A smart loan for people with no credit history (yet)

How much do you need
to know about a person

before you'd feel
comfortable making a loan?

Suppose you wanted to lend 1,000 dollars
to the person sitting two rows behind you.

What would you need to know about
that person before you'd feel comfortable?

My mom came to the US from India
in her late thirties.

She's a doctor in Brooklyn,

and she often lets friends and neighbors
come to see her for health services

whether they can pay right away or not.

I remember running into her patients
with her at the grocery store,

or on the sidewalk,

and sometimes they would come
and pay her right on the spot

for previous appointments.

She would thank them

and then ask them about
their families and their health.

She gave them credit
because she trusted them.

Most of us are like my Mom.

We would give credit
to someone that we know

or that we live next to.

But most of us are probably not
going to lend to a stranger

unless we know a little
something about them.

Banks, credit card companies
and other financial institutions

don't know us on a personal level,

but they do have a way of trusting us,

and that's through our credit scores.

Our credit scores have been created

through an aggregation and analysis
of our public consumer credit data.

And because of them,

we have pretty much easy access to all
of the goods and services that we need,

from getting electricity to buying a home,

or taking a risk and starting a business.

But ...

there are 2.5 billion people
around the world

that don't have a credit score.

That's a third of the world's population.

They don't have a score

because there are no formal
public records on them.

No bank accounts,

no credit histories

and no social security numbers.

And because they don't have a score,

they don't have access

to the credit or financial products
that can improve their lives.

They are not trusted.

So we wanted to find a way to build trust

and to open up financial access
for these 2.5 billion.

So we created a mobile application

that builds credit scores for them
using mobile data.

There are currently over one billion
smartphones in emerging markets.

And people are using them
the same way that we do.

They're texting their friends,

they're looking up directions,

they're browsing the Internet

and they're even making
financial transactions.

Over time,

this data is getting captured
on our phones,

and it provides a really
rich picture of a person's life.

Our customers give us access to this data

and we capture it
through our mobile application.

It helps us understand

the creditworthiness
of people like Jennifer ...

a small-business owner
in Nairobi, Kenya.

Jennifer is 65 years old,

and for decades has been running a food
stall in the central business district.

She has three sons who she put
through vocational school

and she's also the leader
of her local Chama,

or savings group.

Jennifer's food stall does well.

She makes just enough every day
to cover her expenses.

But she's not financially secure.

Any emergency could force her into debt.

And she has no discretionary income

to improve her family's way of living,

for emergencies,

or for investing into
growing her business.

If Jennifer wants credit,

her options are limited.

She could get a microloan,

but she'd have to form a group
that could help vouch for her credibility.

And even then,

the loan sizes would be way too small
to really have an impact on her business,

averaging around 150 dollars.

Loan sharks are always an option,

but with interest rates
that are well above 300 percent,

they're financially risky.

And because Jennifer doesn't have
collateral or a credit history,

she can't walk into a bank
and ask for a business loan.

But one day,

Jennifer's son convinced her
to download our application

and apply for a loan.

Jennifer answered a few
questions on her phone

and she gave us access to a few
key data points on her device.

And here's what we saw.

So bad news first.

Jennifer had a low savings balance
and no previous loan history.

These are factors that would have thrown
up a red flag to a traditional bank.

But there were other points in her history

that showed us a much richer
picture of her potential.

So for one,

we saw that she made regular
phone calls to her family in Uganda.

Well ...

it turns out that the data show a four
percent increase in repayment

among people who consistently
communicate with a few close contacts.

We could also see that though she
travelled around a lot throughout the day,

she actually had pretty
regular travel patterns,

and she was either at home
or at her food stall.

And the data shows a six percent
increase in repayment

among customers who are consistent
with where they spend most of their time.

We could also see
that she communicated a lot

with many different people
throughout the day,

and that she had a strong support network.

Our data shows

that people who communicate
with more than 58 different contacts

tend to be more likely
to be good borrowers.

In Jennifer's case,

she communicated
with 89 different individuals,

which showed a nine percent
increase in her repayment.

These are just some of the thousands
of different data points

that we look at to understand
a person's creditworthiness.

And after analyzing all of these
different data points,

we took the first risk,

and gave Jennifer a loan.

This is data that would not
be found on a paper trail,

or in any formal financial record.

But it proves trust.

By looking beyond income,

we can see people in emerging markets

that may seem risky and
unpredictable on the surface,

are actually willing and have
the capacity to repay.

Our credit scores have helped us deliver
over 200,000 loans in Kenya

in just the past year.

And our repayment rates
are above 90 percent.

Which by the way,

is in line with traditional
bank repayment rates.

With something as simple
as a credit score,

we're giving people the power
to build their own futures.

Our customers have used their loans
for family expenses,

emergencies,

travel,

and for investing back
into growing their businesses.

They're now building better
economies and communities,

where more people can succeed.

Over the past two years
of using our product,

Jennifer has increased
her savings by 60 percent.

She's also started two
additional food stalls

and now making plans
for her own restaurant.

She's applying for a small-business loan
from a commercial bank,

because she now has the credit history
to prove she deserves it.

I saw Jennifer in Nairobi just last week,

and she told me how
excited she was to get started.

She said,

"Only my son believed I could do this.

I didn't think this was for me."

She's lived her whole life

believing that there was a part
of the world that was closed off to her.

Our job now is to open
the world to Jennifer

and the billions like her
that deserve to be trusted.

Thank you.

(Applause)