Fintech popularity grows as inflation bites, report reveals

Fintech lenders continue to be a preferred source of SME financing due to the fast access of loans and low collateral requirements, compared to conventional financial institutions, a recent study by impact measurement firm 60 Decibels and fintech Tala shows.

According to the survey, which was conducted on 250 borrowers, respondents noted that quick and timely loans that they receive from fintechs are instrumental in helping them meet urgent needs, especially during a time such as this when the cost of living is too high.

Twenty-seven per cent of respondents interviewed in the survey said they appreciated having more money in their pockets, 23 per cent appreciated that they were able to afford household goods and bills, while 18 per cent said they were able to buy inventory and stock for their small businesses.

Responsible borrowing

Of all parameters measured, digital loans had the biggest positive effect on individuals’ ability to cover household costs.

“We are motivated to see statistics indicating that 85 per cent of the female borrowers surveyed reported an increase in their confidence in themselves and in their abilities and 60 per cent of them said they now contribute to household decision making as a result of being financially enabled. These findings validate our core mission to bring the financially underserved Kenyan majority into the financial ecosystem and provide them access to affordable credit and flexible payment options,” Tala’s Director of Growth, Annstella Mumbi said.

Over and above disbursement of funds, Tala has been conducting sensitization campaigns on the importance of responsible borrowing as well as sound financial management. The survey reveals that these trainings have enabled borrowers to improve on their ability to save, as well as to be more in control and less stressed about their finances.

Financial inclusion solutions

“By extension, these trainings have enabled borrowers to meet their loan obligations, and as a result, we are seeing the average repayment rate at Tala grow to about 90 percent. That means that the number of customers who can return to borrow from the platform has also increased, and out of 100 customers, 95 borrow again. Most of these borrowers take out loans on a monthly basis,” said Tala General Manager Munyi Nthigah.

While commenting on the findings, 60 Decibels CEO and Co-founder Sasha Dichter commended Tala for outperforming the 60 Decibels Financial Inclusion Benchmarks on a number of core indicators, including First-time Access, Access to Alternatives and Customer Satisfaction.

“The findings of the report speak volumes that Tala is taking the step to listen directly to their customers about social impact in such a rigorous fashion. It means that the company, and the market, see that offering a service at scale is just the first step. To truly understand impact, we need to listen directly to customers, so we know we are building financial inclusion solutions that solve real problems for people,” Ms Dichter said.