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CREDIT COMMITTEE PRESENTATION- EDUCATION DAY 8 th June 2013

CREDIT COMMITTEE PRESENTATION- EDUCATION DAY 8 th June 2013. Objectives of the Credit Function. The main objective is to Lend out loans to members at a reasonable rate of interest as set out in the credit policy

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CREDIT COMMITTEE PRESENTATION- EDUCATION DAY 8 th June 2013

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  1. CREDIT COMMITTEE PRESENTATION- EDUCATION DAY 8th June 2013

  2. Objectives of the Credit Function • The main objective is to Lend out loans to members at a reasonable rate of interest as set out in the credit policy • The second objective is to ensure that the loans are recovered as soon as possible so that funds become available for further lending. • In carrying out the two main objectives, we strive to give the best services to members in the shortest possible period without discrimination or favor.

  3. Benefits Of Taking A Sacco Loan • It is cheaper compared to bank loan less interest for members who clear loans before the agreed period. • Deductions are constant; not adjusted with inflation rate. • Interest is paid back to the member in forms of dividends. • There is personal touch since the member is part of the Sacco. • No hidden charges.

  4. Interest Rate on loans Banks have claimed to charge the same interest as Sacco's at 12%. However, the effective rate for Sacco's is 6.6 percent per annum considering it is 1% on reducing balance method. Example: A loan of Kshs:100,000 payable in 12 months, The monthly installment is Kshs: 8,885 Total repayment (8885 x 12) KShs:106,620 Less loan amount Kshs: 6,620 Therefore the % p.a interest is 6.62% (6,620/100,000)%

  5. Guarantorship The Sacco shall ask for such security as it may consider necessary: • The deposits of a member are taken as security, unless the loan applied for is equal to or less than a member’s deposits then it must be secured by guarantors. • The total free deposits of the borrower and guarantors’ commitment must be equal to or more than the loan applied for. • A member may be granted a loan without guarantor(s) if it does not exceed 95% of his/her deposits and has not guaranteed any loan.

  6. Contd.. • All guarantors must be members of the society with good standing and acceptable by the Credit Committee. • No member of the Board of Directors or any Board committee shall act as an endorser or guarantor for a borrower from the society. • A borrower or a guarantor can apply to the Credit Committee for change of guarantors. • We are in process of integrating our system to enable the system to send SMS to guarantors to confirm if they have guaranteed the loans.

  7. Words of Advice • Its is important to take keen interest when guaranteeing a fellow member by noting the amount of loan applied for and following up to ensure that what you guaranteed is the amount of loan received. • Guarantors should indicate your full names and the amount of shares guaranteed. • Loan applicants should countersign any changes made in the loan form and inform their guarantors where the loan amount has increased. • Statements currently show loans guaranteed, it is easier to monitor the these loan reductions.

  8. Contd.. • Be proactive in approaching the Sacco in case of any anticipated problems regarding your remittances. • When placing standing orders, please indicate your member number in addition to your name and send a copy to our office. • Please indicate your member number when depositing cash and cheques directly to our account and ensure the slip is forwarded to the Sacco office for receipting.

  9. Recovery of Defaulted Loans • A Loan is in default when it is 3 consecutive months overdue. • Any loan defaulted for more than three months, will be recovered instantly, first from the individual member’s shares, then from the guarantors unless the guarantors request to repay the loan through check off. • A defaulter does not qualify for dividends.

  10. Dormant Membership • A member is declared dormant if he/she does not contribute the minimum Kshs:2,000 for six months in a given year. • Dormant members’ shares do not qualify for dividends. • They also lose interests on their deposits

  11. Contd.. • A member can avoid dormancy by making regular contributions through a standing order(individual members), ensuring timely remittances by their organizations and keeping track of contributions by contacting Kimisitu offices. • Statements are sent on a quarterly basis. • Plans are at an advanced stage to avail members statements online.

  12. DIVIDENDS COMPUTATION The 2012 dividends were calculated as illustrated below.

  13. Interest On Deposit Computation • Interest on deposit is prorated as per the number of months the deposits have been in the Sacco. • This is to discourage members from taking advantage of making lump sum payments e.g. depositing Kshs.100,000 in November and expecting to receive a full year’s interest.

  14. Words of Wisdom : • "When wealth is lost, nothing is lost; when health is lost, something is lost; when character is lost, all is lost." - Billy Graham • The most important thing for a young man is to establish a credit.. a reputation, character.- John D Rockefeller

  15. THANK YOU

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