Shivani Siroya’s startup, Tala, is changing the world by making a better, more equitable financial system one loan at a time. Billions of people around the world do not have a financial identity, making it impossible for them to advance due to a lack of credit history, but Tala is changing this.
The Financially Anonymous
Only 30 percent of the world’s adult population has a financial identity. The other 70 percent lack a credit history or any way of applying for loans. This severely limits opportunities to financially advance because loans are often necessary for larger investments, like starting a business, purchasing farm equipment or investing in better irrigation systems.
Credit and loans are only accessible with some type of paper trail or financial history if customers are borrowing from traditional banking institutions. It would be too risky to lend money to anyone lacking credit and financial history. Siroya, Tala’s founder and CEO, realized “that there are billions of people around the world who are not ever seen and don’t even have an identity. That felt really wrong.”
How Tala Works
Tala is a smartphone application available to anyone with an Android phone. With permission from the user, the application uses data collected from smartphones to create a digital credit history that determines if the customer is eligible for a loan. It serves the same purpose as traditional credit history to create a unique financial profile for each user. It is currently serving customers in Kenya, Tanzania, the Philippines, Mexico and India with Kenya accounting for the majority of users.
Using nontraditional data, Tala analyzes each of its three billion users using 10,000 unique data points to determine a user’s risk profile and whether they would be a credible borrower. Data points come from information gathered from texts, calls, sales transactions, application usages and personal identifiers that help to create a unique profile for each user. About 85 percent of Tala users receive a loan within 10 minutes of this vetting process. The average Tala loan is $50. Users typically invest these loans in equipment or business licenses, which are important opportunities that are not available to those who cannot access credit.
Tala expects customers to repay the loan within 30 days, which 90 percent of customers do on time. Tala is a loaning service that deals in microloans, ranging from $10 to $500. Since the company’s inception in Santa Monica in 2014, it has granted a total of six million loans worth $300 million and amassed a customer base of 1.3 million. Investors like Revolution Growth, IVP, Data Collective, Lowercase Capital, Ribbit Capital and Female Founders Fund with around 215 employees around the world fund Tala.
How Microloans Change Lives
Tala is a microfinancing company, using small loans to make big changes. Siroya herself has seen how these small funds make disproportionate improvements in people’s lives. Jennifer in Nairobi, a 65-year old food-service entrepreneur, needed credit to invest in a food stall and start her business. However, she had no credit history and banks refused to invest in her business aspirations. Her son heard of Tala and introduced her to the smartphone app. After answering eight to 10 questions, Tala approved her for a loan.
Over the last two years, Jennifer has taken out 30 loans and subsequently opened three food stalls. Additionally, she now has a formal credit history and can borrow money from formal bank institutions. In fact, Jennifer has used this opportunity to take out a small business loan from a bank and begin opening her own restaurant.
There are more people like Jennifer who lack opportunity but with help from Tala, they are beginning to see changes. By developing a real relationship with their customers, Tala is changing the world by updating the face of microfinancing and the very notion of credit history. Now it is possible to identify those who banking institutions ignored and give them a fair chance at empowering themselves.
– Julian Mok