FIP 016: Credit Scoring for Under-Served Populations with Nicole Van Der Tuin

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For nearly ten years, Nicole has been working to get capital to places where it is scarce. She believes the cost of capital is central barrier to economic growth and development and she’s been focusing on ways to bring that cost down. In 2010 she set up First Access, a business that offers a credit scoring platform for lending institutions in emerging markets. In this episode, Nicole talks us through credit scoring for under-served populations and how this applies to any social entrepreneur taking on some level of risk with a lending product, such as asset financing or loans to customers.

Some of the things you’ll learn on this podcast include:

Ways to build up the “record of proof” for customers living in the informal economy, such as what you have earned, owned, spent.
How the emergence of mobile phones and the requirement to link SIM cards to people through some form of ID, has created the first mass of data, recording formal transactions for the majority of the world’s population.
How micro-finance institutions have been using a very labor intensive process for so long to offer small loans for people, creating a high cost per loan.
Also, how micro-finance institutions for too long have been non-digital and so leveraging the data they have on their customers has been hard.
The First Access analytics platform enables staff to act on patterns they’re seeing in the data of their customers.
The platform eliminates bias and ensures their decisions are made on the context of their country or region.
How using data analytics can reduce average customer acquisition costs dramatically, just by, for example, instantly approving any customer whose credit score comes within the top 5% of loan applicants.
Hiring a credit analyst would be a good move for any enterprise taking on some form of risk with a lending product.
A good first step for any social enterprise could be to simply start building up their data set to enable credit scoring faster at a later time. First Access can help organizations do this through a simpler, entry-level subscription which excludes the data analytics but ensures robust data collection using best practices.
We discuss distinctions between the lending products out there. One is small business micro-enterprise loans done through a customer evaluation process where you collect info about the customer before you lend them the money. This category is where you’re giving a borrower an asset that requires a down payment to ensure buy-in from that customer which predicts how likely they will pay and use the product.
Collecting data at the point of sale is good for your business, not just for potential credit scoring applications and assessing risk, but to know more about your customers which will make your sales and marketing more effective.
Email info@firstaccessmarket.com to request more info about credit scoring algorithms and other basic information to help improve your learning about this area.