SHS FINANCING SRI LANKA EXPERINCE DOCUMENTATION

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

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

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

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

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

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

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

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.

Important Features in document completion Accuracy Completeness Properly witnessed Free of alterations or alterations properly authorised by initialing

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

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