Radix Analytics Pvt Ltd

Application Scorecard

Radix Analytics Pvt Ltd > Scoring Models > Application Scorecard

Issues & Objectives

SMEs play a crucial role in the Indonesian economy, contributing significantly to employment and economic growth. Our client, a non-bank financial institution based in Indonesia, offers a range of financing services to individuals and businesses.

The objective of this project was to develop application scoring model for SME. The SME portfolio was new to the client which had been recently acquired by a multinational bank headquartered in Australia. The scoring model was used for SME loan origination decisions.

Project information

Skills

Advanced Statistical Model 

Client

Bank Lending to SMEs 

Domain

Risk Analytics

Location

Indonesia

Challenges

  • Scaling up operations in accordance with Indonesian government directive
  • Very small number of data points ≈ 400 making it difficult to obtain reliable results through predictive modelling
  • The SME portfolio was new so the history of defaults had not been well established

Solution

  • Bootstrapping was used to overcome the limitation of a small sample.
  • Reject rates were taken as a surrogate for default rate.
  •  High quality scorecard was developed
  • Model Gini = 66.74 (Gini > 55 indicates a high quality scorecard)
  • Model KS = 53.85 (KS > 45 indicates a high quality scorecard)

Benefits

  • Process Automation
  • Ensures Consistency in decision making
  • Predictive modelling replaces gut feel
  • Scores recalibrated with default data after sometime