IN the “Marvel Cinematic Universe,” one is deemed “worthy” if they can lift Thor’s hammer, just like what Captain America did in the movie “Avengers Endgame.” In consumer lending, one of the most common ways to determine whether an individual is “worthy” of a loan is through credit scoring, a statistical analysis performed by lenders and financial institutions to determine the creditworthiness of an individual or sole proprietor, according to Investopedia.com.
To develop a robust credit scoring system, a vast amount of data, such as financial and non-financial information, as well as default information of borrowers, is crucial. This is where the use of alternative data, defined by the World Bank Group as information harnessed from modern data sources, comes in.
“With alternative data, a more complete picture of the client is painted; thus allowing for more individuals and businesses to be assessed,” Diokno was quoted as saying. The use of alternative data also allows banks and credit institutions to evaluate loan applications of individuals and firms who have little to no credit history, helping to expand financial inclusion in the Philippines.
Experiences from developed countries show that alternative data in credit scoring allows for a broader profile view of borrowers, augmenting already existing mature data sources such as government credit registries, credit bureaus and other participating government and private institutions. Using alternative data in credit scoring is also available locally.
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