Tala Raises $145M to Expand Financial Services in Emerging Markets

Tala Secures $145 Million in Series E Funding to Expand Financial Services

Tala, a digital lending platform focused on emerging markets, has successfully raised $145 million in a Series E funding round. The company provides loans ranging from $10 to $500 to both consumers and small business owners.

Round Leadership and Participants

Upstart, a financial technology company established by former Google employees Dave Girouard, Anna Counselman, and Paul Gu, spearheaded the investment. The Stellar Development Foundation’s Enterprise Fund also participated, alongside new investors including Kindred Ventures and the J. Safra Group.

Existing investors, such as IVP, Revolution Growth, and Lowercase Capital, contributed to the round, bringing Tala’s total funding to over $360 million. Sources indicate the new investment values Tala at over $800 million.

Shift to Equity-Only Financing

This funding round differs from Tala’s previous financing, which included $100 million in debt alongside its $110 million Series D. This time, Tala exclusively raised equity capital.

Tala’s Origins and Mission

Founded in 2011 by Shivani Siroya, following her departure from an investment banking analyst position, Tala was born from research conducted for the United Nations Population Fund. Siroya identified a significant gap in financial access for creditworthy individuals in emerging markets.

Addressing Financial Inclusion

According to World Bank statistics, over 2 billion people globally have limited access to financial services and working capital. Siroya recognized that existing financial systems were not adequately designed to serve this underserved population, and Tala was created to address this issue.

Tala has, to a certain extent, begun to reshape the financial landscape in these markets.

Expansion and Credit Scoring Methodology

Tala initially launched its mobile application in Kenya in 2014, offering credit and collateral-free loans. The company has since expanded its operations to the Philippines, Mexico, and, most recently, India.

Unique Credit Assessment: Tala utilizes users’ mobile phone data and activity – such as the consistency and punctuality of phone bill payments – to establish credit scores. These scores then determine the amount of credit a user is eligible to receive.

Currently, over 6 million customers across these four markets utilize Tala’s services, and the company reports having disbursed over $2.7 billion in credit since its establishment.

Transition to a Full Financial Account

With 12,000 new users joining daily, Tala is evolving to offer a more comprehensive suite of financial services centered around a user account, aiming to capture greater value throughout the financial supply chain.

“Our Android application has enabled over 6 million individuals to access credit,” Siroya explained to TechCrunch. “We are now evolving to become a complete financial account for our customers, and this fundraise will facilitate that expansion across our markets.”

New Product Offerings and Customer Needs

The founder and CEO emphasized that the new product offerings will empower customers to “better manage, save, protect, and grow their money.”

This approach mirrors a credit-led model for digital banking, leveraging a credit offering – in Tala’s case, mobile phone-based credit – and providing additional services around a bank account. Similar models have been explored by neobanks like Brazil’s Nubank and Neon, and Nigeria’s FairMoney and Carbon.

Pandemic-Driven Insights: Siroya noted that user behavior during the pandemic revealed a decreased reliance on cash and highlighted unmet financial needs beyond credit.

“Due to the trust and relationship we have with our customers, we were eager to quickly address these emerging needs,” Siroya stated.

Tala now provides users with access to an account and tools for borrowing, saving, and managing their finances. The company also intends to offer a wider range of personalized credit options, including longer-term loans aligned with customers’ income cycles.

Leveraging Crypto and Decentralized Finance

A key component of this new direction is the integration of cryptocurrency and decentralized finance (DeFi) to support Tala’s roadmap.

The company, backed by PayPal, aims to develop the first mass-market crypto product for emerging markets, making cryptocurrency accessible and affordable to its user base. Furthermore, Tala plans to utilize blockchain-based finance to optimize its capital market strategy and connect investors and borrowers directly on the Tala platform.

Strategic Partnerships

Upstart and the Stellar Development Foundation (SDF), both investors in this round, are crucial to Tala’s next phase of growth. Upstart, an AI-powered lending platform, has facilitated over $13 billion in loans for banks and credit unions. The SDF, the nonprofit arm of the Stellar network, focuses on interoperability with existing financial systems.

“This aligns perfectly with our goals: continuing to refine our credit offerings and accelerating the experience by leveraging crypto platforms,” Siroya explained.

Following the announcement, Paul Gu, co-founder of Upstart, and Denelle Dixon, CEO of the Stellar Development Foundation, will join Tala’s board of directors.

Competitive Landscape and Future Outlook

During a conversation, the comparison to Branch, a competitor to Tala, was raised. Both platforms are concurrently expanding their services beyond traditional lending.

Like Tala, Branch initially focused on providing digital loans to customers in Nigeria, Kenya, Tanzania, and India. However, backed by Visa, IFC, and Andreessen Horowitz, Branch is now evolving into a digital bank offering bill payments, money transfers, and investment features.

While acknowledging the coincidence, Siroya emphasized Tala’s unique position. “Across our markets, we are seeing many fintechs recognizing this opportunity. However, Tala possesses a global reach and a focus on the underserved segment that is unmatched across our four markets,” the CEO stated.

With the new funding, Tala intends to expand its team across its four existing markets and in the U.S., where it is headquartered. The company also plans to accelerate its geographic expansion, though specific target markets remain undisclosed.