The creation of a loan application analysis framework

Abstract

The Flemish investment organisation PMV serves as a credit facility and sees an increasing trend in the applications and velocity by which they need to answer these credit requests. Certainly, given the Covid-19 period, a lot of companies will request additional funding from the organisation. In order to screen these requests in a faster way, but with still having attention to the credit risk, PMV asked us to think in a proactive manner with them, to come up with new ideas and potential solutions to assist the PMV organisation and its analysts when dealing with new requests. As a first step, we defined a problem statement which would be the building block to work around. When having our first meetings, we noticed that PMV had a lot of internal data sources but used this not at its full potential. We concluded that the building block from the problem statement could be better divided into 3 main pillars to work on. - How can we reduce the credit risk on an easy and fast way? - Can we use the internally generated data from the past to give some guidance towards analysts? - What external data sources would be relevant for PMV and can we include these in the current analysis? Secondly, with the main pillars in mind, we prepared ourselves for the project by reviewing the academic literature for potential ideas and solutions. We summarised these findings and came up with 3 main solutions to tackle the defined problems. - Development of a Financial Health Indicator - Creation of a reference framework tool based on internal data - Analysing and including external data sources + advising towards PMV We describe in this presentation the methodologies used to create our solutions (i.e. data modelling, providing workshops, training, …) and present our final results. This report will guide you through the work we spent in this project and will inform you how the proposed solutions can have a positive impact on the PMV organisation.