The use of advanced analytics methodologies with alternative mobile data has allowed Tiaxa to work on new credit scoring models in emerging markets in Asia, with the aim of improving economic opportunities and facilitating access to credit for vulnerable segments without causing over-indebtedness for micro-entrepreneurs in the region.
The creation of the first Digital Credit Service in Nepal, funded by the United Nations Capital Development Fund (UNCDF), is a clear example of the work that Tiaxa has accomplished together with PHB Development, a global company focused on financial inclusion and digital transformation, and Prabhu Management via Prabhu Pay, the local financial partners.
Vince Parr, General Manager of Tiaxa Asia Pacific, values the work that has been done in the region, highlighting the effectiveness of mobile and non-mobile alternative data, which has been key to the development of and access to the digital economy.
“During the past few years we have seen a slow but consistent adoption of Alternative Credit Scoring but the financial sector and by companies that are needed to make such data available. However, since Covid-19 began there has been a dramatic increase in the number of organizations willing to take the first steps to address the issue of financial inclusion in many Asian markets. We are confident that the next two years will see the great strides being made to make Alternative Credit Scoring a staple part of credit worthiness assessment for the underbanked in society”.
Access to digital credit has become especially relevant in this area due to the low banking penetration in rural communities. Usually the smallholder farmer has only one source of income and this very often falls short of their requirements.
Source: The Asean Post
The realities of Ram Bahadur BK, a 64-year-old artisan, and Bhakta, a farmer in the mid-hills of Nepal, are a real-life example of the importance of digital credit and mobile alternative data-based scoring.
In Ram Bahadur’s case, his enormous and talented handicraft skill has enabled him to make a living through restoration and conservation of old buildings in the Kaski area of Nepal. Although he is immensely happy in what he does, he knows that working with power tools would mean much greater efficiency in his jobs and prevent younger craftsmen with modern materials from replacing him at any time.
Ram is a user of the Prabhu Pay mobile wallet and has learned about the new digital credit service. This loan can deliver up to Rs 25,000 (USD $210 approximately) in less than 60 minutes directly into his account. With just a fraction of that amount, he could rent, or even buy power tools that would greatly improve his productivity and allow him to digitally pay-out funds when he receives his salary.
On his part, Baktha cultivates a small piece of farmland that he owns. He is not a banked user, so he does not have access to conventional credit, and occasionally his son sends him some money to supplement his income. But the heavy impact of the pandemic has stalled his business, making the process of plowing his field difficult.
In addition, Baktha uses old technology to work his land, which is physically demanding and technically complex, even for a younger man. If he had access to short-term credit, he could lease a tractor and work his plow at least ten times faster.
Digital credit could solve Baktha’s pains, and as with Ram Bahadur, he could access the same loan and the same amount of money. In both cases, Tiaxa’s alternative mobile data and advanced analytics were essential to assess their ability and likelihood to pay-back a small loan, while limiting the risk of over-indebtedness.
In this regard, Felipe Valdés, CEO of Tiaxa, adds that stories like those of Ram Bahadur and Baktha are truly inspiring and reveal the importance of having access to data that enables the discovery of people like them by financial institutions.
“Digital credit based on new datasets in emerging economies will enable the ‘next billion’ people to be financially included. Tiaxa is playing a key role in this process by bridging the gap between telcos and financial institutions so that the data of these individuals is made available in a way that is useful to banks, fintechs and payment companies. We strive to contribute to the livelihood of micro-entrepreneurs in their claims of labor independence and financial security”.
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