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A Scoring Model of the Risk of Costly Arrears at a Microfinance Lender in Bolivia

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  • Mark Schreiner

    (Washington University in St. Louis)

Abstract

Can scoring models help microfinance lenders in poor countries as much as they have helped credit-card lenders in rich countries? I model the probability that loans from a microlender in Bolivia had arrears of 15 days or more. Although arrears in microfinance depend on many factors difficult to include in statistical models, I find that inexpensive data does indeed have some predictive power. In microfinance, computer models will not replace loan officers, but they can flag the highest risks and act as a cross-check on human judgement.

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File URL: http://128.118.178.162/eps/dev/papers/0109/0109005.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Development and Comp Systems with number 0109005.

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Date of creation: 05 Sep 2001
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Handle: RePEc:wpa:wuwpdc:0109005

Note: Type of Document - Adobe Acrobat 3.0; prepared on Windows 98; to print on Adobe Acrobat 3.0; pages: ; figures: Included in pdf file
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Keywords: Scoring; risk management; credit risk; Bolivia; microfinance;

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References

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  1. Zeller, Manfred, 1996. "Determinants of repayment performance in credit groups," FCND discussion papers, International Food Policy Research Institute (IFPRI) 13, International Food Policy Research Institute (IFPRI).
  2. Jens Reinke, 1998. "How to lend like mad and make a profit: A micro-credit paradigm versus the start-up fund in South Africa," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 34(3), pages 44-61.
  3. Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, The MIT Press, edition 5, volume 1, number 026261183x, December.
  4. D. J. Hand & W. E. Henley, 1997. "Statistical Classification Methods in Consumer Credit Scoring: a Review," Journal of the Royal Statistical Society Series A, Royal Statistical Society, Royal Statistical Society, vol. 160(3), pages 523-541.
  5. Reichert, Alan K & Cho, Chien-Ching & Wagner, George M, 1983. "An Examination of the Conceptual Issues Involved in Developing Credit-scoring Models," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 1(2), pages 101-14, April.
  6. Loretta J. Mester, 1997. "What's the point of credit scoring?," Business Review, Federal Reserve Bank of Philadelphia, Federal Reserve Bank of Philadelphia, issue Sep, pages 3-16.
  7. Sharma, Manohar & Zeller, Manfred, 1997. "Repayment performance in group-based credit programs in Bangladesh: An empirical analysis," World Development, Elsevier, Elsevier, vol. 25(10), pages 1731-1742, October.
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Cited by:
  1. Rayo Cantón, Salvador & Lara Rubio, Juan & Camino Blasco, David, 2010. "A Credit Scoring Model For Institutions Of Microfinance Under The Basel Ii Normative," Journal of Economics, Finance and Administrative Science, Universidad ESAN, Universidad ESAN, vol. 15(28), pages 89-124.
  2. Vogelgesang, Ulrike, 2003. "Microfinance in Times of Crisis: The Effects of Competition, Rising Indebtedness, and Economic Crisis on Repayment Behavior," World Development, Elsevier, Elsevier, vol. 31(12), pages 2085-2114, December.
  3. Mermelstein, David A., 2006. "Defaults en carteras hipotecarias, macroeconomía y arreglos institucionales: Más allá de los modelos de Credit-Scoring tradicionales
    [Mortgage defaults, macroeconomics, and institutional arrange
    ," MPRA Paper 7535, University Library of Munich, Germany.
  4. Mark Schreiner, 2001. "Audit Sampling Microfinance Portfolio-at-Risk," Computational Economics, EconWPA 0109001, EconWPA.
  5. Kuhn, M.E. & Darroch, Mark A.G. & Ortmann, Gerald F., 2000. "Assessing the efficacy of a South African microlender's loan screening mechanism," Agrekon, Agricultural Economics Association of South Africa (AEASA), Agricultural Economics Association of South Africa (AEASA), vol. 39(4), December.

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