Credit management

Credit risk management strategies are consistently applied through the group’s centralised credit granting process. (Our centralised credit-granting process has been a core strength in managing credit risk through the downturn in the economic cycle).

• Credit applications are transmitted to head office where the credit application scorecards are applied.
• Credit policies are used to determine the credit limit, term and deposit required for each customer.

The group uses 15 risk scorecards, while 76 risk segments are defined for the application of credit policies across the group.

• Application risk scorecards predict the risk of a potential new customer becoming delinquent in the future taking into account the applicant’s payment record with other credit providers.
• Behavioural scorecards predict the risk for repeat customers and are based on customers’ payment behaviour with Lewis as well as outside credit providers. However the majority of the predictive data is derived from the customers’ payment behaviour with the group.

Current and new customers are referenced at the credit bureaux every month in order to ensure changing risk profiles are immediately taken into account and to ensure that affordability calculations are accurate and up to date.

Credit collection

Lewis operates a decentralised credit collection process, with stores responsible for the cash collection and follow-up of defaulting customers.

This decentralised model is highly efficient as stores are located close to where the customers work, shop, commute and live. Customers pay their monthly accounts in cash at the store and the convenient locations make it easy to visit the stores. Store collection staff have a direct relationship with the customers who are often from the same community and this benefits the collection rate. This store-based collections model proves effective as the monthly contact with customers provides an early indication of payment difficulties. It is more challenging to determine the financial position of customers where a credit provider uses a centralised, call centre-based collections approach.