The traditional approach to credit risk management relies heavily on quantitative models and historical data, assuming that consumers and businesses make rational financial decisions. However, behavioral economics has revealed that human behavior is often driven by cognitive biases, heuristics, and emotional factors that can lead to predictable deviations from rationality. This "Unlocking Insights" training course is a groundbreaking program designed to equip financial professionals with a deeper understanding of these psychological principles and their profound impact on credit decisions, from application to repayment.

This 10-day intensive program will bridge the gap between financial theory and human psychology, providing you with a powerful new lens through which to analyze and predict borrower behavior. You will explore how concepts such as present bias, anchoring, and social norms influence a borrower's likelihood of default. Through a series of practical case studies and hands-on exercises, you will learn to design more effective credit products, communication strategies, and risk models that account for these behavioral insights. By the end of this course, you will be able to build a more nuanced and accurate picture of credit risk, leading to better decisions and improved financial outcomes.

Duration: 10 days

Target Audience:

• Credit Risk Managers and Analysts
• Loan Officers and Underwriters
• Product Development and Marketing Teams
• Data Scientists and Statisticians
• Financial Regulators
• Behavioral Scientists
• FinTech Innovators
• Students in Finance, Economics, and Psychology
• Anyone involved in the design or evaluation of credit products

Objectives:

• Understand the core principles of behavioral economics
• Identify key cognitive biases affecting financial decisions
• Learn to apply behavioral insights to the credit lifecycle
• Develop skills in designing "nudges" for positive financial behavior
• Understand the limitations of traditional credit scoring
• Gain hands-on experience with behavioral data analysis
• Learn to build more predictive and robust risk models
• Understand the ethical implications of behavioral interventions
• Gain insight into the future of AI and behavioral finance
• Prepare for a career in data-driven decision-making

Course Modules:

Module 1: Introduction to Behavioral Economics

• A history of behavioral economics
• The difference between homo economicus and real-world behavior
• Key concepts: heuristics, biases, and framing effects
• The dual-system theory of thinking (System 1 and System 2)
• The role of behavioral insights in modern business

Module 2: Cognitive Biases in Credit Decisions

• Present bias and its impact on repayment
• The role of anchoring and herd behavior
• Overconfidence and its link to debt
• The endowment effect in financial products
• The influence of loss aversion on borrower behavior

Module 3: The Behavioral Credit Lifecycle

• The psychology of a loan application
• Understanding borrower motivation
• The role of a "nudge" in a credit decision
• Behavioral factors in repayment and default
• Designing communication for maximum impact

Module 4: Data Sources and Behavioral Metrics

• The importance of non-traditional data
• Psychometric and survey data
• The use of digital footprints
• The role of transaction-level data
• Integrating behavioral data into risk models

Module 5: Behavioral Scoring Models

• The limitations of traditional FICO-like scores
• Building a behaviorally-informed risk score
• The use of machine learning to capture non-linear behavior
• The challenges of data sparsity
• Model validation with behavioral insights

Module 6: Nudge Theory in Credit Products

• The principles of "nudge" theory
• Designing products that encourage better financial habits
• The use of defaults and pre-populated forms
• Simplifying complex choices
• Ethical considerations of nudging

Module 7: Behavioral Strategies for Collections

• The psychology of late payments
• Designing more effective collection notices
• The role of framing in communication
• Using social norms to encourage repayment
• The importance of empathy and positive reinforcement

Module 8: The Role of Social Norms

• How social comparison influences financial decisions
• Using group behavior to reduce risk
• The impact of peer pressure on borrowing
• Designing community-based credit products
• The importance of a trust-based relationship

Module 9: The Impact of Financial Literacy

• The psychology of financial education
• The limitations of traditional literacy programs
• The role of just-in-time information
• Designing effective financial decision aids
• The link between literacy and behavior

Module 10: AI and Behavioral Finance

• The use of AI to predict and manage behavior
• Building a "behavioral engine"
• The role of natural language processing (NLP) in credit
• The challenges of explainable AI
• The future of AI in financial services

Module 11: Experimental Design in Finance

• The importance of A/B testing
• Designing a randomized control trial (RCT)
• Measuring the impact of a behavioral intervention
• The challenges of running experiments
• Best practices for a test-and-learn culture

Module 12: Ethical and Regulatory Considerations

• The ethics of behavioral interventions
• The risks of manipulating consumer behavior
• The role of regulators in a behavioral world
• Protecting consumer privacy
• The importance of transparency

Module 13: Case Studies in Behavioral Finance

• Analyzing successful behavioral interventions in finance
• The challenges of implementing change
• The importance of a multidisciplinary team
• The role of leadership in adopting new ideas
• Lessons learned from the field

Module 14: Behavioral Economics in Business Lending

• The application of behavioral principles to B2B credit
• How CEO and CFO biases impact borrowing
• The role of trust and reputation
• The importance of relational lending
• The future of behavioral insights in corporate credit

Module 15: Final Project and Discussion

• A hands-on project to design a behaviorally-informed credit product
• Presenting your findings and recommendations
• A discussion of remaining challenges and open problems
• The importance of a continuous learning mindset
• The future of financial services

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.