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CREDIDT COMMITTEE & LOAN APPLICATION GUIDELINES

Presentation by Credit Committee

In UNS-SACCO, loans constitute a major business activity and generate the biggest percentage of UNS-SACCO’s income and equally, taking up the large proportion of management's time.

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FUNCTION 1

Reviews applications for loans and makes decisions upon such applications within the authority delegated to the Credit Committee. All loan decisions must be based on UNS-SACCO’s established credit policies.

FUNCTION 2

Review loan & collection policies along with performance. Recommend changes to the policies to improve loan underwriting & collection efforts.

FUNCTION 3

Evaluate lending performance annually and compare it to past periods by reviewing a breakdown of the number and amount of loans outstanding by purpose and collateral, total number and amount of loans approved and declined, the total number of borrowers, the ratio of borrowers to members, the average loan size, the delinquent loan to total loan ratio, and the net charge off/average loan ratio.

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FUNCTION 1 / APPLICATIONS REVIEW

•Member completes application forms with fulfilling requirements•Member forwards forms to Savings & Credit Officer for review – if requirements not met, the forms will not be forwarded to the General Manager•If successful, SC forwards the forms to the GM for review •Application forms, finally reach CC for review for approval with/without or denial with remarks.•If approved, normally, the following working day, the Member’s commercial account will be credit with the approved amount – best practice or Member collects cash cheque.•Approved amount is not necessarily applied amount – this can be due to payroll figure, installment period, parallel loans or previous record on Member’s file•If denied, normally, this is due to not fulfilling the requirements in most cases in terms of securities such as accumulated savings, shares, fake contracts, contract period short in comparison to securities with the SACCO, additional securities not 100% crystal clear.

EACH FILE CONSUMES APPROXIMATELY 8 – 10 MINUTES

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FUNCTION 2 / POLICIES REVIEW

•DEFAULTERS - There’re policies in place the SACCO follows to handle defaulting Membersi.Member together with Co-Borrower [Guarantor] are informed of the due amount – First callii.Member together with Co-Borrower [Guarantor] are informed of the due amount – Second calliii.Member together with Co-Borrower [Guarantor] are informed of the due amount – Third calliv.Member’s file forwarded to the Law firm for further action at this point, the Member might still have a window to comply with the SACCO or else the it is now out of the SACCOs control and normally (a) Member will find out by finding his/her photo in the National press with a notice to clear dues or be called to court.v.It should be noted, the Member meets all costs involved with the Law firm which are not predetermined by the SACCOvi.In some instances, the Guarantor too is taken to court

Before the file is forwarded to the Law firm, the SACCO exhausts all the Member’s and Guarantor’s securities (a) shares, (b) savings, (c) other securities such as land titles and in some instances the Member and the Guarantor cease to be Members of the SACCO once the shares are exhausted.

•POLICY - The credit/policy document is not a static document. It changes in line with the new products brought on board, change in features/requirements on existing products. •Change in interest rates•Change in borrowing amounts•Change in savings structure•etc

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GUARANTORSHIP: LEGAL, ECONOMIC, REPUTATION & SOCIAL EFFECTSThe guarantors’ liability actThe legal position is clear that: liability of the guarantor and principal debtor are co-extensive and not in alternative. The guarantor is jointly and severely liable with the principal borrower for the principal amount, interest, penalties and other loan recovery and legal costs incurred by the lender.

A guarantor is needed in order to reduce the risk of the loan default in a situation where a principal borrower cannot stand in for her/himself.

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WHAT SHOULD YOU DO?• You must know the loan amount the person has applied for, the loan period, interest rate and installment per month• You must know other securities the client has presented for the loan• You must know the capacity of the client to pay back• You must know if the client has other loan obligations and if s/he is paying well• You must know the contract status of the client and any other benefits the client is possessing• It’s advised not to guarantee more than 2 people at the same time• You can contact UNS-SACCO in case you are not sure of the information given by the loan applicant.

UNS-SACCO UGANDAQ

& A

Thank you for your attention