The Problem: Financial services infrastructure is radically under-developed in many countries, constraining growth in private sector lending and macro-economic growth as a consequence. Many countries – developing and emerging economies alike – lack credit-reporting systems, making access to credit difficult or impossible for the vast majority. The two primary means by which individuals worldwide create wealth are homeownership and small business ownership. For most, this requires credit. Without sound credit reporting, most will remain imprisoned by poverty. Many millions in emerging economies live in remote locations with no access to mainstream lenders Subjective and arbitrary standards, anticompetitive practices, and security concerns impede the rollout of financial services infrastructure.
The Conventional Approach: Traditional microfinance institutions (MFIs) generally do not extend loans to individuals, but rather to groups. Traditional banks have long looked with envy at the portfolio performance and returns of MFIs. These banks now seek to enter the micro-credit market, believing that their greater wherewithal and technical savvy will permit entry and give them an advantage. Meanwhile, MFIs have begun lending to individuals in an effort to look more like traditional banks. Both banks and MFIs are either exclusively relying on data (in the case of banks) or increasingly relying on data (in the case of MFIs). Neither has the total picture. Banks intend to use non-financial payment data (alternative data) and MFIs are relying only on house file data.
PERC’s Unique Solution: PERC brings together parties with harmony of interest in development of financial services infrastructure. We institutionalize relationships in context of goal-oriented coalition. Working with key international organizations –including the IFC, World Bank, and CGAP– we promote sound credit reporting practices to facilitate “information led development.” PERC also identifies and partners with private sector actors and international organizations to develop risk modeling solutions to bypass traditional lenders and extend credit to those in remote locations. We also identify and partner with private sector actors and international organizations in developing risk modeling solutions for those needing credit but who cannot be served by micro-lenders or by banks, and who have too little information to access credit by any means.