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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.

Suggested Citation

  • Mark Schreiner, 2001. "A Scoring Model of the Risk of Costly Arrears at a Microfinance Lender in Bolivia," Development and Comp Systems 0109005, University Library of Munich, Germany.
    • 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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    References listed on IDEAS

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    1. 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, vol. 34(3), pages 44-61.
    2. 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, vol. 160(3), pages 523-541, September.
    3. 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, vol. 1(2), pages 101-114, April.
    4. Zeller, Manfred, 1996. "Determinants of repayment performance in credit groups: the role of program design, intra-group risk pooling, and social cohesion in Madagascar," FCND discussion papers 13, International Food Policy Research Institute (IFPRI).
    5. Loretta J. Mester, 1997. "What's the point of credit scoring?," Business Review, Federal Reserve Bank of Philadelphia, issue Sep, pages 3-16.
    6. Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x, December.
    7. Zeller, Manfred, 1998. "Determinants of Repayment Performance in Credit Groups: The Role of Program Design, Intragroup Risk Pooling, and Social Cohesion," Economic Development and Cultural Change, University of Chicago Press, vol. 46(3), pages 599-620, April.
    8. Sharma, Manohar & Zeller, Manfred, 1997. "Repayment performance in group-based credit programs in Bangladesh: An empirical analysis," World Development, Elsevier, vol. 25(10), pages 1731-1742, October.
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    Cited by:

    1. Vogelgesang, Ulrike, 2003. "Microfinance in Times of Crisis: The Effects of Competition, Rising Indebtedness, and Economic Crisis on Repayment Behavior," World Development, Elsevier, vol. 31(12), pages 2085-2114, December.
    2. Bing Xu & Jingwen Yang & Bifei Sun, 2018. "A nonparametric decision approach for entrepreneurship," International Entrepreneurship and Management Journal, Springer, vol. 14(1), pages 5-14, March.
    3. Salvador Rayo Cantón & Juan Lara Rubio & David Camino Blasco, 2010. "A Credit Scoring Model For Institutions Of Microfinance Under The Basel Ii Normative," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 15(28), pages 89-124.
    4. Mark Schreiner, 2001. "Audit Sampling Microfinance Portfolio-at-Risk," Computational Economics 0109001, University Library of Munich, Germany.
    5. 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 arrangements: Beyond the standard Credit Scoring]," MPRA Paper 7535, University Library of Munich, Germany.
    6. 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), vol. 39(4), pages 1-9, December.

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    JEL classification:

    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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