Overview

Credit Risk Management (CRM) is the systematic process through which a financial institution identifies, assesses, measures, monitors, controls, and mitigates the risk that a borrower or counterparty will fail to meet agreed financial obligations.

Credit risk is one of the most significant risks faced by commercial banks, SACCOs, microfinance institutions, development finance institutions, fintech lenders, insurance companies, and other organizations that extend credit. When poorly managed, credit risk can result in loan losses, declining profitability, liquidity pressures, reduced capital, and, in severe cases, institutional failure.

Effective credit risk management therefore requires more than simply deciding whether to approve or reject a loan. It involves managing the entire credit lifecycle:

Credit Application → Appraisal → Approval → Documentation → Disbursement → Monitoring → Early Intervention → Recovery

A strong credit risk management system ensures that lending decisions are based on reliable information, appropriate risk assessment, sound policies, effective controls, and continuous monitoring.

Target Participants

• Credit officers
• Loan officers
• Relationship managers
• Risk managers
• Bank and SACCO professionals
• Microfinance professionals
• Credit analysts
• Internal and external auditors
• Finance managers
• Debt recovery officers
• Compliance officers
• Managers involved in lending decisions

 FUNDAMENTALS AND CREDIT RISK ASSESSMENT

Module 1: Introduction to Credit Risk Management

• Meaning and nature of credit risk
• Importance of credit risk management
• Sources of credit risk
• Types of credit risk
• Credit risk versus other financial risks
• Credit risk management objectives
• Credit risk management cycle
• Role of the board and senior management
• Role of the credit and risk functions
• Credit risk governance

Module 2: Credit Risk Policies and Governance

• Credit policy framework
• Credit approval structures
• Delegation of lending authority
• Credit limits
• Exposure limits
• Concentration limits
• Segregation of duties
• Credit committees
• Risk appetite
• Credit risk culture
• Regulatory and compliance considerations

Module 3: Credit Appraisal and Borrower Assessment

• Principles of credit appraisal
• The 5 Cs of credit:
• Character
• Capacity
• Capital
• Collateral
• Conditions
• Borrower identification and verification
• Purpose of borrowing
• Source of repayment
• Cash-flow assessment
• Business and industry analysis
• Management assessment
• Credit history
• Customer due diligence

 CREDIT ANALYSIS, SCORING AND RISK MEASUREMENT

Module 4: Financial Statement Analysis for Credit Decisions

• Understanding financial statements
• Statement of financial position
• Income statement
• Cash-flow statement
• Working capital analysis
• Liquidity ratios
• Profitability ratios
• Leverage ratios
• Efficiency ratios
• Debt-service capacity
• Trend analysis
• Comparative analysis
• Identifying financial distress

Module 5: Credit Scoring and Risk Rating

• Concept of credit scoring
• Purpose of credit scoring
• Credit scoring models
• Qualitative and quantitative factors
• Internal credit ratings
• Probability of default
• Risk grades
• Scorecards
• Application scoring
• Behavioral scoring
• Limitations of credit scoring

Module 6: Collateral and Credit Enhancement

• Purpose of collateral
• Types of collateral
• Property
• Motor vehicles
• Guarantees
• Financial securities
• Insurance
• Collateral valuation
• Legal ownership
• Perfection of security
• Loan-to-value ratios
• Collateral monitoring
• Credit guarantees

Module 7: Credit Risk Measurement

• Probability of Default (PD)
• Loss Given Default (LGD)
• Exposure at Default (EAD)
• Expected Credit Loss (ECL)
• Unexpected loss
• Credit risk concentration
• Portfolio risk
• Credit risk models
• Stress testing
• Scenario analysis

 CREDIT MONITORING, MITIGATION AND RECOVERY

Module 8: Loan Approval and Disbursement Controls

• Credit approval process
• Credit documentation
• Loan agreements
• Conditions precedent
• Approval authorities
• Loan documentation checklist
• Disbursement controls
• Compliance with approved terms
• Post-disbursement review
• Loan administration

Module 9: Credit Monitoring and Early Warning Systems

• Importance of loan monitoring
• Portfolio monitoring
• Customer visits
• Financial performance monitoring
• Repayment behavior
• Early warning indicators
• Delinquency monitoring
• Watch-list accounts
• Risk migration
• Covenant monitoring
• Early intervention strategies

Module 10: Non-Performing Loans and Credit Recovery

• Meaning of non-performing loans
• Causes of loan delinquency
• Classification of loans
• Restructuring and rescheduling
• Loan rehabilitation
• Recovery strategies
• Negotiated settlements
• Guarantees and collateral realization
• Legal recovery processes
• Debt collection
• Write-offs
• Post-recovery analysis

Module 11: Credit Portfolio Risk Management

• Portfolio diversification
• Sector concentration
• Geographic concentration
• Single-borrower exposure
• Related-party lending
• Large exposures
• Portfolio quality indicators
• Non-performing loan ratio
• Provision coverage
• Portfolio-at-risk
• Credit risk reporting

Module 12: Credit Risk Management Using Technology and Data Analytics

• Automated credit assessment
• Digital lending risks
• Credit bureau information
• Alternative credit data
• Loan portfolio analytics
• Automated early warning systems
• Fraud detection
• Artificial intelligence in credit assessment
• Cyber and data risks
• Data quality and governance