Plan to equip bank staff with risk assessment skills


Banks have been urged to review and beef up their customer lending risk assessment capacity for staff amid a pile-up of non-performing loans (NPLs).

Equipping staff with appropriate skills and tools to assess risk will be the first line of defence against the risk of bad loans, experts say.

“It is now more important than ever for banking staff to demonstrate knowledge and understanding of lending principles and products, seeing that lending is a core function of commercial Banks,” said KIB Head of Partnerships Peter Gitau.

“In line with the KIB mission of promoting best practice in the acquisition of professional banking education and training in Kenya, it is critical that we as the KIB support the banking industry to develop the requisite knowledge and expertise within this space.”

As part of efforts to address the bad loans challenge head on, KIB has inked partnership for training with the Chartered Institute for Securities and Investment (CISI) to boost bank employees’ capacity to prioritise risk management.

“The expertise will foster better client engagement and rein in on the issue of non-performing loans. Our partnership with the CISI to run this programme in Kenya will ensure that staff is exposed to the right methodologies in credit risk analysis which is a plus for the industry and the economy in the long run,” said Mr Gitau.

According to Kevin Moore, the CISI Director of Global Business Development, capacity building is crucial for bank employees who act as the first line of defence for banks.

"CISI is proud to partner with our accredited training partners to offer this training in Kenya," he said.

"This is our commitment to ensuring that we bring world-class qualifications to this market and participate fully in raising the standards of Credit Risk. This qualification is suitable not only for financial service professionals, but also to those new to credit risk. It offers global recognition and access to higher level qualifications," he added.

In 2017, a study by Financial Sector Deepening (FSD Africa) concluded that inadequate or lack of credit risk management skills can cause tangible losses to financial institutions due to poor assessment of loans leading to possible booking of poor-quality assets.

The study noted that relationship officers and managers are recruited from a variety of backgrounds and do not necessarily have relevant skills and experience.

This exposes institutions to possible fraud or poor assets that could arise as a result of poor assessment skills.

Those targeted for training under the pact include relationship managers, relationship officers, branch managers, credit risk officers and new starters to the company.

"CISI has partnered with training partners including KIB, Kenya School of Monetary Studies (KSMS) and Premier Capital to offer this programme in Kenya," said the institute.

It has invited credit risk managers and learning/development leaders in the banking industry to discuss capacity building within Credit Risk Management at an event to be held in Nairobi today.

"The event will showcase the progress made by the Fundamentals of Credit Risk Management (FCRM) programme as pertains to building skill and expertise within the Credit Risk Management space," said the institute.

"Additionally, the event will also serve as an award ceremony to appreciate top achievers within the various banks that have enrolled their staff onto the programme.

Top achievers from Habib Bank, I&M Bank, KCB, DTB and Consolidated bank will be feted.

Banks in East Africa are highly exposed to bad loans, especially in situations of extreme economic shocks, due to weak client risk assessment tools, a separate study by Deloitte showed last year.

“As a bank, we have taken deliberate steps to ensure our staff are well equipped on effective credit analysis. We have observed quantifiable change on how staff approach the credit risk process after undergoing the Fundamentals of Credit Risk training programme,” said Constance Macharia, head of Credit at DTB.

“Not only is it great for staff morale as it is certified, the skills attained go a long way in matching our clients' needs with our services, ensuring customer satisfaction, and additionally contributing positively to the bank's bottom-line.”

The manufacturing sector accounted for nearly half of loan defaults in the first quarter of the year on the back of high input costs, according to the Central Bank of Kenya. The sector’s non-performing loans climbed to Sh77.8 billion by March from Sh57 billion three months earlier, the highest quarterly growth in value on record.

The Sh20.8 billion jump came at a time the sector complained of the high cost of shipping and challenges in accessing adequate stocks of dollars to pay suppliers on time amid increased competition for raw materials in the global markets.