Recent advances in digital technology and big data have allowed FinTech (financial technology)
lending to emerge as a potentially promising solution to reduce the cost of credit and increase
financial inclusion. However, machine learning (ML) methods that lie at the heart of FinTech credit
have remained largely a black box for the nontechnical audience. This paper contributes to the
literature by discussing potential strengths and weaknesses of ML-based credit assessment through
(1) presenting core ideas and the most common techniques in ML for the nontechnical audience; and
(2) discussing the fundamental challenges in credit risk analysis. FinTech credit has the potential to
enhance financial inclusion and outperform traditional credit scoring by (1) leveraging nontraditional
data sources to improve the assessment of the borrower’s track record; (2) appraising collateral value;
(3) forecasting income prospects; and (4) predicting changes in general conditions. However, because
of the central role of data in ML-based analysis, data relevance should be ensured, especially in
situations when a deep structural change occurs, when borrowers could counterfeit certain indicators,
and when agency problems arising from information asymmetry could not be resolved. To avoid
digital financial exclusion and redlining, variables that trigger discrimination should not be used to
assess credit rating.
The framework guiding the IMF’s communications—established by the Executive Board in 2007—has enabled the institution to respond flexibly to the changing global context. The framework is based on four guiding principles: (i) deepening understanding and support for the Fund’s role and policies; (ii) better integrating communications into the IMF’s daily operations; (iii) raising the impact of new communications materials and technologies; and (iv) rebalancing outreach efforts to take account of different audiences. In addition, greater emphasis has been placed on strengthening internal communications to help ensure institutional coherence in the Fund’s outreach activities.
Continued efforts are needed to strengthen communications going forward. Several issues deserve particular attention. First, taking further steps to ensure clarity and consistency in communication in a world where demand for Fund services continues to rise. Second, doing more to assess the impact of IMF communications and thus better inform efforts going forward. Third, engaging strategically and prudently with new media—including social media.