SMS Loans Let People Skip Banks in the Developing World

Wired: In 2009, a man named Duncan Chege opened up a modest Internet cafe – if you could even call it that – in Nairobi, Kenya. In the beginning, the cafe, called Vision Computers, had just one machine. After 3 years of committed operation by Chege, that number grew to 8, some of those machines being slow and clunky second-hand desktops.But Chege wanted to keep expanding. He didn’t just offer Internet access at Vision Computers, though that was one way the neighborhood stayed connected to the online world. Chege also viewed his fledging business as a way to offer a variety of educational services to the local community, which included a nearby slum. He offered computer-training courses to young people, teaching them how to use basic software like Microsoft Word and Excel, potentially leading to office jobs. For a community where most of the available work was manual labor, this had the potential to be transformative.

But to grow a business, you need capital. And connecting with Zidisha, a nonprofit P2P lending platform for entrepreneurs living in low-income neighborhoods in developing countries, changed the course of Chege’s business.

“I was locked out of banks and other financial institutions because of tedious requirements,” Chege wrote in an email to WIRED. Among other things banks wanted, he said, were guarantors with active bank accounts. Instead, Zidisha cut out the bank – and all the other middlemen typically associated with small business loans – altogether, thanks mainly to the rise of mobile services that make sending and receiving money as simple as dialing a phone.

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