TransUnion Kenya, a global information and insights company, and global analytics software leader FICO are leading the charge in transforming the country’s financial landscape with new groundbreaking risk solutions that are designed to broaden access to credit and empower financial institutions. By leveraging enriched data and analytics, lenders can now make more informed decisions, which foster greater economic empowerment and build a more resilient financial ecosystem.

The two new solutions at the heart of this transformation are TransUnion’s CreditVision® Variables solution and the FICO® Score. Together, they address critical challenges in risk assessment and financial inclusion. CreditVision Variables provides an enhanced view of consumer financial behaviour, analysing over 145 data sources and up to 24 months of historical payment data. The new FICO Score is built for the Kenyan market using proprietary predictive analytics technology and over 4 million records from the TransUnion database.

Enhancing traditional credit risk strategies with the FICO Score and comprehensive data analysis can improve risk predictability and enable lenders to extend financial services to more consumers. In other global markets, lenders integrating CreditVision Variables into their credit risk strategies have experienced a significant boost in risk predictability by 20%-30%. This enhancement has led to a notable improvement in approval rates, ranging from 15%-20%.

CreditVision Variables can address essential business needs by:
Cost-effectively identifying and engaging the right new customers
Growing and optimising the profitability of existing customers
Providing insights into customer motivations and behaviours

“The effects of these innovations are expected to be profound. Consumers, Small, Micro and Medium- sized Enterprises (SMMEs) and other businesses can benefit from greater access to credit and financial services, enabling them to improve their financial health and achieve their goals. Lenders will have access to better risk management and decision-making tools, leading to greater financial inclusion and economic empowerment, and driving more sustainable overall economic growth and stability,” said Morris Maina, CEO of TransUnion Kenya.

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TransUnion has partnered with global analytics software pioneer FICO across Africa since 1997 and the two firms are now expanding their partnership to Kenya to introduce FICO’s advanced scoring models designed to meet the needs of the local market. This collaboration aims to improve credit-granting processes by equipping lenders with these advanced tools to manage portfolio risk and monitor credit activity.

The FICO Score is the latest evolution of credit scoring for the Kenyan market and has been designed to reflect the rapidly evolving lending ecosystem, where microlending, in particular, is more embedded than before. This single credit risk score provides lenders with a more granular and effective means of credit risk assessment, enabling a more accurate understanding of borrowers, and provides a significant boost in predictive power across all forms of lending.

The predictive power of the new Kenya-specific FICO Score is significant across all forms of lending, with specific industries, such as microlending, performing particularly well. This is important in the Kenya context as 95% of scoreable consumers have at least one microlending tradeline.

Benefits of using the FICO Score include:
A single credit score to help lenders make credit decisions across both traditional credit products and microlending, including mobile loans
Rapid approval/decline decisions for new applicants, reducing friction at the acquisition stage
Refined allocation of credit limits and loan amounts
Consistent risk-based pricing and terms of business
Improved risk management, giving lenders the confidence to make more credit available while controlling losses
Greater efficiency using a single score across both traditional and digital lending channels

The FICO Score is a numerical snapshot of a consumer’s credit risk, providing a measure of their likelihood of fulfilling credit obligations. Using data from TransUnion, the model generates a score ranging from 300 to 850, where the higher scores indicate lower credit risk. Each credit score comes with the top four reasons for its calculation, offering transparency and actionable insights into factors impacting the score. The score is calculated on request by the lender and uses the latest information in the TransUnion file.

“This level of transparency aids both lending officers and consumers,” said Mike Manaton, Vice President of Scores at FICO. “The FICO Score provides clear insights into the factors influencing a consumer’s score. Additionally, it enables lenders to assess applicants more accurately, tailor credit terms accordingly and enable credit access for more consumers.”

An example of the power of the FICO Score is the distribution of accounts across the score range. As shown below, the risk decreases sharply as the score rises, with consumers scoring in the highest-risk decile (300-442) representing about nine times the risk of consumers scoring in the lowest-risk decile (682-850).

According to TransUnion’s Q2 2024 Consumer Pulse Study, financial inclusion in Kenya continues to improve. Its insights showed that 36% of consumers felt they had sufficient access to credit compared to 33% who felt the same a year ago. The increase in financial inclusion is noteworthy because well over half (60%) of consumers said they were considering applying for new or refinancing existing credit within the next 12 months.

“We welcome this global innovation in Kenya and are confident that the industry will adopt these solutions to drive the country’s Financial Inclusion agenda. Financial inclusion remains a key focus for the industry, as it is essential for fostering economic growth and empowering communities. By embracing these new technologies, we can ensure broader access to financial services, in turn supporting sustainable development and prosperity for all,” John Gachora, Chairman of the Kenya Bankers Association (KBA).