How Tala Uses Your Phone Details to Qualify You for Loans

With more than 380,000 Kenyans having so far defaulted on loans taken from digital lenders, one can only imagine how hard it was for the fintechs when they started out.

Without any history or listing, it meant that borrowers could default and go scot-free while managing to borrow from other lenders who did not know about their creditworthiness or lack thereof.

Statistics from Metropol Corporation show that more than 7.6 million Kenyans are taking loans from multiple mobile loan apps. Across the board, about 2 per cent default.

This is supported by Tala CEO Ivan Mbowa who says that they have maintained a lifetime repayment rate of over 90%.

Too much credit but little financial literacy

Tala just celebrated its 5^th birthday and over that period, Kenya’s digital lending landscape has changed dramatically.

When the lender started operations in Kenya as Mkopo Rahisi, there were no systems in place to determine who was a risky borrower and who was not.

By default, high-risk borrowers could beat the systems and get credit from multiple lenders without being flagged. This was making it a zero-sum investment for digital lenders.

So far, Tala has disbursed loans to over 2.5 million customers in Kenya and targeting 4 million globally in the ‘emerging markets’ where the lender has a presence.

The company is in the Philippines, Mexico, Tanzania and targeting moving to India as it expands its portfolio.

With this ground-breaking feat, Mbowa says that there has been a myriad of challenges as digital lenders try to navigate and chart a course in the fintech lending sector.

“Digital lenders have increased over that time and this brings to the table too much credit and financial literacy needs that have not been addressed,” says Mbowa.

Mobile Phone Data and Privacy Points

Having learned from their experiences in the past five years, Tala has come up with ways of scoring their borrowers.

Mbowa says that Kenya is Tala’s most mature market with the highest number of customers. This is where they generate the ‘greatest amount of impact’ in terms of the loans disbursed.

With this, it raises the fundamental question of how the lender can assess and score a borrower. As a new customer, how does Tala assess and tell your creditworthiness?

Mbowa says, “When Tala came into the market, many of the customers we wanted to serve did not exist in any credit bureaus. You wouldn’t find any record of them. So we had to find ways of creating a new method of determining credibility and eligibility for credit.”

“We look at device data on your android smartphone, your behavioural data when within our system and thirdly your past payment behaviour,” he adds.

This means that the app harvests as much information as possible for the lender to be able to score you correctly.

“At the beginning, we don’t have any information on your past behaviour so it’s largely based on what we can see on your device. We might look at your phone and see how you list your contacts. We look at over 10,000 factors to determine the creditworthiness of a customer,” he says.

While this may sound like a harmless enough venture for the borrower, the lender has access to all your phone details. Spooky as it sounds, the lender gets to know you more than you will ever do. Leave alone those that are closest to you.

This makes true the saying that data is a goldmine!

As a new customer, the question is if you get the minimum loan limit or you could get more.

Mbowa reveals that some customers potentially get higher than the minimum limit of a thousand shillings. This is however dependent on the factors that they look for.

The lowest loan one can get from Tala is Sh1,000 and a maximum of Sh30,000. Mbowa says that the limit is being reviewed upwards.