For three and a half years, Shivani Siroya engulfed herself in the depths of Sub-Saharan Africa, digging up data on microfinance solutions.
She was then working at the UN Fund for Population and had opted to manually do the research since there was no data on what she was looking for online.
Apart from just talking with people, she would walk to homesteads to get a clear picture of how they were saving and understand what informed their financial decisions.
At the conclusion of her research, she had interviewed an estimated 3,500 individuals and had established that majority of the small borrowers failed to grow their enterprises due to lack of suitable credit.
Armed with personal savings of Sh3 million ($30,000), a team of 10 and an undying passion to transform the financial inclusion spectrum, Ms Siroya went into entrepreneurship full throttle.
The information she had gathered formed the foundation of establishing her technology-driven credit company Tala.
The firm’s smartphone app uses alternative data to deliver instant credit, majorly to small enterprises, without the need for collateral.
“The app unveiled in Kenya in March 2014 riding on the country’s dominant mobile money platform M-Pesa. This made it easier for Tala to integrate with the player and get to up to 27 million people,” Ms Siroya said.
Among the first steps the Tala team made was to use Facebook for advertising the mobile phone application, saying it guaranteed instant credit.
Ms Siroya recalls doubting that the advert on Tala Kenya, formerly Mkopo Rahisi, would attract any customers.
However, in a span of one week, 100 customers had downloaded the app that relies on mobile data points such as network diversity, geographic patterns, and financial transactions to score customers in real time.
The data collected is what is used to determine the creditworthiness of a particular customer. Other credit providers use collateral or a person’s formal credit history to determine borrowing.
Tala offers its customers two products: a 30-day loan at an interest rate of 15 per cent and the 21-day credit at an interest of 11 per cent. The first 8,000 customers on the app were served manually and Ms Siroya notes “this came with its own challenges”.
Today, the micro lender has serviced more than 4.5 million loans and has lent out Sh25 billion ($250 million) to its customers in Kenya, Tanzania, Philippines and Mexico.
“Repayment rates are at 92 per cent with eight per cent accounting for the slow payers. Interestingly, 95 per cent of our clients are repeat customers,” said Ms Siroya, a graduate of Columbia University.
Tala says when launching in a country, they rely on diverse cultural differences.
“When we got started, we raised investor capital of $1.2 million (Sh120m),” she says of the venture that has employed 220 people, among them customer service, engineers and collectors.
Plans are underway to introduce the service in West Africa in countries such as Ghana, Senegal and Nigeria as well as the southern part of the continent in South Africa.