KAMUSIIME CO-OPERATIVE SAVINGS AND CREDIT

KAMUSACCO

SOCIETY LTD.

P.O BOX 64
RUBIRIZI DISTRICT

LOAN POLICIES AND PROCEDURES

(CREDIT POLICY)

SEPT 2022

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1.0 Contents
1.2 Introduction..............................................................................................................................................4
1.2.1 Membership..........................................................................................................................................4
1.3 Vision.......................................................................................................................................................4
1.3.1 Mission Statement.................................................................................................................................4
16.2 Basis of the collection policies.............................................................................................................21
16.3 Acceptable Delinquency Level.............................................................................................................21
18.1 Declaration of Loans with Overdue Installments.................................................................................23
18.2 Demand of the payment.......................................................................................................................24
18.3 COLLECTION BY SACCO.......................................................................................................24
18.4 Anticipated SACCO actions.................................................................................................................24
18.5 Implementing SACCO collection actions............................................................................................25
18.6 Payment reminder............................................................................................................................25
18.8 Second collection notice...................................................................................................................26
19.1 Initiating collection through attorney...................................................................................................26
20.3 Review and organization of the files....................................................................................................28
20.4 Retaining Legal Counsel / Advocate...................................................................................................28
21.3 Penalties for delinquency on the deliquent installment........................................................................30
21.4 Delinquency sanctions assessed on members (end of day)...................................................................31
21.6 Delinquency sanctions assessed on employees.....................................................................................32
Characteristics and acknowledgement of problem loans..............................................................................33
22.1.1 Creation of an estimate for bad loans................................................................................................34
22.1.5Related responsibilities...................................................................................................................36
ATTACHMENTS................................................................................................................................37
First Collection Notice.................................................................................................................................37
Second collection notice..............................................................................................................................38
Third collection notice.................................................................................................................................38
Collection visit report...................................................................................................................................40
Collection telephone call..............................................................................................................................41

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ACKNOWLEDGEMENT
This loan manual has been compiled for the guidance of all Management staff, Credit /loans
Committee, and Board Committee of KAMUSIIME SACCO

All members of Management staff, Credit/loan Committee, and Board of Committee must keep
themselves fully conversant with its contents which are private and confidential and must not in any
way be divulged to any person not in the service of the KAMUSIIME SACCO. All copies of the
manual shall be availed to only the concerned people and must be returned after use to the relevant
custodians of policy documents at the KAMUSIIME SACCO.

The Rules and Regulations for the credit procedures for the KAMUSIIME SACCO are set forth in
this manual. Staff, Loans Committee members and members of the Board Committee are expected to
read these policies and to conduct the affairs of KAMUSIIME SACCO strictly in accordance with
the fundamental principles laid down herein for the protection of KAMUSIIME SACCO’S interests

In furtherance of the instructions contained in this manual, staff shall be guided by the amendments
issued by Board Committee from time to time. All matters of legal nature must be referred to the
Legal counsel of the KAMUSIIME SACCO for guidance through the Board Committee.

No additions or alterations shall be made to this manual and procedures without the authority of the
Board Committee and no pages shall be removed even temporarily unless they are officially
cancelled. When additions or alterations are necessary, management shall make recommendations to
the Board Committee for approval before implementation.

This loan policy document aims to manage and minimize the credit risk arising from administering
all KAMUSIIME SACCO loans. It is important to all credit staff and the Credit Committee members
as well as other KAMUSIIME SACCO officials and members must adhere to these policies. If an
individual employee, or credit committee member (s) in combination, consistently fails to follow
these policies and procedures, or fails to adhere to certain procedures, disciplinary actions and other
necessary actions shall be taken.

The loan policy manual has been divided into sections; about policy and procedural guidelines,
decision making structure regarding loans, the procedures for lending and recovery, security and

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their protection procedures and the loans product features. The manual also has samples of loan
documents (appendices attached) that may be used from time to time while processing new/repeat
loans.

These policies and procedures shall be reviewed from time to time by the Board Committee with
recommendations for policy change by management with a view of being competitive and attractive
to members while at the same time complying with regulatory requirements. This policy has been
developed with the guidance of AI MICROFINACTIONAL CONSULT INT LTD

1.0 BACKGROUND

1.1 1.2 Introduction

KAMUSIIME Sacco is a registered Savings and Credit Cooperative society Ltd that was officially
registered on 28th May/2007 Reg. no RCS/8354 in line with provisions of section 6(2) of Co-
operative Act CAP 112, 1991 And Co-operative Society Regulations 1992.
The Head office is situated at Rutoto T/C - Rubirizi District. The SACCO owns its headquarter
premises. It has two outreaches i.e Katerera and katunguru
The main business of the KAMUSIIME Co-operative Savings and Credit Society Ltd is to
PROVIDE MEMBERS with the opportunity to ACCESS LOANS to develop and improve their
economic and social status (Saving and Credit).
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1.2.1 Membership

The KAMUSIIME Co-operative Savings and Credit Society Ltd draws its membership from the
business community in Rubirizi District, Greater Bushenyi Districts, kasese District, Kamwengye
District, Kitagwenda District.

1.3 Vision
The Vision is: “A sustainable Cooperative Financial Institution where members’ satisfaction and
economic empowerment is a priority”
1.3.1 Mission Statement
To provide affordable, reliable and sustainable financial services to its members to improve their
livelihood”.
1.4 CORE OBJECTIVES
i. To provide members with a safe and convenient avenue where they can accumulate their
savings regularly.
ii. To enable all its members access loans for individual economic and social development.
iii. To do all other things/actions that are permissible under the law, for the promotion of
members’ economic and social interests. These may include: Education, wise use of credit,
importance of savings and project ideas, insurance programmes on savings and loans To offer
savings facilities to members at competitive interests rates
1.5 Core Values:
 Transparency
 Accountability
 Quality services
 Teamwork
 Honesty
 Customer focus and commitment.
 Integrity
 Professionalism
 Reliability
God fearing
1.6 Logo/Corporate colors
Green
Blue
Cream
1.7 Loan policy objectives.

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For perfect lending operations, it is necessary to have this loan manual which shall be revised and up
dated from time to time to help for the ever increasing internal Control requirement of the
KAMUSIIME SACCO and in the view of the changing circumstances and policies in the Micro
finance industry.
This policy establishes the guidelines to be followed in the lending process in order to maximize the
achievement of the following objectives:

a) Granting Loans on a Solid and Recoverable Basis

KAMUSIIME SACCO loan portfolio will consist of a good mix of short and medium term loans.
Every effort will be made to maintain a healthy and balanced portfolio, thereby maintaining
adequate liquidity and lowering the risk of the resources channeled into loans.
b)Investing KAMUSIIME SACCO funds to maximize their returns while providing for the
protection and safety of the Members’ savings.
The KAMUSIIME SACCO will endeavor to keep risk at a reasonable level. Loan quality will
prevail over business opportunities. Maintaining good loan quality will depend on the granting of
sound loans and following them up with a periodic evaluation of the portfolio quality and the
adoption of measures for timely loan recovery.
c) Serving the real credit needs of KAMUSIIME SACCO Members
Providing timely, adequate and competitive responses to applications for loans, observing that they
represent viable options for the use of funds available for investment. KAMUSIIME SACCO will
maintain an adequate social response to members in a manner consistent with sound lending
principles carry out by the Credit process with in a legal and ethical framework
All loans will be processed in full agreement with ethical guidelines to avoid possible conflicts of
interest.
d) Analysis Book. To act as a day to day reference book and a guide to all staff dealing with credit
in order to minimize loan losses.
e)Training aid
To be a training aid for new staff and new Credit/ Loan Committee
The appropriate changes, if any, will be made and approved by the Board Committee and
communicated to all staff responsible for financial management and credit administration and the
members.

1.9 Lending principles of KAMUSIIME SACCO

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In giving credit to clients/ members, KAMUSIIME SACCO shall follow the following principles.
(a) Shall use skill, and exercise proper judgment while executing his/her duties.
(b) Should be member focused to satisfy the member needs carefully and diligently.
(c) Must be realistic and honest while executing his/ her duties.
(d) KAMUSIIME SACCO shall exercise independence in decision making and must never be
rushed into making decision but at the same time give quick and timely response to members.
(e) Analyze thoroughly the purpose of the loan and not use mere speculation.

1.9.0 Source of loan funds.

KAMUSIIME SACCO shall always use the following as source of funds to give loans.
(a) Share capital from members or retained earnings.
(b) Loans from authorized institutions.
(c) Members’ savings but at least 30% must be kept at the SACCO
(d) Donations or grants
(e) Retained earnings
2.0 Target market:
Based on the mission and vision statement of KAMUSIIME SACCO, the targeted market shall be all
low- and medium - income earners in the area of operation.
2.1 Eligibility for the loan,
The applicant or, the client;
(a) Must be a share holder/member
(b) Must be of good sound mind.
(c) Must be aged 18 years to 70 years. Beyond 70 years, the Loans committee and management shall
use personal judgment.
(d) Must not be having outstanding loans debt apart from emergency special and vendor loan
products
(e) Must not be engaged in products or activities that are illegal
(f) Must have saved with the KAMUSIIME SACCO for at least 1 to 4 months
(g) Must have at least 3 (Three) guarantors among which the spouse is preferred for the loan applied
for.
(h) Must possess satisfactory security for the loan
(i) Have ability to carry out the project for which the loan is applied for.

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2.2 Type of loans
Every fully subscribed members of the KAMUSIIME SACCO who meets the requirements
and conditions are eligible to access loans available at the SACCO. These loans include;
(a) Business
(b) School fees.
(c) Agriculture( farming and animal husbandry)
(d) Emergency loans
(e) Boda boda loans
(f) Asset Acquisition Loans( Housing, Water harvest, Solar etc)
(g) Group/Vendors Loans
(h) Board and Staff Advance loans
(i) Institutional loans
The overall objective shall be disbursing loans for working capital.
The SACCO shall not lend startup capital and members must have an equal stake of about 50% in
the business being financed and then the KAMUSIIME SACCO meets the balance.
. The source of payment must be well ascertained and verified by the relevant loans officer and the
loans committee

BASIS FOR THE LOAN OR CONDITIONS

The loan applied for shall be disbursed on the basis of:
(a) Members ability to repay
(b) Amount and number of shares he/she has in the SACCO
(c) Members saving history with the SACCO
(d) The repayment or credit history of the member
(e) Loan security and guarantors
(f) Size and viability of the project
3.1 Loan type
TYPES OF LOANS CONDITIONS OF LOANS
(a) Business loans  Minimum amount Ugx 100,000
 Maximum amount Ugx 20Million
 Maximum period 2years
 No grace period.
 Savings to loan 2% of the loan required
 Interest rate 2.5% Reducing balance
 Monitoring fees 4%
(b) Paying school fees.  Loan period 5 months for higher institutions and 4 months for
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secondary and primary student levels
 Minimum amount is 100,000
 Maximum amount is 3Million for all levels.
 Interest rate 2% Reducing balance
 Savings to loan ratio 2%
 Monitoring fee 4%
(c) Agriculture ( farming  Minimum amount is 100,000
and animal  Maximum amount 20 Million
husbandry)  Interest rate 2% Reducing balance
 Maximum repayment period 2years
 Savings to loan 2% of the loan required
 Grace period of 2 months
 Monitoring fees 4%
(d) Emergency loans (a) Should be an active member with good credit history
(b) Interest rate 5% flat rate
(c) Maximum loan period4months.
(d) Should have paid first installment (2months) of the running
loan.
(e) Maximum loan amount 3 Million
(f) Savings to loan 2% of the loan required
(g) Monitoring fees 4%
(e) Boda boda loans  Interest rate 2.5% Reducing balance
 Maximum period 1year
 Log book remains with the SACCO until final payment.
 Minimum of 1,000,000/= on appraisal.
 Repayment frequency must be at least 60,000 weekly
 The client must avail the motorcycle itself to Sacco premises for
review every week.
 Monitoring fees 4%
(f) Asset Acquisition  Minimum amount Ugx 200,000
Loans  Maximum amount Ugx 20 Million
 Interest rate 2.5% Reducing balance
 Maximum period: 2 years
 Savings to loan 2% of the loan required
 Repayment frequency is monthly
 Monitoring fees 4%
(g) Group loans  Minimum number of members in group is 5 members
 Maximum number of members in group is 30 members
 Each member 500,000 maximum
 Minimum amount Ugx 2.5Millions
 Maximum amount Ugx 15 Millions
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(h) OTHER CONDITIONS
(i) Institutional loan
KAMUSACCO
 Interest rate of 1.5% flat rate
 Period of 4 months/Bi-weekly
 One week Account operational
 LC1 letter
Other loan charges include
 Loan application fees 10,000 for individual loans, and 20,000 for
institution loans
 Stamp duty of 15,000 for loans 3M and above
 Appraisal fee of 20,000 for loan amount above 500,000 & 1% for
500,000 & below.
 Stationary fee of 10,000
 Loan protection fund (Insurance) of 1.5% for all loans
 Loan monitoring fee of 4%
 Minimum amount is 1Millions
 Maximum amount 30 Millions
 Interest rate 2.5% Reducing balance
 Maximum repayment period 2years
 Savings to loan 2% of the loan required
 Loan monitoring fee of 4%

(i). OTHER CREDIT BENEFITS

1. Loans to board (a) Interest rate1.5% Reducing balance

Members (b) Maximum period 2 Years
(c) Minimum amount is 100,000
(d) Maximum amount 15 Million
(e) Maximum repayment period 2years
(f) Savings to loan 2% of the loan required
(g) Loan monitoring fee of 4%
All staff Advances of Sacco Staff shall be signed and approved by chairman Board. Application form
fee 10,000, interest rate of 1% reducing, insurance of 1.5%, stamp duty for amount 3m & above and
one staff as a guarantor. Min 100,000 & Max. 20M.

The staff shall be given staff advances and they shall run within their contracts of two years and
repayment of Salary Advance shall be half of his / her salary.

7.0 Penalty Fees

In case of failure to pay on the due date, the defaulter shall pay a penalty of 0.2% per day on past due
amount that includes principal and interest.

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This is during the loan period and after the expiry date. The amount of penalty computed and
realized shall be treated as income and shall not be compounded on the loan. However, where the
defaulter has a written genuine reason for non payment on the due date and on the discretion and
satisfaction of management, such penalty may be waived off.
8.0 Loan Security.
i. Every loan shall be secured by a combination of securities, movable or fixed assets and at
least two persons as Guarantors with exceptional of Vendor or group loan product where
members of the group guarantee themselves.
ii. The realized security/collateral shall be equal to or more than two times the value of the loan
and interest there on.
iii. The acceptable loan collaterals shall be land, motor vehicle log books, post dated cheques,
milk supplies, building, and any immovable properly.
iv. The land titles and motor vehicle log books must be deposited with the society and
maintained in safe custody. They shall be registered in the security’s register.
9. Loan application, Appraisal and Approval process.
9.1 Loan application.
i. The applicant shall be interviewed to see if they satisfy the requirements, be informed of the
terms and conditions and their roles and responsibilities. If satisfied the clients shall buy and
complete the loan application form. (Appendix 1)
ii. For applicants who are married the spouse shall counter sign on the loan application form
and for those who are not married or lost their spouse one of the family members/ next of kin
shall counter sign on the loan application form.
iii. For employees without a close relative and security in the area of operation, they shall have
to be recommended by their employers.

9.1.2The loan application form shall clearly state the following.

(a) The names of the borrowers
(b) The address of the borrower, the guarantors and their addresses.
(c) The purpose of the loan applied for
(d) The guarantors and their signatures
(e) The names and signature of the spouse/ next of kin and their thumbprint
(g) The loan period and mode of repayment
(h) The security pledged for the loan and its approximate value.

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9.2 Loan appraisal

9.2.1 Meaning of loan appraisal
Loan appraisal is the process of analyzing the borrower’s capacity and willingness to repay the loan
in a given period of time. It involves assessing whether the borrower is able to repay the loan and
whether the business/ activity to be financed can make profits and repay the loan.

9.2.2 Steps of loan appraisal

After a hand written loan application has been received from the applicant, the credit officer shall
access the application by taking the following steps;
I. Discuss the loan application with the applicant (if the application has been filled together
with the loans officer, there is need to discuss it again)
II. Visit the proposed projects and residences of the applicants to see if they satisfy the
eligibility criteria and verify the information indicated on the forms
III. Check with other organizations or persons, to verify the eligibility of the applicants. This
should include at least local council officials of the village in which the applicant is based,
other neighboring financial institutions, husbands/ wife, neighbors, next of kin etc
IV. Loans committee disburses the loan but in the meeting call clients that had collected loans
the previous disbursement.
9.2.3 Importance of loan appraisal
a) It helps to weed out unreliable borrowers whose business will not generate enough income to
repay the loan.
b) It provides staff with an opportunity of getting more information about the borrower which
he/ she shall use in credit evaluation and recovery
c) Helps in assessing the repayment capacity of the client and willingness to pay.
d) It minimizes the risk of default
e) The client is also able to assess his/ her business with guidance from the loans officer
The loan officer shall make a report on the findings and submit it to the manager.
The manager shall appraise the application form basing on the report from the loans officer and
recommend the approval or rejection to the Loans Committee for final approval or rejection.
The factors to consider when appraising
- Repayment capacity.
- Willingness to repay

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- Collateral.
- Market aspect
- Business performance.
- Needs for credit.
- Liquidity position of the institution of that time.
- The institutions capacity to administer and repay the loan.
The credit decision shall be made in 4 aspects
1. Loan amount
2. Loan period
3. Repayment frequency
4. Suitable collateral.
On credit decision, the following factors should be considered and shall lead to the following
decisions.
Low repayment capacity Reduction of loan amount
Lack of willingness to repay Denial of credit.
Un realistic need for credit Denial of credit
Very high indebtness Denial of credit or Reduction of loan
amount.
Insufficient collateral Reduction in loan amount
Poor / bad credit history Denial of credit
Negative verification Denial of credit.

All the above factors shall be considered in the appraisal process because each of them is important
as it contributes a component in the clients’ ability and willingness to repay
9.2.4 Effects of Poor loan Appraisal
It should be noted that if the appraisal is done poorly, it would have the following effects to the loan
portfolio and the KAMUSIIME SACCO
 Poor loan recovery
 High loan loss provisions
 Increased costs due to increased monitoring
 Reduced income that leads to reduced growth of the institution

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 Loss of potential clients because of the sour relationship between the clients and the staff in
case where the client fails to repay and legal procedures are followed
9.3 Loan approval.
9.3.1 The principle underlying the approval process shall include the shared authority to the
management and strict internal controls so that loan losses are minimized. Every loan must pass
through the loans committee as per approval limits irrespective of the loan amounts being granted.
9.3.2 The Loan committee shall review the loan application form recommended by the Gen.
manager and either approve or reject the loan application basing on.
(a) Management appraisal.
(b) Amount applied for
(c) Purpose of the loan.
(d) Source of repayment.
(e) Character of the borrower.
Management Loans committee:
Composition: It’s composed of General Manager (C/p), Accountant, head of credit and Loan
officers.
Loan disbursement limit is from 1,000,000M to 10M for head office.
Loan disbursement limit is from 1,000,000M to 5M for a branch.
Board Loans committee:
Composition: its composed of Board loans committee, General Manager, Head of credit & any Loan
officer if need be.
10.0 Guarantors:
A guarantor is someone who agrees to pay off the loan and the interest if the borrower refuses or is
not in position to pay. As a condition for loan disbursement, a client shall present three guarantors
one of whom shall include the spouse or family member or employer and any two guarantor who
should be share holders and active members in KAMUSIIME SACCO Saving Programme. The
guarantor;
i. Must be a person who can pressurize the borrower to repay the loan.
ii. Shall be a credible person, have the capacity to repay the loan when called upon incase the
principal borrower has failed to repay and shall not be a defaulting borrower or a guarantor of a
loan in default
iii. No person shall guarantee more than 2 loans at same time.

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11.0 Loan Agreement
For the loan to be approved, the Loan agreement (Appendix II) shall be prepared and signed by.
(a) The client and his/her spouse
(b) The guarantors
Head of credit.
(c) The General Manager and branch manager

The loan agreement shall be containing the following information;

(a) Purpose of the loan.
(b) Amount of the loan.
(c) Security for the loan
(d) Loan Period and the mode of payment/ payment schedule
The loan agreement shall be a legal binding agreement between the client and KAMUSIIME
SACCO

12.0 Board Committee members and staff borrowing.

i. Board Committee members and staff will also fill application forms and follow the steps like
any other ordinary member.
ii. Loans to Board members will be approved by the Credit committee.
iii. Board Committee members and staff shall not be allowed to guarantee any ordinary member
loan holder but can guarantee each other according to new Microfinance Regulatory
Authority(UMRA Act).
iv. A committee member shall not participate in the proceedings to consider and approve his/ her
loan application.
v. Any Board Committee member whose loans becomes overdue 60 days and above shall be
considered to have voluntarily relinquished his/ her membership to the committee and if he/
she does not comply, he / she shall be suspended by rest of the committee. And if he/ she
does not pay within the next 90 days, a temporally replacement shall be made pending
confirmation by the next Annual General Meeting.

13.0 Loan Disbursement.

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i. After signing the loan application form and the loan agreement the loan shall be disbursed to the
clients through their saving account. The client’s loan account shall be debited and the saving
account credited.
ii. The loan repayment schedule shall be issued clearly showing his/her repayment amount and
dates to the client.
iii. The client shall then be free to make withdrawals on his/her accounts.
iv. Every loan disbursed shall be registered in the loan register.
14.0. Loan Administration, Monitoring and Recoveries
14.1 Loan register
KAMUSIIME SACCO shall maintain a loan register in which a number of facts about the applicant
are registered at disbursement. This shall include; name of the borrower, location, sex, loan number,
loan cycle, loan amount, loan period, disbursement date and expected loan expiry date
14.2. Loan Repayment Schedule.
a) The loan repayment schedule shall be prepared in duplicate and a borrower shall be given a copy
for information and record upon disbursement of a loan. The second copy shall be part of the
loan agreement.
b) The schedule shall show
i. Names of borrower.
ii. Principal loan.
iii. Interest on loan.
iv. Total amount to be paid.
v. Payment dates and size of installment to be paid.
vi. Monthly compulsory savings

14.3 Loan monitoring/Loan Tracking.

This is the follow up of the financial transactions that occur in the life of the loan. It starts from the
time the loan is disbursed to the payment of last installment.
a) The credit officer shall regularly visit the borrower and their business to get acquitted with their
operations and business performance. This will be done to maintain a healthy loan portfolio,
obtain and document information on outstanding loan balances, arrears and portfolio at risk.
b) The credit officer shall carry out the loan tracking including providing, loan repayment
reminders where repayment lapses into arrears or ensuring that repayment are as scheduled.
c) The credit officer shall prepare monthly reports indicating the progress made in identification,
selection, and monitoring of loans. The report will include;
i. The loan recovery report. (Appendix V)
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ii. The aging of the portfolio at risk to show the number and amount of loans that have passed due
payment indicating the period past due (Appendix VI)
iii. Willful defaulters shall be blacklisted to make sure that they never get credit facilities again and
iv. The Board member’s loans shall be reported separately

14.4 Overdue loan and handling of defaulters

The loan shall be considered overdue if it remains outstanding after the close of business on the day
when it should have been fully repaid according to the repayment schedules. KAMUSIIME SACCO
shall take the following steps a day immediately following the due of overdue loan.
(a) The credit officer shall visit the client and discuss the state of the due loan. An understanding to
repay the loan within seven days will be reached.
(b) If no repayment is received and the client has not yet seen the loans officer, Head of credit or B.
manager, the G. manager shall issue a notice of loan cancellation with a copy to the guarantor.
(c) If the Client fails KAMUSIIME SACCO shall opt for legal means of recovering the money
14.5 Loan rescheduling /Restructuring
Rescheduling/Restructuring of loans means to extend or add extra time to your existing loan tenure,
resulting in a revision of your monthly installment amount so that you may be able to pay a lesser
amount each month. This can help the borrower buy some time to adjust the repayment plan and also
not default on their loans.
In case a loan is to be rescheduled; the loan officer must re-assess the need for rescheduling the loan.
It does not mean the Member will be given more money rather it just gives the member a relaxed
payment schedule as opposed to the initial schedule. All accrued interest to the loan must be paid
first before any rescheduling NOTE that a loan facility shall never be rescheduled more than one
time. The final decision to reschedule a loan MUST be approved and authorized by the loans
committee. This shall hold under the following circumstance.
i. That the member has had permanent and chronic illness hence remaining bed ridden for long
period of time
ii. Police reported robberies, theft of good and money from the Member
iii. Road accidents
iv. Natural calamities e.g. floods, earthquakes, long seasonal drought and famine
v. Unforeseen changes in the business cycle and government macro-economic policies eg taxation
changes
vi. Loss of employment especially in the case of salary loans

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15.0 Loan loss provision and write off.

15.1 Loan loss provision
15.1.1The loan portfolio shall be reviewed to identify loans that are not performing to the
expectations
15.1.2 The objective for providing for loan losses is to ascertain the net asset quality of the SACCO
and preparation of transparent balance sheets for presentation and reports to the Annual General
Meeting and concerned parties.
15.1.3 A provision for possible loan losses shall be created following the aging of the loan balances
where it becomes evident that the loans have not been repaid in spite of the effort to recover the
amount due.

The following provision rates shall be applied for the aged portfolio.
Number of days overdue Provisioning
0-30 days(Performing loans) 5%
31-60 days (Watch Loans) 10%
61-90 days (Substandard Loans) 25%
91-180 days (Doubtful Loans) 50%
Over 180 days (Loss) 100%
The provision shall be made by debiting the loan loss expense accounts and crediting the loan loss
reserve account.
DR. P&L A/c - Provision for loan Loss Expense A/c
CR. Asset A/c – Loan Loss Reserve
15.2 Loan write off
15.2.1 This is when the loan is removed from the active loan portfolio of the SACCO and netted of
against the portfolio. This is usually when the loan have gone over 180 days in default and the loans
committee has come to the logical conclusion that despite all the efforts, this loan shall not be
recovered in short period of time.
15.2.2 After all efforts to recover the loan including legal means have failed and there is little hope
of recovery, the General manager shall recommend to the Board Committee to write off the loan.

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After the Board Committee’s approval the loans shall be written off by debiting the loan loss reserve
account and crediting the outstanding loan portfolio.
DR. Loan Loss A/c
CR. Loan A/C

15.3 Recovery of written off loans.

All efforts shall be undertaken by the management to ensure that all written off loans are closely
monitored and recovered. Such loans shall be monitored on a weekly basis and maintained in the
MIS code named. “Report on written off loans”
The responsibility of recovering written off loans shall still rest in the hands of the Credit Officer
and respective Branch manager and Head of loans for that Branch if the written off loans are
recovered they shall be taken as income by Debiting the saving accounts/ Cash and credit the profit
and loss.
DR. Savings A/C / Cash
CR. P&L – Recovery of written off loans
This policy shall be reviewed from time to time when board and management deem it fit.
16.0 Importance of the Collection Policy
A SACCO’s sustainability and levels of development basically depend on high recovery levels of its
loan portfolio. Therefore, the policies basically depend on high collection actions and disciplines
have unquestionable importance and must be carried out constantly and with the consistency
required by the results of the analysis of the loan portfolio

16.1 Responsibility for enforcing the policies

The responsibility of implementation of collection actions and enforcing both their policies and
procedures falls directly on the SACCO’s management and Loans Committee.

1.2 16.2 Basis of the collection policies

The policies and procedures for implementing collection activities shall be based on the levels of
legalization of the loans and the prior conditions with which the disbursements have been agreed to.
Therefore, it is stressed that collection policies and procedures are measures and disciplines
complementary to the portfolio management activities and primarily the loan granting processes.

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Likewise, it is also stressed that the success shown in high levels of recoveries is principally owing
to two basic aspects:

a. “sound and solid” loan granting, the disbursements of which have been made on the basis of
payment capacity and taking into account the remaining four “Cs” of lending and,

b. The level of legalization of the security and frequency and consistency of the SACCO’s
collection activities.

1.3 16.3 Acceptable Delinquency Level

An acceptable average delinquency level for a SACCO, the purpose of which is to achieve its
sustainability, development and expansion of its services to the members of the community, in
general must run from 2% to 5% of total delinquency at the most. In light of this, the SACCO’s goal
must be to attain and maintain an average delinquency not to exceed 8% of its total portfolio,
measured on the basis of the outstanding balance method of calculation

17.0 General policies

The SACCO will recognize as general collection policies those described below:

1. Managing the credit portfolio is a duty that falls basically on general management and the loan
committee, who may delegate the collection and follow-up of loans to other persons such as the
person in charge of collections, promoter and attorney in the case of collections by means of
attorney or court actions.

2. The SACCO will establish a collection culture among its membership, i.e., for the members to
acknowledge that all of the steps necessary to recover a loan will be taken. This culture will be
achieved by constantly and consistently implementing a series of mechanisms such as economic
incentives for timely payment, surcharges for failure to pay on time.

3. The SACCO’s management will keep strict watch on the fulfillment of payments as well as a
record of payments by a member.

4. On a monthly basis, the SACCO management will generate the necessary information in being
able to prepare and implement collection plans. The collection plans will be changed according
to the information generated.

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5. The measurement of delinquency will begin from the first day of lateness, after the installment
has fallen due.

6. For the purposes of measuring the level of portfolio risk, delinquency will be recognized under
the criterion of the outstanding balance method of calculation, i.e., the outstanding installments.

7. The Loans committee will receive a quarterly report on delinquency submitted by the General
Manager.

8. The Board Committee will receive a quarterly report on delinquency submitted by the loans
committee.

9. Recovery actions will be firm, constant and timely while acting with due swiftness and
impartiality in an effort to reduce delinquent loans in the portfolio.

10. The focus of the SACCO’s collection actions will be preventive, as it carefully monitors those
members with the largest loans.

11. For the purposes of the creation of provisions, the balance owed by the member shall be
considered.

12. For the purpose of maintaining a true financial situation, the SACCO will charge off from its
balance sheets all those loans considered uncollectible (on a quarterly basis).

13. It will not be the SACCO’s policy to restructure, extend or renew loans though exemptions will
be made and approved by the Board Committee

14. Since the purpose of collection is to ensure a low level of problem loans, collection actions must
employ a twofold methods:

a. individual; in other words, the direct relationship with the member in an effort to have him pay
off the loan he/she has obtained from the SACCO, and

b. The institutional approach, i.e., all the actions performed by the SACCO internally to keep its
portfolio healthy.
18.0 SPECIFIC POLICIES
The SACCO specific collection policies are the following

1.4 18.1 Declaration of Loans with Overdue Installments

A delay of one day in the payment of the agreed-to installment is reason enough to declare the loan
delinquent and call for return of the total amount loaned, taking into consideration that the SACCO’s

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risk is the entire outstanding balance to be collected. However, it must be taken into account that it
may be enforced at any time of the payment period.

1.5 18.2 Demand of the payment

1. For the purpose of recovering a loan at the time the SACCO needs to make it effective, the
SACCO will leave a clause in the contracts made by it in which the SACCO’s ability and power
to declare due a loan before the term originally agreed to in the contract expires shall be clearly
stated.

2. The causes for declaring a loan due before expiration and requiring the total payment of the debt
may be the following:
i. Delay in paying two contracted installments
ii. Declaration of bankruptcy or liquidation of the member, business or means financed with the
SACCO loan.
iii. Deterioration, disposal or reduction of the security
iv. Diversion of the resources loaned to another purpose(s) not contracted for.
v. The verification of the hiding or falsifying the information supplied for analysis.
vi. Confirmed illegal use of the loan

vii. These causes may occur even when the aforementioned loan is current and up to date.

2.0 18.3 COLLECTION BY SACCO

The normal collection requires the SACCO’s management to act immediately in collecting overdue
loans. Likewise, the purpose of the SACCO’s action is to prevent as far as possible resorting to
attorney or court action. SACCO collection must be performed by carrying out the activities and/or
actions described below.

2.1 18.4 Anticipated SACCO actions

Before initiating SACCO collection processes, the fulfillment of the following activities must have
been carried out:

1. Monitoring payments and/or installments. The SACCO’s management must keep a very strict
check of the fulfillment of the payments and a transparent record that will serve as a reference
for behaviors for future transactions and/or measures to be implemented.

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2. Rating of delinquency. Delinquency must be rated according to its age as specified in the
delinquency analysis.

3. Portfolio rating. It is advisable to rate loan portfolio twice a year to quantify the risk of each
loan.

4. Checking due dates. It is extremely important to strictly monitor the due dates of loans and at
least every two weeks the person in charge of collections shall receive from the accountant or
person in charge of computation a detailed report of the due dates of installments that will fall in
the next two weeks.
On the basis of the rating of the portfolio and awareness of the due dates, the recovery actions
must be firm and constant.
Immediately after the due-date monitoring report is received, the person in charge of collections
shall initiate the relevant loan recovery actions as outlined in the next item.

2.2 18.5 Implementing SACCO collection actions

SACCO collection must be performed for a maximum of 60 days starting with the first day the loan
becomes delinquent. During this time period, the following collection actions must be carried out:

2.2.1 18.6 Payment reminder

Before each end of the month and/or at least 15 days before the date of the loan installment, the
SACCO must send a payment reminder or visit the members whose installments fall due during that
period. If possible, and if the proper means is available, it is advisable for the loan officer to call the
member on the telephone to remind him of his obligation, which is about to fall due, and record his
communications in an appropriate list.
For large loans, the payment reminder should be done by means of a personal visit, when permitted
by the location and distance.
18.7 First Collection Notice
Within 10 days following the total or partial due date of the obligation, as the case may be, the first
collection shall be sent, without requiring a prompt payment, since it is a reminder with a friendly
content and an invitation to pay under good conditions. (See example in Attachment A.)

2.2.2 18.8 Second collection notice

This communication must be sent 13 days after the obligation has fallen due, i.e., 3 days after the
first payment reminder has been sent. The notice grants a maximum period for paying the

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installments of 10 calendar days. After this period, a collection notice is also sent directly to the co-
guarantors.

18.9 Third and last collection notice

It shall be sent 30 days after the installment has fallen due. This notice notifies the member that the
file will be transferred to the attorney for collection. This notice must be delivered personally to the
borrowing member by the loan officer, the manager and/or a member of the loans committee.

The SACCO must implement a monitoring and control system in which all of the SACCO’s
collection actions are noted as they are performed.

18.10 Make intermediate visits between each notification

It is advisable that, together with the reminder notices, personal visits be made both to the borrower
and the co-guarantors so that there will be no doubt about the judicial processes that will ensue, if
they fail to make the payment within the period set forth in the SACCO phase. Once again, we are
reminded that if the loan has been properly granted with all of the appropriate supporting collateral,
in this and all phases of collection the means and arguments of pressure will be facilitated for
recovery of the loan without the need to carry out legal actions.
19.0 COLLECTION BY ATTORNEY/Court bailiff

2.3 19.1 Initiating collection through attorney

After the deadline stipulated in the third collection notice according to the SACCO’s policy has
expired, the debt will now be handled in the attorney action stage. For the collections through
attorney action, a maximum period of 30 days is established,
19.2 Objectives of collection through attorney action
Collection by attorney action shall be understood to be the stage of collection preparatory to
collection by court action. When a debt reaches this stage, it must be understood for all purposes that
the collection action or step is handled by an in-house or outside attorney.

19.3 Rating of Loans subject to collection through attorney action

The SACCO must rate and document respectively all loans with the possibility of being collected by
legal means out of court.
19.4 Means and conditions for collection through attorney action

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Collection through attorney action is done by means of any method considered ideal and effective
for the recovery of the loan (telephone calls, a letter with the attorney’s letterhead, visits, personal
interviews, publications by written etc). In this stage, actions by outside attorneys will be
remunerated according to the current rates, payable by the borrowers with no entitlement to any type
of cost overrun in the collection.

The outside attorney shall have a maximum period of 20 days counted from the date on which the
documentation is delivered for this stage of collection.

For no reason should the SACCO pay in advance for collection by an attorney, since it is clearly
established that the attorney’s fees both for collection in and out of court must be assumed by the
borrowers themselves. In other words, a contract must be signed with the attorney in whom the
payment of his fees shall be made on the basis of and pursuant to the recovery results. If for any
reason, the SACCO is obligated to make advance payment for the collection actions, this amount
must be included and recovered in the collection whether made through the attorney or at court.

20.0 COLLECTIONS BY COURT ACTION

20.1 Initiating collection by court action

Collection of a loan by court action begins at the latest 30 days after a loan becomes delinquent and
for no reason may the collections by court action be postponed for a period greater than 60
additional days. The postponement of this period shall be done only by express authorization from
the Board of Directors.
20.2 Rating of those Subject to Collection by Court Action

The SACCO must rate the members potentially subject to collection by court action according to the
following aspects:
a) Amount of the loan
b) Age of the delinquency
c) Conditions set forth on the loan agreement
d) Documentation, deeds and/or legal supports of the security in the possession of the SACCO
e) Result of a prior investigation on the borrower’s socioeconomic situation, determining which
property can be attached.

If the necessary supports and the relevant legalization in the loan contracts are unavailable, in
addition to the lack of security and evidence of an improper loan granting, it is preferable to desist
from legal action because no result will be achieved.

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2.4 20.3 Review and organization of the files

All collections by legal means must have their respective supporting documents, which must be
organized and delivered to the retained attorney. The delivery of the documents must be done by
means of a document signed by and between the attorney and the SACCO.

2.5 20.4 Retaining Legal Counsel / Advocate

The SACCO shall retain a capable advocate of the High Court of Uganda. The Advocate must be a
qualified collection resource, whose main duty within the collection scheme is to put into operation
all of the legal mechanisms deriving from the loan security given by the borrower for the purpose of
obtaining the forced payment of the money owed to the organization. Through the legal system, the
assets (going so far as to auction them off) belonging to the delinquent borrower and/or his co-
guarantors so that the proceeds from the sale of the property constituting these assets will entirely
satisfy the loans owed to the SACCO.

After the supports are held and the attorney is retained, the process of collection by legal means shall
be carried out. All of the legal steps of this phase must be performed by an attorney.

20.5 Follow-up and evaluation of the judicial process

Adequate controls shall be established to determine the efficiency of the efforts by the retained
attorney to collect the loan by legal means.
If the loans have been granted properly and all of the necessary supports are available, success in
collection by legal means should be 100%.
The activities of collection by court action are abnormal ways of collecting an obligation since these
activities involve the establishment of trial controls and supervision by the attorneys and thorough
fulfillment of the conferred task and mandate.
These controls are exercised through:
a) Direct visits or verifications to the courts where the respective proceedings are being
conducted
b) Periodic reports required by management from the outside or in-house attorney on the
individual status of each case.
c) Periodic meetings scheduled to evaluate the activities by the attorneys.
d) Updates of the calculation of ordinary and delinquent interest.

20.6 Management of property awarded in payment

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At the time when the legal actions have concluded and the property has been awarded by the
competent court, the appropriate transfer to the Account of Property Awarded in Payment shall be
made.

To record them, the market value and the debt for which the property is being received shall be
taken, whichever is lower.

The SACCO is obligated to sell the awarded property within a period of one year from the time it
recorded it as its own.

In realizing property awarded in payment, the SACCO’s employees, board of directors or

supervisory committee may not participate.

When investing in the property received in payment is required to maintain its value or facilitate its
realization, the board of directors must approve these expenses. They shall be entered on the books
by increasing the recorded value and at the time they are liquidated, recovery of the invested amount
shall be sought.

21.0 DELIQUENCY POLICIES

21.1 Definition and acknowledgment of delinquency

Delinquency is lateness in complying with the payment plan/ schedule, regarding either the principal
or the interest. In the case of loans payable in installments, delinquency is counted from the day
following the due date of the first overdue installment when the entire balance of the operation is
considered overdue. Loans without a due date shall be considered delinquent from the start and
subject to the appropriate late interest.
21.2 Rating and acknowledgement of delinquency
The SACCO shall classify as “delinquent loans” all of the principal or outstanding balance owed.
The rating and acknowledgement of delinquency shall be done according to the outstanding balance
method of calculation; this means that the entire principal shall be considered due the day on which
the corresponding installment falls due and the interest of loans which have partially or completely
fallen due.

2.6 21.3 Penalties for delinquency on the deliquent installment

1. All of those loans that have been delinquent for more than 91 calendar days shall be assessed
and/or charged the same current interest rate agreed to at the beginning of the loan. This
surcharge additional to the normal interest rate may be applied to the delinquent balance of the
problem loan.
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2. In addition to the delinquency penalty, the delinquent borrowers shall be charged for the
respective paper work and legal expenses incurred by the SACCO to recover the delinquent
loans.

3. Likewise, the SACCO will not make any disbursements to a borrower who is delinquent neither
shall it make new disbursements to co-guarantors or guarantors of those borrowers whose loans
are delinquent.

4. Immediately after delinquency is diagnosed, the loan/collection officer will make an exhaustive
follow-up to the terms agreed to in the loan contract in order for them to be fulfilled. Any
delinquent loan shall be subject to immediate collection through attorney or court action

2.7 21.4 Delinquency sanctions assessed on members (end of day)

Any member who becomes delinquent one day after the due date of his installment and/or total
payment of the loan shall be subject to the following sanctions and restrictions:

1. With no exceptions, he shall be assessed the corresponding penalty rate for delinquency.

2. He shall not be entitled to submit a new loan application and, accordingly, shall not be
creditworthy as long as his delinquent status is not brought up to date.

3. He may not guarantee any other member loan applicant as long as he is delinquent

4. Depending on the costs or problems presented by him to come up to date, in a new credit
application, the SACCO shall be more demanding with this type of member by requiring
from him better and larger real security for a new loan.

5. His/her/their total savings and guarantors account savings shall be used by the SACCO to
pay off his/her/their delinquent obligations. This sanction shall be enforced without prior
notice or the members’ authorization.

Depending on the level of repetition or seriousness of the case, the loan officer, manager and
chairman may declare him un-creditworthy for a new loan and he may likewise be rated as a
candidate not worthy to be a member of the SACCO. Likewise, a member who again becomes
delinquent or who is delinquent may not run for any position of leadership in the SACCO.

21.5 Sanctions for delinquency by member leaders

As a policy of the SACCO, it is established that no member in leadership, regardless of the structure,
may present the situations of non-fulfillment or delinquency in their loan obligations.
LEADERSHIP MUST, OF NECESSITY, BE WORTHY EXAMPLES OF DISCIPLINE,
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TRANSPARENCY AND CREDIT CULTURE. Any member in leadership that presents or incurs
situations of delinquency, in addition to having all of the sanctions for delinquency that are
established for the members and set forth in the preceding item, shall also immediately lose their
leadership rights.

2.8 21.6 Delinquency sanctions assessed on employees

1. An employee shall not be allowed to be in a situation of delinquency; for this reason, all
employee loans must be agreed to by means of the payroll deductions, according to the
SACCO’s payment method. In the event that some employees have delinquent and/or
outstanding loans when this collection policy goes into effect, the loan committee and the
manager shall order the respective deduction immediately before the payment checks are issued.

Likewise, it is established that the indicators of delinquency presented by the SACCO will be taken
as an important and determining factor in the evaluation of the performance of the manager, loan
committee, legal advisor and/or other persons involved in the lending activities.

22.0 IDENTIFYING AND RATING PROBLEM LOANS

For the purpose of protecting itself from possible financial losses, the SACCO will identify and rate
all its problem loans for the specific purpose of creating appropriate estimates or reserves for
charging off 100% of the loans over 12 months delinquent and charging off 35% of all loans
delinquent from one to 12 months.

2.9 Characteristics and acknowledgement of problem loans

The SACCO shall acknowledge and rate as problem loans those loans with following characteristics:
 When they have been delinquent for over 30 days and the possibilities of recovery are
definitely questionable.
 Loans that have been criticized in the report by the outside auditors or the most recent
independent portfolio evaluation.
 Loans that have been pointed out internally by management or by the use of similar criteria.
 Loans that must be totally or partially charged off because the borrower has failed
financially, fled or the liquidation of the security is required
 Credit or legal problems arising that render total collection questionable.
 Loans that require an extensive length of time to obtain reimbursement of the obligation,
which makes evident the deterioration of the member’s financial situation.
 A loan in a deteriorating situation and, the loan officer loses objectivity.
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 Loans that present current or potential problems for reimbursement or have documentation
problems.
 Loans rate in category “B” or worse, using the risk rating system given in the portfolio
quality control chapter in the lending process manual.
 When no result has been achieved from the SACCO’s collection actions and it is impossible
to subject it to collection by an attorney and/or collection by court action.

The loan committee and management must closely supervise and attend to problem loans in order to
prevent them from deteriorating further. When a loan becomes a problem loan, the loan officer is
responsible for taking collective actions immediately and persistently. The loan committee shall
maintain, revise and update periodically a “List of Problem Loans,” giving one or more of the
characteristics contained in the preceding item.

When a problem loan does not show any real possibility of overcoming its difficulty and/or
recovering effectively, it must be charged off once and for all according to the procedures contained
in the following subchapters:

22.1 PROTECTION ESTIMATES AND PROVISIONS AGAINST LOSSES AND/OR BAD

LOANS

2.10 22.1.1 Creation of an estimate for bad loans

The SACCO must maintain an adequate level of estimates to absorb possible loans that are
generated by providing the loan service. Estimating is an accounting process based on resources that
reduce fiscal year profits, acknowledged as a disciplinary and administrative loan portfolio
protection expense.
The level of estimates for bad loans shall be determined as follows:
a) 35% of the portfolio identified as delinquent for more than 31 days and less than one year in the
payment of the installments, including those loans that have been restructured.
b) 100% of loans delinquent for more than 12 months which have yet to be charged off.
The calculation of the estimates is done on the basis of the result of analyzing the monthly
delinquency of the loan portfolio.
The term “estimated losses” refers to an estimate of an amount of the portion of the outstanding loan
portfolio, the collection of which is unlikely; i.e., the net charge-off expected to be realized for a
loan, given its situation at the time of its evaluation. These estimated losses in loans must be in
accordance with the criteria for the accumulation of provisions against losses contained in generally

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accepted accounting principles. When there is sufficient information to confirm that a loan or a
portion thereof is uncollectible, these amounts must be charged off in the books as quickly as
possible.
22.1.2 Provisions
The provision for bad loans is an expense that is established and renewed by means of periodic
charges against income, which generates a reduction in profits. The process is designed to maintain
the provision at such a level that relatively unforeseeable losses that may be incurred in lending
activities during the current period, but related to loans granted in previous periods, will not generate
an undue impact on a particular fiscal year.
22.1.3 Loan provision policy
The SACCO must provide and establish on Quarterly basis charges against profits. The loans
considered uncollectible must be charged off with the estimates; likewise, any subsequent recovery,
if any, shall be credited to the estimate.
Management and the Board of directors shall create estimates for losses deriving from the tendencies
of realizable property that the SACCO has received in payment of obligations in its favor and other
risk assets.
22.1.4 Adaptation of the provision
The technical credit committee and general management are responsible for guaranteeing the
adequate provision for loan losses. Furthermore, the loan committee is responsible for providing
adequate, updated information on problem loans to the board of directors on a permanent basis. The
provisions shall be such that, at any time, they shall make it possible to absorb the following:
All losses estimated throughout the actual remaining life of each one of the loans, the
delinquency of which is greater than 180 days and are rated as “deficient or doubtful,” must be
100% provisioned.

Accordingly, in order to maintain an adequate provision, management, the loan committee and the
board of directors must:
 Maintain an effective credit evaluation system, as well as controls, including an effective
loan rating system that will make it possible to identify, follow up and tackle quality
problems in the assets in an accurate and timely manner.
 Guarantee the timely charge-off of loans that seem uncollectible on the basis of the available
information.

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 That the process for determining an adequate level for the provisions is based on an
integrated analysis of the portfolio, that is adequately documented and applied uniformly and
considers all of the significant factors affecting the possibility of its collection and covers the
estimated range of possible losses.
 It is the responsibility of the loan officer to carry out an ongoing follow-up and a rating of the
loan portfolio in categories such as those indicated in the chapter on portfolio risk rating.

2.10.1 22.1.5 Related responsibilities

The quality and reliability of the provisions depend on several factors, among which, the following
primarily appear:
Quality and timeliness of the evaluation of the credit
Timely charge-off of credits rated as "D, doubtful", "E, lost" or portions thereof, and
The adaptation of the methodology used both for loan evaluation and provisions adequacy
Loan Categories:
1. Pass Loans. Meaning that the loan can be recovered on and in time without any
force. / 100% recoverable.
2. Special Mention Loans. Meaning that the loan will be recovered but with some
join recovery and also call reminders to the clients to do loan repayments.
3. Sub-standard Loans. Meaning that this loan will be recovered with external
help i.ecourtbailfs, Arbitrators etc.
4. Deny Loans. This means that the loan is denied because the appraisal done on
client is not in capacity and paying the loan back.

22.1.6 Periodic review of the provisions and respective policy

Management and the loan committee will review this policy on a yearly basis and address any
recommendations they deem in order to the board of directors. Likewise, they shall submit for
consideration by the board similar recommendations developed by independent loan audits and
evaluations. On the basis of the foregoing, the board of directors will introduce the adjustments
relevant to this policy.
The board of directors will hear and, as the case may be, approve the estimated balance at the end of
each fiscal year, taking as a basis the recommendations presented by management and the loan
committee.

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3.0 ATTACHMENTS
1. Collection Notice No. 1
2. Collection Notice No. 2
3. Collection Notice No. 3
4. Collection Visit Report
5. Telephone Call

3.1 First Collection Notice

KAMUSIIME SACCO LTD

COLLECTION NOTICE No. 1
Mr./Ms.
Re: First Payment Request
Dear Sir/ Madam:
We would most kindly like to remind you that we are awaiting payment of installment that fell
due on …………………………
Please visit our offices to pay the amount of installment plus the delinquent interest which on
today’s date present the following charges:
Principal Payment Ushs. ………………………………………....
Interest Ushs. ……………………………………........
TOTAL Ushs. …………………………………………
If, when receiving this notice, your account is up to date, please disregard this.
Sincerely,

……………………………….
Loan Officer

3.2 Second collection notice

KAMUSIIME SACCO LTD

COLLECTION NOTICE No. 2
Mr. /Ms.: ……………………………………………………….
Re: Second Payment Request
Dear Sir/ Madam:
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Once again we are addressing you to ask you to pay your obligation which has fallen due and
presents the following charges on today’s date:
Principal Due Ushs………………………
Current Interest Ushs. ……………………..
Late Interest Ushs. …………………………
Value maintenance Ushs. ………………………….
TOTAL DUE ON TODAY’S DATE Ushs. …………………………..
Number of installments owed:
We would appreciate it if you would stop by our office to pay the delinquent amount, which will
enable you and the other SACCO members to continue enjoying our lending services.
Sincerely,

……………………………….
Loan Officer

3.3 Third collection notice

KAMUSIIME SACCO LTD

COLLECTION NOTICE No. 3
Mr. /Ms.: ……………………………………………………….
Re: Third Payment Request
Dear Sir/ Madam:
In the face of your failure to heed our payment requests, we are informing you that we have
decided to a set a maximum deadline of ……………………………….for you to pay the owed
amount, which on today’s date, can be itemized as follows:
Loan Balance Ushs………………………
Delinquent Balance Ushs. ……………………..
Current Interest Ushs. …………………………
Late interest Ushs. …………………………..
Value maintenance Ushs. ………………………….
TOTAL DUE ON TODAY’S DATE Ushs. …………………………..
Number of installments owed:
In as much as the SACCO has already exhausted all its efforts at obtaining payment of the

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obligation, we are informing you that if, by the above-mentioned deadline, we do not obtain a
positive response, we will be obligated to transfer your case to the SACCO’s Attorney to initiate
the appropriate claim. Likewise, we remind you that, according to the loan agreement that you
signed with our SACCO, any legal expenses incurred in this claim shall be assumed by you..
Sincerely,

……………………………….
Loan Officer

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3.4 Collection visit report

KAMUSIIME SACCO
REPORT ON DELINQUENT BORROWER COLLECTION VISIT
I. GENERAL BORROWER INFORMATTION
Name
Address
Credit background

II. STATUS OF THE LOAN

Original amount………………………… Current Balance…………………………….
Balance should be………………………. Delinquent Loan……………………………
Installment amount……………………... Delinquent Installments…………………….
Delinquent Interest……………………… Date of Last Payment………………………
Date Granted……………………………. Due Date……………………………………
Purpose…………………………………. Security……………………………………..
………………………………………….. ………………………………………………
III RESULT OF THE VISIT
. Cause of the Delinquency…………………………………………………………………
……………………………………………………………………………………………
Member’s proposal………………………………………………………………………
…………………………………………………………………………………………….
Deadline for complying with the proposal……………………………………………….
Recommendation………………………………………………………………………….
…………………………………………………………………………………………….

…………………………………………………. ………………………………………………
Loan Supervisor Borrower
Date: …………………………………….

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3.5 Collection by telephone call

KAMUSIIME SACCO LTD

COLLECTION TELEPHONE CALL
Sir/Madam, good morning, we are calling from KAMUSIIME SACCO LTD to advise you that
installment No. ……………………for Ushs………………………..of your loan commitment
with our SACCO has fallen due. Please stop by our offices or send us the payment to pay off the
delinquent amount.

……………………………………………. …………………..
Loan Officer/ Collection secretary Date

APPEDIX I

KAMUSIIME CO - OPERATIVE SAVINGS AND CREDIT

SOCIETY LIMITED
P.O BOX 64
RUBIRIZI

LOAN APPLICATION FORM

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 KAMUSACCO
Name of the applicant (s) Residential Address
…………………………………… ………………………
…………………………………… ………………………… Attach Attach
Tel……………………………… Business location …… Borrower photo Spousal photo
…………………
Spousal Tel………………………
Account
No………………………

Occupation ……………………………………………Sex ……………... Age …………………

Marital status: Single / Married / Widow / Widower (tick what is applicable to you)

If married, name of spouse …………………………………………Number of dependents …………

Amount of loan applied for Shs…………………………amount in words……………………………
……………………………………………………………………………….…………………………
Purpose for which the loan is required ………………………………………………………………
………………………………………………………………………………………
Date when the loan is required …………………………………………………………………….
……………………………

From where will you get the money to repay the loan?..................................................................
…………………………………………………………………………………………………………..
Securities offered: 1…………………………………….…Approximate value (shs)………………

2……………………………………… Approximate value(shs…………………

Value of shares in the society…………………..………………………………………………………

Balance on my/our savings account deposits in the society (shs)…………..…………………………

Do you have an Account with any other financial institutions?.......................................................
If yes, where?
…………………………………………………………………………………………………………..

Do you have any loan with any of the above? And how much?.......................................................

Applicant(s) Signature…………………… Thumb mark……………………. Date………………

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 KAMUSACCO
Guarantors:
I the undersigned guarantee repayment of the principal borrower’s loan from my resources, the
total amount of loan, interest due, penalty and recovery costs if the borrower refuses, fails or
neglects to pay the loan, and I authorize Kamusiime SACCO Ltd to deduct my balance on my
account with the SACCO to pay off the borrower’s loan and other recovery costs.

Okwemerereera: Nyowe ayasayiniga ahansi, ninyikiriza kushashura roni, amagoba, mutikye

eranshabwe ekigombe kya Kamusiime bika kandi oguze, obwe owukyaguza sente yayanga nainga
yaremwa, narishi akehuzya kushashurira omubwire. Kandi nahereza obushoborozi ekigombe kwiha
sente ahari akahunti yangye eyinyine nakyo kushashura akamarayo eibanja rye.

Name / Amazina Account No. Tel No. Signature / Thumb

print

1) …………………………………..…. …………..…….… …..…….……… ……………….…

2)…………………………………….… ……..…..……… …………………… ………………

3)………………..……………………... ………...…… …………………… ….……………..…

THE REPUBLIC OF UGANDA - THE LAND ACT CAP 227

THE LAND REGULATIONS, 2004
CONSENT BY SPOUSE(S) TO TRANSACTIONS IN LAND
SPOUSAL CONSENT FORM/NEXT OF KIN

1. Location of land the subject of the consent:

a)Village/Zone……………………..b)Parish/Ward…………… c)Sub-county/Town…………..
d) County /Division………….…….……...e) District………………..……….TelNo. ………………
2. Approximate Area (ha)………………………………………………………………………...
3. If the land is registered, state: i. Folio…………………..ii. Block……………iii. Plot No………
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 KAMUSACCO
4. Use or occupation of the Land (e.g. Farming, Housing) ……………..………………………
5. I……………………………………. being the spouse (s) of the owner of the above land, which
forms part of family land under the provision of section 39 of the Act, grant consent to
…………………………………………to Mortgage the said land and property thereon to
Kamusiime SACCO Ltd with respect to access a loan of Shs…………………(in words) ……….
……………………………...……from the SACCO payable in ………. months.

Name Signature/ Thumbprint Date

…………………..…… ………………………….… …………..………

In the Presence of:

Name Signature Date

1) …………………………………..… ………………… ………………………

2)…………………………………… ……………………. ……………..………
3)…………………………………… ………………………. ……………….……

Before me, I having truly and audibly further read over the contents of this consent and the loan
agreement to the spouse and explained to him/her the exhibits referred to in the Runyankore/Rukiga
language he/she being illiterate/Literate and I being conversant with both English and
Runyankore /Rukiga languages and he/she seemed to understand before he/she signed/put his/ her
thumb mark in my presence.
Signature ……………………………………………………………………………………………
Designation ………………………………………... Date: ………………………………………

LCI Recommendation:

I hereby confirm that I know well the collateral security pledged above and further confirm that to
the best of my knowledge, I have never recommended it to any other third party at this time of my
signing.
Name ……………………………………………… Signature ………………………

Tel No………………………………………...………. LCI Official Stamp

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 KAMUSACCO

Employer’s recommendation:

I confirm that the loan applicant is our employee with a good track record, the office shall ensure
that his/her/their loan is paid to the full settlement from his/her/their salary, benefits or from the
employer’s own sources. I recommend him /her/them shs…………… (Amount in words) ……….
……………………………………………………………………………………………
Name ………………………………………………… (Designation) ……………………………...…

Signature …………………………………………Tel No…………………………………………….

Official stamp

FOR OFFICIAL USE ONLY

A. Information about client’s performance

Date Member joined the society………………Date application received…………………………….
Value of shares in the society (shs)…………………. Total savings in the society (Shs)……………..

B. Credit History

(i) Previous Amount…………………………………….……..………... loan product ………………..………………………..

(ii) Previous loan installment ………………………………… Loan cycle ……………….……Loan period……………..
(iii) Previous performance………………………………………………………………………………….……………………………….
…………………………………………………………………………………………………………..………………...
………………………………………………………………………………………………………………………………………..
……………………………………
(iv) How is the applicant’s savings record?..............................................................................................
……………………………………………………………………………………………………………………………………………………..

C. Loan officer’s site report………………………………………………………………………

…………………………………………………………………………………………………………
…………………………………………………………………………………………………………

Credit decision
1) Recommendation of the loan officer on the following
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 KAMUSACCO
(i) Amount………………………………………………………………………………………………………………………………………...
(ii) Loan term/period………………………………………….….………………………………………………………………………….
(iii) Loan installment………………………………………………………………….………………………………………………………
(iv) Security/collateral offered………………………………………………………..…………………………………………………

Reasons for your recommendation

……………………………………………………………………….……………............................
…………………………………………………………………………………………………………

...............................................................................................................................................................

…………………………………………………………………………………………………………

Nature of the loan after appraisal; Pass loan, Special mention, substandard, Doubtful or Loss.

………………………………………………………………………………………………………

…………………………………………………………………………………………………………

Name of Loans officer’s Name ……….………………………….. Sign…………… Date………..…

2. Branch Manager’s recommendation …………………………………………………………….

…………………………………………………………………………………………………………

…………………………………………………………………………………………………………

Name ………………….…………………………..Sign……………..……………… Date…………

3. Head of Credit department recommendation …………………………………………………

…………………………………………………………………………………………………………

…………………………………………………………………………………………………………

Name …………………………………………..Sign………..………………… Date……………….

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 KAMUSACCO
4. General Manager’s approval…………………………………………………………………..……
…………………………………………………………………………………………………………
…………………………………………………………………………………………………………
………………………………………………………………………………………………………….

Name ……………………………………………..Sign………..…………… Date……..……………

LOANS COMMITTEE

Decision by the Loans Committee…………………………………………………………………

…………………………………………………………………………………………………………
………………………………………………………………………………………………………..…

Minute Number………………………………………………….……. Date…………………………

Signed by Chairperson…………….…….….Name……………………..………………. Date……..

Committee member……………………Name…………………………………………….Date……....
……

Committee member……………………... Name…………………………………… Date……..……

THE REPUBLIC OF UGANDA

LOAN AGREEMENT

This loan agreement is made this ………………. day of ………………………… 20 ……………

between Kamusiime Cooperative Savings and Credit Society Ltd. (herein after called the SACCO)
of the one part and………………………………………………Of…………………………………
(herein after called “the borrower”) and witness as follows:-

1. The borrower together with his/her guarantors borrow money from the Kamusiime SACCO
and the particulars of the loan, terms of repayment and settlement of disputes if any, arising
are hereunder agreed upon: -

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 KAMUSACCO
(a) Amount of money borrowed in Figures ……………… (in Words)
…………………………………………………………………………………………………
……………………………………………………………...............…………………………
(b) Agreed interest rate per month …………………………………………………………………
(c) Loan period ………………………ending on …………………………
(d) In case of default in payment of any single installment then the whole amount remaining due
and unpaid shall be recoverable at once together with a penalty of 0.2% per day of the total
amount in default plus interest due and other recovery costs.
(e) Guarantors: I the undersigned guarantee repayment of the principal borrower’s loan from
my resources, the total amount of loan, interest due, penalty and recovery costs if the
borrower refuses, fails or neglects to pay the loan, and I authorize Kamusiime SACCO Ltd to
deduct my balance on my account with the SACCO to pay off the borrower’s loan and other
recovery costs.
Okwemerereera: Nyowe ayasayiniga ahansi, ninyikiriza kushashura roni, amagoba, mutikye
eranshabwe ekigombe kya Kamusiime bika kandi oguze, obwe owukyaguza sente yayanga nainga
yaremwa, narishi akehuzya kushashurira omubwire. Kandi nahereza obushoborozi ekigombe kwiha
sente ahari akahunti yangye eyinyine nakyo kushashura akamarayo eibanja rye.

Name / Amazina Account No. Tel No. Signature / Thumb print

1) …………..….………… ……….…… ….…………..….. …………………

2)………………………… ……..……… ………………….. ………………

3)………………..………… ………….…… ………………. …………………..

(f) The following properties are given as collateral and they may be sold by public auction or
private treaty as the SACCO deems fit without going to courts of law.

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 KAMUSACCO

2. Particulars of property Location Reserve Price

(i) …………………………………. ……………………...… …….…..……

(ii) ………………………………… ……………..………….. …………………
(iii) …………………………………. …………………………. …….……………
The borrower undertakes to forfeit the balance on his account with the SACCO to repay the loan or
part thereof and the SACCO is hereby authorized to deduct the borrower’s balance on the account to
repay the loan.

In witness whereof the borrower herein has hereunto set his/her hand/thumb mark the date and year.

Borrower’s signature (i)…….……………………. (ii) …………………… (iii) ………….…………

Thumb mark (i) ……………………………… (ii) ………………………. (iii) …………………

Name (small letters) (i) ………………………….. (ii) ………………….…… (iii)……………...…

Date (i) ………………..…….……… (ii) ..……………………. (iii) …………..………….

Before me, I having first truly, distinctly and audibly read over the contents of this form to the
applicant and interpreted it to him/her in the Runyankore / Rukiga language he/she being illiterate
and I filled the details/ required as instructed by him/her before he/she signed/thumb marked it in my
presence.

Signature ……………………………………………………………………………………

Full names (in small letters) …………………………………………………………………………

In witness whereof on behalf of the SACCO;

1. Credit officer’s Signature………………………………Name…………………….………………………Date……………….

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2. Gen. Manager’s Signature…………………………….Name ………………….….…………………… Date ………………

Adopted by the Board committee as a working document on the ______day of____________2022

under Minute____________________________________of the Committee meeting.

Signed by;

………………….………. ….……….……………
RUBANZA GEORGE NAMARA Gad
BOARD SECRETARY CHAIRMAN BOARD

Approved by the Annual General Meeting on _______day of __________2023 under

Minute ________________________________________of the meeting.

………………….……….
RUBANZA GEORGE
BOARD SECRETARY

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