Small-scale Financing Through Innovative Credit Scoring System
Selected company: HAKKI AFRICA INC.
Challenges In Tanzanian financial environment, the disparity in access between urban and rural areas has become an issue, due to the strict conditions for using financial services (collateral, etc.), the low level of financial literacy in rural areas, and the lack of infrastructure for accessing financial services.
Solution The team will conduct a PoC of low-risk financing using an innovative credit scoring system for farmers who have limited financial access. The system is designed to provide appropriate loans by continuously analyzing mobile usage data as well as other user data and constantly improving the algorithm of credit scoring of the users.
The Status of PoC
Based on the information collected from each farmer during the briefing sessions and additional mobile data collected, a credit scoring system was developed. The team has already started lending to the 50 selected farmers in collaboration with local financial institutions. In the future, it is planned to improve the scoring system based on feedback from the financial institutions.
(1) Obtain the data necessary to measure credit scores from 100 agricultural workers
(2) Develop a credit scoring system during the PoC period
For (1), through the briefing session 143 data needed for customizing the credit scoring system were collected, exceeding the target amount of data of 100.
With regard to (2), development of a credit scoring system, the system that evaluates the repayment potential of farmers in rural areas who lack access to financial opportunities, has completed based on the data from (1). Accordingly, loans have been provided to a total of 50 farmers through Inspired Microfinance, a local financial institution.
In developing the system, we utilized data on the usage of mobile money services such as M-Pesa and Tigo-Pesa, but we found some issues such as the difficulty in obtaining the details (statements) of these services compared to Kenya. The credit scoring system that was established by solving such barriers was positively evaluated by local experts.
The actual repayment of the loan is scheduled to take place after January 2022.
Through this PoC, HAKKI AFRICA was able to confirm that access to finance has been an issue for small-scale farmers in Tanzania and that the credit scoring system is useful. Accordingly HAKKI AFRICA is considering the development of small-scale finance and credit scoring systems in collaboration with Tanzanian financial institutions.