Behavioral Data

Blog | The LenddoEFL Assessment Part 1: Using psychometrics to quantify personality traits

By: Jonathan Winkle, Manager of Behavioral Sciences, LenddoEFL

At LenddoEFL, we collect various forms of alternative data to help lenders verify identities, analyze credit risk, and better understand an individual. One of our most important tools for financial inclusion is our psychometric assessment. While some people still lack a robust digital footprint, everyone has a psychological profile that can be characterized and used for alternative credit scoring.

In this series of posts, we shed light on the science behind the LenddoEFL psychometric assessment and how we’ve pioneered an approach to measure anyone’s creditworthiness.

Psychometrics for credit assessment

LenddoEFL employs a global research team to ensure our assessment captures the most important personality traits that predict default. We deliver innovative psychometric content by combining insights from leading academics with years of in-house research and development.

Each question in our assessment is targeted to reveal psychological attributes related to creditworthiness. We quantify behaviors and attitudes such as individual outlook, self-confidence, conscientiousness, integrity, and financial decision-making in order to build an applicant’s psychometric profile. By comparing this profile to others in the applicant pool, we can better understand and predict an individual’s likelihood of default.

Psychometric example content: Financial Impulsivity

The marshmallow test asks children whether they would you like one marshmallow now or two marshmallows later, and since its advent, psychologists have recognized that the ability to delay rewards is an important predictor of later success in life.

While adults might not long for marshmallows the same way children do, a similar test can be performed using financial rewards, and research shows that people who are better at delaying rewards are less likely to default on their loans.

Drawing from this research, we ask applicants which of two options they would prefer, a smaller sooner amount of money, or a larger later amount (see image below). Asking people for their preferences across a range of monetary values and temporal delays reveals a quantitative profile of their financial impulsivity, which is indicative of their likelihood to repay debts (If you’re curious about how we deal with people trying to cheat or game the assessment, please see this blog post on our Score Confidence algorithm).


Psychometric example content: Locus of Control

When times get tough, some people believe they can take action to overcome hardships while others believe that the challenges they face are altogether out of their hands. Those who believe their lives are governed by outside forces, an external Locus of Control, are more risk-averse and have more difficulty managing their credit.

We ask applicants to rate their agreement with a battery of statements measuring their Locus of Control, such as “My life is mostly controlled by chance events,” and “It is mostly up to luck whether or not I have many friends.” By asking these types of questions, we can precisely quantify someone’s Locus of Control along a spectrum of internal-to-external and use this data to predict default.


LenddoEFL delivers an innovative psychometric assessment by combining evidence from academia with active, internal research and development.  The examples above demonstrate how we quantify certain personality traits, and the myriad exercises we use in the field allow us to produce a rich psychological profile that is predictive of credit risk. In the next post we will explore the concept of metadata, which will show that how people answer psychometric questions is just as important as the answers themselves.

Blog | iDE Ghana increases access to sanitation with help of innovative credit assessment from LenddoEFL

Partnership allows Ghanaians to purchase their first toilets

image 3.png

Globally, 32% of people lack access to a toilet in their homes (Source: WHO UNICEF JMP). In Ghana an astonishing 87% of people do not own a toilet. And in rural Northern Ghana, it is worse still. Two out of every five children in northern Ghana are stunted, compared to approximately 20% of children stunned nationally (Source: UNICEF).

iDE Ghana, a nonprofit that creates income and livelihood opportunities for poor rural households, wanted to improve sanitation in the region. They began by applying design thinking to understand the low rate of toilet use. It turned out that people didn’t know where to buy a toilet, and if they did, it was prohibitively expensive to buy.  People could not afford the full cost all at once, and there were no options to pay for a toilet over time, as there were for other large purchases.

"What we found was the criteria for borrowing towards non-income generating loans were ridiculous. So we set up a one stop shop for toilets and sanitation products, selling them door to door,” explained Valerie Labi, WASH Director at iDE Ghana. “And the beauty of the model is that we give our customers 6 to 18 months to pay the toilet off over time.”

This seemed like the perfect solution given the challenges to toilet purchasing uncovered, but it was still challenging. “We allowed people to pay over the course of 6 to 18 months but we required for the customer or a guarantor to prove their income with bank statements or payslips. And this was a big deterrent. No one wanted to give their bank statements to a toilet company. And it would take an average of 40 days to get through the process” Labi shared. “We realized these requirements were scaring away customers as they’d never had formal credit before. So we asked ourselves, how else could we assess creditworthiness in a more inclusive way?”

That’s when they came across LenddoEFL universal credit assessment. By collecting behavioral and psychometric data at the time of application, iDE’s commercial agents will be able to assess risk and make a decision in a day or less, cutting down the time to sale greatly. Previously, the commercial agent made multiple calls and visits to collect the required documents. By using the LenddoEFL score, iDE removes the need for a guarantor or proof of income for the best scoring customers. Low scorers will need to pay 50% of the cost of the toilet in monthly installments before receiving the toilets.

iDE’s goal is to provide 20,000 to 25,000 toilets to households in Northern Ghana. At an average of 11 people per household, this will provide life-saving sanitation for 275,000 people. And the plan is to sell toilets as part of a fast, convenient customer-driven process and at affordable rates. With the LenddoEFL assessment in place since February 2018, iDE is already receiving positive feedback for customers who enjoy the process. Stay tuned for updates on this exciting partnership.