Ratisson Finance Credit Policy

8/17/2019 Ratisson Finance Credit Policy

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Ratisson Finance Credit Policy Version 1.1 July 2015

RATISSON FINANCE (PVT) LTD

CREDIT POLICY

Version: 1.1 July!"1#

TA$LE OFCONTENTS1." Pur%ose o& 'e Poliy...............................................................................4

!." So%e o& A%%li*'ion................................................................................5

+." O,nersi% *n- Reie, o& Cre-i' Ris/ Poliy........................................................5

0." *n-*'ory Re*-in2 o& 'is %oliy...................................................................5

#." T*/eoer............................................................................................5

3." De%*r'4en'*l Proe-ures...........................................................................5

5." *n-*'ory Co4%li*ne..............................................................................5

6." 7oernin2 Le2isl*'ion *n- 7ui-elines..............................................................6

8." De&ini'ion o& Cre-i' ris/.............................................................................6

1". 7ener*l Prini%les &or 4i'i2*'in2 Cre-i' ris/.........................................................6

11." Oersi2' o& Cre-i'..................................................................................7

11.1 $o*r- o& Dire'ors................................................................................7

11.! Cre-i' Co44i''ee (CC)...........................................................................7

11.+ Lo*ns *n- Ines'4en' Co44i''ee (LIC)...........................................................8

1!." Coun'ry Ris/........................................................................................9

1+." In-us'ry Pro&iles....................................................................................9

10." Proi9i'e- Len-in2..................................................................................9

1#." i2 Ris/ e;%osures< Se'ors.....................................................................10

13." S'*n-*r- o& e'is.................................................................................11

15." Flo, o& Cre-i' Reo44en-*'ion *n- A%%ro*ls...................................................11

15.1 Cre-i' A%%ro*l Li4i's.........................................................................11

15.! S%ei*l no'es 'o 'e li4i's......................................................................11

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16." Ty%es o& $orro,ers...............................................................................12

16.1 In-ii-u*ls.....................................................................................12

16.1.1 inors....................................................................................12

16.1.! In-ii-u*ls................................................................................13

16.1.+ Join' Aoun's............................................................................13

16.1.0 S%ouses *n- o'er ulner*9le %ersons....................................................13

16.! Sole Pro%rie'or.................................................................................13

16.+ P*r'nersi%s....................................................................................13

16.0 Soie'ies< Clu9s< *n- Assoi*'ions.............................................................14

16.0.1 Sools...................................................................................14

16.0.! Cures..................................................................................14

16.# Li4i'e- Co4%*ny...............................................................................14

16.3 7oern4en' De%*r'4en's< Cen'r*l Co4%*ny=s< inis'ries......................................15

16.5 >u*si?2oern4en' ins'i'u'ions..................................................................15

16.6 Consor'iu4s @ Join' Ven'ures..................................................................15

18." Insi-ers...........................................................................................15

!"." Ty%es o& &*ili'ies.................................................................................16

!".1 S*l*ry $*se- Lo*ns............................................................................16

!".! Or-er Fin*nin2................................................................................16

!".+ Inoie Disoun'in2............................................................................16

!".0 7rou% Lo*n.....................................................................................16

!".# iro?ousin2 Lo*ns...........................................................................16

!1." Seuri'y...........................................................................................16

!1.1 T*n2i9le *n- In'*n2i9le Seuri'y................................................................17

!1.! Ty%es o& Seuri'y...............................................................................17

!1.!.1 De%osi's *n- *r2in*l De%osi's...........................................................17

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!1.!.! De%osi's el- 9y ins'i'u'ions in o'er uris-i'ions........................................17

!1.!.+ S'o/s< S*res............................................................................17

!1.!.0 C*r2es @ Bi49*9,e le2*l &r*4e,or/.....................................................18

!1.!.# Fi;e- C*r2es @ or'2*2es (T*n2i9le Seuri'y)...........................................18

!1.!.3 No'*ri*l 7ener*l oerin2 $on-s (N7C$) (In'*n2i9le Seuri'y)............................19

!1.!.5 Co4%*ny 7u*r*n'ees (T*n2i9le i& &ro4 Ae%'*9le Co4%*nies)...........................19

!1.!.6 S'*n-?9y Le''ers o& Cre-i' (T*n2i9le i& &ro4 Ae%'*9le Co4%*nies).......................20

!1.!.8 7u*r*n'ees (In'*n2i9le)...................................................................20

!1.!.1" Li&e Assur*ne Poliies......................................................................21

!1.!.11 Insur*ne....................................................................................21

!!." Es'i4*'e- Conser*'ie Asse' V*lue..............................................................22

!+." Seuri'y Dou4en'*'ion...........................................................................22

!0." Cre-i' Ris/ *%%e'i'e ersus Eono4i *n- In'ern*l &*'ors........................................23

!#." Cre-i' Proessin2 *n- A%%r*is*l..................................................................23

!#.1 7ener*l 7ui-elines on 'e Cre-i' Proessin2 *n- A%%r*is*l....................................23

!#.! Aoun'*9ili'y &or Cre-i' reo44en-*'ions *n- *%%ro*ls.....................................24

!#.+ Deline- F*ili'ies..............................................................................24

!#.0 Prior e/s....................................................................................24

!#.# For4*' o& Cor%or*'e Cre-i' Pro%os*ls..........................................................24

!#.3 Len-in2 'o SEs...............................................................................27

!#.5 Person*l Len-in2 Pro%os*ls....................................................................28

!#.6 O'er Non Sore 9*se- Person*l len-in2......................................................31

!3." Ter4s o& F*ili'y O&&er Le''ers.....................................................................31

!5." Ce/in2 o& in%u's on 'e Co4%u'er sys'e4......................................................34

!6." Cre-i' &iles........................................................................................34

!8." Cus'o-y o& Seuri'y Dou4en's...................................................................35

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+"." *n*2e4en' o& Pro9le4 *oun's................................................................35

+".1 7ener*l 2ui-elines.............................................................................35

+1." Assess4en' o& Cre-i' i4%*ir4en' Proess........................................................36

+1.1 IFRS ?Assessin2 Cre-i' I4%*ir4en'.............................................................36

+1.! De&ini'ions......................................................................................36

+1.! O9e'ie= ei-ene.............................................................................37

+1.+ Es'i4*'ion o& Reoer*9le V*lue................................................................38

+1.0 In-ii-u*lly Assesse- Cre-i's..................................................................38

+1.# $usiness Pl*n..................................................................................39

+1.# Re%*y4en' Pl*n o& * Person*l Lo*n............................................................39

+1.3 Coll*'er*l.......................................................................................39

+!." oni'orin2 o4%li*ne ,i' In Du%lu4 Rule....................................................40

++." i'-r*,*l o& F*ili'ies...........................................................................40

++.! Le''ers o& De4*n- &or Re%*y4en'..............................................................42

++.+ Co49in*'ion o& ,i'-r*,*l o& &*ili'ies *n- -e4*n- le''er......................................43

+0." AGuisi'ion o& i44o*9le %ro%er'y in lieu o& -e9'.................................................43

+#." Pre&eren'i*l Cre-i'ors.............................................................................43

+3." Proisions........................................................................................43

+5." Res'ru'ure o& re%*y4en' se-ule *n- o'er 'er4s..............................................43

+6." Au'ori'y 'o Re-ue or Rele*se Proisions &or De9's..............................................43

+8." ri'e O&&s %er R$B Co4%*nyin2 Re2ul*'ions< !"""? S'*'u'ory Ins'ru4en' !"# o& !""".............44

+8.1 ri'e O&&s *n- Ino4e T*;......................................................................44

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1.0 Pur%ose o& 'e Poliy

The purpose of this Policy is to provide a general framework for managing credit risk.

!." So%e o& A%%li*'ion

This mandatory policy document applies to Ratisson Finance (Private) imited.

+." O,nersi% *n- Reie, o& Cre-i' Ris/ Poliy

Responsi!ility for reviewing this policy rests with "perations #anager of Ratisson Finance (Pvt) td.The "perations #anager will review this policy at least annually or earlier depending upon changes in the internal ande$ternal environment. %uch reviews and re&uests for amendments will then !e su!mitted to the 'eneral #anager.

These will then !e discussed and referred to the redit ommittee () and if endorsed !y them recommended to the*oard for final approval.

0." *n-*'ory Re*-in2 o& 'is %oliy

+ll ,$ecutives and staff who are involved in lending should read this Policy at the time of taking over a new -o! which iscreditrelated and at least yearly thereafter.

This policy should !e read in con-unction with the /Ratisson Finance (Pvt) td ending 'uidelines which will !e issuedfrom time to time depending upon internal and e$ternal environment and designed to ac&uaint lending officers with thecompanys appetite for credit risk.

2henever there is a conflict !etween the ending 'uidelines and the redit Policy and Procedures #anual the latter will prevail.

+ppropriate evidence of reading should !e maintained either in the form of flying sheets attached to the hard copy ofthis policy or in electronic format such as email confirmation.

#." T*/eoer

+ny incoming "perations #anager should su!mit a Takeover ertificate upon assuming responsi!ility over this policyand manual.

3." De%*r'4en'*l Proe-ures

3ead of redit Risk #anagement and 3ead of redit +dministration are responsi!le for maintenance of appropriatedetailed procedures for the department. %uch procedures must !e in line with the redit Policy and other generaloperational policies and designed to permit any appropriate incoming staff to promptly step into the shoes of theprevious -o! holder with minimum disruption to the operations.

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5." *n-*'ory Co4%li*ne

+ll ompanys staff shall mandatorily comply with the

(a) etter and spirit of the laws of the Repu!lic of 4im!a!we(!) ompanys redit Risk Policy as amended from time to time and approved !y the *oard

(c) ending guidelines as amended from time to time and approved !y the *oard(d) 5nternal departmental procedures as approved !y #anagement

The ompliance function should ensure through appropriate monitoring and checks that all lending are strictly in line with the legal and regulatory framework.

6." 7oernin2 Le2isl*'ion *n- 7ui-elines

The following main +cts and guidelines as amended from time to time define the parameters for the credit !usiness in4im!a!we6

The *anking +ct 7hapter 89680:

*anking Regulations (%5 80; of 8000)The #oney enders and Rates of 5nterest +ct 7hapter 19619:#emorandum of


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ensure that the approved credit risk management policy is implemented in its true spirit using strictly and e$clusivelyprudential credit appraisal criteria and considerations and not influenced !y any e$traneous factors so as to6

ensure that the credit approval process is not unduly influenced !y market share growth targets.

esta!lish and utili@e effectively a system to monitor and control the nature composition and &uality of the

credit portfolio and to ensure that the portfolio is conservatively valued.

ensure implementation of a credit management information system that

tracks the evolving circumstances of a credit repayments regularity !orrowers financial condition continuingvalue of the security and other attri!utes of the credit.

tracks credits !y portfolio characteristics including single and associated groups of !orrowers types of creditfacilities industry sectors and geographical regions.

ensure implementation of an appropriate management reporting system covering the content format andfre&uency of information to management concerning the institutions credit risk position to permit sound andprudent analysis and control of e$isting and potential credit risk e$posures.

install ade&uate internal controls covering the entire credit spectrum including segregation of activities !etweenthe persons responsi!le for analysis authori@ation and e$ecution of credit transactions and those responsi!le fortheir monitoring and in the case of impaired credits their followup and the esta!lishment of an appropriateinternal rating system for individual credits.

ensure implementation of an effective internal audit function to review and assess the credit risk managementactivities which will provide assurance to management and the !oard that credit activities are in compliance withthe credit risk management policy and with local laws and regulatory guidelinesB

11." Oersi2' o& Cre-i'

11.1 $o*r- o& Dire'ors

The *oard of ?irectors is ultimately responsi!le for oversight of credit &uality and operations and providing overallstrategic direction to the credit granting units through approving and reviewing the redit Policy and Procedures#anual and the ending 'uidelines.

11.! Cre-i' Co44i''ee (CC)

The redit ommittee shall !e responsi!le for reviewing the &uality of the Ratisson Finance (Pvt) td loan portfolioincluding the Ratisson Finance (Pvt) td !ook on a &uarterly !asis to achieve the following o!-ectives6

1. To ensure conformity of the loan portfolio to the credit policies.8. To keep the *oard ade&uately informed regarding portfolio risk.C. To properly identify and classify pro!lem assets and where necessary place them in their proper risk

grading with the conse&uent actions.

9. To ensure the appropriate provisions for potential losses are made to the provision for loan losses account.;. To ensure that write offs of identified losses are made in a timely manner.

The shall always !e composed of a ma-ority of independent directors who do not participate in the endingommittees. 5t shall consist of at least three mem!ers and shall !e chaired !y an independent none$ecutivedirector.

The redit ommittee shall !e guided !y the under mentioned R*4 guidelines while fulfilling its responsi!ilities6

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. (1) The company shall review the &uality of its loan portfolio notless fre&uently than each &uarter with a view to achieving the following

o!-ectivesD

(a) to ensure the conformity of the loan portfolio and lending function to asound lending policy documented approved and adopted !y the !oardB and

(!) to keep e$ecutive officers and the !oard ade&uately informed regardingportfolio riskB and

(c) to properly identify and classify pro!lem credits and as necessary placethem on a nonaccrual !asis in accordance with this PartB and

(d) to ensure that appropriate provisions for potential losses are made to theprovision for loan losses account so as to maintain the account at an ade&uate level at all timesBand

(e) to ensure that writeoffs of identified losses are made in a timely manner.

(8) oan reviews shall !e conducted !y a committee which is independent of any person or committeeresponsi!le for sanctioning credit and shall consist of at least three persons including a mem!er

of the !oard without e$ecutive officer responsi!ilities.

(C) Reports of such loan reviews shall !e made directly and timeously to the !oard of the companyand provide sufficient information to ena!le the !oard to re&uire lenders to correct significantpro!lems within a specified time frame.

(9) The company shall maintain sufficient records of every loan review of evaluations of individualloans and advances and of the entries made to its provision for loan losses account and shallmake these availa!le to an inspector on re&uest.

The *oard redit ommittee will !e responsi!le for Ratisson Finances credit policies and their proper application. may delegate part of its responsi!ilities to the 5 and the companys management !ut will also directly assessproposals in e$cess of the 5 limit. +ccordingly shall !e responsi!le for the applica!le limits and proper application

of the related credit policies !y the Ratisson Finance management and 5.

The will !e composed of 100E none$ecutive directors and shall consist of no less than three mem!ers.

5n line with R*4 guidelines the hairman of the shall !e an 5ndependent none$ecutive director.

#eetings shall !e held !y notice on an ad hoc !asis and &uarterly. The ommittee may approve proposals !y roundro!in during the &uarter. %uch proposals will !e su!-ect to ratification at the &uarterly meetings. 2here proposalsare approved !y round ro!in a ma-ority of votes for a proposal shall lead to approval. The hairman shall have acasting vote.

For &uarterly meetings a &uorum of the meeting shall !e the presence of at least three none$ecutive directors. +proposal will !e considered to !e approved if the ma-ority of mem!ers approve with the hairman having a casting

vote in the event of a tie. The normal rules pertaining to meetings of a !oard of directors of a company shall apply. shall review oans and 5nvestments ommittee (5) decisions even within 5s limits and may override suchdecisions.

11.+ Lo*ns *n- Ines'4en' Co44i''ee (LIC)

5s main responsi!ility will !e the approval of Ratisson Finance credit facilities within the range set out !y this policyBthe companys lending guidelines as revised from time to timeB and the parameters set out !y R*4. 5 shall have the

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additional responsi!ilities of reviewing any facilities approved !y officers of Ratisson Finance under their respectivedelegated authority and Ratisson Finances glo!al credit e$posure in line with these policies and ensuring that theRatisson Finance credit !ook operates within general prudential parameters.

will approve the nomination of mem!ers of 5.

#em!ership to 5 should always !e !ased on personal e$pertise and e$perience and will not !e related to -o!positions. This implies that if for e$ample a person has !een appointed !y on 5 and retires from that committee orresigns from the company his successor in the -o! position he was occupying may not !e automatically appointed as amem!er of 5. +dditionally to ensure o!-ectivity the 5 should as far as possi!le !e composed of a ma-ority ofmem!ers who are independent from the redit proposal originating process and who do not have salescommercialtargets (e.g. profit deposits num!er of customers increase in assets lia!ilities) as part of their annual keyperformance indicatorsB 2here due to the companys inherent organi@ational structure this may not !e possi!le to !efully achieved the mem!ership of 5 should !e carefully !alanced to preserve the independence of decision making.

ompliance and Recoveries "fficer will !e in attendance at 5 with no voting right.

5 may invite other mem!ers to !e in attendance (!ut with no voting rights) !ased on e$perience and speciali@ede$pertise value that they may add to the ommittee.

+ &uorum of the meeting shall consist of any three mem!ers of whom one (a) shall !e independent from the reditproposal originating process and (!) does not have salescommercial targets mentioned a!ove.

?ecisions shall !e !y a ma-ority vote of mem!ers present at a duly constituted meeting. ,ach mem!er shall have onevote and the normal rules for meetings of a *oard of ?irectors of a company shall apply.

1!." Coun'ry Ris/

ountry risk arises where the ompany has cross!order e$posures or investments e.g. if the company holds aninvestment in #alawi. ountry risk should !e su!-ect to at least annual reviews or earlier reviews if circumstances

warrant it .%uch an analysis would include factors like the economic legal and regulatory political fiscal and socialenvironment.

The assistance of e$ternal specialists may !e sought !y 'eneral #anager or the *oard to draw such risk profiles.

1+." In-us'ry Pro&iles

The ompany should have industry profiles in respect of all industries where they have significant e$posures. %uchprofiles must !e reviewed and updated at least annually or earlier if market conditions change.

The assistance of e$ternal specialists may !e sought !y the 'eneral #anager or the *oard to draw such risk profiles.

10." Proi9i'e- Len-in2

The ompany will not consider facilities for the following categories6

1. "rganisations or persons which have !een declared insolvent specified or suspended from conducting !usiness!y the 4im!a!we 'overnment or the courts of 4im!a!we.

8. Production or activities involving forced la!our or child la!our as defined !y the 5nternational a!our "rganisation(5").

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C. Trade in wildlife or wildlife products !anned !y the onvention on 5nternational Trade in ,ndangered %pecies(5T,%).

9. ross !order trade in waste and waste products unless compliant to *asel onvention and the underlyingregulations.

;. ?rift net fishing in the marine environment using nets in e$cess of 8.;km in length.

>. Production use of or trade in those pharmaceuticals pesticidesA her!icides chemicals o@one depletingsu!stances and other ha@ardous su!stances su!-ect to international phaseouts or !ans.

G. ?estruction1 of ritical 3a!itat8.

H. ,nterprises directly engaged in military activities or the manufacture of weapons of mass destruction. 3oweverthis provision shall not prevent Ratisson Finance from investing in enterprises operating as private securityandAor investigative firms.

I. "rgani@ations where the investment or practices of the organi@ations are deemed to !e environmentallyunsound unless Ratisson Finance lending is aimed at alleviating or correcting such environmentally unsoundpractices.

10. *usinesses involved in pornography or prostitution.

11. 'am!ling e$cluding institutions like hotels where gam!ling represents a very small proportion of the activity.

18 Production and distri!ution of racist media.

1C Production or trade in any product or activity deemed illegal under host country laws or regulations or internationalconventions and agreements.

1#." i2 Ris/ e;%osures< Se'ors

There are a num!er of sectors which are comple$ in nature have high operational risks are volatile or verycompetitive. +s such their inherent risks may re&uire speciali@ed skills to analyse. ,$amples are6

o %tartups or 'reenfields

o Property ?evelopment J Real ,state

o ontract and Pro-ect Finance

1Destruction means the (1) elimination or severe diminution of the integrity of a habitat caused by amajor, long term change in land or water use or (2) modification of a habitat in such a way that the habitat’s

ability to maintain its role is lost2Critical habitat is a subset of both natural and modified habitat that deserves particular attention Critical

habitat includes areas with high biodiversity value that meet the criteria of !orld Conservation "nion(#"C$) classification, including habitat re%uired for the survival of critically endangered or endangered

species as defined by the #"C$ &ed 'ist of hreatened pecies or as defined in any national legislation*

areas having special significance for endemic or restricted+range species* sites that are critical for the

survival of migratory species* areas supporting globally significant concentrations or numbers ofindividuals of congregatory species* areas with uni%ue assemblages of species or which are associated with

ey evolutionary processes or provide ey ecosystem services* and areas having biodiversity of significant

social, economic or cultural importance to local communities

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o +viation

o %hipping

o #ining

o #anufacturing

o Te$tiles

o Telecommunications

13." S'*n-*r- o& e'is

"peration #anager *ranch #anagers and lending officers involved in credit recommendations and approval aree$pected to6

-+dhere to the highest standard of ethics and integrity

- Put the interests of the ompany a!ove individual interests.

15." Flo, o& Cre-i' Reo44en-*'ion *n- A%%ro*ls

+ll credit proposals should follow the following stages6

1 "rigination and recommendation !y respective oan "fficerA*ranch #anager

8 Recommendation !y ompliance and Recoveries "fficer as the case may !e.

C redit assessment and recommendation !y "perations #anager.

9 Facilities in e$cess of K10000 and insider loans to !e sent to the 'eneral #anager for recommendation

; Proposals are then to !e escalated to * 5 or the *oard depending upon the limits e$plained undersection 1>.1

15.1 Cre-i' A%%ro*l Li4i's

The following approval limits shall apply for all e$isting and future products that have an inherent credit risk6

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Disre'ion*ry Len-in2 Li4i's

Ratisson Finance *oard =o formal limit !ut !ound !y the R*4 guidelines L %ee%ection 8H

*oard redit ommittee () 8;E of the %hareholders apital

oans and 5nvestment ommittee (5)


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15.! S%ei*l no'es 'o 'e li4i's

1 5t is e$pected that most credit proposals will fall within the parameters set !y this redit Policy and theending 'uidelines. 2here this is not the case the proposal should !e highlighted as /%peciali@ed endingand processed in the normal way to redit ?epartment. 3owever normal lending limits will !e suspended insuch cases and all approvals will !e given only !y the redit +pprovals ommittee () or the *oard.

8 %taff loans will fall outside the purview of these limits and will !e su!-ect to the guidelines set !y R,#".

C oans to staff (other than those falling under /staff loans as approved !y R,#") including those related toparallel !usiness social or any other activities as permitted under the terms and conditions of employment

will !e approved !y 5 or depending upon the amounts. The relevant approving authority shouldhowever group the staff loans granted under R,#" authority together with the other loans mentioned inthis paragraph for the purpose of assessing authority to approve.

=o staff mem!er may guarantee any of the companys customers !ut if e$ceptional circumstances warrantsuch a guarantee the latter will have to !e supported !y appropriate -ustifications and approved !y the'eneral #anager. %uch guarantees received from a staff mem!er must !e grouped with the staffs loansgranted under R,#" authority to determine the ma$imum e$posure allowa!le to the staff mem!er and also

which appropriate authorityAcommittee may approve the facility.

9 The following will additionally not fall under the limits of the 5 and may !e approved !y or the full *oard6

1 Facilities to related parties or insiders (e$cept for staff loans as descri!ed a!ove)

8 Facilities referred !y insiders whether in writing or ver!allyM

M +ny manager or lending officer who !ecomes aware of a referral !y an insider whether this referral

is made ver!ally or in writing directly or indirectly to them shall mandatorily advise 'eneral#anager and ompliance and Recoveries "fficer in writing. The 'eneral #anager andAorompliance and Recoveries "fficer as the case may !e shall inform the relevant approvingauthority of such referrals and "perations #anager shall highlight such referrals in the relevantcredit proposal.

C Facilit ies which are e$cess of concentration limits

9 Facilities in e$cess of (under the %R% scale) and !elow re&uires reditommittee endorsement. This would also apply to provisioning and the realisation of interest in suspense toprofit.

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MFacilities mean new amended or renewed

16." Ty%es o& $orro,ers

16.1 In-ii-u*ls

16.1.1 inors

+ny person !elow the age of eighteen (1H) will !e regarded as minors.

The contractual capacity of minors is limited and security given !y them may not !e !inding.

=o credit cards or any other type of facility should !e granted to minors.

16.1.! In-ii-u*ls

5ndividuals have unlimited lia!ility.

16.1.+ Join' Aoun's

+ppropriate account mandate forms must !e in place to authori@e the granting of facilities with or without security onthe re&uest of sole or -oint parties.

The lia!ility of -oint account holders for facilities must !e -oint and several.

16.1.0 S%ouses *n- o'er ulner*9le %ersons

%pouses or other vulnera!le persons e.g. an elderly person may !e su!-ect to undue influence !y third parties.

To ensure such a transaction is not invalidated at a later date for reason of Nundue influenceN lending officers orending "fficers should clearly recommend that any such person !e asked to o!tain independent legal advice !eforee$ecuting any security documentation.

2here independent legal advice is recommended !ut this is declined a record of this should !e kept with relevantsecurity documents.

16.! Sole Pro%rie'or

The !orrowing powers of sole proprietors are the same as those of individuals.

*efore granting facilities checks must !e made on the trading licences.

To avoid confusion as to the nature of the !usiness account of such sole traders must not !e in trade namesB at themost accounts must !e in this format #r. Oohn trading as $$$$

16.+ P*r'nersi%s

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ending "fficers must e$amine partnership agreements to ascertain the !orrowing powers of the partnership and howthey may !e e$ercised.

+ccount opening documentation should include an appropriate mandate designed to specify authority to operateaccounts or to o!tain ompanying facilitiesB and to incorporate -oint and several guarantees of partners for allompanying facilities.


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,sta!lish the

1 NapacityN i.e. if the companies have the power to enter into transactions for which a facility is sought or if thetransaction is valid or /ultra viresN or invalid. 5n that respect the #emorandum of +ssociations o!-ects shouldcontain a clear mandate to enter into the transaction.

5n case of dou!t the ompany should insist upon an ,$traordinary 'eneral #eeting of the ompany to passa %pecial Resolution to alter the o!-ects.

8 N+uthorityN i.e. if the directors have authority to !ind the company under its +rticles of +ssociation. The+rticles should give general authority to the directors to manage the !usiness of the company and should not!e restricted !y limits.

+ transaction which is outside the authority of the directors !ut within the capacity of the ompany may !evoid !ut can !e ratified !y shareholders in a 'eneral #eeting.

C whether there could !e /!reach of duty or /a!sence of commercial !enefit

This may happen if the directors do not !elieve that the transaction is in thecommercial interest of the ompany.

+ proper !oard resolution is re&uired to accept facilities or grant security. *oard resolutions must !e scrutini@ed toidentify any e$clusion.

2here there are facilities granted to a company and secured !y another group companythese facilities must !e granted to the assetowning company or to its su!sidiary under the parents guarantee.

ending officers should take cogni@ance that within a group of companies each company is a separate legal entity andacceptance of facilities or granting of security must !e authori@ed !y the individual company !orrowing and not !y theholding company unless circumstances warrant it e.g. in case of guarantees !eing specifically granted !y the holdingcompany.

16.3 7oern4en' De%*r'4en's< Cen'r*l Co4%*ny=s< inis'ries

These would normally !e !orrowers whose !orrowings are guaranteed !y the government.

3owever the officials who have the authority and capacity to !ind the 'overnment must !e ascertained.

16.5 >u*si?2oern4en' ins'i'u'ions

These would !e normally stateowned corporations and include municipalities and parastatals.

The legal instrument which has led to their formation must !e scrutini@ed and the officials who have the authority and

capacity to !ind these corporations must !e ascertained

16.6 Consor'iu4s @ Join' Ven'ures

=ormally the difference !etween a -oint venture and a consortium is a &uestion of the num!er of the parties involved.

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#anagement should have a copy of the shareholders agreement or -oint venture agreement and from the startesta!lish the legal implications relative to the documentation governing such entities including who has the right powerand authority to !ind a -oint venture.

2hen granting facilities against a guarantee from a -oint venture the guarantee should !e e$ecuted on a -oint andseveral !asis.

18." Insi-ers

The company shall not grant loans to insiders and related interests e$cept where such credit is granted as part of the

employees conditions of service and is availa!le to other employees. 5ndividuals and companies may however

access loans from other ompanying institutions where they are not classified as insiders or related parties.

!"." Ty%es o& &*ili'ies

!".1 S*l*ry $*se- Lo*ns

%alary *ased loan is a small shortterm loan secured against your salary. There is no collateral security re&uirement. 3owever

your employer should sign a Payroll ?eduction +greement (P?+) or ?irect ?e!it +greement (??+) with us. The loan amount

depends on the net salary. Thus the more one earn the higher the loan amount.

!".! Or-er Fin*nin2

5t is a short term loan facility that allows you to finance an order issued !y a corporate when your company does not have

enough funds to meet the cost of the order. +ll we re&uire is the original order and terms of the confirmed order for Ratisson

Finance to put the facility in place

!".+ Inoie Disoun'in2

5nvoice ?iscounting is a short term loan used to improve a companys working capital and cash flow position. This

facility allows a !usiness to draw money against its sales invoices !efore the customer actually pays $ene&i's

,fficient use of working capital

The *usiness improves its cash flow and working capital position

5mproved i&uidity ena!les the company to negotiate !etter prices with its suppliers

3elps the !usiness to grow and secure market share.

!".0 7rou% Lo*n

These are loans o!tained !y a minimum of four (9) up to a ma$imum of ten (10) individuals who are in the same

!usiness. The mem!ers in the group coguarantee each other in solidarity and hence no security in terms of assets is

re&uired.

!".# iro?ousin2 Lo*ns

These are loans issued for the purpose of purchasing a house or improving your home (renovations). The property

ac&uired secures the loan.

!1." Seuri'y

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2here security is taken the following aspects must !e ascertained and followed6

(a) the legal procedures and documentation for perfecting the security arrangement to !e in strict compliance with local legal re&uirements.

(!) the security providers (the !orrower or 'uarantor) are acting within their capacityto provide the security

(c) the value of the security which must !e appraised and updated on a regular !asis or when circumstances warrant. Professional advice must !e sought when appropriate

(d) the enforcea!ility of the security should forced repayment !ecome necessary

(e) where security is su!-ect to insurance the security must !e insured for appropriate value against appropriaterisksB and that the ompanys interests are noted and acknowledged !y the insurer.


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!1.!.! De%osi's el- 9y ins'i'u'ions in o'er uris-i'ions

The classification of security as either tangi!le or intangi!le will need to take account of the a!ility to freely remit thesale proceeds.

!1.!.+ S'o/s< S*res

2hen granting facilities to !e secured !y listed stocks and shares lending officers should carefully evaluate thefollowing6

whether !orrowers have authority to give securitiesB whether securities should !e classified as tangi!le or intangi!leB whether standard margins are appropriate. &uoted on a reputa!le e$changeB readily marketa!le and actively tradedB fully paid.

2here stocks shares securities and converti!le !onds are provided as security which does not conform to either thecriteria listed a!ove the securities should !e classified as intangi!le.

+n ade&uate margin should !e taken depending on

the type of security e$change rate risk if anyB interest rate risk if anyB current market performance of securitiesB the degree of mi$ of share portfoliosB the degree of l i&uidityAmarketa!ility of securities.

+s a general rule the normal margin for shares should !e ;0 percent i.e. facilities should not e$ceed ;0 percent of thevalue of security held.

!1.!.0 C*r2es @ Bi49*9,e le2*l &r*4e,or/

5t is to !e noted that for any charge that the ompany may hold the latter should apply to the ourt to reali@e suchsecurity.

3owever it is perfectly in order for a de!tor to agree that the item(s) !eing held as security may !e disposed of !y theompany on condition that such agreement is struck when default has occurred.

!1.!.# Fi;e- C*r2es @ or'2*2es (T*n2i9le Seuri'y)

5n all cases the ranking of proposed charges should !e first ascertained.5n case the ranking of the ompanys charges is not first rank the value of the security will !e assessed !ased onvaluation less prior charges.

*efore taking mortgages the ompany should assess whether proposed !orrowers have the legal capacity tomortgageAgrant fi$ed charges over the properties. "ther than companies in case of married couples the ompanyshould ascertain in case

(a) the mortgagors who are coowners if the former should have their facility guaranteed !y all other coowners

(!) the mortgagors who are married and whose spouses reside in properties to !e mortgaged if the ompany shouldhave the approval of their spouses to do so.

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The ompany should check that

(a) the mortgagesAfi$ed charges have !een e$ecuted in the correct manner and searches made to confirm thegrantor of these charges have title to the propertyB

(!) fi$ed chargesAmortgages have !een stamped and registered at the office of the Registrar of ?eeds according tolocal law

(c) the title deeds and all documents relating to and any receipts of discharge ofprior fi$ed chargeAmortgages have !een o!tained

+ clause should also !e included in relevant documentation ena!ling the rate of interest charged to !e varied at thediscretion of the ompany.

Qaluation of security should !e o!tained at the time of proposing the facility and also updated on a regular !asis e.g.for land and !uildings at least every C years. %o far as valuation is concerned for commercial properties the valuationmethod should !e the /income approach in lieu of the /market or /replacement cost methodology. Qaluers shouldalso !e re&uested to provide a reinstatement figure for !uilding fire insurance purposes and a forced sale value.

%uch valuations should !e o!tained from valuers duly approved !y the ompany.

Factors to !e considered while approving valuers are &ualifications which are recogni@ed !y relevant authoritiesBmarket reputationB previous track record with the ompanyB

ending officers must ensure assets are insured for appropriate values and against appropriate risksB and that theompanys interests in policies have !een noted and acknowledged !y insurers.

2hile in other -urisdictions fi$ed charges and mortgages technically provide lenders with the right to take possession ofthe property plant and machinery specified in charges in the event of default !y !orrowers in 4im!a!we theompany must apply to the court first to reali@e the security.

%pecific caution must also !e e$ercised when considering foreclosure on any property and local legal advice taken to

esta!lish what lia!ilitiesAo!ligation may e$ist.

!1.!.3 No'*ri*l 7ener*l oerin2 $on-s (N7C$) (In'*n2i9le Seuri'y)

These are e&uita!le charges over the assets of companies operating as going concerns.

These assets may !e disposed of and replaced in the normal course of !usiness without the consent of de!entureholders.

='*s change their status to Fi$ed harges when6

- !orrowers go into li&uidation

-the winding up of companies start irrespective of whether !orrowers are in default with de!enture holdersB

- !orrowers are in default on a facility or are in !reach of the terms of de!enture. ?e!enture holders must then takethe appropriate legal action to change the status of charges usually !y appointing receivers.

ending officers should take into account the possi!le decrease in the value of the security in the event that !orrowersare placed into li&uidation.

ending officers should ensure first rank ='*s charges.

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5n case the ranking of the ompanys charges are not first rank the value of the security will !e assessed on an,stimated onservative +sset Qalue (,+Q) !asis less prior charges (see section 88.0).

!1.!.5 Co4%*ny 7u*r*n'ees (T*n2i9le i& &ro4 Ae%'*9le Co4%*nies)

'uarantees may !e taken from other ompanies to secure facilities to principal de!tors su!-ect to

(a) an assessment of the risk profile of the ompany !eing made

(!) the guarantee is within the approved ompany limit

(c) signatories on the guarantee forms verified to ensure they are authorised to !ind issuing ompanies

(d) electronic forms are authenticated

(e) ountry risk if any is approved within authorised limits

!1.!.6 S'*n-?9y Le''ers o& Cre-i' (T*n2i9le i& &ro4 Ae%'*9le Co4%*nies)

%tand!y letters of credit (%*) are used !y ompanies to authorise other ompanies to grant facilities to thirdparties. %uch %* should !e su!-ect to the provisions of


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guarantors provide continuing security against continuing facilities.

guarantees provide continuing security in the event of death disa!ility or !ankruptcy of guarantors untilnotice to discontinue and determine guarantees is given.

+ll lia!ilities and contingent lia!ilities that are current at the date of determination are guaranteedB

guarantees allow !eneficiaries to give de!tors time to settle outstandings or make other arrangements whenguarantees are calledB

guarantors lia!ilities are not voided !y any irregular e$ercise of !orrowing powers !y de!torsB

guarantors may not take security from de!tors to secure their lia!ilities without the prior consent of!eneficiaries.

ending "fficers should recommend potential guarantors to take independent legal advice where it is !elieved thatthey are unaware of the full legal implications of theguarantees they are giving or where there is a possi!ility they may !e under undueinfluence from parties whose o!ligations are !eing guaranteed. 2here such advice isrecommended !y ending "fficers !ut not taken !y the guarantor this fact should !e recorded on file and kept with

other security documentation.

Prefera!ly the witness to a guarantors signature should !e an independent third party.

The factors in the following sections must !e considered !efore taking guarantees.

5ndividuals

'uarantors must !e reputa!le and financially sound.

'uarantees should not !e taken as a general rule from elderly individuals (defined as persons who are at least >0years old) who have not e$ecuted wills for if they should die intestate the settlement of claims could well !e a lengthyand time consuming process.

'uarantees should not !e taken unless the relationship !etween prospective guarantors and customers appear to -ustify the former accepting the risk and the reason for re&uiring facilities is sound.

5f the !ulk of the assets of the 'uarantor is held with third parties then a -oint and several guarantee should !e taken.

%pouses should !e re&uired as a general rule to seek independent legal advice if they are proposing to guaranteerelatives or !usinesses in which their spouses have an interest.

Partnerships

The #andate or Partnership ?eed will define the powers of partnerships to give guarantees. +s a ruleB all partnersshould sign unless otherwise stated in these documents.

imited ompanies

ending officers !efore taking guarantees from limited lia!ility companies should esta!lish that the capacity authorityand presence of commercial !enefit as descri!ed a!ove.

!1.!.1" Li&e Assur*ne Poliies

Facilities may !e granted against life assurance policies !ased upon the income of an individual plus life assurancepolicies su!-ect to

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policies issued !y assurance companies of undou!ted financial and reputational standing suchcompanies to !e duly approved !y the ompany

policies should !e assigned to the ompany !y e$ecuting relevant documentationAprocesses.

The assurance company confirming that there are no e$isting assignments ranking prior to theproposed assignment

The surrender value of the policy at the time of granting the facilities !eing sufficient to cover thefacilities.

!1.!.11 Insur*ne

+ll fi$ed charges including mortgages and floating charges must !e !acked !y appropriate insurance cover from5nsurance companies of undou!ted financial and reputational standing such companies to !e duly approved !y theompany

5f the policy is unaccepta!le customers should !e notified tactfully of the decision to avoid controversy andAorlitigation with 5nsurance companies

Policies for residences and commercial or industrial premises should seek to cover all or most of the following risks

the replacement cost fire lightning e$plosion aircraft damage riots strikes civil commotion malicious damage landslide

earth&uake shock storm an all atmospheric distur!ances flood leakage

'oods and stocks are to !e covered !y a standard fire policy and insured against any other peril likely to su!stantiallydestroy them.

!!." Es'i4*'e- Conser*'ie Asse' V*lue

The following ,stimated onservative +sset Qalue (,+Q) may !e used as a general guideline to assess the realisa!levalue of assets of a !usiness considered to !e on a going concern6

+ssets Percentage

ash and ?eposits 100 E

?e!tors ;0 E

%tocks 8; E

uoted investments #arket value

; E

Plant and #achinery 8; E

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!+." Seuri'y Dou4en'*'ion

+ll standard security documentation should !e mandatorily vetted !y the ompanys lawyers and evidence of such

vetting !e kept on file.

+ll pages of security documentation other than that which !ears the authorised signatures should !e initialed !yauthorised signatories.

%ignatures on all security documents should !e verified.

!0." Cre-i' Ris/ *%%e'i'e ersus Eono4i *n- In'ern*l &*'ors

5n order to determine the appropriateness of the ompanys redit risk appetite #anagement is re&uired to regularlyanalyse the economic and regulatory environmentB and the level of credit related skills among the staff.

5f deficiencies are detected in skills this must !e promptly addressed through training or the filling of the relevantpositions !y appropriately skilled persons.

!#." Cre-i' Proessin2 *n- A%%r*is*l

!#.1 7ener*l 7ui-elines on 'e Cre-i' Proessin2 *n- A%%r*is*l

redit processing is the stage where all re&uired information on credit is gathered and applications are screened.redit application forms should !e sufficiently detailed to permit gathering of all information needed for creditassessment at the outset.

+ll credits should !e for legitimate purposes and ade&uate processes.

The ne$t stage to credit screening is credit appraisal where the ompany assesses the customers a!ility to meet hiso!ligations. ending "fficers should ensure that facilities are granted only to creditworthy customers who can makerepayments from reasona!ly determina!le sources of cash flow on a timely !asis.

2hile the ompany will usually re&uire collateral or guarantees in support of a credit in order to mitigate risk it must !erecogni@ed that collateral and guarantees are merely instruments of risk mitigation. They are !y no means su!stitutesfor a customers a!ility to generate sufficient cash flows to honour his contractual repayment o!ligations. ollateral andguarantees cannot o!viate or minimi@e the need for a comprehensive assessment of the customers a!ility to o!servethe repayment schedule nor should they !e allowed to compensate for insufficient information from the customer.

are should !e taken that working capital financing is not !ased entirely on the e$istence of collateral or guarantees.%uch financing must !e supported !y a proper analysis of pro-ected levels of sales and cost of sales prudential

working capital ratio past e$perience of working capital financing and contri!utions to such capital !y the !orrower.

5n the event of credit deterioration credit enforcement or foreclosure actions may yield proceeds much less thaninitially foreseen and the value of collateral should accordingly !e very conservatively determined as a setoff againstdefault risk.

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5n the case of loan syndication the ompany as a participant should have a policy to ensure that it does not placeundue reliance on the credit risk analysis carried out !y the lead underwriter. The ompany must carry out its own duediligence including credit risk analysis and an assessment of the terms and conditions of the syndication.

+dditionally lending officers should ensure that

- the facility falls within the approved ending 'uidelines

- the facility meets legal J regulatory re&uirements- the customers !usiness industry environment are well understood- the facility meets the re&uirements of the !orrower- there is no dou!le financing- the facility is not financing losses- credit &uality and o!-ectivity are not sacrificed at the e$pense of growing the !ook- the use of the funds is tracked to ascertain that this is in line with the re&uired purpose

The ompany should not lend to customers showing high leverage

- where the !orrower has a negative tangi!le net worth- the !orrower has de!tA,&uity ratio that e$ceeds 1;0E after the drawdown of the ompanys facilities- the gearing of the !orrower e$ceeds 100E after the drawdown of the ompanys facilities

!#.! Aoun'*9ili'y &or Cre-i' reo44en-*'ions *n- *%%ro*ls

2ithin the credit recommendation and approval process primary accounta!ility for credit decisions rests with theindividual lending officers etc. who recommend new or amended facilities even if they form part of a committee.

!#.+ Deline- F*ili'ies

Records of such facilities should !e maintained with relevant reasons

!#.0 Prior e/s

heck at the outset the legal status.

The documents to !e held and e$amined may include the following6

ertificate of 5ncorporation *usiness Registration ertificate and any locally re&uired authorisation or licenceB#emorandum and +rticles of +ssociation of a limited companyB Partnership ?eed of a partnershipB onstitution of clu!or society *oard Resolution Power of +ttorney.

that the !usiness for which the facilities are proposed does not conflict with the contents of the customers "fficialRegistration ertificates or licences.

Prior to considering the granting of new facilities to any individual partnership company or any other !ody ending"fficers must check

(a) if availa!le all relevant credit reports with the local central credit !ureau information where availa!le to ensurethere are no adverse comments stated.

(!) *lack and caution lists to identify undesira!le relationships

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!#.# For4*' o& Cor%or*'e Cre-i' Pro%os*ls

Pur%ose

Purpose of the facility must !e legal and nonspeculative and to finance the customers normal !usiness activities.

2here facilities are re&uired to finance a new venture e$treme caution is necessary.

2here facilities are re&uired for working capital purposes these must reflect the trade cycle.

5f the purpose is to finance capital e&uipment this will re&uire the identification of the initial cost to guard against overpricing the proportion to !e financed !y the ompany and the !orrowerB the income stream over the life time of theassetB the maintenanceArunning costsB alternative financing methods including leasingB the impact of the ac&uisition onthe !orrowers working capital needsB ash flow pro-ections must !e scrutini@ed to ensure that all related cash outflowshave !een taken into accountB the relia!ility of suppliers so as to ensure availa!ility of maintenance and parts.

ending officers should address the following where applica!le while conducting the evaluation of trade relatedfacilities6

-

estimated annual 5F values of imports or e$ports and the average turnover period for goods.- any seasonal nature of imports or e$ports and sale of goods- fluctuations in the unit price of goods- movements in e$change ratesB- Finance periods re&uired for the facilities e.g. !ased on production storage cycles prior to sending the goods

A4oun'

5t must !e ascertained that the facilities sought are sufficient for the stated purpose and are reasona!le in relation tothe customers own resourcesB some customers are not willing to state the e$act figure re&uired for fear that it may !edeclined. "thers may ask for more than is actually necessary and use the surplus for other less via!le or speculativepro-ects.

Tenor

The tenor of facilities should !e in line with the !orrowers a!ility to pay.+n overdraft due to its nature should also !e specifically repaya!le on demand.

5mport facilities should !e in line with the trade cycle.

oans should !e in line with repayment capacity !ut for asset financing the tenor should not e$ceed the lifetime of theasset.

Priin2

+ll facilities should !e priced to reflect risk.

Pricing should !e commensurate with the risk profile of the !orrower competitive pressure security level of nonfundsincome and other income.

This means that

(i) 5n the event of deterioration in credit &uality consideration should !e given to increased margins

(ii) when the proposed pricing is unattractive particularly for new customers where the prospect for ancillary!usiness is remote or where the !alance of risk and reward is unfavoura!le the ompany will step aside.

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Seuri'y

+ll security should !e perfected in strict compliance with local legal re&uirements !efore facilities are made availa!leBthe advice of local legal advisers on the taking and perfecting of security to !e retained on file.

%ecurity may !e distinguished !etween /tangi!le and /intangi!le

Tangi!le security is security where the client cannot dispose of the asset without getting consent from the ompany.,$amples of tangi!le security include a mortgage !ond a lien on a cash !alance on an account ompany guaranteegovernment guarantee

5ntangi!le security consists of security which can !e sold or replaced in the normal course of !usiness. =otarial generalcovering !ond over plant and assets as well as cession of !ook de!ts are e$amples of intangi!le security.

%ome types of security need to !e valued !efore !eing accepted e.g. land and !uildings life assurance policies andshares.

2ith regard to insurance the interest of the ompany must !e noted on policies.

2here individual or -oint and several guarantees from ownersAshareholders have !een re&uested to support facilitiese$tended to the relevant !orrowers details of guarantors net worth should !e o!tained and recorded in creditapplications where possi!le. redit should verify the information contained in the statement of net worth e.g. searchesto !e made to check ownership of immova!le property and related chargesB confirmation of ompany !alances to !ere&uested and proof of ownership of other assets e.g. motor vehicles to !e re&uested.

2here sensitivities prevent this and it is -ustified ending "fficers may estimate and record the assets and lia!ilities ofthe guarantors to the !est of their knowledge. 5f this is not possi!le then it should !e specifically stated within theproposal that no reliance is !eing placed on the value of the guarantee. For circumstances where guarantors areoverseas registered companies or overseas nationals legal opinion should !e o!tained to ensure enforcea!ility ofsuch guarantees.

Coen*n's

ovenants constitute a pledge to do or refrain from doing something.

They serve to reinforce control over the !orrower to ensure repayment and guard against default. ,$amples aresu!mission of periodic management accountsB pledge not to declare dividends not to dilute shareholding.

$*/2roun-

This section should highlight the following6

Shareholders Names, qualification, experience, net worth, ability to support the business withadditional funds, reputation, personal borrowing track record, commitment to thebusiness, other businesses, responsibilities, level of involvement in the business

Management Names, qualifications, is the team balanced by experienced and qualif ied individuals,experience

Operation & process escribe the l ine of activity

!ompany "aw materials etc#$ Suppliers% list them, does the company rely on one or moresuppliers$ !ustomers% list them, does the company rely on one or more suppliers$ ermsof credit from Suppliers and to customers

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Fin*ni*l Ris/ *n*lysis

+ll individual corporates including %#,s should su!mit their *alance %heet Profit and loss accounts as well aspro-ected financials including cash flow at least for the tenor of the !orrowing. + minimum of three years of historicalfinancials would !e accepta!le

3istorical *alance %heet and Profit and oss

!onfirm if 'inancials are audited or unaudited

!omment on the acceptability of the (uditors

!omment on whether the financials are qualified

)ith regard to the following specify the reasons behind the variations and the risks

!omments should cover *erformance$ !apital Structure$ )orking !apital Management$ +iquidity$ (bility to service the

'acility

Fore*s' $*l*ne see'< P@L *n- C*s &lo,s

!omments should be along the same line as istorical financialshe forecasts should be analysed in relation to historical performance

(bnormal variations should be comprehensively explained he ability of servicing the facilities should be established from the !ash flow forecastshe !ash flow forecasts should be sub-ect to a sensitivity analysis

O%er*'in2 Ris/ *n*lysis

)ith regard to the following specify the risks and mitigation factors

• Shareholders#

• Management

• !ompany#

• .ndustry /competition0#

• 1conomic2Social2*olitical2+egal and "egulatory2'iscal

Proposals to grant facilities to manufacturers will re&uire lending officers to address the following6

he marketing and selling strategy to evaluate whether demand for the products have been properlyassessed

3 he technical competence of management

3 (ssessment of status, reputation of buyers as distributors or retailers and in terms of promptness in settling dues, andthe effect of a change in demand#

3 .f there are adequate sources of supplies available from different suppliers located in different geographical areas#

3 4uality of labour, cost of training$ whether unioni5ed and strength of union

3 Mitigating measures to eliminate2reduce theft

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3 (vailability and reliability of power and water supplies, costs of contingent supply

3 6ulnerability of plants to production and2sale disruptions as a result of communication problems

value of confirmed sales orders$1fficiency of production process, conditions and life time of plant and machinery

Pro&i'*9ili'y

(ctual income versus previously targeted income3 reasons for variations

.dentify products not utilised by borrower and potential for cross sellingSpecify the intended !ross selling strategies & arget income from new facilities and other initiatives

!#.3 Len-in2 'o SEs

R*4 defines %#,s as follows6

F*'or In-i*'or

+sset *ase


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!#.5 Person*l Len-in2 Pro%os*ls

2ith respect to personal lending the ompany has two approaches6

%coring system

The following criteria shall !e used6

Se'ion Cri'erion F*'or

FINANCIAL

+ttri!ute 1 =et 5ncomeThe clients net income is assessed with a larger amount getting higherscores.

+ttri!ute 8 evel of 5nvestments lients with investments

+ttri!ute C evel of e$posure to othercredit commitments

The client should disclose the level of e$posure to other ompaniescredit advancing firms that the client is servicing6

CREDIT REFERENCES

+ttri!ute 9 redit referencesThe client is e$pected to have good references from previous or currentcreditors6

EPLOYENT ISTORY

+ttri!ute ; ,mployers details The clients employer6

+ttri!ute > ,mployment num!er ofyears

The client should disclose how many years they have !een employed!y their current employer6

+ttri!ute G ength of association withRatisson Finance

The client should have had a ompanying relationship with theompany for some period of time6

+ttri!ute H +ccommodation ownership

+ttri!ute I =um!er of years spentresiding at current address

The client should disclose the num!er of years they have !een residingat current address6

+ttri!ute 10 Proof of residencedocuments

The client should su!mit accepta!le documents as proof of residence6(The client must have at a minimum national 5? or Passport and proof ofresidence) 6

+ttri!ute 11 ontact phones forms The client should have accepta!le forms of contact

+ttri!ute 18 Relatives contacts The clients relatives should have accepta!le forms of contact

+ttri!ute 1C lients ageThe client should disclose how old they are. Please input actual num!erof years

+ttri!ute 19 #arital status Please log the clients marital status

+ttri!ute 1; =um!er of dependents

lient to disclose the num!er of dependents i.e. children parents

e$tended family mem!ers etc. they have. Please state the num!er ofdependents.

+ttri!ute 1> Political %tatus The clients is e$pected to disclose whether they are politically e$posed

5n the case of an individual client the credit analyst should esta!lish the character of the client !y considering thelength of time the client has properly used his account(s) held with his !ankers the clients financial standing (i.e. ananalysis of his assets and lia!ilities) an actual check of credit accounts held with retailers or other credit institutionsshould !e conducted. The clients earning a!ility and their a!ili ty to service the loan while meeting their normal

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o!ligations should !e assessed. The social standing of the client is also important although not overriding. + client witha high social standing may have more to lose !y defaulting on his loan. For e$ample a company director if faced withthe se&uestration of his estate may not act as a director of a company until the courts have reha!ilitated his estate.Politically e$posed persons should !e identified at this stage and the risk considered in the assessment.

Soures o& Cre-i' Re&erene

The primary sources of credit references should !eB

• The new clients previous or current !ankers. + character report should !e sought in writing from the proposed

clients previous or current !ankers.

• redit report from Trans


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• ,mphasi@ing a relationship rather than a one off transaction

• #aintaining professionalism at all times avoid overpromising and under delivery

• +void promising clients credit !efore the relevant committees have decided

• ,nsuring o!-ectivity is maintained in credit -udgment

• S principles adhered to

•


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The purpose of conditions precedent is to allow the ompany to suspend or withdraw its contractual o!ligations tomake facilities availa!le until customers meet certain stated re&uirements within a specified period of time.

Ne2*'ie Ple-2es

=egative Pledges are undertakings o!tained !y the ompany in lieu of tangi!le security.3owever these should replace security only if the !orrower is of undou!ted integrity and financial soundness which

would !e e$ceptional given the current environment.

*reaches of the terms of =egative Pledges provide the ompany with recourseonly for !reach of contract which will !e of little value if !orrowers are in li&uidation.

Ae%'*ne

Facility offer letters should contain an appropriate acceptance clause.

For the purpose of this section the term /facility offer letter shall include loan agreements and other documentsforming part of the contractual document for granting facilities.

A*il*9ili'y

Facility offer letters should include a clause under which acceptance of these facilities must !e received !y theompany !y the close of a definite date and if not received !y such time and date the offer of these facilities will !edeemed to have lapsed.

The ompany may also include a clause giving it the right to withdraw the offer at any time prior to receipt of theacceptance.N

Dr*,-o,n

Provided facilities are not of a revolving nature the num!er of days within which the !orrower is allowed to drawdownshould !e specified with a clause that any portion of the facility which has not !een drawn down !y that date shall

thereupon !e automatically cancelled.

Reie,

Facility offer letters must include a clause which provides for a review of the facility at any time and in any case notmore than C>9 days from the date of facility letter.

Re%*y4en'

Facility "ffer letters should include a clause that the facility is su!-ect to the ompanys overriding right of withdrawaland repayment on demand. "nly where formal events of default are documented and agreed may this clause !eomitted.

F*ili'y *4oun'

The amount of the revolving facility or principal amount of the term facility must !e specified.

In'eres'

5nterest rates on loans should !e set at margins over the appropriate !ase rates and !e su!-ect to fluctuation withinthe limits set up !y R*4 through the #"


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Fees

The e$tent and nature of applica!le fees should !e spelt out in facility offer letters e.g.

(a) arrangement fees !eing a percentage of a loan facility usually levied upon acceptance of a facility.

(!) commitment fees e$pressed as a percentage and calculated on the average undrawn amounts of loans overa specified period starting from the date of the loan agreement and for e$ample paya!le &uarterly in arrearsB

(c) ,arly repayment fees calculated on the amount of the outstanding loan to !e prepaid !efore the agreed duedate.

(d) review fees applica!le upon review of the facility

E;%enses

+ll fees legal costs and e$penses incurred in connection with the documentation and perfection of security should !efor the account of the !orrowers.

Dr*,-o,ns

The drawdown and repayment terms should !e stated in loan agreements

Con-i'ions Su9seGuen'

The purpose of conditions su!se&uent is to allow the suspension of su!se&uent drawdowns on loans unless statedconditions have !een met.

Re%resen'*'ions *n- *rr*n'ies

The purpose of representations and warranties is to provide remedies for misrepresentations and in the event of

inaccuracies may ena!le lenders to cancel loan commitments or call up loans if linked to events of default.

Representations and warranties normally will address the legal powers of the !orrowers the validity of the loan and thefinancial condition of customers.

,$amples are6

(a) that representations and warranties shall survive the e$ecution of loan agreements and prevail until the loanagreements e$pireB

(!) !orrowers have the capacity to enter into loan agreements and would not contravene any laws in doing so

(c) !orrowers have the power and authority to enter into loan agreements

(d) !orrowers are not engaged in or have knowledge that they may su!se&uently !e engaged in any legalproceedings which may impair their a!ility to meet the terms and conditions of loan agreements

(e) !orrowers have good t it le to their assets

(f) !orrowers most recent audited accounts reflect true and fair views of their financial situation

Een's o& De&*ul'

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,vents of default including nonpayment !reach of warranty undertaking or othero!ligations cross default insolvency etc. may !e comprehensively listed.

Coen*n's

Facility offer letters may contain !oth affirmative and negative covenants.

,$amples of affirmative covenants are6

(a) su!mit periodic audited and unaudited financial statementsB

(!) maintain specified financial ratios such as gearing de!tAe&uity ratio interest cover dividend cover net worth in-ection of a specified amount of capital.

,$amples of negative covenants are6

(a) seeking the prior approval of the ompany to sell or pledge any part of or the whole of their assets(!) re&uiring that any other de!t will not rank ahead of the ompanys e$isting de!t

7oernin2 L*,

Facility offer letters should state the laws under which they are drawn.

Dou4en'*'ion

+ll pages of facility offer letters other than that which !ears the authorised signatures should !e initialed !y authorisedsignatories.

,vidence of the vetting !y the ompanys lawyers should !e kept on file.

%ignatures on all agreements should !e verified.

"riginal copies of signed loan agreements must !e held as security in record rooms while photocopies of suchdocuments may !e held in credit files for ease of reference.

!5." Ce/in2 o& in%u's on 'e Co4%u'er sys'e4

2hile redit +dministration is primarily responsi!le for accuracy of input on the computer system to avoid financiallosses and litigation with customers in case of inadvertent errors relevant ending "fficers should ensure that systeminput tallies with the terms and conditions of the credit proposal and approvals. =on comprehensive checks includestructure and amount of limits tenor maturity date interest rates penalty rates and evidence of such comprehensivechecks should !e kept as audit trails.

!6." Cre-i' &iles

redit files must !e maintained for each customer who has !een granted facilities.

"ther than for credit monitoring credit files may !e re&uired !y 5nternal and ,$ternal auditors as well as regulators.

+ccordingly the credit files should contain all the necessary information that may !e re&uired to assess that the creditprocessing approval follow ups have !een conducted with due diligence in line with !est practice and in line with theregulatory framework and to accurately demonstrate the evolution of the facilities.

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The credit files should !e neatly organi@ed crossinde$ed and divided into the following sections with relevant hardcopies of the mentioned documents kept in chronological order in each section6

1 credit application and evidence of approvals !y relevant authorities

8 opies of accepted facili ty offer letters

C latest financial information (!alance sheets profit and loss accounts management accounts)

9 Financial ratio spreads

; record and date of all credit reviews

> record of all guarantees and securities

G. record of terms and conditions of facili ty

H. evidence of securities validation function that should include legal validitye$istence valuation registration of charge and safekeeping

I 5nternal rating

10 all reports

11 Relevant correspondences

The removal of redit files from the premises is not permittedB

The ompany should also keep electronic copies of all nonreplacea!le documents

!8." Cus'o-y o& Seuri'y Dou4en's

The custody of security documents should !e under dual control.

+"." *n*2e4en' o& Pro9le4 *oun's

.*ad ?e!ts may occur as a conse&uence of lending.

ending officers must

(a) ensure accounts that re&uire active /risk management can !e identified at an early stage so that correctiveaction can !e taken to avoid losses to the ompany

(!) recognise the customers situation !efore it !ecomes irreversi!le and to ensure a timely transfer of theaccount to the recovery unit where there is e$pertise and resources to manage such accounts.

+".1 7ener*l 2ui-elines

ending "fficers must mandatorily ensure that prompt action is taken to review the financial conditions of companies when warning signs such as the following occur6

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1 ,$cesses in limitsB8 ?rawings against uncleared effectC "verdue principal and interest9 "verdue trade and other !ills; ?elays in receipt of financialsB> hange of auditor without !usiness reasonG *reaches of covenantsBH %tretching of creditorsI Trade creditors or other lenders reduce credit lines or re&uestAtake additional securityB10 #arket sector decline or sector !ecomes o!solete

Facilities must !e reviewed regularly and downgraded as soon as appropriate to ensurethere is no delay in referral to the Recovery unit.

+s soon as the warning signs are flagged ending "fficers should consider taking immediate action to control !othdrawings on accounts and the use of other facilities allowing transactions only on a case!ycase !asis or simply

withdraw or demand repayment of facilities. +dditionally they may consider o!taining control over goods etc. wherethese are pledged to the ompany.

2here the financial pro-ections of the !orrowers indicate that their financial position may improve with suita!leassistance from lenders the ompany should assess the following6

(a) the degree of cooperation that may !e e$pected from !orrowers to work out proposals(!) the e$tent to which other lenders are secured as an indication of the degree of cooperation that may !e

anticipated from them to work out solutions(c) whether the company has the a!ility to raise fresh capital or cash !y the disposal of surplus or noncore

assetsB(d) the e$tent to which the ompanys e$posure is secured whether it can !e improved and the likely

realisation value of security if the !orrowers were sued for recovery of the loan placed in administrationreceivership or li&uidation.

+1." Assess4en' o& Cre-i' i4%*ir4en' Proess

+1.1 IFRS ?Assessin2 Cre-i' I4%*ir4en'

redit 5mpairment losses shall !e assessed in terms of the relevant 5nternational Financial Reporting %tandards (5FR%)applica!le from time to time as well as guidelines from R*4. The following rates shall !e applica!le to current loansand portfolio at risk.

Rate of oan oss

Provisioning'ood loans

urrent loans 1E

Portfolio at Risk 1C0 ?+% ;E

C1>0 ?+% 80E

>1I0 ?+% ;0E

I1180 ?+% 100E

180 P


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+1.! De&ini'ions

arge redit for the purpose of credit impairment assessment will mean facilities greater than


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+dditional sources of evidence of impairment that should merit investigation andassessment include6

Funds o!tained under the loan agreement were not used for the purpose for which they were loanedB

The pro-ect financed !y the loan has !ecome nonvia!le e.g. a failing restaurantB

The !orrower is a!out to default and the lender advances it funds to meet its current payment o!ligationsB

The !orrower !elongs to a group of entities that has credits outstanding from theompany or other financial institutions and one or more mem!ers of thegroup have defaultedB

The !orrower is engaged in a large num!er of undertakings leading to over e$tension of its resources. 5t has!egun shifting support from one undertaking toanother which may lead to potential delin&uency of the loan under reviewB

5n case of an overdraft further elements to !e considered are the e$piry of theapproved overdraft limit and the customer e$ceeding the approved limit

fre&uentlyB

The underlying collateral which was heavily relied upon in granting the loan haslost value significantlyB or

There is a loss of confidence in the !orrowers integrity.

+1.+ Es'i4*'ion o& Reoer*9le V*lue

,stimated recovera!le value of loans shall !e determined individually. +ll credits designated for assessment ofimpairment shall !e assessed individually for estimation of recovera!le amounts.

+1.0 In-ii-u*lly Assesse- Cre-i's

The estimation of recovera!le amount of individually assessed credits shall !e carried out in the conte$t of !roadprinciples enunciated in relevant 5FR%. Future cash flows on credit shall !e !ased on relia!le evidence for determiningamounts recovera!le. The estimation process shall !e !ased on the following factors6

+ssessment of the financial condition of the !orrower and the group to which it!elongsB

+ssessment of the de!t service capacity of the !orrower (ade&uate generation ofcash flow) to discharge its contractual o!ligations on a continuing !asisB

evaluation of any uptodate !usiness plan of the !orrowerB

Regularity of the !orrowers past payment recordB

enders confidence in the integrity of the !orrowerB

5n case of a loan to a related party an evaluation of all factors impinging on thetimely recovery of the loan including seriousness of efforts made !y the company for the recoveryB

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5n case of a foreign !orrower an assessment of all practical aspects of achievingrecovery including the legal enforcea!ility of loan and related instrumentsB

,valuation of the continued via!ility of the pro-ect financed !y the loanB

urrent economic and other conditions including emerging trends affecting theindustry sector relevant to the !orrowerB

,valuation of country risk applica!le to the loan pro-ectB

ength of timeframe for achieving recoveryB longer the time period lesser is thecertainty of o!taining recoveryB

+ny downgrade of the !orrowers credit rating !y a reputa!le rating system oragencyB

Further default occurring in a restructured loanB

+ssessment of value of any personal guarantee of the !orrower or guarantee ofanother partyB

+ssessment of the net realisa!le value of the collateral for the loan.

5n assessing future cash flows emanating from an impaired loan it is not necessary thatseveral of the a!ove factors must !e present !efore it is -udged that the flows will !esu!stantially reduced or none$istent.

+ single factor such as vulnera!le financial condition of the !orrower may -ustify making an appropriate provision forthe loan.

+1.# $usiness Pl*n

+n important element in the calculation of the recovera!le amount of an impaired largecredit to a !usiness customer is the e$istence of its uptodate !usiness plan. Relianceplaced on the plan will depend on several factors including whether the plan

is prepared in a professional mannerB is sufficiently comprehensive to cover all essential elementsB uses realistic assumptionsB uses market and other pro-ections that are soundly !ased and reasona!leB envisages use of &ualified management resources for implementation of the planB and clearly outlines a realistic strategy for achieving the plans o!-ectives.

.

+1.# Re%*y4en' Pl*n o& * Person*l Lo*n

The repayment plan in respect of an impaired personal loan must have ade&uate attri!utes to demonstrate itssoundness. These will include6

the !orrowers analysis of the causes of loan impairment and specific changesenvisaged to make the loan performing againB

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delin&uencies of any previous credits of the ompany or any other ompany to the !orrower and ane$planation of why the circumstances surrounding those delin&uencies do not apply to the present creditB

Documents

Ratisson Finance Credit Policy