How can you trust if someone will repay a loan? Look at their smartphone.

May 17, 2018 / Patrick D’Arcy
By replacing traditional credit scores with mobile phone data, entrepreneur Shivani Siroya has pioneered an innovative way to think about trust.
What makes you decide to trust someone? Maybe you have mutual friends or you know their family. Maybe you know other people who went to the same college or work at the same company. Or perhaps your trust is based on something less concrete, such as their friendliness, openness or a sense of stability they convey.
What if you can’t meet them in person because they live far away, and they’ve asked you for a loan? In the developed world, we use credit scores — calculated by analyzing a person’s banking, credit card and loan histories — to make a decision. But what if they don’t have that kind of history or even an address?
Entrepreneur Shivani Siroya, a TED Fellow, has pioneered a different way of figuring out whom you can trust (TED Talk: A smart loan for people with no credit history yet). Her Los Angeles-based company Tala collects over 10,000 data points from a single smartphone and uses this information to give people in the developing world a financial identity. Tala uses this identity, which is a numerical score, to make microloans between $10 and $500 to customers who own small businesses, such as food stalls and retail kiosks. Since 2014, Tala has provided more than $326 million in loans and boasts a remarkable repayment rate of over 90 percent. Because 69 percent of adults worldwide lack a credit score, this new approach could have enormous possibilities.
Siroya first started thinking about new ways to evaluate trust while she was working at the UN. Between 2006 and 2008, she interviewed more than 3,500 recipients of UN Population Fund microloans in Africa to determine the impact of this lending. As she says, “I started to realize all these people were getting credit, but we didn’t know how they were using the money, and we didn’t understand what their capacity for repayment was.”
One day when a friend visited Siroya, he asked her how she knew who could be trusted with a loan. “I was like, ‘Well, this woman is planning a wedding for three other kids in the community and she’s saving 30 percent of her monthly income for her son to take this computer class,’” she remembers. “And my friend was like, ‘That’s interesting. So you don’t have traditional data, but in a sense you’re actually using her daily life.’”
Something clicked for Siroya. She realized that if she could learn enough about a person’s daily life, she could determine how trustworthy they were and, by extension, how likely they were to repay a loan. But where could she find the data for people she didn’t know? She had a hunch that smartphones could provide a window into their everyday lives. To test the theory, in 2014 she raised an initial round of capital and made small loans to 10,000 individuals in Kenya; she and her team used this group to help figure out what mobile data points could serve as indicators of a person’s creditworthiness.
As it turns out, how someone uses their phone provides many insights into their capacity to repay a loan. For instance, the time of day someone makes most of their calls can be significant. Since nighttime calls cost more than daytime calls, night calls suggest they’re better off — and a better credit risk. Siroya and her team also found if an individual communicates with 58 contacts or more and makes phone calls that last for more than four minutes, these can indicate strong social networks, meaning they’re more likely to repay a loan. If more than 40 percent of a person’s contacts are listed by both first and last name in their phone, this attention to detail means they’re 16 times more likely to repay a loan than someone who doesn’t do this. Tala’s software crunches together these and thousands of other variables to establish your financial identity. “There’s not one feature that can be taken into isolation that can determine your credit score or your creditworthiness,” Siroya cautions.
After someone downloads the Tala app and requests a loan, it asks for permission to view key pieces of data on their smartphone. This data includes texts and calls, merchant transactions, app usage and personal identifiers. After assessing all this information — which takes just minutes — Tala decides whether a customer is creditworthy and, if so, immediately sends them money via a mobile wallet. The company doesn’t use gender, race, religion, ethnicity or national origin as factors in lending. In fact, its data team recently discovered a correlation between the number of vowels in a customer’s name and their ability to repay. On closer inspection, it realized this could lead to discrimination against certain tribes or groups, so the variable was deleted from its algorithm.
The more trusted people feel, she believes, the more trustworthy they will be. “If you’re someone who is not trusted, think of what kind of turmoil that does for you,” she says. “When someone who’s financially anxious has to interact with a financial system, they’re going to make incredibly reactive decisions. That doesn’t just translate into how they repay their loans but every other decision in their life — like how they take care of their families and how they run their business. They’re reacting from a place of insecurity.” As a result, Siroya has tried to design the app to make its users feel comfortable, empowered and trusted. “If you look at the credit card industry, they make money by people defaulting, or by people being late with their payments,” she says. “We think about how to flip that and incentivize positive behavior.”
Tala defines its relationship with customers to be one of “radical trust”: a mutually beneficial partnership in which the company takes the first risk — lending money — in order to put more power in the customer’s hands. “If you think about it, the entire global financial system is built on skepticism, not trust,” Siroya says. “We try to imagine what it would look like to start with believing in people — an assumption of trust rather than risk.”
Today, Tala is used by more than 1.3 million borrowers in Kenya, the Philippines, Tanzania, India and Mexico. It’s the second most popular app in the Philippines, fifth in Kenya, and sixth in Tanzania. Last month, Tala raised $65 million to fund its global expansion.
“We had a Kenyan customer recently say, ‘This is the Kenya we want,’” Siroya says. “He was talking about the idea behind our product and how that’s the kind of country he wants to live in — a place where people are trusted. It’s the kind of world that we all want. To be trusted can enable you to take chances and really improve your life.”


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Mick Dalla-Vee

Early days 1976 - He moved to Western Canada, after leaving Bawating High School from Sault Ste. Marie, Ontario, with the band Shama. Shama toured Western Canada and was managed by Bruce Allen (Bryan Adams, Martina McBride) before disbanding. 1981 -From that point he became the lead guitarist of Trama, managed by Sam Feldman (Joni Mitchell, Diana Krall), 1984 - then on to playing bass for the band Paradox which evolved into his current band Cease & Desist. 1989 - Cease & Desist has been described as "one of Vancouver's most popular bands" by Tom Harrison the rock music critic of The Province. He also plays the part of John in a Beatles cover band, Revolver, that was put together for Expo 86 Songwriting Mick has written or co-written many songs on albums for artists as diverse as country music's Brent Howard and Canada's Singing Cowgirl: Marilyn Faye Parney, the heavy rock sounds of Blackstone (released on the Delinquent label in Canada), the soul/R&B sounds Belinda Metz and 'Emily Jordan' to the 'smooth jazz' sounds of internationally acclaimed Lori Paul. 2005 - He co-wrote ten of the eleven songs on Paul's album Vanity Press. 1998 - His first country song 'The Wrangler' reached the country top 30 charts right across Canada. It also achieved 'Heavy Rotation' on C.M.T., Canada's country music video channel. One of the songs from Mick's 'A Whistler Christmas' album entitled, 'All I Want is You at Christmastime' has been recorded and released by Canadian country star, Brent Howard Currently - He has also written music for movies, television, videos, video games and promotional spots. His writing styles run the gamut from 'Smooth Jazz' to 'Heavy Thrash'. (A Whistler Christmas and Dalla-Vee's original Christmas songs are often heard on Canadian radio during their Christmas music programming.) Producing Aside from producing himself in an array of projects such as 1994's A Whistler Christmas album, he runs his own studio 'Millennia Sound Design', producing and engineering for artists like: Randy Bachman, Twitch, Swaggerjack, Emily Jordan, Russell Marsland, Lori Paul and Suzanne Gitzi among others. 2007 - has provided theme music and soundscapes for two network television series and Simon Fraser University. 2005 - Randy Bachman's CD "Jazzthing" had some work done on it at "Millennia Sound Design". Vocals Dalla-Vee has contributed to projects as diverse as, 1991 - the multi platinum heavy rock of the "Mötley Crüe" album "A Decade of Decadence" to the 2001 - country/rockabilly sounds of Brent Howard and Southern Cherry to Colin Arthur Wiebe. 1989 - Canadian legends, Trooper and The Powder Blues Band have also used Mick's voice for recordings. 1991 - He has worked extensively as a studio session singer/musician, with his talent of many voices being used on a worldwide 'Karaoke' album package marketed over the dreaded U.S. infomercial. He has sung a number of commercial jingles for radio and television. Awards Having recorded with a host of other Canadian and international recording acts such as Randy Bachman (of the band The Guess Who and Bachman Turner Overdrive), Mick was awarded a 'Gold Record' for his work on the 'Trooper' album 'Last of the Gypsies' in 1991. In 1997, he received the Saskatchewan Album of the Year Award for his song writing/musician contributions to an album with proceeds going to people affected with multiple sclerosis. 2011 – Gold Award for Bachman & Turner DVD – Live at the Roseland Ballroom 2013 – Platinum Award for Bachman & Turner DVD – Live at the Roseland Ballroom Appeared in ‘The Campaign’ with Will Ferrell, Zack Galifianakis, Dylan McDermott, John Lithgow, Dan Aykroyd and directed my Jay Roach (shot in New Orleans) Current – Write music for the popular ‘Holmes’ TV series on HGTV Releases: “Bachman and Turner” in 2010 Producing the Toronto pop/soul band ‘Hello Beautiful’. Heads the ‘Music in Motion Workshop’ for the Down Syndrome Research Foundation, a pilot project designed to develop a musical camaraderie with children, youth and young adults with Down Syndrome and other developmental disabilities. Live [edit] He keeps an extremely steady schedule playing guitar, bass and keyboards with his main band, Cease and Desist, and “The Atlantic Crossing Show” featuring Mick as John Lennon and Elton John. Since 2001 - He is the bass player/vocalist with Canadian Rock Legend, Randy Bachman's band 2004 - Bachman’s recent foray in the jazz world with his new CD, ‘Jazz Thing’ features Dalla-Vee on the ‘upright bass’. Ongoing - He plays mandolin, banjo, acoustic guitars and harmonica in the Brent Howard and Southern Cherry band, Ongoing - and has toured as John Lennon in 'Revolver - The Worlds Best Beatles Show'. Ongoing - In addition, he also works as a solo artist appearing regularly at special events and casinos. Affiliations 2004 - A longtime member of the Canadian Academy of Recording Arts and Sciences, he has sat on the panel as a judge for Canada's Juno Awards (Canada's Version of The Grammy's). 1989 – 2001 He was on the board of directors of the Pacific Music Industry Association for 3 years, and is also chair of 2000 – 2005 The Carolyn Foundation Musician's Assistance Society; a non-profit organization he and colleagues set-up in the wake of his daughter Carolyn's sudden death in November 1999