CREDIT APPRAISAL/MONITORING IN SACCO SOCIETIES

APPRAISAL

APPRAISAL

Every credit programme must be appraised before disbursement of loan. The important objectives of appraisal are:

i) That the member meets all conditions necessary to participate in a credit programme

ii) That the lender minimizes the risk of recovering the whole loan.

Appraisal areas: whether;

a)      One is actually a member;

b)      The member loan application meets what is required by the policies and procedures;

c)       The risk can be there when approving the loan and;

d)      How the loan is going to be utilised and the returns will be positive.

Monitoring

Monitoring is the routine collection, analysis, and use of information about how well the project is going. It aims at provision of information on progress.

Monitoring can be continuous or periodic review by management at every level of the hierarchy of implementation of an activity to ensure that input deliveries, work schedules, targeted outputs, and other required actions are proceeding according to plan.

Mode of monitoring

i) Actual site visits (observation)

ii) Interview with loanee

iii) Reports

iv) Repayment records

v) Environmental factor analysis

Importance of monitoring

i) Helps both lender and loanee. Make decision to improve the project.

ii) Allows lender to decide what effect or impact the project is having on loanee

iii) Ensure accountability

iv) Ensure judgement to be made on personal and institutional performance.

Consideration for a good credit programme

A good loan programme should be one that not only enhances the welfare of the member but also repays itself fully (principle + interest).

To the lender the following features are important;

a)      The loanee is well trained to not only utilize but also understand the implications of being a loanee

b)      The loan amount is sufficient (never under lend, never over lend)

c)       The security provided is good

d)      It is adequate (value to cover the entire loan and still leave a good margin).

e)      It is realizable, should be easy to dispose of, to sell

f)       One that appreciates in value with time

g)      Repayment period is adhered to

h)      The shorter the repayment period the less risk the venture and the more liquid the society would remain

i)        Mark-up, prefer to lend to higher mark-up borrower

 

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