ADFIAP, through its service unit, ADFIAP Consulting (AC) visited FSMDB for the re-establishment of its Credit Scoring tool. The objective of the consultancy project is to provide guidelines for the basic evaluation of all credit applications/loan proposals to ensure that all details of the borrower’s personal entrepreneurial profile and business operations are properly assessed, evaluated, and risk-rated. This will enhance the predictability and probability of loan repayments thus ensuring the operational sustainability of the Bank in the long-term.
The engagement is comprised of various phases from desk research on FSMDB’s Lending Policies and Operations; review of the efficacy of the previous credit scoring system, loan portfolio, and product segmentation; on-site visit and validation of initial outputs through interviews of key persons, up to the development and Management approval of the enhanced Credit Scoring Tool. An online orientation training will also be provided to FSMDB’s Head Office and Branch staff involved in lending activities on the proper implementation of the Credit Scoring (CS) Tool.
Upon completion of the desk research and review phases, an on-site visit at the FSMDB Headquarters in Pohnpei, Micronesia was held from February 16-26, 2024 by Mr. Victor Abainza, Senior Consultant and Ms. Carmen Cintura, Lead Consultant for Financial Management, Audit and Compliance. On-site visit activities included: (1) validation interviews with credit officers; (2) initial revision of the proposed CS Tool based on validation interviews; (3) meetings with the Information Technology team on the required IT work to be done such as the ability to translate the excel-based program into the Bank’s current system with appropriate control features, system specifications, user access controls, authorization, digital signature, multiple users and reporting of transactions; (4) meetings with the Finance Officers; (5) presentation of the proposed Credit Scoring Tool to the Technical Working Group; (6) pre-testing of the excel spreadsheet application for the consumer, housing and commercial loan accounts using both current and past due accounts and debugging of the spreadsheet application; (7) inputting of selected accounts into the credit scoring spreadsheet and monitoring the processing time under normal circumstances; (8) calibration of the weights for the parameters and performance measures for each loan type based on the preliminary test data; (9) Wrap up meeting with the Technical Working Group on the activities completed, results of the testing, further enhancements to be undertaken and the IT requirements.
Further review of the specification of the developed Credit Scoring Tool by AC will be done to ensure that the stipulated outputs and revision requirements of FSMDB are met. Upon completion of the automated Credit Scoring Tool, the Technical Working Group shall finalize the Credit Scoring Tool Specs and present the same to the FSMDB Management for final approval. To address the capacity empowerment objective, the online orientation as mentioned above will thereafter commence. AC shall perform extended monitoring of the Credit Scoring System within 1 year from sign-off to ensure its efficiency and predictive capabilities and provide fine-tuning as part of ADFIAP’s unique value proposition.
For inquiries on the ADFIAP Consulting Credit Scoring Project and how ADFIAP can help through consulting services and training, please email inquiries @adfiap.org.