Lending in Kenya more predictive with TransUnion's recalibrated credit scores

A recalibration of TransUnion’s variable data has improved the predictability of the company’s credit scorecards in Kenya – providing reliable, efficient and cost-effective solutions for lenders in the country.

This is according to Rose Muturi, Acting Country Manager for TransUnion Kenya, who says efficient and effective scorecards are becoming increasingly essential in Kenya. The country capped commercial interest rates at 400 basis points above the central bank’s benchmark rate in August 2016. “The recently-implemented interest rate cap has made it crucial for lenders to bring down their own costs,” says Muturi, “One of the most effective ways to achieve that is by automating the application process.”

An international bank and one of the biggest mobile lenders in Africa, headquartered in Kenya, have since implemented TransUnion’s recalibrated scorecard as a variable in their own scorecards. These scores form part of a highly automated, mobile application process.

“This has helped these lenders boost their businesses by identifying more eligible customers through a streamlined and cost-effective process. Lenders can also be confident that the scores are highly predictive, as well as supplied in real-time, which improves accessibility to credit in Kenya,” Muturi says.

The recalibration provides TransUnion with greater depth of data, including historic information, which has helped improve the effectiveness of its scorecards.

Muturi says the recalibration has resulted in an increase in TransUnion’s Gini coefficient – which measures the predictability of the score against the effectiveness of the loan – in Kenya from 37% to 58%. “By global standards, this is a highly predictive Gini coefficient for generic scorecards as anything above 40% is considered quite predictive,” she says.

The high-level data variables in the recalibrated score now include credit history, utilisation of facilities, exposure, product type, demographic information, the recency and frequency of enquiries, delinquency and thick or thin file.

This means that the number of records in TransUnion’s Kenyan database has grown exponentially – from 3 million in 2014 to over 16 million records by July 2016.

“At TransUnion, we believe in the power of information for good. The recalibration of credit scores in Kenya demonstrates that we are constantly looking for innovative information solutions to help our partners streamline their processes and boost their profit margins,” Muturi says.