About Credit Scores

At liwwa, we have a focus on developing the most sophisticated tools for credit assessment and financial reporting. Our in-house credit model relies on a diverse set of inputs to arrive at one discrete output: the Credit Score.

We employ a numerical scoring system to provide users - both borrowers and lenders - with a clearer understanding of the assessment process. Doing so also allows us to deliver more fully on two of our core values: Transparency and Fairness.

First, the Credit Team checks whether the applicant meets the minimum requirements to be considered for a liwwa loan, such as being in operation for more than a year and having a Certificate of Registration and Trade License.

Since small businesses often lack prepared financials, Credit Officers use bank statements and in-person assessments as proxies. Then, Credit Officers weigh and analyze the data collected to generate a Credit Report and Credit Score, based on which the Credit Committee makes its decision about approving or rejecting a loan.

The table below outlines the three components of the Credit Score – the Borrower Profile, the Business Profile, and the Financial Position.

Borrower Profile Borrowers’ ties to the country, personal financial stability, history of financial or non-financial legal issues, management experience, knowledge about the business and its finances, experience in taking loans from liwwa or other financial institutions.
Business Profile Stability of the business’s corporate governance, degree of diversification of suppliers and customers, demand for the product, maturity of the business, competitiveness of the market.
Financial Position Business’s cash flow position, proportion of sales reflected on bank statement, history of bounced checks, borrower’s commitment to financial institutions in the past.

The subscores for these categories are then aggregated to form an overall Credit Score, with the Borrower Profile subscore carrying 35% weighting, the Business Profile subscore carrying 40% weighting and the Financial Position subscore carrying 25% weighting.

The Credit Score is a number between 2.3 and 10, and it can be interpreted as follows:

Credit Score Range Risk Profile
7.5 - 10 Low
4.9 - 7.4 Medium
2.3 - 4.8 High

As is the case with any investment, higher risk is usually associated with higher expected returns for investors.

To read more about how liwwa uses predictive modeling to determine credit risk, read this blog post from our data science team.