Psychometrics as a Tool to Improve Screening and Access to Credit
This paper studies the use of psychometric tests, which were designed by the Entrepreneurial Finance Lab as a tool to screen out high credit risk and potentially increase access to credit for small business owners in Peru. The analysis uses...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2015
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2015/12/25516966/psychometrics-tool-improve-screening-access-credit http://hdl.handle.net/10986/23471 |
| Summary: | This paper studies the use of
psychometric tests, which were designed by the
Entrepreneurial Finance Lab as a tool to screen out high
credit risk and potentially increase access to credit for
small business owners in Peru. The analysis uses
administrative data covering the period from June 2011 to
April 2014 to compare debt accrual and repayment behavior
patterns across entrepreneurs who were offered a loan based
on the traditional credit-scoring method versus the
Entrepreneurial Finance Lab tool. The paper finds that the
psychometric test can lower the risk of the loan portfolio
when used as a secondary screening mechanism for already
banked entrepreneurs—that is, those with a credit history.
For unbanked entrepreneurs—those without a credit
history—using the Entrepreneurial Finance Lab tool can
increase access to credit without increasing portfolio risk. |
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