Lending Process:
Zidisha's lending process works as follows:
1. A first-time loan applicant creates a profile that describes his or her business and credit history, including loans he or she has successfully repaid to local banks or microfinance institutions.
2. The applicant's reported credit history is checked by an independent local financial institution or credit reporting bureau. Only after these checks have confirmed a positive borrowing record may the applicant request a loan through Zidisha.
3. The applicant then posts a loan request that describes the proposed investment, desired loan amount and repayment period, and the maximum interest rate the applicant will accept.
4. Zidisha’s lender participants then have the opportunity to bid to finance all or a portion of the loan at a proposed interest rate that is equal to or less than the applicant's desired rate, net of a transaction fee equal to 5% of the original amount of the loan for each year the loan is outstanding. If the loan is oversubscribed, then bids from lenders with the lowest proposed interest rates are retained.
5. 100% of lenders' accepted bids are disbursed to the borrower. Loan values are fixed in local currency, using the exchange rate effective at the time the loan is disbursed. Because loan values are fixed in local currency, lenders bear the risk of any currency exchange rate fluctuations.
6. The borrower repays principal and interest according to the schedule proposed in the loan application. Each time the borrower makes a repayment installment, lenders' shares of principal repayment and interest are credited to their accounts on the Zidisha website. Lenders may request to reduce their funded balance and receive a corresponding cash promotional payment at any time, or use it to finance new Zidisha loans.
7. Throughout the loan application and repayment period, lenders may post comments and questions, and borrowers may supply additional information and business updates through a weblog on their profile pages.
8. Lenders may post feedback on all lending transactions with which they are involved, thus creating a performance record that allows borrowers to request progressively larger loans with each successful repayment. (From Zidisha Website: "How It Works")
1. A first-time loan applicant creates a profile that describes his or her business and credit history, including loans he or she has successfully repaid to local banks or microfinance institutions.
2. The applicant's reported credit history is checked by an independent local financial institution or credit reporting bureau. Only after these checks have confirmed a positive borrowing record may the applicant request a loan through Zidisha.
3. The applicant then posts a loan request that describes the proposed investment, desired loan amount and repayment period, and the maximum interest rate the applicant will accept.
4. Zidisha’s lender participants then have the opportunity to bid to finance all or a portion of the loan at a proposed interest rate that is equal to or less than the applicant's desired rate, net of a transaction fee equal to 5% of the original amount of the loan for each year the loan is outstanding. If the loan is oversubscribed, then bids from lenders with the lowest proposed interest rates are retained.
5. 100% of lenders' accepted bids are disbursed to the borrower. Loan values are fixed in local currency, using the exchange rate effective at the time the loan is disbursed. Because loan values are fixed in local currency, lenders bear the risk of any currency exchange rate fluctuations.
6. The borrower repays principal and interest according to the schedule proposed in the loan application. Each time the borrower makes a repayment installment, lenders' shares of principal repayment and interest are credited to their accounts on the Zidisha website. Lenders may request to reduce their funded balance and receive a corresponding cash promotional payment at any time, or use it to finance new Zidisha loans.
7. Throughout the loan application and repayment period, lenders may post comments and questions, and borrowers may supply additional information and business updates through a weblog on their profile pages.
8. Lenders may post feedback on all lending transactions with which they are involved, thus creating a performance record that allows borrowers to request progressively larger loans with each successful repayment. (From Zidisha Website: "How It Works")