A Kenyan credit reporting company has introduced into the market a mobile lending scorecard.
The mobile loan scorecard will profile mobile phone based borrowers and share the information with lenders with the aim of weeding out defaulters.
In Kenya, the mobile phone is more than a communication tool, for many it is a bank. For Small and Medium enterprises, it is the only way to access financial services.
When Martin Gichohi needed quick money to work on a project for a client, he turned to his mobile phone.
Without a regular income and collateral to stand in the gap for him, he knew commercial banks would turn him down.
Martin Gichohi Kenyan businessman says:
“Banks have a lot of red tape, it takes a very long time.”
Gichohi is among millions of Kenyans who have opted to turn to the ever-growing financial technology (fintech) space in the country.
Billy Owino, CEO of TransUnion elaborates:
“We have got 5 million active browsers on our records at the moment and it’s anyone from a small business person who borrows for cash flow purposes, IT students, working people who need money to finance any gaps.”
Owning a smartphone is changing the way Kenyans do business and expanding access to financial services.
At any given time, Gichohi will have five different loans from at least five different service providers all of them mobile phone based.
Martin Gichohi again says:
“You may get a client who wants things done urgently and they don’t have a down payment, so the loan app becomes like your guardian angel, you get money instantly sort out your business and when you get paid you repay the loan.”
Data from the International Finance Corporation, the World Bank’s lending arm indicates that SMEs in Kenya have an annual credit gap of $6B.
This gap is now being filled by fintechs, like mobile-based lender, Tala.
Tala, which is a subsidiary of the US based Inventure has offices in Kenya, Tanzania and the Philippines.
Rose Muturi, Manager of Tala in Kenya says:
“Our limit currently is $500 however we do anything from $10 up to $ 500, it also depends is it your first loan, so the first loan we’ll do between 10 and 40 dollars, but the more you repay or depending on how you pay, we increase your limit up to 500 dollars.
The lenders use mobile data to determine one’s creditworthiness.
Rose Muturi, Manager of Tala says:
“What we do is we use what we call alternative data, it’s amazing how much we can tell just based on how you use your phone, how many calls do you make, financial texts that you use or send out.”
From verification to disbursement of funds takes less than five minutes.
Manager of Tala, Rose Muturi, further elaborates:
“For the customers they don’t necessarily look at the money being given to them immediately, it’s the loan decision that has to be immediate, that is why the likes of Tala have been disruptors, because we didn’t just give you the decision, we went ahead to give you the money.
As the demand grows so is the need for a credit score, TransUnion a local credit reference bureau has come up with a scorecard tailor made for mobile lenders.
CEO of TransUnion, Billy Owino says, “From our database we are able to give a view of this person, it’s anything from just a basic ID verification to how is this person performing, mobile loan scoreboard.”
Manager of Tala shares, Rose Muturi explains, ‘These are micro entrepreneurs so once you pay twice, it means we have predicted your capacity to pay and you therefore can qualify for a larger amount from a conventions bank.”
As competition from the mobile lenders intensifies, commercial banks have come up with products to offer similar loans. Financial experts predict that as the ownership of the smartphone grows so will rate of financial inclusion in East Africa’s biggest economy.
Click on the video below for more on the story: