From Micro- Credit To Major Debt

Tala and other startups are flooding Kenya with apps offering high-interest loans. Are they empowering the poor or profiting from desperation?

- Zeke Faux

Patricia Lele waits for nightfall to go to work. As the sun sets in Kitale, in western Kenya, she hikes her 2-year-old daughter up on her hip, gathers some of her other eight children, and sets off down a dirt road. When she reaches the center of town, she spreads a blanket on the sidewalk outside a grocery store and carefully lays out her wares.

Lele makes beads out of brightly colored paper she scavenges from the town dump, stringing them into bracelets she sells for a few dollars apiece. But tourists are rare in this maize-growing hub, especially after dark, when teenagers stumble down the street, holding Sprite bottles to their nose to sniff glue. Lele considers herself lucky if she makes $5 in a night, enough for bus fare home and porridge for her family the next day.

Like almost everyone in Kenya, rich or poor, Lele has a mobile phone. Hers is a small black Android model with a cracked screen. A few times a day it buzzes with a text message sent on behalf of Tala, a tech company in Santa Monica, Calif., that says it’s empowering female entrepreneurs around the world. Each message is a reminder of how that’s gone for Lele. “You haven’t PAID A SINGLE cent of TALA LOAN,” a recent message reads. “TAKE NOTE your DETAILS are with TOUGH SKIP-TRACE & RECOVERY, PAY NOW.”

Tala has made $1 billion in microloans to people in developing countries, all using its app. It says it can reach those who’ve been ignored by banks because its software generates instant credit ratings from data scraped off prospective borrowers’ phones. The company is part of the financial inclusion movement, a loose coalition of tech companies, banks, and non-governmental organizations trying to lift people out of poverty by offering them new ways to gain access to loans and other financial services.