Effective Credit Management

Effective Credit Management in SACCO Societies 

The first thing in credit administration is for the society committee to decide who will be dealing with loan approval and administration. It can be the full management committee or a credit sub committee. The society should then develop a loan policy to be a guideline on loan granting and loan administration. the loan policy should be a document known, understood and owned by all members as it will affect them.

If money could talk to us, most probably it will say goodbye :-)

If money could talk to us, most probably it will say goodbye 🙂

The entire management committee should then be trained on credit administration including a thorough understanding of the loan policy because they will be involved in implementation.

The society committee should then decide on how often various types of the loans as spelt out in the loan policy should be approved. The decision will depend on the volume of business and the number and types of loan products.

The relevant committee mandated to approve loans should also be discussing non performing loans on a monthly basis and resolving on cases that need to be addressed.

While considering and approving loans to members, the committee should strictly follow the society’s loan policy without favoritism.

In every monthly meeting of the full management committee, the item loans shall form part of the agenda. The loan approval committee should present its monthly report on the position of loans including non performing loans. The management committee should then resolve on how to address each defaulted loan.

Loans to members should be issued using their own savings.   When there is an effective and efficient administration of funds, the members’ savings are adequate to meet loan demands.  The society should not use borrowed funds to issue out as loans to members.   Borrowed funds are expensive to the society and lead to dependence. Societies that depend on external financing are not able to make enough surplus to enable them declare any returns on members’ investment in dividends or rebates. It should be open to members to allow borrowing.

NB the source of the fund should dictate the term of loans.

All loans to members should be insured using reputable insurance firms. invite a number of firms to come and explain to the society committee the various methods of paying premiums and the premium amounts. No loans should be outstanding without insurance cover.

 

 

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