Blended Scoring – Case Example: Creditinfo CRB Georgia

The economy is not dominated by large and multinational corporations. SME‘s are greatly responsible for economic growth and therefore are an important sector to focus on. Creditinfo Georgia has invested to develop specific tools to help companies provide better, more effective decisions to enable greater access to finance for SMEs.

In Europe, for instance, 99% of businesses are small and medium enterprises, and at the same time they contribute 58 cents in every euro in economy. This situation is not specific to the Europe.

This problem has attracted attention for the longest time. Investment companies over the world invest a lot of resources into development of SME sector. For instance, only in 2014 the Inter-American Investment Corporation approved 64 operations totalling $426.3 million to support development of SME sector.

In Georgia the role of SMEs is very significant but the access to finance is very limited.  To illustrate the role of SMEs, in 2010 shares of registered taxpayers were distributed as follows: large business was less than 1%, medium business is 5-25%, and small business was 70-95% (Tax Reforms, 2011; p.26).  According to National Statistics office, SME sector created 44% of job places and produced 18% of total turnover in 2014.

Figure 1 shows the results of a survey to SME from 2011. One of the central questions of the survey was about the existing barriers to the development of the small busi­ness in Georgia.  It is clear that access to credit is the highest with 72.3% of those responding citing this reason.

Figure 1 - Related to Government Policy
Figure 1: Macro factors: Related to the government policy (in percentages)
Source: The Role of SME Sector in Georgian Economy, Tatiana PAPIASHVILI, İlyas ÇILOĞLU

According to World Bank Country Profile 2013, approximately only 14 % of SMEs use bank finance for investment. But even for those SMEs who have access to credit, loans are granted with very unfavourable conditions: 96% of accepted loans require collateral, which cover at least 220% of the loan amount.

Creditinfo Georgia provides efficient decision making tools as well as access to credit information (positive and negative). It has been doing so for over 10 years to facilitate lending in the bank and non-bank financial sector but also other forms of lending sectors such as telecoms and trade finance (business to business payment terms). Creditinfo Georgia database contains information of over 2 million individuals and over 56 000 companies, as well as data of large number of sole proprietors registered under personal IDs.

Creditinfo Georgia believes that a core role is to provide the support tools to enable financial institutions to improve their lending, and blended scorecards have proved to be a successful way to do it in numerous markets across the world.

Let’s look at small enterprises from Creditinfo Georgia Credit Bureau perspective. Around 55% of them have no credit history and, according to World Bank data, around 70% of them use internal finance for investments. People often have a problem to get business loan so they apply for personal loan to fund their business. Therefore, finances of the owner and the business are frequently intertwined and SMEs are often dependent on the owner‘s personal actions.

So the logical solution here was to evaluate company’s risk taking into account information about connected individuals: owners, shareholders, board members.

This is the principal that is used when combining all the information about the business and individuals history.

The concept of Blended Score is simple. Imagine that you have to decide, whether or not you will grant a loan to this company illustrated in Figure 2 below.

Figure 2 - Company's Profile

Here is some limited information about the company. Especially if the company is quite young, in that it is operating on a market only during the last 3 years, but it’s making a good profit and showing very fast financial growth. Sounds like good company to have a deal with. Loan approved.

Now let’s look at the information about company owner illustrated in Figure 3 below.

Figure 3 - Company Owner's Profile

It’s turned out he is a well-known fraudster, who is responsible for default of couple of firms and now he is going to spend next 150 years in a jail. Would you change your decision now?

Blended scoring would combine information about both company and owner to identify high risk when it now visible at the first glance.

Figure 4 - Blended Credit Profile
This is exactly what we did when we developed the Blended SME Scorecard using the information that has been collected over many years in Creditinfo Georgia’s database.  Of course the example above is a very extreme; however, the subtitles of the inter-relationship are explained by the credit scorecard.


What information about SME can we get? There is some demographic data such as company age, industry and address and there is credit history.

Then there is the linkages information which is recorded on all the owners and directors within Creditinfo Georgia.  For each individual we have the credit history and credit score which can be combined with the business data.  Where the owners are “formal” but are known by the lender this information can be added.


So how does the final scorecard look like? Figure 5 shows the approximate makeup of its components. Brown sectors refer to variables looking at the company information (around 65%) and the green ones (around 35%) represent variables looking at information of individuals.

Figure 5 - Components of a Blended Score

Talking about efficiency, it is significantly higher than efficiency of classic model based only on commercial data. The blended scorecard should be integrated and combined with internal processes and procedures to achieve best results. Acceptance rate after implementation will increase and default rate will decrease.

This model provides Banks, Microfinance Institutions and Trade Lenders an excellent opportunity to break down some of the existing barriers to lending and extend the access to credit for SME, an essential part of expansion of all economies.

As Bruce Mau once said, when everything is connected to everything else, for better or for worse, everything matters.


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