Reinventing credit history
Using data captured by the Jamiipay service, an alternative credit history can be constructed for unbanked individuals.
What is credit history?
Credit history is a record of a person’s ability to repay loans. Typically, a person’s credit history includes information about the number and types of loans they have, the duration of each loan, and whether repayments are done on time.
A credit history is used to create a credit score which formal money lenders and banks use to see how likely a person is to repay a loan on time - their creditworthiness. This informs them whether a person is eligible to take a loan or not.
Without credit history, a person cannot get a loan
The first time a person takes a loan, money lenders and banks analyse different records on the customer to determine her creditworthiness. This include records on what she owns, her savings, salary, along with many other data. However, most people in developing countries do not have a bank account and many people even lack formal ID. There is no records of their savings because they save up at home or with savings groups. Their salary is paid in cash and many do not own much that can be put up as collateral. Many unbanked individuals even take loans through savings groups - essentially banking without the banks, but they are still not creating a credit history. This means there is no basis for determining their creditworthiness leaving money lenders unable to lend them money.
Data on savings creates an alternative credit score
Jamiipay allows for people in savings groups to build a credit history through the Jamiipay app.
Rather than relying on information from banks and formal money lenders, Jamiipay records activity from savings groups about the money they save, the loans they take, and how reliable they are at repaying loans from their savings group.
Jamiipay uses this credit history to create an alternative credit score. Jamiipay aspires for formal money lenders and banks to use this data to provide loans to these groups and their members.