Granting and managing loans for micro-entrepreneurs: New developments and practical experiences

Bravo, Cristian, Maldonado, Sebastián and Weber, Richard (2013) Granting and managing loans for micro-entrepreneurs: New developments and practical experiences. European Journal of Operational Research, 227 (2), 358-366. (doi:10.1016/j.ejor.2012.10.040).

Record type: Article

Abstract

We present a methodology to grant and follow-up credits for micro-entrepreneurs. This segment of grantees is very relevant for many economies, especially in developing countries, but shows a behavior different to that of classical consumers where established credit scoring systems exist. Parts of our methodology follow a proven procedure we have applied successfully in several credit scoring projects. Other parts, such as cut-off point construction and model follow-up, however, had to be developed and constitute original contributions of the present paper. The results from two credit scoring projects we developed in Chile, one for a private bank and one for a governmental credit granting institution, provide interesting insights into micro-entrepreneurs’ repayment behavior which could also be interesting for the respective segment in countries with similar characteristics

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