CORRECTION APPENDED

A Harvard-based organization seeking to develop ways to screen loan applicants in developing nations received a grant from the philanthropic arm of the search engine giant Google on Thursday.

The University’s Entrepreneurial Finance Laboratory will use the money—totalling almost $710,000—to address the lack of financing that can derail small and medium business enterprises in countries where these businesses are desperately needed to begin building a middle class.

The grant was made to Professor Asim ljaz Khwaja of the Kennedy School of Government, and Bailey Klinger, a fellow at the School’s Center for International Development. The two created the EFL in 2007 and have since directed its research.

The tools created at the EFL rely on a wide variety of psychometric tests to relate cognitive and personal qualities to business success. Such technology can be useful in countries where, in the absence of credit scores or accounting histories, it is difficult for lenders to choose responsible borrowers

But it has yet to be determined whether the loan screening technology has “sufficient predictive power,” Klinger wrote in an e-mail. The recent grant will enable the development and implementation of the EFL’s technology in lending environments in Africa and India as researchers attempt to vet the program.

The notion of using technology to gauge the potential for entrepreneurial success was pioneered by Klinger, who worked with a similar screening program in South Africa last year while completing his doctoral dissertation. [CORRECTION APPENDED]

Companies involved in microfinance and small business lending have already taken notice of the team’s work. TechnoServe, a U.S.-based organization that provides training for entrepreneurs in poor rural areas, and Business Partners, Ltd., a South African lender, have already signed on to implement the program.

Google, whose announcement of the grant is part of the company’s effort to facilitate third-world development, cited the Harvard team’s innovation in developing metrics to deal with such intangibles as bargaining ability, number-sense, and money management skills.

The Google grant is not the first time the EFL has welcomed outside support. SNV Netherlands Development Organisation, a Dutch non-profit, announced its own partnership with the Harvard researchers earlier this month.

Richard Jones, SNV’s Latin American Communications Officer, wrote in an e-mail that the company’s recent partnership will allow the Harvard researchers “to develop and test [their] screening technology in a wider sample of developing countries” while allowing SNV to continue “promoting inclusive business in Latin America.”

According to Sandra C. Oliveira, the EFL’s program manager, the Lab is aiming to release a new version of the screening technology in 18 months. The program will then be further assessed for experimental validity.

The eventual goal, said Oliveira, is for the technology to be fully integrated into lending organizations, helping to unlock a trillion-dollar small-enterprise economy hidden in the developing world.

CORRECTION

The Oct. 21 story, "Aid Org Nets Google Grant," stated that Bailey Klinger, a fellow at the Center for International Development, pioneered the  notion of using technology to gauge the potential for entrepreneurial success. In fact, the technology was pioneered by both Klinger and Harvard Kennedy School professor Asim ljaz Khwaja.