FORMATIVE ASSESSMENT $1[100$ MARKS$]$

How This Fintech Founder Succeeds by Taking the 'First Risk'

In international finance, banks take as few risks as possible on customers. If Shivani Siroya wanted her microfinance startup

to truly disrupt the model, she'd have to embrace risk$-$taking first.

Shivani Siroya had built her Los Angeles$-$based small$-$business lending platform Tala methodically. The founder and CEO

created a mobile platform for unbanked individuals $$ those without formal credit histories $$ that analyzes their likelihood of

repaying their loans, which vary between $$10$ and $$500.$

In $2013$ and $2014,$ the business successfully expanded throughout Kenya. But customers weren't happy. Siroya had a

realization: "I don't think I$\text{'}$m having the impact I want us to be having," she told Inc.$\text{'}$s What I Know podcast.

It was her startup's partnership with traditional banks that was slowing down communications with and lending to customers

$$ and the banks weren't always taking Tala's advice to re$-$lend to existing customers, Siroya says.

They were similar problems she'd encountered early in her career, working in international microfinance. So$,$ Siroya decided

that since her business model was based on trust, she and her investors would have to be the ones willing to take on more

risk. She turned Tala into not just the platform for lending, but also into the bank.

$"$It was deciding to say, 'okay, we're doing this and sure it's working, but are we really moving the needle?" Siroya says. $"$It

was deciding to take the first risk."

Lending the company's own equity capital directly to small business owners who used Tala's Android smartphone app

worked. Within years, the company was ready to expand to new markets. But, in doing so$,$ it didn't take the obvious or easy

route.

$"$We didn't want to just launch another country in East Africa, because when we think about taking that first risk, what are

you doing? You're really needing to prove out that this can work globally," Siroya says.

"And so we wanted to pick a completely different continent. We wanted to pick a different culture. We wanted to think about

a market that didn't have the infrastructure that Kenya had."

It followed up its launch in the Philippines with a launch of services in Mexico, and then India. Today it operates across the

four countries and is delving into deeper services, including banking operations, for its customers.

Tala has $540$ employees in the US and around the globe and has raised $$360$ million in venture capital.

Question $4(25$ Marks$)$

Differentiating internal from external growth, analyze the growth strategies that Shivani Siroya has employed and intends to implement in the future. provide in$-$text referencing