Broader use of alternative data, coupled with risk-based regulation and stronger consumer safeguards, could help widen formal credit access for Filipino microentrepreneurs, according to digital lender Tala.
Tala Philippines President and General Manager Moritz Gastl said lenders should look beyond conventional credit scores when assessing nano and microentrepreneurs who lack collateral or extensive credit histories.
About 27 percent of Tala’s customers are nanoentrepreneurs, including sari-sari store owners who use loans to replenish inventory and fund working capital.
Tala combines behavioral, external and telecommunications data with proprietary models and real-time credit decisioning to assess “thin-file” borrowers. The company said it has built underwriting records covering more than 50 million applicants since its inception.
“Cash flow-based data and payment data haven’t gone away; they are incredibly important. But paired with behavioral data, device data, and telco data, we are in a unique position to target those nano-level entrepreneurs more so than existing financial institutions,” Gastl said.
Tala said lenders could use broader datasets to assess borrowers beyond static credit scores and tailor loan terms to individual circumstances.
As digital lending expands, the company is also recommending risk-based regulation that recognizes differences among borrowers and lenders, alongside stronger consumer safeguards.
Tala said financial inclusion should go beyond expanding access to credit. It recommended giving borrowers clearer information about loan costs and terms, as well as greater flexibility and control over borrowing decisions.
The company said nine out of 10 Tala borrowers who used credit for business purposes reported an improved business outlook, including greater stability, expansion and confidence.
