Akiba Digital uses an affordability model to ascertain how much a business can afford to be financed. The affordability model makes use of a combination of insights to calculate how much an SME can be granted as a loan and solves for a problem faced by many small and thin-filed businesses when calculating their affordability.
The Enterprise product has three primary Application Programming Interfaces which decide the borrower’s affordability, namely:
- Borrower data aggregation API - Bank/ wallet statement OCR, POS (Point of Sale) data aggregation.
- Risk scoring API - Liquidity score, Credibility score, Affordability score, Risk Score, Fraud Detection, ID Verification.
- Financial Analysis API - Transaction classification, Spend Analysis, Default Prediction.
An SME’s affordability can be calculated using two methods, namely:
- Using a savings rate calculation
- Forecasting of the value
Saving Rate Calculation:
A saving rate is the calculation of the amount which is saved in a month by a business. It is calculated using the following calculation:
Saving Value = Total(inflow) - Total(outflow)
The amount was previously calculated using the following equation which provides us with a savings rate. The following calculation was used to ascertain the savings rate:
(1 - (o.Total outflow/i.Total inflow)) AS saving rate)
After this is calculated, the saving rate amount for the previous 30, 60, 90 and 120 days is determined to determine the average. This helps us to have time series structure data over small period and it can be used for predictions.
Forecasting the Value in time series:
For the whole dataset, and we train our model with 70% of the dataset then use the last 30% as testing set to be sure about the model quality. A portion of the testing set is also used for evaluation of the model. We deploy the model has better performance based on some hyper-parameter tuning.
Forecasting the saving rate for given data will provide a few more data points for next month. These data sets are then calculated to a mean value.
The affordability metrics are a way for Akiba Digital to ascertain how much a business can afford when they are seeking funding. This technique differentiates us from competitors because it gives all SMEs an opportunity to access funding. Their affordability is not calculated in a traditional sense, which has historically excluded many growing businesses.