This policy sets out the approach to be executed in its implementation and applies to all investment and lending activities of the Eswatini Association of Savings & Credit Cooperative Ltd (ESASCCO) to all member Savings & Credit Cooperatives (SACCOs) and other organisations where appropriate.
OBJECTIVES OF THE POLICY
- To act as a guide to ensure that in ensuring how ESASCCO implements this investment and lending facility.
- To increase transparency in the provision of money lending service to members so as to enhance cordial relationship between members and the Association.
- To facilitate the investment of excess funds to other institutions.
- To ensure the safety of funds invested and loaned out.
OBJECTIVES OF CFF
- Centralising the financial power among SACCOs for investment.
- Building Promoting and maintaining liquidity stability for both SACCOs and ESASCCO.
- To assist SACCOs meet their financial needs through lending
- To serve as an investment platform for SACCOs.
CAPITALIZATION OF CFF
- Start-up Capital
- The CFF dictates that an individual SACCO must invest E10, 000.00 as a capitalisation to the fund
- SACCOs are expected to save a minimum of E1, 000.00 per month.
- Liquidity reserves
- A SACCO will be encouraged to invest at least 5% of its general reserves with the CFF and interest rates will be offered depending on the performance of the fund
GOVERNANCE OF THE FUND
The Board of Directors of ESASCCO shall delegate the ESASCCO Finance Committee to govern the Fund.
DUTIES OF THE FINANCE COMMITTEE
- To consider and approve loans where appropriate to applicants as soon as possible.
- To consider and recommend investment of excess funds to the Board.
- The Committee shall ensure that all monies in this fund shall be used for the sole purpose outlined in this policy.
- The maximum limit for funds to be loaned to member SACCOs shall not at any one time exceed 75% of the total funds in Central Finance Facility.
- The remaining un-borrowed funds will be invested in Government guaranteed investments such as Central Bank Bonds, and in the Formal Financial system. A Board resolution will be required for that.
- The Finance Committee will recommend to the Board of Directors to invest funds from this Facility to organisations external to Eswatini duly in accordance with prevailing laws and provided safety of the funds and high returns are guaranteed.
TYPES OF LOANS
Loans may be granted for the following purposes and in the following order of priority:
- Liquidity Support
- Loans for re-lending to a society’s members
- Loans for Monthly payroll, and any other such related needs
- Institutional development of Societies
- Purchase of office equipment
- Long term loans to finance the acquisition of land and buildings as well as structural development subject or in compliance with PEARLS requirements.
- Any other loans
- The finance committee will be at liberty to consider other loans that of a need to the SACCO.
There shall be a loan application form designed by ESASCCO that has to be completed by all applicants and be accompanied by:
- Three Years Audited Financial Statements except for a new SACCO that has to provide previous year’s financial statements.
- Cash flow Statement.
- Latest trial balance.
- Six months Bank Statement.
- Resolution to borrow from the Board.
- Licence from FSRA.
- SACCO loan Policy.
- By Laws and/or Maximum Liability Certificate from the Commissioner.
- Project/business plan (in the case of Institutional Development loans).
- Security or surety provision will have to be provided as mentioned in Section.
ELIGIBILITY FOR LOANS
Loans will only be granted to ESASCCO members provided that the applicant meets all the other requirements as per the application form and also meet these following criteria:
- A SACCO must be in good standing with ESASCCO, i.e. paid annual subscriptions, shares and dues.
- A SACCO must in good standing CFF.
- Monthly savings for not less than 6 months.
- In the event a member does not meet the requirements as stipulated in the second and third point, the Executive Committee will have discretional powers.
The lending limit of the Central Finance Facility to a SACCO member will not exceed the amount stated in the Maximum Liability Certificate and lending limit will depend on the availability of funds.
- Liquidity support loans: maximum repayment period of twelve (12) months
- Productive loans to societies to finance direct production or other projects: maximum repayment period thirty-six (36) months.
- Institutional development loans: the terms to be established on a case basis but should not exceed five (5) years
INTEREST ON LOANS
- The annual interest rate calculated in terms of the payment plan shall be 1.15% per month on the outstanding balance.
- A borrower has a right to all information pertaining any principal terms
- The rate of interest for the loan and whether it may be varied over the period of the loan, the loan interest will be charged on the outstanding balance, and shall only vary when the customer has defaulted.
- A loan shall be deemed in default where loan or an instalment has not been paid on the date on which it becomes due.
- A penalty of 10% of the due instalment shall apply.
REFINANCING OF LOANS
Loan refinancing may be considered by the Finance Committee only if a member SACCO has paid 75% of the current running loan subject to the other requirements of loan application subject to the other loan application requirements.
The Finance Committee may accept buildings and other valuable assets as security for the loan provided all the presented assets are in the name of the SACCO and the SACCO Board is willing to legally bond the Asset. All costs related to this exercise shall be borne by the applicant SACCO. In the case of movable property, there have to be a test in lieu of that asset.