Enterprising Psychometrics and Poverty Reduction

Beschreibung

As the deadline for the Millennium Development Goals draws near, one of the most critical--global poverty reduction--remains at best a work in progress. But as emerging markets beckon millions of aspiring business owners to set up shop, age-old barriers to funding prevent them from getting started. One answer lies in psychometrics, which  enables lenders to assess applicants' potential for success in developing their enterprises when traditional credit applications fall short.  

Enterprising Psychometrics and Poverty Reduction sets out in accessible detail this innovative approach to risk evaluation, which uses methods similar to psychometric tools used in corporate hiring. The book evaluates this approach in six financial organizations in Kenya, Colombia, Peru, and South Africa, with extensive charts and tables breaking down each program's profitability and effectiveness. Especially by eliminating disparities that prevent women from accessing credit, this assistance fuels long-range economic growth and general well-being. This concise volume: 

• Explains the psychometric approach to credit and its methodologies.
• Identifies core characteristics shared by successful small business owners.
• Outlines a novel approach to credit scoring models for small businesses.
• Reviews the relevant literature on personality and personality testing.
• Features representative success stories.
• Discusses implications for implementing psychometric loan technologies in banks worldwide, and its potential relationship to training programs.

Enterprising Psychometrics and Poverty Reduction offers message and methods to professionals and researchers in psychology, economics, development, and finance, especially those involved in global development, the psychology of poverty reduction, banking in emerging markets, and NGOs.

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Bailey Klinger

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Angel and Venture Capital Bayesian hierarchal modeling Psychometric tools commercial banks entrepreneurial finance entrepreneurial growth entrepreneurial performance entrepreneurs low-risk business owners modeling techniques profitable lending psychometric profiling

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"This book is of particularly importance for all those who are interested in the question how micro-credits can be given to individual micro-entrepreneurs in developing countries. The problem for the bank is that there is no credit-history of the micro-entrepreneur and the amount of credit is too small to warrant a detailed evaluation of a business plan. Most often there will also not be a business plan that can be evaluated.

What to do? The three economists provide a very sensible and important answer: Evaluate the person him- or herself by psychological tests. Two issues are important for paying back the loan: First the person must be able to build a good enterprise and make enough money to pay back the loan. Second, the person must be willing to pay back the loan.

Psychological research on entrepreneurship has made enough headway to provide good data for understanding which person characteristics lead to good entrepreneurial success. Moreover, there has been a long tradition to evaluate a person’s integrity to understand whether somebody is willing to cheat others by not paying back a loan. The authors take these issues as their starting point and describe how they produce the results. This is practical and useful. Recently the New York Times has written a long piece on the company build by these three authors and how successful they have been in helping banks to help micro-entrepreneurs to get the resources to be able to succeed.

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