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Credit Process Marking Scheme-Baf S23-March 2024

Credit processing scheme

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Wesaya Mathew
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15 views4 pages

Credit Process Marking Scheme-Baf S23-March 2024

Credit processing scheme

Uploaded by

Wesaya Mathew
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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KABETE NATIONAL POLYTECHNIC

Bidii na Uaminifu

INSTITUTE OF SOCIAL SCIENCES & TECHNOLOGY

BUSINESS MANAGEMENT DEPARTMENT


DIPLOMA IN BANKING AND FINANCE

BANKING AND FINANCE LEVEL 6

MODULE I MARCH 2024

END OF TERM ASSESSMENT

UNIT OF COMPETENCY: CREDIT FACILITIES

UNIT CODE: BUS/OS/BF/CR/01/6/A

CLASS: BAF S23

TIME: 2 HOURS

MARKING SCHEME

© 2022 Kabete National Polytechnic. Turn over


a) Identify any four documents considered during customer screening (4 marks)
i. National identification card
ii. Pay slip
iii. Bank statements
iv. Credit reports
v. Tax returns
vi. Proof of address
b) Outline four roles of valuer in security valuation (4 marks)
i. Determining fair value
ii. Risk assessment
iii. Reporting and communication
iv. Dispute resolution
c) State four disadvantages of financing projects using borrowed funds (4 marks)
i. Debt burden
ii. Interest payment
iii. Risk of default
iv. Fear of failure
d) List four content of valuation report (4 marks)
i. Valuation methodology
ii. Market analysis
iii. Valuation conclusion
iv. Asset discription
e) Identify any four categories of bank customers (4 marks)
Retail, Deposit, Foreign, borrowing
f) Define the term valuation of security (2 marks)
Is the process of estimating the fair market value of a financial instrument
g) Outline four requirements for valuation (4 marks)
i. Qualified professional
ii. Appropriate methodology
iii. Reporting and documentation
iv. Standards and compliance
h) List any four financial statement analysis documents used in credit appraisal (4 marks)
2
i. Statement of financial position
ii. Cash flow statement
iii. Income statement
iv. Cash flow projection
i) State any four principles of lending. (4 marks)
i. Safety
ii. Liquidity
iii. Profitability
iv. Ethical and responsible lending
j) Name any two parties involved in valuation of a collateral 2 marks
i. The valuer and the client
SECTION B (60 MARKS)
QUESTION 1
a) Summarise FIVE importance of KYC, to microfinance institutions. 10 marks
i. Reducing fraud
ii. Managing risk
iii. Building trust
iv. Regulatory compliance
v. Combating money laundering
b) Explain FIVE importance of financial statement analysis to a credit institution. 10 marks
i. Evaluating financial health
ii. Identifying risk
iii. Predicting future performance
iv. Comparing borrowers
v. Setting loan terms
QUESTION 2
a) Explain FOUR factors a credit manager should consider when determining amount of credit to
give to a customer. 8 marks
i. Credit history
ii. Employment stability
iii. Purpose of the loan
iv. Collateral
v. Regulatory requirements
b) Describe THREE benefits of collateral to each of the following parties; 12 marks

3 34
i. Borrower- access larger loans, lower interest rates, more flexible loans
ii. Lender- increased security, faster loan recovery, attracting higher quality borrowers
QUESTION 3
a) Explain FIVE features of a security. 10 marks
i. Liquidity
ii. Valuation
iii. Marketability
iv. Asset based
v. transferrable
b) Explain the meaning of the following terms: 10 marks
i. Customer screening- process by which businesses assess a potential customer suitability
for a particular product
ii. KYC- This is regulatory requirements for financial institutions and other regulated
entities to verify the identity and background of their customers.
iii. Customer needs- customer wants or desires
iv. Collateral- asset pledged as security for a loan
v. Terms and conditions of credit- legal terms that govern a loan
QUESTION 4
a) Explain FIVE principles of lending. 10 marks
i. Safety
ii. Liquidity
iii. Profitability
iv. Ethical and responsible lending
b) Describe FIVE requirements for credit application. 10 marks
i. Personal information
ii. Financial information
iii. Collateral
iv. Guarantors
v. Credit history

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