Annual Report 2007

ing from Banco ProCredit’s activities. The design
of our lending process minimises the risk associated
with individual loans. Our thorough credit
analysis examines each client’s cash flow, in addition
to his or her assets. Credit committees, following
the “four eyes” principle, ensure proper
assessment of loan applications by experienced
personnel. The loan portfolio is diversified across
many small borrowers, reducing exposure arising
from a particular industry or region.
Loan officers are responsible for ensuring that
their clients meet their payment obligations and
receive extensive training in portfolio monitoring.
On a monthly basis, the bank evaluates the
total loan portfolio in terms of maturity, arrears,
and diversification by sector. It also assesses
problem loans, loan loss provisioning ratios,
write-offs and recoveries.
As of December 2007, the portfolio at risk greater
than 30 days was 3.1%, and loan loss provisions
stood at USD 1.6 million.
Liquidity and Market Risk
The Assets and Liabilities Committee monitors
and controls the bank’s open currency position,
interest rate gaps, and liquidity and funding positions
to ensure that it maintains an optimal balance
sheet structure. Liquidity levels are defined
in relation to short-term loans (7-15 days) and act
as a safeguard against exchange rate fluctuations.
Throughout the year, Banco ProCedit maintained
acceptable cumulative gaps in the ratio of
liquidity and funding to the bank’s liabilities. The
adjusted maturity gap at December 2007 was
close to zero.
The local banks’ prime interest rates have tended
to follow the trends set by the Bank of Mozambique’s
Liquidity Support Operations (FPC)
and the freely negotiated rates in the interbank
money market. The average financial margin for
banks operating in Mozambique is similar to that
in other Sub-Saharan countries but higher than in
many of the more developed countries.
Operational Risk
Operational risk is a particular focus for the Risk
Management Department. It conducts rigorous
internal analyses of operational events that could
result in losses for the bank. Its operational risk
report serves as an effective instrument for monitoring
the bank’s activities and for defining rules
and procedures for ongoing risk management.
The bank’s extensive training efforts enable employees
to better identify potential risks in their
respective areas. We attach great importance to
fostering a culture of internal and external transparency
in compliance with the ProCredit Code of
Conduct. Our employees are expected to apply
the principles of mutual trust and respect not only
towards their colleagues but also, and especially,
in their dealings with customers. Procedures are
fully documented, and all transactions are carried
out in accordance with the “four-eyes’’ principle.
R i s k M a n a g e m e n t