Colleagues and Fellow Risk Practitioners,

Credit and lending risk collectively represents one of the key risks assumed by sefa in pursuit of its objectives. The Credit Policy was reviewed by Exco, validated by the Enterprise Risk Committee and approved by the Board on the 3rd October 2013.

sefa, as a development finance institution, faces a unique challenge in maintaining a sustainable balance between maximising development returns and minimising financial losses in its lending operations. As a result, the performance of sefa is to a large extent dependent on its ability to take credit risks responsibly and to manage the resultant exposure to credit risk effectivelyin the pursuance of its corporate objectives.

Credit and Lending risk taken on, must consequently, be on the basis of an appreciation of the implications and tactical responses to mitigate and manage any other risks also assumed, directly and indirectly, as a result of credit and lending transactions.

The credit policy is intended to strengthen the governance of the sefa’s credit granting operations and the management of credit riskexposure in accordance with the adopted Enterprise Risk Management policy. The purpose of the credit policy is specifically to provide guidance for the informed and knowledgeable acceptance of tolerable credit risksin exchange for appropriate rewards, which by implication includes the termination, transfer and/or treatment of unacceptable exposures, as well as the rigorous measurement, monitoring and control of credit risk exposures remaining in the credit portfolio.

This policy is built on existing practices within sefa, but incorporating changes for the better management of credit. This policy will therefore pave the way for a detailed implementation procedures.

The policy is expected to enable the sefa to:

  • Apply sound and consistent credit assessment standards;
  • Predict default and identify problem credits proactively;
  • Monitor and manage credit risk exposures rigorously at obligor and portfolio levels; and
  • Maintain a robust processes and procedures throughout the end to end management of credit and Lending risks.

The policy is the primary document by which the CEO and the Board will guidesefa’s credit and lending activities. The policy therefore provides a framework for achieving risk asset quality, consistent with sefa’s standards and risk tolerance levels.

sefa is currently in the process of introducing new credit risk methodologies and procedures to measure and monitor credit risk. These systems and process which will be finalised by the end of the current financial year end, will be tabled before the various approval committees at the beginning of the new financial year and hopefully will be implement by June 2014. These systems and processes will aim at assisting sefa in frontline credit decision on new credit commitments and in the management of the existing portfolio.

I therefore implore all Line Management, as owners of the credit process, to ensuring that front line staff adhere to the credit policy.

Leonie van Lelyveld

Chief Risk Officer

Risk Division