This Week in Startups: #681: Tala Founder & CEO Shivani Siroya: Transforming lending in emerging markets

Shivani Siroya is the CEO and founder of Tala, a company is tackling a massive problem: there are 3 billion people around the world that are currently underserved from financial services—they don’t have bank accounts, access to formal credit options, traditional loan products, small business loans, or insurance products. Tala makes micro-loans in Kenya, Tanzania and the Philippines by using a person’s smartphone, transactions, and app usage to figure out if they are creditworthy. To evaluate creditworthiness, Tala built an Android app that scores would-be borrowers in 20 seconds by using data on their phone. In addition, they make a credit decision to lend money in that 20 second timeframe and acts as the lender. Tala dynamically prices between 5%-11% for the term, which is dramatically lower than the average APR in these markets, which is 350%. In this episode, Siroya describes how she pioneered this new form of micro-lending. Timestamps: 01:45: Jason introduces his guest, Tala founder & CEO Shivani Siroya. 02:48: The problem Tala is tackling is massive: there are 3B people around world that are currently underserved from financial services--don’t have bank accounts, don’t have access to formal credit options, traditional loan products, small business loans, or insurance products. 04:24: Tala is focused on emerging markets--South Africa and SE Asia, but exploring Mexico, India, Eastern Europe, Latin America 05:14: Tala built an android app that allows us to score someone in 20 seconds just using data on their phone. 07:07: Shivani realized a lot of data that she is collecting is sitting in people’s phones. 08:58: During the summer, Tala made 449,000 loans. 40% people who borrowed money were referred by someone that already borrowed money. 10:18: Tala doesn’t meet customers in person, they use untraditional data. 11:10: Shivani compares what they do to credit cards, like a revolving line of credit. 15:41: Shivani compares what they do to “Ubers of the world”--create a playbook and tackle easiest markets first and then think about their long-term plays. 16:32: Shivani talks about the impact Tala has had in Kenya, which is where they first launched and has been operating there now for 2 years. 18:06: Shivani describes the data you can get on Android vs iOS devices. 19:18: Financial transaction data is always going to be most useful--utility bill payments, merchant transactions, payroll data. 19:40: Tala also has behavioral features--how a user organizes their phone book. 21:59: Shivani takes us back to when she first had the realization that people were underbanked, and later that behavioral variables could also come into play. 25:16: The two talk about zombie games, and the correlation to being creditworthy. 29:30: Jason asks if is this going to work in US. 31:48: There is currently a 3.1 trillion dollar unmet need for credit in emerging markets, so if we can unlock these markets, you would be changing these economies and unlocking massive amounts of capital, which will lead to more jobs and commerce. 33:26: Shivani describes the impact Tala is having on people’s lives in the emerging markets. 34:00: Shivani explains that the typical loan sizes in the Philippines and Kenya are small, but they can accelerate businesses. 34:44: Tala does positive and negative reporting to the credit reference bureau. 38:29: Tala dynamically prices between 5%-11% for the term, which is dramatically lower than the average APR in these markets, which is 350%. 42:25: To figure out what market to pursue, Shivani asked herself, “As a startup, what can we take on?” 43:05: What types Android phones do people use in Kenya? 46:40: Tala still does experimental loans and downsampling (lend to intentionally bad borrowers) to continue to refine credit model. 52:35: Shivani describes the types of investors for Tala. 53:57: How do you balance the need of VC returns with working in emerging markets? 57:44: The two discuss the future of these emerging market regions.

This Week in Startups

10yr ago

Real interesting product. @jason A year or so ago, you did a nice interview with Jalak Jobanputra. I thought that interview might have done the trick in exposing you to emerging markets, including Africa. You made some comments about being scared to travel to Africa. As this episode with Shivani came together, I was discouraged to hear you speak from essentially the same vantage point - your surprise that such a high percentage of folks are paying their loans back, etc. Please consider taking a trip to an African country. I think you would find it very helpful.

What an episode! Thank you guys!