Tala Philippines president and general manager Moritz Gastl said the evolution of digital credit requires greater attention to how borrowers are treated, how regulations accommodate different lending models and how alternative data can help lenders assess consumers overlooked by conventional financial systems.
The company is pushing for responsible lending practices and risk-based regulation while using behavioral and other alternative data to reach thin-file borrowers, including nanoentrepreneurs who may lack conventional collateral or extensive credit histories.
Dignity in lending
In a company statement, Tala said borrowers should be treated fairly throughout the credit journey, particularly when financial difficulties affect their ability to repay.
"What we've realized for the last 10 years is that most customers typically have a willingness to pay back. It's really about providing flexibility and the right tools and, of course, treating them with dignity, treating them fairly," Gastl said.
That approach underpins Tala's Debt with Dignity advocacy, developed from its Global Debt Collection with Dignity Initiative. The campaign calls for fairness and respect throughout the credit experience, including during debt collection.
Tala said giving borrowers clear information about their obligations, appropriate repayment tools and flexibility when circumstances change can help them make better financial decisions.
“Tala actively supports reforms and new regulations that solve consumers’ top problems. For example, to address unfair collection practices, we advocate for accreditation of debt collection agencies and publication of true, transparent information on financial products through our Debt with Dignity campaign," said Gastl.
"We recognize that pairing these structural changes with digital and financial literacy would strengthen responsible, sustainable economic participation and ultimately, drive capital market growth and innovation in the Philippines,” he added.
Regulatory balance
The company is also advocating for risk-based and proportionate regulation that takes into account the purpose, cost structure and business models of different financial institutions.
Tala said such an approach could establish safeguards for consumers without restricting responsible lending models designed to serve people who remain outside or underserved by traditional financial institutions.
Digitalization has made it possible for lenders to reach more consumers, but Tala said access must be accompanied by protections and financial literacy to make borrowing sustainable.
Alternative data
The challenge is particularly pronounced among nano and microentrepreneurs, many of whom operate viable businesses but lack the collateral or lengthy credit histories typically required by traditional lenders.
Gastl said 27 percent of Tala customers are nanoentrepreneurs, including sari-sari store owners who use credit as working capital to replenish inventory.
To assess thin-file borrowers, Tala combines behavioral, external and telecommunications data with proprietary models and real-time credit decision-making.
Since its inception, Tala said it has created underwriting records covering more than 50 million applicants, giving the company data across borrowers with different risk profiles and credit backgrounds.
That dataset supports Tala InSight, its risk intelligence platform designed to assess customers beyond static credit scores and help tailor credit terms to individual circumstances.
"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.
Business impact
Tala said nine out of 10 borrowers who used its credit for business purposes reported an improved business outlook, including greater stability, expansion and confidence.
For the company, the next phase of digital lending will depend not simply on extending credit to more people but on making that credit useful, responsible and responsive to borrowers' circumstances.
Tala said combining fair treatment of borrowers, appropriate regulation and data-driven credit assessment could help build a more sustainable digital lending industry while giving underserved Filipinos greater financial agency. —Ed: Corrie S. Narisma
