By Bob Takavingofa
January 2012
Credit risk rating systems now play a central role in banking institutions across the globe to the extent that their performance has a direct impact on profitability and soundness of the institutions. This has prompted vast research into the field.
In this paper we assess the performance of credit rating systems in Zimbabwe and derive generalizations for the MEFMI region. We use an in-depth study of two banking institutions’ internal credit risk rating systems. Various credit risk validation tests that are currently applied in industry are explored and applied. The study concludes that proper credit risk rating system methodology and governance are essential for the continued relevance of the credit assessment process.