Efficiency Assessment Tool for Credit Granting Process

Abstract

Credit granting process has experienced considerable changes in the last years. Households as well as bank officials admit that a credit granting process has become more complicated, excessively time-consuming and non-transparent. A pre-research conducted by the authors pointed out that commercial banks lack tools for proper reflection and evaluation of decision-making process in credit granting. This implies that commercial banks have little control over the process and are unable to measure its efficiency.

The purpose of the research presented in the paper is to develop a tool for assessment of efficiency of decisionmaking process in credit granting and to provide practical recommendations for its improvement.

To achieve the purpose of the research, the authors used a qualitative method – the modified Delphi method and a graphical tool – decision tree. In order to design it the authors applied two criteria – event probability and time component, which reflect time, spent by credit specialists to proceed each activity in all stages of credit granting process.

Results and findings of the research – The authors have developed a decision tree of credit granting process, which proved to be a credible tool for efficiency assessment of decision-making process in credit granting. Moreover, the developed tool ensures transparency and accountability of decision-making process and provide an opportunity to measure and analyze different parts of the decision making process. The authors have elaborated recommendations for efficiency improvement of credit granting process, which implies necessity of changes in the order of data proceeding in credit granting process. This means that information with higher degree of influence on the final decision has to be clarified during the first stage of decision-making process, whenever it is possible, and information that has less degree of influence on the final decision has to be left for clarification on the later stages of decision-making process. That sort of structure of decision-making process in credit granting ensures less time consumption leading to a negative decision on credit granting and, therefore, improves efficiency of the whole credit granting process.

Limitation of the research – This research is limited to the study of the decision-making process applied by commercial banks in granting mortgage credits to households.