Introduction

At CedisPay, responsible lending is a core value that is based on integrity, transparency, and acting in the customer's best interest. CedisPay believes in conducting thorough affordability assessments and carrying out checks on borrowers to ensure that the loan offered is suitable for their circumstances. This approach helps to prevent over-indebtedness, promotes transparency of terms and conditions, and provides support to borrowers facing repayment difficulties.

Affordability Assessment

Central to CedisPay's responsible lending practice is the assessment of customer affordability. The loan underwriting staff is required to consider the borrower's actual or reasonably anticipated income and take into account the customer's ability to repay when deciding on whether to enter into a lending contract. CedisPay uses affordability metrics, such as Effective Disposable Income (EDI), to effectively perform affordability tests for a customer.

CedisPay measures a customer's loan capacity using a metric called CedisPay Effective Disposable Income ratio, which is calculated as the customer's EDI divided by monthly income. This measure helps to ensure that customers can afford to repay the loan and have the appropriate credit behavior or willingness to pay attitude to pay their obligations. The DTI (Effective Disposable Income divided by monthly income) is used to measure capacity to pay, and the credit score is used to measure willingness to pay.

Putting Affordability Assessment into Practice

CedisPay puts the affordability assessment into practice by following the guidelines listed below:

• Data Strategy: CedisPay reviews the data used within the affordability assessment process to ensure that it is fit for purpose. The company balances the need for data capture with the usage of data from other available sources.
• Algorithm Design: CedisPay ensures that the indebtedness and affordability algorithms are well designed and clearly documented. The company considers how income and disposable income are estimated and what tolerances are in the algorithms.
• Policy Design: CedisPay bases its decisions on risk, indebtedness, and current/future affordability. The rigor of the assessment is consistent with the credit exposure. The policy is well-documented to ensure transparency.
• Process: CedisPay carries out the indebtedness and affordability assessment throughout the customer lifecycle. The assessment is done at origination, customer management, pre-delinquency, collections, and debt recovery. An affordability assessment is used in automated and manual decision-making processes.
• Systems: CedisPay ensures that algorithms can be easily implemented and amended
• Monitoring: CedisPay monitors the performance of its affordability assessment and updates it accordingly

Loan capacity measure

CedisPay measures a customer's loan capacity using a metric called CedisPay Effective Disposable Income ratio. The company calculates this ratio as the customer's EDI divided by monthly income. CedisPay credit score ranges between 0 and 100 and is split into the following brackets:

• DTI 50% or lower - acceptable
• DTI 50% to 70% - satisfactory
• DTI from 70% to 80% - not satisfactory
• DTI over 80% - not acceptable

Loan eligibility measure

CedisPay measures a customer's loan eligibility using a metric called CedisPay credit score. The company asks customers some questions about their everyday life, including income, consistency in paying everyday commitments such as rent, utilities, payment of family obligations, decision-making about financial life, savings, insurance, and standing in the community through payment of business permits, association dues, tax payment, and helping others.

Customers can improve their CedisPay credit score by spending less than they earn, paying bills on time, saving for emergencies and investments, and having appropriate insurance. A good credit score can unlock larger loan amounts and improved loan terms such as 1. Spending less than you earn, 2. Paying your bills on time, 3. Saving to have sufficient liquid and long-term funds for emergencies and investments and 4. Having appropriate insurance and unlocking large loan amounts and improved loan terms (e.g., lower interest rates).

CedisPay credit score range between 0 and 100 split into the following brackets:

• 81 – 100- Excellent
• 71 – 80- Good
• 61 – 70- Fair
• 0 – 60- Bad