Short Term Loans
A common narrative for loan providers is financial inclusion. 69% of global adult population is not covered by credit bureaus. Using non-traditional data (e.g. text messages, location, contacts, call logs), more people can get scored.
Between 2016 and 2018, 86% of loans taken by Kenyans were digital. While ~50 fintechs have entered the field from 2015 - 2019, banks and MNOs dominate the market (97% of supply). 49% of borrowers of loans overdue for 90+ days owe less than $10.
Donors were too labor-intensive to find. Siroya’s InVenture (now Tala) was incorporated as a for-profit company. Users would text their income and expenses, InVenture would score them and license this score to banks. Banks weren’t that interested.
She pivoted to lending directly - starting with Kenya. Under analysts' pressure, they charged 15% fee for a 21-day loan (180% annualized). Borrowers that are late are charged a one-time late fee and barred from taking out another loan.
In 2018, Tala spearheaded The Digital Lenders Association of Kenya , an attempt at self-regulation. Other efforts include stricter eligibility evaluations, subsidized health insurance, financial education, switching & monitoring debt collectors.
Tech Startups Are Flooding Kenya With Apps Offering High-Interest Loans. Zeke Faux. Bloomberg New Economy. https://www.bloomberg.com/news/features/2020-02-12/tech-startups-are-flooding-kenya-with-apps-offering-high-interest-loans . https://news.ycombinator.com/item?id=22307002 . Feb 12, 2020.
Making Microfinance Benefit the People and Not the Sharks. Shivani Siroya. https://www.huffpost.com/entry/making-microfinance-benef_b_555361 . Jun 28, 2010.
Making Digital Credit Truly Responsible: Insights from analysis of digital credit in Kenya. Isvary Sivalingam; Olivia Obiero; Evelyne Matibe; Rahul Chatterjee; Karthick Morchan; Anup Singh; Leonard Kambona. https://www.microsave.net/2019/09/18/11310/ . https://www.microsave.net/wp-content/uploads/2019/09/Digital-Credit-Kenya-Final-report.pdf . Sep 18, 2019. Accessed Aug 5, 2021.
Lessons From a Changing Lending Industry in Kenya. https://tala.co.ke/2020/01/22/lessons-from-a-changing-lending-industry-in-kenya/ . Jan 22, 2020. Accessed Aug 5, 2021.