By Andrea Coravos
Community development financial institutions (CDFIs) provide financial services to underserved markets and populations. Using small business loan portfolio data from a national CDFI, this paper identifies the specific borrower, lender, and loan characteristics and changes in economic conditions that increase the likelihood of default. These results lay the foundation for an in-house credit-scoring model, which could decrease the CDFI’s underwriting costs while maintaining their social mission. Credit-scoring models help CDFIs quantify their risk, which often allows them to extend more credit in the small business community.*
Advisor: Charles Becker | JEL Codes: K22, M1,
