When a potential client comes to you for a loan, you check the credit score. If the credit score is high, the potential client goes under the column titled Premier – the higher the credit scores the better. Now that’s fine for a certain few who are premier clients, but what about the people who are unbanked – how can unbanked clients show a propensity to pay? How can you determine such a thing when there is no credit score? You want to tap into that large number of potential clients but where’s the safety net? Fortunately, software companies are finding ways to provide a different type of credit scoring and, best of all, credit score agencies are partnering with them.
While the United States has been depending on credit scores from Equifax, Experian, and TransUnion, developing countries with an emerging market have a population that primarily operates on a cash basis. They are unbanked and have no credit score. However, what is showing up as another way to give a type of credit score is cell-phone usage. When a potential client uses a cell phone regularly it shows a person who is economically active, and that in turn can show a client who has a propensity to pay. Cignifi, a Cambridge, Massachusetts-based company “[uses] cell-phone data to provide a Predictor Inclusion Score for people with no credit score.”
Cignifi’s software has the ability to present a type of credit score that is based on a potential client’s cell-phone usage. Equifax is interested in what Cignifi is doing and over the past few years, they have been working together to have this realized in the Republic of Chile. They are forming a partnership along with telecom companies. As with parts of India and Africa, two places already doing similar testing with phone usage, there are many potential clients in Chile who want loans and who would have a propensity to pay, based on Cignifi’s cell-phone credit-scoring process. Once this is tested in Chile, Cignifi and Equifax will reach out to other South American countries. It’s a new frontier just like it was in 1976 when Muhammad Yunus of Bangladesh gave a twenty-seven dollar loan to women weavers.
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