For lenders, gathering and analyzing meaningful data to help understand borrower credit risks and repayment ability is a critical part of their business. Among the data, credit scoring bureaus that operate in various developed markets are among main sources of information used by banks to value loan requests. However, traditional credit scores are often limited in their ability in the scope of people and companies they cover.
As such, alternative forms of data collection such as using social reaches and analyzing company inventory purchases in real-time are becoming more popular among firms attempting to service borrowers rejected by banks. In addition, in emerging markets with larger levels of the population underbanked, firms are turning to alternative forms of data to create credit scores for loans.
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Announcing a new credit scoring product to meet the needs of an underserved niche, S&P Capital IQ is introducing SME Scorecard. The product is aimed at providing lenders with analytics to service women- owned small and medium-sized enterprises (SME). According to S&P Capital IQ, SME Scorecard works by creating a “transparent lending framework” that removes gender biases when analyzing businesses that are seeking loans.
According to S&P Capital IQ, the women-owned business group in emerging markets could be as large as $287 billion with up to 70% of the firms unserved or underserved by financial institutions. To remove biases, the SME Scorecard reviews data such as country risk, industry risk, competitiveness, management and financial risk. In introducing the SME Scorecard, S&P Capital IQ is targeting lenders such as commercial and development banks, to help them create credit scores for larger groups of their local market.
Bob Durante, Senior Director, S&P Capital IQ, commented on the potential benefits of SME Scorecard stating, “The advantages for closing the lending gap for small women-owned business in emerging markets are pretty clear. It would fuel economic growth, boost labor force participation, drive up per capita income and strengthen GDP growth. That’s why we have developed our SME scorecard, to help credit lending institutions identify and rank order the default risk of loans to SMEs.”