As a lender, your biggest blind spot isn’t the loans you approve. It’s the loans you shouldn’t have touched in the first place. If you’re a lender in developing markets such as Southeast Asia, Africa, and LATAM, you already know: we don’t have the luxury of pulling a FICO score and feeling safe. We have to do it the hard way. We have to look at behavior, read between the lines, and trust our instincts more than the loan application itself.
In more developed countries, credit scores are sacred. Your credit history isn’t just a number. It’s you. Mess with it, and you’ll find yourself locked out of housing, jobs, and even a simple personal loan. In places like Canada, the US or UK, people are so obsessed with credit that even a peek at your history could raise a red flag if too many people are looking at it. Trust me, that’s how seriously they take it.
But once you find yourself in Africa or Southeast Asia, you have to look deeper. And the best place to start is the statement of account. It’s not about what a borrower promises. It’s about what their money movements show. The truth is, a bank statement can reveal more about a borrower’s financial habits than any credit report.
This is something I’ve learned firsthand over the years.
Unfortunately, most lenders still follow the traditional approach. They pull a few months of statements, divide total inflow by the number of months, and get an “average income.” Then they base an entire credit decision on that. But that approach is wildly outdated and dangerously simplistic. It’s even worse than crossing a busy street blindfolded.
Also, just looking at average income doesn’t help you understand capacity or character, which are the two most important qualities in a borrower. You need a deeper, behavior-based review of their financial life. To effectively evaluate capacity and character, it’s necessary to look beyond the surface.
Now, let’s look at how to “properly” review statement of account
To conduct a proper and professional review of a bank statement, lenders must move beyond surface-level impressions and adopt a forensic, data-informed mindset. This process is not about skimming a few line items or glancing at average income. It’s about interrogating the document for financial patterns, behavioral cues, and structural stability. These are the very attributes that determine whether a borrower can and will repay a loan.
Start with the right time frame
When assessing a borrower’s financials, the length of the bank statement you review can make or break your decision. Many lenders, particularly digital ones eager to move fast, often settle for three months of transaction data. But that short-term snapshot can be dangerously misleading. A borrower might appear creditworthy with three months of clean inflows and stable balances, but those months could coincide with seasonal business booms, temporary freelance gigs, end-of-year bonuses, or even borrowed funds meant to create the illusion of financial stability. Three months is just long enough to stage a façade and nowhere near long enough to expose the truth.
Twelve months of statements, at the very least, provide the kind of clarity that truly reduces risk. With that amount of data, patterns begin to emerge. You can see how a borrower handles seasonal cycles. Maybe their income drops during certain months, or spending spikes during holiday periods. You’ll also catch one-off life events like medical emergencies, weddings, school fees, or other large expenses that might not recur, but impact cash flow significantly. These are all things that three-month windows simply fail to reveal.
Over a full year, you also begin to notice debt patterns. Many borrowers juggle multiple loans and may be caught in a cycle of taking one loan to repay another. Short statements can miss this, but a year’s worth of data will show the recurring inflows from different lenders followed by immediate repayments, signaling potential over-indebtedness. You’ll also get a more honest view of income consistency. Maybe the borrower missed two salary payments earlier in the year. Maybe they had great sales one quarter and none the next. Only long-term data tells that story.
More importantly, you get to observe how the borrower reacts to pressure. When funds are low, do they adjust their spending, or do they continue buying airtime and eating out? Do they prioritize rent and school fees, or default on essentials to keep up appearances? These behavioral patterns, especially in lean times, are often better predictors of creditworthiness than income itself.
In short, anyone can appear financially stable for a few months, especially if they know they’ll be applying for a loan. But consistency over a full year reveals discipline, resilience, and true financial habits. Twelve months of data isn’t overkill. It’s the minimum lens you need to separate genuinely stable borrowers from those riding temporary waves.
Evaluate the nature and regularity of income
Income alone does not make a borrower creditworthy. It is easy to be impressed by large one-off deposits or inflated figures on a statement, but without consistency and traceability, those numbers mean very little. What truly matters is the pattern, the source, and the dependability of that income. Regular, salaried payments from a recognized employer landing on or around the same day each month, offer a clear signal of financial reliability. These deposits show not only that the borrower has a job, but also that they are part of a structured financial ecosystem. Such regularity provides predictability, which reduces the risk for any lender.
On the flip side, irregular income from gigs, freelance work, or small businesses is more complicated. These sources might still represent legitimate and sustainable earnings, but they require much deeper analysis. A borrower may receive income from ride-hailing apps, food delivery, hairdressing, or mobile money agency services. These are all valid occupations, but they don’t always guarantee stable inflows. What matters here is not just how much the borrower earns, but how often and how predictably they earn it. If payments are inconsistent or come in lump sums spaced out by weeks or months, the borrower’s financial stability may be more fragile than it first appears.
It is also important to understand whether the income is tied to volatile factors. Some businesses thrive only during holidays or specific seasons. Others are entirely dependent on contracts that can expire or be terminated without notice. Even performance-based salaries, commissions, or bonuses, while lucrative, are risky because they fluctuate depending on variables beyond the borrower’s control. A borrower might have a high earning potential, but without a steady track record, lenders are left guessing.
Another layer of risk lies in untraceable or unverifiable deposits. Money received through peer-to-peer transfers or cash-based businesses often lacks documentation or a clear trail. If a lender cannot identify the source, there is no way to evaluate the sustainability or legality of that income. In some cases, large unexplained inflows could even signal fraud, money laundering, or other high-risk behavior. Verifiability, in this context, becomes just as important as regularity.
Perhaps the most common mistake lenders make is relying on average monthly income. This metric can be dangerously misleading. A borrower who receives $15,000 once every four months may technically average $3,750 per month, but in practice, they are going through long dry spells between payments. Compare that to someone who earns $3,000 like clockwork every month, their financial life is easier to manage and far more predictable. Regularity beats volume every time when it comes to responsible borrowing.
Assess regular living expenses
Where money goes is often more telling than where it comes from. A borrower’s spending habits reveal a lot about their priorities, financial discipline, and risk tolerance. While income provides a sense of capacity, expenses offer insight into character. For lenders, this is a big piece of the puzzle. It is not just about how much a borrower earns, but how well they manage what they have. Patterns of spending can uncover the habits that shape financial behavior and ultimately determine creditworthiness.
A borrower might have monthly inflows of $5000, but if $4800 disappears into living expenses before the 15th of the month, they can’t repay a loan, no matter how “high-earning” they appear on paper.
The trick here is not to be fooled by silent accounts. Many borrowers use their main bank account only to receive salary and repay loans. But when you look closer, you’ll find little to no data about everyday spending; no food, no fuel, no rent, no subscriptions.
That’s a trap.
These expenses haven’t vanished. They’re just being carried out on another platform, maybe a mobile wallet, another bank, or even cash. You must ask the borrower: “Where do you usually spend from?” And then ask to see that account too.
Why does this matter?
Because living expenses are your first clue about financial strain. If someone is spending $100 monthly on data, $400 on leisure activities, and still claims they have enough room to take a $600 loan, you need to push back and recalculate.
Also look at the ratio of discretionary vs. essential spending. Is the borrower buying concert tickets and cocktails but defaulting on savings? That’s poor money discipline. Also, if someone prioritizes school fees, food, and modest rent, that’s a mark of financial maturity even if the income is modest.
One of the strongest signals of financial health is the ability to live within one’s means. A bank statement that shows controlled, deliberate spending, even on a modest income, is often more reassuring than one filled with flashy deposits followed by wasteful expenses. For lenders, this kind of balance is gold. It reflects not just a borrower’s current position but their long-term approach to financial responsibility.
Understand their existing obligations
Many borrowers carry more debt than they openly disclose, and not all of it shows up as formal loans in credit reports. Sometimes, the signs are buried in everyday transactions. Frequent transfers to the same contact, regular repayments to loan apps, or recurring deductions labeled under vague categories like utilities or savings contributions. These payments may not look like debt at first glance, but they often represent existing financial obligations that can significantly affect the borrower’s ability to take on and repay new loans.
This is why it’s not enough to check for official loans. A lender must look closely at bank statements for patterns that indicate informal borrowing or silent commitments. For example, consistent monthly transfers to digital loan apps, family members, or thrift groups may point to recurring repayment responsibilities. Even contributions to a rotating savings and credit association (ROSCA) or cooperative society can behave like debt, especially when the borrower is expected to contribute regardless of personal cash flow.
At this point, calculating a borrower’s debt-to-income (DTI) ratio becomes essential. This metric helps quantify how much of a borrower’s monthly income is already tied up in repaying debts or obligations. If more than 30 to 40 percent of income is being used to settle existing liabilities, it is a clear sign that the borrower is financially stretched. Introducing another loan into the mix may only worsen the situation. A high DTI ratio means that the borrower has little room to maneuver in case of unexpected expenses, which increases the risk of delinquency or default.
Even more concerning is when repayment patterns show signs of financial juggling: borrowing from one source to pay off another. For instance, if a borrower receives a digital loan and shortly after transfers the funds to clear a different loan, that is an indication of debt cycling. This behavior suggests that the borrower is not resolving their obligations but merely shifting them around. While this may help them appear up to date on repayments in the short term, it’s a fragile strategy that can quickly unravel.
Hidden liabilities are the kind that most easily slip past a surface-level review. They don’t show up in credit reports and are often disguised within everyday transactions. But they still weigh heavily on a borrower’s financial position. That’s why lenders must go beyond what is declared and conduct a thorough, line-by-line review of financial records to uncover these obligations. Understanding a borrower’s true financial load, whether formal and informal, is one of the best ways to assess whether they can responsibly take on more debt. Ignoring this layer can lead to decisions based on incomplete or misleading data.
Look for discipline beyond debt
Creditworthiness isn’t just about how much someone earns or how well they manage their debt. It’s also about whether they show signs of financial discipline outside of loan obligations. And one of the clearest indicators of that discipline is a savings habit. Borrowers who consistently set aside even a small portion of their income each month are sending a powerful signal. They understand the importance of planning. They know how to delay gratification. And most importantly, they are preparing for the future, not just reacting to the present.
Savings behavior, however modest, reveals more than just the ability to set money aside. It reflects a mindset: a commitment to financial health. These are people who are less likely to default when life takes an unexpected turn. Whether it’s a medical bill, car trouble, or a temporary job loss, those with savings have a cushion to fall back on. And that cushion often makes the difference between staying current on repayments and falling into default.
On the flip side, the absence of savings in a bank statement often tells its own story. It may indicate that the borrower is stretched to their financial limit, with every naira or dollar spoken for the moment it hits their account. This hand-to-mouth existence leaves no buffer for emergencies and creates a fragile financial state where any disruption, either a late salary, a sick child, or a broken phone can spiral into missed repayments or new loans taken out in desperation.
Lenders who only focus on how borrowers manage debt often miss this part. A borrower might have no active loans and yet still be high-risk because they lack the basic discipline to manage income proactively. Meanwhile, another borrower might carry moderate debt but consistently save on the side, signaling long-term financial resilience.
Ultimately, savings habits act as a silent character reference. They are not mandatory, like rent or loan repayments, which makes them an even stronger signal. Nobody forces a borrower to save. So when they do it voluntarily, month after month, it reveals a maturity and self-awareness that every lender should look out for. In assessing creditworthiness, this kind of discipline deserves as much attention as income or debt levels.
Spot the red flags early
Early detection of red flags in a borrower’s financial behavior can make the difference between issuing a successful loan and walking straight into a default. The most concerning signs are often not dramatic. They’re subtle and easy to miss unless you’re looking closely. Things like sudden or unexplained cash deposits, recurring overdrafts, or inconsistent bill payments might seem like noise in the data, but they often signal deeper issues. A borrower might be scrambling to stay afloat or using short-term debt to plug gaps in their daily finances.
One of the clearest signs of financial distress is the presence of multiple repayments to different loan apps within the same month. This suggests a dependency on short-term credit just to get by. It’s not just about the number of loans, it’s the frequency and overlap that indicate a pattern. Similarly, when salary inflows are depleted within a day or two, it’s worth asking where the money is going. Is it being swallowed up by existing debts? Are there unrecorded obligations? Is the borrower simply unable to manage basic monthly expenses?
These red flags are not merely data points, they are behavioral cues. They tell you how a borrower handles pressure, whether they rely on quick fixes, and how much control they truly have over their finances. But spotting them is just the first step. The real work lies in interpreting them accurately. Lenders must approach this analysis with both curiosity and caution. Jumping to conclusions can lead to unfair exclusions, while ignoring the signs altogether increases exposure to risk.
It’s also important to look at frequency and recurrence. A single overdraft might not mean much, but if it happens every payday, that’s a trend. One delayed bill payment might be an oversight, but three in two months should raise eyebrows. The key is to connect the dots and view the borrower’s financial activity as a story, not just a series of transactions.
The truth is, these red flags don’t always mean a borrower should be rejected outright. They’re signals that demand further scrutiny. Sometimes, a deeper look reveals that the issues are temporary or circumstantial. Other times, they expose underlying instability that makes lending unwise. Either way, they should always shape the final risk assessment. Ignoring them is the same as flying blind.
Confirm loan repayment behavior
When a borrower says, “I’ve taken loans and paid them off,” don’t nod and move on. That claim must be treated as a hypothesis to be tested, not a fact to be accepted.
Start by scanning the statement for obvious signs of disbursement: lump-sum credits from lenders, especially ones labeled with references like “Branch,” “Tala,” “Revolut,” “Loan Disbursement,” or even informal naming like “Credit Transfer – Lender XYZ.” A real loan often has a timestamped trail. You’ll see the funds arrive, and shortly after, the money is withdrawn or spent.
Then go looking for repayments. Are there recurring debits with similar descriptors? Are these repayments weekly, biweekly, or monthly? Do the deductions continue steadily over time? If you find a pattern like $16 leaving the account every Tuesday for five weeks, that’s likely a repayment plan.
But it’s not just about spotting one transaction. Assess the borrower’s repayment behavior. Did they make timely payments or skip a few and later pay in bulk? Did they stop repaying halfway? Did they borrow from another lender to service the old one?
If you only find one loan repayment that was completed out of five visible disbursements, that borrower has a habit of ghosting lenders. That’s not someone you want to extend credit to.
Pro tip: Always ask the borrower which lender they’ve used before. If the statement shows no activity from that lender, they’re either lying or using another account to hide liabilities.
Identify “sweepers” and trace fund movements
A “sweeper” is a borrower who, the second their salary or business revenue hits the account, instantly transfers it somewhere else. You’ll notice it easily: salary comes in at 8:47 AM, and by 8:49 AM, it’s transferred to a fintech wallet, spouse’s account, or a second bank account.
What’s the motive? Avoiding deductions. Many sweepers are overleveraged and have standing orders or direct debit mandates with other lenders. So, the moment money hits their account, they ‘sweep’ it out to escape automatic collections. If you’re a lender trying to assess repayment ability, this behavior signals two things: They’re juggling too many lenders at once or they’re trying to avoid accountability.
To get the full picture, don’t stop at just the primary bank statement. Ask for wallet statements (e.g., Nubank, Alipay, Kuda) or other bank accounts where the funds are being swept to. You’ll often find that while one account looks “empty,” the real financial activity is happening elsewhere.
One borrower might appear cash-strapped on their traditional bank statement, but their mobile wallet, whether it’s PayPal, Cash App, or M-Pesa reveals a different story. They might be spending $100 a month on airtime and ordering takeout every Friday. You need to follow the money across platforms to get the full picture.
A good underwriter doesn’t just ask for a bank statement, they ask for the right bank statement.
Verify SME revenue with supporting documents
When lending to small and medium-sized enterprises (SMEs), bank statements alone are rarely enough to paint a full picture of the borrower’s financial health. Many SMEs, especially in developing markets, operate in cash-heavy or informal sectors. This means their revenue streams may not follow predictable patterns or appear as consistent, labelled deposits in a business account. Relying solely on the bank statement can leave major gaps in understanding the true scale and nature of their operations.
This is where supporting documents become critical. Ask for customer invoices, signed sales receipts, mobile money transaction histories, POS statements, and payment confirmations from digital channels like WhatsApp or Instagram, which many small businesses use to manage orders. The goal is to triangulate what the SME claims to earn with what is verifiable. For instance, if a fashion retailer claims to make $600 monthly, they should be able to show a backlog of messages, receipts, or delivery records that support that volume. And those earnings should, at least in part, be traceable in the form of mobile deposits, transfers, or bulk cash lodgements in their bank account.
This type of cross-checking helps lenders separate genuine businesses from those exaggerating their income to secure loans. It also allows a lender to see how disciplined the borrower is in recordkeeping and customer transactions, both important indicators of financial maturity. In many cases, it is this attention to supporting documents that uncovers the difference between a hobby and a viable business.
Corroborate the borrower’s narrative with the data
Perhaps the most overlooked step in analyzing a bank statement is matching the story the borrower tells with what the financial data actually shows. Borrowers rarely present their circumstances in purely neutral terms. Sometimes they’re trying to put their best foot forward, other times they’re attempting to downplay financial stress. It’s not always malicious, it’s human nature. A borrower might say, “I recently got a great job,” or “Things were rough for a while, but they’re much better now.” These statements can’t be taken at face value. They need to be checked against the cold facts.
If a borrower claims to be employed but no salary credits show up during the claimed period, that’s a red flag. If they mention that business has picked up, but the bank statement shows irregular income and mounting charges, it may suggest a gap between aspiration and reality. Even seemingly harmless claims, like “I have a major deal coming soon,” must be approached with skepticism unless there’s evidence to support forward momentum such as increased deposits, down payments, or incoming transfers that align with that claim.
This is not about assuming the worst. It’s about being grounded in what’s verifiable. A well-told story can be persuasive, but numbers offer something more dependable. They reveal whether the borrower truly has financial momentum or is still trying to get out of a rut. The bank statement is an unfiltered record of how money is earned, spent, and managed. If the numbers contradict the narrative, the numbers should take precedence every time.
Lenders who skip this cross-verification step risk anchoring decisions on misplaced confidence. They trust what’s said without examining what’s shown. That’s a risky move. Verifying the narrative against the data helps strip emotion out of the decision-making process and lets facts lead the way. If a borrower’s story checks out, it builds credibility. If it doesn’t, that’s a warning that due diligence is needed before proceeding.
Listening to the borrower is important, but listening to their bank statement is non-negotiable. The data won’t flatter you or try to impress. It just tells the truth and when making a credit decision, that’s exactly what you need.
Choose a qualitative approach
The best lenders today don’t just read numbers; they interpret behavior. A statement of account isn’t a spreadsheet to audit. It’s a behavioral record. Behind every inflow and outflow is a decision, a priority, a habit. And that’s where real credit insight lives.
Yes, the quantitative metrics matter; income, average balance, expense ratios, debt obligations. But those only tell what is happening. The qualitative layer answers the more important question: why.
Why does the borrower spend heavily at the beginning of the month? Why is there a pattern of savings for only three consecutive months before stopping? Why are there frequent transfers to friends just before payday?
Bank statements should be reviewed with the curiosity of a behavioral analyst, not just the precision of an accountant. You are not just evaluating the financial position. You are trying to understand the borrower as a financial actor.
What story do the patterns tell? Are they building toward stability or just surviving? Do they show signs of foresight and discipline, or impulse and volatility? Are they prepared for a rainy day, or are they consistently one emergency away from default?
When lending decisions are made with this kind of qualitative depth, approval becomes more than a numbers game. It becomes a judgment of character, resilience, and intent.
And if you can answer those behavioral questions with confidence, you are not just making a loan. You are managing risk like a pro.
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