Digital lender mulls new products as cost of living squeezes borrowers

The majority of those who borrow from Tala spend the money on savings. [iStockphoto]

Digital lender Tala is mulling new products that would cater for the utility needs of borrowers as it revealed the cost of living as the current leading financial challenge for many.

In its Money March Report released on Monday, findings also show a drop in the number of individuals in full-time employment with an almost similar rise in those who are unemployed, on contract, part-time job or in business.

Business-related issues, according to the report, are still the key reason for individuals taking loans. Some 55 per cent and 35 per cent reported having taken a loan for business expenses and adding stocks respectively in 2023.

This category of borrowers is followed by those in need of school fees (28 per cent), utility bills (17 per cent) and medical expenses (15 per cent). The other categories include chama contribution (8.0 per cent), rent (8.0 per cent) and public transport (2.0 per cent).

Tala Senior User Research Manager Teddy Kahiro, while acknowledging that the lender's products are meant for mainly business owners, noted the increase in individuals who are borrowing for other needs such as medical, school fees, and utility.

Mr Kahiro pointed out that the population that borrows for utility needs like paying off TV subscriptions, the majority of them are employed in full-time jobs.

"Even though they have income, by the time the bills are due, they do not have money so they have to take a loan to bridge the gap," said Mr Kahiro. He said the non-business related reasons for borrowing indicate the need for Tala to go back to the drawing board to see how to cater for these customers.

"For example those borrowing for medical emergencies, maybe we can think of partnering with health insurance to cater for their needs," said Mr Kahiro.

According to the report, an increase in the cost of living (62 per cent), slowing of business (34 per cent) and seasonal expenses like school fees (34 per cent) are the top three financial challenges among borrowers.

The majority of those who borrow from Tala spend the money on savings (keeping up with chama contributions) at 25 per cent, personal expenses at 22 per cent and utility bills 23 per cent.

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