Ratisson Finance Credit Policy

Ratisson Finance Credit Policy Version 1.
1 July 2015
RATISSON FINANCE (PVT) LTD

CREDIT POLICY
Version: 1.1 July/2015
TABLE OFCONTENTS
1.0
Purpose of the Policy...............................................................................4
2.0
Scope of Application................................................................................5
3.0
Ownership and Review of Credit Risk Policy........................................................5
4.0
Mandatory Reading of this policy...................................................................5
5.0
Takeover............................................................................................5
6.0
Departmental Procedures...........................................................................5
7.0
Mandatory Compliance..............................................................................5
8.0
Governing Legislation and Guidelines..............................................................6
9.0
Definition of Credit risk.............................................................................6
10.
General Principles for mitigating Credit risk.........................................................6
11.0
Oversight of Credit..................................................................................7
11.1
Board of Directors................................................................................7
11.2
Credit Committee (CC)...........................................................................7
11.3
Loans and Investment Committee (LIC)...........................................................8
12.0
Country Risk........................................................................................9
13.0
Industry Profiles....................................................................................9
14.0
Prohibited Lending..................................................................................9
15.0
High Risk exposures, Sectors.....................................................................10
16.0
Standard of ethics.................................................................................11
17.0
Flow of Credit Recommendation and Approvals...................................................11
17.1
Credit Approval Limits.........................................................................11
17.2
Special notes to the limits......................................................................11
Page 1 of 44
Ratisson Finance Credit Policy Version 1.1 July 2015

18.0
Types of Borrowers...............................................................................12
18.1
Individuals.....................................................................................12
18.1.1
Minors....................................................................................12
18.1.2
Individuals................................................................................13
18.1.3
Joint Accounts............................................................................13
18.1.4
Spouses and other vulnerable persons....................................................13
18.2
Sole Proprietor.................................................................................13
18.3
Partnerships....................................................................................13
18.4
Societies, Clubs, and Associations.............................................................14
18.4.1
Schools...................................................................................14
18.4.2
Churches..................................................................................14
18.5
Limited Company...............................................................................14
18.6
Government Departments, Central Companys, Ministries......................................15
18.7
Quasi-government institutions..................................................................15
18.8
Consortiums & Joint Ventures..................................................................15
19.0
Insiders...........................................................................................15
20.0
Types of facilities.................................................................................16
20.1
Salary Based Loans............................................................................16
20.2
Order Financing................................................................................16
20.3
Invoice Discounting............................................................................16
20.4
Group Loan.....................................................................................16
20.5
Micro-Housing Loans...........................................................................16
21.0
Security...........................................................................................16
21.1
Tangible and Intangible Security................................................................17
21.2
Types of Security...............................................................................17
21.2.1
Deposits and Marginal Deposits...........................................................17

Page 2 of 44

21.2.2
Deposits held by institutions in other jurisdictions........................................17
21.2.3
Stocks, Shares............................................................................17
21.2.4
Charges & Zimbabwe legal framework.....................................................18
21.2.5
Fixed Charges & Mortgages (Tangible Security)...........................................18
21.2.6
Notarial General covering Bonds (NGCB) (Intangible Security)............................19
21.2.7
Company Guarantees (Tangible if from Acceptable Companies)...........................19
21.2.8
Stand-by Letters of Credit (Tangible if from Acceptable Companies).......................20
21.2.9
Guarantees (Intangible)...................................................................20
21.2.10 Life Assurance Policies......................................................................21

21.2.11 Insurance....................................................................................21
22.0
Estimated Conservative Asset Value..............................................................22
23.0
Security Documentation...........................................................................22
24.0
Credit Risk appetite versus Economic and Internal factors........................................23
25.0
Credit Processing and Appraisal..................................................................23
25.1
General Guidelines on the Credit Processing and Appraisal....................................23
25.2
Accountability for Credit recommendations and approvals.....................................24
25.3
Declined Facilities..............................................................................24
25.4
Prior checks....................................................................................24
25.5
Format of Corporate Credit Proposals..........................................................24
25.6
Lending to SMEs...............................................................................27
25.7
Personal Lending Proposals....................................................................28
25.8
Other Non Score based Personal lending......................................................31
26.0
Terms of Facility Offer Letters.....................................................................31
27.0
Checking of inputs on the Computer system......................................................34
28.0
Credit files........................................................................................34
29.0
Custody of Security Documents...................................................................35

Page 3 of 44

30.0
30.1
31.0
Management of Problem accounts................................................................35

General guidelines.............................................................................35
Assessment of Credit impairment Process........................................................36
31.1
IFRS -Assessing Credit Impairment.............................................................36
31.2
Definitions......................................................................................36
31.2
Objective evidence.............................................................................37
31.3
Estimation of Recoverable Value................................................................38
31.4
Individually Assessed Credits..................................................................38
31.5
Business Plan..................................................................................39
31.5
Repayment Plan of a Personal Loan............................................................39
31.6
Collateral.......................................................................................39
32.0
Monitoring compliance with In Duplum Rule....................................................40
33.0
Withdrawal of Facilities...........................................................................40
33.2
Letters of Demand for Repayment..............................................................42
33.3
Combination of withdrawal of facilities and demand letter......................................43
34.0
Acquisition of immovable property in lieu of debt.................................................43
35.0
Preferential Creditors.............................................................................43
36.0
Provisions........................................................................................43
37.0
Restructure of repayment schedule and other terms..............................................43
38.0
Authority to Reduce or Release Provisions for Debts..............................................43
39.0
Write Offs per RBZ Companying Regulations, 2000- Statutory Instrument 205 of 2000.............44
39.1
Write Offs and Income Tax......................................................................44
Page 4 of 44
1.0
Purpose of the Policy

The purpose of this Policy is to provide a general framework for managing credit risk.
2.0
Scope of Application
This mandatory policy document applies to Ratisson Finance (Private) Limited.
3.0
Ownership and Review of Credit Risk Policy

Responsibility for reviewing this policy rests with Operations Manager of Ratisson Finance (Pvt) Ltd.
The Operations Manager will review this policy at least annually or earlier depending upon changes in the internal and
external environment. Such reviews and requests for amendments will then be submitted to the General Manager.
These will then be discussed and referred to the Credit Committee (CC), and if endorsed by them recommended to the
Board for final approval.
4.0
Mandatory Reading of this policy

All Executives and staff who are involved in lending should read this Policy at the time of taking over a new job which is
credit-related and at least yearly thereafter.
This policy should be read in conjunction with the Ratisson Finance (Pvt) Ltd Lending Guidelines which will be issued
from time to time depending upon internal and external environment and designed to acquaint lending officers with the
companys appetite for credit risk.
Whenever there is a conflict between the Lending Guidelines and the Credit Policy and Procedures Manual, the latter
will prevail.
Appropriate evidence of reading should be maintained either in the form of flying sheets attached to the hard copy of
this policy or in electronic format such as email confirmation.
5.0
Takeover
Any incoming Operations Manager should submit a Takeover Certificate upon assuming responsibility over this policy
and manual.
6.0
Departmental Procedures
Head of Credit Risk Management and Head of Credit Administration are responsible for maintenance of appropriate
detailed procedures for the department. Such procedures must be in line with the Credit Policy and other general
operational policies and designed to permit any appropriate incoming staff to promptly step into the shoes of the
previous job holder with minimum disruption to the operations.
Page 5 of 44

7.0
Mandatory Compliance
All Companys staff shall mandatorily comply with the
(a)
(b)
(c)
(d)
Letter and spirit of the laws of the Republic of Zimbabwe

Companys Credit Risk Policy, as amended from time to time and approved by the Board
Lending guidelines, as amended from time to time and approved by the Board
Internal departmental procedures as approved by Management
The Compliance function should ensure through appropriate monitoring and checks that all lending are strictly in line
with the legal and regulatory framework.
8.0
Governing Legislation and Guidelines

The following main Acts and guidelines, as amended from time to time, define the parameters for the credit business in
Zimbabwe:
The Banking Act [Chapter 24:20]
Banking Regulations (SI 205 of 2000)
The Money Lenders and Rates of Interest Act [Chapter 14:14]
Memorandum of Understanding between RBZ and Bankers Association of Zimbabwe
RBZ Guidelines No. 1 of 2006 on Risk Management
9.0
Definition of Credit risk

Credit risk means the risk of credit loss that results from the failure of counterparty to honour the counterpartys credit
obligation to the financial institution, either through a direct loan, or any other credit product or in relation to a
contingent risk (e.g. Guarantee or other contract).
10.
General Principles for mitigating Credit risk

The Company must:
Develop a soundly based credit risk management policy and parallel lending guidelines, which deal with, among other
things:
-
the extent to which the financial institution should assume credit risk, taking into account the capital base of
the institution, a prudential assessment of the institutions ability to absorb losses, the financial health of its
existing credit portfolio, the diversification of the portfolio, and the institutions business plan.
the targeted portfolio concentration limits in terms of counterparties, industry sectors, geographic regions,
foreign country or class of countries, and classes of security.
the areas of credit in which the institution should engage or restrict itself from engaging.
clearly documented delegation of credit approval authority of management personnel and committees , taking
into account the type and size of credit, the types of risks to be assessed, and the experience and
competence of individuals.
consistency and tie in with the institutions business plan and other asset/liability management
considerations.
Page 6 of 44

ensure that the approved credit risk management policy is implemented in its true spirit, using strictly and exclusively
prudential credit appraisal criteria and considerations and not influenced by any extraneous factors so as to:
-
ensure that the credit approval process is not unduly influenced by market share growth targets.
establish and utilize effectively a system to monitor and control the nature, composition, and quality of the
credit portfolio and to ensure that the portfolio is conservatively valued.
ensure implementation of a credit management information system that
tracks the evolving circumstances of a credit, repayments regularity, borrowers financial condition, continuing
value of the security, and other attributes of the credit.
tracks credits by portfolio characteristics, including single and associated groups of borrowers, types of credit
facilities, industry sectors and geographical regions.
ensure implementation of an appropriate management reporting system covering the content, format and
frequency of information to management concerning the institutions credit risk position, to permit sound and
prudent analysis and control of existing and potential credit risk exposures.
install adequate internal controls, covering the entire credit spectrum, including segregation of activities between
the persons responsible for analysis, authorization, and execution of credit transactions and those responsible for
their monitoring and in the case of impaired credits, their follow-up, and the establishment of an appropriate
internal rating system for individual credits.
ensure implementation of an effective internal audit function to review and assess the credit risk management
activities, which will provide assurance to management and the board that credit activities are in compliance with
the credit risk management policy and with local laws and regulatory guidelines;
11.0 Oversight of Credit

11.1
Board of Directors
The Board of Directors is ultimately responsible for oversight of credit quality and operations and providing overall
strategic direction to the credit granting units through approving and reviewing the Credit Policy and Procedures
Manual and the Lending Guidelines.
11.2
Credit Committee (CC)

The Credit Committee shall be responsible for reviewing the quality of the Ratisson Finance (Pvt) Ltd loan portfolio,
including the Ratisson Finance (Pvt) Ltd book on a quarterly basis to achieve the following objectives:
1. To ensure conformity of the loan portfolio to the credit policies.
2. To keep the Board adequately informed regarding portfolio risk.
3. To properly identify and classify problem assets and where necessary, place them in their proper risk
grading with the consequent actions.
4. To ensure the appropriate provisions for potential losses are made to the provision for loan losses account.
5. To ensure that write offs of identified losses are made in a timely manner.
The CC shall always be composed of a majority of independent directors who do not participate in the Lending
Committees. It shall consist of at least three members and shall be chaired by an independent non-executive
director.
The Credit Committee shall be guided by the under mentioned RBZ guidelines while fulfilling its responsibilities:
Page 7 of 44

.
(1)
The company shall review the quality of its loan portfolio not
less frequently than each quarter, with a view to achieving the following
objectives
(a)
to ensure the conformity of the loan portfolio and lending function to a

sound lending policy documented, approved and adopted by the board; and
to keep executive officers and the board adequately informed regarding
portfolio risk; and
(b)
(c)
to properly identify and classify problem credits and, as necessary, place

them on a non-accrual basis in accordance with this Part; and
(d)
to ensure that appropriate provisions for potential losses are made to the
provision for loan losses account so as to maintain the account at an adequate level at all times;
and
(e)
to ensure that write-offs of identified losses are made in a timely manner.
(2)
Loan reviews shall be conducted by a committee which is independent of any person or committee
responsible for sanctioning credit, and shall consist of at least three persons, including a member
of the board without executive officer responsibilities.
(3)
Reports of such loan reviews shall be made directly and timeously to the board of the company
and provide sufficient information to enable the board to require lenders to correct significant
problems within a specified time frame.
(4)
The company shall maintain sufficient records of every loan review, of evaluations of individual
loans and advances, and of the entries made to its provision for loan losses account, and shall
make these available to an inspector on request.
The Board Credit Committee will be responsible for Ratisson Finances credit policies and their proper application. CC
may delegate part of its responsibilities to the LIC and the companys management but will also directly assess
proposals in excess of the LIC limit. Accordingly CC shall be responsible for the applicable limits and proper application
of the related credit policies by the Ratisson Finance management and LIC.
The CC will be composed of 100% non-executive directors and shall consist of no less than three members.
In line with RBZ guidelines, the Chairman of the CC shall be an Independent non-executive director.
Meetings shall be held by notice on an ad hoc basis and quarterly. The Committee may approve proposals by round
robin during the quarter. Such proposals will be subject to ratification at the quarterly CC meetings. Where proposals
are approved by round robin, a majority of votes for a proposal shall lead to approval. The Chairman shall have a
casting vote.
For quarterly meetings a quorum of the meeting shall be the presence of at least three non-executive directors. A
proposal will be considered to be approved if the majority of members approve with the Chairman having a casting
vote in the event of a tie. The normal rules pertaining to meetings of a board of directors of a company shall apply. CC
shall review Loans and Investments Committee (LIC) decisions, even within LICs limits, and may override such
decisions.
11.3
Loans and Investment Committee (LIC)

LICs main responsibility will be the approval of Ratisson Finance credit facilities within the range set out by this policy;
the companys lending guidelines as revised from time to time; and the parameters set out by RBZ. LIC shall have the
Page 8 of 44

additional responsibilities of reviewing any facilities approved by officers of Ratisson Finance under their respective
delegated authority and Ratisson Finances global credit exposure in line with these policies and ensuring that the
Ratisson Finance credit book operates within general prudential parameters.
CC will approve the nomination of members of LIC.
Membership to LIC should always be based on personal expertise and experience and will not be related to job
positions. This implies that if for example a person has been appointed by CC on LIC and retires from that committee or
resigns from the company, his successor in the job position he was occupying, may not be automatically appointed as a
member of LIC. Additionally, to ensure objectivity the LIC should as far as possible be composed of a majority of
members who are independent from the Credit proposal originating process and who do not have sales\commercial
targets (e.g. profit, deposits, number of customers, increase in assets, liabilities) as part of their annual key
performance indicators; Where, due to the companys inherent organizational structure, this may not be possible to be
fully achieved, the membership of LIC should be carefully balanced to preserve the independence of decision making.
Compliance and Recoveries Officer will be in attendance at LIC with no voting right.
LIC may invite other members to be in attendance (but with no voting rights) based on experience and specialized
expertise value that they may add to the Committee.
A quorum of the meeting shall consist of any three members of whom one (a) shall be independent from the Credit
proposal originating process and (b) does not have sales\commercial targets mentioned above.
Decisions shall be by a majority vote of members present at a duly constituted meeting. Each member shall have one
vote and the normal rules for meetings of a Board of Directors of a company shall apply.
12.0 Country Risk
Country risk arises where the Company has cross-border exposures or investments e.g. if the company holds an
investment in Malawi. Country risk should be subject to at least annual reviews or earlier reviews if circumstances
warrant it .Such an analysis would include factors like the economic, legal and regulatory, political, fiscal and social
environment.
The assistance of external specialists may be sought by General Manager or the Board to draw such risk profiles.
13.0 Industry Profiles
The Company should have industry profiles in respect of all industries where they have significant exposures. Such
profiles must be reviewed and updated at least annually or earlier if market conditions change.
The assistance of external specialists may be sought by the General Manager or the Board to draw such risk profiles.
14.0 Prohibited Lending
The Company will not consider facilities for the following categories:
1.
Organisations or persons which have been declared insolvent, specified or suspended from conducting business
by the Zimbabwe Government or the courts of Zimbabwe.
2.
Production or activities involving forced labour or child labour as defined by the International Labour Organisation
(ILO).
Page 9 of 44

3.
Trade in wildlife or wildlife products banned by the Convention on International Trade in Endangered Species
(CITES).
4.
Cross border trade in waste and waste products unless compliant to Basel Convention and the underlying
regulations.
5.
Drift net fishing in the marine environment using nets in excess of 2.5km in length.
6.
Production, use of or trade in those pharmaceuticals, pesticides/ herbicides, chemicals, ozone depleting
substances and other hazardous substances subject to international phase-outs or bans.
7.
Destruction1 of Critical Habitat2.
8.
Enterprises directly engaged in military activities or the manufacture of weapons of mass destruction. However,
this provision shall not prevent Ratisson Finance from investing in enterprises operating as private security
and/or investigative firms.
9.
Organizations where the investment or practices of the organizations are deemed to be environmentally
unsound, unless Ratisson Finance lending is aimed at alleviating or correcting such environmentally unsound
practices.
10.
Businesses involved in pornography or prostitution.
11.
Gambling excluding institutions like hotels where gambling represents a very small proportion of the activity.
12
Production and distribution of racist media.
13 Production or trade in any product or activity deemed illegal under host country laws or regulations or international
conventions and agreements.
15.0 High Risk exposures, Sectors

There are a number of sectors which are complex in nature, have high operational risks, are volatile, or very
competitive. As such their inherent risks may require specialized skills to analyse. Examples are:
o
Start-ups or Greenfields
Property Development & Real Estate
Contract and Project Finance
Destruction means the (1) elimination or severe diminution of the integrity of a habitat caused by a
major, long term change in land or water use or (2) modification of a habitat in such a way that the habitats
ability to maintain its role is lost
2
Critical habitat is a subset of both natural and modified habitat that deserves particular attention. Critical
habitat includes areas with high biodiversity value that meet the criteria of World Conservation Union
(IUCN) classification, including habitat required for the survival of critically endangered or endangered
species as defined by the IUCN Red List of Threatened Species or as defined in any national legislation;
areas having special significance for endemic or restricted-range species; sites that are critical for the
survival of migratory species; areas supporting globally significant concentrations or numbers of
individuals of congregatory species; areas with unique assemblages of species or which are associated with
key evolutionary processes or provide key ecosystem services; and areas having biodiversity of significant
social, economic or cultural importance to local communities.
Page 10 of 44
Aviation
Shipping
Mining
Manufacturing
Textiles
Telecommunications
16.0 Standard of ethics

Operation Manager, Branch Managers, and lending officers involved in credit recommendations and approval are
expected to:
-
Adhere to the highest standard of ethics and integrity
Put the interests of the Company above individual interests.
17.0 Flow of Credit Recommendation and Approvals

All credit proposals should follow the following stages:
17.1
Origination and recommendation by respective Loan Officer/Branch Manager
Recommendation by Compliance and Recoveries Officer as the case may be.
Credit assessment and recommendation by Operations Manager.
Facilities in excess of $10,000 and insider loans to be sent to the General Manager for recommendation
Proposals are then to be escalated to BCC, LIC, CC or the Board depending upon the limits explained under
section 16.1
Credit Approval Limits

The following approval limits shall apply for all existing and future products that have an inherent credit risk:
Discretionary Lending Limits
Ratisson Finance Board
Board Credit Committee (CC)
Loans and Investment Committee (LIC)
No formal limit but bound by the RBZ guidelines See

Section 28
25% of the Shareholders Capital
US$25,000 (see Special notes)
General Manager
Operations Manager
Accountant
Branch Credit Committee
Branch Manager
Loans Officer
$5,000
$3000
$3000
$2000
$1000
$500
Page 11 of 44
17.2
Special notes to the limits

1
It is expected that most credit proposals will fall within the parameters set by this Credit Policy and the
Lending Guidelines. Where this is not the case, the proposal should be highlighted as Specialized Lending
and processed in the normal way to Credit Department. However, normal lending limits will be suspended in
such cases and all approvals will be given only by the Credit Approvals Committee (CC) or the Board.
Staff loans will fall outside the purview of these limits and will be subject to the guidelines set by REMCO.
Loans to staff (other than those falling under staff loans as approved by REMCO) including those related to
parallel business, social or any other activities as permitted under the terms and conditions of employment,
will be approved by LIC or CC depending upon the amounts. The relevant approving authority should
however group the staff loans granted under REMCO authority together with the other loans mentioned in
this
paragraph
for
the
purpose
of
assessing
authority
to
approve.
No staff member may guarantee any of the companys customers but if exceptional circumstances warrant
such a guarantee, the latter will have to be supported by appropriate justifications and approved by the
General Manager. Such guarantees received from a staff member must be grouped with the staffs loans
granted under REMCO authority to determine the maximum exposure allowable to the staff member and also
which
appropriate
authority/committee
may
approve
the
facility.
The following will additionally not fall under the limits of the LIC and may be approved by CC or the full Board:
1
Facilities to related parties or insiders (except for staff loans as described above)
Facilities referred by insiders whether in writing or verbally*
Any manager or lending officer who becomes aware of a referral by an insider, whether this referral
is made verbally or in writing, directly or indirectly to them, shall mandatorily advise General
Manager and Compliance and Recoveries Officer in writing. The General Manager and/or
Compliance and Recoveries Officer as the case may be shall inform the relevant approving
authority of such referrals and Operations Manager shall highlight such referrals in the relevant
credit proposal.
Facilities which are excess of concentration limits
Facilities in excess of USD10,000 without tangible security
Facilities which are priced below the minimum pricing fixed by ALCO for lending
Facilities categorized as High Risk Exposures
The Operations Manager or any similar job incumbent has a duty to ensure that accounts are appropriately
graded and provisioned in line with the risk profile and may submit overriding recommendations to the
appropriate approval authority.
Any re-grading or upgrading of facilities at grade 6 (under the SRS scale) and below requires Credit
Committee endorsement. This would also apply to provisioning and the realisation of interest in suspense to
profit.
Page 12 of 44
*Facilities mean new, amended or renewed
18.0 Types of Borrowers

18.1
18.1.1
Individuals
Minors
Any person below the age of eighteen (18) will be regarded as minors.
The contractual capacity of minors is limited and security given by them may not be binding.
No credit cards or any other type of facility should be granted to minors.
18.1.2
Individuals
Individuals have unlimited liability.
18.1.3
Joint Accounts
Appropriate account mandate forms must be in place to authorize the granting of facilities, with or without security, on
the request of sole or joint parties.
The liability of joint account holders for facilities must be joint and several.
18.1.4
Spouses and other vulnerable persons

Spouses or other vulnerable persons e.g. an elderly person may be subject to undue influence by third parties.
To ensure such a transaction is not invalidated at a later date for reason of "undue influence" lending officers or
Lending Officers should clearly recommend that any such person be asked to obtain independent legal advice before
executing any security documentation.
Where independent legal advice is recommended but this is declined, a record of this should be kept with relevant
security documents.
18.2
Sole Proprietor
The borrowing powers of sole proprietors are the same as those of individuals.
Before granting facilities, checks must be made on the trading licences.
To avoid confusion as to the nature of the business, account of such sole traders must not be in trade names; at the
most, accounts must be in this format Mr. John trading as xxxx
18.3
Partnerships
Page 13 of 44

Lending Officers must examine partnership agreements to ascertain the borrowing powers of the partnership and how
they may be exercised.
Account opening documentation should include an appropriate mandate designed to specify authority to operate
accounts or to obtain Companying facilities; and to incorporate joint and several guarantees of partners for all
Companying facilities.
Unless provision is made to the contrary in mandates, any security given must be signed and executed by all the
partners.
The expiry date (if any), of partnerships must be monitored and any facilities repaid, and contingent liabilities
paid/ceased before the expiry date.
When there is a change of partners, fresh documentation must be taken which must be signed by all the new partners.
18.4
Societies, Clubs, and Associations

Such categories of bodies may be either incorporated or unincorporated.
The rules of incorporated bodies must be obtained to determine the powers of their management, general committees
and members, and the names in which assets are registered.
Account opening and acceptance of facilities and granting of security must comply with these rules.
Unincorporated bodies may not be legal entities, and thus facilities should not be granted in these names.
18.4.1
Schools
School Development Associations - SDAs are empowered by the Education Act Chapter 25:04.
In these cases, the constitution of the SDA or Trust and, registration certificates, mandate to pass resolutions, relevant
resolutions to borrow should be scrutinised and obtained. It is also important to ensure that the meetings that approved
the resolutions are properly constituted.
18.4.2
Churches
Churches are informal bodies. Each church is governed by its own constitution. The Company needs to scrutinize the
constitution, the appointment of committee members, signing and borrowing powers to identify who can bind the
church.
Lending officers are strongly advised to have individual guarantees from senior church members who have influence
(spiritual or otherwise) as backing of any lending.
18.5
Limited Company
A copy of the Memorandum and Articles of Association (or equivalent documents) of a limited company must be
obtained;
Prior to lending, checks must be initially done on the objectives of a company; the borrowing powers; the authority and
capacity of directors to borrow on behalf of their company; the types of transactions allowed and those not allowed.
Detail checks should be conducted as follows:
Page 14 of 44

Establish the
1
"Capacity" i.e. if the companies have the power to enter into transactions for which a facility is sought or if the
transaction is valid or ultra vires" or invalid. In that respect the Memorandum of Associations objects should
contain a clear mandate to enter into the transaction.
In case of doubt the Company should insist upon an Extraordinary General Meeting of the Company to pass
a Special Resolution to alter the objects.
"Authority" i.e. if the directors have authority to bind the company under its Articles of Association. The
Articles should give general authority to the directors to manage the business of the company and should not
be restricted by limits.
A transaction which is outside the authority of the directors but within the capacity of the Company may be
void but can be ratified by shareholders in a General Meeting.
whether there could be breach of duty or absence of commercial benefit

This may happen if the directors do not believe that the transaction is in the
commercial interest of the Company.
A proper board resolution is required to accept facilities or grant security. Board resolutions must be scrutinized to
identify any exclusion.
Where there are facilities granted to a company and secured by another group company,
these facilities must be granted to the asset-owning company or to its subsidiary under the parent's guarantee.
Lending officers should take cognizance that within a group of companies, each company is a separate legal entity and
acceptance of facilities or granting of security must be authorized by the individual company borrowing and not by the
holding company unless circumstances warrant it e.g. in case of guarantees being specifically granted by the holding
company.
18.6
Government Departments, Central Companys, Ministries

These would normally be borrowers whose borrowings are guaranteed by the government.
However, the officials who have the authority and capacity to bind the Government must be ascertained.
18.7
Quasi-government institutions
These would be normally state-owned corporations and include municipalities and parastatals.
The legal instrument which has led to their formation must be scrutinized and the officials who have the authority and
capacity to bind these corporations must be ascertained
18.8
Consortiums & Joint Ventures

Normally, the difference between a joint venture and a consortium is a question of the number of the parties involved.
Page 15 of 44

Management should have a copy of the shareholders agreement or joint venture agreement and from the start
establish the legal implications relative to the documentation governing such entities including who has the right, power
and authority to bind a joint venture.
When granting facilities against a guarantee from a joint venture, the guarantee should be executed on a joint and
several basis.
19.0 Insiders
The company shall not grant loans to insiders and related interests except where such credit is granted as part of the
employees conditions of service and is available to other employees. Individuals and companies may, however,
access loans from other Companying institutions where they are not classified as insiders or related parties.
20.0 Types of facilities

20.1
Salary Based Loans
Salary Based loan is a small, short-term, loan secured against your salary. There is no collateral security requirement. However,
your employer should sign a Payroll Deduction Agreement (PDA) or Direct Debit Agreement (DDA) with us. The loan amount
depends on the net salary. Thus the more one earn the higher the loan amount.
20.2
Order Financing
It is a short term loan facility that allows you to finance an order issued by a corporate when your company does not have
enough funds to meet the cost of the order. All we require is the original order and terms of the confirmed order for Ratisson
Finance to put the facility in place
20.3
Invoice Discounting
Invoice Discounting is a short term loan used to improve a companys working capital and cash flow position. This
facility allows a business to draw money against its sales invoices before the customer actually pays
Benefits
Efficient use of working capital
The Business improves its cash flow and working capital position
Improved Liquidity enables the company to negotiate better prices with its suppliers
Helps the business to grow and secure market share.
20.4
Group Loan
These are loans obtained by a minimum of four (4) up to a maximum of ten (10) individuals who are in the same
business. The members in the group co-guarantee each other in solidarity and hence no security in terms of assets is
required.
20.5
Micro-Housing Loans
These are loans issued for the purpose of purchasing a house, or improving your home (renovations). The property
acquired secures the loan.
21.0 Security
Page 16 of 44

Where security is taken, the following aspects must be ascertained and followed: (a)
the legal procedures and documentation for perfecting the security arrangement to be in strict compliance
with local legal requirements.
(b)
the security providers (the borrower or Guarantor) are acting within their capacity
to provide the security
(c)
the value of the security, which must be appraised and updated on a regular basis, or when circumstances
warrant. Professional advice must be sought when appropriate
(d)
the enforceability of the security should forced repayment become necessary
(e)
where security is subject to insurance, the security must be insured for appropriate value against appropriate
risks; and that the Companys interests are noted and acknowledged by the insurer.
Under no circumstances are facilities to be drawn down prior to completion of all security
arrangements unless approval for drawdown has first been obtained from the authority who approved the facility.
21.1
Tangible and Intangible Security

Category A
Category A Security comprises tangible security of an immovable nature that (a) has a realisable value that can be
valued (b) can be disposed without the consent of the original owner of this security and provided that this security
does not have any flaw and is perfected.
Examples; Cash, Immovable property, Company guarantee and stand by letter of Credit from acceptable financial
institutions, Government Guarantee.
It is recognized that despite the fact that the Zimbabwe regulatory framework provides for the Courts consent to
foreclose upon tangible security like immovable assets this may be still be considered as Category A.
Category A security would normally be perfected through e.g. mortgage bonds, fixed charges.
Category B
Category B Security comprise intangible security that can be sold or replaced in the normal course of business or
moved away without the knowledge of the Company. These would include e.g. vehicles, plant & equipment, furniture
and fittings, stock, receivables.
Category B security would normally be perfected through e.g. floating charges, notarial general covering bond.
21.2
21.2.1
Types of Security
Deposits and Marginal Deposits
Such security should be in the same currency as the borrowing.
If in other currencies, the amounts of advances made against deposits must take account of the interest differential and
any exchange risk exposure. Where the latter will arise it may be prudent for customers to enter into forward exchange
contracts.
Page 17 of 44

21.2.2
Deposits held by institutions in other jurisdictions

The classification of security as either tangible or intangible will need to take account of the ability to freely remit the
sale proceeds.
21.2.3
Stocks, Shares
When granting facilities to be secured by listed stocks and shares, lending officers should carefully evaluate the
following:
-
whether borrowers have authority to give securities;

whether securities should be classified as tangible or intangible;
whether standard margins are appropriate.
quoted on a reputable exchange;
readily marketable and actively traded;
fully paid.
Where stocks, shares, securities and convertible bonds are provided as security which does not conform to either the
criteria listed above, the securities should be classified as intangible.
An adequate margin should be taken depending on
-
the type of security

exchange rate risk, if any;
interest rate risk, if any;
current market performance of securities;
the degree of mix of share portfolios;
the degree of liquidity/marketability of securities.
As a general rule, the normal margin for shares should be 50 percent, i.e. facilities should not exceed 50 percent of the
value of security held.
21.2.4
Charges & Zimbabwe legal framework

It is to be noted that for any charge that the Company may hold, the latter should apply to the Court to realize such
security.
However, it is perfectly in order for a debtor to agree that the item(s) being held as security may be disposed of by the
Company, on condition that such agreement is struck when default has occurred.
21.2.5
Fixed Charges & Mortgages (Tangible Security)

In all cases, the ranking of proposed charges should be first ascertained.
In case the ranking of the Companys charges is not first rank, the value of the security will be assessed based on
valuation less prior charges.
Before taking mortgages the Company should assess whether proposed borrowers have the legal capacity to
mortgage/grant fixed charges over the properties. Other than companies, in case of married couples, the Company
should ascertain in case
(a) the mortgagors, who are co-owners if the former should have their facility guaranteed by all other co-owners
(b) the mortgagors, who are married and whose spouses reside in properties to be mortgaged, if the Company should
have the approval of their spouses to do so.
Page 18 of 44
The Company should check that

(a) the mortgages/fixed charges have been executed in the correct manner, and searches made to confirm the
grantor of these charges have title to the property;
(b) fixed charges/mortgages have been stamped and registered at the office of the Registrar of Deeds according to
local law
(c) the title deeds and all documents relating to and any receipts of discharge of
prior fixed charge/mortgages, have been obtained
A clause should also be included in relevant documentation enabling the rate of interest charged to be varied at the
discretion of the Company.
Valuation of security should be obtained at the time of proposing the facility and also updated on a regular basis e.g.
for land and buildings at least every 3 years. So far as valuation is concerned, for commercial properties, the valuation
method should be the income approach in lieu of the market or replacement cost methodology. Valuers should
also be requested to provide a reinstatement figure for building fire insurance purposes and a forced sale value.
Such valuations should be obtained from valuers duly approved by the Company.
Factors to be considered while approving valuers are qualifications which are recognized by relevant authorities;
market reputation; previous track record with the Company;
Lending officers must ensure assets are insured for appropriate values and against appropriate risks; and that the
Companys interests in policies have been noted and acknowledged by insurers.
While in other jurisdictions fixed charges and mortgages technically provide lenders with the right to take possession of
the property, plant and machinery specified in charges, in the event of default by borrowers, in Zimbabwe, the
Company must apply to the court first to realize the security.
Specific caution must also be exercised when considering foreclosure on any property and local legal advice taken to
establish what liabilities/obligation may exist.
21.2.6
Notarial General covering Bonds (NGCB) (Intangible Security)

These are equitable charges over the assets of companies operating as going concerns.
These assets may be disposed of and replaced in the normal course of business without the consent of debenture
holders.
NGCBs change their status to Fixed Charges when:-
borrowers go into liquidation
the winding up of companies start, irrespective of whether borrowers are in default with debenture holders;
borrowers are in default on a facility or are in breach of the terms of debenture. Debenture holders must then take
the appropriate legal action to change the status of charges, usually by appointing receivers.
Lending officers should take into account the possible decrease in the value of the security in the event that borrowers
are placed into liquidation.
Lending officers should ensure first rank NGCBs charges.
Page 19 of 44

In case the ranking of the Companys charges are not first rank, the value of the security will be assessed on an
Estimated Conservative Asset Value (ECAV) basis less prior charges (see section 22.0).
21.2.7
Company Guarantees (Tangible if from Acceptable Companies)

Guarantees may be taken from other Companies to secure facilities to principal debtors subject to
(a) an assessment of the risk profile of the Company being made
(b) the guarantee is within the approved Company limit
(c) signatories on the guarantee forms verified to ensure they are authorised to bind issuing Companies
(d) electronic forms are authenticated
(e) Country risk, if any, is approved within authorised limits
21.2.8
Stand-by Letters of Credit (Tangible if from Acceptable Companies)

Stand-by letters of credit (SBLC) are used by Companies to authorise other Companies to grant facilities to third
parties. Such SBLC should be subject to the provisions of Uniform Customs and Practice for Documentary Credits,
ICC Publication No. 500 or Rules on International Standby Practices (ISP98).
The terms of such credits must stipulate the value of facilities that may be made available to third parties and the
manner in which claims are to be lodged on the issuing Company.
Facilities secured by Stand-by letters of credit may be classified as tangible subject to
(a) the country risk is within authorised limits
(b) the guarantee risk is within the authorised limit of the Company
(c) the authenticity of credits checked
(d) the SBLC is irrevocable
(e) the Company is clearly marked as the beneficiary
(f) The tenor of credits should be long enough to allow presentation of reimbursement
claims, if this need arises;
Facilities granted to third parties should elapse within sufficient time to claim from the issuing Company
21.2.9
Guarantees (Intangible)
A guarantee is a promise by a person (the guarantor) to repay for the present or future debt of a second party (the
debtor).
The worth of a guarantee depends upon the financial standing and integrity of the guarantor.
Guarantees may be limited or unlimited in both amount and time and when taken from more than one party must be
joint and several.
Standard Guarantee forms should provide for the following:
Page 20 of 44

-
guarantors provide continuing security against continuing facilities.
guarantees provide continuing security in the event of death, disability, or bankruptcy of guarantors until
notice to discontinue and determine guarantees is given.
All liabilities and contingent liabilities that are current at the date of determination are guaranteed;
guarantees allow beneficiaries to give debtors time to settle outstandings or make other arrangements when
guarantees are called;
guarantors' liabilities are not voided by any irregular exercise of borrowing powers by debtors;
guarantors may not take security from debtors to secure their liabilities, without the prior consent of
beneficiaries.
Lending Officers should recommend potential guarantors to take independent legal advice where it is believed that
they are unaware of the full legal implications of the
guarantees they are giving, or where there is a possibility they may be under undue
influence from parties whose obligations are being guaranteed. Where such advice is
recommended by Lending Officers, but not taken by the guarantor, this fact should be recorded on file, and kept with
other security documentation.
Preferably, the witness to a guarantors signature should be an independent third party.
The factors in the following sections must be considered before taking guarantees.
Individuals
Guarantors must be reputable and financially sound.
Guarantees should not be taken as a general rule from elderly individuals (defined as persons who are at least 60
years old) who have not executed wills, for if they should die intestate the settlement of claims could well be a lengthy
and time consuming process.
Guarantees should not be taken unless the relationship between prospective guarantors and customers appear to
justify the former accepting the risk, and the reason for requiring facilities is sound.
If the bulk of the assets of the Guarantor is held with third parties, then a joint and several guarantee should be taken.
Spouses should be required, as a general rule, to seek independent legal advice if they are proposing to guarantee
relatives, or businesses in which their spouses have an interest.
Partnerships
The Mandate or Partnership Deed will define the powers of partnerships to give guarantees. As a rule; all partners
should sign, unless otherwise stated in these documents.
Limited Companies
Lending officers, before taking guarantees from limited liability companies should establish that the capacity, authority
and presence of commercial benefit as described above.
21.2.10 Life Assurance Policies
Facilities may be granted against life assurance policies based upon the income of an individual plus life assurance
policies subject to
Page 21 of 44
policies issued by assurance companies of undoubted financial and reputational standing, such
companies to be duly approved by the Company
policies should be assigned to the Company by executing relevant documentation/processes.
The assurance company confirming that there are no existing assignments ranking prior to the
proposed assignment
The surrender value of the policy at the time of granting the facilities being sufficient to cover the
facilities.
21.2.11 Insurance
All fixed charges including mortgages and floating charges must be backed by appropriate insurance cover from
Insurance companies of undoubted financial and reputational standing, such companies to be duly approved by the
Company,
If the policy is unacceptable customers should be notified tactfully of the decision to avoid controversy and/or
litigation with Insurance companies
Policies for residences and commercial or industrial premises should seek to cover all or most of the following risks
-
the replacement cost

fire
lightning
explosion
aircraft damage
riots
strikes
civil commotion
malicious damage
landslide
earthquake shock
storm an all atmospheric disturbances
flood, leakage
Goods and stocks are to be covered by a standard fire policy and insured against any other peril likely to substantially
destroy them.
22.0 Estimated Conservative Asset Value
The following Estimated Conservative Asset Value (ECAV) may be used as a general guideline to assess the realisable
value of assets of a business considered to be on a going concern:
Assets
Cash and Deposits
Debtors
Stocks
Quoted investments
Unquoted investments
Property
Plant and Machinery
Percentage
100 %
50 %
25 %
Market value
50 %
65 %
25 %
Page 22 of 44
23.0 Security Documentation

All standard security documentation should be mandatorily vetted by the Companys lawyers and evidence of such
vetting be kept on file.
All pages of security documentation other than that which bears the authorised signatures should be initialed by
authorised signatories.
Signatures on all security documents should be verified.
24.0 Credit Risk appetite versus Economic and Internal factors
In order to determine the appropriateness of the Companys Credit risk appetite, Management is required to regularly
analyse the economic and regulatory environment; and the level of credit related skills among the staff.
If deficiencies are detected in skills, this must be promptly addressed through training or the filling of the relevant
positions by appropriately skilled persons.
25.0 Credit Processing and Appraisal
25.1
General Guidelines on the Credit Processing and Appraisal

Credit processing is the stage where all required information on credit is gathered and applications are screened.
Credit application forms should be sufficiently detailed to permit gathering of all information needed for credit
assessment at the outset.
All credits should be for legitimate purposes and adequate processes.
The next stage to credit screening is credit appraisal where the Company assesses the customers ability to meet his
obligations. Lending Officers should ensure that facilities are granted only to creditworthy customers who can make
repayments from reasonably determinable sources of cash flow on a timely basis.
While the Company will usually require collateral or guarantees in support of a credit in order to mitigate risk, it must be
recognized that collateral and guarantees are merely instruments of risk mitigation. They are, by no means, substitutes
for a customers ability to generate sufficient cash flows to honour his contractual repayment obligations. Collateral and
guarantees cannot obviate or minimize the need for a comprehensive assessment of the customers ability to observe
the repayment schedule nor should they be allowed to compensate for insufficient information from the customer.
Care should be taken that working capital financing is not based entirely on the existence of collateral or guarantees.
Such financing must be supported by a proper analysis of projected levels of sales and cost of sales, prudential
working capital ratio, past experience of working capital financing, and contributions to such capital by the borrower.
In the event of credit deterioration, credit enforcement or foreclosure actions may yield proceeds much less than
initially foreseen and the value of collateral should accordingly be very conservatively determined as a set-off against
default risk.
Page 23 of 44

In the case of loan syndication, the Company as a participant should have a policy to ensure that it does not place
undue reliance on the credit risk analysis carried out by the lead underwriter. The Company must carry out its own due
diligence, including credit risk analysis, and an assessment of the terms and conditions of the syndication.
Additionally lending officers should ensure that
-
the facility falls within the approved Lending Guidelines

the facility meets legal & regulatory requirements
the customers business, industry, environment are well understood
the facility meets the requirements of the borrower
there is no double financing
the facility is not financing losses
credit quality and objectivity are not sacrificed at the expense of growing the book
the use of the funds is tracked to ascertain that this is in line with the required purpose
The Company should not lend to customers showing high leverage

25.2
where the borrower has a negative tangible net worth

the borrower has debt/Equity ratio that exceeds 150% after the drawdown of the Companys facilities
the gearing of the borrower exceeds 100% after the drawdown of the Companys facilities
Accountability for Credit recommendations and approvals

Within the credit recommendation and approval process, primary accountability for credit decisions rests with the
individual lending officers etc. who recommend new or amended facilities even if they form part of a committee.
25.3
Declined Facilities
Records of such facilities should be maintained with relevant reasons
25.4
Prior checks
Check at the outset the legal status.
The documents to be held and examined may include the following:
Certificate of Incorporation, Business Registration Certificate and any locally required authorisation or licence;
Memorandum and Articles of Association of a limited company; Partnership Deed of a partnership; Constitution of club
or society, Board Resolution, Power of Attorney.
that the business for which the facilities are proposed does not conflict with the contents of the customers Official
Registration Certificates or licences.
Prior to considering the granting of new facilities to any individual, partnership, company or any other body, Lending
Officers must check,
(a) if available, all relevant credit reports with the local central credit bureau information, where available, to ensure
there are no adverse comments stated.
(b) Black and caution lists to identify undesirable relationships
Page 24 of 44

25.5
Format of Corporate Credit Proposals

Purpose
Purpose of the facility must be legal and non-speculative and to finance the customer's normal business activities.
Where facilities are required to finance a new venture, extreme caution is necessary.
Where facilities are required for working capital purposes, these must reflect the trade cycle.
If the purpose is to finance capital equipment, this will require the identification of the initial cost to guard against over
pricing, the proportion to be financed by the Company and the borrower; the income stream over the life time of the
asset; the maintenance/running costs; alternative financing methods including leasing; the impact of the acquisition on
the borrowers working capital needs; Cash flow projections must be scrutinized to ensure that all related cash outflows
have been taken into account; the reliability of suppliers so as to ensure availability of maintenance and parts.
Lending officers should address the following, where applicable, while conducting the evaluation of trade related
facilities:
-
estimated annual CIF values of imports or exports and the average turnover period for goods.
any seasonal nature of imports or exports and sale of goods
fluctuations in the unit price of goods
movements in exchange rates;
Finance periods required for the facilities e.g. based on production, storage cycles prior to sending the goods
Amount
It must be ascertained that the facilities sought are sufficient for the stated purpose, and are reasonable in relation to
the customer's own resources; some customers are not willing to state the exact figure required for fear that it may be
declined. Others may ask for more than is actually necessary and use the surplus for other, less viable or speculative
projects.
Tenor
The tenor of facilities should be in line with the borrowers ability to pay.
An overdraft, due to its nature, should also be specifically repayable on demand.
Import facilities should be in line with the trade cycle.
Loans should be in line with repayment capacity but for asset financing the tenor should not exceed the lifetime of the
asset.
Pricing
All facilities should be priced to reflect risk.
Pricing should be commensurate with the risk profile of the borrower, competitive pressure, security, level of non-funds
income and other income.
This means that
(i)
In the event of deterioration in credit quality, consideration should be given to increased margins
(ii)
when the proposed pricing is unattractive, particularly for new customers where the prospect for ancillary
business is remote or where the balance of risk and reward is unfavourable, the Company will step aside.
Page 25 of 44
Security
All security should be perfected in strict compliance with local legal requirements, before facilities are made available;
the advice of local legal advisers on the taking and perfecting of security to be retained on file.
Security may be distinguished between tangible and intangible
Tangible security is security where the client cannot dispose of the asset without getting consent from the Company.
Examples of tangible security include a mortgage bond, a lien on a cash balance on an account, Company guarantee,
government guarantee,
Intangible security consists of security which can be sold or replaced in the normal course of business. Notarial general
covering bond over plant and assets as well as cession of book debts are examples of intangible security.
Some types of security need to be valued before being accepted e.g. land and buildings, life assurance policies and
shares.
With regard to insurance, the interest of the Company must be noted on policies.
Where individual or joint and several guarantees from owners/shareholders have been requested to support facilities
extended to the relevant borrowers, details of guarantors net worth should be obtained and recorded in credit
applications where possible. Credit should verify the information contained in the statement of net worth e.g. searches
to be made to check ownership of immovable property and related charges; confirmation of Company balances to be
requested and proof of ownership of other assets e.g. motor vehicles to be requested.
Where sensitivities prevent this and it is justified, Lending Officers may estimate and record the assets and liabilities of
the guarantors to the best of their knowledge. If this is not possible, then it should be specifically stated within the
proposal that no reliance is being placed on the value of the guarantee. For circumstances where guarantors are
overseas registered companies or overseas nationals, legal opinion should be obtained to ensure enforceability of
such guarantees.
Covenants
Covenants constitute a pledge to do or refrain from doing something.
They serve to reinforce control over the borrower to ensure repayment and guard against default. Examples are
submission of periodic management accounts; pledge not to declare dividends, not to dilute shareholding.
Background
This section should highlight the following:
Shareholders
Names, qualification, experience, net worth, ability to support the business with
additional funds, reputation, personal borrowing track record, commitment to the
business, other businesses, responsibilities, level of involvement in the business
Management
Names, qualifications, is the team balanced by experienced and qualified individuals,

experience
Operation & process
Describe the line of activity
Company
Raw materials etc.; Suppliers: list them, does the company rely on one or more
suppliers; Customers: list them, does the company rely on one or more suppliers; Terms
of credit from Suppliers and to customers
Page 26 of 44
Financial Risk analysis

All individual corporates including SMEs should submit their Balance Sheet, Profit and loss accounts as well as
projected financials including cash flow at least for the tenor of the borrowing. A minimum of three years of historical
financials would be acceptable
Historical Balance Sheet and Profit and Loss
Confirm if Financials are audited or unaudited
Comment on the acceptability of the Auditors
Comment on whether the financials are qualified
With regard to the following specify the reasons behind the variations and the risks
Comments should cover Performance; Capital Structure; Working Capital Management; Liquidity; Ability to service the
Facility
Forecast Balance sheet, P&L and Cash flows
Comments should be along the same line as Historical financials
The forecasts should be analysed in relation to historical performance
Abnormal variations should be comprehensively explained
The ability of servicing the facilities should be established from the Cash flow forecasts
The Cash flow forecasts should be subject to a sensitivity analysis
Operating Risk analysis
With regard to the following specify the risks and mitigation factors
Shareholders.
Management
Company.
Industry (competition).
Economic/Social/Political/Legal and Regulatory/Fiscal
Proposals to grant facilities to manufacturers will require lending officers to address the following:
-
The marketing and selling strategy to evaluate whether demand for the products have been properly
assessed
The technical competence of management
Assessment of status, reputation of buyers as distributors or retailers and in terms of promptness in settling dues, and
the effect of a change in demand.
If there are adequate sources of supplies available from different suppliers located in different geographical areas.
Quality of labour, cost of training; whether unionized and strength of union
Mitigating measures to eliminate/reduce theft
Page 27 of 44

-
Availability and reliability of power and water supplies, costs of contingent supply
Vulnerability of plants to production and/sale disruptions as a result of communication problems
value of confirmed sales orders;

Efficiency of production process, conditions and life time of plant and machinery
Profitability
Actual income versus previously targeted income- reasons for variations
Identify products not utilised by borrower and potential for cross selling
Specify the intended Cross selling strategies & Target income from new facilities and other initiatives
25.6
Lending to SMEs
RBZ defines SMEs as follows:
Factor
Indicator
Asset Base
Employment
Annual
Turnover
USD10k-USD2m
5 to 20 people
USD30k-USD5m
SMEs usually carry certain characteristics that differentiate them from typical corporate customers; these being (a) the
lack of financial transparency, (b) the need for simple facilities, and (iii) the slim distinction between the companys
assets and assets of the companys owner.
In this respect, conventional commercial credit assessment as outlined above may be inappropriate for SMEs, and to a
certain extent limits the potential lending opportunity to this customer segment.
The risks, however, may be higher than for commercial lending in view of the lack of transparency, limited market,
limited entrepreneurial skills and management skills.
Accordingly, lending to SMEs must be appropriately ring-fenced to minimize the risks while recognizing the fact that
many corporates have initially grown from SMEs
Lending to SMEs should be strictly according to the following parameters:
1
All facilities should be fully secured by first rank tangible security offering coverage of 150% plus personal
guarantees of the owner(s)
Facilities should be vanilla products like loans, guarantees, and small import facilities
The SME should preferably Company solely with ABZL
Gearing of the SME should not exceed 100% after drawdown of the Companys facilities
Positive net worth
Lending Officers should visit at least quarterly the SME to assess de-visu the business.
Page 28 of 44

25.7
Personal Lending Proposals

With respect to personal lending the Company has two approaches:
Scoring system
The following criteria shall be used:
Section
FINANCIAL
Attribute 1 Net Income
Attribute 2 Level of Investments
Attribute 3 Level of exposure to other
credit commitments
CREDIT REFERENCES
Attribute 4 Credit references
EMPLOYMENT HISTORY
Attribute 5 Employers details
Attribute 6 Employment number of
years
Attribute 7 Length of association with
Ratisson Finance
Criterion / Factor
The clients net income is assessed with a larger amount getting higher
scores.
Clients with investments,
The client should disclose the level of exposure to other Companies,
credit advancing firms that the client is servicing:
The client is expected to have good references from previous or current
creditors:
The client's employer:
The client should disclose how many years they have been employed
by their current employer:
The client should have had a Companying relationship with the
Company for some period of time:
Attribute 8 Accommodation ownership

Attribute 9 Number of years spent
residing at current address
Attribute 10 Proof of residence
documents
The client should disclose the number of years they have been residing
at current address:
The client should submit acceptable documents as proof of residence:
(The client must have at a minimum national ID or Passport and proof of
residence) :
Attribute 11 Contact phones forms
The client should have acceptable forms of contact
Attribute 12 Relatives contacts
Attribute 15 Number of dependents
The client's relatives should have acceptable forms of contact

The client should disclose how old they are. Please input actual number
of years
Please log the clients marital status
Client to disclose the number of dependents i.e. children, parents,
extended family members etc. they have. Please state the number of
dependents.
Attribute 16 Political Status
The clients is expected to disclose whether they are politically exposed
Attribute 13 Client's age

Attribute 14 Marital status
In the case of an individual client, the credit analyst should establish the character of the client by considering the
length of time the client has properly used his account(s) held with his bankers, the clients financial standing (i.e. an
analysis of his assets and liabilities), an actual check of credit accounts held with retailers or other credit institutions
should be conducted. The clients earning ability and their ability to service the loan while meeting their normal
Page 29 of 44

obligations should be assessed. The social standing of the client is also important, although not overriding. A client with
a high social standing may have more to lose by defaulting on his loan. For example, a company director, if faced with
the sequestration of his estate, may not act as a director of a company until the courts have rehabilitated his estate.
Politically exposed persons should be identified at this stage and the risk considered in the assessment.
Sources of Credit Reference
The primary sources of credit references should be;
The new clients previous or current bankers. A character report should be sought in writing from the proposed
clients previous or current bankers.
Credit report from TransUnion
Credit report from Financial Clearing Bureau
The Company maintains a historical database of bad debts written off and non-performing loans. All proposals
and applications should be checked against this list prior to being forwarded to the relevant credit granting
body or officer.
If a mildly adverse credit report is received, the Relationship Officer is encouraged to discuss the proposal or
application with a senior member of staff, preferably the Branch Manager or Operations Manager for guidance on what
steps to take. Explanations from the customer should be sought where there is the possibility of the relationship
continuing. The explanation must be recorded in writing and filed. If however, the report received points towards a
financial delinquent character, the Lending Officer will be advised to drop the proposal and advise the applicant
accordingly. It is expected that the senior member will use his/her discretion based on the report and explanation
given. In the case that business is still interested in the application, a copy of the report and the explanations given
must form part of the loan proposal.
Assessment of the Loan Application Forms (Personal Loans)
The assessment of personal loan applications will be by the Companys credit scoring matrix in addition to a
consideration of the extrinsic criteria mentioned above.
For the purpose of appraising personal loan applications a credit scoring system shall be applied. This system enables
Lending Officers to numerically work out the creditworthiness of an applicant and quickly arrive at a decision as to
either recommend or decline an application. The credit scoring system quantifies the odds that the applicant will
perform well or not. The advantage of using the credit scoring system is that it applies one standard, which is
applicable to all propositions without discrimination. In other words, it establishes conformity in decisions ensuring that
policy is effected as intended and ensuring that only those applications, which comply with the Companies credit
policy, are approved.
On receipt of a loan application Lending Officers are to undertake a quick scrutiny of the completed application form to
ensure that the application contains accurate information about the applicant as any inaccuracies may prejudice the
final outcome of the application.
The appraisal system considers the following aspects: the age of the applicant, occupation, accommodation status,
financial commitments and banking history.
A weighting system will be used to allocate a credit value to each heading. Using the information provided in the loan
application the Contact Officers are to complete a matrix sheet for each application. The Contact Officer will determine
the final score of the application. A low score indicates a high probability of a good loan prospect and vice versa. The
credit scoring system will be modified to adjust to the Companys data as a longer credit history becomes available.
Other Principles to Consider (Lending Officers)
Considering at the outset whether the facility falls within Lending Guidelines
Ensuring agreements and transactions with the customer meet legal and regulatory requirements
Page 30 of 44
Emphasizing a relationship rather than a one off transaction

Maintaining professionalism at all times , avoid overpromising and under delivery
Avoid promising clients credit before the relevant committees have decided
Ensuring objectivity is maintained in credit judgment
KYC principles adhered to
Understanding the clients management structure and culture (corporate governance and continuity issues to be
given prominence)
Understanding of the clients business cycle, the industry, market position as well as competition
Regular meetings should be arranged and call reports should be on file
Funds disbursed should be tracked (a lending officer should always be able to state what the money disbursed
was used for)
The reputation impact of dealing with particular clients
The performance of the portfolio under the scoring system should be reviewed at least once a year to ensure that the
scoring matrix remains robust.
25.8
Other Non Score based Personal lending

The following criteria will be used to grant facilities to such categories of borrowers
1
The applicant must have been Companying with us at least for the past six months demonstrating a clean
track record.
Applicants must be employed by well-known and financially stable employers
Source of income should be principally the salary excluding overtime and other fluctuating allowances. Other
regular ancillary income from other sources of activity should be determined and evidenced to the Company
A statement of net worth should be submitted and the accuracy verified e.g. via searches
Monthly facility repayment including interest should not exceed 25 % of the salary and other ancillary income
earned, provided appropriate evidence of the latter is on file
An irrevocable undertaking from the borrower and employer to pay in the full net salary to the account held
with us should be obtained.
Financial Bureau Clearance and TransUnion clearance required.
All personal lending are covered by loan protection insurance. The insurance should covers death, disability
and client absconding
Any facilities in excess of USD5, 000 to be secured by first rank tangible security
26.0 Terms of Facility Offer Letters

Terms of facilities must be precisely documented in the relevant facility offer letter.
While the standard facility offer letter in use should have been mandatorily be vetted by the Companys lawyers, the
following, at a minimum, must be the contents of the facility offer letter.
Conditions Precedent
Page 31 of 44
The purpose of conditions precedent is to allow the Company to suspend or withdraw its contractual obligations to
make facilities available until customers meet certain stated requirements within a specified period of time.
Negative Pledges
Negative Pledges are undertakings obtained by the Company in lieu of tangible security.
However, these should replace security only if the borrower is of undoubted integrity and financial soundness, which
would be exceptional given the current environment.
Breaches of the terms of Negative Pledges provide the Company with recourse
only for breach of contract, which will be of little value if borrowers are in liquidation.
Acceptance
Facility offer letters should contain an appropriate acceptance clause.
For the purpose of this section, the term facility offer letter shall include loan agreements and other documents
forming part of the contractual document for granting facilities.
Availability
Facility offer letters should include a clause under which acceptance of these facilities must be received by the
Company by the close of a definite date, and, if not received by such time and date, the offer of these facilities will be
deemed to have lapsed.
The Company may also include a clause giving it the right to withdraw the offer at any time prior to receipt of the
acceptance."
Drawdown
Provided facilities are not of a revolving nature, the number of days within which the borrower is allowed to drawdown
should be specified with a clause that any portion of the facility which has not been drawn down by that date shall
thereupon be automatically cancelled.
Review
Facility offer letters must include a clause which provides for a review of the facility at any time and, in any case not
more than 364 days from the date of facility letter.
Repayment
Facility Offer letters should include a clause that the facility is subject to the Companys overriding right of withdrawal
and repayment on demand. Only where formal events of default are documented and agreed may this clause be
omitted.
Facility amount
The amount of the revolving facility or principal amount of the term facility must be specified.
Interest
Interest rates on loans should be set at margins over the appropriate base rates, and be subject to fluctuation within
the limits set up by RBZ through the MOU.
The timing and method of payment of interest must be stated in agreements.
Page 32 of 44
Fees
The extent and nature of applicable fees should be spelt out in facility offer letters e.g.
(a)
arrangement fees, being a percentage of a loan facility, usually levied upon acceptance of a facility.
(b)
commitment fees, expressed as a percentage and calculated on the average undrawn amounts of loans over
a specified period starting from the date of the loan agreement and for example payable quarterly in arrears;
(c)
Early repayment fees, calculated on the amount of the outstanding loan to be prepaid before the agreed due
date.
(d)
review fees applicable upon review of the facility
Expenses
All fees, legal costs and expenses incurred in connection with the documentation and perfection of security should be
for the account of the borrowers.
Drawdowns
The drawdown and repayment terms should be stated in loan agreements
Conditions Subsequent
The purpose of conditions subsequent is to allow the suspension of subsequent drawdowns on loans unless stated
conditions have been met.
Representations and Warranties
The purpose of representations and warranties is to provide remedies for misrepresentations and, in the event of
inaccuracies, may enable lenders to cancel loan commitments or call up loans if linked to events of default.
Representations and warranties normally will address the legal powers of the borrowers, the validity of the loan and the
financial condition of customers.
Examples are:
(a)
that representations and warranties shall survive the execution of loan agreements and prevail until the loan
agreements expire;
(b)
borrowers have the capacity to enter into loan agreements, and would not contravene any laws in doing so
(c)
borrowers have the power and authority to enter into loan agreements
(d)
borrowers are not engaged in, or have knowledge that they may subsequently be engaged in any legal
proceedings which may impair their ability to meet the terms and conditions of loan agreements
(e)
borrowers have good title to their assets,
(f)
borrowers' most recent audited accounts reflect true and fair views of their financial situation
Events of Default
Page 33 of 44
Events of default, including non-payment, breach of warranty undertaking, or other

obligations, cross default, insolvency etc. may be comprehensively listed.
Covenants
Facility offer letters may contain both affirmative and negative covenants.
Examples of affirmative covenants are:
(a)
submit periodic audited and unaudited financial statements;
(b)
maintain specified financial ratios, such as gearing, debt/equity ratio, interest cover, dividend cover, net
worth, injection of a specified amount of capital.
Examples of negative covenants are:

(a)
(b)
seeking the prior approval of the Company to sell or pledge any part of, or the whole of, their assets,
requiring that any other debt will not rank ahead of the Companys existing debt
Governing Law
Facility offer letters should state the laws under which they are drawn.
Documentation
All pages of facility offer letters other than that which bears the authorised signatures should be initialed by authorised
signatories.
Evidence of the vetting by the Companys lawyers should be kept on file.
Signatures on all agreements should be verified.
Original copies of signed loan agreements must be held as security in record rooms while photocopies of such
documents may be held in credit files for ease of reference.
27.0 Checking of inputs on the Computer system
While Credit Administration is primarily responsible for accuracy of input on the computer system, to avoid financial
losses and litigation with customers in case of inadvertent errors, relevant Lending Officers should ensure that system
input tallies with the terms and conditions of the credit proposal and approvals. Non comprehensive checks include
structure and amount of limits, tenor, maturity date, interest rates, penalty rates and evidence of such comprehensive
checks should be kept as audit trails.
28.0 Credit files
Credit files must be maintained for each customer who has been granted facilities.
Other than for credit monitoring, credit files may be required by Internal and External auditors as well as regulators.
Accordingly, the credit files should contain all the necessary information that may be required to assess that the credit
processing, approval, follow ups have been conducted with due diligence in line with best practice and in line with the
regulatory framework, and to accurately demonstrate the evolution of the facilities.
Page 34 of 44
The credit files should be neatly organized, cross-indexed and divided into the following sections with relevant hard
copies of the mentioned documents kept in chronological order in each section:
1
credit application and evidence of approvals by relevant authorities
Copies of accepted facility offer letters
latest financial information (balance sheets, profit and loss accounts, management accounts)
Financial ratio spreads
record and date of all credit reviews
record of all guarantees and securities
7.
record of terms and conditions of facility
8.
evidence of securities validation function that should include, legal validity,

existence, valuation, registration of charge and safekeeping
Internal rating
10
Call reports
11
Relevant correspondences
The removal of Credit files from the premises is not permitted;

The Company should also keep electronic copies of all non-replaceable documents
29.0 Custody of Security Documents
The custody of security documents should be under dual control.
30.0 Management of Problem accounts
.
Bad Debts may occur as a consequence of lending.
Lending officers must
30.1
(a)
ensure accounts that require active risk management can be identified at an early stage so that corrective
action can be taken to avoid losses to the Company
(b)
recognise the customers situation before it becomes irreversible and to ensure a timely transfer of the
account to the recovery unit, where there is expertise and resources to manage such accounts.
General guidelines
Lending Officers must mandatorily ensure that prompt action is taken to review the financial conditions of companies
when warning signs, such as the following occur:
Page 35 of 44
1
2
3
4
5
6
7
8
9
10
Excesses in limits;
Drawings against uncleared effect
Overdue principal and interest
Overdue trade and other bills
Delays in receipt of financials;
Change of auditor without business reason
Breaches of covenants;
Stretching of creditors
Trade creditors or other lenders reduce credit lines or request/take additional security;
Market sector decline or sector becomes obsolete
Facilities must be reviewed regularly, and downgraded as soon as appropriate to ensure

there is no delay in referral to the Recovery unit.
As soon as the warning signs are flagged, Lending Officers should consider taking immediate action to control both
drawings on accounts and the use of other facilities, allowing transactions only on a case-by-case basis or simply
withdraw or demand repayment of facilities. Additionally, they may consider obtaining control over goods etc. where
these are pledged to the Company.
Where the financial projections of the borrowers indicate that their financial position may improve, with suitable
assistance from lenders, the Company should assess the following:
(a)
(b)
(c)
(d)
the degree of co-operation that may be expected from borrowers to work out proposals
the extent to which other lenders are secured as an indication of the degree of co-operation that may be
anticipated from them to work out solutions
whether the company has the ability to raise fresh capital, or cash, by the disposal of surplus, or non-core
assets;
the extent to which the Companys exposure is secured, whether it can be improved, and the likely
realisation value of security if the borrowers were sued for recovery of the loan, placed in administration,
receivership or liquidation.
31.0 Assessment of Credit impairment Process
31.1
IFRS -Assessing Credit Impairment

Credit Impairment losses shall be assessed in terms of the relevant International Financial Reporting Standards (IFRS)
applicable from time to time as well as guidelines from RBZ. The following rates shall be applicable to current loans
and portfolio at risk.
Rate of Loan Loss

Provisioning
Good loans
Portfolio at Risk
Current loans
1%
1-30 DAYS
5%
31-60 DAYS
20%
61-90 DAYS
50%
91-120 DAYS
100%
120 PLUS DAYS
100%
Page 36 of 44
31.2
Definitions
Large Credit for the purpose of credit impairment assessment will mean facilities greater than USD10,000
credit: loans and advances by whatever instrument granted and includes customers lines of credit, overdrafts, bills
purchased and discounted, bills receivable, and finance leases.
effective interest rate means the contractual interest rate on a loan adjusted for (i) fees
and related costs recognised as an adjustment of yield on the loan and (ii) any discount or premium on the loan.
foreclosed loan means assets acquired in full or partial settlement of a loan through
realisation of collateral or repossession of leased property.
independent appraiser means a valuer registered with the Valuers Council of Zimbabwe
loan is a financial asset resulting from commitment of the borrower to repay the amount borrowed on a specified date
or dates, or on demand, usually with interest. Loans include residential mortgages; non-personal loans, such as
commercial mortgages and loans to businesses, financial institutions, government and its agencies; loan substitutes,
such as debentures that are, in substance, loans; and direct financing leases and other financing arrangements that
are, in substance, loans.
provision for credit losses is an expense account for credit related losses recognised
during the year, based on the Companys estimate of such losses in respect of on
and off-balance sheet items that are assessed to be impaired during the year.
31.2
Objective evidence
Objective evidence provides the trigger point for launching an investigation into the
impairment of the financial asset to assess the degree of its impairment. The Standard lists the following items of
objective evidence:
-
significant financial difficulty of the borrower
an actual breach of contract, such as a default or delinquency in interest or principal payments;
granting by the lender to the borrower, for economic or legal reasons relating to the borrowers financial
difficulty, of a concession that the lender would not otherwise consider;
a high probability of bankruptcy or other financial reorganisation of the issuer;
recognition of an impairment loss on that asset in a prior financial reporting period;
the disappearance of an active market for that financial asset due to financial
difficulties; or
historical pattern of collections of accounts receivable that indicates that the

entire face amount of a portfolio of accounts receivable will not be collected.
It should be underlined that according to the above criteria, when a borrower misses a
contractual instalment payment on interest or principal, his loan is forthwith designated for an assessment of the
degree of impairment. This assessment must be completed within 60 days of the first indication of impairment.
Page 37 of 44
Additional sources of evidence of impairment that should merit investigation and

assessment, include:
31.3
Funds obtained under the loan agreement were not used for the purpose for which they were loaned;
The project financed by the loan has become non-viable e.g. a failing restaurant;
The borrower is about to default and the lender advances it funds to meet its current payment obligations;
The borrower belongs to a group of entities that has credits outstanding from the
Company or other financial institutions and one or more members of the
group have defaulted;
The borrower is engaged in a large number of undertakings leading to over extension of its resources. It has
begun shifting support from one undertaking to
another, which may lead to potential delinquency of the loan under review;
In case of an overdraft, further elements to be considered are the expiry of the

approved overdraft limit, and the customer exceeding the approved limit
frequently;
The underlying collateral, which was heavily relied upon in granting the loan, has
lost value significantly; or
There is a loss of confidence in the borrowers integrity.
Estimation of Recoverable Value

Estimated recoverable value of loans shall be determined individually. All credits designated for assessment of
impairment, shall be assessed individually for estimation of recoverable amounts.
31.4
Individually Assessed Credits

The estimation of recoverable amount of individually assessed credits shall be carried out in the context of broad
principles enunciated in relevant IFRS. Future cash flows on credit shall be based on reliable evidence for determining
amounts recoverable. The estimation process shall be based on the following factors:
-
Assessment of the financial condition of the borrower and the group to which it
belongs;
Assessment of the debt service capacity of the borrower (adequate generation of

cash flow) to discharge its contractual obligations on a continuing basis;
evaluation of any up-to-date business plan of the borrower;
Regularity of the borrowers past payment record;
Lenders confidence in the integrity of the borrower;
In case of a loan to a related party, an evaluation of all factors impinging on the

timely recovery of the loan, including seriousness of efforts made by the company for the recovery;
Page 38 of 44

-
In case of a foreign borrower, an assessment of all practical aspects of achieving

recovery, including the legal enforceability of loan and related instruments;
Evaluation of the continued viability of the project financed by the loan;
Current economic and other conditions, including emerging trends, affecting the
industry sector relevant to the borrower;
Evaluation of country risk applicable to the loan project;
Length of timeframe for achieving recovery; longer the time period, lesser is the
certainty of obtaining recovery;
Any down-grade of the borrowers credit rating by a reputable rating system or

agency;
Further default occurring in a restructured loan;
Assessment of value of any personal guarantee of the borrower or guarantee of

another party;
Assessment of the net realisable value of the collateral for the loan.
In assessing future cash flows emanating from an impaired loan, it is not necessary that
several of the above factors must be present before it is judged that the flows will be
substantially reduced or non-existent.
A single factor, such as vulnerable financial condition of the borrower, may justify making an appropriate provision for
the loan.
31.5
Business Plan
An important element in the calculation of the recoverable amount of an impaired large
credit to a business customer is the existence of its up-to-date business plan. Reliance
placed on the plan will depend on several factors, including whether the plan
-
is prepared in a professional manner;

is sufficiently comprehensive to cover all essential elements;
uses realistic assumptions;
uses market and other projections that are soundly based and reasonable;
envisages use of qualified management resources for implementation of the plan; and
clearly outlines a realistic strategy for achieving the plans objectives.
.
31.5
Repayment Plan of a Personal Loan

The repayment plan in respect of an impaired personal loan must have adequate attributes to demonstrate its
soundness. These will include:
-
the borrowers analysis of the causes of loan impairment and specific changes
envisaged to make the loan performing again;
Page 39 of 44

-
delinquencies of any previous credits of the Company or any other Company to the borrower and an
explanation of why the circumstances surrounding those delinquencies do not apply to the present credit;
a clear identification of sources of funds, which will generate sufficient flows on a

continuing basis to honour the loan obligations;
control of the borrower over such sources and identification of risks that might
impair their availability; and
other information supporting the bonafides of the borrower.
31.6
Collateral
Another important factor in the calculation of the credit loss provision is the value of
collateral. The following pre-conditions must be met in determining the appraised value of collateral:
-
Appraised value of collateral is based on a conservative view of current market

prices, suitably discounted for price volatility and the lack of ready market for
assets. All realisation costs, including legal costs, must be taken into account.
Realisable value of collateral is supported by a written opinion of an independent

and qualified appraiser. It must be ensured that the appraisal is reasonably comprehensive, up-to-date and
based on acceptable assumptions.
Experience with foreclosed loans indicates that the net realisable value of collateral may not generally exceeded 50 per
cent of its appraised value. Unless the Company presents reasons to the contrary, the value to be considered in
determining the recoverable amount of an impaired loan shall not exceed 50 per cent of the appraised value of
collateral, discounted to its present value using the loans effective interest rate.
Where the Company is convinced that it is not going to recover the outstanding amount of the loan, in part or in full, it
must take steps to write-off the unrecoverable amount.
32.0 Monitoring compliance with In Duplum Rule
Credit Risk Management must mandatorily ensure that the Company is not charging interest which would be qualified
as void under the In Duplum rule
According to the case of COMMERCIAL COMPANY OF ZIMBABWE V MM BUILDERS AND SUPPLIERS PVT LTD
1997(2) SA 285 ZHC:
The in duplum rule states that interest stops to run once accrued interest equals the amount of capital borrowed or
outstanding. Thus, if an amount of $100 is borrowed, assuming everything is equal; the amount payable on it in both
interest and capital should be no more than $200.
This rule applies to loans, overdrafts and any other contracts where a capital sum can be identified, and where interest
is chargeable on it at an ascertainable rate.
To avoid such situations, CRM must insist on payments of all amounts due in terms of the credit facility, as and when
they are due.
Page 40 of 44
As soon as interest falls under the above rule, CRM should cease such accrual and any surplus interest reversed.
33.0 Withdrawal of Facilities
Formal letters must be sent to customers when withdrawing the availability of facilities
previously granted to them. Such letters should however only be used where it is the intention to prevent further
increases in exposure to a customer by their use of available facilities
The wordings of such letters should be carefully drafted by lawyers but all withdrawal letters should:
(a)
refer to the last facility letter or the documentation under which the Company agreed to make facilities
available to a customer;
(b)
give notice that, with immediate effect, all previously agreed limits, as set out in the last facility letter, have
been withdrawn, reserve the Companys rights, in relation to security held and in taking whatever action may
be necessary to protect the Companys interests, including exercising the Companys overriding right of
repayment upon demand.
Following the issue of such a withdrawal letter

(a)
(b)
all limits must be cancelled

Interest rates on the facilities should continue at the rates agreed in the facility letter so that, if the Company
takes legal action against the customer for recovery, the Courts should approve the interest charges.
Page 41 of 44
If after taking all steps available it is evident that the borrower business is not viable and/or repayment of outstandings
is doubtful, consideration should be given to calling up advances.
The Company must however obtain, and retain on file, the advice of local legal advisers, on the legal remedies
available to creditors, and the manner in which they are taken, in order to realise debtors' assets.
Formal written demand needs to include repayment of outstandings, plus interest, and including cash margins to cover
contingent liabilities.
If the borrowers fail to comply, the Company will need to decide whether to
33.2
(a)
file appropriate petitions to realize security
(b)
start proceedings to appoint Judicial Managers
(c)
file petitions to put companies into liquidation
(d)
if facilities are clean, or if amounts are still due to the Company after utilising any readily realisable security,
the Company may instruct their legal advisers to issue writs against debtors and to obtain judgment
Letters of Demand for Repayment

Formal demand letters must be sent to customers when both demanding repayment of
outstanding amounts due to the Company and cancelling undrawn facilities, subject to the relationship between the
Company and the customer having irreversibly broken down and the Company no longer wishes to maintain a
relationship with the customer; it is necessary to crystallise the amount outstanding and due from the client or specific
events dictate that it is necessary in order to protect the Companys rights.
Basically demand letters should never be used as a negotiating tactic or threat, and should only be issued when the
Company requires repayment and is willing to commence legal proceedings to recover outstandings, if necessary.
The wording of such letters should be carefully drafted by lawyers and should
(a)
(b)
(c)
(d)
(e)
make reference to the last facility letter;

demand full and immediate repayment of all principal and accrued interest thereon;
reserve the Companys rights not only in relation to security held but also in taking whatever action may be
necessary to protect the Companys interests;
cancel any undrawn facilities;
demand cash margins for any contingent liabilities.
Lending officers should ensure that the demand letter has been received by a customer before taking any action to
return items presented for payment especially if such item would, in the ordinary course, be paid within approved limits.
Ideally, a customer should be advised by phone that items are to be returned unpaid and the customer should be given
the opportunity to place stop orders on all outstanding items.
Similar procedures apply to a demand under a guarantee issued in the Companys favour. However, prior to any
demand letter being sent to a guarantor (either personal or corporate), formal demand must have been made on the
primary obligor and this demand referred to in the demand letter.
Page 42 of 44

Demand letters may also be sent to a customer if the Company has the right to require the customer to take certain
action (e.g. provide 100% cash collateral, convert an equitable charge into a legal charge, etc.). In such circumstances,
the demand letter should refer to the document under which the Company has the right to demand that the customer
takes action and the wording of the letter must be consistent with the right that has been granted by the customer.
33.3
Combination of withdrawal of facilities and demand letter

The Company may combine the above two steps depending upon the urgency of the situation.
34.0 Acquisition of immovable property in lieu of debt

Lending officers must be cognizant that the Companys main business is lending and that acquisition of immovable
property in exchange of debt should be actioned as a last resort.
Prior to such acquisition, Independent valuations must invariably be obtained.
The debt should be reduced only after the transfer of the immovable property into the Companys name has been
completed with the deed issued in the Companys name. Any exception to this practice should be approved by the
Credit Committee
The debt should be reduced after the Company has acquired actual ownership and taken possession of the immovable
property. The Company should identify all obligations that may be attached to the ownership of the immovable property
and transferred thereby.
Such properties should be promptly disposed as soon as possible to avoid losses due to changes in market value.
35.0 Preferential Creditors
The Company should obtain, and retain on record, the advice of local legal advisers on the priority given to classes of
preferential creditors in the settlement of their claims on companies in winding-up or liquidation.
36.0 Provisions
It is essential that the Companys balance sheet prudently reflect any likely diminution in the ultimate realizable value of
its assets through the raising of appropriate provisions. The Company will adopt the following illustrated scale when
provisioning
37.0 Restructure of repayment schedule and other terms
If the Company restructures any loans, the account should not be up-graded at the time of restructure. Lending officers
should observe the account for a period of at least 180 days and evidence material and sustained improvement before
a proposal is put to CC for such up grading.
38.0 Authority to Reduce or Release Provisions for Debts
Approval to reduce provisions for bad debts, which have been approved by a relevant approving authority, other than
by an inflow of funds or taking of additional tangible security, should be sought from CC.
Page 43 of 44

39.0 Write Offs per RBZ Companying Regulations, 2000- Statutory Instrument 205 of 2000.
The Company shall strictly apply the following:
A loan or asset graded loss shall be immediately written off, whether or not the Companying institution intends or is in
the process of attempting to recover the loan or asset.
Lending officers while considering the amount to be written off may take into
consideration tangible security held
e.g. cash, mortgages. However in the case of Mortgages/fixed charges held on property, an appropriate prudential
haircut should be applied on the original security value. The percentage of such haircuts may be
independently
established after consultations with acceptable specialists like Estate agents and/or valuers. Such consultations must
be conducted at least annually or earlier if warranted by market conditions.
(At the time of writing, based on feedback received from estate agents the Company shall apply a prudential hair cut of
35% which will be subject to periodic review as provided under this section)
Lending Officers must maintain a record of all debts written-off, which must contain the authority for the write-off.
Lending officers should note that the writing off of a debt does not automatically imply the cessation of recovery efforts.
Should it be judged that recovery efforts should be ceased an application should be made to the relevant approving
authority (LIC or CC) and CC
39.1
Write Offs and Income Tax

Lending officers should be aware that bad debts written off are allowable deductions in terms of Income Tax Act
(Chapter 23.06),quoted below:
The deductions allowed shall be
The amount of any debts due to the taxpayer to the extent to which they are proved to the satisfaction of the
Commissioner to be bad, if such amount is included in the current year of assessment or was included in any previous
year of assessment in the taxpayers income either in terms of this Act or a previous law.
It is not a local requirement that the bad debt must be certified/confirmed by a Lawyer, Court etc. before it is written off.
In line with guidance received from the Companys tax advisor, the following pre-conditions for a write off to qualifyas a
tax deduction should be observed:
The Board should authorise the debt to be written off.
The Company should clearly demonstrate that all appropriate steps have been taken to recover the debt and this
has not materialised
Page 44 of 44

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Ratisson Finance Credit Policy Version 1.

RATISSON FINANCE (PVT) LTD

Purpose of the Policy...............................................................................4

Ownership and Review of Credit Risk Policy........................................................5

Mandatory Reading of this policy...................................................................5

Governing Legislation and Guidelines..............................................................6

Definition of Credit risk.............................................................................6

General Principles for mitigating Credit risk.........................................................6

Credit Committee (CC)...........................................................................7

Loans and Investment Committee (LIC)...........................................................8

High Risk exposures, Sectors.....................................................................10

Flow of Credit Recommendation and Approvals...................................................11

Credit Approval Limits.........................................................................11

Special notes to the limits......................................................................11

Ratisson Finance Credit Policy Version 1.1 July 2015

Spouses and other vulnerable persons....................................................13

Societies, Clubs, and Associations.............................................................14

Government Departments, Central Companys, Ministries......................................15

Consortiums & Joint Ventures..................................................................15

Salary Based Loans............................................................................16

Tangible and Intangible Security................................................................17

Deposits and Marginal Deposits...........................................................17

Ratisson Finance Credit Policy Version 1.1 July 2015

Deposits held by institutions in other jurisdictions........................................17

Charges & Zimbabwe legal framework.....................................................18

Fixed Charges & Mortgages (Tangible Security)...........................................18

Notarial General covering Bonds (NGCB) (Intangible Security)............................19

Company Guarantees (Tangible if from Acceptable Companies)...........................19

Stand-by Letters of Credit (Tangible if from Acceptable Companies).......................20

21.2.10 Life Assurance Policies......................................................................21

Estimated Conservative Asset Value..............................................................22

Credit Risk appetite versus Economic and Internal factors........................................23

Credit Processing and Appraisal..................................................................23

General Guidelines on the Credit Processing and Appraisal....................................23

Accountability for Credit recommendations and approvals.....................................24

Format of Corporate Credit Proposals..........................................................24

Personal Lending Proposals....................................................................28

Other Non Score based Personal lending......................................................31

Terms of Facility Offer Letters.....................................................................31

Checking of inputs on the Computer system......................................................34

Custody of Security Documents...................................................................35

Ratisson Finance Credit Policy Version 1.1 July 2015

Management of Problem accounts................................................................35

IFRS -Assessing Credit Impairment.............................................................36

Estimation of Recoverable Value................................................................38

Individually Assessed Credits..................................................................38

Repayment Plan of a Personal Loan............................................................39

Monitoring compliance with In Duplum Rule....................................................40

Letters of Demand for Repayment..............................................................42

Combination of withdrawal of facilities and demand letter......................................43

Acquisition of immovable property in lieu of debt.................................................43

Restructure of repayment schedule and other terms..............................................43

Authority to Reduce or Release Provisions for Debts..............................................43

Write Offs and Income Tax......................................................................44

Ratisson Finance Credit Policy Version 1.1 July 2015

Purpose of the Policy

Ownership and Review of Credit Risk Policy

Mandatory Reading of this policy

Ratisson Finance Credit Policy Version 1.1 July 2015

Letter and spirit of the laws of the Republic of Zimbabwe