Context

Assessing credit risk has become more complex for financial institutions when developing a wide range of credit products for different types of clientele. Credit risk depends heavily on the product and the targeted client base, especially for financial institutions offering specific loans to Small and Medium-sized Enterprises (SMEs).

Client-risk scoring tools help make the risk assessment process more reliable and efficient. They can be used at different stages of the analysis process.

Our approach

We design and implement risk-scoring tools tailored to the specific needs of the financial institutions and to the target clienteles.

The purpose of these risk-scoring tools is twofold:

  • Qualify credit applications according to their scores: "Good", "Fair", or ďRejected"
  • Make the credit application analysis process more reliable, based on objective and mandatory data

Our credit risk-scoring tools are based on a broad set of criteria; weighted scores for each criterion are added together to obtain an overall credit risk score.

We apply the following method:

  • The scoring system and weightings are initially set following an expertsí analysis of the institutionís client knowledge. This risk scoring system is an intermediate step
  • These parameters are then updated on the basis of statistical analysis of reimbursement behaviors by customer profile. The gradual establishment of a database of information on loans that have been granted will enable such adjustments to be made, and lead to a full statistically-based model

At the first stages of the credit appraisal, it enables credit officers to identify focuses for their analysis and thus improve its effectiveness.

Once the credit officer has completed the credit application analysis, he or she can apply the tool, based on a full range of preset criteria, including appraisal criteria, in order to get an overview of the risk on the credit application. The credit officer can thus check the credibility of the application before presenting it to the credit committee. The latter, in turn, could base its decision on this general view of the credit risk on the application.

Our credit risk-scoring tools are not intended to replace the credit officerís analysis of the credit application, but to be complementary.

Example of a credit risk scoring tool

 

Our Experience

Implementation of a client risk assessment tool for agricultural SMEs for the Banque Nationale de Dťveloppement Agricole du Mali (BNDA) (World Bank Agrifin Program/Gates Fondation, 2012-2014)

Back to Consulting Services