Dar es salaam (IDN/afr). Two years ago, 32-year-old street cook monica makona wanted to expand her business. However, the bank denied her the necessary loan. The credit app tala was their salvation. Within minutes, makona received a small amount of money on her smartphone.
"It was a very quick process," makona tells IDN news agency in an interview. "I received a notification from tala that 20.000 tanzanian shillings (10 U.S. Dollars, note.) were paid into my mobile wallet."
The cook works at the bustling ubungo bus station northwest of dar es salaam's city center. There are many women entrepreneurs on the road who use the credit app to keep their businesses running or to expand them.
In east africa, there are a number of digital payment providers that want to revolutionize the credit market. Many people do not have access to loans from traditional banks because they cannot show evidence of their creditworthiness.
Mobile money transfer is standard in east africa
Since the M-PESA mobile payment system was introduced in kenya in 2007, no stone has been left unturned. The simple transfer of funds from one cell phone to another has led to the development of a variety of digital payment functions away from banks. De facto, today in east africa, a cell phone credit can be used to pay anytime and anywhere.
Increasingly, international fintech startups are also catering to previously neglected segments of the population. Apps such as tala or branch enable people to obtain small loans at short notice that are repaid in small installments.
Tala has its headquarters in st. Monica and currently has offices in kenya, tanzania, india, mexico and the philippines. Country director in charge of tanzania francis ndikumwami explains the company's approach, "our mission is to give our customers choice and control over their financial existence."
Algorithm checks creditworthiness
Despite low-threshold access, tala checks applicants' creditworthiness. The app's algorithm allows tala employees to assess the risk of failure within a maximum of 72 hours. This involves analyzing data available on cell phones, such as calls, text messages and mobile money transactions.
In practice, therefore, only a small amount is paid out initially, which grows as the customer repays it. Borrowers then have the option of repaying the loan in seven, 21 or 30 days. Interest rates range between eleven and 15 percent.
Street chef monica makona started out with only 20.Receive 000 tanzanian shillings, which in themselves were no real help. However, she has since been granted a credit line of 1.000.000 tanzanian shillings (450 U.S. Dollars, anm.) granted, which she can access at any time with her cell phone.
Concerns from data protectionists
Determining creditworthiness on the basis of user data, however, causes data protectionists some headaches. "Digital lenders must have the highest level of ethical standards to protect their customers' private data," says joseph mapunda of the state regulator tanzania communications regulatory authority.
Dan karuga, country director of the credit app branch in kenya, assures a careful approach to data protection: "we have strict policies in place to ensure that our customer data is always protected."
Branch works similarly to tala, but offers a much longer loan term with a repayment period of four to 16 weeks. The company is headquartered in san francisco, california and has operations in kenya, tanzania, nigeria, mexico and india.
Branch says it has made more than 15 million loans totaling $3.5 million to three million customers to date. (end)
Cover photo: monica makona gets an overview of her finances in tala app. (photo: IDN/kizito makoye)
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