A Credit Score System for Socially Responsible Lending
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Ethical banking, microfinance institutions or certain credit cooperatives, among others, grant socially responsible loans. This paper presents a credit score system for them. The model evaluates social and financial aspects of the borrower. The financial aspects are evaluated under the conventional banking framework, by analysing accounting statements and financial projections. The social aspects try to quantify the loan impact on the achievement of Millennium Development Goals such as employment, education, environment, health or community impact. The social credit score model should incorporate the lender’s know-how and should also be coherent with its mission. This is done using Multi-Criteria Decision Making (MCDM). The paper illustrates a real case: a loan application by a social entrepreneur presented to a socially responsible lender. The decision support system not only produces a score, but also reveals strengths and weaknesses of the application.
KeywordsEthical banking Social impact assessment Credit scoring Multi-criteria decision making (MCDM) Financial ratios
The work reported in this paper was supported by Grants ECO2010-20228 and ECO2013-45568-R of the Spanish Ministry of Education and Science, and the European Regional Development Fund and by grant Ref. S-14 (3) of the Government of Aragon. We are especially grateful to Coop57 Aragon and La Veloz staff for their support in this research.
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