Date: April 24, 2021
Coming from an SME lending background, I feel that I need to acquire knowledge in Retail Finance and adjust my thinking for my new position. I asked my previous supervisor, what kind of materials are helpful. He recommended the book called, Managing a Consumer Lending Business. He said it was used in some internal training in banks.
In the Introduction chapter, the author talks about what is the book about. The book introduces and discusses tools available to manage a consumer loan business for intelligent risk-taking in order to achieve an appropriate return.
The chapter also touches on the 5 principles of good consumer loan management. They are “Balance Risk and Reward”, “Plan Ahead”, “Manage by the Odds”, “Develop and Analyze Management Information”, and “Assign Responsibility for Managing Risk”. They may sound obvious and simple. And yes, I think they are indeed obvious. But, I found some messages brought up by the author valuable, such as:
- Write-off levels are never discussed without a reference to how much profit (or loss) the product is generating
- Sometimes, it is too much detail to be called management information. I (the author) always like to show key information visually.
- He (the manager) should take advantage of the available technical information but be able to distil it down to the basic, underlying facts that should go into making a well-informed decision.
- A good manager should know the importance of attracting enough good accounts to offset the inevitable bad accounts that every lender will get, controlling line sizes, encouraging use by good customers/ discouraging or controlling bad customers, managing profitability with predictability.
The book is basically structured around the 5 fundamental principals.
In the next Chapter, Planning Consumer Products, the author will talk about how to introduce new products, evaluate and modify existing products, and eliminate products when necessary. It is a chapter about product development.