Who deserves a loan? Is there an answer more fundamental than, someone who is likely to pay it back? The challenge is figuring out who that might be. Finding the answer can cost you. Not finding the answer can cost, too, for it means economic opportunity lost, for individuals and for the nation overall.
Consider short term, small dollar loans. These can be the most expensive for a lender to make, precisely because of the cost of identifying the good risks. Lenders report that analyzing borrower risk, together with basic costs of making, processing, and collecting repayment can run to several hundred dollars per loan. When the loan itself is for only a few hundred dollars, how does the lender earn sufficient profit to stay in that market?
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