In today’s financial landscape, responsible access to credit can be a powerful enabler of economic mobility and wealth creation. Yet, millions of individuals and businesses remain excluded due to onerous processes and traditional credit scoring models that prioritise traditional credit history, formal employment, and banking relationships – factors that don’t reflect the realities of emerging markets, where informal economies and cash transactions prevail. 

Alternative credit scoring models are reshaping financial access for the emerging mass market by leveraging non-traditional data like mobile phone usage, wallet transactional data, utility payments, and behavioural insights. These innovations break down barriers, creating a more inclusive financial ecosystem and stronger product value proposition for those long excluded.

Rethinking Creditworthiness  

Traditional credit scoring systems have long been the gold standard for assessing borrowers’ loan repayment ability. However, their reliance on a formal credit history excludes those without access to traditional financial systems. In emerging markets, this exclusion affects vast swathes of the population, leaving individuals and small businesses without the financial resources needed to thrive. 

The limitations of traditional credit scoring create a feedback loop of financial exclusion. Without a formal credit history and/or banking relationship, individuals are denied access to credit, and without credit, they cannot build the credit history required to participate in the financial system. For many, the door to economic opportunity remains firmly shut. 

Alternative credit scoring models offer a fresh perspective, going beyond traditional banking activity to assess both affordability or the ability to pay, and risk or the willingness to pay. These models analyse alternative data points such as mobile phone usage patterns, wallet cash-in and cash-out transactions, and utility bill payments to paint a more comprehensive picture of an individual’s financial behavior. By integrating affordability metrics alongside risk assessments, lenders can make more informed decisions, ensuring financial inclusion without compromising sustainability. This shift from exclusion to inclusion is transforming lives and driving economic growth.

Leveraging Technology for Inclusion

At the heart of alternative credit scoring lies technology — an enabler that bridges the gap between the unbanked and financial institutions. Advanced algorithms powered by machine learning (ML) analyse vast datasets to assess creditworthiness, often in real-time. These models don’t just examine whether an individual has borrowed money before; they assess broader behavioural patterns that indicate reliability and responsibility. 

For example, consistent payment of cash-out transactions or mobile phone top-ups can demonstrate a borrower’s ability to manage financial obligations. Social data, such as patterns of online transactions or mobile wallet usage, provides additional context, giving lenders the confidence to extend credit to individuals who may have otherwise been deemed “unscorable.” 

This shift is particularly impactful in regions where mobile penetration far outpaces traditional banking access. For instance, mobile network operators (MNOs) are emerging as key players in enabling financial inclusion by providing the data necessary for alternative credit scoring. Integrating such data into credit assessments opens up opportunities for individuals and businesses to access financing tailored to their needs, often for the first time.

Transformative Impact on Financial Inclusion

Adopting alternative credit scoring models is more than a technological advancement; it is a transformative force driving financial inclusion. By expanding access to credit, these models enable underserved individuals and businesses to participate meaningfully in the economy. 

For small businesses, access to credit can mean the difference between stagnation and growth. A micro-retailer, for instance, can use a small loan to increase inventory, leading to higher sales and greater profitability. For individuals, credit can open doors to education, healthcare, or even the ability to start a small business, laying the foundation for long-term economic stability. 

The ripple effects of financial inclusion extend beyond individual borrowers. Communities benefit as businesses grow, creating jobs, and local economies flourish. By enabling participation in the financial system, alternative credit scoring models help to close the inequality gap, empowering underserved populations to achieve greater economic mobility. 

Use-Cases for Success

The real-world application of alternative credit scoring models underscores their potential to revolutionise financial access. Consider the example of mobile money platforms in emerging markets like Africa and the Middle East, who leverage transaction data to offer microloans. These loans, often small and with a short tenure but significant, provide immediate relief and opportunity for borrowers without access to traditional financing channels. These systems allow individuals to access credit quickly and seamlessly, often with repayment terms tailored to their income flows. 

Similarly, airtime credit services have transformed the way people stay connected. By analysing mobile usage patterns, these services offer small, short-term credit solutions to cover phone expenses, ensuring individuals remain connected to opportunities. This innovation is particularly significant in regions where connectivity is a lifeline to education, employment, and entrepreneurship.

Ezra’s Role in Driving Innovation 

As a leader in financial inclusion, Ezra is pioneering the use of alternative credit scoring to unlock access to finance. By combining advanced technology, proprietary credit scoring algorithms, and deep market insights, Ezra is driving meaningful change in emerging markets. 

Ezra’s approach is built on the principle of empowerment. Ezra’s flexible credit solutions enable lenders to extend financing to individuals and businesses that would otherwise remain excluded by continuously enriching and analysing data points such as mobile activity, utility payments, and transaction patterns. These efforts not only increase access to credit but also foster trust between borrowers and lenders, creating a more sustainable financial ecosystem. 

One example of Ezra’s impact is its collaboration with mobile network operators to offer airtime lending solutions. These services have kept millions of people connected, enabling them to stay engaged with the world around them. Similarly, Ezra’s partnerships with Banks, MNOs, Digital Wallet Providers, and Fintechs have facilitated the launch of innovative products like Buy Now Pay Later (BNPL) solutions, Merchant and Agent loans, and short-term cash loans, helping individuals spread costs while maintaining financial stability. 

Building a Future of Financial Empowerment

The potential of alternative credit scoring models to transform lives is undeniable. By focusing on alternative data sources that focus on behavioural patterns rather than traditional credit history, these models unlock opportunities for individuals and businesses, fostering resilience and growth. As more financial institutions and fintech companies adopt this approach, the barriers to financial inclusion will continue to erode, creating pathways to prosperity for millions. 

At Ezra, we believe that access to finance is not just a privilege — it is a right. By leveraging technology and innovation, we are committed to building a future where financial opportunity is within everyone’s reach. As we push the boundaries of what is possible, we remain focused on our mission: to close the inequality gap and empower communities to achieve their full potential.