Credit Scoring in Ghana: State of Utilization, Challenges, Benefits and Prospects

Financing businesses is a major challenging task for financial institutions in developing countries. Business enterprises continue to make significant impacts on the economies of many countries. The purpose of the study was to examine methods of credit scoring and risk assessment in the banking sector of Ghana. Interviews were used in a survey to solicit information from bankers randomly selected from the 27 banks in Ghana. Findings of the study indicate that credit scoring and in-house built risk grading system are the most prevalent types of SME risk assessment. Similarly, findings reveal credit scoring as the most prevalent technique used in SMEs risk rating. The importance of risk rating was examined in the study, and most respondents agreed that risk rating serves as an aid in conjunction with other lending considerations. Findings further identified the fact that banks are interested in deploying credit scoring as a lending tool in future. It is recommended that banks employ training methods to equip employees to become expert credit risk assessors. The sector of banking in Ghana must also collaborate with the government to establish a credit bureau to which reference can be made in risk assessment.