Self-Employed Term Loan Review 2021

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Questions and Answers

What is the maximum loan amount under the Self-Employed Term Loan product after the changes approved in December 2019?

  • GHS 250,000
  • GHS 300,000 (correct)
  • GHS 350,000
  • GHS 200,000

Which group was primarily targeted by the Self-Employed Term Loan product?

  • Self-employed individuals and Micro Enterprises (correct)
  • Corporate businesses
  • Only large enterprises
  • Non-profit organizations

What prompted the review of the Self-Employed Term Loan product parameters?

  • A decrease in loan applications
  • A regulatory requirement
  • Increased interest rates on existing loans
  • Market insights from the Sales team and customer feedback (correct)

What issue does the Self-Employed Term Loan product face despite changes made?

<p>Competition and rapidly changing customer needs (B)</p> Signup and view all the answers

What is one of the main goals of adjusting the key parameters of the Self-Employed Term Loan product?

<p>To grow the risk assets book and attract the target market (A)</p> Signup and view all the answers

What is the significance of gathering market information on competitor offerings for the Self-Employed Term Loan product?

<p>To ensure the product remains competitive and attractive (C)</p> Signup and view all the answers

How did the changes to the Self-Employed Term Loan product affect the bank's financials?

<p>They yielded some balance sheet and revenue growth (D)</p> Signup and view all the answers

Who is responsible for approving the proposals outlined for the Self-Employed Term Loan product adjustments?

<p>The Management Credit Committee (A)</p> Signup and view all the answers

What is the minimum number of deposits that must be monitored for traders?

<p>8 per month (B)</p> Signup and view all the answers

Which feature ensures a documented record of cash deposits collected?

<p>Audit trail of all cash deposits (A)</p> Signup and view all the answers

What must be issued to the client at the point of cash collection?

<p>Receipt (C)</p> Signup and view all the answers

What is a feature of the new cash collection platform?

<p>Instant cash deposit into client's account (D)</p> Signup and view all the answers

How will minimum deposit amounts be determined?

<p>Based on the customer's cash flow (A)</p> Signup and view all the answers

Which of the following is not a requirement listed for the cash collection process?

<p>Regular customer feedback (B)</p> Signup and view all the answers

What is the purpose of deploying the Mobile Cash Collection platform?

<p>To ensure proper monitoring of cash deposits (D)</p> Signup and view all the answers

Which aspect of account behavior is specifically highlighted in the new requirements?

<p>Monitoring of deposits (A)</p> Signup and view all the answers

What is the upfront processing fee percentage for each transaction?

<p>2.00% (C)</p> Signup and view all the answers

What is the minimum premium for stock insurance if the sum assured is less than GHS25,000?

<p>GHS 50.00 (B)</p> Signup and view all the answers

Which fee has a maximum cap of GHS 500?

<p>Monitoring Fees (D)</p> Signup and view all the answers

What is the percentage charged as penal charges?

<p>7% (C)</p> Signup and view all the answers

Who co-signs the list of stock sighted with the Relationship Officer (RO)?

<p>Business Sales and Service Manager (B)</p> Signup and view all the answers

What must be included in the application pack to verify the client's business information?

<p>Additional supporting documents (D)</p> Signup and view all the answers

What is the legal fees status according to the listed fees?

<p>To be determined by legal where applicable (B)</p> Signup and view all the answers

In the application process, who reviews the completeness of the credit application pack?

<p>Business Sales and Service Manager (C)</p> Signup and view all the answers

Which bank requires cash collateral?

<p>Fidelity Bank (B)</p> Signup and view all the answers

What is the maximum loan amount offered by ABSA?

<p>$500K (A)</p> Signup and view all the answers

Which bank has the longest maximum tenor?

<p>Fidelity Bank (B)</p> Signup and view all the answers

Which bank offers loans without the requirement for any collateral?

<p>Both GCB and Stanbic Bank (A)</p> Signup and view all the answers

What type of collateral is accepted by CBG?

<p>Credit life and stock insurance (B)</p> Signup and view all the answers

What is the minimum operational period required for cash collateral reduction for customers?

<p>12 months (A)</p> Signup and view all the answers

What collateral requirement applies to first-time borrowers according to the data?

<p>12 months collateral requirement (B)</p> Signup and view all the answers

Which bank has a loan assessment purely through handheld devices?

<p>GCB (C)</p> Signup and view all the answers

What is the maximum loan amount a single obligor can receive?

<p>GHS 300,000 (D)</p> Signup and view all the answers

Which repayment mode is preferred for loans?

<p>Monthly instalment payments (A)</p> Signup and view all the answers

What is the repayment tenor for unsecured loans between GHS 30,001 - 70K?

<p>6 - 12 months (C)</p> Signup and view all the answers

What type of security is required for a partially secured loan of GHS 70,001 - 150K?

<p>Cash &amp; stock (A)</p> Signup and view all the answers

For loans of GHS 200,001 - 300K, what is the minimum required cash collateral?

<p>50% of the facility amount (C)</p> Signup and view all the answers

Under what condition can a second time borrower be eligible for 18-month loans?

<p>If they are in good standing with existing loans (C)</p> Signup and view all the answers

What is the main responsibility of the Credit Documentation team in the loan processing procedure?

<p>Preparing Offer Letters for sign off (B)</p> Signup and view all the answers

What is the minimum collateral requirement for all collaterals provided?

<p>150% of the facility amount (A)</p> Signup and view all the answers

Which type of loan typically does not require any form of security?

<p>Unsecured loans up to GHS 30K (D)</p> Signup and view all the answers

What is the minimum time frame required for loan disbursement upon satisfactory fulfilment of conditions?

<p>Three days (B)</p> Signup and view all the answers

What type of loan has an interest rate margin of up to 14%?

<p>Unsecured loans only (A)</p> Signup and view all the answers

Who must sign the Offer letter and security document before the disbursement of a loan?

<p>The customer and their witness (B)</p> Signup and view all the answers

What is the repayment structure dependent on for some loans?

<p>Customer segment and cash flow patterns (B)</p> Signup and view all the answers

What triggers the initiation of recovery for processing facilities under this product?

<p>A total outstanding amount of three percent (3%) degenerates to non-performing (B)</p> Signup and view all the answers

What is included in the monthly monitoring reports generated by the product owners?

<p>Lessons and recommendations for future improvements (B)</p> Signup and view all the answers

What is the role of the Relationship Officer (RO) in the loan monitoring process?

<p>To ensure loan accounts remain in NORM category (A)</p> Signup and view all the answers

What focuses on the confirmation of borrower fulfillment of turnover covenants during the annual review?

<p>Product owners (C)</p> Signup and view all the answers

What is one of the methods used for tracking and reporting lending data?

<p>Fidelity’s existing systems (A)</p> Signup and view all the answers

Flashcards

Self-Employed Term Loan (SETL)

A loan product designed to provide funding for micro-enterprises and self-employed individuals.

Single Obligor Limit

The maximum loan amount that can be provided to a single borrower.

Previous Single Obligor Limit

GHS 200,000

New Single Obligor Limit

GHS 300,000

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Product Review

An evaluation of the Self-Employed Term Loan product, considering market trends and customer feedback.

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Management Credit Committee

The group responsible for approving changes to loan parameters.

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Market Insights

Information about competitors offering and customer needs.

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Security Requirements

Factors considered when assessing loan applications, such as collateral.

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RAC

Risk Acceptance Criteria - a set of conditions and rules used to determine whether a loan application should be approved based on the risk involved.

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Post-Disbursement Condition

A condition applied after a loan is disbursed to ensure the loan is managed safely and effectively.

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Loan Tenor

The duration of a loan, typically expressed in months.

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Mobile Cash Collection

A platform that allows for fast and efficient collection of loan repayments using mobile phones.

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Repayment Mode

The system for paying back a loan, including frequency and method.

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Cash Collateral

Cash provided as security for a loan.

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Minimum Deposit Amount

The smallest amount of money a borrower is required to deposit regularly, usually set based on their cash flow.

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Interest Rate

The percentage charged for borrowing money.

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Audit Trail

A record of all transactions related to a loan, including deposits and withdrawals.

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Unsecured Loan

Loan without collateral, relying on the borrower's creditworthiness.

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Offer Letter

A document given to a borrower outlining the terms and conditions of the loan.

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Cash Flow

The movement of cash in and out of a business or individual's finances.

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Partially Secured Loan

Loan partially secured by collateral, like cash or stock.

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Secured Loan

Loan fully secured by collateral like land or property.

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How does the use of a Mobile Cash Collection platform impact RAC?

It enhances RAC by providing real-time monitoring of deposits, generating audit trails, and improving efficiency in cash collection. This strengthens the lender's ability to assess and manage risk.

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Guarantor

A person or entity who agrees to repay a loan if the borrower defaults.

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Loan Security Requirements

Conditions for loan approval based on collateral and borrower type.

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Offer Letter Preparation

Credit Documentation creates the Offer Letter, which outlines the loan terms, for the Head of Self Employed & Micro Business and Head of Credit Administration to approve.

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Security Documentation

The Legal team prepares the necessary security documents, which outline collateral requirements and legal aspects of the loan.

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Customer and Witness Signing

Before disbursement, the customer and their witness must sign both the Offer Letter and security documents.

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Availment Ticket

Credit Documentation issues an Availment Ticket after vetting the loan application, indicating that the customer is eligible for the loan.

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Disbursement Process

The Credit Administration team manages the disbursement of the loan once the Availment Ticket is issued.

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Loan Monitoring

The Relationship Officer (RO) is responsible for monitoring the loan account throughout its cycle, ensuring it remains in good standing.

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Portfolio Monitoring Threshold

If 3% of the outstanding loan portfolio becomes non-performing, processing of new loans under this product is paused to focus on recovery efforts.

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Who approves the Self-Employed Term Loan?

The Personal Banking Credit department is responsible for approving Self-Employed Term Loan applications.

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What happens if the CVU finds issues?

If the Credit Verification Unit (CVU) finds issues with the application, it's sent back to the Relationship Officer (RO) to fix before the Personal Banking Credit can approve it.

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Self-Employed Term Loan Eligibility

To qualify for a Self-Employed Term Loan, a customer must meet specific eligibility criteria set by the bank.

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What is the purpose of the Decision Document?

The Decision Document (DD) is submitted to Credit Risk after a Self-Employed Term Loan is approved.

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What is the role of the BSSM?

The Business Support Service Manager (BSSM) reviews the completeness of the loan application and co-signs it with the Relationship Officer.

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What is the process after the RO collects the application?

Once the Relationship Officer (RO) collects a complete application pack, it's sent to Personal Banking for review and then to the Credit Verification Unit.

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Credit Life Insurance Cost

The cost of Credit Life Insurance is 1% of the total loan amount and is underwritten by Prudential life.

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What are Monitoring Fees?

Monitoring Fees are charged at 1% of the loan amount with a minimum of GHS 100 and a maximum of GHS 500.

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Loan Amount

The maximum amount of money a borrower can receive for a loan.

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Collateral

Assets like a car, land, or stock used as security for a loan.

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Credit Life & Stock Insurance

Insurance protecting the loan in case of death or disability of the borrower.

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Assessment

The process of evaluating a loan application based on the borrower's creditworthiness, collateral, and other factors.

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Loan Application

A formal request to borrow money from a bank or financial institution.

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Repeat Borrower

A customer who has used the loan product previously and is applying for a new loan.

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Study Notes

Self-Employed Term Loan Product Review

  • Product: Self-Employed Term Loan (SETL)
  • Objective: Provide loans to micro-enterprises and self-employed individuals for business needs.
  • Review Date: May 2021
  • Existing Parameters: Maximum loan amount of GHS 200,000 with various security requirements.
  • Key Change Parameters: Maximum loan amount increased to GHS 300,000 with various security requirements, and a post-disbursement condition with more stringent account behavior requirements.
  • Account Behavior Requirements: Minimum 8 deposits per month for traders, using a Mobile Cash Collection platform to ensure, instant cash deposit, audit trail of all cash deposits, and issuance of receipt to client.
  • Pricing:
    • Interest Rate: GRR + Risk Margin (10% - 14% p.a.) for unsecured facilities, and GRR + Risk Margin (up to 13% p.a.) for partially secured.
    • Interest rate determined by business and quoted in nominal terms by front line staff.
    • Monitoring Fees: GHS 100 minimum, 1% of loan amount maximum.
  • Target Market: Fully registered sole proprietors, individuals trading in retail/wholesale or service industry, and self-employed professionals.
  • Target Area: Nationwide.
  • Risk Acceptance Criteria (RAC): Two years of experience in the line of business, application must fall within the bank's target market, and a transactional account is required.
  • Documentation:
    • Facility request letter from the customer.
    • Duly completed application form.
    • Business operating permit
    • Environmental/Social Risk Management (ESRM) report.
    • Lien and right of set-off on cash and instruments.
    • Assignment of stock.
  • Post-Disbursement Conditions:
    • Loan purpose justification.
    • Ownership of shop/tenancy verification.
    • Minimum annual credit turnover requirements (GHS30,000 (or GHS50,000 for 1 year).
    • Assessment of the facility based on previously bank transactions.
    • Turnover trends (rising, fluctuating, flat).
  • Security/Support: Requires security based on the loan amount.
  • Single Obligor Limit: Maximum loan amount GHS 300,000.
  • Tenor: 36 months.
  • Repayment Mode: Preferred method is monthly installments to include principal and interests, structured based on customer segment and cashflow.
  • Guarantor Requirements: Positive credit history, business/residence details, bank statement/pay slips, and identity documents.

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