Amala Core Banking is a software platform that has automated banking operations of Microfinance and SACCOS provided by Singo Africa Limited on our mission to improve, grow and transform businesses of our fellow African’s and the world at large. On serving Tanzania as a primary market where the company is based, Singo Africa Limited is ensuring their clients also comply with the regulations that govern them, to do that, we have automated all the areas that relate with their operations in terms of managing their banking information and that required by the regulations.
In this article we will elaborate what the regulation requires and how the Amala Core Banking system support the regulation. Part I : Regulations of Microfinance Tier 2 (Non-Deposit taking Microfinance service providers) Regulation 24 : Books of Accounts records and financial year – (1) A microfinance service provider shall keep proper books of accounts and other records in relation to its operations, which are sufficient to show and explain its transactions and financial position. (2) The books of accounts and records referred to under sub regulation (1) shall- (a) correctly explain all transactions, including all applications for loans and all loan transactions; (b) enable the financial position of the microfinance service provider to be determined with reasonable accuracy at any time; (c) allow for the timely preparation of financial statements; and (d) include underlying documentation which shall be kept to reflect details of- (i) all sums of money received and expended and the matters in respect of which such receipts and expenditures took place; (ii) all sales and purchases and other transactions; and (iii) the assets and liabilities of the microfinance service provider. From Amala Core Banking: Record all the transactions of the portfolios automatically when operations like disbursements, repayments are done. Allow the manual entries for other operations like recording expenses. Provide the accounting reports like Balance Sheet, General Ledger, Income Statement etc and other many loan reports at any time needed. The system is flexible to allow creation of new report as the client will need.
With that, Microfinance will be able to meet all the requirements from a) to d) iii) provided. Regulation 38 : Loan Application
38.-(1) Every application for a loan shall be made on a standard form prescribed by a particular microfinance service provider and shall state at a minimum the following- (a) full name; (b) date of birth or date of registration; (c) place of residence or place of business; (d) occupation or type of business; (e) the loan purpose; (f) economic sector; (g) the loan amount requested; (h) the collateral offered; (i) marital status; (j) number of dependents; (k) place of employment; (l) current income; (m) expenses and assets; (n) other loans outstanding; and (o) such other information as may be required. From Amala Core Banking The form to register client of Microfinance allow to collect the details shown in Picture 1 below The form of loan applications allow to collect another information directly related with the loan as in Picture 2 below The system allow the additional of other details in a client profile or loan account as many as the Microfinance will want.
Regulation 39, 2) : Loan Agreement
39.- (2) The loan agreement referred to under sub regulation (1) shall at a minimum contain the following- (a) loan amount; (b) nominal or stated annual interest rate; (c) all other fees charged; (d) effective annual interest rate that includes all fees charged; (e) loan repayment schedule that includes the number of installments, total amount of each installment indicating principal, interest and fees components separately, and due date of each payment; (f) sum of all payments until the loan is fully paid; (g) interest rate computation method; (h) late payment penalty; (i) debt recovery fee, charges or expenses; (j) notice of security interest for collateral used to secure the loan; (k) signatures of both the borrower and the microfinance service provider; and (l) any other relevant disclosure as may be directed by the Bank. From Amala Core Banking The sub regulation 2 a) b) g) can be seen from the Picture 3 above The sub regulation 2 c) h) i) j) can be seen from the Picture 4 above, elaborated by one charge attached but the system can allow to attach as many charge that will be present. The sub regulation 2 d) e) f) can be elaborated from the Picture 5 below
The sub regulation 2 k) and l) can be met through uploading document with the signature and any other needed requirement in the segment of “Loan Documents“ shown in Picture 5 above. Regulation 42 : Loan Repayment
42.-(1) For all payments received from a borrower, a microfinance service provider shall credit a borrower’s account with the amount received on the date payment was made. (2) The repayment amount referred to in sub regulation (1) shall first be allocated to any due interest charges on the loan, then to the outstanding fees and charges on the loan and lastly to settle any due principal payment. (3) A borrower has the right, without advance notice and without being penalized by a microfinance service provider, to repay a loan prior to its maturity either in whole or in part to reduce outstanding principal amount owed, interest charges and fees owed. (4) Subject to sub regulation (3), where the loan is paid in full prior to its maturity, the borrower shall not be required to pay interest for the remaining period to maturity. From Amala Core Banking For sub regulation 1), the system allow to do a loan repayment that capture the amount paid, the date of payment, the payment method used and other payment details like bank account etc.
For sub regulation 2), the system allow the Microfinance to set the repayment strategy to deduct fee and interest first then the principal amount.
For sub regulation 3) and 4), the system has a feature of foreclosure which allow the client of Microfinance to pay the outstanding amount in total and with this feature, the interest that will be charged is to the date of the payment (Won’t include the time left for maturity). Picture 8 shows the total amount outstanding and Picture 9 shows how much the client will pay when foreclose.
Regulation 43 : Loan Restructuring Subject to its lending policy, a microfinance service provider may restructure a loan in terms of instalment amount or payment period for a borrower facing cash flow problems or financial distress.
From Amala Core Banking
The system allow restructuring of a loan to change repayment date, to extend repayment period, to introduce the grace period or to adjust interest rate for the reminder loan.
Regulation 44: Past due Loans
44.-(1) A loan with specific repayment date shall be considered as past due in its entirety if any of its contractual obligation for payment has become due and unpaid. (2) Loans which are payable in installments shall be considered past due in their entirety if any of the installments has become due and unpaid for one day or more. From Amala Core Banking
The system automatically record the overdue loans and label them red when the repayment at least of one installment is unpaid from one day.
Regulation 45 : Classification and Provision for Loan
45.-(1) A microfinance service provider shall classify loans based on days past due as follows-
(2) The minimum provision rates for loans shall be based on the following schedule-
(3) A microfinance service provider shall classify housing microfinance loans based on days past due as follows-
(4) The minimum provision rates for housing microfinance loans shall be based on the following schedule- Classification Provision Substandard Twenty five percent Doubtful Fifty percent Loss One hundred percent
From Amala Core Banking For subregulation 1 and 2, The system allow the Microfinance to set their provisioning in days past with the categories and provisions as stated by regulation.
For subregulation 3 and 4, The Microfinance to set the provisions for category “current” and “especially mentioned” 0 and set their provisioning in days past with the categories needed and it is stated by regulation. Regulation 55: Disclosures Loan Guarantors A microfinance service provider shall give to the guarantor the disclosure statement in writing indicating his liability for the loan guaranteed and such statement shall include- (a) the name and address of the microfinance service provider; (b) the loan number; (c) name of borrower; (d) loan amount; (e) the date a loan was granted; and (f) the guarantor’s signature. From Amala Core Banking
The system can provide the statement of disclosure of guarantor as needed by the regulation.
With the above details and screenshots taken from Amala Core Banking system showing how the system comply with the regulation, we are happy to be able to make our clients focus on their business without worrying on compliance when they have taken care of other regulations which are procedural.
We have also be able to provide more than what regulations require to enable Microfinances to transform their business. We welcome other Microfinance to join Amala team on ensuring they get the best service they deserve. Request for the demo and we will be more than happy to pass you through the system.
If you will find any regulations which is not covered here and you think could be automated, we welcome feedbacks through our e-mail firstname.lastname@example.org or you can call us through +255 766 521258 and we will be happy to work on them.