This Question was raised on the LinkedIn Group SME Finance in Emerging Markets:
Credit Professional: “My concern with these models is an over-reliance on the outcomes, often to the detriment of the SME owner. At the same time, the financier can step back and provide little value and can replace skilled staff with less skilled thus saving on costs. Little thought seems to have gone into the long term effects of the models, nor the fact that a financier needs skilled relationship bankers and credit support staff in this environment, rather than a system”
Answer from an Information Professional: “Far too many financiers think that their project is complete when they decide which model to build or purchase. They often ignore the importance of the managerial framework required around the models. Decisions such as where in the process to introduce human expertise and intervention, when to review model relevance, and when to allow or disallow score overrides are often neglected. This in turn forces users to rely too much on the models, because they don’t have a well-understood process for doing otherwise. In some cases this lack of certainty leads users to become overly conservative, which decreases access to finance in the SME space. While it is often assumed that the use of score-cards (or other models) is a risk management function, in practice it is very much a leadership function. The process should be about empowering people to make better decisions, not replacing people.”
