Faculty of Social & Historical Sciences


UCL and Village Invest UK develop app to help people without credit histories access loans

A user-friendly mobile app, co-developed at UCL, has increased access to finance in rural areas of India.

Coins in a glass pot with a plant growing out of it

21 July 2021

Access to finance is a key step to graduate out of poverty. Yet, 1.7 billion adults remain unable to access loans around the world. Formal financial institutions hesitate to lend to people without credit histories, mostly due to their perceived high risk profiles.

Using anthropological research conducted at UCL, Professor Lucia Michelutti has developed a new app in partnership with Dr Barbara Verardo, founder of the social enterprise Village Invest. The Ethnographic Driven Risk Analysis Framework (EDRAF) is a novel instrument to assess and minimise risks in social lending, and generate measurable impact in rural south Asia.

“In many countries, people without credit histories can only rely on informal financial institutions, like community savings and credit organisations and local money-lenders, for their credit needs,” explains Lucia. “While the former can only provide small cash amounts for immediate consumption needs, the latter generally charge exorbitant interest rates.”

EDRAF aims to break this cycle of poverty and indebtedness by providing financial institutions with an innovative and culturally-appropriate credit rating tool. The tool uses social, institutional and cultural indicators, comprehensive household budget data, and business planning data to estimate a household’s actual capacity to repay. Crucially it also shows how to mitigate the risks of issuing loans in areas of high corruption and criminal or informal political economies.

EDRAF has now been trialled in nearly 120 villages in Rajasthan, North India. 54 households were disbursed loans through Village Invest. 40% of families said they are now better off and that their new businesses (financed by the loans) helped them to get out of debt with local money lenders. 

UCLB, the commercialisation arm of UCL and part of UCL Innovation & Enterprise, is now supporting the UCL team to develop a go-to-market strategy for the tool. Lucia and her colleagues are working on plans to launch EDRAF in Africa and Italy later in 2021.