Predicting Creditworthiness with Publicly Observable Characteristics: What Can Informal Groups Contribute to Formal Finance in Africa?
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Publisher:Ohio State University. Department of Agricultural, Environmental, and Development Economics
Series/Report no.:Ohio State University. Department of Agricultural Economics and Rural Sociology. ESO (Economics and Sociology Occasional Paper). No. 2220
If publicly observable characteristics such as age, sex, household size, and education help predict borrowing from informal groups, they may also help predict creditworthiness in general. Because formal lenders can collect and consider this information cheaply, its use may help to screen poor credit risks. Econometric results suggest that age and household size may indeed indicate creditworthiness among the rural poor in Africa.