Tala takes aim at banks with Sh16bn war chest

Digital micro-lender Tala has raised Sh16.1 billion ($145 million) for onward lending and expansion in its key four markets including Kenya - taking the battle for the popular mobile loans to local commercial banks' door steps.

While announcing the long-term funding, Tala, which also operates in Mexico, the Philippines, and India said the fresh funding would increase its lending to borrowers at longer tenors and help launch new products.

"Tala’s evolved account will offer an expanded range of personalised credit options, including longer-term loans and credit that can be configured to match customers’ income cycles," Tala said in a statement without expounding on the expected new terms for customers.

“This investment will secure our ability to continue innovating and driving the creation of new, relevant products for the Kenyan market and beyond” added Ivan Mbowa, Tala East Africa Managing Director, in the statement.

Tala had earlier disclosed that its Kenyan customers are mostly aged between 18 to 40 years and are trying to raise capital for their businesses.

Micro-lenders

Dozens of micro-lenders have invested in Kenya’s credit market in response to the growth in demand for quick loans, where borrowers can get credit within minutes via their mobile phones rivalling commercial banks.

The micro-lenders have, however faced a clamour for regulation amid criticism that they have saddled borrowers with high interest rates, which rise up to 520 percent when annualised, leading to mounting defaults and an ever ballooning number of defaulters who have been adversely listed with credit reference bureaus (CRBs).

Tala and Branch, some of the top players in the mobile digital lending market, offer annualised interest rates of 84- 152.4 percent and 156- 348 percent respectively.

Unsecured loans

Market leader M-Shwari, Kenya’s first mobile-based savings and loans product introduced by Safaricom and NCBA in 2012, charges a “facilitation fee” of 7.5 percent on credit regardless of its duration, pushing its annualised loan rate to 90 percent.

"We believe that our pricing is fair. It’s an actual representation of the risk involved in providing unsecured or no-collateral loans. It may seem relatively high, but it’s not an interest rate," said Mr Mbowa earlier.

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