Risk Minimization in Consumer Credit Cooperative Activities

The subject of the research is risks in consumer credit cooperative activities in the context of economic instability. The purpose of the article is developing methods of risk minimization in terms of the authors’ approach to cooperative risks classification. The importance of the research lies in the fact that risks are an integral part of the consumer credit cooperative process of functioning; therefore there is a necessity of appropriate risk assessment that will enable businesses to mitigate possible losses. Consumer credit cooperatives have some distinctive features in comparison with other credit institutions. The authors identify risks of consumer credit cooperatives, and analyze different approaches to risk assessment. While assessing the risks of cooperatives the authors suggest using scoring method according to international standards for building risk management system. It is proved that scoring is the most optimal and effective instrument for the consumer credit market. It is noted that probability of material losses arises as a result of financial risks, while nonfinancial risks result in both material and nonmaterial losses. The authors also pay attention to the fact that the guiding lines in determining the limit value of risks appear in financial norms of consumer credit cooperatives established by the Central Bank. Methods of minimization of consumer credit cooperative risks are proposed. The authors come to the conclusion that monitoring of credit risks must be conducted at every stage of crediting in order to detect problems with loan clearing off at due dates, which allows to provide effective management of the cooperative loan portfolio and to mitigate risks.