The lending business can be very challenging and particularly if you do not have the requisite knowledge to vet the right credit customers.

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  • Outline

In this Chapter we will study:

  • The different types of lending institution and the nature of the borrowing they provide;
  • The general principles of good lending;
  • An introduction to the various methods of Credit Analysis;
  • An introduction to the Credit Analysis process.


  • What do financial institutions do?

As we saw in Chapter 1, in economic terms the financial services industry is vitally important to the stimulation of growth and wealth creation because it: –

  1. Facilitates Financial Intermediation and the operation of the Credit Creation Multiplier;
  2. It provides payment and cash management services that help the day to day conduct of business activity, and;
  3. It is a key mechanism to facilitate secure and efficient cross border trade in an increasingly globalised business environment.


A common misconception that is that credit risk arises from a) above, whilst the risks attributed to b) and c) are largely operational.  Whilst this assertion is true to a certain degree, it is worth highlighting that to deliver all 3 of these functions banks frequently have to commit to some form of Settlement or Documentary exposure to a third party ahead of being reimbursed by the client they are acting for.  Those commitments represent a Credit Risk, and the analysis of Credit Risk therefore has to be very firmly at the heart of everything a bank does.

For the purpose of this study text, we are focusing primarily on those institutions within the wider financial services industry that are engaged in “Financial Intermediation”.  It will be recalled from Chapter 1 that this means that they primarily seek deposits to fund credit related activities.    Readers should be aware, however, that not all institutions rely purely on raising deposit monies to fund lending activity.   Some, for example, may borrow money on international wholesale debt markets to on-lend to other borrowers; whilst others may use a blend of wholesale debt and retail deposit funding to finance their activities.   Some more specialist financiers, meanwhile, may raise funds from institutional and high net worth investors to on-lend to certain types of borrower.

Irrespective of where they are based in the world, Deposit taking institutions, above all other entities within the wider global financial services sector, are subject to intense regulation, especially given the aftermath of the 2008/09 financial crisis.   The nature and impact of this regulation will be covered in more detail in Chapter 8, but it is worth highlighting again at this point that much of this regulation is focused on ensuring the institution’s prudence and diligence in relation to the way in which it both assumes and manages credit risk; the primary objective being to maintain the confidence of depositors and other investors.

As indicated in Chapter 1, the key to effective Financial Intermediation is for lenders to be able to generate an adequate return from their lending and related activities to both meet their costs of funding (i.e. the interest they need to pay to depositors/investors); and also to cover their day to day operating expenses (for example property rents, power costs, IT Costs, Staff Costs etc).   All but the most socially motivated institutions will also expect to make a profit, to both provide for future investment in their business and to allow the payment of an adequate return to the shareholders or subordinated investors that are providing the risk capital needed to underpin the institution’s lending activity.

A further operational cost that also needs to be covered from the lending related revenues generated by a financial institution is the cost of loan losses (i.e. any borrowing that the institution is not able to recover in full from its borrowers).   Like any other operational cost, the management of a financial institution will want to minimize loan losses in order to both maximise the profitability of the institution and also to preserve the reputation of the business and its ability to raise deposit funding when it needs it.

The above commentary illustrates why credit analysts have such an important role to play in any financial institution, their core role being to both minimize losses and to also ensure that lending that is approved on a portfolio basis is priced at a level adequate to reflect the relative risk that is being carried within that portfolio.


Exercise 2.1:  We have stated that banks will often incur a form of Credit Risk in connection with the payment and other services that they offer. To encourage some thought as to how this works in practice, consider the example of Customer A that asks your bank to arrange a forward foreign exchange contract under which they will purchase US dollars at a pre-agreed price from the bank in 3 months’ time in order to settle a cross border transaction. What credit related risks does the bank incur by agreeing to this transaction?

Note down your answers on a sheet of paper and then compare them with the answers section at the end of this study text.

  • Different types of lending Institution and the Nature of their lending.

This section outlines the general principles and institution profiles that are common to all major geographic regions. The exact structure of the finance industry may vary from country to country. For example, in addition to the types of instructions detailed below, the Kenyan financial industry also has Savings and Credit Cooperative Societies (SACCOs). These predominantly lend to individuals and “chamas”. Loans are used to finance purchase of a house, car, payment of school fees or other personal needs or small projects in the case of chamas”. A chama is a Swahili word for group of individuals and in the financial circles is used to refer to an investment group or an informal cooperative. Banks in Kenya have designed products specifically for this group of customers.

The products offered by SACCOs are usually standard with interest rates and repayment periods known upfront unless the loan is to facilitate the purchase of a house or a car when the amount granted is subject to the multiplier effect. For instance, the loan amount that a borrower qualifies for is 3x their shares/savings in the Sacco. For most of the loan products, risk is mitigated by use of guarantors (members of the same SACCOs). Property title deeds and vehicle log book are other forms of security commonly used.

Increasingly, SACCOs are venturing into the real banking world by providing similar credit facilities as those available from banks. Nonetheless, this is so far restricted to the common funded facilities of overdrafts and loans.

A description of the types of lenders in East African can be found in Chapter 1.

2.2.1 Retail Banks

These institutions primarily serve individual consumers or small localised businesses.  In terms of lending activities, therefore, credit risk is most likely to arise in relation to the financing of house, car or other consumer purchases; or the provision of finance to support the trading needs of small localized business entities. Lending is usually in the form of standardised products that are offered subject to fairly rigid acceptance criteria or risk related formulae dictated within the banks credit policies.   Loan applicants that cannot comply with these criteria will usually be automatically declined, with little or no further analysis required.

Individual credit facilities within retail banks will usually be of relatively low value, and credit risk management within the bank will tend to be more focused on portfolio metrics rather than the detailed management of individual loans.  Moreover, where possible, lending will typically be “secured” by assets owned by the borrower, which the bank will have the right to sell in the event of a credit default, thus potentially providing an alternative source of recovery if needed.

2.2.2 Private Banks

These institutions tend to focus on lending to private individuals rather than to active businesses.  Most of their clients are, however, “High Net Worth” (i.e. wealthy private individuals).   Such clients may have the need to borrow from the bank from time to time, but any lending agreed will normally be for a very specific project or purpose.  The credit risk related to such lending will often be assessed in the context of the potential ability of the client to raise money from other sources to repay the debt if an Event of Default occurs.  For these reasons credit risk assessments are usually evaluated on the basis of the professional judgment of an experienced credit analyst or approver.

2.2.3 Commercial Banks

Commercial banks will normally operate within a single country or localised geographic region and will serve both the transactional and borrowing needs of commercial entities. Tanzanian financial institution CRDB Bank is an example of a commercial bank. Despite their SME “Label”, however, some of these companies may in reality be quite large.  In Chapter 1, we discussed the various definitions of SME depending on the region one is operating in.

The lending activities undertaken by a Commercial Bank will be substantially related to business borrowers that are likely to need to raise finance for the purposes of working capital management, and also possibly capital investment.   The specific risk considerations related to both of those borrowing purposes will be considered in much more detail in Chapter 3 of this text.

When lending to smaller companies, much of a Commercial Bank’s lending activity may again be formula driven, with risk mitigated by the provision of security (also commonly referred to as collateral).  Larger borrowing clients, however, may also potentially have more sophisticated credit needs associated with the need to finance cross border transactions.  Some growing companies may also have even more specialised needs if they are looking, for example, to expand through business acquisitions.  The credit analysis processes for commercial banks will almost certainly reflect this diversity, with a mix of automated and judgmental credit assessment tools being utilised based on the type of lending being contemplated.

2.2.4 Wholesale Banks

Whilst there is considerable overlap between commercial and wholesale banking activity, pure wholesale (or institutionally focused) banks typically deal with the largest internationally focused corporate clients.  Many of these clients will not be owner managed, but their ownership will rest either with large institutional investors or they will be listed on a quoted stock exchange.  The day to day management of such companies will therefore be undertaken by professional managers, and they will be required by law to adhere to very rigid corporate governance and reporting requirements.  Citibank is one of these banks and operates across the East African region with a presence in Kenya, Uganda, Tanzania and Zambia.

Such borrowers will typically operate both in the region and globally and have access to numerous banking lines and sources of finance, including potentially the international bond markets.  Much of their bank debt will be syndicated, with the risk related to any single funding line shared across multiple lenders working together in accordance with common documentation.  To put this into perspective, the funding lines provided to the largest corporate borrowers may well run into hundreds of millions or even billions of dollars, and lending syndicates made up of as many as 10 or more lenders.

The financing needs of such companies can inevitably be complex, incorporating a vast range of different lending products and services.  Equally the desire of banks to lend to such companies is often very strong, driven by both the credibility they can generate by being seen to operate in the Wholesale markets and also the substantial fees that can be generated by working with such clients.  This does mean that competition amongst institutions to lend to such clients can be intense, and as a result the client can often dictate their own pricing for debt.  They will also almost certainly use all of their negotiating power to ensure that their funding lines are as unrestricted as possible. Their inherent financial strength and scale also means that they will rarely wish to give banks any security to provide an alternative source of repayment in the event of a credit default.

All of the above can mean that credit exposures to such borrowers will frequently not even be subject to any formal repayment arrangements.  Banks will instead be expected to lend relying on the capacity of the borrower to refinance debt as and when it falls due for repayment.

In terms of credit risk analysis, most Wholesale Banks will make lending decisions based on the judgment and recommendations of their most experienced credit analysts.  Ironically the actual process of credit analysis can in some ways be easier to complete when dealing with such borrowers, than in the case of commercial or SME borrowers.  This is because credit Analysts working in the wholesale markets usually have access to far more publicly available and independently validated information on which to base their recommendations.  Their own credit analysis can also often be bench marked against the opinions of external market analysts and those of the rating agencies, as explained later in this chapter.  At the same time, however, the level of exposure that a bank will often be expected to carry for a Wholesale client can be substantial; and any losses incurred thus have the potential to be very damaging for the bank, both financially and from a reputational viewpoint.   For this reason, credit analysts in the wholesale sector usually specialise their expertise very narrowly on specific industries or geographic markets, with final lending decisions also often made by committee to ensure that the loan underwriting process is conducted with a higher degree of objectivity and independent scrutiny.

2.2.5 Investment/merchant banks

Investment, also referred to as merchant, banks, typically specialize in offering advice to large corporations or governments about how to raise funds on the global capital markets. They may also provide advice on mergers, public share offerings and large company acquisitions.

In terms of credit risk, the lending activity of Investment Banks is often based on underwriting publically offered debt or equity issues. Credit Risk Assessments are thus hugely reliant on professional judgments regarding not only about the credit quality of the client, but also the resilience of the markets that will provide the primary source of repayment for the bank. Credit analysts working in such banks are often very highly qualified and highly paid; and they can often have a high profile both within their own organisation and within the external markets in which they operate.

Investment Banks are often also active on specialist financial markets, trading in stocks, currencies and risk derivatives. The individual credit exposures that they might hold on their short term “Trading Books” can run at any point in time to many millions if not billions of dollars, and the failure of the bank to put adequate procedures in place to manage these risks can be catastrophic. In 2012, investment bank JP Morgan Chase announced losses of USD 6.2 billion from trading activities in its London office. In addition, the bank was fined in excess of USD 1 billion by regulators for reporting and control failures. JP Morgan Chase made the losses trading in corporate credit instruments as part of the bank’s strategy for managing the risks it was taking in other positions in the market.

As the example of JP Morgan Chase shows, given the huge sums involved in investment banking, getting risk, including credit risk assessments, wrong can have dire consequences for the bank.  In 2008 /09 Lehman Brothers, Merrill Lynch and Bear Sterns were just 3 large global investment banks that failed completely because of their poor credit risk management, and that fact alone escalated the loss of confidence in the global financial system and contributed hugely to the contagion that subsequently had such devastating effects on the global economy.  This contagion as the crisis unfolded meant that a number of other international banks with large investment banking divisions needed government bail-outs and enforced mergers with other institutions to ensure that they did not go the same way and to help stabilize the global financial system.

2.2.6 Universal Banks

These banks get involved in all of the activities referred to above, offering a full range of banking services to multiple customer types, usually through specific business divisions or subsidiary operations. A prime example of a Universal Bank from the pre-crisis era was UK based RBS Group, which in 2007 was actually the largest bank by assets in the world.  RBS had huge Retail Banking operations in its home UK market, Ireland and also in the US.  Through its acquisition of the Dutch bank ABN Amro, it also had large commercial banking operations in 53 countries across Europe and Asia in addition to its traditional domestic markets.  It additionally had a massive global investment banking business, focused primarily on underwriting leveraged debt and bond securitisation issues in Asia, the US and Europe.  Its activities also included insurance, asset finance and private banking amongst many other lines of business.

In 2007, RBS made the largest profit ever recorded in a single year by a Scottish based company at GBP 10.7bn.  Conversely, just a year later it recorded the largest ever loss in UK corporate history of GBP 24.1bn. Its cumulative losses until it was able to report another annual profit in 2017, were in excess of GBP 55bn.

There are a number of factors that contributed to the downfall of this once great organisation, analysis of which is not necessarily relevant for the purpose of this study text.  However, one of the bank’s core failings was to adequately understand and manage credit risk across the full range of its diverse businesses, providing yet more evidence of just how important effective credit risk management really is.

Exercise 2.2:   Think about the financial institution you work for.  How many different lending products can you think of that the bank offers to its customers, and what sort of customers does it primarily serve?

  • General Principles of Good Lending

It will be recalled from Chapter 1 that the Bank for International Settlements has defined Credit Risk as: – “The potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms”.

We additionally considered in Chapter 1 some of the reasons why Credit Defaults might arise.

For banks and similar lending institutions, the incidence of some level of Credit Defaults is an inevitable consequence of doing business. However, it is the core function of the Credit Department within such organizations, and the individual analysts that work within those departments, to undertake objective credit assessments in a structured and ordered way to ensure that the risk of loss is minimized as far as possible.

By implication when assessing Credit Risk, analysts need to form a judgment as to whether circumstances might arise that will negatively affect either the ability or willingness of the borrower to fulfill their obligations under a credit agreement. They additionally need to quantify the likelihood that those circumstances might arise; and the potential level of losses that could be incurred as a result.

In other words, Analysts need to assess the borrower’s Probability of Default (“PD”) and the likely Loss Given Default (“LGD”).

The actual process applied towards making lending decisions may vary between banks and between different categories of borrower.  However, the common aim of all credit analysis is assess PD and LGD as detailed above; and to ensure that they fall within the parameters of the lender’s Risk Appetite as specified by the institution’s Board of Directors.

Maintaining objectivity when undertaking credit assessments can sometimes be challenging.  Credit Analysts frequently face pressure from prospective borrowing customers to approve requests for facilities quickly and, perhaps, without access to all the information that they may be required.  It can at times be tempting to bow down to this pressure. Credit Analysts must, however, try to avoid becoming too influenced by these pressures, and insist on the provision of adequate information and sufficient time to fully understand and evaluate the proposition.

Always remember – It is usually the lender that will bear the cost of loss if a credit default arises, and the decision whether or not to lend should always reflect that consideration.

2.3.1 The 10 Principles of Lending

With the aforementioned in mind, it is recommended that the following 10 Golden Rules or Principles are always applied when considering a borrowing request received from a client of a lending institution:

  1. Take the time you need – to fully review all of the information required to make a decision. Remember that snap lending decisions are rarely good decisions!  If a borrower is pressuring for an immediate answer it may be better to say No!  However, you could add when relaying that message that if you are given adequate time to fully review, understand and assess the proposal – it is possible that the answer may change to Yes.
  2. Don’t make assumptions! – If information is not available or totally understandable, defer finalizing your lending decision until adequate and understandable information is availed.
  3. Don’t take borrower’s statements at face value – Whilst lending decisions should be based on a reasonable relationship of trust between Lender and Borrower, make sure you are able to make the distinction between facts and aspirations; and seek independent verification of facts wherever you can. The principle to apply here is: TRUST BUT VERIFY.
  4. Remain alert that bankers are custodians of their depositors’ money – you have the responsibility to return those deposits when asked to do so. For the most part banks work on a Net Interest Margin of just 2-3%, particularly in the era of interest rate cap in Kenya, from which they need to cover all of their operating costs and any loan losses they incur. That is a thin margin, and needs to be fully borne in mind when making each and every lending decision.
  5. Be very careful when a borrower verbally proposes to provide further funds – or access to an alternative source for repayment if something goes wrong.  In reality when their backs are against the wall, borrowers’ frequently don’t deliver on such informal promises.  The basic rule is that if they are not willing to show their full commitment to support their request for borrowing at the outset, they will be much less likely to do so when times get tough.
  6. CASH IS KING!  A borrower needs the ability to generate cash to repay debt.  As we will explain when we look at Financial Analysis in Chapter {3}, when dealing with business borrowers in particular, it should always be remembered that there is a big difference between the ability to generate profit and the ability to generate cash.  It is cash that a lender should always focus on.
  7. Do not lend purely on the basis of security – Assets sold under financial distress rarely generate the value that might be expected as a result of an orderly sale.  Security should thus be regarded as an insurance policy that might provide a potential means of limiting credit losses should a credit default occur.  It should not, therefore, be relied upon as the primary source of repayment.
  8. Beware the borrower that seeks to borrow more than they apparently need – As indicated under principle 5 above, people rarely commit further resources to a project or business when things are not going well.  The golden rule therefore is that if a borrower is asking a bank to take a risk that they could take themselves, but they don’t want to – they are clearly not totally confident that the source of repayment is deliverable. If they don’t want to take the risk, why should the bank?
  9. The bank’s risk continues until the last payment – A credit analyst’s responsibility for risk management does not end when the money is advanced.  As explained later in this chapter, credit analysis involves the identification of potential risks, consideration of their possible impacts, and consideration of how those impacts can be mitigated.  Ultimately it means   forming a definitive view as to whether any residual risk sits within the scope of the lending institution’s prescribed Risk Appetite, and how that residual rick can be controlled to protect the position as far as possible.
  10. Two or more heads are always better than one – A good credit analyst will always be willing to take full personal responsibility for the recommendations that they make, but equally where they have any doubts or reservations they will always be willing and able to seek input from colleagues and other subject matter experts and incorporate that input into their analytical thinking.


Exercise 2.3: We will look at the process to assess Probability of Default in the following sections of this study text, but what examples of security or other tools can you think of that might help limit Loss Given Default and protect the lenders position?

  • Methods of Credit Analysis

Throughout history there has been an active debate across risk professionals as to whether lending is an art or a science.

In reality it is often a combination of the two.  There are undoubtedly many situations where the use of historic statistical data can provide a good objective indicator of the potential for problems to arise when dealing with borrowers within a particular sector or industry.  Such data can also tell Credit Analysts a great deal about likely borrower behavior, and this too can be useful in helping to reach lending decisions.

Notwithstanding the above, there are equally many instances where professional judgment and experience contributes hugely to the lending decision. Experienced lenders rarely ignore their “gut instinct” when it indicates the need for caution, even when the factual assessment on the face of historic statistical data looks satisfactory.

The primary methods used to analyze and quantify credit risk inevitably vary across different types of financial institution and borrower types, but they may broadly be grouped under the following general headings: –

  1. Fundamental Risk Analysis based on a professionally judgmental approach.
  2. Use of statistical models, credit scoring or credit bureau information/data

These methods may be used unilaterally or may, as often happens, be combined.

2.4.1 The Judgmental Approach

The primary purpose of this study text is to teach readers the analysis techniques that are used as part of the professionally judgmental approach.  This approach is most commonly applied when lending to small and medium sized enterprises (SMEs), because in many ways SME’s require the most comprehensive and objective credit analysis.  It is also particularly relevant given that this category of borrower is most likely to represent the largest area of focus for the majority of lenders operating in the emerging markets of {East Africa).



2.4.2 The use of statistical models or “credit scoring”

Credit scoring allows a lender to rapidly assess the credit worthiness of a borrower, especially in the context of low value credit products that are marketed to “homogeneous” pools of borrowers (I.e. where they are all broadly similar, and where they might reasonably be expected to react to adverse events or circumstances in a broadly similar way). In many markets around the world, almost all lending to personal borrowers is now based on the use of statistical models and credit scoring techniques. Credit scoring and the use of credit information are discussed in more detail in Chapter 7.

  • The Credit Analysis Process

Having discussed in the previous sessions within this chapter the general principles that should be observed when making lending decisions, and also the various methods that might be used to support credit assessments, it is now time to introduce the reader on how to apply their own professionally judgmental approach to the analysis of credit risk.

Over the years, bankers have come up with various mnemonics and anagrams to try to illustrate how to approach credit analysis in a structured and organized way.  Readers might have come across the following at some point in their careers:-


The 5 C’s



Character, Capacity, Capital, Collateral and Conditions




Character, Ability, Means, Purpose, Amount, Repayment, Insurance





Character, Ability, Means, Purpose, Amount, Repayment, Insurance, & Interest, Charges, Extras





Character, Capability, Capital, Purpose, Amount, Repayment, Terms, Security/collateral




Person, Amount, Repayment, Security/collateral, Expediency, Remuneration







  • Chapter Summary

In this chapter we have looked at the different types of borrowers that readers might come across; and different types of lender who meet the needs of those borrowers.   We have also looked at some of the “automated” or market driven approaches that can, in the right circumstances, be applied in the assessment of credit risk for some of these borrowers.

The assessment methods referred to all have valid applications when it comes to day to day lending activity, but from Chapter 3 onwards we are going to look in detail at how lenders might form their own judgment about what constitutes a good or bad credit risk, and the structured approach they should adopt to achieve this.

  • Knowledge Check
  1. a) What is the essential difference between PD and LGD?
  2. b) What is the value of the average Net Interest Margin generated by a Bank?
  3. c) What does the acronym PARTS stand for?

Suggested Answers to Exercises

Exercise 2.1

The forward exchange contract the bank has committed to means that in 3 months it will need to have USD dollars available to provide to Customer A at an agreed exchange rate.  To minimize its risk, the bank will seek to agree a back to back deal with another client who wants to sell dollars, whereby the bank will commit to buy them at an agreed rate.  If the Customer A for some reason does not have the money available to pay for the dollars it has contracted to buy, the bank will need to go into the foreign exchange market to sell the dollars it is holding having fulfilled its obligations under the back to back deal it has agreed to buy them.  It could suffer a loss on that basis if exchange rates move against it, although it could also potentially benefit if rates move in its favour.  For a relatively small sum (say USD10k) it may be willing to accept this risk itself, but for a much bigger sum – Say USD 10m its loss on the deal could be quite significant.  It is thus taking a credit risk on Customer A that they will have the dollars available in accordance with the terms they have agreed.

Exercise 2.2

There is no definitive answer here. This exercise is deliberately intended to think about the nature of the borrowers’ that they deal with and to reflect on how credit risk decisions needs to be made in relation to those customers as they read through the remaining sessions in this chapter.

Exercise 2.3

What assets a bank can rely on for security to a degree depends on legal jurisdiction, but some basic principles always apply.

The best security should be easy to get control of, and it should also have a readily available market with a stable pricing structure that will enable the lender to assess what they will get when they sell the asset on.  Inventory may also represent good security on a similar basis but only if there is a ready market for the type of inventory, and assuming it is not perishable fashion related or subject to deterioration in quality or transportable. Thus Steel ingots may be good security because they are not easy to move and have well-established tradable markets, but pineapples are not because they can be moved ahead of enforcement action being taken and, in any event, they have a very short shelf life.  Fashion related products are valueless. Today’s hot designer tee shirt is, in reality, tomorrow’s dishcloth!

An assignment over trade receivables can be good security, but only if the underlying debtors are of high quality and there is no scope for them to refuse to pay.

Plant and Machinery may be suitable, but it must be attractive to potential buyers.  A good quality industrial printing machine or steel press will retain its value, but no one wants to buy second hand desk top computers that are replaced by new models almost as soon as they are taken out of their packaging.  Remember as well that to sell a piece of plant you need to move it, and that can cost a lot.  A 100kg plastic injection moulding machine does not cost much to move.  A 3 tonne industrial generator that needs to be bolted to a 60 cm concrete slab and enclosed in specialist insulation, costs an awful lot to relocate.

Intangible assets are rarely worth anything in an enforced sale.

The key message is don not get too bogged down with the Balance Sheet numbers when assessing what assets are available to repay debt if a borrower fails.  Look at each class of assets individually and think objectively about what value those assets will attract when buyers know that the borrower is in distress and they will thus be seeking to get a bargain!

Solutions to Knowledge Check

  1. a) PD is the statistical probability that a borrower will default based on collated data for similar borrowers that have historically actually defaulted on credit obligations.

LGD is the loss that the lender is likely to suffer in the event of a default, assessed statistically against loss data for similar borrowers that have historically actually defaulted on credit obligations and which had a similar security / asset profile.

  1. b) 2-3%. Consider that as for practical purposes the Gross Margin that a bank generates. In relative terms it is very low, and lenders would be advised to take a fairly cautious view with regard to the assessment of the risks they take on that basis.
  2. c) Purpose, Amount, Repayment, Terms, Security.