Are Psychometric Tools a Viable Screening Method for Small and Medium-Size Enterprise Lending? Evidence from Peru

36 Pages Posted: 16 Dec 2017 Last revised: 27 Apr 2018

See all articles by Irani Arraiz

Irani Arraiz

InterAmerican Development Bank

Miriam Bruhn

World Bank - Development Research Group (DECRG)

Claudia Ruiz Ortega

World Bank; World Bank - Development Research Group (DECRG)

Rodolfo Stucchi

InterAmerican Development Bank

Date Written: December 14, 2017

Abstract

This study collaborated with the Entrepreneurial Finance Lab and a large bank in Peru to use psychometrics for small and medium-size enterprise lending. Applicants used a psychometric tool and those who achieved a score higher than a threshold were offered a loan. Using a regression discontinuity design and credit bureau data, the study finds that the tool increased small and medium-size enterprise loan use by up to 59 percentage points for applicants without a credit history, without leading to worse repayment behavior. This increase in borrowing resulted primarily from financial institutions other than the partner bank. For applicants with a credit history, the tool did not increase small and medium-size enterprise loan use.

Keywords: Financial Structures, Legal Institutions of the Market Economy, Financial Crisis Management & Restructuring, Rural Microfinance and SMEs, Microfinance

Suggested Citation

Arraiz, Irani and Bruhn, Miriam and Ruiz Ortega, Claudia and Ruiz Ortega, Claudia and Stucchi, Rodolfo, Are Psychometric Tools a Viable Screening Method for Small and Medium-Size Enterprise Lending? Evidence from Peru (December 14, 2017). World Bank Policy Research Working Paper No. 8276, Available at SSRN: https://ssrn.com/abstract=3088319

Irani Arraiz (Contact Author)

InterAmerican Development Bank ( email )

1300 New York Avenue NW
Washington, DC 20008
United States

Miriam Bruhn

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Claudia Ruiz Ortega

World Bank ( email )

1818 H Street
Washington, DC 20433
United States

World Bank - Development Research Group (DECRG) ( email )

1818 H Street, NW
Washington, DC 20433
United States

Rodolfo Stucchi

InterAmerican Development Bank ( email )

1300 New York Avenue NW
Washington, DC 20577
United States
+1 (202) 5237619 (Phone)

HOME PAGE: http://https://www.sites.google.com/site/rodolfostucchi/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
61
Abstract Views
489
rank
487,216
PlumX Metrics