Objective
- Assess the likelihood of default.
- Expediate the application process resulting in expanded business in this sector.
Application scorecard for Small and Medium Enterprises (SME).
Solution
- TTD population was used for model with reject inference.
- Classification of risk factors for better understanding the magnitude of risk.
Moral Risk
- Company Reputation
- Management Experience
- Reference
- New/Existing Client
Business Risk
- Type Of Business
- Location / Property
- Years Trading
- Utilization
- Loan Objective
Financial Risk
- Financial Index - Trend and Forecast
- Liquidity Ratio
- Leverage Ratio
- Profitability Ratio
Challenges
- Not enough application data to develop model.
- Classification of risk factors for better understanding the magnitude of risk
Benefit
- The initial model expediated the loan process resulting in xxx% increase in business with excellent separation between good and Bad classes.
- After couple of years the model was recalibrated with financial variables – The result was outstanding with KS 58 and GINI 72 indicating a high performing model. Bank shifted to a scorecard generated loan application process.
