MEFMI Supports the Central Bank of Kenya to Deploy the Second Version of ICRAT(V2)

As part of its capacity building interventions, MEFMI develops scalable and customisable tools which support member countries in their efforts to develop and adopt sound practices in macroeconomic and financial management. In this regard, MEFMI developed the Internal Credit Rating Analysis Tool (ICRAT) in 2015/2016 as part of ongoing efforts to support managers of foreign exchange reserves to establish and strengthen internal credit risk analysis and assessment practices. Following its commissioning, the tool was deployed in 9 MEFMI member countries.

Subsequently, there was need to upgrade the tool to make it more robust to respond to the users’ needs. The objectives of the upgrade were to broaden the data sources, increase the data processing capability, facilitate executing complex calculations and algorithms without affecting the speed of computation and improve functionality in terms of handling multiple currencies, more counterparties and wider maturity spectrum as well as provide for composite ratings.

MEFMI contracted a consultant in September 2022 to upgrade the ICRAT tool to a new version 2 (V2) through November 2023. The upgraded tool was piloted in 3 member institutions, Bank of Tanzania, Bank of Botswana and Bank of Uganda in Sep – Nov 2023. Upon completion of the pilot phase, the critical issues were considered and were resolved by the developer. The tool was also subjected to an external review, which entailed reviewing the model enhancements, graphical user interface, migration of the excel-based model to Python as well as testing the functionalities of the upgraded tool. The current phase entails installing the tool in the rest of the member countries through in-country missions. The first mission in 2024 was implemented at the Central Bank of Kenya (CBK) on 15 – 19 April 2024 in Nairobi, Kenya.

The objectives of the mission were to install the upgraded ICRAT (V2) tool, train CBK staff on the system requirements, data sources, system set up and configuration, integration fields, data downloads, market implied ratings, default probability and financial ratios models, report generation and interpretation of results and obtain feedback, resolve any issues, and consider recommendations to improve the tool going forward.

A total of 7 officials participated in the mission. The officials included investment analysts from the middle office and IT personnel of the Central Bank of Kenya. There were 3 (43%) female participants and 4 (57%) male participants.

Barbara Jjaggwe