A basic principle in microfinance is the joint evaluation of the business unit and the client's family unit. Furthermore, the visit to the customer's business and home is a determining part of the credit evaluation. It is not enough to determine the utility that is generated. It is also important to estimate the family expenses that are incurred.
That said, every Credit Analyst should know the number of dependents of the Family Unit, to calculate expenses in food and clothing. Likewise, it should inquire about the educational level of the children (initial, primary, secondary, university), to determine the expenses in texts, supplies, mobility and tips; and, in case of being private, the amount of the pensions.
In addition, health spending should be consulted. The age of the owner and spouse could be of great help.
Another important aspect is to know the customer's consumption habits: do you usually go out to eat? Do you usually go out on weekends? Do you usually travel or vacation? Do you pay cash or do you have loans for such items? If so, how much does it imply per month, in monetary terms?
Home ownership is another relevant factor: is it your own or are you paying for it? If it is its own: how much will it be valued? If you are paying:
How much is the monthly amount of the installments ?. By the way, if it is rented it could be a bad sign, since the exit barrier could be very low, even worse if the business premises are also leased.
The expenses for services also deserve special attention: How much is paid for water, electricity, telephone, cable, internet service, surveillance? Do you have a housemaid?
There are also hidden expenses, such as the support of parents or some relatives (mainly unemployed). If so, how much is the monthly grant that goes to them ?.
In summary, the work of Credit Analyst must be comprehensive and, above all, honest; so that the ratios reflect all the information on the client's economic-family unit.
Finally, it is very important to never overlook the client's personal references, which must necessarily be collected from neighbors, suppliers and businesses in the same field. Knowing the moral quality of the potential borrower will allow us to analyze another relevant aspect of the credit evaluation: the debtor's willingness to pay.
