...UNIVERSITY OF ZIMBABWE ASSIGNMENT CREDIT POLICY AND STARDARDS June 2014 Lecturer:Mr Samuel Gumbe Student: Rutendo Brian Mawoyo Question: With reference to your organisation or any that you are familiar with, outline the importance of a well articulated credit policy to the credit function. Background Credit is deferred payment and its control is an important feature of business management. In banks clients deposit their money. The bank lends out the money through a credit function. Deposits are collected at say x% and advanced at say x% plus 5% and 5% being the profit of advancing credit. This is how banks operate. Retail shops and wholesalers also sale goods on credit and this generally enables them to achieve higher margins and greater sales. Trade credit generally facilitates trade in the country and internationally. In all these some customers fail to pay back and there have to be effective, economic and efficient ways of recovering debts. Where credit sales or business constitute above 40% of total volume the importance of managing this function well becomes of paramount importance. Introduction Banks are in the business of receiving deposits and lending them out. Retailers, manufacturers and wholesalers offer trade credit. This process ties up money and at the same time these organisations have financial obligations to meet hence there has to be a balance. To achieve...
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...Find the Most Important Variables In Predictive Models A commonly used method in determining the most important variables is to examine how well each variable individually in predicting the target variable. However, this approach has its limits. The first limit is that it excludes variables that are actually good ones. For example, to find if credit score is a good indicator of account default, we calculate the default rate for each credit class as shown below (or we may perform some statistical tests such as a Chi-Square test for that matter). As we can see, the low credit score class have a default rate of 18% vs that of 6% for the high credit score class. Thus, credit class is considered as a good variable to build a default model. Credit score and account default. However, this approach has its limit because it does not take the relationship among variables into consideration. This can be illustrated using an imaginary example. We want to asses if height and weight of people are indicative of getting a disease. We can calculate the following tables for height and weight, respectively. Since short or tall people have the same percentage of sick people (2%), we may conclude that height is not relevant to predicting the disease. Similarly, we also think weight is not important. Height and Disease Weight and Disease If examining weight and height at the same time, we can develop the following matrix. There are four groups of people, high/heavy (normal), short/light...
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...foreign currency deposit ratings of four Philippine banks after announcing the same decision on the country’s credit rating. These banks are the Sy-led Banco de Oro Unibank (BDO), Ayala-led Bank of the Philippine Island (BPI), government financial institution Land Bank of the Philippines (Landbank) and Ty-led Metropolitan Bank & Trust Company (Metrobank). These banks local and foreign currency deposits are rated ‘Ba1/Not Prime’. Also under review is BDO’s foreign currency senior unsecured debt rating of ‘Ba1’ and Metrobank’s local currency subordinated debt rating of ‘Ba2’. “The bank financial strength ratings of the four banks remain unchanged,” Moody’s said in a statement. It explained that “credit strength of the government is an important input in our assessment of the government's capacity to provide support in times of stress.” "The review for upgrade of BDO's, BPI's, LBP's and MBT's ratings reflect our assessment that these ratings would likely benefit from an additional notch of systemic support uplift in the event that the parallel review of the Philippine sovereign debt rating concludes with a rating upgrade," Moody's Assistant Vice President and Lead Analyst for the Philippine banks Simon Chen said. Aside from assessing the government’s ability to extend support, the debt watcher said the current evaluation “will also take into account the systemic importance of each bank, which would influence the government's willingness to extend support in times of stress.” ...
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...NAME: Amira Mustapha Yabo COURSE: MGT200 TOPIC: Transformational Leadership Transformational Leadership * Introduction Transformational leadership as stated by Wikipedia, defines Transformational leadership as “leadership which enhances the motivations, morals, and also performance of followers through a variety of mechanism”. In other words, transformational leadership could be termed as a type of leadership that could inspire change positively to everyone who follows. A transformational leader is one who possesses the skill set to motivate and inspire people who follow his/her footsteps. Transformational leaders are usually full of energy, ideas and are very passionate. (Wikipedia) The entire concept of transformational leadership was introduced by presidential biographer James MacGregor Burns. He related his theory to that of the difficulty in differentiation between management and leadership then said the only difference were in behavior and characteristics. Burns developed two different theories – Transformational leadership and Transactional leadership. It said that transformational approach made way for change in the organization and life of the employees. He believed that leaders and followers could help each other advance to higher levels if the work together. Unlike the transactional approach where only the leader benefits. Burns also believed that because of the vision and personality that leaders have, they can easily change the expectations and perceptions...
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...Banking sector restructuring and the development of financial intermediation in Albania Bachelorthesis at the Swiss Banking Institute University of Zurich Chair: Prof. Dr. Urs Birchler Author: Ardita Kapedani Submission date: 1 July 2010 The banking sector in Albania has seen dramatic developments over the past 10 years. Since 2000, the size of the banking sector has grown rapidly, with credit/GDP rising from less than 10% to more than 35%. In 2000 two-thirds of banking assets were controlled by state-owned banks. Today well over 90% of bank assets is in the hands of foreign controlled banks. In this paper we firstly showed the step by step restructuring of the banking sector in Albania. Then the changes in the structure of financial intermediation and finally, the conditions of access to finance for firms in different years were analysed. For the first two topics, we used mainly data from the Bank of Albania like the Supervision Annual Reports, Annual Reports, Financial Stability Reports and time series found in its homepage. For the last topic, the BEEPS data were used to build different summary statistics and to test different null hypothesis with STATA. The first part was the introduction. In the second part we saw Albania after the fall of communism and the economic reforms in 1992, when the one tier banking system became a two tier. The Bank of Albania represented an independent central bank and the other banks were second tier banks. Many...
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...because they don’t understand the importance of the subjects. In the seminar that took place last week I learned some valuable information that wouldn’t just help me in my young adult years but for a lifetime. For every teen when you reach the big one eight it feels that you gain so much more freedom. You’re now considered an adult and the credit card companies began to start sending you all these offers. However, with this new found freedom comes responsibility. To people who don’t know the risk of getting credit cards this may be a bad road to go down. Yet, I’m not saying that credit cards are bad, what I’m saying is that you have to be responsible. Credit cards should never be used as a long term tool. Everyday expenses should not be charged on your credit card but should be budgeted. It will come out being a lot more expensive charging a 5 dollar hamburger, than just budgeting it in to you weekly spending. Some people really don’t know the true cost of a charge transaction. An example was given to me during the seminar I attended. Sample: $1000 purchase @12% APR paying monthly min. = 9.3 years/interest paid =$513.36. Therefore you end up paying more than half of what your initial purchase was in interest. So when considering a credit card you really need to know what you’re using it for. It’s best to limit the amount of “junk” credit cards, for example the department store cards. Some teens don’t realize the importance of keeping a good credit profile. The debt that we obtain...
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...financial system must provide a complete range of products and services to meet the different needs of all strata in the economy by expanding the financial base of society and preventing financial exclusion. Therefore, informal credit institutions such as pawnshops are recognized as providing loans to those in society that are excluded from mainstream bank loans. Operating side-by-side with the mainstream financial sector, but largely ignored, the pawnshops as part of the informal sector are significant in providing credit finance, particularly to low-income groups and in areas where mainstream institutions are hampered by bureaucracy (Chan and Owyong, 2007). In the context of development, Caskey (1994) emphasizes the importance of pawnshops as „banks for the poor‟. He elaborates that pawnshops have a high outreach, are often financially viable, and have several advantages; compared to other informal market institutions, clients are not expected to fall into long-term indebtedness. Moreover, it reduces the risk of a pawnbroker to provide loans to poor people, and monitoring is not necessary. Although pawnshops have grown in importance and influence part of the population in various societies, there is still a lack of research regarding these important informal credit institutions. In other words, despite the flourishing business, the theoretical and empirical studies of pawnshops are very limited. The following studies are some of the earlier studies in the U. S. among the little available...
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...Will Reforms Enable Outreach? M-CRIL Review of Rural Banking in India: Working Paper 1 Micro-Credit Ratings International Limited 602 Pacific Square, 32nd Milestone NH8, Gurgaon 122 001 INDIA Telephone: +91 124 230 9497, 230 9707, 405 0739, 426 8707; Fax: +91 124 230 9520 e-mail: contact@m-cril.com ; website: www.m-cril.com Study Sponsored by Swiss Agency for Development and Cooperation Micro-Credit Ratings International Limited Table of Contents Section Background Executive Summary 1 2 3 4 Introduction The Importance of Rural Banks Recent Performance of the Rural Banking System Reforms and the Rural Banks 4.1 A huge effort to reform the cooperative system 4.2 Sensible proposals for reorienting the Regional Rural Banks but… 5 Will Reforms Enable Inclusion? 5.1 Cooperative reform – is it good money after bad? 5.2 RRB reform – has the inclusion objective been sidelined? 6 Conclusion Page v vii 1 3 7 8 8 12 15 15 17 18 M-CRIL Review of Rural Banking in India Background This study follows from the discussion of issues in the performance of Regional Rural Banks (RRBs) written by Sanjay Sinha, Managing Director, M-CRIL and published in The Economic Times (newspaper) on 17 March 2007. In relation to financial inclusion, many of the issues raised there affect the performance of cooperative banks as well as the RRBs. These issues include • The effect of government ownership of RRBs on their ability to operate efficiently and effectively to fulfil the financial inclusion...
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...Oct 27. Submit to Turnitin. 1. A credit card company conducts a conjoint survey to find out how consumers trade off various aspects of credit card offerings: the brand, annual fee and credit limit. A potential consumer rates each of the following nine credit cards on a 0 to 9-point scale, where 0 means that the offering is really terrible and 9 means that the offering is very excellent. Card #1 Discover $20 annual fee $2,500 credit limit Score: 3 3 | Card #2 MasterCard $20 annual fee $5,000 credit limit Score: 8 8 | Card #3 Visa $10 annual fee $5,000 credit limit Score: 9 9 | Card #4 MasterCard No annual fee $1,000 credit limit Score: 4 4 | Card #5 Discover $10 annual fee $1,000 credit limit Score: 1 1 | Card #6 Discover No annual fee $5,000 credit limit Score: | Card #7 Visa No annual fee $2,500 credit limit Score: 5 5 | Card #8 MasterCard $10 annual fee $2,500 credit limit Score: | Card #9 Visa $20 annual fee $1,000 credit limit Score: 2 2 | a. Utility function: Calculate the utility function of each brand based on the above response. Show how you calculate the utilities to demonstrate understanding. Record the utilities in the table below Part worth utilities: Brand | Utility | Annual Fee | Utility | Credit Limit | Utility | Visa | 5.33 | No annual fee | 5.33 | $1,000 credit limit | 2.33 | MasterCard | 6.00 | $10 annual fee | 5.33 | $2,500 credit limit | 4.67 | Discover | 3.67 | $20...
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...|Subject Code |Subject Title |Marks |Credit | | |Business Communication and Report Writing (In English) |100 |4 | | |Computer and Information Technology |100 |4 | | |Taxation in Bangladesh |100 |4 | | |Business Statistics (In English) |100 |4 | | |Macro Economics |100 |4 | | |Human Resource Management |100 |4 | | |Viva-Voce |100 |4 | | |Total = |700 |28 | |Course Code | |Marks: 100 |Credits: 4 | Class Hours: 60 | |Course Title |BUSINESS COMMUNICATION AND REPORT WRITING...
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...Finance - Finance is the Art & Science of Managing Money - Finance is the Art of passing currency from hand to hand until it finally disappears Types & Sources of Finance ____________________________________________________________ ________ Long Term Sources of Finance - Finance required to meet Capital Expenditure - Also, known as Fixed Capital Finance Short Term Sources of Finance - Finance required to meet day-to-day Business requirements - Also, known as Working Capital Finance 2. Working Capital Management: Working Capital (WC) ____________________________________________________________ ____________________________ Basics regarding WC Meaning of WC Working Capital Concept Factors Affecting WC Meaning of WC Management Importance of WC Management Classification/Type of WC A On the Basis of Concept (i) (ii) Gross Working Capital Net Working Capital (Positive & Negative Working Capital) Methods of estimating WC Conventional Method Operating Cycle Method Cash Cost Method Balance Sheet Method B On the Basis of Periodicity (i) (ii) Fixed / Permanent Working Capital (Regular & Reserve Margin/ Cushion WC) Variable Working Capital (Seasonal & Special Working Capital) Parag Nalin Doshi 1/12/2009 www.CAalley.com Meaning of Working Capital: - Working Capital is the amount of Capital that a Business has available to meet the day-to-day cash requirements of its operations - Working Capital is the difference between resources in cash or readily convertible...
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...is the Art & Science of Managing Money - Finance is the Art of passing currency from hand to hand until it finally disappears Types & Sources of Finance ____________________________________________________________________ Long Term Sources of Finance Short Term Sources of Finance - Finance required to meet Capital Expenditure - Also, known as Fixed Capital Finance - Finance required to meet day-to-day Business requirements - Also, known as Working Capital Finance 2. Working Capital Management: Working Capital (WC) ________________________________________________________________________________________ Basics regarding WC - Meaning of WC Working Capital Concept Factors Affecting WC Meaning of WC Management Importance of WC Management Classification/Type of WC A On the Basis of Concept (i) (ii) Gross Working Capital Net Working Capital (Positive & Negative Working Capital) Methods of estimating WC - Conventional Method Operating Cycle Method Cash Cost Method Balance Sheet Method B On the Basis of Periodicity (i) Fixed / Permanent Working Capital (Regular & Reserve Margin/ Cushion WC) (ii) Variable Working Capital (Seasonal & Special Working Capital) Parag Nalin Doshi 1/12/2009 www.CAalley.com Meaning of Working Capital: - Working Capital is the amount of Capital that a Business has available to meet the day-to-day cash requirements of its operations - Working Capital is the difference between resources...
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...Minimizing working capital is essential for a company in today’s economy. There are many reasons why minimizing working capital is important. With its importance, though, there are many challenges. The most important reason to minimize working capital is to maximize shareholder wealth. Nicholas Havoutis states, “Proactive working capital management is fundamental to a company’s ability to adapt in a challenging economy, because it’s a discipline firmly within an organization’s control that can be practiced independent of the current macroeconomic environment,” (2003). He goes on to say, “Cash management activities, once seen as managing cash inflows and outflows, are increasingly viewed as fundamental to enhancing shareholder value,” (2003). Another importance of minimizing working capital is “to ensure that the organization is able to find the difference between short-term assets and short-term liabilities,” (Capital Eyes). When minimizing working capital we are basically managing short-term assets and liabilities. This means cash, receivables, and payables. Successful cash management means increasing cash surplus to cover debt. There are three ways a company can increase their cash surplus in an effort to cover their debt. First, collect receivables faster. Second, get better credit terms from suppliers. Third, move inventory faster, (Capcut). “Good capital management practices can lead to the optimal management of short-term assets and...
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...In the case of a developing economy the increasing populations are not completely affordable in the current economic system. In this context micro enterprises have been considered as an effective instrument for advancement and empowerment of women both economically and socially. Millennium Development Goals (MDGs) which have ended in 2015 specify the importance of women empowerment. Sustainable Development Goals which have to be achieved in 2030 also gives importance to women empowerment. In this context micro entrepreneurship program is...
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...Credit Policy of Ghana Commercial Bank THE CREDIT POLICY The credit policy of Ghana Commercial Bank Ltd is aimed at maintaining acceptable credit standards by holding reasonable risk limits, evaluating new business opportunities, complying with regulatory requirements and providing adequate liquidity for the effective running of the bank. This aim is achieved through the following objectives: 1. Attract and maintain a High Quality Portfolio of Assets 2. Efficiently manage its assets to ensure liquidity 3. Finance the needs of Corporate, medium and small scale as well as individual clients. 4. Join syndicates with other banks and financial institutions. The importance of these objectives is to ensure that clients who borrow from the bank have the ability to repay the funds they borrow on schedule and with interest. Businesses that borrow from the bank should demonstrate an ability to repay from their current and future net cash flows of the business. Individual client's repayments depend also on their personal cash inflows basically being their salaries. Another importance is the need to avoid bad debt as much as possible by not giving credit to clients who are likely to be unable to repay due to their peculiar circumstances. Also the bank must ensure that at all times it is able to meet its obligations to depositors since its stock in trade is money. This it does by diversifying loans it has given (assets) to have a wide array of maturity profiles. Also it ensures...
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