This archive report was first published on 30 September 2019.
September 30, 2019
Tala, a pioneering fintech lender, is poised to revolutionize Kenya's insurance sector with a new micro insurance product, while tackling the challenges of mobile money loans.
The company, which celebrated its 5th anniversary in Kenya, claims that the country's lending market has changed dramatically over the past five years, coinciding with the start of digital credit.
Tala, which launched in Kenya as Mkopo Rahisi in 2014, has disbursed loans to over 2.5 million customers in Kenya and targets 4 million globally in emerging markets.
According to Ivan Mbowa, Tala's Regional General Manager, the company has maintained a lifetime repayment rate of over 90% and Kenya remains its largest market and best investment.
Despite the challenges faced by digital lenders, Mbowa says that Tala will continue innovating, including offering insurance and other financial services that will empower its customers.
The company is piloting a micro insurance product with Turaco, which Mbowa says is still in the early stages.
With the aim of making insurance more accessible to Kenyans, Tala's tech-savvy approach will enable customers to make claims on WhatsApp, eliminating the hassles experienced with traditional insurance models.
Kenya's lending market has changed dramatically over the past five years, with digital lenders increasing and bringing too much credit and financial literacy needs that have not been addressed.
Some digital lenders have been engaging in unprofessional practices, especially on collections, which led to the formation of the Digital Lenders Association of Kenya (DLAK).
DLAK aims to regulate the sector and aggregate borrowers' credit history, which can be accessed in real-time.
However, default rates have been high, with over 380,000 Kenyans defaulting on loans taken from digital lenders, according to a report by Metropol Corporation.
With more than 7.6 million Kenyans taking loans from multiple mobile loan apps, about 2% default, leading to their being listed with the Credit Reference Bureaus (CRBs) in the country.
Tala's statistics show that most of its customers take loans for small businesses, with 75% of loans spent on businesses for working capital purposes and 25% on personal needs.
Despite claims that most Kenyans take loans for gambling, Mbowa says that Tala does not have evidence to support this and that its customers use loans for various purposes.
