The increase of non-performing loans (NPL) is one of the critical challenges that banks and financial institutions face nowadays. The benchmark of non-performing loans for bank industry is set to 5 per cent but in the third quarter of the year 2017, unaudited accounts for 19 banks and financial institutions indicated that NPLs ranged between 4 per cent and 51 per cent which is very high from the benchmark. Higher per cent of NPL will mean lower in collecting of repayments, no return of expected interests and even the borrowed principal. This reason could lead to institution bankruptcy.
One of the strategies that BOT recommended to banks and financial institution on reducing NPLs is to establish NPLs policies, some of them are arrears management policy, debt recovery policy, collateral management, valuation and reporting policy and early warning policy. Also, some of the banks have started to provide a group loan on their way of reducing NPLs as group are easy to make follow up.
On implementing the above policies could be more efficient if they were managed by a banking system and hence expected to reduce more NPLs than if they were to be implemented manually. It clear you will need a system that will support these.
Amala App Suite system includes a web application for back-office of the financial institution that helps to manage their business. As a system developed on top of Fineract Platform, a core banking platform used worldwide, Singo Africa Limited has advanced it more so that it can both serve the many countries but at the same time give all Tanzania’s banking industry needs in a core banking system.
To support the banking industry on reducing the NPLs, Amala App Suite has been developed to implement the above policies in a system in an easiest and efficient way an institution can implement. Several features have been included in the system to facilitate the policies and other strategies.
The following are among the many features that can help you to manage well your loans and reduce the NPLs in your institution.
The overdue loan shows with red colour
When the loan is overdue even for one instalment, the system changes the status of the loan by labelling it with a red color, this will draw attention to the loan officers to pay a close look at the borrower.
Automatically calculated penalties for the overdue loans.
The system support to attach penalties to a loan and when the due installment is not paid, the systems will automatically calculate the penalty that s/he supposed to pay. This creates the discipline for borrowers to pay on time and hence reduce the possible numbers of NPLs.
Soon after the loan has entered in arrears, the loan of a borrower is updated by showing the overdue amount of principal and interest as from the pictures above.
Also, the system provides you with several arrears reports that will help the institution to see the progress of the loan repayments and see the potential loans to enter in NPL for them to make very close follow up.
Collateral Management and Valuation
Collateral has been used as one of the guarantees of a loan by many financial institutions, a borrower provides collateral to ensure the lender that s/he is planning to return back the money as agreed.
Through Amala App Suite the institution can configure the per cent they want the collateral to have based on the loan, meaning to set that the collateral should not be below the certain per cent of a loan requested. This will evaluate the value of the collateral whenever it will be attached to the loan.
SMS notifications for the loans that are due.
Amala App Suite is integrated with the SMS provider which enable to send SMS notifications for different business rules. One of the business rule is when the loan of a customer is due, you can configure the system to send an SMS to a customer reminding him/her that his/her loan is due and he should come to pay, on that notification you can even warn the customer that there will be penalties if they won’t pay on time. This gives the borrower early warning concerning his due instalment.
Other notifications that can be sent through SMS among the many are when the customer withdrawal or deposit from the saving account when the whole loan is passed its maturity date and it is not paid fully, approvals and disbursements of the loan and so many other.
To reduce the hassle of follow-ups, many banks and financial institutions have decided to borrow loans in groups especially to people with low income. By using Amala App Suite, you can register customers in the system and put them in one group.
As you can see from the picture above, you will get to know all the members of that group and you can view their individual information, you will be able to apply the loan of that group and see the status of the loan like the way you see that of an individual loan.
From the above and other many more features available in Amala App Suite, the institution can be able to make a very close tracking of the loans of their customers and be able to know in advance whenever there is a risk of an increase in NPLs.
Singo Africa team is open to any other requirement that your institution will need on the way of improving your business if you will find they are not yet included in the system, request for a demo today and our team will be happy to show you more.
As one of our policy, we always improve the system to meet your needs, you can pay a visit to some of the notes of releases that we have already done currently.