Cleaned Loan Repayment Study
Click here to Download the spreadsheet in Microsoft Excel Format. (Uses Data current as of 5/10/11)
What You’ll See
There are two books to this sheet. “Study” and “Summary.” Study shows an outlier-free view of whether certain clients paid or did not pay loans on a certain level. these were used to calculate a “cleaned” repayment rates, which were then translated into the “Summary” book. “Summary” shows each loan level and the attached repayment rates.
This study was an attempt to calculate the repayment rate by each loan amount, in the hope of finding the precipice at which our repayment declines significantly. This study led us to identify three loan groupings, “yellow,” “orange” and “red.” In the historical Personal Loan program, the 500L & 1000L (“yellow”) loans carry what I would call a “medium” risk, which is to be expected with our “$25 bet” mentality. The “orange” loans range from 1500-2000L and carry a “low” risk, we feel these are a happy medium between a clients ability to pay and the risk we assume in loaning to them. The loans that were above 2000L are “red” and carry a significant risk, thus the proposal to cap the New Personal Loan program at 2000L. (Note: the 2800L loan information was described as an “outlier” by Dr. H, as those were our initial group loan clients)
Our Loan ladder is clearly too large, with much of it in the “red” high risk segments. Capping the personal loans at 2000L greatly reduces our risk by maximizing the potential for repayment in existing loan levels.