Arráiz, IraniStucchi, RodolfoBruhn, Miriam2015-12-182015-12-182015-12https://hdl.handle.net/10986/23471This 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-USCC BY 3.0 IGOBUSINESS OWNERSCREDIT MARKETSALTERNATIVE CREDITSMALL-BUSINESS LOANBARRIERS TO GROWTHECONOMIC GROWTHDEPOSITSPEOPLEFINANCINGFORMAL FINANCIAL INSTITUTIONSLOAN PERFORMANCEINTERESTCREDIT SCORECREDIT AVAILABILITYBIASPRIVATE CREDITLACK OF FINANCEENTREPRENEURSCAPITAL STRUCTUREFINANCIAL STATEMENTSINFORMATION SHARINGCREDIT SCORINGLOANASYMMETRIC INFORMATIONPROBABILITY OF DEFAULTBORROWERSPAYMENTSINTERNATIONAL BANKBUSINESS SUCCESSCASH FLOWSINFORMATION ASYMMETRIESLENDERBANK COMPETITIONMICROFINANCE INSTITUTIONSWILLINGNESS TO PAYPUBLIC CREDITSMALL-BUSINESSSMALL BUSINESSINTERNATIONAL FINANCELOAN APPLICANTSCREDIT UNIONSFINANCIAL INSTITUTIONLOAN DEFAULTSCOMMERCIAL BANKCONSUMER CREDITCREDIT BUREAUSUNIONFINANCESLENDING DECISIONSCREDIT SCORESPAYMENTBUSINESS LOANFINANCIAL INSTITUTIONSDEBTLIMITED ACCESSLENDERSGOOD CREDITLOANSENTERPRISESPROPRIETARY INFORMATIONAPPLICATION PROCESSFINANCIAL SYSTEMFINANCEBANKSUNIONSLOAN REPAYMENTCREDIT DECISIONSFORMAL FINANCIAL INSTITUTIONFEDERAL RESERVECREDIT CONSTRAINTSCREDIT-SCORINGBUSINESS MANAGEMENTCAPITALFEDERAL RESERVE BANKCREDIT HISTORY INFORMATIONSMALL ENTERPRISESBUSINESS CREDITFAMILYACCESS TO FINANCEGENDERBANKCREDITWORKING CAPITALREPAYMENTPOTENTIAL LENDERSCREDIT INFORMATIONCREDIT HISTORIESPROPERTIESLOAN PORTFOLIOCREDIT REPORTINGJOB CREATIONPAYMENT HISTORYACCESS TO LOANSASSETSSMALL BUSINESS OWNERSDEFAULTEMPLOYERSCREDIT BUREAUMICROCREDITPROFITABILITYCREDIT RISKACCESS TO CREDITMICROFINANCEECONOMIC DEVELOPMENTFINANCING OBSTACLESFUTURE—CASH FLOWSBANK LOANSBUSINESS OWNERSMALL BUSINESS CREDITFINANCIAL INTERMEDIATIONIDBANKRUPTCIESBALANCE SHEETSCREDIT- SCORINGLOAN SIZEFINANCE CORPORATIONLARGE FIRMSNET WORTHMARITAL STATUSCOMMERCIAL LENDINGRISK MANAGEMENTLENDINGCREDIT APPLICANTSENTREPRENEURIAL FINANCEENTREPRENEURARREARSCREDIT HISTORYFINANCIAL CONSTRAINTSFORMAL CREDITSMALL BUSINESSESCREDIT REGISTRYCASH FLOWDEVELOPMENT BANKCREDIT APPLICATIONEMPLOYEESWorking PaperWorld Bank10.1596/1813-9450-7506