A smart loan for people with no credit history (yet)
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0:01 - 0:03How much do you need
to know about a person -
0:03 - 0:05before you'd feel comfortable
making a loan? -
0:06 - 0:08Suppose you wanted to lend 1,000 dollars
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0:09 - 0:11to the person sitting two rows behind you.
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0:11 - 0:13What would you need to know
about that person -
0:13 - 0:15before you'd feel comfortable?
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0:15 - 0:19My mom came to the US from India
in her late thirties. -
0:20 - 0:21She's a doctor in Brooklyn,
-
0:21 - 0:25and she often lets friends and neighbors
come to see her for health services, -
0:25 - 0:28whether they can pay right away or not.
-
0:28 - 0:31I remember running into her patients
with her at the grocery store -
0:31 - 0:32or on the sidewalk,
-
0:32 - 0:35and sometimes they would come
and pay her right on the spot -
0:35 - 0:37for previous appointments.
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0:37 - 0:38She would thank them,
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0:38 - 0:41and ask them about their families
and their health. -
0:41 - 0:45She gave them credit
because she trusted them. -
0:45 - 0:47Most of us are like my mom.
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0:48 - 0:51We would give credit to someone we know
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0:51 - 0:52or that we live next to.
-
0:52 - 0:56But most of us are probably not
going to lend to a stranger -
0:56 - 0:59unless we know a little
something about them. -
1:00 - 1:03Banks, credit card companies
and other financial institutions -
1:03 - 1:06don't know us on a personal level,
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1:06 - 1:09but they do have a way of trusting us,
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1:09 - 1:11and that's through our credit scores.
-
1:11 - 1:13Our credit scores have been created
-
1:13 - 1:18through an aggregation and analysis
of our public consumer credit data. -
1:18 - 1:21And because of them, we have
pretty much easy access -
1:21 - 1:23to all of the goods
and services that we need, -
1:23 - 1:26from getting electricity to buying a home,
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1:26 - 1:29or taking a risk and starting a business.
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1:30 - 1:31But ...
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1:31 - 1:35there are 2.5 billion people
around the world -
1:35 - 1:37that don't have a credit score.
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1:37 - 1:40That's a third of the world's population.
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1:41 - 1:42They don't have a score
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1:42 - 1:45because there are no formal
public records on them -- -
1:45 - 1:47no bank accounts,
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1:47 - 1:48no credit histories
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1:48 - 1:50and no social security numbers.
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1:50 - 1:52And because they don't have a score,
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1:52 - 1:57they don't have access
to the credit or financial products -
1:57 - 1:59that can improve their lives.
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2:00 - 2:02They are not trusted.
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2:03 - 2:06So we wanted to find a way to build trust
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2:06 - 2:10and to open up financial access
for these 2.5 billion. -
2:11 - 2:13So we created a mobile application
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2:13 - 2:18that builds credit scores for them
using mobile data. -
2:18 - 2:23There are currently over one billion
smartphones in emerging markets. -
2:23 - 2:26And people are using them
the same way that we do. -
2:26 - 2:29They're texting their friends,
they're looking up directions, -
2:29 - 2:31they're browsing the Internet
-
2:31 - 2:33and they're even making
financial transactions. -
2:33 - 2:36Over time, this data is getting
captured on our phones, -
2:36 - 2:40and it provides a really rich picture
of a person's life. -
2:41 - 2:43Our customers give us access to this data
-
2:43 - 2:46and we capture it
through our mobile application. -
2:46 - 2:49It helps us understand
the creditworthiness -
2:49 - 2:54of people like Jenipher,
a small-business owner in Nairobi, Kenya. -
2:54 - 2:59Jenipher is 65 years old, and for decades
has been running a food stall -
2:59 - 3:01in the central business district.
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3:02 - 3:05She has three sons who she put
through vocational school, -
3:05 - 3:08and she's also the leader
of her local chama, -
3:08 - 3:09or savings group.
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3:10 - 3:12Jenipher's food stall does well.
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3:12 - 3:15She makes just enough every day
to cover her expenses. -
3:15 - 3:17But she's not financially secure.
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3:18 - 3:21Any emergency could force her into debt.
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3:21 - 3:23And she has no discretionary income
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3:23 - 3:25to improve her family's way of living,
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3:25 - 3:26for emergencies,
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3:26 - 3:29or for investing
into growing her business. -
3:30 - 3:33If Jenipher wants credit,
her options are limited. -
3:34 - 3:35She could get a microloan,
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3:35 - 3:39but she'd have to form a group
that could help vouch for her credibility. -
3:39 - 3:42And even then, the loan sizes
would be way too small -
3:42 - 3:44to really have an impact on her business,
-
3:44 - 3:47averaging around 150 dollars.
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3:48 - 3:50Loan sharks are always an option,
-
3:50 - 3:54but with interest rates
that are well above 300 percent, -
3:54 - 3:56they're financially risky.
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3:56 - 4:00And because Jenipher doesn't have
collateral or a credit history, -
4:00 - 4:04she can't walk into a bank
and ask for a business loan. -
4:04 - 4:06But one day,
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4:06 - 4:10Jenipher's son convinced her
to download our application -
4:10 - 4:11and apply for a loan.
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4:11 - 4:14Jenipher answered a few
questions on her phone -
4:14 - 4:18and she gave us access to a few
key data points on her device. -
4:19 - 4:20And here's what we saw.
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4:20 - 4:22So, bad news first.
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4:23 - 4:28Jenipher had a low savings balance
and no previous loan history. -
4:28 - 4:30These are factors
-
4:30 - 4:33that would have thrown up
a red flag to a traditional bank. -
4:33 - 4:35But there were other points
in her history that showed us -
4:35 - 4:39a much richer picture of her potential.
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4:39 - 4:40So for one,
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4:41 - 4:44we saw that she made regular
phone calls to her family in Uganda. -
4:46 - 4:48Well, it turns out that the data shows
-
4:48 - 4:51a four percent increase in repayment
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4:51 - 4:56among people who consistently
communicate with a few close contacts. -
4:57 - 4:58We could also see
-
4:58 - 5:01that though she traveled
around a lot throughout the day, -
5:01 - 5:03she actually had pretty
regular travel patterns, -
5:03 - 5:07and she was either at home
or at her food stall. -
5:07 - 5:11And the data shows
a six percent increase in repayment -
5:11 - 5:14among customers who are consistent
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5:14 - 5:16with where they spend most of their time.
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5:17 - 5:20We could also see
that she communicated a lot -
5:20 - 5:22with many different people
throughout the day -
5:22 - 5:25and that she had a strong support network.
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5:25 - 5:27Our data shows
-
5:27 - 5:31that people who communicate
with more than 58 different contacts -
5:31 - 5:34tend to be more likely
to be good borrowers. -
5:34 - 5:36In Jenipher's case,
-
5:36 - 5:40she communicated
with 89 different individuals, -
5:40 - 5:43which showed a nine percent
increase in her repayment. -
5:44 - 5:48These are just some of the thousands
of different data points -
5:48 - 5:51that we look at to understand
a person's creditworthiness. -
5:51 - 5:54And after analyzing all
of these different data points, -
5:54 - 5:56we took the first risk
-
5:56 - 5:59and gave Jenipher a loan.
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5:59 - 6:03This is data that would not
be found on a paper trail -
6:03 - 6:05or in any formal financial record.
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6:06 - 6:08But it proves trust.
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6:08 - 6:10By looking beyond income,
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6:10 - 6:12we can see that people in emerging markets
-
6:12 - 6:16that may seem risky
and unpredictable on the surface -
6:16 - 6:20are actually willing and have
the capacity to repay. -
6:21 - 6:27Our credit scores have helped us deliver
over 200,000 loans in Kenya -
6:27 - 6:28in just the past year.
-
6:28 - 6:31And our repayment rates
are above 90 percent -- -
6:31 - 6:37which, by the way, is in line
with traditional bank repayment rates. -
6:38 - 6:40With something as simple
as a credit score, -
6:40 - 6:44we're giving people the power
to build their own futures. -
6:45 - 6:48Our customers have used
their loans for family expenses, -
6:48 - 6:50emergencies, travel
-
6:50 - 6:53and for investing back
into growing their businesses. -
6:54 - 6:57They're now building better
economies and communities -
6:57 - 7:00where more people can succeed.
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7:01 - 7:03Over the past two years
of using our product, -
7:03 - 7:08Jenipher has increased
her savings by 60 percent. -
7:08 - 7:10She's also started
two additional food stalls -
7:10 - 7:13and is now making plans
for her own restaurant. -
7:13 - 7:17She's applying for a small-business loan
from a commercial bank, -
7:17 - 7:22because she now has the credit history
to prove she deserves it. -
7:22 - 7:25I saw Jenipher in Nairobi just last week,
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7:25 - 7:28and she told me how excited
she was to get started. -
7:28 - 7:30She said,
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7:30 - 7:36"Only my son believed I could do this.
I didn't think this was for me." -
7:36 - 7:39She's lived her whole life
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7:39 - 7:43believing that there was a part
of the world that was closed off to her. -
7:44 - 7:48Our job now is to open
the world to Jenipher -
7:48 - 7:52and the billions like her
that deserve to be trusted. -
7:52 - 7:53Thank you.
-
7:53 - 7:58(Applause)
- Title:
- A smart loan for people with no credit history (yet)
- Speaker:
- Shivani Siroya
- Description:
-
Trust: How do you earn it? Banks use credit scores to determine if you're trustworthy, but there are about 2.5 billion people around the world who don't have one to begin with -- and who can't get a loan to start a business, buy a home or otherwise improve their lives. Hear how TED Fellow Shivani Siroya is unlocking untapped purchasing power in the developing world with InVenture, a start-up that uses mobile data to create a financial identity. "With something as simple as a credit score," says Siroya, "we're giving people the power to build their own futures."
- Video Language:
- English
- Team:
- closed TED
- Project:
- TEDTalks
- Duration:
- 08:11
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Brian Greene edited English subtitles for A smart new business loan for people with no credit | ||
Brian Greene edited English subtitles for A smart new business loan for people with no credit | ||
Brian Greene edited English subtitles for A smart new business loan for people with no credit | ||
Brian Greene approved English subtitles for A smart new business loan for people with no credit | ||
Brian Greene edited English subtitles for A smart new business loan for people with no credit | ||
Brian Greene edited English subtitles for A smart new business loan for people with no credit |