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Credit risk
African Bank Retail
Credit decisions are made using a
combination of manual and automated
processes based on rigorous analysis
of historical performance. The risk tools
involve a series of scorecards and
discrete criteria derived from data
sources such as credit bureaux, pay
slips, bank statements and information
obtained during the client interview
stage. These sources enable
determination of a true financial picture
for each client. Centrally, payroll loans
also undergo further scrutiny at the
employer level to account for economic
trends in the relevant industry sectors
and the employment stability of
employees. Credit criteria determine
the final product offering ie. loan size,
term and price and are based on the
individual’s risk assessment.
The underwriting principles are
predicated on establishing the ability,
stability, and willingness to pay and are
captured in the following manner:
Ability to pay
– Application data supplemented
with pay slips, bank statements
and bureaux enquiries to
establish the client’s debt burden
and affordability.
Stability
– Clients must be formally
employed for minimum periods
of time and employment is
verified with employer.
Willingness to pay
– Repayment for retail loans is
automated according to the pay
frequency of the client and
deducted from his/her bank
account. For payroll loans, the
employer deducts payment at
source.
– The client’s credit bureau history
enables assessment of
willingness to pay for new loans.
For those clients with existing
loans or prior history, actual loan
performance is leveraged in this
assessment.
In addition to the rigorous credit
decision making procedures, the division
monitors and controls risk through a
number of mechanisms:
Detailed MIS on the application
process and loan performance to
enable timely identification and
assessment of potential problem areas;
Sophisticated data mining and
multivariate analysis to identify and
capitalise on behavioural patterns
and trends;
Limitation of exposure for specific
corporate payrolls based on
historical performance;
System-enforced data quality rules
and logic to ensure clean capture of
application data and adherence to
credit policy;
Fraud detection systems with
dedicated resources for analysis and
follow-up;
Electronic disbursement of all loans;
Exception reporting to control fraud
and identify errors.
Collections
The Collections business unit is
responsible for the collection of all
African Bank Retail matters from the
date of default until the loan repayments
are either rehabilitated or the loan is
written off.
Risk management within the
Collections business unit is achieved
through a combination of advanced
technology and dividing the unit into
smaller areas of focus.
In terms of technology, a substantial
investment in the collections
environment has been made over the
past 18 months. The main elements are:
A fully integrated, specialist
collections software package called
Tallyman. The key features of this
package are, amongst others,
workflow automation, document
generation, work prioritisation and
queueing and the ability to set
collection strategies at client level for
clients with multiple loans;
The call centre technology has been
upgraded with the acquisition of
additional predictive dialling
capacity, the implementation of a
new PABX together with its
integrated call centre management
system. The process of integrating
the client services call centre, which
deals with inbound calls, is also in
progress and specialised workflow
technology to automate much of this
process has been acquired.
The principle of specialised focus to
enhance risk management, which is
practiced throughout the organisation, is
also applied in the Collections business
unit. The unit is divided in the following
four divisions with special focus on:
Legal Collections;
Administration Orders;
Call Centre; and
Insurance.
Each division has an executive
responsible for its specific risks,
objectives and results and is divided into
further specialist units as required.
In respect of general process, once
a loan is identified as being in default
it is immediately transferred to the
call centre. Arrangements to collect
the overdue instalments are made
with the debtor, and, in the event of
such attempts being unsuccessful the
debtor is progressed through the various
stages of legal collection. In the event
of non-performing loans being identified
either as insurance claims or
administration order matters, the loans
are transferred to the appropriate
division for recovery.
The ultimate risk mitigator within the
Collections business unit is having
experienced, appropriately qualified
staff. The Collections business unit is
well equipped at all staff levels, but
in particular at senior and middle
management to handle the current
risks. This favourable situation has
arisen both through experience gained
within the bank, as well as the
opportunity to acquire and retain
collection skills through the Saambou
transaction.
Credit Indemnity
The division is continuing to grant new
credit using a dual score matrix which
combines an internal score with a credit
bureau score when assessing first time
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African Bank Investments Limited