KETE-KRACHI COMMUNITY CO-OPERATIVE CREDIT UNION LIMITED REVISED LOANS POLICY Prepared by the Board of Directors
Kete-Krachi Community Co-operative Credit Union Ltd LOAN POLICY INTRODUCTION This loan policy document is aimed at ensuring that: 1. Loans are equitably and fairly distributed to needy members, bearing in mind the capacity and capability of individual members. 2. Liquidity requirements and appropriate reserve ratios of the society are maintained at all times. 3. The incidence of loan delinquency is reduced to the barest minimum. REFERENCE ARTICLE 17 28 of the Kete-Krachi Community Co-op. Credit Union bye-laws and articles of association ARTICLE ONE Loan Application 1. All applications for loans shall first be in writing before been made on a prescribed form provided by the Credit Union. The application form shall specify the amount applied for, the loan purpose the terms of repayment and the type of security. 2. All loan application forms shall be lodged with the book-keeper who shall process them before passing them to the credit committee. 3. Partly completed application forms shall be rejected out-right. 4. Loan applications shall be considered in the order in which they are received. Where there are many more applications than funds available, preference shall be given to smaller loans. 5. Where amounts applied for are approximately the same, preference will be given loans for shorter Period. 6. Further to these provisions, priority shall be given to: a. Members who have never had loans. b. New members who have qualified for loans. c. Members who have finished paying their first loans and have re-applied for fresh loan 7. All applicants shall sign a credit agreement before any loan is disbursed to them. 8. All loans shall be insured with the CUA Loans Protection Programme. The payment of the insurance premium is the responsibility of the borrower. 9. All loan applicants shall be counseled on the use, repayment terms and insurance of the loan before loans are disbursed to them. 10. The manager shall assist the credit committee to appraise all loan applications. 2
ARTICLE TWO: Eligibility 1. Loan shall be granted to members only. i. A borrower shall have completed at least six months uninterrupted membership. ii. A member who withdraws from a society and joins later will be treated as a new member. iii. Any contributions made purposely to secure a loan would be considered if iv. such contributions remain in the society for at least six months. A Member who retires from the common bond but retains his/her membership shall be granted a loan not exceeding his/her total shares and savings. v. Microfinance women groups shall also be granted microfinance loans for a cycle of four months period. These loans shall be approved by the loans committee before they are disbursed to the women. 2. Loans to Office Bearers and Staff. All applications for loans from elected members and staff in excess of Deposits shall be Considered by a Joint committee. The Chairman of the Credit Committee or vice Chairman shall call for a meeting of the majority of the Board and credit committee to consider such applications. A Board member shall chair the meeting. The decision of the joint committee shall be final. At least three members of the joint committee shall sign the application to endorse their decision, approval or otherwise and state reasons. ARTICLE THREE Refinance and Rescheduling of Loans 1. There may be valid reasons for a loan to be refinanced provided the member has the ability to repay. In such case the existing loan balance plus the amount requested are treated as new loan. 2. The credit committee/board may agree to reschedule a member s loan payment if such an action is deemed necessary. ARTICLE FOUR Amount of Loan 1. Society s Limitation The total loans granted to members at any period shall not exceed 60% of the total assets of the credit union. 2. Limitation per Member Loans shall be properly appraised by the loan committee. Appraisal criteria Shall be based on the 5Cs Capacity to repay, character, collateral (guarantor) Credit worthiness and capital (amount available at the disposal of the credit Union) and condition. 3
3. Loan Ceiling The maximum amount of loan to be granted per month shall not exceed Twenty Thousand Ghana Cedis GH 20,000.00. Any amount exceeding this figure shall be referred to the Board of directors. The amount shall be the equivalent of the maximum personal benefits of CUA loans protection programme. The maximum amount shall be determined and reviewed from time to time by the management committee. No individual member shall borrow more than 20% of the society s funds. The following shall apply in the approval of loans to members. Loan disbursement guidelines Microfinance Women with good credit history, who graduates into the credit union and apply for loans, shall be given up to twice (1:2) their savings as loan depending on their ability to pay. In approving loans of Direct entrants into the credit union who apply for loans the guidelines below shall be followed: No. Guidelines Cycle Maximum loan Amount In Ghana Cedis 1 All first time Applicants One Savings Balance + 50% of Savings 2 Second Time Applicants Two Savings Balance + 75% of Savings 3 Third Time Applicants and beyond Three Savings Balance + 100% of Savings Remarks If applicant satisfies all requirements. If applicant s repayment history in Cycle 1 is good If applicant s repayment history in Cycle 2 and beyond is good. ARTICLE FIVE Emergency Loan Emergency loan will be considered to good members only. Total emergency loans to member shall not be more than Two Thousand Ghana cedis (GH 2000.00) in a month. a) Emergency loans will be considered for sudden hospitalization, death of a near relative, natural disaster, fire and robbery. b) Emergency loan will be considered EXCEPTIONALLY and SEPARATELY from normal lending practice. c) TIA Loans: This is a short-term emergency loan that is payable within a period not exceeding thirty (30) days. i. The manager shall endorse all TIA loan. 4
ii. iii. iv. TIA loan amount shall not exceed Hundred Ghana Cedis (GH 100.00) per member in a month. Interest on TIA Loans shall be 10% per month (subject to review by the management committee). The maximum number of members who can access the TIA loan in any particular month shall not exceed Ten (10). This is subject to review by management. ARTICLE SIX Interest on Loans 1. Interest on Loans shall be fixed from time by the Board of Directors, but shall not be less than 3% per month on the outstanding balance. Seasonal loans shall be at the rate of 4% per month on declining balance basis. Season loans special loan package out of a special fund for agricultural production loans purposes. 2. Penalty rate of interest shall be charged at 2% for due balance not Paid within thirty (30) days after the installment becomes due. 3. In case a loan is not repaid according to the loan agreement the Borrower shall be liable to pay. i. The collection expenses. ii. Fines not exceeding 10% per annum on the unpaid balance. ARTICLE SEVEN Security for Loans 1. All loan balances in excess of the borrower s share/savings must be secured by a guarantor. The total share /savings of the borrower and the guarantor must be equal or more than the loan applied for. The guarantor(s) shall be a member of the credit union. Each guarantor(s) shall sign an undertaking before the loan is granted to the borrower. 2. No borrower or co-maker shall be allowed to withdraw his/her savings which serves as assigned security for an outstanding loan. 3. No member of the credit union shall stand as guarantor for a second loan while a former one remains unpaid. 4. Landed property is acceptable as security. 5. For workers who take salary from the bank, standing orders are used as a security. 5
ARTICLE EIGHT Approval of Loans 1. No loan shall be approved except on the union s prescribed loan application forms. 2. All loans will be considered only in the credit union office. 3. All loans shall be approved by majority decisions of the credit Committee members present. The committee shall meet at least once a month or as frequently as possible to consider loan applications. 4. When considering a loan application, the applicant must not be present during the consideration. 5. A writing explanation shall be given for all rejected loans. Appeal Whenever a member feels that his/her application has been considered unfairly he/she shall appeal to the Board in writing within fourteen days (14) after the decision date stating grounds of appeal. The appeal should be copied to the Credit Committee. The Board s decision shall be final and shall reply within fourteen days of receipt of the appeal. ARTICLE NINE Repayment Terms 1. Loan repayment period shall be determined by the management Committee (Board) but in all cases shall not exceed 18 months. 2. The following guidelines shall apply; LOAN RANGE (GH ) MAXIMUM REPAYMENT PERIOD 100-500 10 months 501-3000 12 months 3001-5000 15 months 5001-20,000 and above 18 months The Board shall upon the advice of the loans Committee review the repayment period and the range of the loans. ARTICLE TEN Defaulters and Withdrawal 1. Where a member wishes to withdraw his/her membership or Savings from the society he/she shall be required to give the Society a written notice of not less than one (1) month of his/her intention to withdraw. 2. No borrower shall be allowed to withdraw his/her membership unless the loan is repaid in full or the loan balance can be fully offset by the member s savings. Such a member will also have to satisfy the society that all loans guaranteed have been paid in full or the balance does not exceed the savings of the members whose loans were guaranteed. ARTICLE ELEVEN Delinquent Loans and Collection procedure 6
1. The credit committee shall notify in writing each borrower and his co-makers whose loan repayment falls in arrears within 7 days. 2. The second notice shall be given not later than three weeks after the first notice is given. 3. If no reply to the original letter of reminder is received within thirty days of the due date for the loan, a personal visit shall be made by the executive committee or a representative who shall request payment and explanation of the reason for the default. 4. If no payment is forthcoming from the borrower within 60 days, management committee shall consider off setting the loan balance with share and savings of the borrower or the guarantors or institute legal action against the borrower and the co-maker whichever is deemed fit for the recovery of the debt. 5. A portfolio quality report of the both credit union loans to members and microfinance loans showing the portfolio at risk and a schedule of delinquent loans, according to age shall be maintained and submitted to the Board at each sitting by the manager/bookkeeper. ARTICLE TWELVE Miscellaneous 1. All loan applications shall be considered in STRICT confidentiality. 2. No loan approved shall be used for any purpose other than for which the loan was granted. 3. The Board reserved the right to cancel a loan; if it has not been paid and if it is proved beyond all reasonable doubt that the money will be misused or diverted, other than the purpose for which the loan was granted. 4. The Board or Credit Committee reserved the right to inspect all projects being undertaken by members for which the credit union loan has been invested. 5. Reference to the masculine gender also applies to the feminine gender. 7
ADOPTION OF RULES It is the consensus of the management committee of Kete-Krachi Community Co-op. Credit Union limited that these rules as presented and modified shall form the written Loan policies of Kete-Krachi Community Co-op. Credit Union Ltd and shall be strictly followed by both members and officers of the society so being, it is decided that these rules shall go into effect as of this day 1st September, 2009. Name :. Position : [Board Chair-Kete-Krachi CCCU] Date : Name :. Position : [Loans Committee Chair-Kete-Krachi CCCU] Date : 8