Are Psychometric Tools a Viable Screening Method for Small and Medium-Size Enterprise Lending? Evidence from Peru
This study collaborated with the Entrepreneurial Finance Lab and a large bank in Peru to use psychometrics for small and medium-size enterprise lending. Applicants used a psychometric tool and those who achieved a score higher than a threshold were...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/729911513262009360/Are-psychometric-tools-a-viable-screening-method-for-small-and-medium-size-enterprise-lending-evidence-from-Peru http://hdl.handle.net/10986/29012 |
| Summary: | This study collaborated with the
Entrepreneurial Finance Lab and a large bank in Peru to use
psychometrics for small and medium-size enterprise lending.
Applicants used a psychometric tool and those who achieved a
score higher than a threshold were offered a loan. Using a
regression discontinuity design and credit bureau data, the
study finds that the tool increased small and medium-size
enterprise loan use by up to 59 percentage points for
applicants without a credit history, without leading to
worse repayment behavior. This increase in borrowing
resulted primarily from financial institutions other than
the partner bank. For applicants with a credit history, the
tool did not increase small and medium-size enterprise loan use. |
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