What Happened When Tala Discouraged Kenyans Not To Borrow

In December, mobile lending app Tala decided to discourage Kenyans from borrowing from their app, running ads that urged customers not to take out loans.

Most Kenyans did not understand why the lender would be advertising against their own business and even faulted the marketing strategy since their business sorely relies on users borrowing loans and paying with interest. “So you guys instead of encouraging people to borrow you are discouraging them? Who is your marketing manager?” One customer asked on Facebook.

In 2019, the number of digital credit products in the Play Store continued to rise and without functioning credit bureaus or loan stacking databases consumers continued to borrow from multiple providers with ease leading to high levels of so did indebtedness.

Tala says they set out to help reduce this by showing customers how to budget for their Christmas celebrations and reminded them to spend their money wisely without having to take out loans.

“As a pioneer of the sector, we’re committed to doing our part to advance financial health and collaborating with other like-minded lenders on solutions. And we support and welcome regulations that would better safeguard consumers and build a vibrant digital lending industry” A statement from the five-year-old startup  Tala that recently received Sh11 billion in funding.

The mobile lender wants new regulation of the lending industry which is why Tala together with 11 other lenders founded the Digital Lenders Association of Kenya (DLAK) in June 2019 to try and introduce “self-regulation”.

Although quite limited, Tala says DLAK will continue to engage regulators and industry leaders to shape meaningful regulation that will protect customers and support sector innovation.

Tala says most of their loan defaulters are people who take loans due to unexpected medical bills. After a lot of research the company says in order to deal with this they developed an insurance cover for the customers. “We developed a pilot program with Turaco, an insurance company based in Kenya, to subsidize the cost of health insurance for select customers. We plan to continue scaling the pilot this year.”

Tala also says they are currently piloting and scaling a free financial coaching program to help customers plan and budget given that many of their customers are new to credit and debt management.