Context
Small businesses are too small to be assessed like corporate clients and too complex to be scored like retail ones. Assessed through a standard corporate underwriting process, the process slows and its cost becomes disproportionate to the loan size. Left purely to scoring, the information the branch holds about the customer but which was never reduced to a number is lost. What was needed was a segment-specific process that preserved speed and quality at once.
Approach
- A new application process was defined within a credit policy and strategy specific to the small SME segment.
- The information set and income types were redefined against the segment's reality.
- Branch manager participation in the credit decision and branch manager scoring were built in, turning field knowledge into a decision input.
- A route to convert a decline into an approval request, and an appeal path against declines, softened a one-way decision mechanism.
- Quota management and adverse record correction processes were designed.
- Application channels outside the branch were made part of the process.
Outcome
- Small business credit applications came to be assessed by the segment's own logic.
- Underwriting time shortened while qualitative field knowledge was retained in the decision.
- Defining an appeal route made it possible to correct mistaken declines.
- Widening application channels reduced dependence on branch capacity.
This case study describes the project through its scope and approach. Client name, commercial figures and performance metrics are withheld under confidentiality obligations.
What This Project Left Behind
There is no necessary trade-off between speed and quality in a credit decision; a badly designed process only makes it look necessary. The real task is deciding correctly which information can be scored and which requires human judgement. The same distinction is observed when preparing an SME's credit file: strengths that cannot be reduced to a number must find their place in the file's narrative.
- Banking & Credit Process Advisory — Strategic advisory on restructuring distressed loans, financial analysis, negotiation preparation and process management with banks.