Fintech companies are using digital technology to score the creditworthiness of people in emerging markets, potentially enabling millions of people in East Africa to get access to affordable credit and financial services for the first time.
More than 2.5 billion people around the world – many of them in Africa – lack formal identification that enables them to access to financial and government services, according to the United Nations and the ID2020 project. What’s more, less than 10% of adults in low and middle-income countries are on file in public credit.
The result is that millions of people in East Africa are paying punitive interest rates for credit or are frozen out of access to financial services. Microfinance institutions (MFIs) in the region charge their borrowers notoriously high-interest rates, often up to 30% per year. This is partly because these lenders face a higher risk of loan defaults than mainstream banks due to a lack of borrower data to support lending decisions.
MFIs in frontier markets have traditionally needed to make lending decisions without access to …read more