A Social Approach to Microfinance Credit Scoring
This paper proposes that evaluations of clients' creditworthiness by MFIs should be coherent with their social mission and should, accordingly, estimate the social impact of microcredit. Thus, it proposes a decision support system to facilitate microcredit granting and uses multicriteria evaluation to translate MFI's social mission into numbers. The paper presents a technique to perform the assessment of social impact by calculating the Social Net Present Value (SNPV), capturing credit officers' experience, and addressing incomplete and intangible information. It illustrates the case of a loan application and describes how to implement a social approach in microcredit scoring. The proposed model is:
- Comprehensive as it includes all the possible criteria in microcredit valuation;
- Flexible because it allows each MFI to adapt the model to its needs and priorities, thus making it coherent with its social mission;
- Able to address various indicators including qualitative and quantitative, social and financial, and even indicators measured in different scales.
The paper concludes that every social assessment is complex and is not far from subjectivity. However, much can be gained from social assessment processes, as they can contribute to include social issues in the decision-making systems of the organization.