President William Ruto launched Hustler Fund on November 30, welcoming millions of Kenyans into a Ksh.50 billion kitty in its first phase which has a minimum loan limit of Ksh.500 and Ksh. 50,000 maximum.
During the launch, the President backed the assigning of credit scores to borrowers in a push for an all-out financial inclusion in a rather perceived market with a high cost of credit.
Metropol CRB has a credit scoring solution dubbed the ‘Metro Score’, generated based on the credit information available on the borrower’s profile with the bureau and considers a number of relevant parameters.
The Metro Score predicts the probability of default for a borrower over a 5-year period and can be used in credit assessment as well as other instances where determining the risk associated with the borrower is pertinent in credit decision-making. The Metro Score is available to all Participating Institutions/parties with user rights to the Metropol Core CRB system.
With the support of USDD code *433#, the Metro Score ranges from 200 – lowest to 900 – highest for individuals and 20-90 for non-individuals.
Lenders and borrowers alike have a lot to benefit from using the Metro Score including but not limited to the following;
a) Prediction of the borrower’s payment behavior. The Metro score, through its advanced indexing system, enables the lender to have a feel of how the borrower is likely to repay the loan whether in the agreed installment periods or the right installment payments.
b) Faster turn-around time for credit assessments. Instead of going through voluminous files to determine the creditworthiness of the borrower, the Metro Score summarizes all that for the lender, and one is able to make a Lend or No Lend decision faster, thus saving time and money for both parties. Related to this, the lender is able to prioritize loan applicants by serving those with a good Metro Score first and the others that may need further assessment are handled later.
c) Objective Credit Assessment. The Metro Score eliminates subjectivity inherent in credit assessment processes and the lender does not have to labor much to explain or justify why the loan has been denied or extended. This will in effect lead to a significant reduction in bad debts.
d) Credit risk policy enhancement. The Metro Score can be used as a benchmark to determine the credit risk appetite of lenders and include this in their credit policies.
e) Risk-based pricing. The Metro Score facilitates lenders to determine interest rates based on one’s credit score. Therefore, loan applicants with good Metro scores should enjoy discounted interest rates and vice versa. This also promotes behavior change among borrowers when they realize that their Metro Score has a bearing on the level of interest they will be charged for their desired credit facilities.
f) On the side of borrowers, a good Metro Score facilitates easy access to credit facilities as many lenders would want to associate with someone who repays their credit facilities as per agreed terms over a sustained period of time.
All participating institutions should take advantage of the Metro Score to simplify their credit assessment processes and enhance efficiency and effectiveness, thereby, reducing losses that may arise from such process inefficiencies.