Zidisha vs. Kiva Zip

Note: this article is authored by the founder of Zidisha. The information about Kiva Zip is taken from public sources, and does not necessarily express the views of Kiva or Kiva Zip.

Zidisha and Kiva Zip are both experimental web platforms that aim to use person-to-person lending approaches to reduce the cost of microloans in developing countries. How are they different?

In general, Zidisha has a more radically transparent, hands-off and libertarian orientation. This can be a good thing or a bad thing, depending on the sort of experience you are looking for. Zidisha is structured as a free marketplace, where lenders and borrowers interact directly without intermediaries. Lending through Zidisha is a do-it-yourself experience involving an authentic, unpredictable human connection.

In the case of loans outside the US, where Kiva Zip is most frequently compared with Zidisha, Kiva Zip feels more like a traditional managed charity. Kiva Zip loans are overseen by local partners called Trustees, and the Trustees have an especially active role in non-US loans. The result is a more polished and uniform experience.

Generalities aside, I consider these to be the most important tangible differences between our lending models:

Geographic scope. Zidisha offers loans in Benin, Burkina Faso, Ghana, Guinea, Indonesia, Kenya, Niger, Senegal and Zambia, and we have no plans to enter the US market.

Kiva Zip offers loans in the US and Kenya.

Interest rates. Zidisha allows borrowers to offer interest rates of their own choosing to lenders. Lenders may then choose to fund the loans at any rate they desire, from 0% up to the maximum offered by the borrower. The rate of interest chosen by Zidisha users varies widely, but the average is about 5%. Zidisha borrowers also pay a 5% service fee per year the loan is held to cover money transfer costs. Zidisha is not supported by any large donors, and borrower fees along with optional lender tips fully cover our operating costs.

Kiva Zip is interest-free. Its operating costs are subsidized, so that borrowers are not asked to pay any service fees to Kiva Zip.

Risk. Zidisha does not use local partners or loan officers to collect repayments. Instead, we've adopted a variety of non-traditional methods to control credit risk, ranging from automated statistical analysis of incoming applications to crowd-sourcing the help of fellow Zidisha members to follow up on repayments. We publish borrowers' historical on-time repayment track records and allow members to set their own interest rates to offset expected credit risk. Zidisha's historical repayment rate is between 78% and 91%.

Kiva Zip uses a more traditional method to control credit risk, enlisting the help of local Trustees to act as loan officers, vetting applicants and following up on repayments. Kiva Zip's historical repayment rate is 88%.

Information provision.Zidisha publishes detailed statistics on the repayment status of its outstanding portfolio and ended loans in each country. The repayment performance of each individual loan, and all comments posted on each loan project, are also displayed to the public. Borrowers' public Facebook pages, historical repayment rates, and the repayment performance of the Zidisha borrowers who invited them to Zidisha are all published in the loan profile pages for prospective lenders to evaluate.

Kiva Zip does not make any of this information available to the general public.

Borrower demographics. Due to the internet use requirement, most Zidisha borrowers are young adults living in large cities like Dakar, Jakarta and Nairobi. They are very low-income - often earning less than a dollar a day - but unlike previous generations, can use the internet easily from the cheap public cybercafes that have proliferated in developing countries in recent years. The median age of Zidisha borrowers is around 25 years old.

Kiva Zip's Trustee-based structure facilitates a focus on the more traditional microfinance client demographic: older generations and residents of rural areas, who do not necessarily use the internet themselves.

Communication with borrowers. Zidisha has no local staff other than volunteers, and no local intermediaries. Borrowers post their own loan applications and dialogue directly with lenders. We have a very active member community, with hundreds of direct conversations between lenders and borrowers throughout the world taking place daily in our loan project pages and user forum.

Kiva Zip Trustees often post loan applications on borrowers' behalf, and assist with collecting repayments. Kiva Zip also has an office with staff in each borrower country. Kiva Zip borrowers can post updates via SMS message or via their profiles, and Kiva Zip trustees may also post updates on borrowers' behalf. Kiva Zip does not have a user forum, and direct dialogue with borrowers outside the US is less frequent with Kiva Zip than with Zidisha.

The bottom line. Zidisha and Kiva Zip each adds value in its own way. Kiva Zip retains Kiva's historic expertise in liaising with local entities: hence the Trustee-based organization of the loans.

Zidisha's core expertise is in person-to-person communication, and we are passionate about keeping that direct individual connection untainted. We interfere as little as possible in the transactions between borrowers and lenders, while providing the marketplace infrastructure that makes direct person-to-person lending across the international wealth divide possible.

Have you tried lending with Zidisha or Kiva Zip? Please share your experience by posting a comment here.