Loan Disbursement - Week 15: 28th September - 2nd October 2009

The week was a normal work week for MAKAZI BORA. It was a loan disbursement week (disbursements now take place every two weeks).  There was a lot of work involved in getting out the loans that were approved at the previous week’s credit committee meeting. Thursday was disbursement day, which meant heavy activity for Boaz and Irene at the MAKAZI BORA office. Credit officers were out in the field verifying loan use for home improvement loans that had been disbursed the previous month.

Boaz at the Mbagala Office

 

Loan disbursement is quite a process with an inherent challenge between trying to deliver reasonably quick service to the client after approval and having adequate internal controls. We are dealing with money, which can lead to all kinds of problems from fraud to mistakes that can erode the trust that is a foundation in a credit relationship. MAKAZI BORA loans are disbursed as cash checks written in the name of the client. MAKAZI BORA staff does not handle cash in disbursement or collection of loans. This is how the process works as soon as the loans are approved:

Friday: The credit committee meets and approves loans. Clients are contacted almost immediately to inform them of the status of their loan application and when to come to the office. Before the credit committee meeting takes place, clients have already negotiated loan terms, learned procedures and been advised of what they will need to do in the event that their loans are approved.

Theresia, Irene and Osnery during a Credit Committee Meeting

Monday: Loan agreements and repayment schedules are prepared and a letter of offer is prepared for the client that includes the terms of the loans and the specific amounts needed for an insurance payment (1% of the principal per annum) and a security deposit (8%) of the principal prior to disbursement. This is a formality, but keeps a clear and transparent record of the agreed upon terms. Clients make their payments into the bank and bring deposit slips as proof of payment on the day of signing loan agreements.

Tuesday: Clients arrive at the office to present their deposit slips for insurance and security deposit payments and review and sign their agreements. There is often a client or two who is not yet ready with the deposit or has travelled or is otherwise not available. Requisition forms are prepared by Irene (the Administrative Assistant) for each loan disbursement and approved by Boaz (Program Manager) and then sent from the Mbagala Branch Office to the National Office in Sinza (slightly over 30 kilometers away by road in another part of Dar es Salaam).

Wednesday: The check requisitions are reviewed by Osnery (accountant) and then signed and passed to me (Scott). I review the agreements and payment schedules against the approved applications and requisitions and then start signing. Two copies of each loan agreement are signed and initialed on each page and the requisition forms are signed. These are then passed on to Pamella (National Office Secretary) who is the custodian and writer of checks. She writes out all of the checks based on the requisitions and puts the check numbers into the requisition forms as a reference. The checks then come to me for signing. A check confirmation list is also prepared for the bank, indicating each check, the amount the client name and client identification number. The signed checks, check listing and files are then sent back to Mbagala.

Writing the Loan Disbursement Checks

Thursday: Boaz signs his portion of the checks first thing in the morning, Irene takes the check listing to the bank and then clients begin to arrive to receive their loan disbursements. As checks are handed over to the clients, they sign a check disbursement voucher that is returned to the head office as proof that the check was actually disbursed. Clients take their checks to the bank, present their MAKAZI BORA identity card that matches the client number indicated on the check and the check listing and they receive their loan in cash from the bank teller and then proceed to get started with their home improvement project.

That’s how everything is supposed to work. Aside from common delays from a client or two in coming in to sign their contracts, we also are still prone to make mistakes. Sometimes the wrong client number has been written on a cheque, creating a problem for the client at the bank. Other times a requisition has not arrived at the head office with the associated client file. This week, I signed everything for one client but somehow missed the actual check and sent an unsigned check back to Mbagala. This meant that the client arrived at the branch office, but could not receive the loan disbursement. We tried to rush over to the Mbagala branch office to solve the problem, but the first rain in many months rained locally exactly in between Sinza and Mbagala, creating a huge traffic jam and the inability to respond in a timely manner as soon as the problem was discovered. The client ended up coming back to receive the check on Friday, which was poor customer service our part.

Prevention is better than cure.

An unexpected rain caused traffic jams that prevented

 a quick reponse to a glitch in the loan disbursement process

 for one client on Thursday.

Small mistakes like a missed signature happen, but they represent an aggravation and cost to the client who has to spend additional time away from their income generating activities as well as bear the cost of coming to the office one more time than necessary. As gracious and understanding as the clients can be, we owe it to them to give them the best possible service and put in an extra review of the final documents to ensure that everything will be ready when they arrive for their loan disbursement. That loan disbursement represents a critical part of our core business processes as well as the next stage in client’s housing process. Despite hiccups like my missed signature on a check this week, our professionalism continues to improve in handling these critical transactions as we head into our second quarter of MAKAZI BORA operations. We are seeing progress and improvement, but must remain focused on service to our clients.