CREDIT POLICY AND PROCEDURES MANUAL
© 2021
TABLE OF CONTENT
TABLE OF CONTENT .................................................................................................................... i
PREFACE .................................................................................................................................... iii
1. INTRODUCTION .....................................................................................................................1
1.1. Purpose ...........................................................................................................................2
1.2. Legislation .......................................................................................................................2
1.3. Policy and Procedures Manual Violation ........................................................................2
1.4. Policy Approval and Review ............................................................................................2
1.5. Definitions .......................................................................................................................2
2. GENERAL POLICY AND PROCEDURES.....................................................................................5
2.1. Administration ................................................................................................................5
2.2. Authority .........................................................................................................................5
2.3. Eligibility for a Loan .........................................................................................................5
2.4. Loan Applications ............................................................................................................6
2.5. Loan Process ...................................................................................................................6
2.6. Assessment and Analysis ................................................................................................6
2.7. Appraisal .........................................................................................................................6
2.8. Loan Approval .................................................................................................................7
2.9. Purpose of Loan ..............................................................................................................8
2.10.
Insider Loans................................................................................................................8
2.11.
Limits to insider loans..................................................................................................8
2.12.
Interest on Loans .........................................................................................................8
2.13.
Loan Repayment and Recovery ...................................................................................9
2.13.1.
Guarantors/ assessed loans: ................................................................................9
2.14.
Security for Loans ......................................................................................................10
2.15.
Loan Disbursement ...................................................................................................10
2.16.
Loan Delinquency ......................................................................................................10
2.17.
•Loan Classification ...................................................................................................11
2.18.
Loan Documentation .................................................................................................11
2.19.
Reports ......................................................................................................................11
2.20.
Allowance for Doubtful Loans ...................................................................................12
2.21.
Summary loan granting mechanism .........................................................................12
3. LOAN PRODUCTS AND FEATURES .......................................................................................14
3.1 Normal Loans ................................................................................................................14
3.2 Emergency Loan ............................................................................................................14
3.3 Loan Refinance ..............................................................................................................14
3.4 Development Loans .....................................................................................................15
4. OTHER CREDIT PROCEDURES FOR LOAN PRODUCTS ..........................................................24
4.1. Loans Appeal .................................................................................................................24
i
4.2. Savings Refund ..............................................................................................................24
4.3. Clearance ......................................................................................................................24
4.4. Guarantors ....................................................................................................................24
4.5. Replacement of Guarantors..........................................................................................24
4.6. Defaulters......................................................................................................................25
5. FUNCTIONS OF THE CREDIT COMMITTEE AND CREDIT OFFICE ..........................................26
5.1. Duties of the Credit Committee ....................................................................................26
5.2. Credit Office ..................................................................................................................26
Objectives of the Loans Office .............................................................................................26
Duties and Responsibilities of Credit Officer .......................................................................27
Duties and Responsibilities of Credit Officer .......................................................................27
Conclusion ...............................................................................................................................27
BOARD APPROVAL OF MANUAL ..................................................................................................28
ii
PREFACE
The purpose of this SACCO Credit Policy and Procedures Manual is to provide guidance in
decision-making and taking actions within the SACCO for various operations and activities. The
manual is intended to:
a) Establish and implement the objectives of the SACCO as interpreted by the Board of
Directors; and
b) Govern the operations of the SACCO. This is on the premise that it is an operational
document that is meant to assist members of management teams and the staff in
running the SACCO Credit Department smoothly.
This Credit Policy and Procedures Manual has been developed as a guide towards providing a
uniform level of understanding in the interpretation and administration of the credit at Braemeg
SACCO Society Limited.
In developing this manual, the Board of Directors considered that most of the procedures
described herein are practiced or are to be practiced by the Society in one way or the other.
This manual should therefore be carefully studied, as it constitutes an integral part of the
expectations of the Society sets out the details of the various procedures that should be
followed.
Policy and Procedures help an organization to:
a) Save time by preventing people from having to make the same decision many times;
b) Prevent and help resolve disputes as policies and procedures lay down firm guidelines
that make it easy to decide what does or does not lie within the guideline;
c) Encourage faith in the organization as members and employees see that they can rely
on the organization to behave consistently hence making them feel secure about their
dealings with the organization; and,
d) Aid continuity as the organization gradually changes in their make-up, for instance, even
if Board of Directors, members and employees leave and are replaced.
Additions, deletions and changes to the policy and procedures manual may be made from time
to time by the Board of Directors and become effective only when adopted by the Board of
Director resolution. The Board of Directors may amend this Manual from time to time when
necessary.
iii
1. INTRODUCTION
Savings and Credit societies meet a need not presently met by other financial institutions by
allowing members to obtain loans based on Security of their Savings, their Incomes, Character
and Guarantee by fellow members.
To fulfill the above objectives, policies are formulated to guide Savings and Credit Co-operative
(SACCO) Societies. Braemeg SACCO Credit Policy and Procedures Manual has been formulated
within the legal framework to help members and officials of the Society avoid credit
administration problems.
The general objective of credit policy is to:
a) Guide and induct new management/employees on what they are expected to do
b) Provide standard ways of performing certain activities and tasks in credit program.
c) Eliminate misunderstanding and certain errors of omission which may occur in
performing specific functions
d) Help in communicating what each person is expected to do
e) Help Board of Directors and management staff to focus on certain areas of importance
– key result areas.
The specific Objectives of the Policy are to:
a) Establish a fair and efficient loaning system based on uniform and consistent credit
administration
b) Ensure fairness in loan granting process
c) Provide clear basis for dealing with members’ loans
d) Ensure that society does not get into difficulties through approving loans in excess of
available funds
e) Ensure proper utilization of loans granted to members
f) Facilitate loan recoveries
g) Minimize loan defaulting
h) Set checks and balances in credit operations
i) Define Committee and Staff roles in order to avoid duplication and overlap of duties and
responsibilities
For the Credit system to function there is need to have a Credit Policy and Procedures Manual
to guide those who are involved in the credit granting process. The Credit Committee, C.E.O,
Officers and Board must follow clear-cut set of rules, procedures and policies. These policies
include preconditions for granting loans, the minimum requirement for a member to be eligible
to borrow, maximum loan, types, terms and conditions and other relevant information on the
Credit Management Process.
1
1.1. Purpose
The Credit Policy and Procedures Manual is intended to provide direction, guidelines, and make
provisions for proper and efficient utilization and administration of SACCO Loan Portfolio. This
will ensure that the Society’s interests are adequately protected, to ensure equitable
distribution of funds, encourage liquidity planning and enhance effective communication and
information flow between the SACCO and its members.
The document shall become the Loaning Policy for Braemeg SACCO Society once approved by
the Board.
This policy and procedures shall be reviewed as may become necessary from time to time.
1.2. Legislation
All loans must be made in accordance with the provisions in the Cooperative Societies Act, the
Rules, the SACCO Act, SACCO Regulations and the SACCO By-Laws.
1.3. Policy and Procedures Manual Violation
Any violation to this Credit Policy and Procedures Manual shall be subject to disciplinary action
as prescribed by the SACCO Board of Directors.
1.4. Policy Approval and Review
This policy takes effect from the date of signing and will be subject to review annually or as may
be necessary by the Board of Directors.
1.5. Definitions
Unless otherwise stated in this Policy and Procedures Manual the following words shall mean:
i. Board of Directors: Members elected by the Braemeg Savings and Credit Cooperative
Society Limited at the Annual General Meeting who ultimately will be responsible for
the policy making operations of the SACCO.
ii. Credit Committee: A Board Committee appointed by the Board of Directors comprised
of members responsible for the approval of loans within the approved lending policies
as stipulated in this manual.
iii. C.E.O: An officer hired by the Board of Directors responsible for the day-to-day
operations of the SACCO in accordance with the rules and regulations set by the Board
of Directors.
iv. Credit Manager: This is delegated authority to an officer to consider and approve loans
within specific limitations as set by the Credit Committee.
v. Deposit: means a sum of money paid on terms under which it shall be repaid, with or
without interest or premium, and either on demand or at a time or in circumstances
agreed by or on behalf of the person making the society receive it at the risk of the
society receiving it;
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vi.
vii.
viii.
ix.
x.
xi.
xii.
xiii.
xiv.
xv.
xvi.
xvii.
xviii.
xix.
xx.
xxi.
xxii.
xxiii.
xxiv.
Delinquent Loan: A loan whose repayment terms and conditions have been violated or
a loan granted in violation of the SACCO Loan/ Credit Policy.
“Equity” is the difference between assets and liabilities, or the total of institutional
capital and other capital accounts
“Foreclosed assets” means real estate and assets of material value that are transferred
to the Society because of non-repayment of a loan.
Fixed Deposits: It is Savings by a member whose withdrawal period is fixed.
Interest Rate: The cost of using money
Loan: Any financial transaction or commitment entered into by the SACCO with a
member whereby the other party becomes or could become indebted to the SACCO.
Loan Application: A form requiring information used to determine whether a member
will be granted a loan.
Loan Contract: A document that binds the SACCO as lender and member as borrower in
acknowledgment of a loan granted to the member and all subsequent terms and
conditions associated with the loan.
Loan Collateral/Security: An asset (any item) of monetary value pledged to ensure loan
payment and may be subject to seizure upon default to offset the indebtedness. The
collateral value should at least be 80% of the loan applied for.
Management: Refers to the senior staff of the Society
Market Rate of Interest: A rate of interest determined by the financial market forces of
demand and supply and is related to the real cost of funds.
“Member in good standing” means a member who is current on the repayment of
his/her loan payments due to the Society, who is current on making his/her required
contributions and has not in any way acted in a manner which is potentially damaging
to the Society, and has fully complied with the policies and rules set by this Society.
“Minors” shall mean people who are not at least 18 years of age who may not vote or
hold office or borrow from the Society.
“Provision for Loan Losses” is an expense in the income statement to reflect an increase
in the probability of losses due to uncollected loans
Provident Loan: A loan granted to a member for his or her own personal welfare or for
consumption purposes.
Productive/Business Loan: A loan granted to a member for a use in an income
generating activity (business) or agriculture intended to earn a return secured by assets
of the said venture and its source of repayment is intended to emanate from revenue of
the said business.
“SACCO” means a savings and credit co-operative society registered under the Cooperative Act and licensed under the SACCO Societies Act, 2008.
“Society” means “Braemeg Savings and Credit Co-operative Society Limited”.
Shares: A member contribution to the Society capitalization subject to review by the
Board of Directors and is not withdrawable.
3
xxv.
xxvi.
xxvii.
“Share Capital” shall mean members equity in the form of issued and fully paid up shares
of common stock
Savings: Savings by members which can be withdrawn on demand within the normal
working hours as specified by the Society Management
Technical Credit Committee: The Committee constituted by the C.E.O comprising of
Management staff such as the Credit Manager, Finance Manager among others for the
approval of loans as mandated by the Credit Committee.
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2. GENERAL POLICY AND PROCEDURES
2.1.
Administration
A high quality of loan documentation including proper signing authorities, borrowing
resolutions shall be instituted and maintained. Adequate accounting records for a loan shall be
required and maintained as well as such physical and monitoring controls that are necessary to
ensure that the loan does not jeopardize or impair the SACCO financial position.
2.2. Authority
This Policy and Procedures Manual has been approved by the Board of Directors to provide
direction and guidelines to the Credit Committee and SACCO staff in order to ensure that
financial resources are adequately protected, SACCO investment in member loans is of high
quality and that the SACCO return on loans is relative to the risk undertaken.
2.3. Eligibility for a Loan
A member shall be considered for a loan only when he or she fulfils the following
Conditions of the society:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
xi.
xii.
Must be above 18 years of age and be of sound mind
Must be a person of high integrity, honest and trustworthy
Must have been a member of Braemeg SACCO through the contribution of the
prescribed entrance fees.
Must have accumulated the prescribed minimum based on multiples (un-withdraw able
unless ceases to be a member)
Must have a set minimum in a Savings/Deposits account or any such Minimum amount
as may be set by the Board of Directors from time to time
Must have no delinquent loan
Committed to savings the prescribed amount towards deposit contribution, and
embracement of prorate basis deposit contribution for clients with loans.
Shall have guarantors
The maximum borrowing by a member cannot exceed the set limits by the board and
shall be three to four times members’ shares deposits
Existing members must have a clean past loan repayment record
Employees of the Society who wish to apply for a loan should pledge the security and
the loan should be approved by the Board of Directors
Loans will be granted according to the applicant’s qualifications based on character,
ability to repay and specific compliance with requirements and Specifications.
5
2.4. Loan Applications
i. With the exception of mobile advances applied on the mobile phone, all loan
applications shall be completed in writing on standard forms provided by the Society.
Verbal applications shall not be entertained. An Application fee specified by the Board
of Directors shall be paid to the Society as may be prescribed and subject to change from
time to time.
ii. The loan form shall in each case set the amount applied for, the purpose of the
loan/advance, terms of repayment and security offered.
iii. The loan/advance application form must be fully completed and supported by Relevant
supporting documents (such as most recent payslip, business records and current trade
license) confirming the applicant’s ability to repay the loan comfortably.
iv. The loan applications may also be sent by post and shall be processed accordingly.
2.5. Loan Process
i. Loan applications shall be directed by the applicant and during working hours to the
Society offices where the Credit Office will attend to the customer.
ii. The society’s date stamp will be put on the application the same day when it is received
and processing done in chronological order
iii. In the initial discussion, the Credit office shall find out if the prospective applicant meets
the requirements, verify the correctness of the information provided by the borrower in
the application form and attachments thereof, and number the application form serially
and enter the application in the loan Application register.
iv. If requirements are not met in full, the Credit Office has the prerogative to advise the
customer not to pursue the loan any further.
v. If the applicant does not agree with the Credit Officer, the loan applicant has the right
to contact the C.E.O, or Finance Manager who, together with the Credit Committee will
enter the final verdict on whether or not the application should be processed further.
vi. If requirements are fully met, the Credit Committee can move to the next step, loan
assessment and analysis.
2.6. Assessment and Analysis
i. The Credit committee shall in the case of BOSA applicants, make an assessment of the
applicants eligibility based on the deposits and the attached security i.e. Guarantors
shares, collaterals and the assessed security.
ii. All guarantors must be Braemeg Sacco Ltd members.
2.7. Appraisal
i. The application will be subjected to the predetermined formula based qualification
parameters, period of patriotic membership, savings multiple and debt ratio.
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ii.
iii.
The officers will ensure the appraisal is done considering parameters comparing incomes
and expenditures to gauge capability of payment. Physical appraisal is also done
especially to suspicious customers.
In case the expenditure exceeds the income the loan will be issued with a lot of caution
and the officer is at liberty to advice the customer
2.8.
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
Loan Approval
The majority of three members of the Credit Committee shall meet to review loans
approved by the Management staff as per specified limits as well as security and
consider other loan applications.
The Credit Committee shall approve loans based on the applicant’s character, capacity,
ability to pay, capital and collateral security offered.
Loan applications shall be considered in the order in which they are received, provided
that: whenever there are more applications for loans than the funds available,
preference will be given, in all cases, to smaller loans
When all conditions for approval have been satisfied, a loan will be approved by a
majority decision of the Credit Committee.
Members will be informed immediately and not later than 14 days the decision that has
been passed on the fate of their applications and reasons for passing Such decisions.
The rejected/ deferred loan applications are filed and reasons for rejection are indicated
in the application forms which are therefore communicated to members.
The Board of Directors shall approve loans for staff and Directors.
The Management / Credit Committee may at any time request for more information or
an interview with the member to satisfy their need to be assured that the application is
fully compliant to this policy.
ix.
Only once the loan has been approved and all policy requirements have been fully
complied with, then the Funds are transferred to the Member through EFT or a Cheque.
x.
All loans MUST be registered in the loans register by the Sacco staff.
xi.
No cheque should be collected by third party or EFT transfer unless authorized by the
member in writing.
xii.
All EFT transfers batch No. dispatched and Cheques should be recorded and signed for
in the register.
7
xiii.
The payment date for the loan is to be set at 1 month from the date the loan was
disbursed, or in the case of payroll deduction on the next payroll date.
xiv.
The decision of the Management / Credit Committee is final.
2.9. Purpose of Loan
Loans shall be granted for provident and productive purposes where repayment will emanate
from farming and business activities.
2.10. Insider Loans
i. Staff members are entitled to loan like any other members.
ii. Loans to Board members and staff shall be approved in the normal loan Process. This
shall however be brought to the attention of the Board of Directors provided that such
member or employee shall not be present when their loan application are being
considered.
iii. A board member who defaults in his/ her loan shall be liable for fine and is forwarded to
board members and is likely to lose his position as a Director; if he or she defaults for
two months or more.
iv. An employee who tampers with his/her monthly deposit contribution and loan
repayment shall face disciplinary action as per section 94 of the Cooperative Societies
(Amendment) Act 2004.
v. The Sacco will not grant any unsecured facilities to its employees or their associates. This
includes immediate family, persons whom or which any of the Sacco Officers has an
interest in as an agent, director, manager or shareholder or any other person of whom
or of which any of the Sacco officers is a guarantor.
vi. The Sacco will not grant or permit to be outstanding any advance or credit facility to any
of its directors or officers unless such an advance or credit facility is adequately secured.
vii. Terms and conditions for staff loans shall be determined by the board from time to time.
2.11. Limits to insider loans
i. Any advance or credit facility or financial guarantee or any other liability to or in favour
of or on behalf of any one insider in excess of 20% of member deposits.
ii. Any advance or credit facility or financial guarantee or any other liability to or in favour
of or on behalf of all insiders amounting in aggregate to more than 100% of member
deposits’
iii. All insider loans shall be recorded in the loan register.
2.12. Interest on Loans
i. The Board of Directors is empowered by the Society’s By-laws to set and review loan
interest rates.
8
ii.
iii.
iv.
The Society will adopt a loan pricing strategy, which will be based on full sustainability,
balancing institutional sustainability, growth, safety and soundness and quality of
services to members. Factors to be considered when determining interest rates include:
full cost of funds, loan risk, inflation, institutional capital building, members’ needs and
market trends.
The method of quoting interests shall be decided by the society from time to time and
may vary from one loan product to another
The stated interest rates shall exclude legal fees and any other direct cost related to loan
processing like collateral valuation
2.13. Loan Repayment and Recovery
i. Loan repayment period shall depend on product type and they are serviced to a range
of up to 60 months
ii. The customer is issued with the loan schedule which indicates the loan to be paid and
the deposits to be contributed.
iii. To make good of the borrowed loans, members shall be required to repay their loans by
instalments and deductions shall be made from All loans disbursed shall be recovered
through check off system, or any other mode acceptable by the society. Members are
advised to ensure timely payment of loan failure to which the recovery process are
enhanced.
iv. Any refinancing of a loan balance, or any request for an extension of time in which to
pay, shall be agreed to by the C.E.O only in exceptional circumstances. Any extension so
granted must be consented to by guarantors and shall be treated as though it was a new
loan, and an extension agreement shall be executed and signed.
v. No loan shall be refinanced until at least 50% of the previous loan has been repaid.
vi.
vii.
viii.
ix.
The Supervisory Committee shall monitor the performance of all loans and in particular,
the insiders loans (for Board of Directors members, staff, their relatives and friends) and
ensure that their repayments are prompt and correct.
Loan restructures will be recommended to loanees upon written explanations of the
poor loan repayment.
Top ups will be allowed for the loans in consideration to their good loan repayments.
The Management/Credit Committee should get monthly reports on loans recovery.
2.13.1. Guarantors/ assessed loans:
a) One month - send sms to loanee
b) Two months – send sms to loanee and guarantors
c) Three months – reminder to loanee and guarantor on offset or recovery
d) Four months- offset and fully recover from guarantors
9
2.14. Security for Loans
i. The Credit Committee or Board of Directors shall ask for such security, as it may consider
necessary.
ii. No member will be allowed to guarantee more than known capacity as evidenced by the
deposits on record at the society. The society shall maintain a register to ensure this
requirement is not violated.
iii. A borrower or a guarantor may apply to the Credit Committee for a change of guarantors
iv. The obligation of previous guarantors shall cease upon change of guarantors subject to
the new guarantors being accepted by the society. The obligation of guarantors shall
also cease when the loan guaranteed is fully paid, reduced to or less than the borrowers
deposits in the society. The society shall maintain a record of all guarantors to every loan
in each member’s file
v. The Credit Committee shall require those applying for loans to produce 100% full
security for All Loans.
vi. All security offered must be in place and in possession of the Society before funds are
disbursed.
2.15. Loan Disbursement
i. Loans will be disbursed when all security documents are completed, signed,
acknowledged and in place at the Office.
ii. Loan application forms once duly completed shall constitute the loan contract. Loans
will be disbursed after approval by the relevant authorities subject to availability of the
funds
iii. The Society will debit net loan to the member’s loans account in the BackOffice and
credit his/her savings/bank account with the same amount
iv. The member can withdraw the money through his or her savings/bank account through
the normal procedure.
v. The society, on the request of the borrower, may disburse a loan by making direct
payments to another organization/bank
2.16. Loan Delinquency
i. The credit manager/officer shall at the end of each month prepare a loan aging report
listing all loans whose repayment date has been exceeded in the following order:
 0days
 1-30 days
 31-180 days
 181-360days
 360 days and above
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2.17. •Loan Classification
 Performing loan (1%)
 Watch (5%)
 Sub-Standard (25%)
 Doubtful (50%)
 Loss(100%)
Other delinquency report to be extracted on monthly basis is the defaulter’s report which
indicates the defaulted period and the amount.
2.18. Loan Documentation
i. The department shall maintain up-to-date documentation of loan files and ensure that
the loan file has the following complete and in place: Loan application,
 Appraisal and analysis report,
 Loan Contract,
 Receipt/acknowledgement of security,
 Security documents and
ii. All application forms for loans and all reports and minutes of the Credit Committee for
every sitting shall be filed and retained in the Society files as permanent records.
iii. There shall also be maintained a Security Register
2.19. Reports
i. A quarterly delinquency report shall be prepared by the Credit Manager/officer,
discussed by the Board of Directors and compared with targets to track down the
society’s overall rate of delinquency.
ii. The loan aging report listing all loans whose repayment date has been exceeded shall
also be tabled. Aging shall be as follows;
 0-3 months, 3-6 months, 6-12 months, and over 12 months
iii. The society shall also ascertain that all necessary insurance covers for the loans, in case
of the member’s death, are taken. For example loan guard.
iv. Every staff member should submit reports to the credit officer fortnightly pertaining
their duties and responsibilities geared to performance.
v. The society shall charge off delinquent loans it considers difficult to collect. This shall be
done through the accounting procedures. All efforts will be made to recover them and
proceeds written back in the society’s income and expenditure account.
11
2.20. Allowance for Doubtful Loans
Provisioning shall be done as per the requirements of IFRS 9
2.21. Summary loan granting mechanism
ELIGIBILITY
i. One should have registered as a BOSA member
ii. Contribute deposits to a multiplier factor of 3 or 4 of the desired amount
iii. OWN DEPOSIT member’s loans can freely be issued to members without any additional
security provided they have not used their deposits to guarantee a loan.
iv. If offset is done to a loanee, before getting another loan there must be an activation of
his/her account for three months. In cases of dormancy, activation fees determined by the
management from time to time is charged before issuance of loan.
LOAN APPLICATION
i. Issuance of loan forms by the officers and filling in of forms
ii. Signing of loan forms by the guarantors who are still shareholders of the SACCO
iii. Return of loan forms to the office ratification
 On the how the form is dully filled up
 Qualification of guarantors
LOAN APPRAISAL
i. Desktop and physical appraisal
ii. Physical appraisal’s is mainly done high risk loan products Physical appraisals are done to
evaluate
 The value and worthiness of assets pledged as security
 Character of loanee i.e. to counter the cunning loanees who for instant bring strangers
to stand for their spouses
iii. Evaluation of members’ income based on parameters including but not limited to the nature
of the business and salary to determine the customer strength is done vis-a-vis the
expenditure gauged by parameters such as salary/wages, house rents, bills etc. to determine
the amount which is not committed to cater for the borrowed amount.
iv. Surprise visits shall be done by Credit officers on a needs basis to ensure that the loans and
security items are safe for the avoidance of bad loans
QUALIFICATION
i. Must meet eligibility criteria
ii. If not a self guarantee loan, security must be pledged inform of Guarantors or the collateral
iii. The repayment period depends on the product type provided that the loanee may repay
within a shorter period.
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SECURITY
i. Guarantors :- who are also the shareholders
VERIFICATION
The officer after receiving the loan form they countercheck the following: Loanee’s deposits
 The core capital
 The amount borrowed against the deposits and the pledged security
 Whether the loan form is properly filled and signed by both the loanee and the
guarantors
APPROVAL/DISBURSEMENT
Approval will be carried out as per the limits set in section 2.8
Only once the loan has been approved and all policy requirements have been fully complied
with, then the Funds are transferred to the Member through EFT or a Cheque.
LOAN FOLLOWUP/RECOVERY
i. Two reminder messages are sent before the due repayment date
 One month default – A reminder message
 Two months –A reminder message to both the loanee and the guarontor
ii. A Demand notice issued
iii. Three months-notification of recovery
iv. Four months- recovery
v. On the follow-up process, we are always so keen to know the reason as to why the loans are
late. After realizing the genuinity we can either: Restructure the loan to the comfortable amounts they feel they can manage
 Top ups
 Continuous daily contact for customers
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3. LOAN PRODUCTS AND FEATURES
Credit services are intended to enable members to borrow against their savings. Braemeg
SACCO has repackaged and introduced the following growth oriented individual loan products
that members may obtain at competitive interest rates.
The members may obtain the following loans depending on their capacity and the ability to
service the loans. The proposed loan products have also taken into account the existing
Braemeg SACCO products with a view to ensuring harmony in operations.
3.1
Normal Loans
•
These are loans for development purposes and form the major portion of loan
Loans are processed as received.
•
Disbursement is within 35 days from receipt of correctly filled and all required
attachments included, of the Loan application form.
•
Maximum Repayment period is 48 months at an interest rate of 1% per month
on a reducing balance.
•
Maximum Entitlement is 3 times the member’s deposits.
•
The Maximum limit is KES 3 Million
3.2
Emergency Loan
This Loan facilitates any unseen circumstances for example; sudden hospitalization, funeral
expenses, court fines, and other unforeseen circumstances beyond our members' control.
•
Emergency loans are given within a member’s entitlement.
•
Maximum amount granted is Kshs. 100,000
•
Members are allowed to have a maximum of two Emergency loans subject to
member’s deposits.
•
This Loan is granted to a member even though he/she has an outstanding loan.
•
This is payable within 12 months at an interest rate of 1% per month on a
reducing balance
•
Emergency Loans are disbursed within 72 working hours.
3.3
Loan Refinance
•
This Loan gives members access to a new, bigger loans on fresh terms, i.e.
maximum repayment period of 48 months if applied as Normal loan or 60 Months if
applied as Development loan.
•
Refinance Loan is applicable to members who wish to apply for a loan while still
servicing a previous loan
•
A commission of 2% is charged on the balance proceeding the month following
the application date.
•
Loan repurchase is only permissible upon repayment of a Normal, Development
and Emergency up to the set prescribed period/amount determined by the board.
14
•
3.4
The Refinance loan falls under the normal terms applicable to all loans.
Development Loans
•
These are loans for development purposes and forms a major portion of
loan Loans are processed as received.
•
Disbursement is within 35 days from receipt of correctly filled and all
required attachments included, of the Loan application form.
•
Maximum Repayment period is 60 months at an interest rate of 1.125%
per month on a reducing balance.
•
Maximum Entitlement is 4 times the member’s deposits.
•
The Maximum limit is KES 2 Million
15
MAIN SECTOR
AGRICULTURE
SUB SECTOR
LEVEL 1
CROP
PRODUCTION
SUB SECTOR
LEVEL 2
OUR PRODUCT
features
TEA
COFFEE
SUGARCANE
OTHER: SISAL,
COTTON, ETC
CREALS: MAIZE,
WHEAT,
SORGHUM
LEGUMES: BEANS,
PEAS, ETC
HORTICULTURE;
VEGETABLES,
FRUITS
ROOTS & TUBERS;
IRISH POTATOES
ETC
ANIMAL
PRODUCTION
AGRICULTURE
SUPPORTING
ACTIVITIES
DAIRY FARMING
BEEF
PRODUCTION
POULTRY
FARMING
BEE KEEPING
SHEEP AND GOAT
REARING
AGRICULTURE
MACHINERY SUCH
AS TRUCKS,
TRACTORS AND
ARM TOOLS
AGRICULTURAL
EQUIPMENTS
AND ACCESSORIES
15
MAIN SECTOR
TRADE
SUB SECTOR
LEVEL 1
SUB SECTOR
LEVEL 2
WATER,
IRRIGATION AND
SUPPORTING
ACTIVITIES
VETERINARY AND
RELATED
SERVICES
WHOLESALE
AND RETAIL
WHOLESALE
TRANSPORT
FOREIGN
TRADE
MANUFACTURING
AND SERVICING
INDUSTRIES
COTTAGE
INDUSTRY
OUR PRODUCT
features
RETAIL
PUBLIC SERVICE
TRANSPORT
PURCHASE OF
MOTOR VEHICLE
ACCESSORIES EG
SPARE PARTS,
ENGINES ETC
TRANSPORTATION
OF GOODS
IMPORT
EXPORT
JUAKALI
INDUSTRY
SMALL SCALE
AGRICULTURAL
PRODUCE
PROCESSING
DRESSMAKING
INDUSTRY
LEATHER
TANNING
CARVING AND
HANDCRAFTS
16
MAIN SECTOR
SUB SECTOR
LEVEL 1
SERVICING
INDUSTRY
SUB SECTOR
LEVEL 2
PROFESSIONAL
SERVICES SUCH AS
BARBER SHOPS,
SALON,
MECHANICS ETC
WORKING
CAPITAL FOR
LEARNING
INSTITUTIONS,
CHURCHES AND
BUSINESS
OUR PRODUCT
features


PROMOTION OF
LOCAL TOURISM



CHRISTMAS SAVINGS






HOLIDAY SAVINGS
EDUCATION
EDUCATION
AND RELATED
SERVICES
SCHOOL FEES FOR
PRIMARY AND
SECONDARY
SCHOOLS
INCLUDING
This is a short term members saving basically for the
Christmas Holidays Registration is at the beginning of
every year i.e January of Every year.
Funds are disbursed on or before 20th of Every
December.
Minimum contribution is Kshs. 500 Per Month.
Savings earn interest at 3% per annum.
All Members interested fill Christmas Package form at
the beginning of the Year
This as a short term saving plan for purposes of half year
holiday, Traveling and Touring.
Must fill the Holiday package form
The package is Voluntary
Minimum Savings is Kshs. 2,000 per Month.
No interest shall accrue on the deposits made as the
holiday Package
The saving runs from September to June of the
following year. Payment is due in April, July, August, &
December when schools are out of sessions or at the
maturity of the period.
This is a saving done for your Childs future financial needs; like
Education, entertainment etc.
 This saving is for members’ children below the age of
18yrs.
BRAEMEG TOTO
SAVINGS
17
MAIN SECTOR
SUB SECTOR
LEVEL 1
SUB SECTOR
LEVEL 2
SHOPPING AND
ACCOMODATION
OUR PRODUCT
features
 Saving is done through check off system, direct deposit
or a standing order.
 The saving will earn 5% annual interest after completion
of a 12 month cluster. All interest will be compounded
onto the fund. Withdrawal before completion of the
cluster forfeits the interest for that cluster.
 In the event of withdrawal, Refund is only due after 45
days.
 Minimum Contribution is Kshs. 500 per Month.
COLLEGE FEES,
UNIVERSITY FEES,
TRAINING FEES,
SEMINAR FEES
RESEARCH AND
SCIENTIFIC
ACTIVITIES ETC
HUMAN HEALTH
HUMAN
HEALTH AND
RELATED
SERVICES
This Loan facilitates any unseen circumstances for example;
sudden hospitalization, funeral expenses, court fines, and other
unforeseen circumstances beyond our members' control.
 Emergency loans are given within a member’s
entitlement.
 Maximum amount granted is Kshs. 100,000
 Members are allowed to have a maximum of two
Emergency loans subject to member’s deposits.
 This Loan is granted to a member even though he/she
has an outstanding loan.
 This is payable within 12 months at an interest rate of
1% per month on a reducing balance.
 Emergency Loans are disbursed within 72 working
hours.
MEDICAL BILLS,
PURCHASE OF
MEDICINE ETC
LAND AND
HOUSING
LAND
MATERNITY BILLS
PURCHASE OF
LANDS / PLOTS
EMERGENCY LOAN


Housing Fund
18
A member fee of Kshs. 3,000 upon entrance.
Minimum Contribution Is Kshs. 5,000 Per Month.
MAIN SECTOR
SUB SECTOR
LEVEL 1
HOUSING
FINANCE AND
INSURANCE
MICRO
FINANCE
COMMERCIAL
BANKS
SUB SECTOR
LEVEL 2
OUR PRODUCT
features
 One must be a bonafide member of a BRAEMEG SACCO.
 To qualify for a loan, a member must have continually
saved for at least 6 months.
 Loan granted is a maximum of Kshs. 7,000,000.
 Interest is at 13.5% per annum on reducing balance.
Loan repayment period is a maximum of 15 years
Interest earning savings balance is Kshs. 100,000.
 Member’s savings with KHF and Title deed of the
property shall form security for the loan.
 Entitlement is 4/5 times a member’s savings.
LAND PURCHASE
SERVICES SUCH AS
SURVEYING AND
EVALUATION
CONSTRUCTION
OF SINGLE
RESIDENTIAL
DWELLING UNITS
CONSTRUCTION
OF MULTIPLE
RESIDENTIAL
DWELLING UNITS
CONSTRUCTION
OF COMMERCIAL
BUILDINGS
RENOVATION OF
BUILDINGS
PAYMENTS TO
MICROFINANCE
LOANS
PAYMENTS TO
COMMERCIAL
BANK LOANS

19
MAIN SECTOR
SUB SECTOR
LEVEL 1
MORTGAGE
FINANCE
SUB SECTOR
LEVEL 2
PURCHASE OF
RESIDENTIAL
PROPERTY /
PAYMENTS TO
MORTGAGE
LOANS IN OTHER
FINANCIAL
INSTIRURIONS
OUR PRODUCT
features
In partnership with stanbic Insurance Agency & UAP old Mutual
Life Braemeg Sacco is offering
Funeral/Last respect cover to its members. The cover caters for
the Member & Spouse, Both Member & spouse parents and up
to 4 children of the member at the following rates
INSURANCE
OTHER
FINANCE AND
ISNURANCE
SERVICES
CONSUMPTION
AND SOCIAL
ACTIVITIES
UTILITIES
PAYMENT TO
INSURANCE
POLICIES
BUYING SACCO
SHARES
PAYING
PERSONAL DEBTS
TO NONREGISTERED
INSTITUTIONS
1. A cover of Kshs. 100,000 per family at a premium of Kshs.
2,000 annualy.
2. A cover of Kshs. 200,000 per family at a premium of Kshs.
4,000 annualy
3. A cover of Kshs. 500,000 per family at a premium of Kshs.
10,000 annualy
Benevolent Fund
scheme
EXPENSES
INCURRED
RELATING TO
BILLS LIKE
ELECTRICITY,
SEWER, WATER,
20
MAIN SECTOR
SUB SECTOR
LEVEL 1
CONSUMER
STAPLES
SUB SECTOR
LEVEL 2
TELEPHONE,
DECODERR,
PERSONAL DEBTS
TO FAMILY
MEMBERS AND
FRIENDS,
EXPENSES ON CAR
AND ELECTRONIC
REPAIRS
HOUSEHOLD
NECESSITIES LIKE
FOOD,
BEVERAGES, AND
BASIC
HOUSEHOLD
PROPERTIES
OUR PRODUCT
features



CONSUMER
DURABLES
GOODS THAT DO
NOT WEAR OUT
QUICKLY LIKE
AUTOMOBILES
(CARS ETC),
BOOKS,
HOUSEHOLD
GOODS (HOME
APPLIANCES,
FURNITURE,
TOOLS, ETC)
SPORTS
EQUIPMENT,
JEWELLERY



These are loans for development purposes and form the
major portion of loan
Loans are processed as received.
Disbursement is within 21 days from receipt of correctly
filled and all required attachments included, of the Loan
application form.
Maximum Repayment period is 48 months at an interest
rate of 1% per month on a reducing balance.
Maximum Entitlement is 3 times the member’s deposits.
The Maximum limit is KES 3 Million
NORMAL LOAN



DEVELOPMENT LOAN
21

These are loans for development purposes and forms a
major portion of loan
Loans are processed as
received.
Disbursement is within 21 days from receipt of correctly
filled and all required attachments included, of the Loan
application form.
Maximum Repayment period is 60 months at an interest
rate of 1.125% per month on a reducing balance.
Maximum Entitlement is 4 times the member’s deposits.
MAIN SECTOR
SUB SECTOR
LEVEL 1
SOCIAL AND
COMMUNAL
SUB SECTOR
LEVEL 2
BURIAL EXPENSES,
WEDDING
EXPENSES, RITES
OF PASSAGE
EXPENSES
OUR PRODUCT
features
 The Maximum limit is KES 3 Million
This Loan facilitates any unseen circumstances for example;
sudden hospitalization, funeral expenses, court fines, and other
unforeseen circumstances beyond our members' control.
 Emergency loans are given within a member’s
entitlement.
 Maximum amount granted is Kshs. 100,000
 Members are allowed to have a maximum of two
Emergency loans subject to member’s deposits.
 This Loan is granted to a member even though he/she
has an outstanding loan.
 This is payable within 12 months at an interest rate of
1% per month on a reducing balance.
 Emergency Loans are disbursed within 72 working
hours.
EMERGENCY LOAN
22
MAIN SECTOR
SUB SECTOR
LEVEL 1
SUB SECTOR
LEVEL 2
OUR PRODUCT
features









OTHER
LOAN USAGE NOT
SPECIFIED

LOAN REFINANCE
This Loan gives members access to a new, bigger loans
on fresh terms, i.e. maximum repayment period of 48
months if applied as Normal loan or 60 Months if
applied as Development loan.
Refinance Loan is applicable to members who wish to
apply for a loan while still servicing a previous loan
A commission of 2% is charged on the balance
proceeding the month following the application date.
Loan repurchase is only permissible upon repayment of
a Normal/Development loan Halfway or half the
duration period.
The Refinance loan falls under the normal terms
applicable to all loans.
Disbursement is within 21 days from date the correctly
filled loan application form + all required attachments
are received.
Refinance loans are processed as received.
Repayment period is 48 months for Normal loans and 60
Months for Development loan at an interest rate of 1%
per month or 1.125% per Month respectively on a
reducing balance.
Maximum Entitlement is 4/5 times the members
deposits, less commission of 2%, Less Outstanding Loan
balance.
The Maximum limit is Kshs 3 Million
STAFF LOAN WILL BE FEATURED IN ALL LOAN CATEGORIES. USAGE SHALL BE SPECIFIED UPON LOAN APPLICATION
23
4. OTHER CREDIT PROCEDURES FOR LOAN PRODUCTS
4.1. Loans Appeal
i. This should be done in writing stating the grounds of appeal supporting documents.
ii. The Credit Officer who will attach with the loans form accompanied with the members
file before forwarding to the Credit committee should receive them.
iii. The Credit Committee will make remarks and forward the appeal to the credit committee.
iv. All the other procedures will then follow.
4.2. Savings Refund
i. When one wants to withdraw from the society, he or she will be referred to the C.E.O, or
a respective officer mandated by the Board to see whether they can be advised on the
need to maintain their membership.
ii. If one insists on resigning, he/she will be advised on how to write the withdrawal letter
iii. He /she will also be advised on the need to replace Guarantors
iv. He/she will be advised on the maturity date.
v. The Credit Officer will then check if all the documents are in order
vi. In case there is an issue arising from the clearance, the Credit Committee will
communicate to the member within 3 days.
4.3. Clearance
Upon the clearance of loan the following should be considered:• If the loan is cleared before the stipulated period the remaining interest is evaded and
only the interest for the cleared month is charged.
• If top up is done the customer is charged 2% of the outstanding principle plus interest
whichever is higher.
• No charges for paying beyond the expected monthly repayment or clearing a loan by
lumpsum.
• A charge of 4% will be payable when a loan is paid prematurely through a Bank loan.
4.4. Guarantors
i. For a member to qualify as a guarantor one has to have been a member for six months,
ii. Members of staff and B.O.D are not allowed to guarantee other members of the society
or each other.
4.5. Replacement of Guarantors
i. This will be done on request of the member or when a member is withdrawing from
membership.
ii. The member will be given an irrevocable guarantor replacement form.
iii. If a member cannot be able to get a guarantor, an apportionment of the loan he/she has
guaranteed will be calculated and will be retained until the loan is cleared.
24
4.6.
i.
ii.
Defaulters
The Credit Officer will print defaulters list on the first day of the month. He will check
individual accounts and produce a report of reasons for non-payments by 5th of every
month.
In case the loan of a customer falls in default due to unavoidable circumstances such as
sicknesses, legal cases, natural calamities and similar circumstances, and the member is
able to provide supporting documents, the penalties shall be waived upon the
authentication of the matter by the Board.
25
5. FUNCTIONS OF THE CREDIT COMMITTEE AND CREDIT OFFICE
5.1. Duties of the Credit Committee
The Credit Committee consists of three members of the Board of Directors. This Committee is
chosen within seven days of each General Meeting. The Vice-Chairman shall be the chair of the
credit committee. It shall hold such meetings as the business of the society may require but not
less frequently than once a month.
The Credit officer will arrange for the Credit Committee meetings, and ensure the schedules
and forms are ready. He will also liaise with them whenever there are issues to be addressed
and keep them updated on the loans status regularly and advice them on cash provisions, and
the loaning policy.
The credit officer should take minutes in case the secretary is absent; the minutes should be
available within 3 days.
The Board may also appoint a Technical Credit Committee consisting of Members of
Management, who should meet at least once a week.
Main Duties
i. Ensure establishment and review of appropriate credit policy consistent with the
relevant provisions of the regulations and these bylaws
ii. Ensure that the problem loan accounts are adequately identified and classified as
prescribed in the regulations.
iii. Ensure adequate provisions for the potential loss
iv. Review periodic credit and loan portfolio reports of the Society before submission of the
board.
v. Endeavour diligently to assist members to solve their financial problems
vi. Observe the loan policy and the By-Laws when acting on Loan Applications.
vii. Keep minutes of their meetings and detailed reports about their deliberations for the
consumption of the Board.
The Credit committee has therefore a very important function to undertake within the Board
of Directors of a society. They should analyze the lending activity to evaluate the efficiency of
the lending process. They are supposed to fulfill the obligations of the society faithfully and with
determination. The credit committee is expected to make detailed reports about their
deliberations for the consumption of other committees and the general membership.
5.2. Credit Office
Objectives of the Loans Office
i. The main objective of credit office is to lend out loans to members at a reasonable rates
set out in the credit manual.
ii. After lending the second objective of credit office is to ensure that the loans are
recovered as soon as possible so that the funds become available for further lending
26
iii.
The credit department should strive to give the best services to members in the shortest
time possible period without discrimination or favour.
Duties and Responsibilities of Credit Officer
i. Receiving loan forms and acting on them
ii. The credit manager to ascertain the loan form is properly filled and has the right and
correct information
iii. Checking/accessing the form checking the following:- What type of loan is applied for and whether it has all the supporting documents
and details or information required for that particular type of loan.
iv. Checking the validity of savings/deposits
- -checking the guarantors deposit
- Confirming the assessment
v. Reporting
Duties and Responsibilities of Credit Officer
i. Receive and record all loan forms
ii. Doing appraising and disbursement of loans
iii. Arranging loan forms and filling them appropriately
iv. Doing loan recoveries
Conclusion
The Braemeg Sacco credit manual is a guiding tool which shall be followed to the letter for
ensuring the right loan processes are adhered to, a good quality portfolio is disbursed and good
recovery procedures are enhanced.
The manual also gives a clear business of SACCO by analysing all the loan products offered by
the society.
27
BOARD APPROVAL OF MANUAL
This document was discussed and approved for implementation as a manual of the society in
respect to credit administration with effect from
It is approved under minute number
of
board of directors meeting held on
Chairman:
Rowland Njagi
Vice Chairman:
Treasurer:
Sign
Josephat Okora
Joseph Thuo
Hon secretary:
C.E.O
Sign
Paul Asewe
Sign
Sign
James Anyika
Sign
28