Radix Analytics Pvt Ltd

Application Scorecard

Radix Analytics Pvt Ltd > Financial Services > 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

Benefits

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

Project information

Techniques

Risk Analytics

Client

Bank Lending to SMEs 

Industries

Financial Services

Location

Indonesia

app-scorecard

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)

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