Amala Core Banking Complying with the new Microfinance Act, 2019 – Microfinance Tier 3

Introduction

Amala Core Banking is a software platform that has automated banking operations of Microfinance and SACCOS (Microfinance and SACCOS operations are banking operations at small scale) 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 II : Regulations of Microfinance Tier 3 (Savings and Credit Cooperative Society)

Regulation 29 : Loan Application

29.-(1) A SACCOS shall ensure that every member who intends to obtain a loan submits an application to the SACCOS using a standard form prescribed by the SACCOS.
(2) The standard form referred to under subregulation (1) shall at a minimum contain the following particulars- (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 member of SACCOS 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 member’s profile or loan account as many as the SACCOS will want.

Picture 1:

Picture 2:

Picture 3

Picture 4:

Regulation 31 : Loan Agreement

31.-(1) A SACCOS shall consider a loan application in accordance with its lending policy and shall, if satisfied that a borrower meets the loan conditions and has the capacity to repay the loan, enter into a loan agreement with the borrower. (2) The loan agreement referred to under subregulation (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; (l) required savings or share amounts and if these funds may be used to pay past due loan payments; and (m) any other relevant disclosures as may be directed by the Bank or Delegated Authority.

From Amala Core Banking

The subregulation 2 a) b) g) can be seen from the Picture 3 above

The subregulation 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 subregulation 2 d) e) f) can be elaborated from the Picture 5 below

Picture 5:

4. The subregulation 2 k) and m) 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.

5. The subregulation 2 l) is met by the guarantee configuration to link to the percent amount that a member’s saving should have to take a particular loan.

Picture 6

Regulation 33 : Loan Security and Collateral
33.-(1) A member may secure a loan by voluntary shares, savings, time deposits or goods provided that such loan shall not exceed ten percent of the core capital.

From Amala Core Banking

This regulation is met by the configuration of guarantee elaborated in the Picture 6 above by configuring “Minimum guarantee from own fund“. SACCOS will need to specify how much percent of loan to be taken should be available in the saving account to secure a loan.

Regulation 34 : Loan Guarantee

34.-(1) A member may guarantee a loan advanced to another member provided that such member has adequate collaterals including voluntary shares, savings, time deposits and other acceptable collaterals.

From Amala Core Banking

This regulation is met by the configuration of guarantee elaborated in the Picture 6 above by configuring “Minimum guarantee from guarantor fund“ and specify how much percent of loan should be guaranteed by the guarantor saving account.

Regulation 37 : Loan Prepayment

37.-(1) A member may repay a loan prior to its maturity in whole or in part on any business day without being penalized. (2) Subject to subregulation (1), 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

The system allow a member to pay for the interest which is due for that time of payment without including the interest of remained period to maturity.

Picture 7 shows the summary of the whole loan which is active. Picture 8 shows how much the member will be charged when want to foreclose the loan (pay in whole before maturity)

Picture 7:

Picture 8:

Regulation 40 : Classification and Provision for Loan

40.-(1) Every SACCOS shall classify its loan portfolio into the following categories-
(a) current; (b) especially mentioned; (c) substandard; (d) doubtful; and (e) loss.
(2) The criteria for classifying loan portfolio shall be as follows-

Number of days past due

Classification

0 to 30 days

Current

31 to 90 days

Especially Mentioned

91 to 180 days

Substandard

181 to 365 days

Doubtful

More than 365 days

Loss


(3) The minimum amount of provisions for each category of classification shall be as follows –

Classification

Provision

Especially Mentioned

10%

Substandard

30%

Doubtful

50%

Loss

100%

From Amala Core Banking

The system allow the SACCOS to set their provisioning in days past with the categories and provisions as stated by regulation as they can edit the fields and specify the percentage and days that regulation states.

Picture 9:

Regulation 42 : Restructuring of loans

42.-(1) Subject to its lending policy, a SACCOS may restructure a loan provided that- (a) the loan shall not be restructured more than once;

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. The SACCOS will be able to specifically provide the limitation of restructuring in its configuration of the system to restrict to one restucturing.

Picture 10:

Regulation 51 : Books of accounts, records and financial year

51.-(1) A SACCOS 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 subregulation (1) shall- (a) correctly explain all transactions, including all applications for loans and all loan transactions; (b) enable the financial position of the SACCOS to be determined with reasonable accuracy at any time; (c) allow for the timely preparation of financial statements; (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 SACCOS.

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, SACCOS will be able to meet all the requirements from a) to d) iii) provided.

TCDC Reports

SACCOS of Category B are required to send monthly reports to Tanzania Corporative Development Commission (TCDC) as a regulatory compliance for the regulator to be able to monitor the performance of the SACCOS.

Amala Core Banking can provide all the reports required to support the SACCOS to comply without the hassle.

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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 SACCOS to transform their business. We welcome other SACCOS 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 huduma@singo.africa or you can call us through +255 766 521258 and we will be happy to work on them.

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