KakaoBank Lowers Loan Barriers for Small Business Owners...Develops Credit Scoring Model

Additional Screening for Low-Credit Individual Business Owners

KakaoBank announced on the 9th that it has additionally selected one out of six individual business owners who were previously rejected for loans due to low credit through its self-developed ‘Industry-Specific Credit Evaluation Model for Small Business Owners’ and supplied loans to them.

Since launching loans for individual business owners at the end of 2022, KakaoBank has been advancing its credit evaluation model that can assess business owners' capabilities from multiple perspectives. Until now, operational data of individual business owners’ workplaces could not be significantly utilized in credit evaluations. This was because it was difficult to secure data that could evaluate business capabilities, and the data categories required varied by industry, making comprehensive application challenging.

KakaoBank developed an industry-specific credit evaluation model for small business owners by combining various workplace information as pseudonymized data, enabling effective evaluation of industries with relatively low financial accessibility. This overcame the limitation where loans were impossible if individual credit scores were low or credit information was insufficient, even if business capabilities were excellent.

For the development of this model, over 4,400 variables and 24 million pseudonymized combined data records were utilized. Various alternative information such as the Korea Federation of SMEs’ mutual aid information and workplace sales data were applied, along with items suitable for specific industries.

The model’s discriminatory power was enhanced through a dual structuring that added industry-specific specialized models capable of evaluating individual industry business owners to a universal model assessing all individual business owners. Analyzing the model’s performance showed that its evaluation discriminatory power improved by up to 30% compared to credit evaluation company (CB) models based solely on financial information.

Following the currently applied specialized models for food service business owners and service and special-type workers, plans are underway to add specialized models for e-commerce business owners in the future.

A KakaoBank official stated, "We will continue to advance the model based on diverse data to assist individual business owners struggling with fund management," adding, "We will lead financial inclusion for medium- and low-credit individuals and small business owners based on KakaoBank’s unique data-driven credit evaluation model to ensure that those with low individual credit scores or insufficient credit information do not suffer disadvantages."