Introduction

In today's dynamic and often volatile financial landscape, traditional credit assessment methods are proving insufficient to accurately gauge borrower risk and optimize lending portfolios. Risk-Based Lending and Credit Assessment offers a sophisticated and proactive approach that enables financial institutions to move beyond a one-size-fits-all model, instead tailoring loan products, pricing, and terms directly to the unique risk profile of each applicant. This methodology allows for a more granular understanding of potential defaults, enhances portfolio diversification, and ultimately drives sustainable profitability while minimizing exposure to bad debt. By systematically evaluating creditworthiness through a comprehensive lens that integrates financial data, behavioral insights, and market conditions, lenders can make more informed decisions, expand their market reach responsibly, and improve overall asset quality. Without a robust framework for Risk-Based Lending and Credit Assessment, financial institutions risk making sub-optimal lending decisions, accumulating excessive non-performing loans, and missing opportunities to competitively price credit for a diverse range of borrowers, underscoring the vital need for specialized expertise in this critical domain. This comprehensive training course focuses on equipping professionals with the expertise to master Risk-Based Lending and Credit Assessment.

This training course is meticulously designed to empower credit managers, loan officers, risk analysts, financial analysts, portfolio managers, and compliance officers within banks, microfinance institutions, and cooperative societies with the theoretical understanding and practical skills necessary to effectively implement and refine Risk-Based Lending and Credit Assessment strategies. Participants will gain a comprehensive understanding of credit risk models, learn to analyze financial statements and credit bureau reports, explore qualitative and quantitative risk factors, and acquire hands-on experience in structuring risk-adjusted loan products and pricing. The course will delve into topics such as credit scoring methodologies, collateral evaluation, early warning systems for default, recovery strategies, regulatory capital requirements, and the crucial aspects of ethical and fair lending practices. By mastering the principles and practical application of Risk-Based Lending and Credit Assessment, participants will be prepared to optimize their lending portfolios, reduce credit losses, improve profitability, ensure regulatory compliance, and contribute significantly to the financial health and stability of their organizations.

Duration: 5 Days

Target Audience

• Credit Managers and Directors
• Loan Officers and Relationship Managers
• Risk Analysts (Credit Risk)
• Financial Analysts
• Portfolio Managers
• Underwriters
• Compliance Officers
• Internal Auditors
• Business Development Managers (Lending)
• SACCO and MFI Professionals

Objectives

• Understand the fundamental principles and benefits of risk-based lending.
• Learn to conduct comprehensive credit assessments for various borrower types.
• Acquire skills in interpreting financial statements and credit reports for risk evaluation.
• Comprehend techniques for developing and applying credit scoring models.
• Explore strategies for identifying, measuring, and mitigating credit risks.
• Understand the importance of collateral evaluation and loan structuring in risk management.
• Gain insights into early warning systems and recovery strategies for distressed loans.
• Develop a practical understanding of regulatory aspects and ethical considerations in lending.

Course Content

Module 1: Introduction to Risk-Based Lending

• Definition and evolution of risk-based lending (RBL).
• Why RBL is crucial in modern financial institutions.
• Benefits of RBL: improved profitability, reduced defaults, optimized portfolio.
• Key concepts: credit risk, default probability, loss given default (LGD), exposure at default (EAD).
• Overview of the lending process from a risk perspective.

Module 2: Credit Assessment Fundamentals

• The "5 Cs" of Credit: Character, Capacity, Capital, Collateral, Conditions.
• Analyzing financial statements: income statements, balance sheets, cash flow statements.
• Understanding key financial ratios for individuals and businesses.
• The role of credit bureaus and credit reports.
• Qualitative factors in credit assessment: industry risk, management quality.

Module 3: Credit Scoring and Rating Models

• Introduction to credit scoring methodologies (e.g., FICO, behavioral scoring).
• Developing internal credit rating systems for different borrower segments.
• Statistical models in credit scoring (logistic regression, decision trees - conceptual).
• Validation and calibration of credit scoring models.
• Use of alternative data in credit assessment (e.g., mobile money data).

Module 4: Risk Measurement and Pricing

• Quantifying credit risk: Probability of Default (PD).
• Calculating Expected Loss (EL) and Unexpected Loss (UL).
• Risk-Adjusted Return on Capital (RAROC) and its application in lending.
• Principles of risk-based pricing for loan products.
• Adjusting interest rates, fees, and terms based on risk.

Module 5: Loan Structuring and Collateral Management

• Designing loan products to match borrower risk profiles.
• Types of collateral: real estate, movable assets, guarantees.
• Valuation and perfection of security interests in collateral.
• Legal aspects of collateral and enforcement.
• Covenants and conditions in loan agreements.

Module 6: Portfolio Management and Early Warning Systems

• Monitoring credit portfolio performance.
• Diversification strategies to mitigate concentration risk.
• Identifying early warning signs of credit deterioration.
• Developing and implementing early warning systems (EWS).
• Proactive measures to manage deteriorating loans.

Module 7: Non-Performing Loans (NPLs) and Recovery Strategies

• Definition and classification of Non-Performing Loans (NPLs).
• Impact of NPLs on financial institutions.
• Strategies for NPL management: restructuring, rescheduling, workouts.
• Legal and practical aspects of loan recovery and debt collection.
• Provisioning for bad and doubtful debts.

Module 8: Regulatory and Ethical Considerations in Lending

• Overview of relevant banking and financial services regulations (e.g., prudential guidelines).
• Regulatory capital requirements for credit risk.
• Anti-Money Laundering (AML) and Know Your Customer (KYC) in lending.
• Ethical lending practices: fair access, responsible borrowing.
• Consumer protection laws related to credit.

Training Approach

This course will be delivered by our skilled trainers who have vast knowledge and experience as expert professionals in the fields. The course is taught in English and through a mix of theory, practical activities, group discussion and case studies. Course manuals and additional training materials will be provided to the participants upon completion of the training.

Tailor-Made Course

This course can also be tailor-made to meet organization requirement. For further inquiries, please contact us on: Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Training Venue

The training will be held at our Skills for Africa Training Institute Training Centre. We also offer training for a group at requested location all over the world. The course fee covers the course tuition, training materials, two break refreshments, and buffet lunch.

Visa application, travel expenses, airport transfers, dinners, accommodation, insurance, and other personal expenses are catered by the participant

Certification

Participants will be issued with Skills for Africa Training Institute certificate upon completion of this course.

Airport Pickup and Accommodation

Airport pickup and accommodation is arranged upon request. For booking contact our Training Coordinator through Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Terms of Payment: Unless otherwise agreed between the two parties’ payment of the course fee should be done 10 working days before commencement of the training.