Psychometrics as a Tool to Improve Credit Information

This paper studies the use of psychometric tests, designed by the Entrepreneurial Finance Lab (EFL), as a tool to screen out high credit risk and potentially increase access to credit for small business owners in Peru. We compare repayment behavior...

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Bibliographic Details
Main Authors:	Arraiz, Irani, Bruhn, Miriam, Stucchi, Rodolfo
Format:	Journal Article
Language:	English
Published:	Published by Oxford University Press on behalf of the World Bank 2019
Subjects:	ENTREPRENEUR ENTREPRENEURSHIP SMALL AND MEDIUM ENTERPRISE MICROENTERPRISES SMALL BUSINESS ECONOMICS ACCESS TO FINANCE PSYCHOLOGY CREDIT RISK
Online Access:	http://documents.worldbank.org/curated/en/999861565615232538/Psychometrics-as-a-Tool-to-Improve-Credit-Information http://hdl.handle.net/10986/32232

id	okr-10986-32232
recordtype	oai_dc
spelling	okr-10986-322322021-05-25T10:54:42Z Psychometrics as a Tool to Improve Credit Information Arraiz, Irani Bruhn, Miriam Stucchi, Rodolfo ENTREPRENEUR ENTREPRENEURSHIP SMALL AND MEDIUM ENTERPRISE MICROENTERPRISES SMALL BUSINESS ECONOMICS ACCESS TO FINANCE PSYCHOLOGY CREDIT RISK This paper studies the use of psychometric tests, designed by the Entrepreneurial Finance Lab (EFL), as a tool to screen out high credit risk and potentially increase access to credit for small business owners in Peru. We compare repayment behavior patterns across entrepreneurs who were offered a loan based on the traditional credit scoring method versus the EFL tool. We find that the psychometric test can lower the risk of the loan portfolio when used as a secondary screening mechanism for already banked entrepreneurs—that is, those with a credit history. The EFL tool can also allow lenders to offer credit to some unbanked entrepreneurs—that is, those without a credit history—who were rejected based on their traditional credit scores, without increasingthe risk of the portfolio. 2019-08-13T17:21:20Z 2019-08-13T17:21:20Z 2016-03-30 Journal Article http://documents.worldbank.org/curated/en/999861565615232538/Psychometrics-as-a-Tool-to-Improve-Credit-Information World Bank Economic Review http://hdl.handle.net/10986/32232 English CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Published by Oxford University Press on behalf of the World Bank Publications & Research :: Journal Article Publications & Research Latin America & Caribbean Peru
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ENTREPRENEUR ENTREPRENEURSHIP SMALL AND MEDIUM ENTERPRISE MICROENTERPRISES SMALL BUSINESS ECONOMICS ACCESS TO FINANCE PSYCHOLOGY CREDIT RISK
spellingShingle	ENTREPRENEUR ENTREPRENEURSHIP SMALL AND MEDIUM ENTERPRISE MICROENTERPRISES SMALL BUSINESS ECONOMICS ACCESS TO FINANCE PSYCHOLOGY CREDIT RISK Arraiz, Irani Bruhn, Miriam Stucchi, Rodolfo Psychometrics as a Tool to Improve Credit Information
geographic_facet	Latin America & Caribbean Peru
description	This paper studies the use of psychometric tests, designed by the Entrepreneurial Finance Lab (EFL), as a tool to screen out high credit risk and potentially increase access to credit for small business owners in Peru. We compare repayment behavior patterns across entrepreneurs who were offered a loan based on the traditional credit scoring method versus the EFL tool. We find that the psychometric test can lower the risk of the loan portfolio when used as a secondary screening mechanism for already banked entrepreneurs—that is, those with a credit history. The EFL tool can also allow lenders to offer credit to some unbanked entrepreneurs—that is, those without a credit history—who were rejected based on their traditional credit scores, without increasingthe risk of the portfolio.
format	Journal Article
author	Arraiz, Irani Bruhn, Miriam Stucchi, Rodolfo
author_facet	Arraiz, Irani Bruhn, Miriam Stucchi, Rodolfo
author_sort	Arraiz, Irani
title	Psychometrics as a Tool to Improve Credit Information
title_short	Psychometrics as a Tool to Improve Credit Information
title_full	Psychometrics as a Tool to Improve Credit Information
title_fullStr	Psychometrics as a Tool to Improve Credit Information
title_full_unstemmed	Psychometrics as a Tool to Improve Credit Information
title_sort	psychometrics as a tool to improve credit information
publisher	Published by Oxford University Press on behalf of the World Bank
publishDate	2019
url	http://documents.worldbank.org/curated/en/999861565615232538/Psychometrics-as-a-Tool-to-Improve-Credit-Information http://hdl.handle.net/10986/32232
_version_	1764476089534513152

Psychometrics as a Tool to Improve Credit Information

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