Credit scoring has been used for more than half a century by the financial industry all over the world to automise the assessment of risk. In microfinance, credit scoring is still not very common but change is under way. The authors of this chapter believe that credit scoring will become a standard application in microfinance within the next 10 years. This chapter lays out how credit scoring works, how microlenders and their clients can benefit and, finally, what are crucial success factors in the implementation process.
The World Bank has completed a study on rural banking and microfinance, with the help of the Government of Bangladesh and the United Kingdom’s Department for International Development. Business & Finance Consulting (BFC), a consulting firm with focuses on Eastern Europe and Central Asia, was hired to provide an analysis of the Bangladeshi rural market for microfinance. Titled the “Access to Rural Finance” project, the study examined commercial banks and microfinance institutions (MFIs) practicing in the rural areas of Bangladesh, including the state agricultural banks Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB).
EBRD in 2006 provided resources to two Moldovan banks, Mobias Banca and Banca Sociala, for lending to microbusinesses. This international financial institution also provided funds for technical assistance (consulting of recipient banks). This week we met Michael Kortenbusch, Managing Director of the German consulting company BFC that won the EBRD tender for provision of these services.
The article, published in November 2005 by KfW’s Project Manager Stefan W. Hirche and BFC’s Managing Director Michael Kortenbusch, identifies the main reasons for the lack of finance for small enterprises in rural areas of Georgia, and why most microfinance suppliers have focussed their attention on the urban centres.
Furthermore, previous experiences with microlending operations in Georgian rural areas are summarised and suggestions made on how to deal with some of the inherent problems of agricultural lending.