QUESTION THREE

a$)$ MFIs may choose a minimalistic or integrated approach depending on its objectives or the circumstances in which it is operating. Highlight four advantages of adopting the integrated approach by MFIs. $(10$ marks$)$

b$)$ Discuss any five collateral substitutes commonly used by MFI. $(5$ marks$)$

c$)$ Two loans are released on the same day by MFI. Client $$A$$ receives a loan of sh$.2,000$ and must pay five equal installments. Client $$B$$ receives a loan of sh$\mathrm{.}3,000$ and must pay six equal installments. Client $$A$$ pays regularly, but client $$B$$ pays once and missed the $2$nd and $3$rd installments before paying all other installments.

Required:

Assuming that MFI has no other loans outstanding, calculate the Portfolio at Risk after every installments. $(10$ Marks$)$