AI-based credit scoring can open doors for small businesses

Artificial intelligence (AI)-based credit scoring can help small businesses, especially women entrepreneurs, get loans without collateral, according to experts.

They also discussed how this system could be used in Bangladesh, elaborating on the need for partnerships with banks and financial institutions as well as legal and policy support.

The small and medium enterprise (SME) sector is very important for Bangladesh’s economy, accounting for 32 percent of the country’s GDP.

The discussion was held during a workshop titled “AI-Powered Credit Scoring and Micro-Loans for Women-Led Small Businesses,” organised by the Small and Medium Enterprise (SME) Foundation and the Asia Foundation at the city’s Lakeshore Hotel yesterday.

Nazeem Hasan Sattar, deputy managing director of the SME Foundation, said the SME Foundation has given nearly Tk 1,000 crore in loans to about 10,000 small and medium businesses under easy terms and low-interest rates.

About 25 percent of borrowers were women entrepreneurs. This year, Tk 450 crore is being distributed through 23 banks and financial institutions.

The SME Foundation believes this new method can help more small businesses, especially those owned by women, get loans and contribute to the country’s economic growth and job creation, Sattar said.

Ahsan H Mansur, governor of the Bangladesh Bank, was present as chief guest at the event.

Addressing the event, Mansur said the largest SME lender, BRAC Bank, distributes around 6 percent of its total loans to women entrepreneurs.

This makes it clear what the situation is like in other banks, he said.

However, he said it is necessary to overcome this situation.

“In this regard, I welcome the initiative of the SME Foundation and Asia Foundation to increase SME loan distribution among entrepreneurs through technology-based credit assessment,” he added.

Kazi Faisal Bin Seraj, country representative of The Asia Foundation, stressed that financial services should be available to all women, regardless of their economic background.

He said that innovative financial products and services are needed to reach women across the country and support their businesses.

“Through our engagement with micro finance institutions (MFIs), SMEs, banks, and other financial institutions, we recognise the growing demand for innovation — not just in financial products but in how they are delivered,” Seraj said.

According to a concept paper presented during the workshop, banks usually ask for land, houses, or other valuable assets as collateral before giving loans.

But many small business owners, especially women, do not have such assets, making it difficult for them to get financial support. As a result, these businesses struggle to grow, limiting new job opportunities and economic progress, the paper said.

Checking a borrower’s financial background takes a lot of time and money, especially for small loans, making it hard for banks to support them.

This gap in the system stops many promising businesses from reaching their full potential.

However, AI-based credit scoring can change this by using data to fairly assess borrowers and open doors for small businesses.

To address this problem, Kifiya Financial Technology, an Ethiopian company specialising in digital financial services and AI-driven solutions founded in 2010, introduced an AI-based credit scoring system.

This system looks at the borrower’s business, transactions, and customer profiles instead of traditional financial records. The system is already being used in Ethiopia and other African countries.

Panellists included Farzana Khan, general manager of the SME Foundation, Syed Abdul Momen, deputy managing director of BRAC Bank, Nawshad Mostafa, a director of the Bangladesh Bank, Dhawal Cheda, senior product manager (commercial solutions) at Visa, and Munir Duri, founder and CEO of Kifiya Financial Technologies.