US-based mobile app lends Kenyans Sh1bn under one year

Mobile credit app firm, Tala, formerly Mkopo Rahisi, has issued loans totalling Sh1 billion in under a year of operation, highlighting Kenya’s increased appetite for cellphone-linked financing services.

California-based InVenture – which owns the mobile lending app – said the platform was gaining traction among small- and micro-entrepreneurs in need of quick loans to finance businesses, but are locked out by traditional banks which demand collateral deeming them high-risk borrowers.

The Android app collects data from the applicants’ mobile device such as call patterns and mobile money history to build a credit score.

Tala disburses loans, via M-Pesa, of up to Sh50,000 and charges a one-off processing fee of between 5 to 15 per cent depending on customers’ profile and size of loan that must be repaid up to in six months.

“Mobile-based apps can be used to reach people unable to access traditional bank branches and allow them to create and build an identity,” said Amanda Donahue, InVenture’s vice president in charge of East Africa.

“The Kenyan market is changing quickly. We want to provide more transparency into their financial health and offer products and services that make their daily lives easier,” said Ms Donahue in an interview with the Business Daily.

Tala has already processed 275,000 loans in Kenya to a client base of 75,000 customers, InVenture said, with more than half being repeat borrowers.

The average loan size is Sh10,000 according to Ms Donahue, but first time applicants are given Sh2,000 and have to build their profiles over time.

Tala is the brainchild of Shivani Siroya, a techie based in Los Angeles. InVenture has raised about $11.2 million (Sh11 billion) in funding from investors including Collaborative Fund, a venture fund founded by Craig Shapiro.

About 10 per cent of Tala’s loan book has been non-performing in the 11 months and InVenture said it continues to refine the app’s screening of customers’ data.

“This continues to reduce as we improve our platform and collection methods,” said InVenture.

Mobile lending is fast gaining currency in Kenya, with nearly a dozen major players in the market including commercial banks’ platforms such as M-Shwari, M-Co-op Cash, KCB M-Pesa, and Equitel.

READ: Mobile money’s quick growth transforms financial services

Branch, a Facebook-linked mobile application that allow users to borrow and repay micro-loans via mobile M-Pesa, in March raised $9.2 million (Sh930 million) in equity funding from Silicon Valley investors.

Matt Flannery, founder of Branch, said the app had disbursed “nearly $1 million” (about Sh100 million) as at October last year, after being in the Kenyan market for about six months.

Others are Saida and Mombo Mobile, which also issue short-term loans via mobile money.

Branch is said to command 27 per cent market share in Kenya’s app-based lending market followed by Tala (24 per cent) while Saida controls 7.1 per cent, according to a study by Djuaji Research published early this year.