Presentation at the Fin4Ag conference - Nairobi, July 2014.

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FIRM: An Information Solution to the
Challenge of Rural Financial Inclusion
Unlocking the power of non-financial data to enable financial inclusion

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PERC’s
Alternative
Data
Initiative
(ADI)
PERC galvanizes the inclusion of alternative data for use in credit
granting as a means of financial access to mainstream lending markets
for the financially excluded
alternative = regular payments data from telecoms, energy utilities, mobile (pre)payments,
fast moving consumer goods supply chain data, agricultural supply chain data, and other such
non-financial services and transactions

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0%
5%
10%
15%
20%
25%
30%
< $20K $20-$29K $30-$49 $50-$99 $100K+
2009/2010 2005/2006
Access to Credit Resulting from Non-Financial Data
by Household Income

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The Limits of Tradition Financial Data
Models to Bring Data Online
 Non-financial service firms don’t have clear incentive to
report to a bureau in the traditional way.
► Prepayment reduces value of “disciplining” consumer
► Transaction counterparty gains nothing by reporting
► Providing data for free so bureaus can monetize seems unfair
 Little uptake of data on most people (pre-paid or
transactional) over past decade.
 A lot of our focus has been on how to get these data
furnishers to share data.

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► Non-financial payment information
● Pre-paid utilities
● Telecom prepayments
► FMCG supply chain (P&G, Nestles, Coca Cola)
► Other SME suppliers (e.g., in construction)
► Agricultural supply chain information
● E.g., coffee wet mills collect data on acreage, bushels, coffee
berries per bushel, bean quality, price, sale….for season after
season after season
● Similar data in tea, dairy, etc.
Potential alt data in
emerging economies

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What is FIRM?
 FIRM is a new initiative by Experian, the world’s leading consumer
information services and risk analytics firm and PERC
 FIRM aims to leverage digital technology to gather non-financial
information in real time to create a financial identity, credit risk profile
and income estimate of a potential borrower, especially those outside
the financial mainstream.
 FIRM is not a credit bureau. It does not collect or centralise any
information. FIRM provides a solution for lenders when a bureau has
no report.
Conducted a feasibility study sponsored by Bill and Melinda Gates
Foundation in Kenya December 2012 – May 2013

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FIRM seeks to overcomes hurdle:
the incentive to share data
 Because alt data providers are reluctant to turn over their whole
database, FIRM does not store data. Data furnishers only provide data
on each individual request they receive, leaving them in control of their
database.
 Because alt data providers resist giving data for free so that others
make money, FIRM shares revenue based on the value of the data.
 Because alt data providers are concerns about customer fears of
privacy, FIRM requires that consent be obtained each time the
applicant’s data is pulled.

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The FIRM Network Structure

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FIRM and the Agricultural Supply Chain
Large/Medium
Buyers
Processors
Farmer
Small Holder
SME
Large/Medium
Suppliers
Banks
MFIs
SACCOS
FIRM
Information
Information
(e.g., Coffee wetmills,
tea factories,
dairy processors)
(Agri inputs)
FIRM Report
VAS such as Score
Biometric ID in
Economies where
needed
Sales
Purchases
Advances
AcctRecAcctRec
Loan
product

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Advantages for the lenders
 Better Data: Lenders get access to new data, available for
the majority of the potential borrowers and are able to
better predict credit risk and affordability.
 Lower Costs: Use of FIRM reduces origination costs as
data that was manually collected is now available digitally.
 Can ease the entry of larger lenders into lower income
segments without altering their lending models very much.

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Advantages for the borrowers
 Fairer, more inclusive credit access: Experience and research
demonstrate that by using non-financial data, lenders extend
affordable credit to a much greater percentage of low income, female,
and minority borrowers.
 Access to more affordable mainstream credit: Borrowers get
access to competitive financial products since their credit risk is better
accessed and start being reported to credit bureaus, becoming credit
visible.
 Protections: Borrowers have control over this information being
accessed, as they need to give their explicit consent, limiting chance
of consumer backlash for unauthorized violation of privacy.

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The need for FIRM
Why FIRM, given new digital finance MNO driven options
like SMART (Philippines), M-Shwari (Kenya), why share
data rather than have holders enter financial markets
 FIRM will enable lenders to digitally provide a broader range
of financial services
► A lot of new digital finance provides small, short-term loans (often
month payback period).
► To identify which BoP, MM borrowers can afford longer term loans for
investment, a more 360° financial view is needed—willingness and
capacity
► A more comprehensive historic view of income cycles also allows
lenders to better structure products, e.g., payment cycles that match
up with agricultural income

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What Our Feasibility Study Found
 Data furnishers:
► There are data sources that are being digitized in agriculture (tea,
dairy)
► The question of confidentiality, loss of control and fairness is a
major hurdle, i.e., incentives design is key to data access.
► Large strategic players are less willing—seek to capture revenue for
themselves, other players unwilling to share with strategic players;
challenge to developing a comprehensive view
 Large lenders:
► Willing to service down market if down market risk assessment
segments can be made to conform to their risk assessment
processes.

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