That's treating delinquency and default as the same thing. Even if your debt isn't forgiven, if you repay late, then the present discounted value of that future money is worth less to the creditor than had it been paid on time.
Tala, Branch, and all these fintech firms are taking out debt themselves in order to lend to these individuals. Thus, they are paying interest. If you are late in your payments, they are floating you on their debt lines for longer.
Thus, even without loan forgiveness, a higher interest rate make sense to account for the risk if delinquency.
Secondly, even if they don't forgive the loan formally, internally it will eventually be taken as a writedown. You can default on a loan and they never get the money back without loan forgiveness existing. That again affects their rate of return and thus needs to affect their interest rate.
If instead they shouldn't be allowed to charge above a certain interest rate, then that will internet come with denying credit to a lot of the population.
People always want to have it both ways: don't discriminate against poor people by denying them credit but don't charge them the interest rates that are required to offer them credit. It's why people simultaneously complain about how sub-prime was predatory but also complain that the banks aren't doing enough to get low income people into home ownership. You can't have it both ways.
I'm not saying that there shouldn't be regulation limiting the types of loans allowed, interest rates, etc. Uneducated people in developing countries are probably not the best rational actors when it comes to making complex financial decisions. Some regulatory paternalism (and even libertarian paternalism by the govt through forcing clearer information on loan terms) is definitely warranted.
My point is fundamentally you can't have it both ways. Interest rates are a reflection of risk. And the result would be denying people access to financial services. We should be honest ourselves about these tradeoffs instead of pretending we can simply have our cake and eat it too.
There is only so much philanthropy money from the Gates Foundation, World Bank, etc. The rest of the capital to fund development ultimately comes from the private sector wherein there must be a sufficient return on that capital to justify its use in that scenario. Otherwise, the capital will simply just go elsewhere.
And again there could be other solutions. A massive overhaul to tax policy worldwide could provide a massive new source of capital to solve the problems of economic development. But I'm not holding my breath for such changes in a world where the super rich have only become more adept at tax evasion.
Disclaimer: I worked in online lending at Avant. I know some of the Tala guys as I live in Santa Monica. And my wife works at the World Bank in international development.