Granting and managing loans for micro‐entrepreneurs: New developments and practical experiences

We present a methodology to grant and follow‐up credits for micro‐entrepreneurs. This segment of grantees is very relevant for many economies, especially in developing countries, but shows a behavior different to that of classical consumers where established credit scoring systems exist. Parts of our methodology follow a proven procedure we have applied successfully in several credit scoring projects. Other parts, such as cut‐off point construction and model follow‐up, however, had to be developed and constitute original contributions of the present paper. The results from two credit scoring projects we developed in Chile, one for a private bank and one for a governmental credit granting institution, provide interesting insights into micro‐entrepreneurs’ repayment behavior which could also be interesting for the respective segment in countries with similar characteristics.