The Birth of Dunia (B): Time to Actively Start Lending?

Supplement to case SMU382. Dunia B is a follow up case to Dunia A, but can also be taught independently. This case discusses the challenges faced by the chief risk officer Raman Krishna after the launch of Dunia, during a time of unprecedented uncertainty in the midst of the 2008 worldwide financial crisis. During this time it has become difficult to manage the sales force and their motivation on account of ever tightening credit criteria and the inevitable reduction in loan volumes. There is a real need to understand how, and from where, to source a sufficient number of potential borrowers who will satisfy the revised criteria and also enable Dunia to meet their planned growth numbers. Dunia has been cautious with its first couple loans, but as it begins to loan out the remainder of its portfolio, the company needs to make some tough decisions on how to make the lending business work with such widespread uncertainty. In the Dunia B case, participants experience the challenges of pursuing profit with quality (versus quantity) growth. It provides students an opportunity to discuss the challenges of credit evaluation and approval strategies, as well as credit risk management, faced by a new financial institution. The instructor can also guide a discussion on the reliability of traditional rule-based models as opposed to a judgment-based approach.

• Start-ups
• Finance and investing