The Role of Artificial Intelligence and Machine Learning in Credit Scoring

Executive Summary

The use of artificial intelligence (AI) and machine learning (ML) in credit scoring is revolutionizing the lending industry. By leveraging vast amounts of data and advanced algorithms, lenders are able to more accurately predict credit risk, improve operational efficiency, and expand access to credit for underbanked individuals and small businesses. This white paper explores the benefits and challenges of AI and ML credit scoring, and provides guidance for lenders on how to successfully integrate these technologies into their lending processes.

Introduction

Traditional credit scoring models rely on a limited set of data points, such as payment history, outstanding debt, and length of credit history, to assess creditworthiness. These models are effective for many borrowers, but they can be limiting for individuals with thin credit files or non-traditional sources of income. AI and ML credit scoring models, on the other hand, can analyze a vast array of data points, including non-traditional data sources, to develop a more accurate and comprehensive picture of a borrower’s creditworthiness.

Benefits of AI and ML Credit Scoring:

1. Improved accuracy: AI and ML algorithms can analyze a wide range of data points, including non-traditional data sources such as social media activity and utility bill payments, to develop a more accurate picture of a borrower’s creditworthiness. This can result in more accurate credit scores and better loan decisions.

2. Expanded access to credit: Traditional credit scoring models can be limiting for individuals with thin credit files or non-traditional sources of income. By analyzing a broader range of data points, AI and ML credit scoring models can expand access to credit for underbanked individuals and small businesses.

3. Increased efficiency: AI and ML credit scoring models can automate many aspects of the lending process, reducing the need for manual underwriting and improving operational efficiency. This can result in faster loan decisions and a better borrower experience.

Challenges of AI and ML Credit Scoring:

1. Data privacy and security: As AI and ML credit scoring models rely on vast amounts of data, data privacy and security are critical concerns. Lenders must ensure that they are collecting and using data in compliance with applicable laws and regulations, and that they have robust cybersecurity measures in place to protect sensitive borrower data.

2. Bias and discrimination: AI and ML algorithms are only as good as the data they are trained on, and if that data is biased, the algorithms can perpetuate that bias. Lenders must be mindful of potential biases in their data and take steps to mitigate any potential discrimination in their lending decisions.

3. Explainability: AI and ML algorithms can be complex and difficult to interpret, which can make it challenging for lenders to explain their lending decisions to borrowers. Lenders must be able to provide clear explanations of their credit scoring models and lending decisions to borrowers.

Conclusion

AI and ML credit scoring has the potential to revolutionize the lending industry, providing more accurate credit scores, expanding access to credit, and improving operational efficiency. However, lenders must be mindful of the potential challenges, including data privacy and security, bias and discrimination, and explainability, and take steps to mitigate these risks. By investing in AI and ML technologies and developing robust risk management practices, lenders can successfully integrate these technologies into their lending processes and provide better loan decisions and a better borrower experience.

Samuel White

Director of Direct Marekts, Creditinfo Group.

www.creditinfo.com

“Vera”, Creditinfo’s ESG platform, now available for customers in Iceland

Environmental, social, and governance (ESG) factors are increasingly becoming a key consideration for investors, stakeholders, and companies. These factors help measure the sustainability and societal impact of a business, and ESG data is crucial for decision-making in the investment and corporate world. However, the availability, quality, and accessibility of ESG data have been major challenges, making it difficult to obtain accurate and reliable insights. This is increasingly becoming a problem for small and medium sized businesses that do not have the resources available to access and produce accurate and reliable ESG data.  

To address this growing need for ESG data services Creditinfo Iceland recently launched Vera, a new ESG data platform, for customers in Iceland. With Vera companies can access data about their customers and/or suppliers in an accessible way. The platform contains diverse sustainability information for all active companies in Iceland including  data directly reported by companies as well as external sources such as media coverage, judicial information, and supply chain operations. Companies can easily update their own sustainability information through MyCreditinfo to ensure an accurate portrayal of information such as emissions, ESG ratings, and other relevant data.  

What are the features Vera has to offer? 


 

  • Who can update sustainability information? 

One of Vera characteristics is that much the data can be updated to increase accuracy. If a company has a dedicated in-house sustainability officer, this person can be given access to Vera to update its info. This is done through MyCreditinfo where anyone inside the company with edit access can forward the access to a relevant employee. The sustainability officer can then provide the needed input.  

  • Contact person 

Sometimes it is difficult to reach the relevant person within companies regarding sustainability. ​This can happen during supplier assessments or during other processes where sustainability data is needed. It can also be time consuming to figure out who is responsible for this subject within companies. Vera helps with this process by offering companies to clarify who is the responsible person for sustainability related matters.​ This makes all communications easier and data flow quicker. 

  • Greenhouse gas emissions 

Most companies are accountable for greenhouse gas emissions, either directly or indirectly. Some companies know how much is emitted and where. Vera can estimate the greenhouse gas emissions from company operations if she knows the industry companies operate in and their revenue. This data must be in place in order for Vera to run its calculations.​ If companies know however their emissions, they can update their profile to provide better information to the market. 

  • Emission intensity 

Absolute greenhouse gas emissions tell a certain story regarding company operations.​ However, companies can emit the same amount of greenhouse gases while their size may differ. So understanding how much is emitted per revenue provides a better understanding of the sector. Emission intensity of the sector is therefore also a very relevant metric.​ Vera provides its users with an overview of the carbon intensity of the sector companies operate in. Sector emission intensity can initiate an interesting conversation between a lender/investor and the company where the company may want to demonstrate a better performance than the sector as a whole.​ Vera provides the sector carbon intensity on a scale which is easy to read and understand. 

  • Sustainability risks and opportunities 

Sustainability risks vary between sectors. Material sustainability factors are those who may have financial implications on companies if mismanaged. Sustainability accounting standards board (SASB) which is now a part of the IFRS has defined which sustainability factors are material within sectors and why.​ Such an overview is important for companies in order to manage material factors instead of using resources to provide data on non-material factors.   

Vera uses data from SASB to provide its users with an overview of material factors for individual companies and if the factors are considered climate risks. If a sustainability risk is classified as climate risk, Vera indicates the type of climate risk. This can be physical or transitional.​ Physical risks appear for example through extreme weather, ocean acidification etc. Transition risks appear through policy and legal risks. Vera provides an understanding regarding which sustainability risks companies are exposed to in a convenient manner.  

  • Sustainability in the value chain 

Using public data it is possible to map out the international supply chain of sectors. Vera provides such overview but is clear regarding the pitfalls of the data as the sector does not represent individual companies. Companies can therefore update their supply chain data. By updating the data in Vera, companies gain a deeper insight into various sustainability related matter in their value chain.  

Users of Vera can click on the value chain countries and redirect to the UN SDG website where even more detailed data is provided.​ In this way, the users of Vera and the reporting companies get a much better overview of the possible risk factors in the supply chain.​ 

  • Sustainability media information 

Creditinfo maintains a media monitoring service in many of its markets​. Using the data from Creditinfo, it is possible to monitor ESG related news articles involving individual companies.​ The ESG media monitor only monitors ESG related articles. Vera therefore utilizes the media quite effectively as a watchdog.​ Vera also provides ESG related media coverage regarding companies within the same sector. ​ 

  • Sustainability media information in the supply chain 

Vera understands which countries the sector mostly does business with.​ Using this data, Vera can monitor ESG related matters in the countries the company mostly does business with.​ If a company provides better data regarding its value chain, they have the possibility to understand better on a macro level the operating conditions in those countries. ​Such data can be used for decision making and supplier assessments.​ 

  • Sustainability documents 

Companies often publish reports and documents related to sustainability. This data is often dispersed around their website and is time consuming to maintain in a single place. Companies may also have various certifications in place which they may want to put forward.​ Such reports can be uploaded to Vera, which makes their access easier.​ If a company does not upload its reports to Vera, Creditinfo staff manually gathers the data and uploads to Vera. 

  • Court cases 

Vera provides an overview of court cases the company appears in for all court levels. It is possible to see the case abstract only or navigate to the official court document online. Vera also shows court cases for parent companies and subsidiaries. The ratio of ownership has to be 10% or more in both directions for Vera to show the cases. Vera therefore provides a better insight into related cases than the courts themselves.  

  • Diversity information 

Diversity in management and staff is an important component of successful companies. Studies have shown that gender diversity in staff has a positive impact on companies. Vera offers information about gender ratios for employees, board members and executives for a company. This information can be updated via MyCreditinfo.  

 For more information visit www.creditinfo.com

 

Kredītinformācijas Birojs and Citadel Bank Sign an Agreement to make It easier for Ukrainian citizens to receive Financial Services

Kredītinformācijas Birojs (KIB) has concluded an agreement with Citadel Bank on using credit history data of Ukrainian nationals to evaluate the possibility of granting loans. The service will allow bank employees to verify personal identification data and residential address before opening an account for Ukrainian citizens, as well as check the customer’s credit history and information on existing credit obligations in Ukraine, evaluating the granting of a loan.
 
“The information provided by us is valuable for any Latvian company that enters into a contract with Ukrainian nationals to more objectively evaluate the client’s ability to fulfill their financial obligations in the future. We are happy that “Citadele” has become the first Latvian bank to which such data will be available in the future,” says Intars Miķelsons, a member of the board of AS “Kredītinformations Birojs.”
 
The database contains information on 15 million private individuals and 54 million unique credit agreements – both those where payments are made according to the schedule and those where the borrower delays payments. The data providers comprise 20 of the largest Ukrainian banks and non-bank lenders. The credit history report also contains the person’s tax identity number, declared place of residence in Ukraine, and registered contact numbers in Ukraine.
 
When starting cooperation with each client, the bank observes the principles of “know your client,” i.e., learns all the necessary information about the potential client, for example, the origin of funds entering the client’s account. The bank also checks the client’s credit history and information on existing obligations if the client has applied for a loan. The information obtained from KIB about the obligations of Ukrainian citizens will benefit the bank. “We are already providing Ukrainian citizens with the opportunity to open a bank account remotely and receive various financial services, such as loans for various purposes. The new information base will speed up these processes,” says Jānis Mūrnieks, Head of Citadele’s Private Person Service Directorate.
 
For the Latvian company to obtain data, it must conclude a contract with KIB. In contrast, before requesting the data, the Ukrainian citizen must permit using his data by signing the consent.  
 
Like residents of Latvia, citizens of Ukraine can check their credit history free of charge at the Credit Information Bureau (Grēdu Street 4a, Riga). To receive information, a citizen of Ukraine needs a valid foreign passport issued by Ukrainian state authorities.

It has already been reported that last year the “Credit Information Bureau” of Latvia (KIB) concluded an agreement with the “International Credit Information Bureau” in Ukraine Мидрождение бюро кредитних історий ) on the exchange of credit history data of Ukrainian nationals.

One of the safest businesses in Lithuania – Dental Services

The profitability of some companies is almost half their revenues, very few go bankrupt.

Vilnius, Lithuania 06/02/2023. Although most dental businesses are small and usually employ fewer than 10 people, this is one of the most stable businesses in Lithuania. Profitability often exceeds one-third of income and only a few become insolvent. Dental businesses are 7 times less likely to go bankrupt than the average insolvency across all other businesses, according to an analysis conducted by Creditinfo Lithuania.

According to data from January 2023, there are currently almost 2,000 dental businesses in Lithuania employing 9,500 people. The number of companies and their employees is growing year on year. Dental businesses are generally small, with more than half of them employing fewer than 10 people. Only 12 organisations have created more than 50 jobs, while the largest dental service companies are Vilnius University Hospital (293), SB Dental Clinic (168), Denticija (153), Smile Academy (126), Smile Laboratory (124), Vilnius Implantology Centre Clinic (93), Panevėžys City Dental Clinic (72), Laudenta (71), Pasirink (66) and Žvėrynas Dental Clinic (59).

Revenues grow year on year, profitability remains high

Despite the pandemic’s restrictions on the medical services sector between 2020 and 2021, the total revenue of dental companies has grown consistently year on year, reaching €294.6 million in 2021, an increase of 39.8% compared to 2020 (€210.7 million), which in turn is an increase of 76% compared to 2019 (€167 million).

The top 10 companies with the most revenue in 2021 are SB Dental Clinic (€8.2 million), Vilnius Implantology Centre Clinic (~€7 million), Denticija (€3.2 million), Smile Academy (€3.1 million), Prodenta (€3.1 million), Žvėrynas Dental Clinic (€3 million), Sveikatos Gija (€2.9 million), Šiauliai Implantology Centre (€2.8 million), Laudenta (€2.6 million) and Dental Harmony (€2.6 million).

Dental service companies are characterised by relatively high profitability, reaching up to 45%. The top ten companies with the highest profits in 2021 are Laudenta (€922 thousand), SB Dental Clinic (€917 thousand), Implantera (€739 thousand), Šiauliai Implantology Centre (€713 thousand), Smile Design (€688 thousand), Vilnius Implantology Centre Clinic (€644 thousand), Klaipėda Orthodontics Centre (€592 thousand), Dantima (€556 thousand), Donatas Jurgaicis Odontology Clinic (€529 thousand) and Teeth Centre (€512 thousand).

“The dental services business has advantages – patients usually pay for services immediately, which speeds up the turnover of funds. In addition, some dental services are subject to significant VAT exemptions, which reduces the tax burden and increases the profitability of the companies,” says Jekaterina Rojaka, Head of Business Development and Strategy at Creditinfo Lithuania.

However, not all companies were profitable, with 148 dental service providers declaring a loss in 2021, compared to 128 in pandemic year 2020 and 133 in pre-pandemic year 2019.

Dentists 7 times less likely to go bankrupt

The dental services sector has a particularly low risk of bankruptcy compared to all other sectors, with 1% of firms currently at high risk of bankruptcy and 0% at the highest risk. The high and highest risk classes for late payment are 3% and 2% of companies, respectively. The riskiness of dental firms was slightly higher at the beginning of 2021, with 4% of firms in the high bankruptcy risk class (none in the highest) and 11% in the high and highest delayed payment risk classes.

No dental companies went bankrupt in 2021 or 2022, while 26 firms have become insolvent since 2003, an average of 1-2 per year.

The dental business is characterised by a low level of debt. As of January 2023, there were 98 registered debts in the credit bureau’s system, totalling €95 thousand. The average debt was €971.

Compared to companies operating in other sectors in Lithuania, dental service companies are 7 times less risky. For example, in January this year, 1.3% of dental businesses were classified as high and highest risk, compared to an average of 9.5% for all other businesses in Lithuania. In terms of the risk of late payment, 4.5% of firms were in the high and highest risk classes, while the average for all other firms was 17.2%.

Almost a fifth of dental businesses (359) have not yet submitted their financial statements for 2021.

More information:
Jekaterina Rojaka, Head of Business Development and Strategy, Creditinfo Lithuania (jekaterina.rojaka@creditinfo.com)

lt.creditinfo.com

Travel agencies in Lithuania are slowly rising from the ashes

Revenues doubled in a year but remained three times lower than before the pandemic.  

Vilnius, Lithuania, 24/01/2023. Travel agencies in Lithuania that declared their income in 2021 earned almost twice as much as in the previous year. However, compared to income in 2019, they earned almost three times less, according to an analysis carried out by the credit bureau Creditinfo Lietuva. Almost 100 tourism companies were loss-making. With the increase in travel flows, the number of debts increases and their average size grows.

There are currently 783 companies in Lithuania for which tour organisation is the main activity. In 2021, travel agencies declaring revenues collectively earned more than €171 million, almost double (82%) the pandemic year 2020 (~€94 million). However, travel agencies are still a long way from a real recovery – for example, in 2019, their revenues were almost €474 million, but fell more than fivefold in the aftermath of the pandemic.

According to 2021 data, the largest annual revenue was earned by the following companies: Novaturas (€108,995 million), Tez Tour (~€60 million), Itaka Lietuva (€12.5 million), Coral Travel Lithuania (€9.5 million), Kidy Tour (€8.9 million), Estravel Vilnius (€6.3 million), Estekspress (€4 million), Traveldeals LT (€4 million), Glotera (€3.6 million) and ZIP Travel (€2.9 million).

The top ten most profitable travel agencies are Novaturas (€909 thousand), Baltic Tours Group (€633 thousand), Vestekspress (€530 thousand), Glotera (€336 thousand), Traveldeals LT (€307 thousand), Baltic Clipper (€288 thousand), Baltic Travel Service (€271 thousand), TEZ Tour (€215 thousand), Estravel Vilnius (€158 thousand), Riviera Tours (€148 thousand) and ZIP Travel (€123 thousand).

Staff numbers shrink by a quarter

In total, travel agencies currently employ almost 2,000 employees (1,850). While the number of enterprises has remained almost constant over the past few years (776 in 2019, 787 in 2021), the number of employees has fallen by almost a quarter since 2019, from 2,426 to 1,850.

Travel agencies are more often headed by women, accounting for almost 56% of all managers. The average age of a travel agency manager is 49 years and the average age of a travel agency is over 15 years.

In the travel sector, men’s salaries are higher than women’s – as of November 2022, the average salary for men was €2,659 per month, while for women it was €2,014 per month. At the start of 2022, the average salary for women was €2,053 per month and for men was €2,364 per month.

State support has prevented more bankruptcies

Since 2004, a total of 94 travel agencies have gone bankrupt in Lithuania, with the highest number of bankruptcies recorded in 2009 (10) and in 2015 (12). In 2022, there were 5 travel agency bankruptcies, while there were 3 in 2021 and 4 in 2019. No travel agency bankruptcy was recorded in pandemic year 2020.

“The travel sector was one of the hardest hit by the pandemic, along with hotels and restaurants. During the pandemic, when revenues from tour operators dropped fivefold, it was state support that saved the sector from bankruptcy,” explains Aurimas Kačinskas. But the challenges of the pandemic were replaced last year by new challenges – the war in Ukraine and the sanctions imposed on Russia have exacerbated the energy crisis, fuel prices have risen and many travel routes have been disrupted. The slower-than-expected recovery of the air transport sector, with a sharp increase in fares, is having a negative impact on the business of tour operators, preventing them from recovering faster.

According to the head of the credit bureau, it was state support that determined the stability of the number of enterprises and the discipline of submitting financial statements – compared to other sectors, only 90 travel agencies did not submit their financial statements for 2021, making them ineligible for state support.

However, a risk analysis of travel agencies shows that there have been both positive and worrying signs in the recent period. For example, as of January this year, 9% of companies were in the high and highest classes of bankruptcy, compared with 12% a year ago. In terms of delayed payments, 17% of companies are currently in the high and highest risk classes, down from 21% last year.

Compared to 2020 and 2021, the recent increase in debt is slightly higher and the average amount of debt per person is growing. At present, 306 debts have been registered in the credit bureau system, amounting to more than €349 thousand, with an average debt of €1,141.  A year ago, the number of debts was 316, amounting to €351 thousand, with an average debt of €1,112. In January 2020, 255 debts amounting to €203 thousand were registered, with an average debt of €798. 335 travel agencies mostly owe money to Sodra (€3 million). The debt of 158 travel agencies to telecommunications companies amounts to €222 thousand. 8 travel agencies owe €74 thousand to financial companies.

“The tour operator business is recovering, but revenue growth is slower than expected in the wake of the pandemic due to the many geopolitical and economic shocks around the world. The tourism sector is currently encompassed by a number of risks, so it is advisable to keep a close eye on the changing financial indicators of partners organising the trips,” concludes the head of the credit bureau.

More information:
Aurimas Kačinskas, CEO of Creditinfo Lithuania (aurimas.kacinskas@creditinfo.com)

lt.creditinfo.com

Creditinfo Estonia Management Change

EXTERNAL ANNOUNCEMENT

07/02/2023

Ms. Ege Metsandi, CEO and Chairman of the Management Board for Creditinfo Estonia is leaving her position at the company. During the next 6 months, Ms. Metsandi will be working closely with the interim Chairman and CEO, Mr. Elari Tammenurm, currently the Head of IT – Baltics, along with the Estonian team to ensure a seamless handover continues until a replacement is found.

Paul Randall, Group CEO for Creditinfo, advised, “During her 6 years of tenure, Ege has successfully developed the company, both financially and commercially. I want to personally thank Ege for her efforts, utilizing her experience and great insight in risk management to build the Creditinfo brand in Estonia.

Everyone at Creditinfo wishes Ege well for her future.” Ege added, “I leave a very strong and talented team behind at Creditinfo. I look forward to making certain of a smooth transition to keep up the positive momentum that we have established together over the last 6 years.” Established in 1997, Creditinfo Group provides credit information and automated risk management services around the world.

www.creditinfo.com

JSC “International Bureau of Credit Histories” launched the chatbot “MBKI online” in order to provide Ukrainians and migrants from Ukraine with access to their credit histories.

Lending is one of the main elements of the modern financial system. In one way or another, most people rely on loans from banks – whether these are credits, mortgages, installments, credit cards to pay for critical goods and services. An important role in this process is played by credit bureaus that collect, store, process and transmit information on borrowers’ payment discipline, credit scoring and current obligations.

However, when people move to a new country or are forcibly evicted from their homes due to occupation or fleeing war – this is what many Ukrainians are currently experiencing – it becomes much more difficult to access financial and other services. This unfortunately disadvantages refugees and adds to the problem regardless of whether they had good or bad credit history before.

Aiming to resolve issues related to solvency confirmation of the tenant from Ukraine and checking the credit history of Ukrainians when applying for a loan or employment, JSC “IBCH” (one of the largest Credit History Bureaus in Ukraine, a member of the international Creditinfo Group since May 2021) created the “MBKI online” chatbot.

For more than 16 years IBCH (Creditinfo Ukraine) has been cooperating with the largest banks and non-bank financial institutions, including foreign financial institutions and credit bureaus of other countries. The organization is now focusing its attention on supporting Ukrainians, both in Ukraine and abroad, with getting access to credit reports.

Kateryna Danylchenko, CEO of JSC “IBCH” (Creditinfo Ukraine), stated, “Since the beginning of the war in Ukraine, over 6 million people – including myself, my fellow colleagues and partners– have been forced to leave the country at short notice with no idea if or when they will return. Displaced Ukrainian refuges face a whole host of challenges without necessary documentation or access to registries. While JSC “IBCH” (MBKI, Creditinfo Ukraine) became the first Ukrainian bureau to launch cross-border data sharing with bureaus from 5 countries, it is also important to assure easy and mobile direct-to-consumer gate to credit history reports. “MBKI online” is so important in helping Ukrainians staying in country and abroad gain online access to their credit histories (also in English), so they can prove their ability to make payments on time to landlords or new employers, follow their credit history updates and bureau score change, as well as to report about lost identification documents.”

“Creditinfo was set up to aid financial inclusion through making credit information more easily accessible and digestible for borrowers and lenders.” – comments Paul Randall, CEO Creditinfo Group. “I’m so glad that there’s something practical we’ve been able to do to help Ukrainian refugees across Europe to access financial services. The creation of this chatbot is an important development in our journey to make the lives of everyone forcibly displaced by this war that tiny bit easier.”

The “MBKI online” chatbot, available on Viber and Telegram, gives Ukrainians access to their own credit history and offers an easy way of identification including using BankID.

Chatbot enables the customer:

• To get a certificate about credit history (in Ukrainian and English);

• To find out personal credit score;

• To get answers to basic questions about credit history;

• To inform the Bureau about the loss of a passport or other identity document;

• To ask for a loan and find out available offers.

Chatbot accepts different payment methods (including bank card, Apple Pay and Google Pay). For more information and to start working with the service, follow the link: https://credithistory.com.ua/bots/

Evolution of customer onboarding and risk assessment 

This year, Creditinfo celebrated its 25-year anniversary, so I decided to look back on how the landscape in effective credit risk management has evolved. 

While it was a little before my time, I’m sure there are still many people today who remember that the only way to open a bank account, apply for a loan or to be considered for a mortgage was to visit your local branch and sit with a loan officer. Though, this is still the case in many emerging markets even today, there will be some small differences on the data used and the risk assessment criteria that is in place.  

Historically, a visit to the branch would involve meeting a loan officer who would then try to understand your circumstances before making an approval. If there was a past relationship or a connection (family member, friend, etc) with the loan officer, this would usually work in your favor. It was a direct relationship that usually lasted a lifetime. The loan officer would know or at least try to understand as much personal information on your employment, income, and expenses as possible and then would make a personal judgement to provide you with a form of credit. All of this was most likely completed and documented on papers and filed into a filing system for record.  

 Fast forward a few decades and not only are local branches disappearing, but also the idea of sharing personal information with a “stranger”, along with any supporting documents that validate your circumstances are a thing of the past. In a world of smartphones, tablets, and access to the internet 24/7, we have moved to a new wave of digital lending.   

Lenders are implementing new strategies today to meet the end needs of customers by enabling access to credit instantly at their fingertips. Digitalization has become the new norm in lending and to succeed today, lenders need to adjust and transform their platforms. It is now a thing of the past to fill in an application form on paper when we have a smartphone in our pockets that can allow us to fill in the same information into a mobile application within a few minutes. As part of the loan onboarding, we can now validate our identity through biometric authentication options – fingerprint analysis, selfie/face recognition and document validation, etc. eliminating the need to do human to human verification.  

 The challenges from old-fashioned lending methods, i.e. understanding family ties or seeking information on employment and income would typically result in an unfair and inaccurate risk assessment. With the vast amount of information available today, either traditional or non-traditional, we can accurately assess everyone, even customers with limited credit history – “thin files”. These are often rejected due to the lack of evidence on how risk-tolerant or risk-averse they are. Usually, the absence of traditional information for these customers creates a challenge for them to receive the financial support they need. With the introduction of psychometric data, e-wallet data or open banking solutions, lenders can combine credit scoring methods with traditional models to provide accurate and reliable risk assessment.   

The benefits and success of this digital transformation and innovative approach to lending is not just about delivering quick-fix money solutions. Instead, it is about empowering individuals, facilitating access to credit and growing our global economies.    

If you are interested to reach the top and win the digital race with a state-of-the-art digital lending platform then reach out to Gary Brown, Commercial Director, Creditinfo Group.  

Visit www.creditinfo.com for more information.

Paving the way for a brighter future through SME lending  

Developing modern solutions and removing barriers, paves the way for a brighter future through SME lending

SMEs (Small and Medium-sized Enterprises) are known as one of the biggest business sectors in each economy, being important contributors to job creation and global economic development. They create more than 50% of employment worldwide.

SMEs have gained importance in developing economies. Although SMEs have some weaknesses, they are less affected by economic crises due to their flexibility and ability to keep up with changing conditions. SMEs are vital establishments to create an effective innovation ecosystemThis is shown by recent studies that SME’s can contribute to over 55% of GDP and over 50% of total employment.

SMEs can find it increasingly difficult to borrow money from traditional banks because of strict requirements. It is often seen that SMEs are riskier than large institutions as it is difficult for banks to evaluate them in the same way since they often do not have solid accounting systems. This difficulty in assessing their creditworthiness often impacts the bank’s ability to provide affordable credit. As a result, many SMEs are forced to look at alternative solutions such as expensive credit lines charging high interest rates or offering costly collateral. Neither of these options are sustainable for small businesses.

SMEs need fast decisions and a more agile, digital approach. This is where Creditinfo and local Fintechs are working in collaboration to support the sector. Together, we specialize in using technology to quickly assess each SME’s entire data footprint and then provide tailored financial solutions. Based on our experience in Africa, we can assess the credit risk an SME poses by using real-time data from multiple sources, including e-wallets, credit bureaus and credit scores. The traditional method, consisting of manual processes and hard copies, is now an outdated approach in the digital world.

Digital SME finance, using alternative data, offers an extraordinary opportunity for addressing some of the challenges. Every time SMEs and their customers use digital services, conduct banking transactions, make or accept digital payments, use their mobile phones, or manage their receivables and payables through a digital platform, they create alternative data. This real-time and verified data can be analyzed to determine both capacity and willingness to repay loans.

Specific SME assessment methodology can also be applied. For example, small companies tend to have a greater level of owner centricity. Therefore, blending business and personal data can enable the development of highly predictive blended scorecards that utilize the payment behaviour of business owners and managers and company credit data to produce a more comprehensive risk assessment.

Help is also needed from Central Banks to continue to support this sector. We are seeing reforms happening globally where Central Banks are implementing mandates for all banks to lend a set percentage of their credit portfolios to SMEs. Boosting the availability of finance for the SME sector, the reforms aim to ease the flow and reduce the high cost of credit to a sector that is considered an engine of growth for the future.

SME lending is rapidly growing, and by putting the customer needs first and using new solutions and data, we can begin to shift the status quo. Globally there is a shift toward digital lending solutions, which can support a level playing field for SMEs. By transforming this lending sector as a whole, we can make it more accessible for small businesses to grow and continue making a difference.

Joe Bowerbank – Business/Commercial Development, Creditinfo Group.

www.creditinfo.com

Angola’s first licensed credit bureau in partnership with Creditinfo to provide millions with access to finance

  • Private credit bureau will support responsible lending and economic growth
  • Millions of unbanked citizens and small businesses to gain access to lending for the first time

Luanda/London, 16th May 2022 – Creditinfo Group, the leading global service provider for credit information and risk management solutions, today announces plans to open Angola’s first licensed credit bureau, with Bureau Central Privada de Informação de Crédito SA (Bureau). This long-term strategic partnership, represents a vote of confidence and major investment into Angola’s buoyant economy, unlocking access to credit for millions of micro-to-medium sized businesses and citizens – many of whom are currently unbanked.

To deliver a world-leading private credit bureau solution, Creditinfo will combine Bureau‘s local knowledge with its own extensive experience delivering private credit bureau solutions in developing markets – including across Sub-Saharan Africa. The project’s initial remit will include Creditinfo’s most popular products and services, including CBS. Based on market appetite, further value-added products will be introduced.

Samúel White, Regional Director at Creditinfo said: “Accessing credit has long been a challenge across Sub-Saharan Africa. By opening Angola’s first private credit bureau, we’ll enable banks and other lenders to extend credit to citizens and businesses, helping to build and develop its already thriving economy. Supporting the unbanked to access finance requires a specific set of experiences and insights which Creditinfo has honed over decades of working across the region. We’re proud to be a leader in this space and can’t wait to open for another dynamic market together with our strategic partners.”

Cristiano Monnerat, Director at Bureau Central Privada de Informação de Crédito S.A. added: “Boasting significant untapped opportunities for wealth creation and a young, dynamic population, Angola represents an attractive investment for us. As such, we’re excited to be able to draw on Creditinfo’s global expertise to build a private credit bureau that’s run by local people, for local people. All in all, this marks a major step forward for Angola’s growing economy.”

-ENDS-

 

About Creditinfo

Established in 1997 and headquartered in Reykjavík, Iceland, Creditinfo is a provider of credit information and risk management solutions worldwide. As one of the fastest-growing companies in its field, Creditinfo facilitates access to finance, through intelligent information, software and decision analytics solutions.

With more than 30 credit bureaus running today, Creditinfo has the most considerable global presence in this field of credit risk management, with a significantly greater footprint than competitors. For

decades it has provided business information, risk management and credit bureau solutions to some of the largest, lenders, governments and central banks globally to increase financial inclusion and generate economic growth by allowing credit access for SMEs and individuals. For more information, please visit www.creditinfo.com

About Bureau Central Privada de Informação de Crédito S.A.

Established in 2021, the Bureau Central Privada de Informação de Crédito S.A. (Bureau) supports access to finance in Angola – with a focus on underserved segments of society with no formal access to credit facilities. Bureau is led by a highly qualified team of Brazilian advisors based in Angola. In February 2022, the Bureau received its operational license from the Central Bank of Angola, fulfilling all of the legislative and regulatory requirements.

The long-term strategic partnership with Creditinfo Group will provide Bureau with the necessary insights and industry best practices from similar markets to increase economic growth and improve financial inclusion across Angola.

Media Contacts:

Jack Benda

Red Lorry Yellow Lorry for Creditinfo Group creditinfo@rlyl.com

+44 (0)7760 291 679