Are psychometric tools a viable screening method for small and medium-size enterprise lending ? evidence from Peru

Irani Arraiz, Miriam Bruhn, Claudia Ruiz Ortega, Rodolfo Mario Stucchi, Irani Arraiz, Miriam Bruhn, Claudia Ruiz Ortega and Rodolfo Mario Stucchi
Authors registered in the RePEc Author Service: Rodolfo Stucchi, Miriam Bruhn, Irani Arraiz and Claudia Ruiz Ortega

No 8276, Policy Research Working Paper Series from The World Bank

Abstract: This study collaborated with the Entrepreneurial Finance Lab and a large bank in Peru to use psychometrics for small and medium-size enterprise lending. Applicants used a psychometric tool and those who achieved a score higher than a threshold were offered a loan. Using a regression discontinuity design and credit bureau data, the study finds that the tool increased small and medium-size enterprise loan use by up to 59 percentage points for applicants without a credit history, without leading to worse repayment behavior. This increase in borrowing resulted primarily from financial institutions other than the partner bank. For applicants with a credit history, the tool did not increase small and medium-size enterprise loan use.

Keywords: Financial Structures; Legal Institutions of the Market Economy; Financial Crisis Management&Restructuring; Rural Microfinance and SMEs; Microfinance (search for similar items in EconPapers)
Date: 2017-12-14
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:8276

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