In an effort to promote financing to self-employed entrepreneurs and micro- and small enterprises (MSEs) in emerging economies, Entrepreneurial Finance Lab (EFL), a US-based company, is employing psychometric analyses to assess the creditworthiness of loan applicants. EFL’s service is based on a computerized survey that can be taken on a desktop or mobile device, which attempts to interpret subjective personal data such as character, ethics, intelligence, beliefs and attitude to identify loan applicants that have lower repayment risk. EFL uses proprietary analytics to interpret the survey data and offers a three-digit credit score that lenders can then use in their underwriting process.
The EFL software has been translated to 26 languages and the service is offered in as many countries in Africa, Asia and Latin America. The average loan size for EFL-based applications is USD 7,500, with loans ranging from USD 150 to USD 50,000[2]. According to statements attributed to Ms Emily Silberstein, Head of EFL’s Asian operations, the service not only includes a computer learning technology that purportedly increases its accuracy over time, but also methods to adapt to local cultural sensitivities and to control for fraud. Financial data on the firm are not available.
By A’kos Szebeni, Research Associate
About Entrepreneurial Finance Lab (EFL)
Entrepreneurial Finance Lab (EFL) is a technology company that is headquartered in the US city of Boston. The company offers computerized psychometric testing services that analyze subjective personal characteristics such as character, ethics, intelligence, beliefs and attitude to predict credit risk for borrowers in informal markets. EFL’s customer base includes retail commercial banks, microfinance institutions, venture capital companies and training organizations. The EFL software has been translated into 26 languages and the service is offered in as many countries in Africa, Asia and Latin America. The average loan size for EFL-based applications is USD 7,500, with loans ranging from USD 150 to USD 50,000. Financial data on the firm are not available.
Sources and Additional Resources:
[1] India Infoline, “Addressing the Missing Middle – EFL’s Psychometric Credit Scores Help Financial Institutions Lend to Entrepreneurs,” http://www.indiainfoline.com/BWNewsWire/Addressing-the-Missing-Middle-EFLs-Psychometric-Credit-Scores-Help-Financial-Institutions-Lend-to-Entrepreneurs/38558
[2] Entrepreneurial Finance Lab FAQs, http://www.eflglobal.com/faqs
MicroCapital, March 19, 2014, “US-based Startups First Access, Cignifi Analyze Mobile Phone Usage to Measure Creditworthiness of Unbanked,” https://www.microcapital.org/microcapital-brief-us-based-startups-first-access-cignifi-analyze-mobile-phone-usage-to-measure-creditworthiness-of/
MicroCapital, October 29, 2013, “Airtel, Tanzania Postal Bank (TPB) Partner to Offer Mobile Banking Services,” https://www.microcapital.org/microcapital-brief-airtel-tanzania-postal-bank-tpb-partner-to-offer-mobile-banking-services/
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MicroCapital, August 28, 2013, “Bharti Airtel, MicroEnsure Launch Mobile Microinsurance Service in Africa,” https://www.microcapital.org/microcapital-brief-bharti-airtel-microensure-launch-mobile-microinsurance-service-in-africa/
MicroCapital, May 14, 2013, “Inter-American Development Bank Promotes Psychometric Testing for Screening Loan Applicants,” https://www.microcapital.org/microcapital-brief-inter-american-development-bank-promotes-psychometric-testing-for-screening-loan-applicants/
MicroCapital, April 22, 2013, “Younger People in Kenya More Open to “Game Changer” of Buying Investment, Insurance Products by Mobile Phone,”
https://www.microcapital.org/microcapital-brief-younger-people-in-kenya-more-open-to-game-changer-of-buying-investment-insurance-products-by-mobile-phone/
MicroCapital, October 13, 2012, “YuMobile, MicroEnsure, Jubilee Insurance Partner to Offer Life, Disability Insurance to Mobile Subscribers in Kenya,”
https://www.microcapital.org/microcapital-brief-yumobile-microensure-jubilee-insurance-partner-to-offer-life-disability-insurance-to-mobile-subscribers-in-kenya/
MicroCapital Universe Profile: Entrepreneurial Finance Lab (EFL),
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Entrepreneurial+Finance+Lab+%28EFL%29
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