Credit Scoring and Microfinance

Credit Scoring and Microfinance provides an insight into the relation between the notions of microfinance and credit scoring.

There is an analysis of the possible uses of the process of credit scoring in the context of microfinance as well as some assessments regarding the prospects of this process in the context of microfinance. Relation of Credit Scoring and Microfinance There is a deep connection between the concepts of credit scoring and microfinance. It has often been observed that in the countries that are economically better off the system of credit scoring has its place.

The question that arises in this context is that is credit scoring applicable in countries where the microfinance is a predominant form of procuring money. Credit Scoring in Microfinance It can be safely assumed that the process of credit scoring is useful as far as microfinance is concerned. Credit scoring is the process, which is used by lenders in order to estimate the amount of risk that may be there in case of a particular loan. That means there could be a possibility that the process of credit scoring is found to be useful in microfinance. Credit Scoring and Microfinance Assumptions It is being assumed in certain circles that in the coming ten years the process of credit scoring would be gaining in applicability as far as microfinance is concerned. Areas of Use of Credit Scoring in Microfinance There are certain areas in which credit scoring can prove to be useful in the context of microfinance. An example would be the reduction in the costs that are incurred in arrears and appraising the loan. This would make the entire process of microfinance a more productive and comprehensive process.

The experiments that have been carried out in Colombia and Bolivia with the utility of credit scoring in the context of microfinance substantiate the fact that credit scoring is indeed helpful as far as reduction of various expenses are concerned.

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Last Updated on : 9th July 2013

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