Psychometrics as a Tool to Improve Screening and Access to Credit

Arráiz, Irani; Bruhn, Miriam; Stucchi, Rodolfo

doi:10.1596/1813-9450-7506

Working Paper

Psychometrics as a Tool to Improve Screening and Access to Credit

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collection.link.5	https://openknowledge.worldbank.org/handle/10986/9
collection.name.5	Policy Research Working Papers
dc.contributor.author	Arráiz, Irani
dc.contributor.author	Bruhn, Miriam
dc.contributor.author	Stucchi, Rodolfo
dc.date.accessioned	2015-12-18T22:33:42Z
dc.date.available	2015-12-18T22:33:42Z
dc.date.issued	2015-12
dc.date.lastModified	2021-04-23T14:04:15Z
dc.description.abstract	This paper studies the use of psychometric tests, which were designed by the Entrepreneurial Finance Lab as a tool to screen out high credit risk and potentially increase access to credit for small business owners in Peru. The analysis uses administrative data covering the period from June 2011 to April 2014 to compare debt accrual and repayment behavior patterns across entrepreneurs who were offered a loan based on the traditional credit-scoring method versus the Entrepreneurial Finance Lab tool. The paper finds 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. For unbanked entrepreneurs—those without a credit history—using the Entrepreneurial Finance Lab tool can increase access to credit without increasing portfolio risk.	en
dc.identifier	http://documents.worldbank.org/curated/en/2015/12/25516966/psychometrics-tool-improve-screening-access-credit
dc.identifier.uri	http://hdl.handle.net/10986/23471
dc.language	English
dc.language.iso	en_US
dc.publisher	World Bank, Washington, DC
dc.relation.ispartofseries	Policy Research Working Paper;No. 7506
dc.rights	CC BY 3.0 IGO
dc.rights.holder	World Bank
dc.rights.uri	http://creativecommons.org/licenses/by/3.0/igo/
dc.subject	BUSINESS OWNERS
dc.subject	CREDIT MARKETS
dc.subject	ALTERNATIVE CREDIT
dc.subject	SMALL-BUSINESS LOAN
dc.subject	BARRIERS TO GROWTH
dc.subject	ECONOMIC GROWTH
dc.subject	DEPOSITS
dc.subject	PEOPLE
dc.subject	FINANCING
dc.subject	FORMAL FINANCIAL INSTITUTIONS
dc.subject	LOAN PERFORMANCE
dc.subject	INTEREST
dc.subject	CREDIT SCORE
dc.subject	CREDIT AVAILABILITY
dc.subject	BIAS
dc.subject	PRIVATE CREDIT
dc.subject	LACK OF FINANCE
dc.subject	ENTREPRENEURS
dc.subject	CAPITAL STRUCTURE
dc.subject	FINANCIAL STATEMENTS
dc.subject	INFORMATION SHARING
dc.subject	CREDIT SCORING
dc.subject	LOAN
dc.subject	ASYMMETRIC INFORMATION
dc.subject	PROBABILITY OF DEFAULT
dc.subject	BORROWERS
dc.subject	PAYMENTS
dc.subject	INTERNATIONAL BANK
dc.subject	BUSINESS SUCCESS
dc.subject	CASH FLOWS
dc.subject	INFORMATION ASYMMETRIES
dc.subject	LENDER
dc.subject	BANK COMPETITION
dc.subject	MICROFINANCE INSTITUTIONS
dc.subject	WILLINGNESS TO PAY
dc.subject	PUBLIC CREDIT
dc.subject	SMALL-BUSINESS
dc.subject	SMALL BUSINESS
dc.subject	INTERNATIONAL FINANCE
dc.subject	LOAN APPLICANTS
dc.subject	CREDIT UNIONS
dc.subject	FINANCIAL INSTITUTION
dc.subject	LOAN DEFAULTS
dc.subject	COMMERCIAL BANK
dc.subject	CONSUMER CREDIT
dc.subject	CREDIT BUREAUS
dc.subject	UNION
dc.subject	FINANCES
dc.subject	LENDING DECISIONS
dc.subject	CREDIT SCORES
dc.subject	PAYMENT
dc.subject	BUSINESS LOAN
dc.subject	FINANCIAL INSTITUTIONS
dc.subject	DEBT
dc.subject	LIMITED ACCESS
dc.subject	LENDERS
dc.subject	GOOD CREDIT
dc.subject	LOANS
dc.subject	ENTERPRISES
dc.subject	PROPRIETARY INFORMATION
dc.subject	APPLICATION PROCESS
dc.subject	FINANCIAL SYSTEM
dc.subject	FINANCE
dc.subject	BANKS
dc.subject	UNIONS
dc.subject	LOAN REPAYMENT
dc.subject	CREDIT DECISIONS
dc.subject	FORMAL FINANCIAL INSTITUTION
dc.subject	FEDERAL RESERVE
dc.subject	CREDIT CONSTRAINTS
dc.subject	CREDIT-SCORING
dc.subject	BUSINESS MANAGEMENT
dc.subject	CAPITAL
dc.subject	FEDERAL RESERVE BANK
dc.subject	CREDIT HISTORY INFORMATION
dc.subject	SMALL ENTERPRISES
dc.subject	BUSINESS CREDIT
dc.subject	FAMILY
dc.subject	ACCESS TO FINANCE
dc.subject	GENDER
dc.subject	BANK
dc.subject	CREDIT
dc.subject	WORKING CAPITAL
dc.subject	REPAYMENT
dc.subject	POTENTIAL LENDERS
dc.subject	CREDIT INFORMATION
dc.subject	CREDIT HISTORIES
dc.subject	PROPERTIES
dc.subject	LOAN PORTFOLIO
dc.subject	CREDIT REPORTING
dc.subject	JOB CREATION
dc.subject	PAYMENT HISTORY
dc.subject	ACCESS TO LOANS
dc.subject	ASSETS
dc.subject	SMALL BUSINESS OWNERS
dc.subject	DEFAULT
dc.subject	EMPLOYERS
dc.subject	CREDIT BUREAU
dc.subject	MICROCREDIT
dc.subject	PROFITABILITY
dc.subject	CREDIT RISK
dc.subject	ACCESS TO CREDIT
dc.subject	MICROFINANCE
dc.subject	ECONOMIC DEVELOPMENT
dc.subject	FINANCING OBSTACLES
dc.subject	FUTURE—CASH FLOWS
dc.subject	BANK LOANS
dc.subject	BUSINESS OWNER
dc.subject	SMALL BUSINESS CREDIT
dc.subject	FINANCIAL INTERMEDIATION
dc.subject	ID
dc.subject	BANKRUPTCIES
dc.subject	BALANCE SHEETS
dc.subject	CREDIT- SCORING
dc.subject	LOAN SIZE
dc.subject	FINANCE CORPORATION
dc.subject	LARGE FIRMS
dc.subject	NET WORTH
dc.subject	MARITAL STATUS
dc.subject	COMMERCIAL LENDING
dc.subject	RISK MANAGEMENT
dc.subject	LENDING
dc.subject	CREDIT APPLICANTS
dc.subject	ENTREPRENEURIAL FINANCE
dc.subject	ENTREPRENEUR
dc.subject	ARREARS
dc.subject	CREDIT HISTORY
dc.subject	FINANCIAL CONSTRAINTS
dc.subject	FORMAL CREDIT
dc.subject	SMALL BUSINESSES
dc.subject	CREDIT REGISTRY
dc.subject	CASH FLOW
dc.subject	DEVELOPMENT BANK
dc.subject	CREDIT APPLICATION
dc.subject	EMPLOYEES
dc.title	Psychometrics as a Tool to Improve Screening and Access to Credit	en
dc.type	Working Paper	en
okr.date.disclosure	2015-12-03
okr.doctype	Publications & Research :: Policy Research Working Paper
okr.doctype	Publications & Research
okr.docurl	http://documents.worldbank.org/curated/en/2015/12/25516966/psychometrics-tool-improve-screening-access-credit
okr.googlescholar.linkpresent	yes
okr.identifier.doi	10.1596/1813-9450-7506
okr.identifier.externaldocumentum	090224b083a6a76f_1_0
okr.identifier.internaldocumentum	25516966
okr.identifier.report	WPS7506
okr.imported	true
okr.language.supported	en
okr.pdfurl	http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2015/12/03/090224b083a6a76f/1_0/Rendered/PDF/Psychometrics00and0access0to0credit.pdf	en
okr.region.country	Peru
okr.topic	Finance and Financial Sector Development :: Access to Finance
okr.topic	Finance and Financial Sector Development :: Banks & Banking Reform
okr.topic	Finance and Financial Sector Development :: Bankruptcy and Resolution of Financial Distress
okr.topic	Finance and Financial Sector Development :: Microfinance
okr.topic	Finance and Financial Sector Development :: Debt Markets
okr.unit	Finance and Private Sector Development Team, Development Research Group

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