Keynote speakers big data deployment in assessing the creditworthiness of low-income families and micro-enterprises in emerging economies: Platforms, methodologies and business models

Abstract

General consumer and business finance companies and microcredit organizations have had limited success in serving the needs of economically active low-income families and micro-enterprises cost-effectively and sustainably. Recent advances in computing and telecommunications technology are dramatically transforming this landscape by changing the way the financial industry operates. A key mechanism underlying this transformation concerns the use of big data (BD) in assessing, evaluating and refining the creditworthiness of potential borrowers. The objective of this paper is to examine this issue from the perspective of emerging economies. It investigates how various inherent characteristics of big data - volume, velocity, variety, variability and complexity - are related to the assessment of the creditworthiness of low-income families and micro-enterprises. The paper also examines the platforms, methodologies and processes used by lenders in assessing the creditworthiness and lending decisions. Case studies of developing world-based BD companies involved in this business such as China's Alibaba, Tencents and Xiaomi, Africa's Agrilife, Farmforce and Kilimo Salama, Brazil's Cignifi and Mexico's Kueski will be discussed. It looks at various categories of personal financial and non-financial information that are being used as proxy measures for a potential borrower's identity, ability to repay and willingness to repay. The sources of data (internal vs. external to the BD organization) and providers of credits (BD organization vs. external partners or clients of the BD organization) considerations suggest the four basic categories of business models represented by the 2×2 matrix. The paper evaluates the business models represented by each cell from the perspective of potential borrowers. Also addressed are privacy and cybersecurity issues associated with this phenomenon.