I wish the team at Zidisha nothing but success, but I'm skeptical that micro-lending is a practical solution for relieving poverty in the developing world.<p>If a viable opportunity for making small loans existed, then I would expect local financial institutions to fill that need. When those institutions do not exist, there is usually a reason, such as the lack of an adequate legal and financial system for recovering debts. Without the ability to enforce payment obligations, the line between lending and charity becomes rather slim.<p>It's also unrealistic to expect most people receiving micro-loans to operate effective businesses, given their limited educations and lack of direct exposure to Western entrepreneurial values. Perhaps their living conditions could be improved more efficiently by a non-profit that gave away the right to operate franchise businesses using a proven model?<p>I don't have the expertise to know what kind of business would be optimal for people with limited resources. But when I see the success of immigrant-run franchises within the United States, I can't help but imagine that the underlying principle could be harnessed to generate wealth for needy people overseas.
A lot of the overhead from 'traditional' microfinance (the model popularized by Mohammed Yunus in the 70's-80s) comes from creating social/community-based incentives for repayment, referred to as social capital. This is considered the alternative to regular loans since in non-collateral lending the borrower loses nothing monetarily if they don't repay.<p>According to their site, the repayment rate for Zidisha is under 50%... thats pretty dismal in an industry where you normally consider a healthy MFI (microfinance institution) to be operating at high 90 percentiles of repayment.