Scaling Up Affordable Lending: Inclusive Credit Scoring
The vision of affordable lenders is that everyone should have access to affordable and appropriate credit, delivered in a fair, respectful and responsible way. Affordable lenders are typically social purpose lenders, such as responsible finance providers and credit unions.
A known barrier to financial inclusion is the credit scoring approaches utilised by both mainstream and affordable lenders. Current approaches mean that there is an information gap and lenders do not always have the information they need to make a lending decision. Evidence in this report demonstrates the limitations of traditional credit scoring models in their ability to understand and capture the financial reality of consumers today to support full, fair and appropriate access to consumer credit markets. Increasing concerns with whether the current credit scoring methodology is fit-for-purpose for all segments of the consumer market is driving the development of new approaches, including what has been termed ‘inclusive credit scoring’.
Responsible Finance (RF) and Centre for Business in Society (CBiS), Coventry University have been funded by Oak Foundation to undertake a research programme to advance the supply of sustainable and affordable finance to consumers excluded from mainstream credit. The programme’s particular focus is to investigate how to overcome barriers to affordable lenders meeting consumer demand both at a national scale and sustainably.