The global financial crisis has affected the Africa Middle East Asia region in many different ways, with some countries impacted much more severely than others. Also, in terms of recovery, the picture is just as varied, with some countries fully recovered and in growth mode, while others are still in intensive care. With such a wide range of economies, credit grantors in the region have responded to the recent challenges with a multitude of different strategies.
The credit grantors’ responses can be grouped into 5 different categories, which every company in the region should consider, to enable them to gear up for growth in 2012.
- Cost cutting and automation.Almost all credit grantors have reduced personnel numbers and increased the level of automation in their business. This has ranged from mass lay-offs to natural attrition. Examples of popular automation projects include the processing of new credit applications to implementing rules based handovers to collections agencies.
- Focus on collections.Most clients have suffered a significant increase in non- performing loans and so there has been a significant focus on collections, which will continue into 2012. Associated with increased automation, a large number of clients have implemented new and advanced collections systems, as well as investing in sophisticated account management systems and predictive diallers.
- Increased use of external data.Clients are making more use of external data, where it is available via credit bureaux etc. There are increasingly more credit bureaux operating in the emerging markets and this is driving down costs. In addition, as the credit bureaux become more established, they will offer more sophisticated products and services, such as credit bureau scores, which enhance account management strategies significantly.
- Affordability calculations.Clients have reviewed their affordability models and income estimators and are now using these with stricter scorecard cut-offs. Much has been learnt from the past few years where affordability was pushed to the limits or even ignored in many mortgage lending situations.
- Improved credit marketing.In many markets clients are proactively marketing credit again, albeit in a much more structured and targeted manner. Rather than chasing volumes, the focus is now on maximising ROI through booking better quality accounts.
All 5 of these strategies have been proven to be effective in many diverse markets in the region. The Top Tip is that lenders consider using all 5 strategies in various combinations to prepare your company for exiting the current financial quagmire and succeeding in 2012 and beyond.
About the Author
Stephen J. Leonard, Founder & CEO, Credit Risk Connection
Stephen J. Leonard is the Founder and Chief Executive Officer of Credit Risk Connection, a risk management consultancy and reseller of analytics, consulting, CRM, scorecards, software and training. Stephen has over 25 years’ of specialist credit risk management experience in the emerging markets of Europe, Middle East, Africa and South Asia. He has managed assignments with over 150 clients in 30+ countries, covering the entire credit life cycle and the complete range of organisations and products in the consumer credit, SME and credit bureau industries. Stephen holds an AS, BA and MBA and can be contacted at SLeonard@CreditRiskConnection.com