“Italian banks’ approach towards low-income consumers and microenterprises: is there a bias against some segments of customers

The objective of this chapter is to examine the characteristics of credit scoring
approaches, their application and their predictive power to estimate the credit risk in
lending decisions. In particular, it considers the main economic implications, generated
by using these methodologies, in these areas:
- lending costs for banks or other credit institutions;
- credit assessments, quality and accuracy;
- loan pricing and credit availability.
This analysis proceeds as follows. Section I provides background information on
credit scoring models and describes highly predictive variables used in the model by
lenders. Section II discusses about opportunities and risks of these methodologies. The
benefits of scoring can vary according to the type of loan and the nature of available data
about borrowers and repayment experience. Section III examines economic effects raised
by the increasing in the use of scoring-based systems for lending, distinguishing between
the effects of credit scoring on “marginal borrowers” and “non marginal borrowers”.
Section IV presents the empirical results concerning a sample of Italian banks, operating
in Abruzzo region, about their lending policies towards “marginal” segments of
customers.