully — something critics said would be the decentralized microlending platform’s biggest challenge. As a result, the platform has now processed more than 17,000 loans over the course of several years and, with the $200,000 milestone reached last month, more than doubled last year’s monthly average.

Some money I donated to Zidisha 2 months ago has already funded 123% of its value in loans. (http://t.co/AWe79jaVll)

— Paul Graham (@paulg) August 4, 2015

Because Zidisha is focused on connecting people in wealthy countries with self-employed workers in developing countries, that level of growth and lending has an outsized impact, too. “A dollar goes about 10 times as far in Africa as it does here relative to people’s income,” founder Julia Kurnia said.
In developing countries, few workers have formal jobs. Instead, their livelihood comes from tasks like raising cattle or tailoring clothes or selling grains. For such small businesses, the biggest constraint is often capital — and seemingly small amounts can make a significant difference.
“Someone might sew dresses by hand and could quadruple her income if she had a sewing machine,” Kurnia explained. But getting that equipment isn’t easy when a sewing machine costs hundreds of dollars and a traditional loan models slaps steep interest rates on small amounts to cover intermediary costs.
“The world’s poorest people are paying the world’s highest interest rates,” Kurnia added, noting that the average interest rate is around 40 percent and can run as high as 80 percent — rates that naturally and rapidly eat into profits.
Eliminating those interest rates means breaking down a key barrier to capital for workers in developing countries, allowing for the lending of a hundred or so dollars here and there to make a tangible impact.

How a sewing machine changed everything: The story of our first member in Senegal, Ndeye Bineta Sarr. http://t.co/BSOcQ7kCR6

— Zidisha Inc. (@ZidishaInc) March 22, 2014

Just consider an example like Ndeye Bineta Sarr: A seamstress in West Senegal, she bought her first electric sewing machine thanks to a Zidisha loan and has since also rented a boutique workshop, hired an employee and established a working capital fund using the platform. Prior to the first loan, Sarr was sewing by hand and filling only one or two client orders at a time. Now, she can fill up to a dozen at once.
The list of examples goes on: One user is currently requesting just $60 to open a grocery story and another is in need of $100 to purchase a dairy cow. Add it up, and it’s easy to see why Kurnia is so excited about reaching a grand total of $200,000 in loans during a one-month period. That monthly total could fund over 3,300 grocery stores, for instance — and it was largely enabled by Zidisha’s few hundred thousand dollars of funding.