Credit Risk Analysis Using Alternative Data is the Key to Financial Inclusion

According to the latest survey from the Bangko Sentral ng Pilipinas (BSP), the number of Filipino adults who remain unbanked is estimated at 51.2 million, out of a total adult population of 72 million. Forty-five percent of the unbanked cited lack of funds as the top reason for not having an account, followed by the perception that they don’t need one (27%), and the lack of documentary requirements (26%).

The absence of bank accounts limits the opportunities of Filipinos, especially those in rural areas. If this situation continues, many Filipinos will have no money to spare for emergencies, support their children’s education, or use for investments that could further grow their savings.

The Role of Rural Banks in Financial Inclusion

For decades, rural banks have brought more opportunities to the countryside and far-flung areas. They show great potential in driving financial inclusion in the Philippines. While smaller in size compared to commercial banks, they provide an invaluable contribution to the development of rural communities. By creating bank accounts and giving rate-friendly loans, they help set Filipinos up for financial protection in the long run.

That’s why the call for rural banks in the Philippines to become more present and active is stronger than ever. Rural banks have the opportunity to provide much-needed capital to empower farmers, fishermen, and small-town business owners. However, they’ll have to face a roadblock first before they can be given a loan: credit risk analysis.

Credit risk analysis is vital to assess a borrower’s ability to meet their debt obligations but what happens if a person doesn’t have a credit history?

Credit Risk Analysis Using Alternative Data: The Solution to Financial Inclusion

Enter: alternative credit scoring.

The traditional credit scoring or credit risk analysis process verifies a borrower’s willingness and ability to pay through metrics such as past credit performance, current income, and amount of outstanding debt. In rural areas, this traditional process of determining creditworthiness is limited. Many Filipino farmers, fishermen, and other small-town folk do not have regular fixed wages or credit history, but this doesn’t mean they don’t have the willingness or the ability to pay.

Alternative credit risk analysis using telco data is the solution to this roadblock. As of 2020, 75.6 million Filipinos own a mobile phone. Fintech (financial technology) companies such as FinScore have created innovative credit scoring systems that use telco data to determine an individual’s creditworthiness. Information such as call, text, and data usage, SIM age, and top-up patterns are great indicators of a user’s lifestyle and economic activity. This helps rural banks assess the creditworthiness of borrowers who don’t have credit history but use a mobile phone daily.

Innovations such as alternative credit risk analysis do not only make financial inclusion more viable in rural areas, but they turn rural banks into true pillars of countryside development. Once rural banks tap on the opportunities provided by credit scoring using telco data, they can assist in further driving economic progress to countryside communities.

Business Analytics

Leverage the Power of Telco Data Today with FinScore

At FinScore, our telco credit risk analysis system is built on 400 various MNO data variables including location and sms usage, top-up patterns, voice and data usage, and many more. It has an incredibly high predictive power due to cutting edge AI and Machine Learning technology. Its flexibility allows it to be used as a standalone model or in combination with your current score models.

As of November 2020, we have delivered over 3.5 million credit scores for financial institutions. We can do the same for rural banks all over the Philippines.

Credit Score the Rural Market in the Philippines with UBX’s i2i Financial Network

Rural banks do not need to take a long route to transform their credit scoring activities and upgrade to the digital level. FinScore’s telco data credit score system offers quick and easy deployment thanks to our highly successful partnership with i2i

Developed by UBX Philippines (FinTech arm of UnionBank of the Philippines), i2i is the largest financial network in the Philippines where member rural banks can access the FinScore Telco Credit Score Portal.

Work with FinScore through i2i today and discover how we can transform the way your rural bank operates. For more information and inquiries, please don’t hesitate to call us.

FinScore is a financial technology company in the Philippines that offers a powerful credit scoring platform and fraud detection tool based on alternative data, including telco-based data. 

As the pioneer in lending and scoring of the unbanked, we continuously provide fintech services that empower financial institutions, banks, and credit bureaus with flexible platforms to help them make insightful and reliable credit decisions. Contact us today to learn more about our products and solutions for financial institutions.

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