New Credit Screening and Risk Evaluation Tools Help Issuers Unlock Capital for SMBs

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PURCHASE, N.Y.--(BUSINESS WIRE)--MasterCard (NYSE:MA) and the Entrepreneurial Finance Lab (EFL) today announced a global partnership to promote small business (SMB) growth in developing countries. The partnership, signed during a ceremony at the SIBOS Conference in Dubai, provides international issuers in developing markets with new tools to help improve credit underwriting for unbanked small businesses. The cost-effective approach to screening and risk evaluation increases SMBs’ access to capital, unlocking entrepreneurial potential and driving economic growth around the globe.

Throughout emerging markets, SMBs are often shut out of the financial system due to a lack of traditional prerequisites for finance, including reliable credit bureau and bank performance information being available to financial institutions. EFL’s psychometric risk-scoring technology narrows the financing gap for high potential, growth-generating SMBs, by providing a unique vetting process that evaluates business acumen, honesty and integrity. Through the partnership with EFL, MasterCard is extending its strategic mission of financial inclusion across all customer segments and regions.

“Around the world, SMBs lack access to low cost financing, and banks are handcuffed from lending by lack of data on them. In developing countries, only 20 percent of SMBs have a positive bank performance while only another 20 percent have credit bureau references,” said Ed Glassman, Group Executive, Global Commercial Products & Solutions at MasterCard. “With EFL’s innovative credit scoring tool, even the smallest business will be able to join a payments network, avoiding the inefficiencies and risks of checks and becoming able to compete for the same customers as the largest global retailers.”

Among the first banks to benefit from the partnership is Banco BHD of the Dominican Republic which will utilize the EFL model to credit score MasterCard small and medium size businesses credit cards in addition to its traditional SMB term loan business. MasterCard and EFL are working globally across Latin America, South East Asia, Mid-East and Africa to promote the use of psychometric scoring as an alternative to traditional credit scoring where SMB credit underwriting challenges exist.

“Since our inception out of the Harvard University Research Lab in 2010, EFL has enabled close to $200 million in new loans to unbanked small businesses in emerging markets,” confirmed D.J. DiDonna, co-founder and Chief Operating Officer of EFL. “Across 26 languages in over 20 countries, EFL’s psychometric risk scoring provides new, crucial information which enables banks to lower restrictive lending hurdles for SMBs. EFL partner banks have observed increased lending and profitability along with the new customer-base of under banked, many of whom enjoy their first risk-product relationship with a formal financial institution.”

About MasterCard

MasterCard (NYSE: MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard’s products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MasterCardNews, join the discussion on the Cashless Conversations Blog and subscribe for the latest news.

About EFL

The Entrepreneurial Finance Lab (EFL) is an innovative financial technology company which employs psychometric and nontraditional applicant data to create credit scores to measure risk and potential among new and existing small businesses. After beginning with research at the Harvard Center for International Development, EFL now works with leading financial institutions across Africa, Asia, and Latin America, and has been recognized by the G-20 as one of the most innovative approaches to SME finance globally. Find EFL at www.EFLglobal.com or connect @EFinlab.

From left: Ed Glassman, group executive, Global Commercial Products & Solutions MasterCard and D.J. DiDonna, ,co-founder and Chief Operating Officer of EFL announce partnership at Sibos 2013 in Dubai, UAE. (Photo: Business Wire)

Pius Nganga (left) and his wife (right) run a business selling second-hand clothes in the Gikomba market of Nairobi, Kenya. After taking over the family business from his mother in 2005, Nganga struggled for years with small lines of credit, held back by stringent bank requirements and little credit history. After taking the EFL credit application in 2009, Nganga was granted a loan more than three times as large as his previous loan, and with that capital he was able to increase his stock by four times and triple his profits. (Photo: Business Wire)