Fancy Some Credit?

Welcome to the 103rd edition of ፍራንክ Digest!

Your weekly brief on all things Finance and Investing. Quick, enjoyable reads for busy professionals in 5 minutes or less.

Here’s what’s coming your way:

• 💯 Does Ethiopia Need a Credit Reporting Agency?

• 📍 404: Having No Formal Addresses Is Holding Us Back

• 🖼️ Big Picture

Thanks for reading!

Reporting Agencies: Deciding Your Credit Fate

Economy

Have you ever wondered how lenders decide whether or not they want to give you a loan as soon as you step into their office?

Is it the way you speak?

The way you dress?

Whether or not you’ve decided to say ‘Hello’ that day?

Or maybe the fact that you haven’t acknowledged the new fade that ከበደ, the proud loan officer staring at you, had gotten done the weekend before?

The truth is, loan disbursement in Ethiopia is done in kind of an arbitrary way.

Sure you get asked all of the KYC questions: Name, D.O.B, Employment status, Collateral, your account activity, whether you have a dog or a cat (Okay that last one we just added). But collecting data doesn’t mean you have a magical machine that spits out the credit decision. Or even if that data is fed to the machine.

If you did, that would be called a credit scoring model. And that, for Ethiopia’s context at least, is still in fairytale territory, a.k.a ‘We don’t do that here’

Although some companies are building proprietary technology fueled by AI and years of being left out of the loan disbursement network like yours truly 😉, it begs the question of who actually should own the credit scoring engine? Lenders? NBE? A Credit Reporting Agency?

Right now, it's to each its own. Everyone is doing their own thing and just vibing like the GEICO insurance lizard whenever he’s shooting his infomercial from the beach. The system is intact but…for how long?