November 18, 2011 3:26 pm

Psychometric loans

Standard Bank is to use computerised tests to decide who to lend to

Watch out – an unqualified shrink may soon determine the size of your home loan. From next year loan officers at Standard Bank in 10 African countries will use computerised psychometric tests to help decide whether to lend to entrepreneurs.

The problem with these tests, which are also used in employment screening, is they rarely adjust for culture. Neuropsychologists know that when two applicants from the same place but with different backgrounds are asked a question, they can think the same thing but answer differently. So clinicians adjust their tests. Software does not.

If psychometric tests gain a foothold in the loan approval process, it will encourage ­“­box-ticking” loans – of the sort that helped cause the financial crisis.

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from and redistribute by email or post to the web.