Prachi Mishra, Nagpurnanand Prabhala, Raghuram Rajan, 02 June 2021

India only introduced credit scoring technology in 2007. This column studies its adoption by the two main types of banks in the country: new private banks and state-owned public sector banks. While both types of banks check nearly all scores for new borrowers, public sector banks are very slow to adopt scoring for their prior relationship borrowers even though scores are reliable predictors of delinquency. Government ownership does not explain this slow adoption, as older privatebanks also exhibit similar adoption patterns. The findings suggest that practices from the past, when adapted to different regulatory and economic environments, are slow to change and can hold back better practices today.

Tobias Berg, Valentin Burg, Ana Gombović, Manju Puri, 24 August 2018

Digitisation is one of the major trends of our time, with all of us constantly leaving footprints in the digital sphere. This column evaluates the value of digital footprints for credit scoring and finds that easily accessible variables from such footprints have a predictive power that equals or exceeds that of traditional credit bureau scores. Analysing borrowers’ digital behaviour may present an opportunity to boost financial inclusion in developing countries, where the inability of the unbanked population to participate in financial services is often caused by a lack of information infrastructure.

James Wang, 30 December 2014

Many lenders hire loan officers to screen soft information that may otherwise be ignored by credit scoring. However, in addition to their compensation costs, loan officers may have characteristics, such as being overly cautious, that could distort their decisions. This column documents the performance of loan officers using data from a Chinese lender. Despite the distortions, the loan officers contribute three times their pay in annual profits above what the lender could have earned by itself, even with the benefit of hindsight.

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