Automation of SACCOs - FSD Kenya

Level 1 Level 2 Description
AUTOMATION OF SACCOS: ASSESSMENT OF POTENTIAL SOLUTIONS • 21
BOSA Collateral The system needs to be able to calculate credit risk by calculating the difference between the sums
of the nominal value of all loans issued net of amortisation and the current market value of collateral/
security net of any depreciation. The security could be borrowers and guarantors shares or other nonwithdrawable
deposits or assets. The system needs to store data about loan value, recovery schedule,
collateral and collateral depreciation in order to at any time provide a value of the SACCOs exposure
should the borrower default on the loan at that time. The collateral management includes registering
and tracking the identifiers, value and location of the asset.
BOSA Loan issuing The SACCOs require a system to fully automate the loan issuing processes and which is fully integrated
with the overall business model and utilises the data that has been accumulated. The SACCO will require
support with appraising a range of different loans, each with a different eligibility criteria and appraisal
process. Across the loan products it is critical that approval and release is documented should evaluation
be required.
BOSA Reporting It is key that the SACCO gets access to the full range of information captured in order to actively manage
the loan portfolio. The information will also be used to evaluate products and customers. Marketing will
also be using information about historic loan portfolio performance to target customer acquisition to the
most profitable demographies. Regulations will also require a flexible and efficient reporting function as
well as the board and various committees.
BOSA Collections The SACCOs are expected to enforce collection more actively in the future using a range of activities.
Which activities are undertaken and what the outcome is needs to be documented and evaluated.
BOSA Delinquency The SACCOs will need a robust and comprehensive system to prevent and manage delinquency. The
system in itself will have an impact by how it enables in particular the loan issuing process. Additionally
specific delinquency features such as loan aging and tailored reports connecting delinquency with
appraisal and approval will be required. They will also feedback to the collections department to
optimised workforce management. The microfinance groups will especially need to be monitored closely
as they are particularly prone to default. The delinquency also needs to be accurate taking the specific
properties of each product into consideration.
Accounting Core accounting features The system needs to meet all of the SACCOs fundamental accounting needs with regards to the
loan and savings operations as well as other standard corporate accounting functions. These include
accounts payable for suppliers, expense management for all employees, fixed asset registry and payroll
functionality. The fixed asset registry should ideally eliminate the need to rely on e.g. Excel to keep track
of assets and calculate depreciation. The system should adhere to IFRS in all aspects.
Accounting Reconciliation It is essential that the system enables the SACCO to automatically reconcile accounts to avoid tedious
manual processes. Reconciliation includes cash, bank, cheque and shares.
Accounting Chart of accounts The system needs to provide a structure to build a chart of accounts (CoA) that is flexible, consistent and
common across the SACCO. Ideally the system should be delivered with a default CoA.
Accounting Group accounting The system should allow the SACCO to produce consolidated group accounts and reports eliminating any
intra-branch transactions.
Accounting and
Sub-ledgers
General ledger The system should allow for sub-ledgers to track specific sub-segments of the SACCO and reduce
complexity in the GL.