tala: 🦄🦄

the next lending unicorn

One of the biggest things I like to look for in a company is a deep moat. A monopoly as highlighted by Peter Thiel in his book ‘Zero to One’ is ‘build a monopoly that has a very unique competitive advantage where rivals can’t enter.”

There are four components to a unique competitive advantage:

(a) proprietary technology, (b) network effects, (c) economies of scale and (d) branding.

Tala has (a) proprietary technology: An data-driven AI and machine learning technology that analyzes eight questions asked to an applicant on references and information about their daily lives, their business/means of income as well phone data like airtime purchases and mobile money transactions.

It offers interest rates in Kenya starting from 0.3% daily.

(b) Network effects: It allows users to obtain loans with a very speedy onboarding process in which when the user answers eight questions, they get cash in their accounts. The founder Shivani Siroya divulged that:

85% of customers get the cash in their wallet in two minutes.

(c): Economies of scale: The proprietary technology Tala has allows it to acquire customers very efficiently at scale by giving people instant access to cash. Factor in a customer-centric approach, the platform maintains a highly loyal customer base which drives business growth — the customer repeat rate is 95% and repayment rates are above 90%. In addition, Tala conducted a study in which they found “three-quarters of borrowers reported an improvement in their overall quality of life because of Tala, with one in five saying it has significantly improved. Notably, eight out of 10 of Tala’s customers in emerging markets reported feeling confident in covering a financial emergency.”

This novel approach has allowed Tala to expand to not only Kenya, but The Phillipines, India, Mexico in which “Tala’s eight million customers are accessing more than $3 million every day, totaling nearly $100 million in origination per month. The Tala platform bridges digital and cash ecosystems to help customers seamlessly manage their financial lives, processing nearly $200 million transactions monthly.”

(d) Tala strong branding using bold bright colors of teal, orange captures the eye highlighting its main unique selling points.

The unique selling point being customers can get up to KSH 50,000

The problem of the unbanked is staggering: over two billion people worldwide are excluded from the formal financial system, forced to operate in a cash-dependent, informal economy.

To tackle this problem, Tala till date has raised nearly $500 million in equity and debt from visionary investors, including Upstart, Stellar Enterprise Fund, RPS Ventures, J. Safra Group, IVP, Revolution Growth, Lowercase Capital and PayPal Ventures. Tala has been named to CNBC’s Fortune Impact 20, CNBC’s Disruptor 50 list four years in a row and Forbes’ Fintech 50 list for seven consecutive years.

In addition, Tala expanded product offerings like Tala Wallet in The Phillipines announced in August 2023, that nearly one million Filipino customers are now using Tala Wallet after it formally launched in the Philippines in April of 2023. Over 90% of Tala’s first-time customers are also account holders. Tala is looking to expand this offering in other countries which from a growth perspective; creates a virtuous cycle of increasing financial accessibility for millions, fueling sustainable growth for the company, and ultimately impacting lives positively.

The culmination of all these factors valued Tala at $800 million in 2021 and why I believe it is poised to be Africa’s next unicorn.