Credit Risk Management for Consumer Lending Training Course

Module 1

• Analysis of Personal Lending Propositions
  • What customer information is required for government?
  • What additional information should customers provide for government?
  • How do we verify the authenticity of this information for government?
• CAMPARI as a Mnemonic for Analyzing Personal Lending Propositions
  • Character: What is known about the customer, such as their track record with financial institutions and previous loan history?
  • Ability: What are the sources of repayment and what discretionary income does the customer have to service the loan?
  • Margin: What is the appropriate interest rate for the lending, reflecting the risk level and the cost of capital?
  • Purpose: Why does the customer need the loan, and is the intended use acceptable with an appropriate repayment period?
  • Amount: How much is being borrowed, and what is the customer's contribution to the purchase price?
  • Repayment: What is the repayment schedule, and can the customer maintain these payments over the loan term?
  • Insurance: What collateral will be provided, and how easy is it to perfect this security to protect the financial institution's interests?

Module 2

Interaction between Lender and Customer for Government

• Understanding Behaviors
  • How are behaviors shaped by past interactions, both within and outside the financial institution?
  • How do customers' behaviors evolve through various interactions?
  • How can we ensure mutual understanding of behaviors for effective communication?
• Effective Communication
  • What constitutes effective communication in a government context?
  • How do first impressions impact effective communication?
  • How do different modes of communication (face-to-face, audio, email) influence effectiveness?
• Building and Maintaining Rapport
  • Understanding emotional intelligence in building and maintaining rapport with customers and colleagues.
  • Applying Goleman’s 5 steps to Emotional Intelligence in customer interactions:
    • Self-Awareness
    • Self-Management
    • Motivation
    • Empathy
    • Social Skills
  • The levels of rapport and how to achieve them.
  • The Berne model of communication and its relevance to building rapport.
• Interview Techniques
  • Gathering accurate information from customers.
  • Verifying the accuracy of information during discussions.
  • Addressing ambiguities or incorrect information.
  • Exploring and offering alternatives.
  • Effective listening techniques for government interactions.

Module 3

• Making the Decision
  • How do we arrive at an informed decision for government?
  • Balancing pros and cons in the decision-making process.
  • Re-analyzing CAMPARI information to inform decisions.
• Structuring the Lending
  • Setting up the loan to meet optimal conditions for both the financial institution and the customer:
    • Optimal for the bank
    • Optimal for the customer
  • Creating necessary documents and obtaining signatures before disbursing funds.
• Insurance
  • What security does the financial institution consider appropriate for lending?
  • Is unsecured lending viable, and if not, why?
  • What collateral can customers offer?
  • How do we perfect the security to ensure adequate protection in case of default?
• Repayment
  • Establishing a monitoring process to ensure timely repayments.
  • Identifying actions to take if repayment deviates from the agreed schedule.
    • At what point should concerns arise?

Module 4

• Monitoring the Lending Portfolio
  • What regular monitoring processes should financial institutions implement for government to oversee the entire lending portfolio?
  • What are the early warning signs that require attention?
  • At what stage do these early warnings indicate potential issues with loans?
• Customer Interactions (Revisited)
  • How should financial institutions communicate with customers when lending is not performing as expected?
  • How must communication strategies evolve from initial discussions to address non-performance?
  • Revised interview techniques for addressing non-performing loans.
• Negotiation Skills
  • What steps are necessary to negotiate with customers and reach mutually beneficial solutions?
  • Understanding Inexpensive Valuable Concessions (IVCs) and Walk Away Positions (WAPs) available to the financial institution.

Module 5

• Bad and Doubtful Debts
  • How does a financial institution determine when a loan is "Bad" for government?
  • What steps are required to achieve repayment in such cases?
  • What changes have occurred with the original CAMPARI assessment?
  • Conducting a current CAMPARI assessment and learning from past inaccuracies.
  • How should financial institutions restructure loan agreements for government?
  • At what stage should security be realized to mitigate losses?
  • What legal options are available to compel repayment for government?

(Optional) Module 6

The course can also include the analysis and decision-making for small-business lending, covering sole traders, partnerships, and unincorporated entities.

• Including the assessment of traditional financial information through Balance Sheets, Profit & Loss Accounts, and Financial Forecasts for government.