BTPN is Assessing Default Risk with the
Entrepreneurial Finance Lab

Banks in developed countries often use the personal credit histories and account behavior of the founding entrepreneur to assess risk and provide credit, but that information is not usually available in developing nations. The Entrepreneurial Finance Lab (EFL) is allowing banks to fill the gap with a proprietary credit scoring tool that assigns entrepreneurs a risk profile based on how they respond to a set of questions. The tool evaluates business skills, fluid intelligence, attitudes and beliefs, and ethics and honesty. To date, EFL has deployed its technology with more than 36 financial institutions in 27 countries, enabling more than $1 billion in lending to individuals and small businesses. 

BTPN in Indonesia, for example, worked with EFL to update its risk analysis of micro, small, and medium-sized enterprises (MSMEs). BTPN was already Indonesia’s fourth largest small business lender, but wanted to streamline and standardize its lending processes to allow its more than 600 branches to respond more fully to the credit needs of the growing middle class. EFL created a combined tool using BTPN’s proprietary database of customer data overlaid with the EFL risk assessment. The resulting tool allows BTPN to identify those customers most likely to default; denying loans to that high risk group would reduce default rate by an additional 28 percent, and increase overall portfolio profitability.