SHS FINANCING SRI LANKA EXPERINCE

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SHS FINANCINGSRI LANKA EXPERINCE

• DOCUMENTATION

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Why do we need documents ?

• Documents serves manifold purposes and documents
  are of different types
• In a loan or lease transaction an initial request
  from the prospective borrower is taken as the
  first step of negotiation.
• This basic document is called APPLICATION
• Then comes the supporting documents
• Third and final set of documents are the security
  documents and these documents are important as
  they may have to be used at a latter date when
  the relationship becomes sour and unsuccessful

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Important facts

• In micro finance we deal with people of poor
  education levels most of the time
• Therefore it is important to have simple
  documents which could be understanable by all
• For SHS financing in Sri Lanka is using a very
  simple set of documents all in one set combined
  together

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APPLICATION

• Details of the applicant/s - income ,expenditure,
  assets owned, liabilities pending, borrowings if
  any
• Guarantors statements - similar details as above
• They keep a special provision to get assistance
  from the suppliers employees as they often
  assist the applicants to prepare the documents

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Supporting documents

• Suppliers technical report is a half page
  document outlines the type of house, situation,
  required equipment
• Field officers credit evaluation report is the
  second supporting document
• The important feature in this context is that the
  applicants are unable to offer supporting
  documents to prove their income and the proof
  comes from the evaluation

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CREDIT APPROVAL

• Credit approval is also noted in the application
  itself to make the process more simpler
• SECURITY DOCUMENT IS A COMBINED DOCUMENT
• Agreement , Receipt , Promissory note,
• guarantee bond

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LEGAL REQUIREMENTS

• Documents obtained is in terms of legal
  requirements of Sri Lanka
• They leave option for MFI to institute one action
  or several actions if at all if we decides to go
  against the borrower or the guarantors
• UPTO DATE THEY HAVE NOT GONE TO COURTS AND THE
  RIGHTS ON THE AGREEMENT HAS NOT BEEN CHALLANGED
• They resort to settle all issues amicably
  keeping in mind that GOODWILL is more important
  

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Additional documents

• These are obtained as a proof of the transaction
• INVOICE MFI ownership to the equipments
• CAR - Customer acceptance receipt.
  Evidence to prove that the SHS is
  fixed at the borrowers house in good
  order

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Additional doc. Contd.--

• Road Map sketch
• Kept in every file to be used in future when a
  problem props up in the field
• This has been a very useful document in follow
  up action and also for appraisal level.

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Important Features in document completion

• Accuracy
• Completeness
• Properly witnessed
• Free of alterations or alterations properly
  authorised by initialing

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Storage of documents

• Properly stored
• Check list attached
• Kept in numerical order,
• in fire proof cabinets under lock and key
• Periodical inspections by the internal and
  external auditors
• Custody of documents Manager/ Asst. Manager

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Common Problems

• Lack of understanding of the legal requirements
  at the initial stages of the lending program.
• Strategies to overcome the weakness
• Employees has to be trained
• Responsibility levels has to be established
• Authority line to be clearly defined