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Mibanco Uses FICO Platform to Expand Microlending and Help Customers During the Pandemic

Largest microfinance bank in Latin America wins FICO® Decisions Award for financial inclusion

Mibanco, the largest microfinance bank in both Peru and Latin America, has used FICO Platform’s Decisions Capability to boost its lending capacity and respond quickly to changing market conditions during the pandemic. The transformational project has reduced the time taken to put policy into production by 90 percent and cut annual IT development expenditure by 20 percent, allowing Mibanco to better serve thousands of its customers.

“Mibanco’s goal is to expand access to credit for the unbanked or credit invisible,” said Sebastián Valera, risk transformation manager at Mibanco. “Annually we grant about 1.6 million loans worth about USD$3.7B to hundreds of thousands of people. These loans are often life-changing, allowing individuals to build businesses, access housing and education. We were seeking a tool with predictive analytic qualities that would accelerate and increase approvals, while qualifying consumers better, even the unbanked ones. FICO had the strongest offering that filled the brief.”

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Prior to the implementation, the entire credit flow, including the policies and various scores, was developed within the bank’s core system. This meant when any lending changes were needed, software development within the core was required.

“It could take anywhere between 3 to 12 months whenever credit risk wanted to make a change,” said Valera. “Requests went to IT, meetings were held, changes were prioritized by committee, technical documents prepared, development, testing and so on. As a result, we were lacking the agility we wanted and failing to extend microcredit to the largest number of consumers possible.”

Mibanco needed to adopt a solution to make more precise, value-based decisions at the origination stage, enabling them to grow more profitable portfolios while managing customer-level risk.

Mibanco implemented FICO’s technology in two stages. The first was to enable FICO® Platform – Decision Modeler to be connected directly to the core system, where the flow would be maintained. The second was to replace the core credit flow, used FICO® Originations Solution which is powered by FICO Platform.

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Over just six months, FICO worked with the Mibanco team to examine, adjust and migrate all the policies programmed into FICO Platform. Group policies were also added that could not be programmed in the past and by January 2020, 28 policies were put into production just as COVID-19 started to spread around the world.

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When the pandemic arrived, Mibanco was able to react quickly by having a highly flexible originations solution in place. The risk team rescheduled and froze repayments for USD$2.4 billion in loans to 720,000 borrowers and assisted approximately 267,000 customers with USD$785M of credit through government-sponsored programs to the MyPe segment (micros and small companies).

Additionally, COVID forced Mibanco to adjust credit policies and the different scores it uses. Thanks to FICO Platform, Mibanco can make quick changes and assist its customers while ensuring that risk keeps within the company’s guidelines.

“Lenders want to expand their market to include more new borrowers, but this segment of applicants poses a significant challenge to a lender’s ability to assess character, credit risk and verify the credit destination,” said Nikhil Behl chief marketing officer at FICO“Mibanco has modernized its ability to originate loans by harnessing the analytic and predictive power of FICO Platform. Financial inclusion has been a foundational area of focus for FICO and a key part of our ethos. We get great satisfaction out of helping lenders like Mibanco expand their offering to hundreds of thousands and bring them into the financial system.”

“Mibanco did a great job optimizing their decisioning process to drive more automation,” said Armando Junior, general manager, risk and compliance at Dock and one of the FICO Decisions Awards judges. “With an increased adoption of advance technology in microfinancing, lenders can reduce the operational costs and expand lending to thousands more people and at the same time grow their own revenue and opportunities in the market.”

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[To share your insights with us, please write to sghosh@martechseries.com]

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