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How Tala is Changing the World One Loan at a Time

Tala is Changing the WorldShivani 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
Photo: Pixabay

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InSight: Generating Micro-Business Financial Identity

InSight: Generating Micro-Business Financial Identity
A common obstacle for any business owner, regardless of which country they live and work in, is access to credit.

The twenty-first century has brought with it increasing dependence on loans and financial institutions for basic individual purchasing power – let alone entrepreneurial success.

An emergent non-profit organization has taken advantage of cell phones – a technology available to a growing percentage of the global population- to create wide spread access to these vital financial services.

For micro-business owners in the less developed world, there is an abundance of informal transactions and very little access to financial identity. Providing financial identity is something Shivani Siroya, a 2013 TED fellow, CEO and founder of InVenture, describes as the most important objective of her latest venture.

According to InVenture, 400 million people lack access to financial services due to insufficient credit scores, which means that they do not have a clear idea of how much they earn, spend or need to save. In other words? They lack financial identity.

Without financial identity it is not only challenging to manage a business, it is almost impossible to secure loans and credit lines needed to grow a business.

Siroya invented InSight, an accounting tool that enables individuals and small-business owners in the less developed world to keep track of their finances and build a financial identity for themselves. InSight is operated through SMS and compatible with any cell phone, it allows individuals to input their daily earnings and expenses, and utilize financial tracking tools. This process provides proof of growing businesses and the data collected is made available to financial institutions; making connections between those in need and those able to provide large-scale loans.

Siroya was inspired to connect micro-business owners to the credit market by creating a cell phone operated credit scoring service due to the misconception that divided the two worlds.

According to Siroya’s research, financial institutions largely disregard micro-business owners as potential credit recipients due to their “untrustworthiness,” a judgment passed based on the amount of their transactions comprised of cash, which is inevitable without access to financial institutions.

Siroya wants to change this perception and decrease the percentage of micro-businesses that currently operate under considerable credit constraints, which is currently an estimated 85 percent.

This is a dream that is being realized. As micro-business owners in the less developed world start to utilize InSight, their “buckets of receipts” are replaced with income statements on their cell phones.

Perhaps the biggest impact of all, has been for some InSight users who have reported doubling their savings for the first time.

– Zoë Dean

Sources: TED Blog, InVenture
Photo: Vintage 3D