BBA alumnus Bailey Klinger brings finance options to emerging markets

Jan 14, 2016

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Donovan Woollard, Director of Radius Ventures, interviewed BBA alumnus and co-founder of EFL, Bailey Klinger at the annual Alumni Reunion.

Donovan Woollard (left), Director of Radius Ventures, interviewed BBA alumnus and co-founder of EFL, Bailey Klinger at the annual Alumni Reunion.

The prospect of a financial institution being unable to determine whether or not a customer is eligible for a loan is an alien one to Canadian residents. In western society, the population has become used to loans being approved within minutes, often without even speaking to someone face to face.

Yet in developing parts of the world, the systems required to determine whether a prospective customer is viable often do not exist, making it impossible for institutions to make finance available to millions of small and medium sized enterprises.

Beedie School of Business alumnus Bailey Klinger, however, is determined to address this issue – and thanks to his Entrepreneurial Finance Lab (EFL) technology, customers in 26 developing countries across the globe who would previously have been turned down have been able to access an incredible $500 million in loans.

Klinger spoke about his incredible story in front of a packed audience at the annual Beedie School of Business Alumni Reunion. The event, held at the Segal Graduate School on January 13, saw Klinger interviewed by Donovan Woollard, Director of RADIUS Ventures.

Woollard first asked Klinger to describe just what the pressing societal problem was that he was trying to solve.

“For loan officers in Nairobi or Bangalore, the majority of the population walks in with a job in an informal micro enterprise – taxi driver or hairdresser for example – but how can they evaluate whether they are a good risk option for a loan?” said Klinger. “In developed countries there are options such as personal credit checks, or you can look at the business’ books. In developing countries you have none of that. All the transactions are cash based, and there is no option to develop credit. They can’t evaluate the person, so every day they just say ‘no’. I was fascinated by this problem.”

In searching for a solution to this issue, Klinger and his co-founders examined what he referred to as some “crazy” options, including lie detectors, DNA swabs, and voice analysis. He revealed that the moment of insight happened in a typically entrepreneurial fashion: over beers.

“We came across some research papers that looked at entrepreneurs in emerging markets and identified that they had different personality characteristics to managers,” he said. “They studied these differences using psychometric tests, and there is some forty years of research using these tools. We thought we could apply that to our problem, so took a few existing things and combined them in different ways to suit our purpose.”

The EFL technology utilizes psychometric tools and principles to enable banks & microfinance institutions in emerging markets to lend profitably to business owners and consumers lacking credit history and collateral. Importantly, the technology has a number of characteristics that make it attractive to banks and lenders in developing countries: it is low-cost, and can be applied by anyone, any time, anywhere, without any training.

Asked whether it is possible for potential customers to cheat the system, Klinger responded that it is an important concern, and one which they work to ensure is not an issue. The tool includes potential traps so as to spot people attempting to play the system, and as time goes on the data collected allows EFL to ensure that any tactics successful in gaming the system will not work in the future.

Touching on his career path, Klinger reflected on his time as a business undergraduate at SFU, citing current Beedie Associate Dean of Undergraduate program Andrew Gemino as a big influence on his career. He described how an application for a Rhodes Scholarship as an undergrad made him realize that he was interested in private sector development in emerging countries, and caused him to draw career road map – an exercise he said was invaluable in determining his path, and led him to do a Masters and PhD at Harvard.

Commenting that failure is often a necessary evil for successful entrepreneurs, Woollard enquired as to whether Klinger has encountered any challenges with EFL. Klinger responded that they have been fortunate with their early success, and though there had been bumps in the road since then, the business has scaled up in every year of its operation.

“We have had some challenges, but we have been fortunate that they have always come at the perfect time and we soon had the next solution ready – so in a lot of ways we just got lucky,” he said. “Each time we took a hit we have been lucky to have these proof points. The scale of the company has grown over time, which also helps – we have done more testing in the last year than we did in the first nine.”

For more information on EFL, visit

Watch the full interview below: