Credit risk management: Challenges and solutions
On Monday, October 10, following their annual general meeting, the representatives of Proxfin held a workshop on credit risk management. The event, which took the form of a roundtable discussion, featured the following guest speakers:
- Maria Ricciardi, Vice-President Products and Operations Division, Business Services, Desjardins Group (Canada)
- Militza Ambulorio, Director of Credit, Centro Financiero Empresarial (Panama)
- Jean-François Mopaka, Director General, OTIV cooperative network, Toamasina-Littoral (Madagascar)
- Fortunatas Dirgincius, Director General and Chair of the board of directors, Lithuanian Central Credit Union (Lithuania).
The speakers identified factors and best practices that minimized the portfolio at risk and loan losses, and thereby increased the performance and profitability of their institutions.
They noted that:
- Care must be taken at all times to maintain a balance between business development and sound risk management.
- Rigour is essential at each step of credit management, from analysis to recovery.
- Credit risk management is not only a concern for base cooperatives. The apex institution has a key role to play which includes authorizing loans above a certain amount.
- Lending institutions should segment their clientele, and have adequate knowledge of each segment, in order to serve them while adequately managing associated risks.
- Because it improves the reliability of information and makes it more rapidly available, technology is a tool of the utmost importance.
- Incentive compensation is a factor for successfully developing the credit portfolio, but it should target quality as much as volume.
- The frequent lack of credit bureaus in developing and emerging countries must be compensated by credit officers knowing their members and clients and making them aware of the dangers of overindebtedness.