Lecture 30 - Building the market for investing in microfinance. The following will be discussed in this chapter: Credit bureaus and credit scoring, building the market for investing in microfinance. | Summary of the Last lecture BUILDING THE INFRASTRUCTURE FOR INCLUSIVE FINANCE: BUILDING THE MARKET FOR INVESTING IN MICROFINANCE CREDIT BUREAUS AND CREDIT SCORING Internet surfers and late night television viewers in the United States are bombarded with offers of free credit reports and advised to know their credit scores (I confess to not knowing mine). CREDIT BUREAUS AND CREDIT SCORING While the advertisements may be a nuisance, consumers in developed countries understand that their credit histories, as revealed in their credit scores, determine not only whether they will qualify for loans but also how much they will pay for them. Without a credit score, or with a poor one, middle-class American lifestyles are nearly impossible. CREDIT BUREAUS AND CREDIT SCORING Cut to the owner of a small but fast-growing shop on the outskirts of Dar es Salaam, Tanzania. With no recognized identification card in a country where people often bear the same names, he cannot establish his unique . | Summary of the Last lecture BUILDING THE INFRASTRUCTURE FOR INCLUSIVE FINANCE: BUILDING THE MARKET FOR INVESTING IN MICROFINANCE CREDIT BUREAUS AND CREDIT SCORING Internet surfers and late night television viewers in the United States are bombarded with offers of free credit reports and advised to know their credit scores (I confess to not knowing mine). CREDIT BUREAUS AND CREDIT SCORING While the advertisements may be a nuisance, consumers in developed countries understand that their credit histories, as revealed in their credit scores, determine not only whether they will qualify for loans but also how much they will pay for them. Without a credit score, or with a poor one, middle-class American lifestyles are nearly impossible. CREDIT BUREAUS AND CREDIT SCORING Cut to the owner of a small but fast-growing shop on the outskirts of Dar es Salaam, Tanzania. With no recognized identification card in a country where people often bear the same names, he cannot establish his unique identity. If he has borrowed from a microfinance institution like Pride Tanzania, his good repayment record will do him no good at Standard Chartered Bank, CREDIT BUREAUS AND CREDIT SCORING since there is no system for sharing information between banks and MFIs. The end result? In all likelihood, Standard Chartered will turn him down, and Pride Tanzania will know that he is a captive client, which reduces its incentives to give him better service at lower cost. CREDIT BUREAUS AND CREDIT SCORING Today’s web of credit information in the United States originated a century ago in blacklists of bad customers compiled and shared by merchants. Formal credit bureaus grew after World War I, taking on broader geographic ranges due to the increased mobility of the population. CREDIT BUREAUS AND CREDIT SCORING Banks joined in to support their growing personal, small business, and mortgage lending businesses. Although these systems took more than a generation to evolve, their spread to new countries is .
