NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, May 17, 2016

Today global microfinance leader FINCA and First Access, whose technology predicts the credit risk of borrowers in informal markets, announced a new collaboration that will create the largest and most sophisticated alternative credit-scoring approach by a microfinance institution (MFI) in the world.  The partnership will vastly improve FINCA’s outreach to excluded populations.

First Access will analyze existing client data from FINCA’s operations, as well as subscriber data from local mobile network operators (MNOs), to establish credit scores for low-income clients who lack sufficient formal credit history to secure small loans to build businesses or support emerging personal needs.

Based on a pilot in Tanzania, the collaboration with First Access will, by late 2016, operate in six African countries where FINCA maintains subsidiaries, making it the largest such credit scoring program using innovative financial technology, or fintech, for any MFI.

77% of African adults remain excluded from the formal financial system. Mobile phones enable faster outreach and assessment of potential customers, but most digital lenders offer loans under $30 and 30 days, so they serve a limited range of customer needs. Digital channels are also more difficult to use for building strong relationships and offering flexible products that serve a wider range of customer needs, two areas where institutions like FINCA excel.