Revolving Credit

The primary commercial rationale for the introduction of a Revolving Credit Loan is to alleviate the administrative burden of top-up lending and thereby achieve cost efficiencies.

The CEO Forum Workstream and the Solution Centre cooperated to design and specify a solution that will address the inefficient practice of conducting full credit assessment for those borrowers who are ‘frequent’ borrowers.  The prevailing process is inefficient for the borrower as they must provide all necessary documentation as they would as if they were a new borrower to the credit union.

Outcomes

  • The group developed a business case that is based on an understanding of the issue being addressed and how a collaboration can design, develop and specify a solution.
  • The Scope and Deliverables of the product design work are set out in the business case, the Revolving Credit Loan product features and a very informative features comparison with other credit product types.
  • Detailed functional requirements and technical requirements were also agreed, and these were very instructive for banking system providers,
  • There are risks associated with the introduction of a new credit product and an analysis of these risks, and mitigants, were identified and included in the report.
  • A specific Credit Policy has been drafted as part of this standardised process, and critically an innovative and compliant Revolving Credit Loan Agreement was developed.
  • The group recommend a set of next steps that assist credit unions with implementation via their banking system, establishing loan product pricing, planning roll-out to the relevant target markets

Outcomes

The report concludes with interesting considerations including impact of collaboration to utilise the ability within the sector to design, specify and develop solutions.  How costs can be managed in doing so, and the need to enhance prioritisation and negotiation skills to assist in dealings with partners.