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Do-It-Yourself Microfinance Scoring Trees
Schreiner, M.
Publication Date: 13 Nov 2001
Published by: Microfinance Risk Management, http://www.microfinance.com
Document Type: Presentation
What is a statistical scoring tree and what are the benefits of using it?
This presentation defines scoring and describes how a statistical tree can be used effectively for scoring in microfinance. It also compares the statistical tree with other methods of scoring.
- Defines scoring and the purpose of using scoring to forecast and quantify risks;
- Describes the functioning of a statistical tree;
- Illustrates examples from the simple tree;
- Assesses the effect of using scoring tree on profitability.
Further, the paper:
- Compares the scoring tree with other methods like regression and expert systems;
- Enumerates the stages in scoring;
- Checks where scoring fits in traditional underwriting;
- Presents a scoring follow-up report.
Finally, the key points emerging from the paper are:
- Creating one's own scoring tree makes for a simple, quick and predictive tool;
- Scorecard must be checked with historical data;
- Scoring should be used for loans already provisionally approved under traditional underwriting norms;
- Scoring's performance in practice should be tracked.
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