The Big Data Credit Revolution in Frontier Markets

Credit cards - Photo by frankieleon
Credit cards – Photo by frankieleon








Startup-driven development

In frontier markets, gaining access to finance has traditionally been a hindrance for most consumers. Perceived as not being credit-worthy, they are ignored by formal lending institutions and have to rely on other, non-formal, sources of credit. A rapid change is underway, however, due to technological advances that allow credit firms to analyze non-financial data to identify credit-worthy consumers that were previously invisible in the system. Interestingly, startups are driving the development of big data models and algorithms for mobile banking. By mining data on mobile networks, they are able to drive down underwriting costs.

Potential for investors

The numbers are staggering. If investors were able to tap into the consumer retail loan market that would emerge if the estimated 2 billion people who are “unbanked” , they could effectively bank on the emerging middle class of frontier markets, the very engine of future global economic growth.

According to a new report by the Omidyar Network, “In India alone, in 2014, more than 400 million people borrowed money—but fewer than one in seven were approved for a formal loan.” Big Data Small Credit (BDSC) firms have in the last few years used non-financial data – such as mobile phone usage, social media behavior, and internet browsing patterns – to assess consumer risk. This way, a massive pool of underserved consumers gain access to convenient, quick, and cheap loans.

Opportunities for consumers  

The social impact is potentially huge. The early adopters of the technology tend to be young and tech-savvy, and often with an entrepreneurial streak. Interestingly, as they are better off than the average consumer (early adopters of the technology tend to also have formal bank accounts), the increase in use of BDSC is less one related to financial inclusion, but its effects are more felt in SME development and entrepreneurship.

As these new forms of banking expand, however, the ripple effects reach other parts of the population. Expanding access to finance for the poor, women in particular, will yield a stepping stone out of poverty as well as a social safety net as they increase their control over finances and household incomes.

In order to achieve the World Bank’s goal of universal financial inclusion by 2020, the revolution in big data for credit is an essential compliment to traditional financial institutions. As the “unbanked” rate dropped by 20% between 2011 and 2014 in tandem with these developments, there is cause for optimism in the coming years.

About OnFrontiers

To gain additional insights on small credit, big data, mobile banking or other opportunities in frontier markets from top industry professionals, contact OnFrontiers today at

Founded in 2014, OnFrontiers is a global advisory network and research firm that provides rapid access to targeted, high quality insights in hard to reach frontier markets.