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Credit Scoring vs. Expert Judgment - A Randomized Controlled Trial
Series
School of Finance Working Paper Series
Type
working paper
Date Issued
2017-06
Author(s)
Gietzen, Thomas
Abstract (De)
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.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
None
Publisher
SoF - HSG
Publisher place
St. Gallen
Volume
2017/09
Number
09
Pages
37
Subject(s)
Eprints ID
250987