This paper examines the role of credit scoring in very low-default environments based on experience in both commercial banks and MFIs in Myanmar, between 2016-2018.

It argues that, even in low-default environments, financial institutions stand to gain from digitization and automation of the loan-application process and from the consistent and efficient application of credit policy that a credit-scoring model facilitates. However, quantitative risk measurement is not possible until financial institutions have lent to a sufficient number of borrowers who actually fail to pay back. In some market segments in Myanmar, such as traditional microfinance, such borrowers have been very hard to find. The paper shares a few examples of the unique features of Myanmar and suggests how the ‘ecosystem’ for credit scoring may be changing in the near-term future.

Disclaimer: This document is made possible by the support of the American people through the United States Agency for International Development (USAID). Its content is the sole responsibility of the author and does not necessarily reflect the views of USAID or the United States government.