Alternative Credit Scoring

Voice Over Text Visual

1 Limited credit history and the collateral requirements Limited credit history
have rendered the majority of the micro and small Collateral requirements
business in Bangladesh as credit invisible.

2 credit invisible

3 Data shows that 84% of the loans accessed by firms 84% of the loans
were backed by collateral which is on average 271% of
the loan amount. Backed by collateral
which is on average
271%

4 Additionally, the high cost of traditional MSE

creditworthiness assessment process makes MSE
financing less appealing for commercial banks commercial banks
5 While underserved, this segment of the population is Population is not Infographic Pie
not unservable. unservable. Chart. 75% small
business
unservered and
rest 25% served.

6
Globally there has been a rise in alternative credit Alternative credit
scoring techniques which collateralized human capital, scoring techniques
social capital and other data points as opposed to the
conventional parameters employed by financial Human capital
institutions..

social capital

Other data points

financial institutions

7 This enables FIs to tap into a market worth of GBP 11 GBP 11 billion Infographics and
billion with reduced risk and cost
Reduced risk and cost

8 To bridge the gap, BFP-B in partnership with Shopfront BFP-B

limited and Credit Rating Agency Bangladesh has
launched two alternative credit scoring tools targeting
the underserved market.

Shopfront limited
 Credit Rating Agency
Bangladesh

9 Two alternative credit

scoring tools

Underserved market

10 In 2016, Shopfront limited launched ShopUp, a one 2016

stop solution for delivery and order management for
Shopfront limited
merchants who sell through social media.
launched ShopUp

Delivery

Order management

Social media

11 Within two years into business, Shopfront realised Number of merchants is

although the number of merchants is increasing, lack of increasing
capital is hindering their business growth.

Lack of capital is
hindering

12 These businesses are not getting the financing they

require due to the informal nature of the business.
13 To address the pain point of these merchants, ShopUp e-loan
Shopfront launched ‘ShopUp e-loan’, a capital appraisal
platform to bridge the information asymmetry between
MSE and Financial Institutions.

A capital appraisal
platform

MSE and Financial

Institutions

14 ShopUp e-loan’ capital appraisal algorithm uses the Character, Capacity,

5Cs[1] model and analyses over 2,000 social media and Capital, Collateral, and
transaction data points[2] to appraise the amount of Condition
capital an MSE requires and is capable of repaying.
2,000 social media Review

Data points
 Featuring the 5Cs

Info-graphics

15 The appraisal is forwarded to Financial Institution Financial Institution

(BRAC NGO), who then transfers the loan amount to (BRAC NGO)
the merchant’s bank account using BEFTN.
Loan amount

merchant’s bank The screenplay will

show the whole
account
process

BEFTN

16 Instalment amount is deducted from the sales and Instalment amount

transferred back to Financial Institute by Shopup.
Sales

Transferred back The screenplay will

show the whole
Financial Institute by process
Shopup

17 GBP 1.2 million worth of financing has been disbursed GBP 1.2 million Infographics
to more than 1000 micro and small business with a
1000 micro and small
100% recovery rate.
business

100% recovery rate

18 Credit Rating Agency Bangladesh (CRAB) will pilot an Credit Rating Agency
alternative credit scoring tool for the financial sector to Bangladesh (CRAB)
address the complexities of client provided information
verification and conventional risk assessment process

Information verification

Conventional risk
assessment process

19 CRAB in partnership with Live Technologies and Tiaxa CRAB

will use telco data and transaction data coupled with a
Machine Learning Approach to generate credit scores
for clients which will be used by financial institutions to
extend financing

Live Technologies

Tiaxa

Telco data and

transaction data
 Machine Learning

20 The pilot is expected to generate 20,000 credit scores, 20,000 credit scores Info-graphics
provide business development services to 1,500 MSEs
1,500 MSEs
and extend GBP 1.43 million worth of financing
GBP 1.43 million

21
These numbers can grow exponentially if some actions
are implemented

● · Financial institutions test underwriting risk

for loans below BDT 10lkh using non traditional Loans below BDT 10lakh
data sets
● · Private sector organisations develop
pricing strategies for sharing data with
Develop pricing
Financial Institutions
strategies

● · Regulators create a cross regulatory

committees compromising of representatives
for BB, BTRC, IDRA and MRA and issue BB, BTRC, IDRA and MRA
guidelines on using alternative data set and
data privacy.

● Finally, Development partners need to

invest in providing targeted TA to pilot risk
underwriting with non traditional data sets.
Invest

22
Shopfront & CRAB’s initiatives required a total of GBP Shopfront
Seven hundred and thirty thousand of which 40 % has
been contributed by BFP-B for algorithm development,
business development, hardware procurement and
 market development activities.

CRAB

Infographics

GBP 730,000

4%

23
BFP-B

Algorithm development

Business development

Hardware procurement
activities