The Use of Credit Scoring in Microfinance Institutions and Their Outreach

摘要

Credit scoring contributes to a faster growth in outreach of microfinance institutions - better financial inclusion is offered to more low-income beneficiaries. The use of credit scoring has great potential for diminishing inefficiencies related to micro-loan appraisal procedures, which are burdensome due to high information asymmetry and ignorance. The benefits of credit scoring come with a financial cost — the development, implementation, and maintenance of the scoring tool - and with a social cost - the good borrowers who are screened out by the scoring tool. Credit scoring by increasing financial inclusion expands developmental opportunities in emerging economies.