Finance, a force for good, by Matthew Jourlain (A'21)

by jtijssen
Oct 18

Last Monday, the Institute for Global Leadership’s Empower Program hosted a talk by Ivan Mbowa, Regional Manager at Tala, a fintech startup that is changing the way that people in developing countries access financial services. The talk focused on the history of microfinance, the financial needs of people in developing countries, and the ways in which social entrepreneurship can change the world.

Ivan, a Tufts alumnus, used to work in Investment Banking at Citibank, showing us how the skills that he gained and used in the private sector were transferrable to the world of social entrepreneurship. He now works at Tala, one of Africa’s largest fintech startups, which provides micro-loans to people who are unbanked. According to Ivan, fintech is new technology and innovation that aims to compete with traditional banks in the financial services industry.

Ivan used three numbers to explain the financial situation in Africa. Seventy-eight percent of Africans have no access to formal financial services, showing that the entire continent is underserved. He also explained how 12 percent of people in Africa have access to mobile money, which is a form of currency that can be sent via text message. This is six times more people than the rest of the world, which evidences the potential of mobile money and innovative ways of providing financial services in Africa. As Ivan stated, in Africa, cash is king, but it is under attack.

Additionally, while 80 percent of the population in Africa work in agriculture (which represents 33 percent of Kenya’s GDP, for example), only four percent of financial services are geared towards serving farmers. This shows a large gap between the needs of a specific (and large) segment of the population, and the services that traditional banks are providing them. Products such as cash advances, microloans, and even wealth management would be instrumental in changing the way that farmers think about money and manage their finances.

Ivan described the wide range of financial services that microfinance companies could provide people with, such as bill payments, savings accounts, microinsurance, cash withdrawals, money transfers, international remittances, credit, asset finance, and airtime recharge. He mentioned that many of these services are now being satisfied by pure-play digital services, such as Eseye, a company that uses SIM cards to track the usage (and thus the cost that customers pay) of home appliances that it lends to people.

When a student asked a question about how Tala rated the creditworthiness of its customers, Ivan answered that the firm looks at around 10,000 data points every time a credit application is submitted. The firm scrapes information from the user’s phone, collecting data on the device, SMS logs, in-app behavior, and even the applicant’s network, which allows the firm to gain knowledge around each user. This evidences the positive power of technology, and how unconventional data, alternative data, can be used in order to reach new clients and provide them with an essential service.