One-third of the world’s population — about 2.5 billion people — have no credit score that might give them access to loans. However, about 1 billion people in the developing world do have basic smartphones.
For many of those people, that handset is their only computer and communication device. So it can be particularly useful, but also personally revealing.
Now some startups are emerging to exploit the opportunities and manage the problems that this creates.
Tala, for example, culls data from cellphones to gauge a person’s ability and willingness to repay loans.
To its founder and chief executive, Shivani Siroya, the cellphone number is an entry point to help bolster the “emerging middle class” in countries such as Kenya, the Philippines and Tanzania by giving them access to credit.
“Your daily life is on your cellphone,” said Siroya, whose company is based in Santa Monica, California.
Potential borrowers download the company’s app and allow it to track their online purchases, utility payments, location, phone calls, text messages and social media use.
No single piece of information determines a loan decision. However, if, for example, more than 40 percent of the entries in a person’s contact list have first and last names, it suggests a customer who is 16 times more reliable than one with very few contacts listed with first and last names, Siroya said.
Social networks are also predictive of repayment, especially the pattern of a person’s phone calls, texts and daily routines.
Consistency and stability are stronger signals of repayment than the size of a person’s network.
Since 2014, Tala has made 750,000 loans of US$10 to US$250 each.
Loans have terms of three weeks to three months, and the fees range from 7 percent to 15 percent, Siroya said.
The repayment rate of the loans is about 90 percent.
Truecaller, a Swedish startup, is also giving people a tool to identify callers and block unwanted calls.
Truecaller is amassing an online directory of cellphone numbers and building an identity service. It claims about 250 million users worldwide, mainly in developing markets like India, Africa and the Middle East.
Users download an app, enter their identity information, and the Truecaller software, with permission, gathers the names and numbers of people whom users call regularly. In addition to caller ID, Truecaller has a popular blacklist feature, which screens calls from known swindlers and telemarketers.
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