The SME Opportunity Bailey Klinger, CEO of the Entrepreneurial Finance Lab Felaban Conference...
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Transcript of The SME Opportunity Bailey Klinger, CEO of the Entrepreneurial Finance Lab Felaban Conference...
The SME Opportunity
Bailey Klinger, CEO of the Entrepreneurial Finance LabFelaban ConferenceNovember 18, 2012
© 2012 - EFL Global Ltd. All Rights Reserved 1
And how to capture it with new screening tools
Why Do So Few SMEs Receive Loans?
Potential clients
© 2012 - EFL Global Ltd. All Rights Reserved 2
SME Loan Approvals
Potential clients Self-selection reduces
applications
SME Finance Challenge
© 2012 - EFL Global Ltd. All Rights Reserved 3
Potential clients Self-selection reduces
applications
Loan officers decide not to present
potential applicants
© 2012 - EFL Global Ltd. All Rights Reserved 4
SME Finance Challenge
Self-selection reduces
applications
Loan officers decide not to present
potential applicants
Formal credit screening
Potential clients
© 2012 - EFL Global Ltd. All Rights Reserved 5
SME Finance Challenge
Potential clients Self-selection reduces
applications
Loan officers decide not to present
potential applicants
Formal credit screening
SME Loan Approvals
© 2012 - EFL Global Ltd. All Rights Reserved 6
SME Finance Challenge
EFL provides psychometric credit scores for any
entrepreneur. Banks use EFL to expand their SME portfolio and
improve control over risk.
© 2012 - EFL Global Ltd. All Rights Reserved 7
EFL’s SME Solution
The questionnaire takes 45 minutes to complete,
EFL’s SME Solution
© 2012 - EFL Global Ltd. All Rights Reserved 8
EFL questionnaire is administered
The questionnaire takes 45 minutes to complete,
and can be taken on aPC or a Tablet,
EFL’s SME Solution
© 2012 - EFL Global Ltd. All Rights Reserved 9
EFL questionnaire is administered
The questionnaire takes 45 minutes to complete,
and can be taken on aPC or a Tablet,
with or without an internet connection.
EFL’s SME Solution
© 2012 - EFL Global Ltd. All Rights Reserved 10
EFL questionnaire is administered
The questionnaire takes 45 minutes to complete,
and can be taken on aPC or a Tablet,
with or without an internet connection.
EFL’s SME Solution
© 2012 - EFL Global Ltd. All Rights Reserved 11
Analyzes: Honesty, Business Skills, Attitudes & Intelligence
EFL questionnaire is administered
Ethics & Honesty
37. Other people’s opinions are not important.
True False
Analysis of Borrower
© 2012 - EFL Global Ltd. All Rights Reserved 12
Business Skills
101. Which of the following should you take into account when calculating costs?
Rent Inventory
© 2012 - EFL Global Ltd. All Rights Reserved 13
Analysis of Borrower
12. A big part of success is luck.
True False
Attitudes & Beliefs
Analysis of Borrower
© 2012 - EFL Global Ltd. All Rights Reserved 14
78. Remember this number for
5 seconds, then repeat it: 823460
Right Wrong
Fluid Intelligence
Analysis of Borrower
© 2012 - EFL Global Ltd. All Rights Reserved 15
EFL sorts applicants from safest to most risky and banks choose who to accept
EFL Scores Applicants
© 2012 - EFL Global Ltd. All Rights Reserved 16
Developed based on:40 years of academic research on entrepreneursPre-employment screening tools used successfully by over a
third of US companies
Psychometric Credit Scoring
“Being computerized [psychometric tests provide], a simple and low cost, it is ideal for use by small-scale entrepreneurs lacking the traditional credit scoring inputs.”
“Credit-scoring complemented by the use of psychometric testing to assess an SME’s willingness to pay and ability to absorb the loan.”
© 2012 - EFL Global Ltd. All Rights Reserved 17
RESULTS
© 2012 - EFL Global Ltd. All Rights Reserved 18
Champion Challenger
Bank credit risk target:10%
Loan given: If EFL or the Bank said “Yes”
% of Portfolio NPL Bank Yes Bank No
EFL No
# Loans Bank Yes Bank No
EFL No
+64% of new loans classified as EFL “Yes” and Bank “No,” meaning they were inaccessible without EFL
Percentage of Non-Performing Loans
Number of Clients
4.1%
12.6% 20.1%
166
138 123
EFL Yes 9.9%
EFL Yes 529
© 2012 - EFL Global Ltd. All Rights Reserved 19
Currently Accepted
EFL Results
© 2012 - EFL Global Ltd. All Rights Reserved 20
Currently Accepted
Increased Approvals
One bank increased approvals of applicants that they would have rejected by 251%, while maintaining their target PD.
© 2012 - EFL Global Ltd. All Rights Reserved 21
EFL Results
Currently Accepted
Increased Approvals
Loan officers present more than double the number of applicants knowing that they can now be scored.
More good clients presented by loan
officers
© 2012 - EFL Global Ltd. All Rights Reserved 22
EFL Results
More good clients presented by loan officers
Currently Accepted
Increased Approvals
Requirements Streamlined
Mexican bank started approving loans to firms with less than 2 years of documentation.
© 2012 - EFL Global Ltd. All Rights Reserved 23
EFL Results
More good clients presented by loan officers
Currently Accepted
Increased Approvals
Requirements Streamlined
Foot traffic to African bank increased by 3x as more people heard they could get loans.
More potential clients come through
the door
© 2012 - EFL Global Ltd. All Rights Reserved 24
EFL Results
EFL History
Harvard researchers and EFL co-founders Bailey Klinger and Asim Khwaja developed a credit screening tool for unbanked SMEs2006
2008 Received a grant from Google.org and SNV Latin America to launch the Entrepreneurial Finance Lab project
The Entrepreneurial Finance Lab became an independent, private organization 2010
2011
Winner 2012 African Business Award for Innovation1.7M+ USD in Lending per Week44,000+ EFL Applications
2012
G-20 Award: One of the most innovative solutions to SME finance in the world. With IFC & G-20 assistance, major global expansion
© 2012 - EFL Global Ltd. All Rights Reserved 25
Where is EFL Today
Partner
EFL Offices
26
Other Partners:
THANK YOUEFL Global
Calle Mártir Olaya
129 Oficina 1002
Miraflores, Lima, Peru
EFL USA
Harvard Innovation Lab
125 Western Ave
Allston, MA 02125
© 2012 - EFL Global Ltd. All Rights Reserved 27
EFL Brazil
Avenida Cidade Jardim
400 20º andar.
CEP: 01454-000 Jardim
Paulistano. Brazil
EFL South Africa
286 Fox St
CBD, Johannesburg, 2094