Scoring: The Next Breakthrough in Microcredit?

January, 2003     Mark Schreiner

Scoring is a new way to judge the risk of whether the self-employed poor will repay their microcredit debts as promised This paper discusses how scoring works, what microlenders can expect from it, how to use it, and what its implications are for microcredit. Scoring does reduce arrears and so reduces time spent on collections; this greater efficiency improves both outreach and sustainability. Scoring, however, is not for most microlenders. It works best for those with a solid individual lending technology and a large database of historical loans. Success comes not from technical wizardry but rather from painstaking training of users.