Fundamentals of Credit Risk Management – Quiz 01

Last Updated: June 2024

Table of Contents

Topics:
Chapter 1:
Explain the credit environment.
– Understand the lending environment in East Africa.
– Explain effective lending processes and practice.
– Explain the underlying principles of good lending.

• The importance of credit and its role in the economy.
• Types of borrowers in East Africa.
• Types of lenders in East Africa.
• Credit risk
• the role of ethics and social responsibility in lending.
• What do financial institutions do?
• Types of lending.
• Suitability of loans.
• The process of lending – building / manufacturing credit.
• The Credit Analysis process.
• The canons of lending
• Borrowing types; working capital, seasonal, projects, asset purchase, etc.
• Sources of repayment – cash flow, asset conversion loans, asset-based loans
• Credit policies
• Trading cycles – understanding the term working Investment
• Control of lending
• Business Plans

Chapter 2:
Understand the provision of credit products and services.
– Understand types of lending products.

• Types of products; benefits and features; advantages and disadvantages
• Customer profiles / matching products
• Personal products – overdrafts, loans, hire purchase, house purchase loans, credit card, pay day loan (salary loan, cash advance loan)
• Corporate products – leasing, factoring, revolving credit, project financing
• Alternative sources of credit
• Emerging credit products, delivery channels and associated risks – how new technology is impacting on credit risk

Chapter 3:
Explain how financial institutions mitigate credit risk by taking good security.
– Examine the appropriate use of security in the loan agreement.
– Understand how security is taken.
– Explain the challenges of security.

• Security / collateral to support the lending request
• Types of security – personal and corporate
• Attributes of a good security: MAST (marketability, assess ability, stability and transferability)
• Valuing security – Loan to value/ intangible security
• Microfinance lending and security – lending with little or low security, guarantees and other third-party security

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