FluxCap Financial Services — Credit Risk & Underwriting Framework
The credit-risk and underwriting framework - the scoring, the affordability and the collections approach underpinning FluxCap.
Section 12 · Business Plan
Credit Risk & Underwriting Framework
The credit-risk and underwriting framework – the scoring, the affordability and the collections approach underpinning FluxCap.
Underwriting philosophy
FluxCap underwrites affordability first, propensity second. Every
decision passes a three-gate sequence: (1) statutory NCA affordability
assessment on verified income and expense data; (2) FluxScore
probability-of-default estimation blending bureau, transactional and
behavioural features; (3) exposure and pricing assignment within
product-level risk appetite. Declines are routed to FluxWell with
concrete credit-health guidance — converting today’s decline into
tomorrow’s approvable customer.
Risk appetite and limits
| Parameter | Launch (FY2027) | Maturity (FY2031) |
|---|---|---|
| First-loan maximum exposure | R3,000 | R5,000 |
| Repeat-customer maximum | R8,000 (FluxAdvance) / R25,000 (FluxFlex) | R8,000 / R50,000 |
| Cost of risk (impairment / avg gross book) | 22.0% | 13.0% |
| Provision coverage (balance / gross book) | 8.0% | 8.0% |
| Single-employer concentration (FluxSalary) | n/a | ≤ 7.5% of gross book |
| Approval rate target (applications) | 20–25% | 30–35% |
| Vintage trigger (90+ dpd at month 6) | > 12% pauses segment growth | > 9% pauses segment growth |
The cost-of-risk glide path — mechanism, not hope
- Mix shift: payroll-deducted FluxSalary and merchant-context
FluxEmbedded lending grow from 7% to ~18% of revenue, carrying
structurally lower loss rates than open-market short-term
loans. - Data maturity: each vintage enriches FluxScore;
champion–challenger cycles compound approval quality quarter by
quarter. - Customer graduation: repeat customers with demonstrated repayment
migrate to lower-risk, larger, longer products at lower rates —
improving both loss rates and lifetime value. - Collections automation: behavioural-science-driven early-arrears
treatment and DebiCheck payment integrity reduce roll rates from early
delinquency buckets.
VARIABLE
The market context is unforgiving: the industry unsecured default
ratio hit a record 23.7% and 36% of credit-active consumers carry
impaired records. FluxCap’s launch assumption of 22.0% sits
realistically within this environment, but the improvement to 13.0% by
FY2031 is a projection, not a fact. Section 25 shows that a sustained
+300bp cost-of-risk deviation cuts FY2031 EBITDA by approximately R189
million (−17.5%), and +600bp combined with a 35% revenue shortfall
eliminates terminal-year profitability entirely. Funders should treat
vintage performance data — not EBITDA — as the primary early-warning
covenant.
Provisioning and vintage monitoring
Provisioning follows IFRS 9 expected-credit-loss principles
operationalised as a flat 8% coverage ratio against the gross book
across the plan — deliberately conservative for a portfolio whose
modelled risk is declining, so that provision releases are never a
source of reported profit. Vintage curves are the governance instrument:
every monthly origination cohort is tracked on first-payment default,
30/60/90+ day delinquency and cumulative loss, with pre-agreed triggers
that pause segment growth automatically.
| Monitoring metric | Green | Amber (action) | Red (automatic response) |
|---|---|---|---|
| First-payment default rate | < 6% | 6–9%: pricing & score-cut review within 2 weeks | > 9%: pause affected acquisition channel |
| 90+ dpd at month 6 (vintage) | < 9% | 9–12%: segment exposure caps tightened | > 12%: segment origination paused |
| Rolling 12m cost of risk vs plan | ≤ plan | plan +200bp: Credit Committee deep-dive | plan +400bp: covenant event; growth throttle |
| Collections promise-kept rate | > 55% | 45–55%: treatment-strategy retune | < 45%: external capacity escalation |
| Fraud loss rate (of originations) | < 0.8% | 0.8–1.5%: rules & model retrain | > 1.5%: channel-level verification hardening |
Confidential — this business plan is provided to prospective investors and lenders for evaluation purposes only and may not be reproduced or distributed without the written consent of FluxCap Financial Services (Pty) Ltd.