The image that comes to mind when discussing banking and investment institutions is that of a behemoth. Large, enormous and in many cases a little slow on the uptake. Not always transparent and quick to process least of all  for the generation of  Millennials. The financial sector has long been overdue for innovation. More than 2 billion people around the world are still to come under the umbrella of banking services. This is particularly true of developing nations. What has changed? Better internet access and with more and more people of the developing world going the mobile way, new opportunities are presenting themselves to make changes way in the banking industry.

Online Microlending Platforms

Tech start-ups like Konfio, Milaap, Rang de, Kiva and Zidisha are helping micro businesses in Latin America, India and Africa get small business loans. Konfio has a  proprietary algorithm that it uses for its credit appraisal process while Zidisha connects lenders and loan seekers directly.

Forbes reports:

"The average interest rate charged for microfinance loans worldwide is about 40% and even charitable loans funded through Kiva are passed on to the end borrower at an average interest rate of 35%. By eliminating intermediaries, Zidisha has been able to reduce cost to the borrower to just 5% of the loan amount."

Take the case of Faustina Yeboah who has taken a $200 loan from Zidisha to buy frozen fishes and meat for resale. She has taken a $200 with the cost of loan being $10.

This is her story from the Zidisha website:

“I am a cold store operator (sale of frozen fishes and meat) in addition I sell food products like palm oil, frying oil, tin tomatoes fried fishes and fresh vegetables (tomatoes, pepper, onion, and garden eggs). I sell the additional items on table top and in smaller quantities to my customers who buy for food preparations in their households. The business is located in Seikwa, Tain District, Ghana. The patronage of my items is very high and most of the people who buy are women who buy for family food preparation. I operate throughout the day but my busy hours are from 2:00pm (14 hours GMT) to 5:30pm (17:30 GMT) each day. My vision is to raise this business to the level that I can be making wholesaling to those who will like to buy in bulk for resale. Currently unemployment is on the rise in my country and it is worrying trend to every concern citizen. My shop space is very small and I operate from two fridges and again I have no extra power source. So I will be grateful to get Zidisha loans support to enable me employ some of the unemployed boys and girls, make a big cold room to keep my items frozen always and to buy a power generator to power my shop in case of power cut (dumsor, dumsor as in local terms). This in the long run will help me get more profit to support my parents and cater for my children education.”

Usually a bank would never extend a loan to Faustina, but with the help of microfinance Faustina may grow her business to the point where she can avail a larger loan for capital expenditure from a bank.