Is a credit system for the Bottom Up economy feasible and beneficial? I'll be travelling to my home country of Kenya to build out my company www.5group.co . While there, I want to research trends in credit and lending especially with regards to those earning less than $3000/year (apx. bottom of the pyramid). Would a FICO like agency for Sub-Sharan Africa open up new lending frontiers and thus lead to upward mobility for the masses? What considerations might need to be made? |
FICO matters in a competitive market for good customers, where good customers borrow significant amounts of money and are relatively low risk due to having access to cash income streams. Where customers may not have ready access to cash [e.g. operating in informal economies or living more closely to direct agricultural subsistence], then the risks more systemic and less tied to the individual. When the amount borrowed is small, the overhead of a credit check may be a non-trivial cost for the lender. This suggests that there may be a tipping point between flat rates that reflect a more or less uniform risk and individual rates that reflect variance in individual's economic behavior.
Good luck.