CONDUCTING EFFECTIVE SME CREDIT RISK REVIEW PROCESS

INTRODUCTION
Small and Medium Enterprises (SMEs) are vital to economic growth and employment, but they also carry unique credit risks due to limited financial information, informality, and vulnerability to market shocks. This course provides practical tools and techniques for conducting effective SME credit risk reviews to ensure early identification of risks, improve credit decision-making, and minimize non-performing loans (NPLs).
Participants will learn how to evaluate SME borrowers, assess business models, analyze financial statements, and conduct periodic credit reviews effectively.

COURSE OBJECTIVES
At the end of the session, participants will be able to:

• Understand the fundamentals, importance, and frameworks guiding SME credit risk reviews.
• Identify key risk factors and early warning signals in SME credit portfolios.
• Apply structured approaches to analyze both financial and non-financial information for effective risk identification.
• Document and communicate credit risk findings clearly, with actionable insights.
• Recommend practical mitigation strategies and remedial actions to strengthen SME lending practices.
   

COURSE OUTLINE
Module 1: Fundamentals of SME Credit Risk Reviews

• Importance of SME sector and lending landscape
• What is credit risk review?
• Objectives and scope of credit risk reviews
• Regulatory expectations
• Types: Routine vs. Special reviews
• Challenges in reviewing SME credits.
   

Module 2: Understanding SME Risk Profiles

• Unique characteristics of SMEs
• Common SME credit risks
• Financial vs. non-financial risk factors
• Sector-specific risk considerations
• Use of risk rating tools and scorecards
• Red flags and early warning indicators.
   

Module 3: Review Process and Methodology

• Step-by-step credit risk review process
• Planning the review
• Gathering information
• Conducting interviews/site visits
• Financial analysis techniques
• Collateral and legal document review
• Assessing borrower performance vs. original loan terms
• Qualitative assessments (management quality, governance, etc.)
• Key documentation requirements
   

Module 4: Reporting and Action Planning

• Structuring credit review reports
• Communicating findings to key stakeholders
• Escalation of high-risk accounts
• Recommending corrective actions and risk mitigation strategies
• Linking findings to credit policy adjustments
• Monitoring implementation of action plans.
   

Module 5: Case Studies and Practical Exercises

• Real-world examples of SME credit risk reviews
• Group exercises: Identifying risks and drafting review comments
• Best practices and lessons learned.