Risk & Reward: Credit Risk-Based Pricing Strategies for SACCOs Training Course

Introduction

In the competitive financial landscape, a "one-size-fits-all" approach to loan pricing can be detrimental to a SACCO's financial health. This specialized training course is designed to empower leaders and credit professionals with the knowledge to implement credit risk-based pricing, a strategy that ensures loan pricing accurately reflects the level of risk for each borrower. By moving beyond flat interest rates, SACCOs can enhance profitability, attract high-quality borrowers, and responsibly serve a wider range of members while safeguarding their portfolio.

This intensive program offers a clear, analytical framework for linking a borrower's credit profile to a customized loan rate. Participants will gain practical skills in risk assessment, financial modeling, and policy development, learning how to design a pricing model that is both fair to the member and beneficial to the SACCO. This is an essential course for any SACCO committed to building a sustainable and profitable lending portfolio through intelligent and data-driven pricing strategies.

Duration 5 days

Target Audience This course is for SACCO credit managers, loan officers, risk analysts, financial officers, and board members responsible for setting lending policies and pricing strategies.

Objectives

  1. To understand the fundamental principles and benefits of risk-based pricing.
  2. To master the key factors that influence a borrower's credit risk profile.
  3. To design and implement a transparent credit scoring system.
  4. To link a borrower's risk score to a tiered pricing structure.
  5. To develop a robust policy framework for managing risk-based pricing.
  6. To use data and analytics to inform and optimize pricing decisions.
  7. To understand the legal and ethical considerations of risk-based pricing.
  8. To effectively communicate the risk-based pricing model to members.
  9. To analyze the impact of pricing strategies on profitability and portfolio mix.
  10. To create a sustainable model that balances member-centric values with financial goals.

Course Modules

Module 1: Foundations of Risk-Based Pricing

  • What is risk-based pricing and why is it essential for SACCOs?
  • The difference between flat-rate and risk-based pricing models.
  • The benefits of risk-based pricing for both the SACCO and its members.
  • The link between risk-based pricing and a SACCO’s financial sustainability.
  • Case studies of financial institutions that have successfully implemented risk-based pricing.

Module 2: Key Risk Factors

  • Identifying the financial and behavioral factors that determine credit risk.
  • The "5 Cs" of credit revisited for a risk-based model.
  • The role of credit history, debt-to-income ratio, and cash flow analysis.
  • Understanding the impact of collateral and loan terms on risk.
  • How external economic conditions influence risk.

Module 3: Designing a Credit Scoring System

  • The principles of a transparent and objective credit scoring system.
  • Components of a custom internal scoring model.
  • The use of external credit bureau scores and reports.
  • Developing a scoring matrix that is tailored to the SACCO’s membership.
  • Validating and back-testing the scoring system.

Module 4: Linking Risk to Price

  • Creating a tiered pricing structure based on risk score.
  • The concept of a risk-adjusted return on capital (RAROC).
  • Calculating a loan's profitability based on its risk rating.
  • Setting a minimum profitability threshold for each loan.
  • Practical exercises on pricing different loan scenarios.

Module 5: Policy & Governance

  • The board's role in approving the risk-based pricing policy.
  • Essential components of a comprehensive pricing policy manual.
  • Defining exceptions to the policy and the approval process.
  • The importance of regular policy review and revision.
  • Ensuring the pricing model is compliant with all regulations.

Module 6: Data & Analytics

  • Sourcing and cleaning the data needed for a pricing model.
  • Using data to analyze the performance of different risk tiers.
  • The role of technology and software in automating the pricing process.
  • How to use analytics to identify trends in loan applications and approvals.
  • The future of AI and machine learning in dynamic pricing.

Module 7: Ethics & Fair Lending

  • Ensuring the pricing model is fair and non-discriminatory.
  • The importance of transparency and clear communication with members.
  • Addressing potential bias in data and algorithms.
  • The role of a review process for members who wish to appeal their rate.
  • Aligning pricing practices with the cooperative values of equity and fairness.

Module 8: Communicating the Model

  • Strategies for explaining the risk-based pricing model to members.
  • The benefits of showing members how to improve their credit profile.
  • Developing marketing materials that highlight the fairness and benefits of the model.
  • Training front-line staff to effectively answer member questions.
  • Handling member feedback and managing expectations.

Module 9: Impact on Growth & Portfolio

  • Analyzing the impact of risk-based pricing on loan application volume.
  • The effect on the SACCO's overall portfolio mix and quality.
  • How a risk-based model can expand the SACCO’s reach to new member segments.
  • Measuring the profitability and sustainability of the new model.
  • Using pricing as a strategic tool for growth and competition.

Module 10: Capstone Project: Pricing Model Design

  • Participants will work in teams to design a full risk-based pricing model for a SACCO case study.
  • They will develop a scoring system, create pricing tiers, and draft a policy framework.
  • Teams will present their model to a mock "Board" and defend their decisions.
  • This module provides a practical, hands-on opportunity to apply the concepts from all modules.
  • Participants will leave with a clear action plan for implementation.

CERTIFICATION

  • Upon successful completion of this training, participants will be issued with Macskills Training and Development Institute Certificate

TRAINING VENUE

  • Training will be held at Macskills Training Centre. We also tailor make the training upon request at different locations across the world.

AIRPORT PICK UP AND ACCOMMODATION

  • Airport Pick Up is provided by the institute. Accommodation is arranged upon request

TERMS OF PAYMENT

Payment should be made to Macskills Development Institute bank account before the start of the training and receipts sent to info@macskillsdevelopment.com

For More Details call: +254-114-087-180

 

Risk & Reward: Credit Risk-based Pricing Strategies For Saccos Training Course in Slovenia
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