Innovating Microcredit : How Fintechs Change the Field

Usually screening in microcredit is a very opaque process, because borrowers seldom have verifiable information or collateral. We explore the relationship between traditional screening variables and a new screening variable (Job Experience) for a Brazilian fintech microcredit firm. Unlike traditional microcredit providers in Latin America, this firm developed a strategy that targets poor workers by using the clients' job contracts as collateral and by implementing a 100% online application system with a low level of bureaucracy. A total of 911 contracts were analyzed. Unlike previous studies, we show that the main variable used for screening is Job Experience: borrowers with longer experience in their current jobs received larger loans with lower interest rates while maintaining smaller delinquency. Thus, we show that financial technology can change the field of microcredit