Credit Scoring vs. Expert Judgment - A Randomized Controlled Trial

Item Type Monograph (Working Paper)
Abstract Developing financial markets experience a swift increase in the availability of borrower-information from credit information sharing systems. I study whether banks can use this information to automate credit decisions. In the wake of a randomized controlled trial, a bank in Africa introduced an automated credit decision-process based on a credit scoring technology at half of its branches, while the other half kept applying an extensive screening procedure as a base for a loan officer's expert judgment. Results show that the quality of the loan Portfolio in the treatment branches did not decrease significantly, at the cost of rejecting only a 6 percentage points higher share of applications, using a much simpler procedure. An analysis of the costs and benefits of the credit scoring system strongly suggests that the bank's cost of lending decreased substantially.
Authors Gietzen, Thomas
Language English
Subjects finance
HSG Classification contribution to scientific community
HSG Profile Area None
Date June 2017
Publisher SoF - HSG
Place of Publication St. Gallen
Series Name School of Finance Working Paper Series
Volume 2017/09
Number 09
Number of Pages 37
Depositing User Geraldine Frei-Böbel
Date Deposited 08 Jun 2017 12:12
Last Modified 17 Jan 2018 15:27


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Gietzen, Thomas: Credit Scoring vs. Expert Judgment - A Randomized Controlled Trial. School of Finance Working Paper Series, 2017, 09.

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