Credit monitoring by MFB management
Ensuring an accurate bank-wide credit risk management system would require board members and top management to;
- Formulate policies that reduces risk and establishes clear policies.
- Establish independent credit review department to monitor and give appropriate report.
- Periodically review and act where necessary where there are report infractions.
- Encourage an effective internal control system and program.
- Maintain a healthy credit portfolio by encourage line managers to achieve set goals.
- Develop appropriate product and services that resonate with the existing and prospective customers.
- Present periodic credit report to the board in other to make appropriate decision.
Credit monitoring by MFB staff
- Conduct proper credit assessment to determine a customer credit worthiness and ability to repay before loan disbursement.
- Be responsible for loans under their portfolio at all times.
- Continued follow up after loan disbursement to ensure loan is not diverted.
- Introduce measure to serve and meet customers demand at all times.
- Maintain a healthy relationship with customers and be accountable financially.
Client Interview Process
- Confirms the clients identity through an acceptable means of identification recognized by law or any other means applicable
- Probe personal information contained in the application form and other related ones.
- Probe question relating to clients business and other ties to other business in which client is a partner.
- Ask and confirm if client has outstanding loans with other MFBs and if yes, the outstanding loan balance.
- Ask about prepayment and accruals so as to take account of future income and expenses.
- Confirm the loan amount requested with what is written on the loan application form.
- Ask for savings balance with other banks or other informal savings groups.
- Ask for evidence of previous financial transaction (savings or loans) with other financial institutions or informal sector.
- Observe relationship of client to his/her own personal customers and neighbours
- Ask for available form of security/collateral for the loan the client is seeking.
- Confirm if family member is indebted to other microfinance banks
Client Business Interview Process
- Verify the authenticity of clients business and the location.
- Verify ownership of the business to determine if the business is actually owned by the client.
- Verify any form of record keeping including all the books of account.
- Verify consistency and differentials in sales record to determine peak period and low sales day.
- Verify and study the cash flow to determine the business capacity to repay the loan.
- Confirm the level of competition around the business to determine its continued existence.
- Indicate the specific type of business to know its legitimacy.
- Verify receipts ( Prepayments and accruals)
- Confirm ownership of the business premises (owned or rented)