July 01, 2024




Promoting inclusivity in credit underwriting an essential step towards financial empowerment

In today's world, financial empowerment is increasingly important, especially in economic and social inequality. One key component of financial empowerment lies in the credit underwriting process, which plays a major role in financial inclusion and access to capital. 

Credit underwriting has the potential to promote financial health, economic growth, and increase prosperity. However, the credit underwriting process can also be exclusive and disadvantageous to those already disadvantaged due to their race, ethnicity, gender, and other demographic factors. To ensure equitable access to capital, it is essential to promote inclusivity in credit underwriting. 

Understanding New to Credit (NTC)

One of the most common obstacles to financial inclusion is the lack of access to credit. When lenders cannot evaluate the creditworthiness of new borrowers with no prior credit history, many people are excluded from participating in the wider economy.

To combat this problem, lenders must be able to evaluate the creditworthiness of "New to Credit" (NTC) borrowers. NTC borrowers have never been issued a credit account, line of credit, or loan and have no record of delinquency or bad debt. To assess the creditworthiness of these borrowers, lenders must look beyond the traditional credit scoring methods and instead consider alternative sources of information, such as payroll information, rental and utility payments, and employment data history. By doing so, lenders can promote financial inclusion and empower those who have been previously excluded.

Fresh Perspectives: Welcoming NTC to the Workforce

India is home to a rapidly growing working population, with new people entering the 'new to credit' workforce daily. 

According to the latest statistics, over 12 million Indians enter the workforce each year, making India one of the world's fastest-growing economies. This influx of new people to the workforce is a major contributor to the growth of India's economy and has resulted in an unprecedented amount of financial inclusion.

In addition to the influx of new people joining the workforce, the number of people accessing credit is also increasing. The number of people entering the 'new to credit' workforce is growing steadily due to the rise of digital banking and mobile payments. According to The Financial Inclusion Insights report, the number of people accessing credit in India is rising. The number of borrowers reached an estimated 200 million in 2020. This is a significant increase compared to the 110 million borrowers in 2015 and is a sign of increasing financial inclusion in India. This rise in credit access is encouraging for the Indian economy, as these newly-minted borrowers can now access the capital they need to launch businesses, make investments, and purchase goods and services.

Promoting inclusivity in credit underwriting is essential to financial empowerment, especially for those who are underbanked or unbanked. However, traditional credit bureau data such as credit scores, payment history, and debt-to-income ratios are not always reliable or even available for certain groups, such as gig workers

To ensure that all individuals have access to the same financial opportunities, it is important to look beyond traditional credit bureau sources and explore alternative ways to assess creditworthiness. For example, using payroll data information and financial health information of the gig economy can provide a more accurate and comprehensive picture of an individual's financial health.

To ensure that everyone has access to credit, it is necessary to implement advanced technologies and data-driven methods. This includes collecting data points from various sources, such as fintech, payroll systems, and banking systems. Credit underwriting can be more inclusive and efficient by using bankAPIs to connect these different systems. This data can then be used to assess creditworthiness holistically, allowing a larger number of NTC individuals to access credit.

Unlocking the Value of an NTC Workforce

These New to Credit workforces are critical to lenders in today's economy. As more people enter the financial services market, lenders must find ways to assess their risk effectively and accurately. By tapping into the New to Credit workforce, lenders gain access to a pool of educated and qualified individuals who may not have had the opportunity to establish a credit history. 

By understanding the financial needs and behavior of those new to credit, lenders can more accurately assess their risk and develop tailored solutions that meet the needs of this growing population. 

Lenders can expand their customer base by tapping into this market and gaining a competitive advantage. Lenders can reduce risk by offering new credit workers access to credit and increasing customer loyalty and engagement. 

Additionally, lenders can benefit from the potential of these workforces to become long-term customers. They can foster a mutually beneficial relationship with new credit workers by providing competitive and fair terms, resulting in increased customer loyalty and engagement. 

Furthermore, lenders can position themselves as a trusted partner in this sector, offering them financial advice and support to ensure responsible credit use. This also ensures that customer relationships are built on trust and understanding, creating a more successful and sustainable business.

New to Credit Workforce is Fuelling India's Economic Growth

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©2024 TartanHQ Inc.