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| Topics and Issues | Financial inclusion (22) |
In April 2010, PERC issued a paper, PERC – Financial Inclusion Through Credit Reporting: Challenges and Solutions. The report concluded that
Information-sharing expands access to credit overall and disproportionately expands access among the underserved. Information-sharing improves loan performance by reducing delinquency rates for any given target. Both are achieved by accurately identifying good credit risks that otherwise would have been misidentified as bad risks and, therefore, would have been denied credit.
At the same time, bad risks, given credit because they were thought to be good risks, now have credit denied to them or are no longer subsidized by lower-risk individuals. In the aggregate, lending is increased, leading to greater economic growth, rising productivity and greater capital stocks. Average interest rates decrease. Poverty and income inequality are alleviated. This is especially true of full-file, comprehensive reporting, comprising nonfinancial obligations as well, to private bureaus.
In addition to the recommendations regarding financial identity noted above, policy reform and credit reporting standards should allow the collection of non-financial payment and other non-financial data. As shown above, the inclusion of this information can greatly expand financial services to the underserved.