In this Briefing Note, Microsave suggests a fresh approach to MSME finance through the design of credit scorecards.
Microsave bases its approach on practical experience based on its work in MSME finance across Africa and Asia. A judgemental scorecard developed using in-house experience and staff members’ practical knowledge of credit risks for MSMEs, and refined based on a series of pilot-tests, has the potential to enhance efficiency of loan processing and underwriting.
Credit scorecards have the potential to support financial institutions to enhance lending to the MSME sector while at the same time managing risks. However, it is important to note that credit scorecards are not silver bullets and it may not be able to predict default in all circumstances.