The strategy to reduce the loan portfolio at risk (PAR) aims to decrease the risk from 17% to 10% by 2028 by enhancing credit assessment procedures. For instance, implementing advanced AI and machine learning credit scoring models can refine borrower evaluations, while conducting regular training for credit teams ensures continuous improvement. Utilizing external credit ratings and setting stricter loan approval criteria promote sound credit decisions.
Moreover, by strengthening loan monitoring, real-time automated systems can efficiently track repayments and empower dedicated teams for timely follow-ups. Early-warning systems help avert defaults, whereas monthly loan reviews ensure thorough performance assessments, leading to proactive risk management.
Lastly, optimizing the loan portfolio through diversification caps high-risk sectors and introduces flexible repayment methods. Collaborating with micro-lenders allows an expanded reach, while market-focused loan products reduce concentration risk. Partnerships and regular risk assessments refine approaches, aligning with market and borrower needs.
The strategies
⛳️ Strategy 1: Enhance credit assessment procedures
- Review and update the current credit assessment processes
- Implement advanced credit scoring models using AI and machine learning
- Conduct regular training sessions for the credit assessment team
- Increase the use of external credit ratings for evaluation
- Set stricter criteria for loan approvals
- Perform regular audits of credit assessments
- Establish a committee to review loans above a certain threshold
- Monitor industry trends to anticipate credit risk factors
- Engage external consultants for fresh perspectives on credit assessments
- Implement a probationary period for new types of loans to test risk
⛳️ Strategy 2: Strengthen loan monitoring and follow-up practices
- Automate loan monitoring systems to track repayments in real time
- Set up a dedicated team for loan follow-ups and collections
- Implement early-warning systems for potential loan defaults
- Conduct monthly reviews of outstanding loans and track performance
- Develop and distribute borrower communication guidelines for default scenarios
- Initiate reward systems for timely repayments by clients
- Include regular financial counselling for borrowers
- Offer periodic training to loan officers on handling delinquent accounts
- Collaborate with collection agencies for default management
- Benchmark performance metrics bi-annually to assess strategy effectiveness
⛳️ Strategy 3: Diversify and optimise the loan portfolio
- Assess and identify sectors with lower default rates for strategic lending
- Cap exposure to high-risk sectors and evaluate periodically
- Redesign loan products to align with market demands and risk tolerance
- Introduce flexible repayment schemes tailored to borrower capacity
- Conduct focus groups with borrowers to understand market needs
- Implement loan insurance products to mitigate risk
- Develop partnerships with micro-lenders and community banks
- Set maximum exposure limits per borrower to reduce concentration risk
- Review and refine risk management frameworks annually
- Use data analytics to forecast and adapt to changing market conditions
Bringing accountability to your strategy
It's one thing to have a plan, it's another to stick to it. We hope that the examples above will help you get started with your own strategy, but we also know that it's easy to get lost in the day-to-day effort.
That's why we built Tability: to help you track your progress, keep your team aligned, and make sure you're always moving in the right direction.
Give it a try and see how it can help you bring accountability to your strategy.
