WEDNESDAY: 23 August 2023. Afternoon Paper. Time Allowed: 3 hours.
Answer ALL questions. Marks allocated to each question are shown at the end of the question. Do NOT write anything on this paper.
QUESTION ONE
1. Differentiate between “Implied credit policy” and “Stated credit policy”. (4 marks)
Enumerate FOUR reasons why it is important for the credit manager to undertake periodic review of a
credit policy. (4 marks)
2. Explain THREE effects of a consumer protection agreement in the financial sector. (6 marks)
3. Discuss THREE goals of financial regulations. (6 marks)
(Total: 20 marks)
QUESTION TWO
1. State FOUR reasons why “Riba” is prohibited in Islamic banking. (4 marks)
2. Examine FOUR elements of Basel IV proposals. (8 marks)
3. Describe FOUR signs of delinquency in a microfinance institution. (8 marks)
(Total: 20 marks)
QUESTION THREE
1. Differentiate between “renegotiated substandard loans” and “renegotiated doubtful loans”. (4 marks)
Summarise FOUR benefits of risk classification of credit assets. (4 marks)
2. Outline SIX principles of good governance in a Saving and Credit Cooperative Society (SACCO). (6 marks)
3. Assess THREE roles of a bank risk management committee. (6 marks)
(Total: 20 marks)
QUESTION FOUR
1. Describe the term “Credit risk migration matrix”. (2 marks)
Explain THREE reasons why a credit risk rating system is important. (6 marks)
2. Explain THREE ways in which agency relationship conflict could arise in an organisation. (6 marks)
3. Examine THREE principles of operational risk management. (6 marks)
(Total: 20 marks)
QUESTION FIVE
1. Outline SIX actions that could demonstrate that a credit officer operates within the dictates of professional ethical standards. (6 marks)
2. Analyse THREE elements of an ineffective loan management process. (6 marks)
3. Discuss FOUR responsibilities of a director of a financial institution. (8 marks)
(Total: 20 marks)
