details secret, not acted fraudulently, acted with reasonable care and acted in
accordance with these Terms.
4.5 You will be responsible for all instructions given by you or anyone acting with your
authority between the times you pass the security procedure until you exit from the
Mobile Phone Banking Service. Please note that this includes any input errors or
instructions sent by someone other than yourself so please do not leave your mobile
phone unattended while you are still logged onto the Mobile Banking Service.
4.6 You are responsible for making sure information either shown or stored on your
mobile phone is kept secure. You must advise us of any change to your mobile phone
number or email address.
6.4 If you are not the bill payer for the mobile telephone or handheld device being used
to access the Application, you will be assumed to have received permission from the
bill payer for using the Application.
HFBE SACCO is micro-credit dispensing financial intermediary and its efforts to
efficiently operate as an institution and to respond to the newly emerging financial
needs of the members, there is immediate need for lending policy and procedures
manual to provide guidelines to operationalize the lending business. This is in the
interest of establishment of a long-term financial relationship between the SACCO
with each member. In carrying out its mandate the SACCO functions as a financial
advisor to its members. For those that are denied credit financial advice is to be
offered so that they can improve their financial situation. The cardinal goal of this
policy is to ensure that credit is granted to only those members who have a good
reputation and are creditworthy.
1.1 Purpose and scope
The LPPM shall be used and strictly complied with in all lending operations by the
SACCO board of directors, management and staff.
This policy provides the preconditions for granting loans, the minimum
requirements, terms and conditions and other relevant information on the credit
management process.
Any violators of this policy will be subjected to disciplinary action as prescribed by
the Board of Directors or as described in this policy. It shall be an offence for an
applicant, SACCO employee or board member to give false information in the
assessment or appraisal of any loan.
Any difficulties encountered in the implementation of this loan policy should be
referred to the Board of Directors for final interpretation.
It is the duty of the borrower to ask any member of the Executive Committee or
Credit Committee for interpretation of on any clause or article in this policy.
BEING AWARE THAT lending is the principal business of the SACCO, in its lending
operations therefore, the principal of ZERO TOLERANCE FOR LOAN DEFAULTS
shall be the guide as it is important to note that non-payment of loans is the most
damaging threat to the survival of the SACCO, AND in an effort to achieve timely
and full loan repayment, the SACCO and its membership shall be mandated do the
following;
a) Strictly abide by its Lending Procedures and Guidelines.
b) Avoid making rushed loans.
c) Never allow insider lending in the SACCO, that is to say, Members of
evaluation committee and credit committee, and other committees,
management Staff plus their relatives should never use their privileged
positions in the SACCO to make undue financial gains from the SACCO by
accessing loans outside the provisions of the SACCO’s Lending Procedures
and Guidelines.
d) Make loan approvals and disbursements in batches to ease monitoring, follow
up and record keeping.
e) Maintain up-date loan records; registers and securely keep loan documents.
f) Ensure that full loan repayment is a responsibility of all members of the
governance structures.
g) Though the primary responsibility lies with the Board assisted by
management, the credit committee shall help in the case of defaulting
borrowers.
h) On their part, members and guarantors should alert the credit committee on
bad borrowers (when the lists of intending borrowers are displayed) and must
exert social pressure on defaulting borrowers to pay up.
i) Ensure equity in approving loan applications and determining loan sizes.
j) Utilize utmost due diligence and care in evaluating loans requests with
exceptional terms.
k) Use loan graduation methodology to maintain borrower discipline.
l) Maintain close monitoring and follow up on all borrowers.
Any committee members, management staff or SACCO Leader who does not comply
with the SACCO’s lending guidelines in handling loans shall be held personally
liable for the full repayment of the loans involved plus the interest thereon. If not
desisted from, the staff member or leader shall be dismissed from his / her position
and later on, from the SACCO.
Anyone who in the service of the SACCO purports to make any loans without
following the provisions of these lending policies and guidelines shall be
personally held liable by the SACCO for any losses arising out of such
loans. In addition, disciplinary action shall be taken against the
responsible officer or leader.
This LPPM is intended to attain the following objectives
a) To provide wider perspective and exposure to members of the HFBE SACCO
Board of Directors, the Credit Committee and enlighten members of staff
involved in the lending process in respect of established principles and
practices of lending management and assist them in their capacity building
so that they are enabled to take lending decisions.
b) To equip the staff of the HFBE SACCO and its members with necessary skills
so as to facilitate them to take decisions on lending disbursement based on
sound principles of credit management.
c) To train members and borrowers of the HFBE SACCO who are the primary
loan applicants for preparing quality loan proposals that can meet.
d) To maintain a health loan portfolio in order to ensure that the SACCO’s
interests are adequately protected; maximize returns to the members and to
facilitate liquidity planning.
2 CREDIT MANAGEMENT STRUCTURE
The SACCO has the following Management Structure to lay down policy framework,
to implement its policies and to supervise that policies are implemented. The HFBE
SACCO Management structure consists of one tier, which is Board of Directors and
is elected body. BoD is comprised of members elected by the AGM is responsible for
formulating business, management and financial policies and programs for the
growth and development of the SACCO.
BoD is accountable to AGM.
The Management team is responsible for implementing the policies and programs
formulated by the BoD with the objectives of managing the day to day affairs of the
SACCO in such a way that members’ of the SACCO feel that it is owned and
managed by them and it is customer friendly.
The management team is expected to put in its best effort to make the SACCO
operations viable & financially sustainable. Broad based functions of the General
Assembly, Board of Directors, Credit Committee & supporting staff of the
management team in relation to the HFBE SACCO LPPM are indicated as under
tiered management structure.
The SACCO’s Board of Directors is responsible for formulating, reviewing, and
adjusting the lending policy and procedures manuals as mandated by the AGM. The
specific committee of the board charged with this responsibility is the Credit
Committee. The Credit Committee comprises of five members who shall meet as
frequently as required but in any case at least once a week or as shall be agreed
from time to time and upon prior approval of the Board of Directors. The committee
will comprise a Chairman, Vice Chairman, Treasurer, Secretary and the General
Manager of the SACCO. The committee will change as the SACCO leadership
changes as stipulated in the SACCO bye –laws.
The Board of Directors will be responsible for ensuring that the lending policy and
procedures manual is adequately implemented and that it achieves the goals for
which it was created.
The Board of Directors and the supervisory committee are charged with the
responsibility to determine if the policy is being complied with by periodically
(preferably monthly and no less than quarterly) reviewing a sample of loans granted
and denied.
2.1 Approval Limits
Given current make-up of the HFBE SACCO, all loans are approved by the BoD and
recommended by the Accounts Assistant. All requests that are of an exceptional
basis shall be made in writing by the applicant as well as in the HFBE SACCO MIS
Thereafter communication relayed to the member on email.
2.2 Maximum loan to an individual member
The maximum loan an individual member of the SACCO shall not exceed Uganda
Shillings Fifty Million (Ugx 50,000,000). This is a prescribed the AGM from time to
time.
2.3 Eligibility of borrowers
For a member of the HFBE SACCO to be eligible to apply for the available credit products
offered by the SACCO they have to be a fully paid up shareholder who makes their
minimum monthly savings contribution voluntarily and has no history of default on any
of the HFBE SACCO loans in the recent past i.e. 5 years.
Any shareholder who wishes to apply for a loan from the SACCO should have saved
continuously for at least 2 calendar months. The maximum loan amount for the new
borrower shall not exceed Ugx 10,000,000 (Uganda Shillings Ten Million Only).
Subsequent loans shall follow a graduation principle of 50% increase every 3 months
subject to regular account performance – implying the member remits their monthly savings
and loan instalment during the recent past.
2.4 Lending Criteria
The member shall fill in the prescribed loan application form and deliver it to the HFBE
SACCO Accounts Assistant or through the official SACCO Management Information
System or the member portal.
i. The applicant needs to be an active member of the SACCO and that means paying
monthly savings and loan instalments on schedule over the last 6 months.
ii. Provide an update of the current residential address
iii. Should have accumulated at least three months continuous deposit of their
monthly minimum contributions as prescribed by the SACCO policy.
iv. Have saved at least half of the amount they want to borrow one month before
the application for a loan
v. Request a maximum loan amount not exceeding two times their savings in
the SACCO.
vi. Not defaulted on any outstanding loan or guaranteed a defaulting borrower.
vii. Repay at least 30% of the total amount outstanding (i.e. principal and interest)
before applying for a top up/additional loan. The additional loan must not
exceed 50% of the initial loan borrowed and must be fully secured in
accordance with section 2.3 of this policy.
viii. Not withdrawn their membership from the SACCO, otherwise they are
treated as new when they apply to rejoin the SACCO. A member cannot
leave the SACCO when they have an outstanding loan obligation unless it is
fully settled
ix. Loans relating to medical, court fines, death and other unforeseen happenings
beyond a member’s control are treated as emergency loans and may be given
express consideration and approval by the Chairman and Treasurer and later
ratified by the Credit Committee. Such loans however shall not exceed 75% of
the member’s total savings and shall be repayable within a period not
exceeding one months.
x. School fees loans may be granted to a member even though he has an
outstanding loan provided the total of all outstanding loans, including school
fees, must never exceed two times a member’s savings.
xi. The first security and principal guarantee applicable to a loan is the member’s
savings, followed by asset based security.
xii. All loans will be restricted to members only and should be approved by the
Credit Committee. No member of the loan approving committee shall be
present when their loan application is being considered.
xiii. All loan applications shall be made in a prescribed form of the SACCO, must
be completed and shall in each case set out the amount applied for, the
purpose of the loan, terms of payment and type of security provided, desired
loan maturity, membership number, membership savings, borrower name,
borrower address and telephone number, signature of borrower, savings
guaranteed and/or security where applicable. All loan applications must be
submitted through the Treasurer of the SACCO or the MIS system.
xiv. No loan shall be advanced without a complete form, except for emergency
loans where a form shall be completed with 36 hours. If a member advanced
an emergency loan fails to complete an application form within the prescribed
time, the principal and interest due will be charged from his savings
immediately by the Treasurer.
xv. It shall be an offence for an applicant, to give false information regarding
deposits, shares, loans and security. Disciplinary action or termination shall
be taken as prescribed by the Board of Directors.
xvi. Loans shall be granted for only legal and lawful activity.
xvii. To a great extent possible loans relating to merchandise or property purchase,
assets and services shall be paid directly to the vendor by cheque or EFT. The
applying member must attach to the loan application pro-forma invoices from
the vendor of the assets being purchased.
xviii. No member or group of members who are considered to be related for credit
purposes, such as closely related family members (those dependent on the
same source of income), may borrow or be obligated to the SACCO, in excess
of 50% of their joint savings.
xix. Loan applications shall be considered on the order of first come first serve
basis.
xx. HFBE SACCO shall maintain 15% reserves of the member’s savings as cash
reserves. At least 85% of the cash reserve shall be kept in a deposit account
and will be available for granting loans. This reserve fund shall be replenished
from time to time.
xxi. Whenever there are more applications for loans than there are funds
available; preference will be given, in all cases, to smaller loans.
xxii. However, where amounts applied for are approximately the same,
preferences, priority shall be given in the following order:
a) Members who have never had loans.
b) New members who have qualified for loans.
c) Members who have cleared their first loans and have applied for fresh
loans.
2.5 Loan Assessment and Approval Standards
All loans MUST be approved by the relevant authority as per policy. In approving
the loans the Board of Directors will carry any or all the following functions:
i. Analyze the information in the loan application form.
ii. Verify the loan purpose.
iii. Understand the financial status of the applicant.
iv. Assess whether the savings are sufficient and correspond to 1/2 of the
loan amount.
v. Where applicable confirm facts from the vendors or guarantors where
applicable
vi. Where applicable, determine the market value, verify the genuineness and
locate the security offered by the loan applicant.
vii. Interview and provide financial counselling to the loan applicant.
viii. Determine the reliability of the applicant according to their personal
history.
ix. Establish a personal relationship with the applicant.
x. Sell other SACCO services and educate the member about the SACCO
philosophy.
xi. Monitor the progress of businesses undertaken by applicants that were
funded by SACCO loans.
xii. In consultation with the Chairman and Treasure of the SACCO, have a
clear understanding of the liquidity position of the SACCO.
xiii. Making follow-ups on all borrowers who fail to repay their loans in time.
xiv. Notwithstanding the functions of the credit committee as stipulated in this
policy, the credit committee shall exercise total independence in course of
executing its duties and shall not be unduly influenced by any members,
committee or Executive of the SACCO.
2.6 Composition and responsibilities of the credit committee
At HFBE SACCO the credit committee shall be appointed by the seating board
of directors and for the current executive it is comprised of Chairman, Vice
Chairman, Treasurer and Secretary General.
Responsibilities:
a) Appraising and approving all loans (or those above a certain limit).
b) Reviewing and proposing revision of the lending policies and guidelines.
c) Monitoring all lending operations and the portfolio quality.
d) Helping management to enforce loan recover in case of stubborn and
overdue loans.
e) Planning and monitoring the loan portfolio growth.
f) Participating in product development and improvement.
g) Depending on the size of the Cooperative Society, it may also have a
number of other sub-committees to handle issues like
planning/evaluation, human resource management, business
development, discipline etc.
2.7 Sanctions for ultra-vires decisions on the part of the committee
A credit committee member who commits a material breach of this policy,
undermines the objectives of the SACCO, is incompetent, fails to attend three
consecutive committee meetings, engages in gross misconduct or behaviour or
has physical or mental impairment that renders him to perform his functions,
shall be summoned by the Board of Directors, through the Chairman, by notice
of at least seven days prior to the meeting, and failing a satisfactory explanation
or non-attendance, may be cautioned, required to resign. In the event that a
member resigns or is removed from the Committee or expelled from the SACCO,
the Executive committee may appoint a member of the SACCO, excluding any
of them, to fill the vacancy until the general meeting appoints a substantive
member. The Expulsion shall be by unanimous vote of the all members of the
Executive Committee and subject to appeal to the general meeting. The
resolution of the general meeting shall be final and binding to all parties.
A credit committee member may resign in writing to the Chairman clearly
indicating the effective date of resignation. The executive committee shall
appoint any member from the SACCO with the exception of any member on the
Executive Committee, to act in interim until the general meeting appoints a
substantive member to replace the member who resigned.
The Executive Committee by unanimous resolution, may suspend the credit
committee and its operations when it is determined that they are highly
compromised, are engaging in fraudulent activities, are executing their
mandate outside this policy or are non performing. The Executive committee
shall take up the mandate of the credit committee, excluding powers to grant
themselves loans, until a new credit committee is elected at the next sitting of
the general meeting.
Members of the credit committee are indemnified from and against all costs,
charges, losses, damages and expenses whatsoever which may arise in the
execution of their mandate under this policy unless the same shall arise by
reason of their own wilful neglect or default as resolved by the Executive
Committee.
2.8 Insider lending guidelines
Loans for any member of the Executive Committee shall be recommended by
the Credit Committee but approved by the entire Executive Committee. All
loans for members of the credit committee shall be handled and approved by
the Executive Committee after receiving appraisal reports from the SACCO
manager. In processing and approving loans, no preferential treatment shall
be given to the credit committee members and any other members of the
governance committees. The lending policies shall apply equally to all
members.
A member may be called to defend or justify their loan application. Failure to
appear may lead to the cancellation of their application. Committee members’
personal interests shall be declared to the other members and the concerned
member shall disqualify himself from the approval process of such application.
The interview process focuses on the member’s loan qualifications and the
condition and value of the collateral (if any is offered to secure the loan) in order
to help the committee make an informed decision. The committee may also
reject a loan where a member fails to disclose his financial status on request.
3 Loan application process
Loan application and related requests shall be received through the SACCO’s
email address saccorequests@housingfinance.co.ug or through the HFBE
SACCO management information system under the user menus. The SACCO
Credit officer (currently role is Accounts Assistant) will check all available
channels three times a day that is, at 9am; 12 noon and 3pm to retrieve all
requests and action them as required. All requests received after 3 pm that
business day shall be considered to have been received the next day.
The SACCO shall be open for business from 8am to 5pm Monday to Friday.
All loans must be considered within a period not exceeding 7 days from the date
of application but subject to availability of funds.
In the event that the committee is unable to approve a loan as requested, they
may make a counter offer and the member has 2 days to accept or reject the
counter offer.
All loans approved by the Credit Committee shall be considered based on
character, credibility, ability, margin, purpose, amount and repayment proposal
of the applicant.
Members shall be informed, within the prescribed time as per policy, whether or
not their application has been successful or not. In the event that the request is
unsuccessful, clear reason for the decision shall be relayed to the applicant
through the available communication channels.
Post application counselling, where necessary, will be offered to the applicant
with the aim of improving their credit standing to improve their eligibility status
for future loans.
The SACCO shall employ a credit officer to manage the loan portfolio, maintain
records of members’ loan application and approvals, scrutinize loan application
forms to ensure they provide accurate information, are accompanied by all
required supporting documentation and ensure they are ready for the credit
committee meetings. The credit officer shall be the liaison person between the
loan applicant and the credit committee and shall pass on information to the
member when decision is made.
3.1 Loan appraisal and analysis
In making the lending decision the following information shall be required and
reviewed during loan appraisal. The information shall be analysed to give a fairly
comprehensive picture of the applicant such as:-
a) Personal history
b) Credit history
c) Current financial position
d) Fulfilment of rules and regulations pertaining to application
The appraisal shall include an interview process aimed at achieving the
following objectives;
a) Verify all information obtained
b) Yield additional information
c) Procure information not disclosed by member
3.1.1 Investigation
The purpose of the investigation is to obtain information about the borrower
especially for ex-staff that are self-employed. The potential sources of information
can be any one of the following
SACCO file
Other creditors
Income verification – salary slip etc.
Physical visit to their business
3.1.2 Security/collateral
Security offered is geared towards incentivise the borrower to repay the loan
and provide a measure of ultimate safety for the loan. Collateral shall
generally be taken to ensure the borrower has a stake or commitment in the
transaction for which the loan is sought and shall also provide inducement
for the borrower to ensure ultimate and orderly repayment of the loan and
provides for the recovery of the loan in case of default in payment. Collateral
shall include, in order of priority and preference as below.
1) Applicant’s savings are the preferable cover.
2) Members shares
3) HFB Employees retirement benefits or provident fund benefits
4) Any other alternative acceptable securities for instance land titles, lock up
titles, treasury bills/bonds, motor vehicle logbooks in which the SACCO’s
interest will be registered. This will be accepted on an exceptional basis
and for a small portion of what would be covered by savings.
5) Guarantors
6) The SACCO will have to register its interest in the security by way of the
following;
a. Legal mortgage over registered land
b. Equitable mortgage over registered land
c. Caveat over motor vehicle/ motor cycle log book
d. Lien over treasury bill/bond
e. In all cases the certificates of title; log books; shall be held in custody
of the SACCO until full payment is completed
3.1.3 Character
This entails the member’s reputation and willingness to pay the loan. The
member’s willingness to pay particularly under adverse conditions shall be
considered and the following information shall be analysed:
i. Family status – no. of dependents.
ii. Personal referees.
iii. Stability of employment/business
iv. Land/home ownership
v. Type of job
vi. Length of membership in the SACCO
3.1.4 Capacity
Establishing capacity to pay the loan involves confirming whether the member
will be able to pay even if he is willing? Capacity shall be an all-embracing
word including the attributes of ability, knowledge, financial circumstances,
physical facilities and external factors. Capacity to pay shall be determined
from: –
o Pay-slip; to know the member’s salary, if employed
o Business records, if engaged in business.
3.1.5 Credit worthiness
Credit represents a member’s commitment to meet his/her obligations
usually obtained from past borrowing records – past loan record with SACCO.
The information shall be obtained from SACCO file also considering the
eligibility criteria outlined in this policy manual.
The credit officer/Accounts assistant shall compile a member’s file with the
following and present it to the credit committee:
Complete duly signed form
Investigative report where applicable
Loan analysis
Recommendation
The credit committee shall base its decision on the information provided.
3.2 Appeals
Whenever a member feels that their application has not been considered fairly,
they shall appeal stating the grounds of the appeal in writing to the Board of
directors through the Accounts Assistant within fourteen days after the
decision date. The Credit Committee’s decision thereafter will be final and shall
apply with immediate effect.
The Executive Committee may reject any loan application, prior or during a
loan review or block any member from obtaining a loan from the SACCO.
3.3 Loans disbursement
The credit officer shall ensure that: –
a) Before accepting a loan application and after funds are released, members’
clearly understand the terms and conditions of the loan.
b) A member understands other provisions of the loan.
c) That security documents are in place and receipted.
d) Funds shall be released to the member by crediting the member’s account or
Electronic Funds Transfer (EFT).
e) The proof of payment that is, the EFT confirmation, inter account transfer
form shall be considered the member’s acknowledgement of receipt of funds.
f) The loan application form will also be used as the loan agreement between
the SACCO and the member borrower
3.3.1 Loans contract
A loan contract shall become effective as soon as a loan is approved by the credit
committee and disbursement is completed. The Credit Committee shall reserve the
right to withhold disbursement of an approved loan should new pertinent
information about the borrower’s credit worthiness be obtained indicating
otherwise.
A loan application/contract shall contain the following information:
i. Title – i.e. Loan Application/contract.
ii. Name and address of SACCO.
iii. Name and address of borrowing member.
iv. Date of the contract.
v. Loan amount and purpose.
vi. Period of loan/duration/term.
vii. Price of the loan (interest).
viii. Repayment structure (monthly etc.) and number of such payments and
due date
ix. Security Pledge.
x. Associated conditions.
xi. Signature of SACCO’s authorized officer (s).
xii. Signature of borrower /member.
xiii. A loan contract must be witnessed and dated and for follow up purposes
include physical address of both borrowers and witness.
4 Loan monitoring and loan performance
Loan monitoring shall include post disbursement monitoring especially for the ex-
staff in respect to activities of the borrower’s business/cash flows and his
behaviour/business conduct and reporting these observations to the SACCO.
Loan monitoring shall be done to protect the finances of the SACCO and ensure that
the loan proceeds are used for intended purposes and shall mostly be done for loans
where repayments will be the borrowers business and employment.
1. Remittances of loans should be deposited in the SACCO’s designated
accounts.
2. By the member signing off the loan application forms give the SACCO
authority to monitor the loan till its full payment
3. Loan monitoring shall not be intended to interfere with the member’s business
but to reinforce the relationship between member and SACCO should any
problem occur.
4. Monitoring reports shall be a regular part of the agenda for Credit Committee
along with a review of payments received and due during the SACCO
Manager/Credit Committee reports to the Board.
5. Loan monitoring shall be a continuous process. It shall only stop when the
loan is paid off completely.
4.1 Loan performance standards
In managing its lending operations, the SACCO shall be guided by the following Key
lending standards (measured as ratios):
RATING ASPECT CALCULATION OF INDICATOR LIMITS
Capital Adequacy
ratio
Total Equity/Total Assets HFBE SACCO to maintain a minimum of
15% of Total Assets
Total Loans Outstanding/savings +
share capital ratio – To what extent
A ratio below 60% indicates satisfactory
status of the SACCO
Loans to Assets RatioFinancial strength: To what extent is
the SACCO capable of providing loans
to its members?
Total loans outstanding/Total Assets
Standard: Should be > 5
Cost of Lending Operating efficiency: Are loans being
given at the lowest cost? What is the
average cost per loan?
Total Expenses/Total loans disbursed
Standard: Should be as low as possible.
Cost per shilling lent Operating efficiency: What is the
average cost incurred for each shilling
lent?
Total Expenses/Total loans
Standard: Should be as low as possible.
Rate of return on
loans
Financial Strength: What is the rate of
return on loans?
Total income from loans outstanding
Standard: Should be greater than the
lending rate.
Liquidity How easily can the SACCO meet the
cash demands of its members and
creditors
Cash + Near Cash
Investments
Total Savings Deposits +
Share capital + Any other monies on call
Standard: 30%
Delinquency
Indicator
Measure of the portfolio quality
(Portfolio at risk).
To what extent is non-payment of loans
a common occurrence?
Total loans past due date
Total loans outstanding
Standard: 2%
4.2 Repayment
Loans are repaid within the approved loan repayment period but not exceeding 60
months. Repayment terms shall clearly indicate amounts relating to the principal
and interest to be paid, the instalments to be paid per period and the frequency of
payments periodically.
An interest rate shall be communicated every financial year and this will be charged
on the outstanding principal amount and applied monthly in arrears. If deemed
necessary the Executive Committee may charge a late fee on any payments which
are due and outstanding. Simple interest will apply when computing interest.
Interest rates shall be reviewed annual by the Credit Committee, endorsed by the
Executive Committee and approved by the General Assembly during the Annual
General Meeting
Payments received from a borrower shall have the following payment preference: 1-
legal costs, 2-interest and 3-principal.
Loans repayments shall commence in the month following disbursement. Loan
repayments in any month shall be due on the HFB pay day or the 28th day of evry
month for ex-staff.
In the event that a member is not able to meet their monthly loan payments and
before 7 days after the due date, he will request in writing or by e-mail, for a
deferment, through the board Chairman, stating the reason and the proposed new
date when the loan repayment will be settled. The Credit Committee may set a grace
period, on any repayment which shall not exceed 7 days, to allow for monthly
payments without incurring a late fee. If the member does not honor his obligations
within 7 days, the Chairman shall forward his case for review to the Credit
Committee.
The Credit Committee subject to the reasons given by the borrower may approve the
new payment plan in its entirety, modify it with the consent of the borrower or reject
the proposal stating in writing the reasons for rejection. All such requests will be
reviewed and concluded within 7 days following written notification to the
Chairman. No member will be granted more than one deferment any loan.
A member in default will be notified of a default after 7 days from the due date.
Except loans modified upon approval of the credit committee as specified earlier on,
all other loans and after 7days, all loans in default shall attract a late fee of UGX
5,000, which is ever is greater.
Loan payments will be accepted on any day. Evidence of payment will always be a
receipt of payment.
All loan repayments shall be deposited on the designated SACCO account. Funds
paid by borrowers shall not be expended before they are applied to the member’s
loan account.
In the event that the borrower’s cash inflows are obtained on a quarterly basis this
payment frequency will be accepted, preferably with monthly payment of the interest
due. However this payment plan is subject to approval by the Credit Committee.
Loan repayments shall be paid in full instalments based on the loan agreement.
Nothing in the foregoing prevents any member from repaying his loan and interest
in whole, or part, prior to maturity without penalty.
4.2.1 Defaulters and withdrawals
The SACCO shall pursue a strategy of 100% per cent recovery of loans and a loan
shall be considered in default:
I. When regular scheduled payment is not made.
II. When term expires and there is a loan, balance.
III. When payment is applied to principal only and interest is not collected.
IV. When interest is being paid without principal.
V. When loan contract is violated.
VI. When loan Policy is violated.
VII. When security becomes deficient.
The credit committee shall do the following in order to minimize delinquency
a) Loan monitoring.
b) Loans follow up.
c) Secure collateral provided.
d) Ensure member understands loan conditions.
e) Ensure loan collection systems and procedures are in place.
f) Maintain up to dates records.
g) Due care by the governance committees to avoid insider lending because of
their privileged position.
In the recovery of outstanding amounts due from defaulting borrowers, the credit
committee, by notice to the Treasurer, shall first charge the full amount of the
members’ savings, if not sufficient and the borrower has not provided a repayment
plan, for existing Bank staff attachment of their terminal benefits will follow. For ex-
staff upon failure of laid down recovery initiatives legal means shall be pursued.
In the event of death of a member, the outstanding loan is written off less any
savings due to the member. Guarantors shall not be required to pay any amounts
guaranteed for a deceased member, unless such amounts were due and payable
following default of any amount due by the deceased member and is in excess of his
savings.
No member shall be allowed to withdraw from the SACCO membership unless his
loan is repaid in full or the loan balance can be fully offset by the member’s savings.
Where a member who is exciting HFB employment is not able to clear their
outstanding loan, they shall be required to make arrangements with the SACCO
Board for payments. The request will be considered by the Credit Committee for a
final decision.
For the members who offer repayment plans, in the event that the amount due is
not paid within one month from the due date, the Credit committee shall inform the
borrower immediately in writing with a copy. If no repayment is effected during the
second month, the Credit Committee may recall the whole loan and demand the
payment of the full amount outstanding from the borrower. However, the SACCO
through the credit Committee will still maintain efforts to recover the defaulted loan
from the borrower.
4.3 Loans management and reporting
The Credit Committee shall at the end of each month prepare a listing of all loans
whose repayment date has been defaulted in the following order
a) 0-2 months,
b) 3-6months,
c) 7-9months,
d) 10-12 months
e) 12months and over.
This list shall be presented at the Credit Committee meetings detailing action taken
to minimize potential loss to the SACCO.
This shall be done so as to: –
i. Determine how long a loan has been delinquent
ii. Categorizing loan according to the period of delinquency (number of months
overdue).
iii. Determine the extent of risk exposure to the SACCO.
iv. To provide a basis for loan provisioning and objective classification of bad and
doubtful loans.
Loan Aging and provisioning
Classification
(No. Days Over-due)
Provisioning Rate
1 – 30 5%
31 – 60 15%
61- 90 30%
91–120 60%
121-180 85%
181 days and above 100%
All security pledged shall be realized whenever a loan is outstanding for more than
two months.
During the annual general meeting the Chairman or a person delegated by him shall
present a loan portfolio evaluation including but not limited to the following:
a) Total number and value of loans,
b) Number of loan denials,
c) Ratio of loans approved to applications received,
d) Average loan size,
e) Number of short term loans (less than 6 months) and long term loans greater
than 12 months
f) Number and percentage according to loan collateral,
g) Ratio of borrowers to members,
h) Ratio of loans to savings,
i) Ratio of loans delinquent more than 1 month to total loans,
j) Ratio of net loans written off (total loans charged off for the period – any loan
recoveries) to outstanding loans.
5 Loan Recovery process
In the event that members do not repay their loan obligations and action is
necessary to get members to make repayment arrangements a robust collection
mechanism shall be used. The process outlined below shall be followed to ensure
SACCO loans are recovered fully.
5.1 One day past due
The following collection steps shall be undertaken
1. Member’s loan file shall be pulled and action is recorded on member character
card.
2. Determine security and exposure.
3. Phone member to make repayment arrangement.
4. If no response to phone call or member is not on phone
5. Then written notice giving 7 days and an acknowledged copy filed. (Enquire
to determine cause or problem).
6. Note all actions in collection/character card file copy of letter and diaries.
5.2 Seven days past due
After 7 days, the following steps shall be taken:
i. A 14 Days’ Notice is issued to the borrower and an acknowledged copy
filed
ii. Personal contact by visitation
iii. Mail notice/ written notice
iv. Record on collection/character card and diaries
v. Inform member failure to respond may result in action such as realization
of security i.e. savings, and other collateral/guarantors shares and
salaries.
5.3 Twenty one days past due
A 21 Days’ Notice shall immediately be issued aimed at:
To inform member that action shall commence 7 days from date of this notice/letter
unless repayment arrangements are made. The applicant’s savings shall then be
attached if the overdue period crosses the 2 months mark.
Legal procedure: In the event of failure to collect the total loan as per collection
procedures above, in an extreme case where the total loan cannot be recovered even
after attaching the borrower’s savings and shares the file shall be handed over to a
lawyer or debt collector. The lawyer/debt collector shall determine the course of
action which may include the following:
a) Collection by demand.
b) Magistrates’ courts.
c) High court
This process takes time and money and as such all proceedings are on account of
the members and this they will be advised in writing or email. The Court shall be
the last resort.
A cost benefit analysis will be carried out to determine the loans to be handed over
to the lawyer/external debt collectors. If the costs of recovery of a given loan amount
in default are higher as compared to the loan amount then a provision for this loan
shall be recommended.
When all measures to collect have failed the loan shall be taken to the executive
committee and finally recommended for write off to the Annual General Meeting.
5.4 Loans documentation
The Chairman of the Credit Committee shall maintain up to date documentation of
loan files and ensure that each loan file has the following information in place:
Loan application/loan contract, receipt/acknowledgement of security
documents where applicable and member’s personal statements.
All applications forms either approved or not and all minutes of the Credit
Committee shall be filed and retained by the Secretary of the Credit
Committee.
Credit Committee members are to sign minutes after each meeting.
All loan applications should be numbered in sequential order and stored in
an orderly manner.
All this to facilitate full recovery of the loans disbursed by the SACCO.
6 Adoption
This policy was discussed, reviewed, approved and adopted for implementation as a
Lending Procedures and Policy Manual by the by the Board of Directors on the HFBE
SACCO’s meeting held on 20th day of April 2021 at Kampala and
takes effect from June 2021.
Name Designation Signature
Peter Ssekyazi Chairman
Seguya Eric Vice Chairman
Peter Ndumu Treasurer
Adeelah Baboola Male Secretary General
Nadia Mindra Carol Executive member
Patrick Tumwine Executive member
Beatrix Kagene Executive member
Denis Kiiza Executive member
Arnold Assasira Executive member