Paper
Benefits and Pitfalls of Statistical Credit Scoring for Microfinance
What is statistical credit scoring and how effective is it?
33 pages
This paper discusses the benefits and pitfalls of credit scoring applied to microfinance. Although scoring will not replace joint-liability groups nor loan officers, it does have enough predictive power to significantly improve the evaluation of the risk of loans applicants. This paper discusses what scoring can and cannot do, describes the data that microlenders who plan to use scoring should start to collect from all loan applicants, and outlines the basic steps in a scoring project.
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