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Credit Risk Policy

Overview​

This document outlines Oan Financing's credit risk management framework for providing financing to micro, small, and medium enterprises (mSMEs) in Saudi Arabia.

Target Market​

Customer Segment​

  • Sole owner mSMEs in KSA
  • 1-3 years of operation
  • Annual revenue: 1-3M SAR
  • 1-10 employees
  • Valid commercial registration

Industry Focus​

  • Eligible sectors as per SAMA guidelines
  • Focus on operational and expansion financing
  • Exclusions as per regulatory requirements

Product Parameters​

Financing Terms​

  • Amount: SAR 5,000 - 250,000
  • Tenure: 1 - 60 months
  • Purpose: Business operations and expansion
  • Structure: Shariah-compliant financing

Pricing Structure​

  1. Upfront Fee

    • 2% of total loan amount
    • Plus applicable VAT
    • Deducted at disbursement

  2. Risk-Based Pricing

    • Rating A: 13.9% APR
    • Rating B: 17.8% APR
    • Rating C: 25.7% APR
    • Rating D: 25.7% APR
    • Rating E: Rejection

Risk Assessment​

Eligibility Criteria​

  1. Business Requirements

    • Minimum 1 year of operation
    • Valid commercial registration
    • Saudi citizen ownership
    • Sole proprietorship

  2. Documentation

    • Business registration
    • Financial statements
    • Bank statements (6 months)
    • VAT registration
    • National address

Credit Assessment​

  1. External Checks

    • SIMAH credit report
    • AML verification (Focal)
    • Bank statement analysis
    • Business verification (Wathq)

  2. Internal Scoring

    • Business performance
    • Financial metrics
    • Banking behavior
    • Market factors

Risk Acceptance Criteria​

  1. KO Criteria

    • Internal blacklist
    • AML compliance
    • Financial data
    • Transaction history
    • External registers
    • Business segment

  2. Scoring Model

    • Risk grade assignment (A-E)
    • Limit calculation
    • Pricing determination
    • Term assessment

Credit Authority​

Delegation Matrix​

  1. System Auto-approval

    • Up to SAR 50,000
    • Grade A & B only
    • Clean credit history
    • Complete documentation

  2. Manual Review

    • Above SAR 50,000
    • Grade C & D
    • Exception cases
    • Policy deviations

Approval Levels​

  • Level 1: System (First pair of eyes)
  • Level 2: Credit Officer (Second pair of eyes)
  • Level 3: Credit Committee (Third pair of eyes)

Portfolio Management​

Monitoring​

  1. Individual Level

    • Payment behavior
    • Account activity
    • Financial changes
    • Business performance

  2. Portfolio Level

    • Sector exposure
    • Risk grade distribution
    • Delinquency rates
    • Collection efficiency

Early Warning Signals​

  1. Financial Indicators

    • Payment delays
    • Bounced payments
    • Declining balances
    • Irregular transactions

  2. Business Indicators

    • Market conditions
    • Sector performance
    • Regulatory changes
    • Economic factors

Collection Management​

Payment Monitoring​

  1. Regular Tracking

    • Due date monitoring
    • Payment reconciliation
    • Account status
    • Communication logs

  2. Delinquency Management

    • Early stage (1-30 days)
    • Mid stage (31-60 days)
    • Late stage (61-90 days)
    • Default (90+ days)

Recovery Procedures​

  1. Early Stage

    • Payment reminders
    • Customer contact
    • Payment facilitation
    • Root cause analysis

  2. Late Stage

    • Intensive follow-up
    • Restructuring options
    • Legal notices
    • Recovery action

Reporting & Review​

Regular Reporting​

  1. Daily Reports

    • New applications
    • Approvals/Rejections
    • Disbursements
    • Collections

  2. Monthly Reports

    • Portfolio quality
    • Risk distribution
    • Collection efficiency
    • Delinquency status

Policy Review​

  1. Regular Review

    • Quarterly assessment
    • Performance analysis
    • Market conditions
    • Regulatory changes

  2. Special Review

    • Major market changes
    • Regulatory updates
    • Performance issues
    • Strategic shifts

Compliance & Control​

Regulatory Compliance​

  • SAMA guidelines
  • AML regulations
  • Data protection
  • Consumer protection

Internal Controls​

  • Process audits
  • Documentation review
  • System checks
  • Staff training

Appendices​

Documentation Checklist​

  • Required documents
  • Format specifications
  • Validation requirements
  • Storage guidelines

Risk Grade Definitions​

  • Grade criteria
  • Score ranges
  • Risk implications
  • Pricing impact

Exception Handling​

  • Acceptable exceptions
  • Approval requirements
  • Documentation needs
  • Monitoring procedures