Psychometrics as a Tool to Improve Screening and Access to Credit

Small and medium enterprises (SMEs) often face financial constraints because they lack audited statements and other information about their operations, and as a result, financial institutions have difficulties assessing the risk of lending to them. Studies have shown that information sharing, credit bureaus, and credit scoring can increase credit to SMEs, but not all countries have well-developed credit bureaus that gather the level of information needed to build a reliable credit-scoring model. While improving credit bureau information is a policy priority, other technologies may also help lenders to better screen loan applicants. One example is a psychometric credit information tool developed by the Entrepreneurial Finance Lab (EFL).