Tala’s Long Journey to Profitability: Weathering Storms and Reimagining Microfinance

After 11 years in the microfinance business, fintech company Tala remains unprofitable, but its trajectory suggests a potential turning point. Founded by Shivani Siroya in 2011, Tala specializes in small loans of up to $500 for low-income consumers in developing nations—a notoriously challenging market to serve profitably. Despite this challenge, the company has rebuilt its technology infrastructure, developed a sophisticated new underwriting approach, and set ambitious expansion plans. With revenue running at an annualized rate of $340 million (up 35% from last year) and 1.8 million active customers, Tala aims to enter six new countries and finally break even by early 2026, doubling its lending by the end of 2027.

The COVID-19 pandemic nearly destroyed Tala’s business model. In March 2020, as lockdowns devastated the finances of consumers in the Philippines (one of Tala’s key markets), the company’s typical 10% loan default rate tripled in just one quarter. While most American fintech companies benefited from increased digital transactions during this period, Tala was forced into survival mode, slashing its monthly lending from $80 million to just $3 million. Siroya implemented drastic measures, laying off 20% of customer service staff in the Philippines and Kenya while dramatically cutting other costs. This “cockroach mode” strategy proved effective—after a year, Tala returned to pre-pandemic lending levels and secured funding in 2021 at an $800 million valuation from investors including Upstart, Kindred Ventures, and Revolution Growth. The pandemic crisis ultimately demonstrated both Tala’s vulnerability and resilience in challenging circumstances.

Tala’s innovative approach to risk assessment has been central to its business model from the beginning. When Siroya founded the company, she pioneered a creative solution to a fundamental problem: how to assess creditworthiness when traditional credit reports weren’t available. Her answer was to analyze cell phone data, including text-message receipts, to extract information about financial behaviors like bill payment patterns. However, this early system had limitations, placing consumers into broad risk buckets that Chief Technology Officer Kelly Uphoff (who joined Tala four years ago after nearly a decade at Netflix) described as “manual” and “not personalized.” Under Uphoff’s leadership, Tala has revolutionized its approach, moving from imprecise credit-score buckets to truly personalized risk assessments. The new system utilizes open-source tools and a statistical approach called causal inference, continuously running numerous small tests to draw conclusions without requiring experimental data and control groups.

Tala’s revamped risk assessment system has already shown promising results in Mexico, where approval rates have increased from about 40% to up to 80%, while defaults have fallen when comparing consumers with similar credit profiles. The company has diversified its data sources beyond Google’s Android operating system to include more internal information about how consumers use its app—like whether they speed through the loan application—along with factors such as education level and existing loans. This technological overhaul has dramatically accelerated Tala’s ability to enter new markets, reducing the time needed to build a lending model for a new country from 12 months to just three. With this enhanced capability, Tala has embarked on an ambitious expansion plan spanning Latin America and Asia. After recently launching in Guatemala, the company plans to enter Panama, the Dominican Republic, India, and Vietnam by the end of December, with Peru following in early 2026. These countries were selected for their large, underserved populations with income levels similar to Tala’s existing markets.

Making microloans profitable presents significant challenges that explain Tala’s continued losses despite substantial revenue. Every loan carries fixed costs regardless of size, making small loans inherently less profitable. Investors often hesitate to fund loans for poorer consumers, who typically have higher default rates—about 10% of Tala’s global customers don’t repay their loans, more than double the default rate on American credit cards. To compensate for these risks, Tala charges very high interest rates: up to 15% monthly in the Philippines (183% APR) and 24% monthly in Mexico (288% APR). Siroya defends these rates as necessary and comparable to competitors, noting that unlike credit cards, Tala’s loans don’t have revolving interest. She remains confident in Tala’s risk management, citing ten years of lending data (including the COVID downturn) and the short-term nature of its loans (averaging 30 days) that allows quick adjustments to lending volumes if needed. Furthermore, most of Tala’s future growth will come from its three established markets—the Philippines, Mexico, and Kenya—rather than new territories.

While Tala continues to prioritize growth over immediate profitability, competitor Branch has taken a more conservative approach. After laying off half its staff at the start of the pandemic, Branch founder Matt Flannery adopted a “self-imposed mandate to be profitable,” applying “profitability logic to every decision.” Today, Branch serves 6.5 million monthly active users (90% in India), lends $80 million monthly (55% of Tala’s total), generates about $140 million in annualized revenue, and expects $20 million in net profit after taxes in 2025. Siroya, however, defends Tala’s growth-focused strategy, noting the company hasn’t raised funding since 2021 and has kept costs sustainable while pursuing expansion. Beyond the six-country expansion plan, she’s planning to launch a stablecoin-based wallet that can function as an interest-earning bank account and enable international money transfers. Despite this ambitious agenda, Siroya says raising additional funding is “not a core focus” at present, though she’ll consider it if needed to accelerate growth. Like many tech CEOs, her primary concern is maintaining Tala’s competitive edge in a rapidly evolving landscape where advancements in AI and data availability could enable well-resourced tech companies to launch competing lending businesses faster than ever before.