Behavior Revealed in Mobile Phone Usage Predicts Loan Repayment

28 Pages Posted: 11 Jun 2015 Last revised: 18 Feb 2018

See all articles by Daniel Björkegren

Daniel Björkegren

Brown University - Department of Economics

Darrell Grissen

Entrepreneurial Finance Lab

Date Written: February 16, 2018

Abstract

Many households in developing countries lack formal financial histories, making it difficult for banks to extend loans, and for potential borrowers to receive them. However, many of these households have mobile phones, which generate rich data about behavior. This paper shows that behavioral signatures in mobile phone data predict loan default, using call records matched to loan outcomes. In a middle income South American country, individuals in the highest quintile of risk by our measure are 2.8 times more likely to default than those in the lowest quintile. On our sample of individuals with (thin) financial histories, our method outperforms models using credit bureau information, both within time and when tested on a different time period. The method forms the basis for new forms of lending that reach the unbanked.

Keywords: credit scoring, microfinance, mobile phones, big data

JEL Classification: O16

Suggested Citation

Björkegren, Daniel and Grissen, Darrell, Behavior Revealed in Mobile Phone Usage Predicts Loan Repayment (February 16, 2018). Available at SSRN: https://ssrn.com/abstract=2611775 or http://dx.doi.org/10.2139/ssrn.2611775

Daniel Björkegren (Contact Author)

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

HOME PAGE: http://dan.bjorkegren.com

Darrell Grissen

Entrepreneurial Finance Lab ( email )

45 Prospect St.
Suite 400
Cambridge, MA 02139
United States

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