Digital credit provider Tala is marking a decade of operating in Kenya. Annstella Mumbi, general manager for Tala Kenya spoke to the Business Daily on moving the business from an unregulated business to a regulated regime.
Ms Mumbi also delved into what it has meant to run the business without listing customers on credit reference bureaus (CRBs) and Tala’s plans to triple its annual loan book by 2026.
Tala is marking 10 years this year. What has stood out for you since joining in November 2020?
I joined Tala at the height of Covid-19. I was interviewed for the job when I was recovering from the virus. The virus in some way hit everybody and we even had to pause lending for six months.
The bigger thing I had to do in my first year was how to rebuild trust with customers after not lending them at a time when they needed it the most. We had to rebuild many relationships and stabilise in 2022. Loan repayment rates are at about 95 percent upwards on average.
You joined Tala when the Central Bank of Kenya (CBK) had, for the first time, introduced regulations for the digital credit providers. What did it take to navigate through Covid-19 and new regulations?
It was a stressful time. Initially, it was a lot about how to work together with CBK and Parliament to inform the right set of regulations. One of the initial drafts had capital requirements and we had to learn a lot in a short period to be able to get regulations that would not break the business.
But one of the things that brought comfort internally was that by virtue of us being a US-based company, we have always operated very ethically. We knew that when it came to submission of documents or any audits, we were confident there was minimal risk there.
When you look at the Digital Credit Providers regulations, what has stood out in shaping Tala’s operations?
Consumer protection. The issue that existed was that we moved from one or two digital lenders in 2014 to over 300 by the time I was joining Tala in 2020. And this was in an unregulated market. So, the unfair lending and unethical collection practices that included debt shaming were alarming.
The challenge we faced in an unregulated environment was that people would be harassed by any rogue lender and would say hawa akina Tala because of being the face of the industry. So the regulations really helped to complete what self-regulating had started.
Digital loans tend to be small ticket-size. Yet the regulations barred negative listing of defaulters of below Sh1,000. How have you navigated this space without running into a spike in defaults?
We actually have not been listing on CRBs since 2019. So how do you remain stable as a business when you are not listing people? I always say the fact that we are customer-centric means we do not want one-off relationships. We want to see customers grow and build a relationship.
At the end of the day, it is unsecured lending and borrowers will only repay if they care. Therefore, for us, we have taken a lot of time investing in relationships. Finance is very emotional. It is about how people feel and this plays a big role in repayment.
Cost of funds and loan defaults have been spiking in the banking sector. What has been your experience as a digital lender?
There is our cost of credit that is going up as a company and there is the cost of credit that is going up for the consumer.
On pricing, we leverage risk-based pricing and our rates are between 0.3 percent and 0.6 percent per day depending on the risk profile of customers. The interest is on reducing balance and we have kept the rates relatively the same.
What does the next chapter of growth look like for Tala?
Over the past 10 years, we have disbursed about Sh300 billion into the Kenyan market and as we think about growth, it continues to be how we can cement our place as a market leader and continue growing. We believe there is still a huge credit deficit in this market.
We will still leverage debt and equity for growth. As we grow, we prefer to work with local partners and leverage on debt financing through local banks. That will be a big focus. By 2026 I would love Tala Kenya to be two times or three times what it is today in terms of loan book.
What will it take you to double or triple your annual lending?
I am passionate about use-case lending. Today we just disburse money to customers’ M-Pesa but use-case lending will see us start giving credit for specific needs, like directly paying bills for those seeking money to settle bills, as opposed to sending the money to customers’ wallets.
You will also start seeing us leverage on partnerships so that people start accessing Tala on different platforms outside our app. We are working with different customers so that customers can start accessing credit in different ecosystems
The last for me is expansion. Kenya is not the only market for Tala in Africa. Our other markets are Philippines, Mexico and India. So, I really want to take Tala to additional markets starting with East Africa. That is something we are actively looking at.
