Loans

Lesson Attachments

Short Term Loan

A member is eligible for a short-term loan up to a maximum of twice savings contributed.

The following guidelines relating to short term loans must be complied with:

  1. Short term loans shall be twice the member’s savings.
  2. Members are to pay an appreciation fee of Ten Kenya Shillings (Kshs. 10/-) for each short term loan. The appreciation fee forms part of the group’s TRF.
  3. The interest is at 10% per month calculated on a reducing balance
  4. The loan shall only be given to a member who is present during the Table-banking meeting, unless the member’s absence is known and acceptable to the group.
  5. Members must duly complete an application form for the loan amount;
  6. The borrower must be guaranteed by a member of the same group and must also be able to guarantee another member of the same group;
  7. The borrower must pledge a security/collateral of any movable asset known to the group and of a market value not less than the amount borrowed;
  8. The guarantor shall be liable to pay the loan in case the borrower is unable to pay.
  9. There shall be corporate responsibility for the repayment of the loan. All members of the group acknowledge their part in ensuring that all loans are paid and paid on time.

Long Term Loan

A member is eligible for a long-term loan, after four months of active membership to the group. The loan attracts 12% annual interest calculated on a reducing balance.

The following guidelines relating to long term loans must be complied with:

  1. The loan amount maximum shall be three [3] times the member’s savings;
  2. Members are to pay an application fee amounting to one percent (1%) of the long term loan one applies for. The appreciation fee forms part of the group’s TRF.
  3. The borrower must pledge a security/collateral of any movable asset known to the group and of a market value not less than the amount borrowed;
  4. The borrower must stick to the agreed repayment schedule as set out in the loan forms for the first three months;
  5. The loan shall only be given to a member who is present during the Table-banking meeting, or who has sent an acceptable note of absence;
  6. Long-term loans are repayable on monthly basis for a period not exceeding thirty-six [36] months from date of disbursements. Repayment period for large loans may exceed thirty-six (36) months at the discretion of the group.
  7. The guarantor shall be liable to pay the loan in case the borrower is unable to pay.
  8. There shall be corporate responsibility for the repayment of the loan. All members of the group acknowledge their part in ensuring that all loans are paid and paid on time.
  9. One cannot apply for both short term and long-term loans during the same meeting.

Long Term Loan Top Up

A member will be allowed to top up on their long-term loan after they have offset at least fifty percent (50%) of their loan.

Once there has been a top up, the new loan amount will be booked as new loan and the member will fill a new form. The member will pay an application fee of 1% of the new loan amount.

The guarantor of a member in their previous loan before top up will continue to guarantee the remainder of the loan. A member seeking a top up will require a new guarantor for the top up.

Banking

Banking refers to the amount that remains on the table unborrowed by members at the end of a table banking meeting. Where there is banking, the amount shall remain in the custody of the group’s treasurer until the next group meeting.

At the next group meeting, the banking amount MUST be the first amount placed on the table. Where banking is not returned, an automatic 10% interest will attach to the amount.

Where a group is recorded frequent bankings, this will signal that the group needs to either reduce its savings amount or undertake withdrawal or both.

Gifts and Grants

Gifts or grants that a group receives refers to an amount that does not require repayment. This money goes into growing the group’s TRF and is borrowed by members in short- and long-term loans. The profit generated from this money will be divided in dividends at the end of every year. This amount of money however is NOT to be divided amongst the members to form part of their savings. It will be a floating kitty that can only be divided amongst the members once a member exits or if the group chooses to dissolve.

Any gifts and/or grants made to a group must be known and communicated to the Organization.

Loan Appraisal

Members are required to justify the amounts they wish to borrow by itemizing in detail how they intend to use the loan and stating how their business will benefit. The amount to be borrowed is based on needs and not maximum allowable loan size.

Funding

  • Joyful Women Funding

A group qualifies for external funding after being in operation for not less than six [6 months].

The group:

  1. should have been active doing savings and lending short term and long-term loans to members;
  2. must NOT have a defaulter whether in short term or long-term loan;
  3. registration certificate should be current;
  • Destiny Women Funding

Where a group wants to obtain funding from Destiny Women, the group should make an application for the loan with Destiny Women and will be subjected to their processes and requirements for lending. Where a group is successful in its application, then it will receive the loan amount disbursed to it during its next meeting.

Joyful Women shall assist in the recollection and repayment of loans issued by Destiny Women and the Economic Empowerment Officer shall ensure that loans are repaid during every meeting.

Reference can be made to Appendix 4 below.

  • Other External Funding

Where a group wants to obtain from a third-party lending institution, the group will take the responsibility of learning the requirements and processes of the institution and shall abide by them. The group that wishes to may proceed to make an application for the loan with the lending institution and will be subjected to the lender’s processes for lending. Where a group is successful in its application, and it receives the loan amount, the group shall ensure that the Joyful Women County Manager is notified.

Joyful Women shall assist in the recollection and repayment of external loans and the Economic Empowerment Officer shall ensure that loans are repaid during every meeting.

Loan Repayment

Member loan repayments are done at group level and monitored by the Economic Empowerment Officer.

Members should hand correct loan repayment instalments to the Treasurer, who should confirm correctness. Any shortfalls must be promptly discussed by the members and appropriate action taken.

Securing Repayment of Loans

All loans shall be secured in the following ways:

  1. Guarantees by a member of the group.
  2. Forfeiture of savings by the borrower upon loan repayment defaults.
  3. Forfeiture of end year dividends by the borrower upon defaulting on loan repayment.
  4. Listing of a moveable asset as security for the loan. It shall be the responsibility of the group members to ensure that pledged securities are in place.
  5. Notwithstanding the stated guarantor in the loan application form, the group itself shall be a guarantor for all loans taken by its members.

Arrears

Loans are considered to be in arrears when borrowers are behind in repayment of one [1] or more instalments, or where an instalment is not paid in whole when it falls due.

When a loan is in arrears, members in question are asked to give reasons by the group. If the reason is not considered genuine, pressure is applied through the guarantors.

If the reason is considered genuine, the member is asked to make corrective action by the group officials who also visit his/her business to determine the nature and extent of the problem.

Default

There are two possible types of default: Part payment of an amount that is due and absolute non-payment of an amount due.

All loans will be calculated on a reducing balance to assist with reducing the rates of default. There will be a three-month period within which a defaulting member will be given an opportunity to plan to settle the defaulted amounts. After three months, a member will be classified a defaulter and the system will be able to flag the member/group. Within these three months however, the defaulted amount will continue to roll over and accrue interest. The period of the loan remains the same regardless of this 3-month period.

A member can negotiate for a repayment plan in the instance of part payment or non-payment provided that the plan fits within the specified loan period.

Where a member fails to make payment after the three-month period, notice letters should be issued to the defaulting member and where there is no action taken, the member’s guarantors shall be called upon to make true their guarantorship.

Where this is not complied with or the default is not settled in full, the group shall be entitled to pursue all legal means of recovery such as repossession of the collateral offered by the member or the institution of legal proceedings.

Where a member cannot meet his/her obligation due to circumstances beyond their control or circumstances known and understood by the group, the group can consider restructuring the terms of the loan. In such a case, notification must be made to the County Manager who is to inform the head office of the restructuring.

Bad Debts

A default becomes a bad debt if it remains outstanding a year after the date of default. Loan amounts that cannot be collected shall be declared bad debts by the group, and are to be provisioned and recovery efforts intensified.

If provisioned amounts still prove unrecoverable, authority to write-off should be sought from the members and submitted to the Director, Women Economic Empowerment at the head office. Recommendations for write-off must include details of all efforts made to recover the loan.