Course

• Financial Institutions
• Teacher: Faran Ali
Recommended Books:
• Madura, Jeff. Financial Markets and Institutions, Florida: Thomson
Learning Inn. (Latest Ed.)
• Thygerson, J. Kenneth. Financial Markets and Institutions (Latest
Ed.),
• Saeed, Khawaja Amjad. Financial Institutions in Pakistan:
Operational and Procedural Aspects
• Introduction to Financial Systems & Banking Regulations published
by Institute of Bankers Pakistan (IBP) Publication for ISQ Stage 1

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 Credit Risk Mitigation
• Cannons of lending
– Character
– Capacity + Cash flow
– Capital
– Collateral
– Conditions

2
 Character
• Personal Character
– Verifications from different sources of bank
including personal visit of banker / call /
Asking from neighbors / References etc.
• Professional Character
– eCIB (Electronic Credit Information Bureau)
– Previous loans and history
– Default / Restructuring of loans

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4
 Capacity
• This is an evaluation of the company’s
ability to repay the loan. The bank needs to
know how you will repay the funds before it
will approve your loan.

– Cash Flow (Present and future)

– Payment History

5
 Capital
• Borrower’s stake in project
• Regulatory requirements

6
 Collateral
• Machinery, accounts receivable, inventory,
and other business assets that can be sold if
a borrower fails to repay the loan are
considered collateral.

• Collateral is considered a “secondary”

source of repayments-banks want cash to
repay the loan, not sale of business assets.

7
 Conditions
• This is an overall evaluation of the general
economic climate and the purpose of the
loan.
• And also what rate and charges should be
offered customer / borrower

8
Conclusion

9
 Study Material
• https://www.score.org/resource/6-cs-
business-credit

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