SMS, social media may reveal credit strength
Companies are looking to tap into alternative sources of financial data, but concerns around quality remain
Let’s say, you want to take a loan from a formal financial institution. To begin with, commercial banks and non-banking financial companies (NBFCs) will check your credit worthiness by pulling out your credit report and score from either one or more credit bureaus—Credit Information Bureau (India) Ltd, Equifax Credit Information Services Pvt. Ltd, Experian Credit Information Co. of India Pvt. Ltd, and Crif Highmark Credit Information Services Pvt. Ltd—in India. These bureaus give you a credit score if you have taken credit before. But, say, you do not have regular income, proper documentation to show income flow, have never taken a loan and don’t have a formal saving channel. You could be self-employed or may be working on a freelance basis. In such a situation, getting a loan from a commercial bank may be difficult. Since lack of credit information leads to little or no access to loans, many depend on informal channels. In 2014, in India, more than 400 million people borrowed money, but fewer than one in seven were approved for a formal loan, according to a report by Omidyar Network, an international philanthropic investment firm, named Big Data, Small Credit—The Digital Revolution and Its Impact on Emerging Market Consumers.