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CAMBRIDGE, MA – A psychometric screening tool devised by researchers at Harvard Kennedy School (HKS) to help identify viable small and medium enterprise (SME) opportunities across Africa and Latin America will now be applied to SME’s in the Middle East. The automated, low-cost screening tool was developed at the Entrepreneurial Finance Lab Research Initiative (EFLRI) at the school’s Center for International Development (CID).
“The growth potential for small and medium sized businesses in many parts of the world is often constrained by the difficulties in accessing credit in these challenging economic times,” said Asim Khwaja, HKS professor of public policy and EFLRI Principal Investigator. “These new automated and scalable screening tools have been statistically proven over time to reduce risk to while simultaneously expanding lending. Ten of thousands of entrepreneurs across more than a dozen countries and languages have used the application, from one-person microenterprises borrowing $800 to medium-sized enterprises receiving financing of over $500,000.”
The Lab now plans to extend the tools to the Middle East and Muslim countries in particular after receiving a $438,000 grant from the United States Agency for International Development.
“EFLRI will adapt the assessment to the local context, and then partner with a financial institution in the region to implement the tool on a sample of SME clients. The resulting data will be used to develop the scoring tool further to the differing business and cultural context and evaluate its predictive power and scalability potential,” said Khwaja. “Unlocking credit to businesses in the Muslim world will be a critical factor in helping expand economies and job opportunities in the Middle East and beyond.”
Originally established in 2008, the Entrepreneurial Finance Lab Research Initiative is the home for research into the impact of psychometric tools on access to finance, entrepreneurial training and skills, and experimental alternative financial contracts. Principal Investigator Asim Khwaja focuses his research on economic development, finance, education, political economy, institutions, and contract theory/mechanism design, combining extensive fieldwork, rigorous empirical analysis, and microeconomic theory to answer questions that are motivated by and engage with policy.