A Major Step Forward for Entrepreneurs and the "Un-banked" in Emerging Economies: Alternate Credit Scores

Dan Evans, a Research Fellow at the Network Science Center at West Point, recently caught up with our Country Director, Athu Karume, at the Commission for Science & Technology in Dar es Salaam. Dan writes…


In previous blog posts, I’ve written about the challenges entrepreneurs and small business owners face when it comes to accessing commercial loans. Banks typically require a great amount of collateral and charge incredibly high interest rates. A lot of these stringent requirements are due to the perceived risk that banks assume when loaning to people or firms with an unknown credit history.


Additionally, nearly 2.5 billion people in the world are “unbanked,” or have no access to any form of formal financial institutions. More than a third of the global population has scarcely a trace of financial identity. This group has no financial history and has little chance to potentially borrow money for personal or business needs.


This challenge does not exist for people in North America or most of Europe due to a simple tool that many take for granted-a Credit Score.      


During my visit to the Dar Teknohama Business Incubator (DTBi), I was introduced to an entrepreneur, Athu Karume who is the Country Director for First Access, a start-up based in New York, that is developing an alternative credit score for consumers in informal markets through access to the applicant’s financial and mobile data. Using their proprietary algorithms they are able to predict credit risk and empower banks to make better lending decisions and reduce the overhead cost on these loans.


First Access offers instant risk scoring to financial institutions in emerging markets who vet applicants via SMS. First Access is able to access “alternative data” from prepaid mobile-phone information. Examples of this type of data are: the frequency of replenishing airtime, the types of data packages purchased, the number of text messages clients send, the timing of their calls, the manner in which clients interact with social networks, and records of online transactions. This data is then analyzed and interpreted to predict loan applicants’ creditworthiness. First Access claims that their “retail credit risk models have the highest reported accuracy of any in the developing world.”


First Access gets real-time permission in the local language from mobile subscribers before accessing mobile records, they do not share information between financial institutions, and they engage closely with telecommunications and financial regulators.

First Access currently operates in 5 countries and recently signed a deal with Tanzania’s largest mobile network operator to provide instant risk scores for microfinance and other personalized loans.


Something that we in the West take for granted, a lender’s ability to access our credit history, is a huge obstacle to economic growth in much of the world. As soon as Athu, explained the product to me, I had a true “a-ha moment.” I think the idea is brilliant and is truly an out-of-the-box approach that addresses a major worldwide economic challenge. I truly believe that if First Access succeeds with their worldwide expansion plans, we may look back in 20 years and remark that this product was a seminal event that spurred economic growth in the world’s developing economies.