Credit scoring: a path to financial inclusion
Building a credit score in the informal economy: why it matters and how to start
Introduction
In Africa’s informal economy, cash has long been the norm for everyday transactions. This reliance on cash leaves many individuals and small businesses without a formal financial history—a crucial asset for accessing loans and other financial services. Without a credit score or verifiable record of financial activity, millions of informal merchants remain financially excluded. Fintech platforms like Blipply are working to bridge this gap by enabling users to build credit profiles through mobile wallet transactions and digital payments when shopping.
Why a credit score matters for financial inclusion
A credit score can open doors to financial inclusion by providing individuals and businesses with access to loans, savings products, and other essential financial tools. Research from the African Development Bank (AfDB) has highlighted that access to credit is crucial for driving economic growth, helping small businesses expand, and providing families with a means to manage risks and invest in their futuresAfrican Development Bank Group. Traditional credit scores rely on past financial records, but for many Africans in the informal economy, these records are unavailable. Alternative credit scoring methods, such as those based on mobile payments, pay later flows and shopping data, are now emerging as a solution.
How digital payments contribute to creditworthiness
In many African nations, over half of the adult population is unbanked, making access to traditional credit scoring methods challenging. According to the Alliance for Financial Inclusion (AFI), alternative credit scoring based on mobile and digital transactions is key to expanding financial services to underserved populations Afis. With each transaction on Blipply, whether it’s a sale, purchase, or timely repayment, users gradually build a financial history, laying the groundwork for a credit score that can unlock access to credit.
The Consultative Group to Assist the Poor (CGAP) has found that credit scoring models based on digital transaction histories are particularly beneficial in emerging markets where traditional data is limited CGAP. For Blipply users, this means that routine digital transactions can become an effective way to establish a credit profile, ultimately improving access to tailored financial products.
Benefits of building a credit profile with Blipply
Establishing a digital credit history brings long-term benefits, helping users qualify for loans and other financial tools that can provide stability and growth. The World Bank’s research shows that even minimal access to credit can improve financial resilience and help individuals and businesses navigate economic challenges World Bank.
Empowered access to credit: A digital financial history helps users qualify for larger loans with better terms over time. For informal merchants, this can make a significant difference in expanding their businesses.
Improved financial planning: Digital profiles allow users to manage money more effectively, avoid hidden fees, and budget efficiently. Blipply’s transaction tracking tools help users stay organised, contributing to financial well-being.
Pathway to economic growth: Small business owners with access to credit can make valuable investments in stock and business growth. According to the World Bank, access to credit in informal economies can increase productivity and income levels African Development Bank Group.
How to start building a credit profile with Blipply
Blipply provides users with several simple steps to begin building a credit score:
Regularly use digital payments: Every digital payment on Blipply adds to the financial history. Consistent use strengthens the profile.
Timely repayments: Using Blipply’s “pay later” feature responsibly improves a user’s credit score by demonstrating good financial behaviour.
Leverage financial tracking tools: Use Blipply’s digital receipts and balance summaries to keep track of spending, saving, and cash flow.
Set financial goals: Over time, a stronger credit profile can qualify the user for larger loans and more financial products.
Supporting behaviour change through aid-backed loan programs
In addition to Blipply’s features, aid-backed loan programs can provide incentives for merchants to maintain digital payment habits. These programs could structure loans in progressive stages, encouraging users to stay consistent in digital behaviour. CGAP’s research suggests that structured loan programs combined with digital credit histories can help informal merchants build long-term financial habitsCGAP.
Key takeaway: a pathway to financial security
By building a credit score through consistent digital payments and shopping, Blipply users in Africa’s informal economy can unlock new financial opportunities. This digital credit history can provide a stepping stone to larger financial goals, supporting individuals and communities in achieving economic stability.
For further insights into credit scoring and financial inclusion, explore resources from the World Bank on financial inclusion World Bank and the AfricanFinancialIndustrySummiton credit solutions in Africa Afis.
