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SHS FINANCING SRI LANKA EXPERINCE

SHS FINANCING SRI LANKA EXPERINCE. DOCUMENTATION. Why do we need documents ?. Documents serves manifold purposes and documents are of different types In a loan or lease transaction an initial request from the prospective borrower is taken as the first step of negotiation.

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SHS FINANCING SRI LANKA EXPERINCE

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  1. SHS FINANCINGSRI LANKA EXPERINCE DOCUMENTATION

  2. Why do we need documents ? • Documents serves manifold purposes and documents are of different types • In a loan or lease transaction an initial request from the prospective borrower is taken as the first step of negotiation. This basic document is called ‘APPLICATION’ • Then comes the supporting documents • Third and final set of documents are the security documents and these documents are important as they may have to be used at a latter date when the relationship becomes sour and unsuccessful

  3. Important facts • In micro finance we deal with people of poor education levels most of the time Therefore it is important to have simple documents which could be understanable by all • For SHS financing in Sri Lanka is using a very simple set of documents all in one set combined together

  4. APPLICATION • Details of the applicant/s - income ,expenditure, assets owned, liabilities pending, borrowings if any • Guarantors statements - similar details as above • They keep a special provision to get assistance from the suppliers’ employees as they often assist the applicants to prepare the documents

  5. Supporting documents • Supplier’s technical report is a half page document outlines the type of house, situation, required equipment • Field officer’s credit evaluation report is the second supporting document • The important feature in this context is that the applicants are unable to offer supporting documents to prove their income and the proof comes from the evaluation

  6. CREDIT APPROVAL • Credit approval is also noted in the application itself to make the process more simpler • SECURITY DOCUMENT IS A COMBINED DOCUMENT – Agreement , Receipt , Promissory note, guarantee bond

  7. LEGAL REQUIREMENTS • Documents obtained is in terms of legal requirements of Sri Lanka • They leave option for MFI to institute one action or several actions if at all if we decides to go against the borrower or the guarantors • UPTO DATE THEY HAVE NOT GONE TO COURTS AND THE RIGHTS ON THE AGREEMENT HAS NOT BEEN CHALLANGED • They resort to settle all issues amicably keeping in mind that GOODWILL is more important

  8. Additional documents • These are obtained as a proof of the transaction • INVOICE – MFI ownership to the equipments • CAR - Customer acceptance receipt. Evidence to prove that the SHS is fixed at the borrower’s house in good order

  9. Additional doc. Contd.-- • Road Map sketch – Kept in every file to be used in future when a problem props up in the field This has been a very useful document in follow up action and also for appraisal level.

  10. Important Features in document completion • Accuracy • Completeness • Properly witnessed • Free of alterations or alterations properly authorised by initialing

  11. Storage of documents • Properly stored Check list attached Kept in numerical order, in fire proof cabinets under lock and key • Periodical inspections by the internal and external auditors • Custody of documents – Manager/ Asst. Manager

  12. Common Problems • Lack of understanding of the legal requirements at the initial stages of the lending program. • Strategies to overcome the weakness Employees has to be trained Responsibility levels has to be established Authority line to be clearly defined

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