The appraisal
What the committee reads, and what goes back.
LitFin reads a lender's credit files, appraises them, and leaves a record of how the judgement was formed. This page is about the second of those three.
Two things live on this page. The document a board credit committee interrogates, and the loop that carries an answer back to whoever sent the file. How the file was read before any of this is a page of its own.
The appraisal is one analysis in two views, exported in whatever form your committee actually reads. Each of the seven sections below takes one part of that, including the parts where the honest answer is a number we will not produce.
The artifact
Thirteen panels to work in, one document to argue from.
An officer works the file in thirteen panels. The same analysis renders as a memo of fourteen sections, from the summary the committee reads first to the recommendation it argues over, and it folds into the five Cs for the committee that reasons in five Cs.
Those are two views of one analysis rather than two documents that have to be kept in step. The panels are where the work is done. The memo is what leaves the officer's desk.
It exports in eighteen formats, because the packet that goes to the committee, the copy an officer files, and the copy that goes to a partner are rarely the same object. LitFin hands the institution a file. What the institution does with its own copy afterwards is its own business. Where a file you send us is held, and for how long, is answered in one place. A committee whose own paper is shaped differently exports the memo and carries its sections into that paper. The panels an officer works in are fixed; the memo is what adapts. Nothing here asks an institution to change the form its committee reads.
Provenance
Every figure says where it came from.
Each figure in the memo carries its own origin: read from a named document, derived and from what, or declared an assumption. There is no fourth category, and there is no number on the page that does not show where it came from.
A sentence that cannot say what it rests on does not go on the page. That is the rule that makes the rest of the document interrogable. A committee member puts a finger on any line and asks where it came from, and the answer is already printed beside it rather than reconstructed afterwards by the officer who wrote it.
What the appraisal stands on is bounded by what could be read.
Confidence
A number about the analysis, never about the borrower.
The appraisal carries a confidence figure, and it is worth being exact about what that is.
It is a function of how complete the packet of evidence is, and of nothing else. The same packet produces the same number for any institution, on any day, so it is a property of the evidence rather than a matter of tone.
It states how much of the analysis is standing on evidence and how much is standing on gaps. That is all it states. It is not a view on the borrower, it is not a view on the facility, and it does not move because the analysis reached a conclusion somebody liked.
LitFin returns no score, no grade, no band and no rating of a borrower on any surface, and no version of one in disguise. Not a rescale, not a percentile, not a letter, not a star, not a colour band, not a bar filling toward a threshold.
Risk
What the file puts at risk, and under whose definition.
Risk analysis is where two careful appraisals quietly disagree. Two officers computing the same coverage ratio on the same borrower can land on different numbers because one included an obligation the other did not, started from a different line, or looked back over a different period. Neither of them is careless. They are working to two definitions, and the file never said which one governs.
So the definition is settled openly, inside the document itself. Where the agreement in the file defines the terms, that definition governs and is cited. Where it does not, the ratio is still computed and labelled an assumption, because refusing to compute would block the ordinary case and help nobody. Covenant thresholds are held to the same provenance rule.
There is one case where no number is produced at all. An existing facility sits in the file and no scope has been declared for the denominator. There the two readings are materially different numbers, and a guess would be a confident wrong answer rather than a missing one. A missing number gets chased. A confident wrong one gets approved.
Counterparties are screened against the official published sanctions and politically exposed person lists, refreshed on a registered schedule rather than on the day somebody remembers. That is a one way read of public material: nothing about your file or your borrower is sent to those bodies. A hit is something an officer settles. LitFin reaches no conclusion from it.
The climate overlay
A green appraisal is an ordinary appraisal with a layer on it.
A file carrying a climate or green mandate is not a different product and is not worked by different machinery. Underneath the layer it is the same appraisal, reading the same evidence, asking whether the borrower can and will repay. The layer adds four things: an eligibility screen, an environmental and social safeguards screen, the additionality case, and the impact plan.
LitFin holds that depth in English and in Swahili, grounded in the published criteria rather than in generalities. The six investment criteria of the Green Climate Fund are held by name and worked one at a time: impact potential, paradigm shift potential, sustainable development potential, the needs of the recipient, country ownership including the National Designated Authority's no objection, and efficiency and effectiveness. Beside them sit the IFC Performance Standards and the safeguards regime built on them, climate rationale and additionality, and the Green Loan Principles and their taxonomy.
What LitFin holds is knowledge of these published criteria, and no relationship with the bodies that publish them.
The loop
Three things an officer can do with a file that is not finished.
Most files are not decided on the first read. Three moves are available, and every one of them is written down.
Ask the applicant.
A question goes back down the chain to the person who can actually answer it, instead of sitting in the officer's head until the next meeting.
Forward it.
To one named colleague, or to the whole institution when nobody is sure who holds the knowledge. A file from a trade the institution has not lent to before is exactly the file worth putting in front of everyone who might recognise it.
Return it to the sender.
A return requires a question. It cannot be a bare rejection of a packet, and it names which step of the preparation the question is about, so whoever receives it knows what to fix instead of guessing.
Each of these is written down before it is sent, so a question is never lost. The worst case is late, not lost.
The officer sees the state of their own message rather than sending it into silence, and where a message has not gone yet the officer is told whether it is something for them to act on or something being handled for them.
The outcome
The outcome goes back to whoever sent the file.
A file that arrived from a lender's own origination path over a signed handoff does not simply stop here. When the institution reaches its decision, that decision returns: approved, approved with conditions, declined, withdrawn, or referred to committee. Those five are closed on purpose. An outcome vocabulary anyone can extend informally becomes an outcome vocabulary nobody can report on.
If the sending system has nowhere configured to receive it, the outcome is held and deferred rather than failed and dropped. It goes when there is somewhere for it to go, and until then it is visibly waiting rather than quietly gone.
The same record reconciles four ways at once: what is still open, what is closed, what was returned, and what was recorded here but never delivered back. The fourth is the one worth having, because it is the only one that is invisible from every other angle.
The decision is the institution's, always. LitFin prepares the appraisal, argues it, and shows its working.
Related pages
- How a file is read
The nineteen formats, the page that arrived as a photograph, and the ledger of what could not be read.
- How judgement transfers
Who formed the judgement in this memo, and how the next officer sees it.
- What LitFin will not do
You have just read what an appraisal contains. What it will never contain is set out on its own page.