Did You Know African small business owners can access micro loans worldwide?

Funding for projects is hard to come by throughout the world. There are so many innovators and only a certain amount of angel investors to go around. Even if your idea is incredible, it can be down to being at the right place at the right time in order receive your initial funding to get your project off the ground. If you fail at this stage, the next step is approaching the bank for a loan, and in some cases this can be successful, but for many, banks will not take the risk on an idea when there is nothing to offer as collateral. This is even more of a problem for small business owners in Africa who have very few assets and banks are not very supportive of. There are possibilities for them to be part of cooperatives, which should help with personal development, but many of these often end up just paying for funerals.

The internet, and crowdfunding has offered these small business owners new ways of getting much needed funding to either build their businesses or develop personally. Most of us will have heard to Kickstarter and similar platforms. Some innovations on these sites receive enormous amounts of money, but sadly, some slip under the radar and don’t come close to their monetary needs. These platforms are not the right place for small business owners who just need a few hundred dollars to either purchase stock or equipment or even books to get through university.

Zidisha, which is a Swahili word for grow or expand, is a platform which enables small business owners and individuals to sign up and crowd source a micro loan from people all around the world. Entrepreneurs of all sorts can sign up to the service and they can then access individual lenders in order to meet their goals.

Lenders can search through all the projects to find one that they relate to, or that they would like to support. Once they have selected a project, they can choose how much to loan and begin the process of helping the entrepreneur meet their set goal. It is important to remember, this is a loan and not charity, or a gift! This money gets repaid to the the lender in instalments, and the lender can then choose to offer it to someone else to start up a business, or take the money back.

Benard is an entrepreneur in Kenya. $843 will help him buy new inventory and provide for his wife and small son. https://t.co/kTaTGpBOZF pic.twitter.com/F6rSCNuRzq

— Zidisha Inc. (@ZidishaInc) 19 November 2016

There are a number of similar platforms out there, but Zidisha offers something slightly different. When the goal has been reached and the entrepreneur has accepted payment of his or her loan, lenders are able to communicate directly with them. Entrepreneurs can give regular updates and answer questions from lenders. They are even able to upload pictures of their funded activities.

Each entrepreneur has a rating, so lenders can see how likely it is that their loan will be repaid. It should be remembered though, that this site is for philanthropy and not somewhere to save money, or hope for big returns. The loans are high risk, like any peer to peer funding platforms, but so far, a large majority of the loans have been repaid.

Zidisha is a great way to get much needed money to entrepreneurs. A little bit of capital input can go a long way for these small business owners, and when the loan is repaid, it can be used over and over again to help more small businesses. Currently there are entrepreneurs from all over the world hoping to meet their targets and fund their growth. They are receiving loans for exploits such as, buying rice and maize, investing in a colour printer to print posters for customers, a heat press machine to apply designs to hats and t-shirts and to buy two sheep and expand a farm.

Charities have their uses, but they do not inspire responsibility. When people or communities receive free charity, a ‘take culture’ is cultivated and rather than make sure that they are successful, they become dependent on aid. The micro loan system motivates entrepreneurs to pay back loans, so they can receive another loan in order to continue to grow their business. They have to learn to be careful with money, and use their loans efficiently, to fully benefit from the lenders.

Have you received a micro loan that enabled you to grow your business? Please let us know. If you would like to be a guest blogger and write about your favourite African innovation please Tweet us at @InventiveAfrica and please also share the blog on Twitter and Facebook.