Why has Home Credit's cash loan approval rate dropped by 15% in the last quarter?

Introduction

Home Credit's 15% drop in cash loan approval rate over the last quarter is a significant issue that demands immediate attention. This decline could have far-reaching implications for the company's revenue, customer satisfaction, and market position. I'll approach this problem systematically, focusing on identifying the root cause, validating hypotheses, and developing both short-term and long-term solutions.

Step 1

Clarifying Questions (3 minutes)

• Looking at the timing, I'm thinking there might be seasonal factors at play. Has this drop coincided with any particular season or holiday period?

Why it matters: Seasonal trends could explain temporary fluctuations in approval rates. Expected answer: No significant seasonal correlation. Impact on approach: If seasonal, we'd focus on adjusting for cyclical patterns.

• Considering recent economic shifts, I'm wondering if there have been any major changes in the credit market or interest rates. Have we seen any significant economic indicators change in the past quarter?

Why it matters: Economic factors could be influencing loan eligibility criteria. Expected answer: Some market volatility, but no major economic shifts. Impact on approach: If economic, we'd need to reassess our risk models.

• Thinking about our approval process, has there been any recent change in our credit scoring model or approval criteria?

Why it matters: Internal changes could directly impact approval rates. Expected answer: No major changes to the model or criteria. Impact on approach: If internal changes occurred, we'd focus on reviewing and possibly reverting those changes.

• Considering our user base, have we seen any shift in the demographics of loan applicants in the last quarter?

Why it matters: Changes in applicant profiles could affect overall approval rates. Expected answer: No significant demographic shifts noted. Impact on approach: If demographic changes are present, we'd need to adjust our targeting and risk assessment strategies.

• Thinking about data integrity, has there been any change in how we're measuring or reporting approval rates?

Why it matters: Ensures we're comparing apples to apples across quarters. Expected answer: No changes in measurement or reporting methods. Impact on approach: If measurement changes occurred, we'd need to recalibrate our analysis.