Credit Scoring, Banks and Microfinance: Balancing High-Tech with High-Touch

Latin American banks make consumer loans based on “high-tech” automated credit scoring, whereas microfinance lenders make microenterprise loans based on “"high-touch”" individualized analysis of cash flows and personal character. What can these two approaches learn from each other? In the next five years, downscaling banks will adopt a more personalized approach to collect data for scoring, and growing microlenders will add scoring as a complement to loan officers analysis. The increasing importance of scoring for all types of loans will create incentives for better credit bureaux.

Note: Authors' Abstract