WEDP - Loan Policy & Procedures Manual - Final

Oromia Credit & Saving Share Company [OCSSCO]
Oromia Credit & Saving Share

Company
[OCSSCO]
Women Entrepreneurship
Development Programme (WEDP)
Loan Policy and Procedures Manual
Jan. 2014
Finfinnee
WEDP Business Loan Delivery Manual

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Table of Contents
I. Introduction .................................................................................................................................. 3
2. Cardinal Issues of the Company ............................................................................................... 5
3. Binding Rules, Regulations, Policies and Directives ............................................................ 7
4. Major Policies & Procedures of the Manual ........................................................................... 7
5. Priority Sectors in WEDP Loan Provision ............................................................................... 8
6. Savings .......................................................................................................................................... 10
7. Loan size, Application Fees, Interest Rate, Grace Period & Loan Terms and Repayment
Modality.............................................................................................................................................. 10
8. Women Entrepreneurs’ Business Plan Receiving, Appraising and Approval Procedures

and Authority Limit ......................................................................................................................... 12
9. Collateral options ........................................................................................................................ 20
10. WEDP Loan Approval and Authority Limit ........................................................................ 25
11. Portfolio Quality Management ............................................................................................... 30
12. Monitoring .................................................................................................................................. 31
Annexes .............................................................................................................................................. 32
Annex 1. Women Entrepreneurs’ Business Plan format ....................................................... 32
Annex 2. Instructions on filling the Appraisal tool ................................................................. 37
Annex 3. WEDP Loan Agreement ........................................................................................................... 58
Annex 4. Report Formats ...................................................................................................................... 68

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I. Introduction
Based on the issuance of proclamation No. 40/1996 and commercial code of the
country, OCSSCO was established in 1997 by five shareholders as a Share
Company. It had commenced its formal operational activities with Head Office in
Addis Ababa and four branch offices namely Kuyu, Shashemane, Hetosa and
Sinana Dinsho in 1997. OCSSCO had started its operational activities on 4th
August, 1997 with only four (4) branch offices serving less than 1,600 active
borrowers with loan portfolio less than Birr less a million (0.9 million).
The wide-range and continuous escalation of the Company’ development trend

has come from the dedication of all concerned bodies at all levels, starting from
the Board of Directors to the loan officers at the grass rooted level. As of June 30,
2013, the Company has attained the following;
 Service outlets growth from 4 service outlets as of its very beginning (1997) to
258 full-fledged,
 18 Zonal offices,
 From 1,529 solidarity group loan borrowers to 496,635 active clients with
loan portfolio less than a million Birr 815,929.00 to 2,421,314,496.00,
 The outstanding loan recovery rate of the Company has been staying above
98% on an average till now which shows the sustainability of the Company.
 Saving mobilization from Birr 1,150,856.00 to Birr 1,367,584,501.00,
 Capital formation from Birr 9,378,759.00 to Birr 573,262,551.00, Staffing

from less than 20 staffs to 3,362 staffs.
Since its inception, OCSSCO has experiences of working in joint venture with
many development organizations both governmental & nongovernmental
organizations. OCSSCO has been entering into different partnership agreements
with many development organizations with those have been supporting its
objectives and their ultimate goal is poverty reduction.

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Hence, Women Entrepreneurship Development Programme (WEDP) is one of its

partners to work with. WEDP is a World Bank-funded project and one of its sub-
components (i.e. the technical assistance to MFIs participating in the line of
credit for individual or organized women owned enterprises). The goal of WEDP is
to assist its Microfinance Institutions (MFIs) partners, through needs-based
technical assistance (TA), to upscale and be able to provide financial services on a
commercially sustainable basis to individual women owned business or organized
& women owned enterprises.
This WEDP loan lending manual is expected to facilitate the loan product
development by targeting women in major urban areas of the region. This is in
order to set free the income growth of potential women entrepreneurs and it is
important to identify the growth oriented women entrepreneurs and tailor
support in order create jobs to their needs.
Supporting of growth oriented women entrepreneurs is not only important for job
creation but also for realizing of higher and more stable incomes in line with the
GTP aims. The key question is then how to identify the growth oriented women
entrepreneurs? This WEDP loan lending policy and procedures manual is
expected to enable the identification of growth oriented women entrepreneurs by
using the characteristics of the growth oriented women entrepreneurs that have
the highest likelihood of expanding could be a useful starting point for identifying
the target group.
Oromia Credit & Saving Share Company (OCSSCO) is one of the selected MFIs to
use the opportunities of the World Bank-funded project (WEDP) to implement in
the major urban areas by targeting growth oriented women entrepreneurs. It is
with this intention that WEDP loan lending policy and procedures manual is
developed.

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2. Cardinal Issues of the Company
2.1 Mission
To provide need based micro financial services to strengthen the economic base
of the low-income rural and urban people in Oromia through increased access
to sustainable and cost efficient financial services.
2.2 Vision
Aspire to be a financially self-sustaining model MFI enhancing mainly the

livelihood of low-income people in Oromia.
2.3 Core Values and Principles of the Company

The following values and principles should be maintained as Core Values and
Principles of the Company. These values and principles are general, individual,
strategic and operational and are consistent.
General Values
 Transparency
 Zero tolerance to irregularities, delinquencies and embezzlement.
 Commitment to serve and satisfy the client.
 Commitment to work in line with working manual
 Enhancing women participation
Individual Values
These are values, which knitted together individuals and the company.
 Hard working and completeness,
 Trustworthiness,
 Prudence,
 Good personality,

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 Loyalty,
 Confidentiality,
 Accountability,
 Team work/ spirit,
 Impartiality and
 Continuous improvement
Strategic Values
 Dedication to clients’ quality service,
 Participatory,
 Commitment to excellence and
 Commitment to quality and professional competence
 Enhancing women participation and empowerment
Operational Values
 Customer focused
 Mission focused
 Regular and intensive monitoring and follow up,
 Effective and efficient management,
 Cost effectiveness
 Binding to rules and regulations,
 Continuous learning from experiences and improving and
 Timely decision and reporting
2.4 Major Objective of this WEDP Loan Policy and Procedures

Manual
 To make the optimal utilization of the newly coming up of the programme,

i.e., Women Entrepreneurship Development Programme (WEDP),

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 To realize the ever intention of the Company, i.e., enhancing of women

participation in its outreach and loan portfolio; at least to reach 50% of
client outreach and loan portfolio.
 To provide some optional opportunities for women owned business, being

individuals &enterprises, like the exemption of pre loan savings, different
collateral options, larger loan size & others.
3. Binding Rules, Regulations, Policies and Directives

In providing sustainable financial services, there are pertinent proclamations
major binding rules, regulations, policies and directives issued by the national
bank of Ethiopia to govern micro finance institutes and financial institutes as
a whole in the country. Thus, this individual lending manual has taken into
account these major polices and directives while delivering individual loans.
4. Major Policies & Procedures of the Manual
4.1 WEDP Loan Deliver Policies

This WEDP loan lending manual is intended to enhance women owned
individual businesses or enterprises. The main targets are individual
businesses owned by women and of organized women enterprises in any one
of the business types, sole proprietor, Private Limited, Share Companies and
partnerships that are registered with the concerned bodies & fulfill all
necessary criteria’s.
The targeted women can be of educational background, being graduates from

Technical Education and Vocational Training (TEVT), Colleges and
Universities as well as other unemployed women & youths those have
interests of running businesses either individually or in organized one. The
women may fully or partially own the enterprise and demonstrate good
entrepreneurship knowledge and skills.

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Since there may be high failure rate of new business start-ups, it is

recommended to focus mainly on the existing businesses to be financed
under WEDP; if exceptions are made to this policy, they should only be made
for extremely qualified and experienced entrepreneurs;
4.2 Targeting and Marketing WEDP Loan

Targeting & marketing of the WEDP loan availability will be through the following
channels
 By referrals. This will be the main marketing tool used using referrals from
existing clients especially
 One Stop Service Centers-to be provided with accurate information about

the loan so as to manage potential client expectations
 Cross selling to walk in’s and existing clients
There are some eligibility criteria for this WEDP loan targeting. These are;
 Brief background of the business runner or owner, Be permanent resident
of the lending branch,
 Viable business plan,
 Renewed or valid Business License,
 Job related experience and skills of operating business,
 Appropriate working and sales outlets
 Audited financial report for the businesses so far in the market,
 Able to present appropriate matching collateral/s,
5. Priority Sectors
OCSSCO, as a development supporting MFI, gives priority to the Individual
Business that can contribute to the economic growth, industrial transformation
and the sectors that can create more job opportunities. In line with this,
individual business loan working on manufacturing and other related business

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that are supporting the export sector as well as produces raw materials or
products that can substitute imports shall be OCSSCOs’ priority sectors for
financing.
Accordingly, the followings are some of major business types that shall be given
priority:
Urban
Manufacturing Construction Trading Service Sectors
Agriculture
 Textile and  General  Domestic  Transport  Modern

garment contractor products service fattening
wholesaling
 Leather and  Sub-contractors  Cafeteria and  Bee keeping
leather products  Domestic restaurant
 Production of products  Poultry
 Food processing construction retailing  Packing
and beverage inputs service  Vegetables
 Inputs and fruits
Metal engineering  Traditional delivery  Consultancy production
mining service and
 Wood work distribution
 Coble stone  Project
 Handicrafts engineering
 Infra structure service
 Agro processing sub contract
 Product
design and
development
service
 Electronics
software
development

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6. Savings
OCSSCO has been providing two types of saving services namely compulsory and
voluntary savings.
6.1 Compulsory Savings

As a rule, OCSSCO has two types of compulsory savings which mandatory for all
of its loan customers to access any loan. The 1st one is pre-loan saving before
accessing a loan. The 2nd one is post-loan savings which is monthly deposit which
is Birr 100.00 and above until the loans is fully repaid. In order support the
growth oriented women entrepreneurs, OCSSCO has let off the pre-loan saving
for WEDP loan beneficiaries.
6.2 Voluntary saving

Voluntary saving is a type of saving that everybody can deposit at OCSSCO; being
loan borrowers, non-borrowers, organizations/institutions and the communities
at a large. To open a voluntary saving account, the minimum amount is Birr 10
(ten). Voluntary saving is withdraw able at any time during the working hours of
the Company based on terms and conditions put on the passbook of savers and
under withdrawal part of this manual.
7. Loan size, Application Fees, Interest Rate, Grace Period &

Loan Terms and Repayment Modality
7.1 Loan size; is the amount of the loan approved for the business based on
the types of the businesses and mainly of the repayment capacity business.
The size can be determined with the critical assessment of the business
during the loan appraisal.
7.2 Application Fee; is considered as a service charge for processing the loan.
The application fee is 2% of the loan which will be paid before the loan is
released.

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7.3 Interest rate is the price of the loans. OCSSCO has been charging10%on
declining basis. The interest rate starts accrue on the date that the loan is
released partially or fully.
7.4 Interest rate on deposits or savings. OCSSCO has been paying5%interest

on deposit annually which shall be calculated on the amount deposited
until the withdrawal date.
7.5 Grace period; it is the period during which the borrowers are let off from
loan repayment. It is the period given to the loan borrowers to demonstrate
the business. OCSSCO provides grace period based on the types of the
loan.
The 1st one is a grace period for investment loan which is 6 months while
the 2nd one is a grace period for working capital, which is 2 months for new
individual loan borrowers. No grace period for repeat women entrepreneurs
for working capital.
7.6 Loan Term. It the period of the loan stays at the hand of the borrowers
which is agreed up on with both parties. OCSSCO’s women entrepreneurs
loan terms are set based on the purpose of the loan. The 1st one is loan
term for working capital which is mainly a year. The second is loan term
for investment loan with maximum of three years.
7.7 Repayment modality is based on the type of the business. Generally loan
repayment modality is an installment base which might be monthly or
quarterly based on the types of the businesses. The loan repayment
schedule for the total loan amount will be issued on the date the loan
agreement is signed and to be given to individual business owner
immediately on same date.

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8. Women Entrepreneurs’ Business Plan Receiving, Appraising

and Approval Procedures and Authority Limit
8.1 Branch Level Business Plan Receiving Procedures

Service provider: Customer Service Officer (CSO) receive the business plan
 The women entrepreneurs shall submit the signed and stamped business
plan to the lending branch with official letter – application letter.
 CSO, if present in the office is responsible to receive the business plan but
at the absence of CSO, the branch manager or the accountant in the branch
office shall receive the business plan.
 The CSO or anyone who receives the individual business loan shall sign and
write the date and the time on which s/he receives the business plan and
gives the copy of business plan receiving format for each business plan
received to the agency generalist or the operators. (Use Business plan
receiving and transferring format).
Women Entrepreneurs Business Plan Receiving Checklist and Requirement

level; the individual business plan shall not be accepted if one of the following
mandatory documents is missed:
Mark
Requirement
√ or ×
S/N Particulars level
At the time of
receiving
1 Renewed or valid business license Mandatory
Signed and stamped business plan with

2 official application letter of business owner Mandatory
or the Chairperson of the business
Be permanent resident of the lending
3 Mandatory
branch-with renewed/valid kebele ID card

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Mark
Requirement
√ or ×
S/N Particulars level
At the time of
receiving
Evidence of appropriate working and sales
outlets from the concerned body-e.g rental
4 Mandatory
agreement, or ownership letter from
authorized body
Certificate or any evidences of experience,
5 skill or job related trainings to run the Optional
business (optional)
Audit report or financial statements for

6 Mandatory
repeat Women Entrepreneurs
7 ID from One Stop Service Center Mandatory
So, any Women Entrepreneurs’ business plan should be a complete one which
encompasses necessary points &has to keep all business plan preparation steps
and procedures. It should at least includes personal data; equipments owned
and to be purchased, appropriate working and sales outlets, yearly
production/service plan, yearly raw material requirement, yearly sales plan and
other yearly operating expenses and yearly profit and loss statement.
8.2 Branch Level WEDP Loan Appraisal Techniques Procedures

Branch office is responsible for individual business loan. The branch office
should confirm the feasibility/profitability of the business to be financed. It is
strictly prohibited to approve and release the loan based only on the
collateral/guarantee value without properly analyzing the feasibility of the
business. The approving team will be responsible and accountable for any loan
that is disbursed without proper analysis and evaluating the profitability of the

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business. The Customer Service Officer (CSO) will appraise the business plan
using the following business appraisal techniques;
i. History and Nature of the Business,

ii. Business managing capacity of business owner,
iii. The existing market for the goods & services to be financed and market
competitions,
iv. Goodwill and Intangible Assets of the business owner at local
communities,
v. Reality of the set cash flow of the submitted business,
vi. Earning Capacity of the business owner,
vii. Recent Sales of Stocks for scale up individual business loan,
viii. Economic Outlook and others,
The CSO will submit the appraised individual business plan to the branch loan
appraising& approving team. The branch loan appraising& approving team will
reappraise the business plan if needed. The loan approving team at the branch
level shall be organized by the following core process staffs:
8.2.1 Branch Level WEDP Loan Online Appraising Techniques

After the receiving of Women Entrepreneurs’ business loan, the appraiser will
integrate the information drawn from analysis of data, and from numerous
appraisal techniques to reach on a conclusion. This conclusion may be an
estimate of value or a range in which the value may fall. An effective integration
depends on an appraiser’s skill, experience, and judgment. With this on line
appraisal techniques the followings would be considered;
 Confirm the appropriateness of the working place and selling outlet,
 Confirm the capacity, experience, readiness and initiation of the business

owner with direct discussion with him/her,

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 Consider the value of the assets like materials, tools and other equipments
that are already owned by the individual business owner (if any),
 Review the financial managements and records system of the individual

business owner and consider the bookkeeping procedures and capabilities,
 Critically evaluate the estimated value of the collateral, if & only if house
collateral,
By doing this,
 Individual business loans at branch offices should be appraised and

evaluated within two days of receiving the business plan,
 All members have equal vote in approving the loan and it is encouraged to
approve or reject the loan by all members consensus but if there is
reservation or abstain among the members, the different idea shall be
recorded and the loan is approved or rejected if the majority favors the
decision.
 All loans above the branches’ authority limit shall be sent to the branches’
respective Zonal offices
 No business plan is sent to the next higher layer by branch office if the
branch office appraisal and approval committee has rejected or decided for
amendment.
 All original loan documents whether that to be approved at branch or zonal
or head office shall be kept locked at branch office under the custody of the
branch manager
 The loan documents that to be sent to zonal or head office shall be only the
copy of the relevant documents.
 The branch should thoroughly review, appraise and evaluate the loan
requests and send the minute with relevant copy of the loan documents to
Zonal office with clear opinion and recommendation. (Use business loan
appraisal and recommendation format) All loan approving team members
should sign on the minute of recommendation.

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8.2.2 Branch Level WEDP loan Offline Appraisal Techniques

Offline business plan appraisal tasks are mostly the on table business appraisal
at office. The business appraiser who is the CSO will consider the following;
 Confirm whether all mandatory requirements of the business plan and

documents are fulfilled,
 Consider whether the business owner has been involving in export/import

substitute businesses or development oriented businesses,
 Evaluate the strength of the collateral value in recovering the loan, if

defaulted,
 Critically analyze whether the business doesn’t create market saturation if

materialized,
 Evaluate whether the sales plan is based on market demand in that

particular area/town,
 Check whether there is sustainable market and promising demand for the
product/service of individual business,
 Check availability of raw materials and other inputs in nearby distance,
 Consider the loan purposes:
 If the loan requested is for investment capital, does the

machine/equipment requested is as such important to run the business?
 What other alternatives are there other than the equipment/machine

requested?
 Are there necessary infrastructures and electric power to use the machine
in the working area? If yes where/how /when can be the machine/
equipment acquired?
 When does it start to generate cash inflows and etc?

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 If the loan requested is for working capital,
 Does the volume that is requested match with the plan?
 Can it be utilized and converted in to cash within the period in which

the repayment will start?
 Does the business owner benefitted or lose by price fluctuation (if any),
if purchase is made according to the request made and etc?
 Experience and skill of the business owner to run the proposed

business,
 Also consider the expected monthly repayment and the real situation of
the town/working area to generate this repayment amount(repayment
capacity of the business owner)
 Compare the sales forecast of the business owner stated in the cash flow
statement with the existing and real situation of the working area.
 Also take in to account the competitors (those running the same

business) position in the town or working area
 Confirm whether the projected raw material, net income, working and
investment capital requirement, direct and indirect cost and output
price (service or product) are not exaggerated.
 Review the audit and financial reports, if it is scale upping the business
& review the credit history of the business owner,
 Examine and investigate if the business owner has any credit history
form other MFIs or lending institutes including banks
 Evaluate the feasibility of the plan by using at least non-discounted and

repaying capacity measures.

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8.3. Zonal Level WEDP Loan Appraising Techniques

The Zonal business loans appraising team is organized by the following core
process staffs:
 Zonal Manager (chair person),
 Zonal Office core process officer (member),
 Senior Accountant (member),
 Senior HRM Officer (Member),
 Zonal Office Senior core process officer(member and secretary)
First of all, any business plan sent to the Zonal offices should be critically
appraised by the branch loan approving team and suggestions/recommendations
should be given by same. All loan documents and recommendation minute that
are signed by the branch loan approving team should be sent to the zonal office
(Use business loan appraisal and recommendation letter).
With the same manner as of the branch level business plan appraising and
approving tasks, Zonal level business loan appraising team has been carrying out
the appraising tasks of business loans submitted by their respective branch
offices which are beyond branches’ loan approval authority limit. Same business
loan appraising techniques for branch level, like off and on lines appraising
techniques would be employed by Zonal business loan appraising team even
though not as detail as branch level. Because all business plans sent to zonal
offices are assumed that the branch office has appraised thoroughly.
But if the zonal loan approving team considers the importance of physical visits
of the business, the zonal business appraising and approving committee can
delegate two to three of its members and sent to the specific area/town of the
business to be financed and to appraise in detail to confirm the value of the
business in addition to branch office appraisal and recommendation. The
delegated team should present a written report to the Zonal office loan approving

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committee. The approving team should immediately review and provides its
decision within the day set? to approve the loan.
With this,
 Zonal office should appraise and evaluate the business plan on the day it
received,
 The Zonal office attorney (if available) shall review all loan documents that
to be approved at zonal office and provide legal advices before the loan
approval notification is issued,
 All members have equal vote in approving the loan and it is encouraged to
approve or reject the loan by all members consensus but if there is
reservation or abstain among the members, the different idea shall be
recorded and the loan is approved or rejected if the majority favors the
decision.
 Notification letter should be sent to the branch within a maximum of five
days. The Zonal office should notify the approved loan amount to the
branch offices and the copy of the letter should be send to its respective
directorate at head office. (Use approved loan notification letter format),
8.3. Head Quarter Level WEDP Loan Appraising Techniques

As for Zonal office, first of all, any business plan sent to the Head office should
be critically appraised at two levels; i.e. at the lending branch and at the Zonal
offices and come with appropriate suggestions/recommendations. All loan
documents and recommendation minute that are signed by zonal offices should
be sent to the Head office (Use business loan appraisal and recommendation
letter).
With the same manner as of the zonal level business plan appraising tasks, head
quarter level business loan appraising team will has been carrying out the
appraising tasks of business loans submitted by their respective zonal offices
which are beyond zonal offices’ loan approval authority limit. Same business loan

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appraising techniques for branch & zonal offices will be employed, like off and on
lines appraising techniques similarly even though not as detail as branch & zonal
offices level. Because all business plans sent to Head office are assumed that the
branch & Zonal offices has appraised thoroughly.
As for Zonal offices, if the Head office loan appraising team considers the
importance of physical visits of the business, the committee can delegate two of
its members and sent to the specific area/town of the business to be financed
and to appraise in detail to confirm the value of the business in addition to
branch and zonal offices appraisal and recommendation. The delegated team
should present a written report to the Head office loan approving committee.
9. Collateral options
 Property collateral mainly of house collateral,
 Salary guarantee,
 Time deposit certificate /Evidence of blocked account
 Vehicles
 Machines
A. Property Collateral
1. Any individual business loan can access OCSSCOs’ loan through the
property collateral mainly of only house collateral (if it is property collateral
option) that is owned either by the borrowing individual business loan
borrower or of third party property.
2. The individual business owner and his/her spouse should sign the
agreement that confirms they are voluntarily providing their house as a
collateral for the loan they have requested for,
3. If the house owner who provides collateral reports he/she is single
(unmarried), evidence of non marriage should be presented. Authenticate the
evidence from the issuing office.

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4. Verify and authenticate the ownership certificate, marriage certificate and

other relevant documents from the concerned issuing offices (municipality)
5. House ownership original certificate and site plan and other relevant
evidences should be presented to the lending branch,
6. The lending branch should confirm whether the house has been constructed
according to the approved plan and work permit and also take in to account
the bill of quantity in which the house has been built(if any) to estimate the
value of the house.
7. The borrower should present the confirmation letter from respective
municipality to confirm that the house has not been kept or held or
registered by any other obligation or collateral so far.
8. Collect letter of guarantee and registration from the municipality to protect
the transfer of the house to third party or not to register the house as
collateral for another obligations until OCSSCOs’ loan is fully repaid and
clearance of the liability is issued from OCSSCOs’ lending branch.
9. The house to be held as a collateral can be at different construction levels
that includes:
 Foundation level completed,
 Frames/skeleton of the house is built but no roofing,
 Frameworks and roofing are completed but finishing remains and
 The house fully completed and finished. Thus, it is possible to take

buildings at different construction stage as collateral, even though the
construction has not been fully completed.
10. In any case, the loan amount should at least lower than the estimated market
value of the collateral/the house by 25%.
11. The lending branch office should request professional support from the
respective municipality where the estimation becomes difficult.
12. Even though the estimated value of the house or construction under progress
is known through the bill of quantity submitted by the property owners or

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through calculations to be made using the value of m², or through the

support of municipality professionals, still OCSSCOs’ loan appraising and
approving team should independently evaluate and estimate the construction
value of the collateral taking in to account the real and current value of
similar construction in the area.
13. The bare land without any construction or the construction below the
foundation level cannot be taken as collateral.
14. The value of land and the site value are not considered when estimating the
value of the collateral house. The value to be taken in to account is the value
of the constructed house only
15. The house to be presented as collateral for the loan of Birr 200,000 and above
should be insured and the insurance agreement should be renewed each year
until the loan is fully repaid.
16. The borrowing client is required to renew the insurance policy every year for
the loan term above one year. If the borrowing client doesn’t renew the
insurance policy, OCSSCOs’ lending branch renews the policy and add all
related expenses and premium paid on the loan balance of the borrowing.
17. At least two of the branch level loan approving team members, alternatively
branch manager and CSO, or branch manager and branch finance officer or
branch manager and branch cashier can evaluate/estimate the value of the
house to be held as a collateral and submit a written report to the loan
approving team,
18. All loan documents including original ownership certificate and other related
evidences should be filed and kept locked under the custody of the branch
manager.
B. Salary Guarantee
1. Women entrepreneurs can access OCSSCOs’ loan through salary guarantee of
permanent Government or Non Government Organization employees excluding
private Share Company and Plc staff.

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2. The person who guarantees the borrowers with his/her monthly salary should
submit official letter of guarantee from the employer that states/indicates at
least the following information:
 Whether he/she is permanent employee,
 Date of recruitment in the present office and years left for retirement for
governmental employee and date of recruitment in the present office and
end of contract terms for NGO staff,
 The letter should also state the gross salary (taxable salary only) and
marital status of the guarantor,
 The letter should also state whether the guarantor has no any other
outstanding loan from other party and his/her salary has not been held as
a guarantee for any other obligations.
 The guarantors’ office should promise in the letter to notify OCSSCOs’

lending branch in advance when the guarantor is transferred and/or
terminates the work contract for any reasons as well as promise not to
issue clearance until OCSSCOs’ lending branch notify the office as the loan
guaranteed has been fully repaid and so that the guarantor is free from any
accountability for the loan he/she has guaranteed.
3. The spouse of the guarantor should sign on the loan guarantors’ agreement
documents.
4. If the monthly salary of the employees is paid by the guarantor office, the office
should promise to deduct from monthly salary of the guarantor or if the salary
is paid by the town/Woreda finance and economic development offices, the
Woreda/town finance office should also promise to deduct from the monthly
salary of the guarantor and refund to the OCSSCOs’ lending branch monthly, if
the guaranteed individual business owner fail to repay the loan as per the
agreed schedule.

23
5. OCSSCOs’ lending branch cashier should collect the monthly repayments from
the office of the borrower or office of finance and economic development which
ever paying the salary of the guarantor.
6. The guarantor should work at least for 6(six) months in his/her current
employer office and at least left five (5) years for retirement.
7. The loan approving team should ensure that whether 1/3 of the guarantors’
monthly salary covers and repay the full loan and interest within three years
period if default faces. (1/3 of monthly salary X 36 months should be greater or
equal to the loan and the interest amount on the loan)
8. The guarantor should agree and sign the agreement format to pay the loan
from his/her monthly salary on behalf of the borrower if defaulted, and
9. The borrowers has also an option of bringing two (2) salary guarantors if a
single guarantor monthly salary doesn’t match the require repayment, if
defaulted.
10. OCSSCOs’ lending branch staff cannot be a guarantor,
C. Time Deposit Certificate /Bank Blocked Account

1. Any person/s or institution those have a time deposit at OCSSCO’s lending
branch which is equivalent to the loan amount requested can be used to
guarantee the individual business.
2. The time deposit account owner should sign agreement that certifies
OCSSCOs’ mandate to transfer the time deposit amount to the guaranteed
individual business loan repayment without any additional approval,
immediately up on the borrowing failed to repay the 1st & subsequent
installments.
3. The guarantor can also block loan equivalent amount in OCSSCOs’ lending
branch or any other bank. The evidence of the blocked bank account should
confirm that:
 The account is not released until OCSSCO provides clearance letter as well
as,

24
 The blocked amount is transferred to OCSSCOs’ lending branch

immediately if the guaranteed fails to repay the 1st installment and if
OCSSCOs’ lending branch requests the bank to transfer the guarantee
amount because of the failure of the borrowing to repay the loan as per the
agreement made.
4. The guarantor is also expected to certify that he/she couldn’t withdraw
his/her time deposit which is equivalent to the outstanding loan of the
borrower.
D) Vehicles –any vehicles which are legally registered at the lending branch town
transport authority not before 10 years will be used as collateral for loan. This
type of collateral will be used only for loans which does not exceed Birr
100,000.00.
 The owner of the vehicle should present ‘Librie’

 Certification should presented from concerned transport authority,
 Insurance certificate & etc.
E) Machines – machines which cannot move easily from place to place and which
are registered at trade and industry office of the respective lending branch will
be used as collateral. The value of the machine has to be more than 50% of
the loan and its purchased date should be on or latter than 5 years.
10. WEDP Loan Approval and Authority Limit
10.1 Branch level Loan Approval and Authority Limit

Branch level business plan approving team members have equal vote in
approving of the business loan and it is encouraged to approve or reject the
loan by all members consensus but if there is reservation or abstain among the
members, the different idea shall be recorded and the loan is approved or
rejected if the majority favors the decision.

25
 The business owner should be notified within five days of receiving the
business plan as long as the business fulfills all requirements.
 All loans above the branches’ authority limit shall be sent to the branches’
respective Zonal offices
 All original loan documents whether that to be approved at branch or zonal
or head office shall be kept locked at branch office under the custody of the
branch manager
 The loan documents that to be sent to zonal or head office shall be only the
copy of the relevant documents.
 The branch should thoroughly review, appraise and evaluate the loan
requests and send the minute with relevant copy of the loan documents to
Zonal office with clear opinion and recommendation. (Use WEDP loan
appraisal and recommendation format) All loan approving team members
should sign on the minute of recommendation.
Branch level Loan Approval Authority Limit

i. All Micro banks, loan approving teams are delegated to approve individual
business loan up to Birr 100,000.00.
ii. Other branches’ loan approving teams are delegated to approve the business
plans that have loan size of up to Birr 75,000.00.
The branch manager issues loan approval notification to the borrowing

individual business owner (use loan approval notification format).or all
approval authority limits, no loan is disbursed at head office or Zonal office
except if the lending branch has delegated head office to effect the payment in
case of if the suppliers are found in Addis Ababa. So, all loans disbursement
are made at OCSSCOs’ lending branch in which the loan request was primarily
generated.
If the loan approved is both for investment and working capital, the amount
approved for investment capital is released first and the amount for working

26
capital will be released next after the investment capital utilization report is
submitted by the case manager (CSO).
The loan amount that has been approved for investment capital is released
fully at once. The loan approved for working capital can be released once or
the borrower can withdraw part of his/her loan. But the loan should be
deposited the borrowing account opened at the lending branch.
10.2 Zonal Level Business Loan & Approval Authority Limit

The Zonal office loan approving team is delegated to approve loan between Birr
100,001.00 - 300,000.00 that shall be sent from micro bank, including
Dukem and Legetafo branch as well as all loans between Birr 75,001-
300,000.00 that shall be sent from other remaining branches.
10.3 Head Quarter Level WEPD Loan Approval and Authority

Limit
As for Zonal office, first of all, any business plan sent to the Head office should
be critically appraised at two levels; i.e. at the lending branch and at the Zonal
offices and come with appropriate suggestions/recommendations. All loan
documents and recommendation minute that are signed by zonal offices should
be sent to the Head office (Use business loan appraisal and recommendation
letter).
With the same manner as of the zonal level business plan appraising and
approving tasks, head office level business loan appraising team has been
carrying out the appraising tasks of business loans submitted by their respective
zonal offices which are beyond zonal offices’ loan approval authority limit. Same
business loan appraising techniques for branch & zonal offices will be employed,
like off and on lines appraising techniques similarly even though not as detail as
branch & zonal offices level. Because all business plans sent to Head office are
assumed that the branch & Zonal offices has appraised thoroughly.

27
As for Zonal offices, if the Head office loan approving team considers the
importance of physical visits of the business, the committee can delegate two of
its members and sent to the specific area/town of the business to be financed
and to appraise in detail to confirm the value of the business in addition to
branch and zonal offices appraisal and recommendation. The delegated team
should present a written report to the Head office loan approving committee.
At Head office level, business loans appraising and approving team is categorized
in four levels;
A. District level;
The first business loans appraising and approving team is at District level which
encompasses;
1. District Director of the respective loan requesting branch (chair person)
2. The respective district team leader (member)
3. The respective district core process senior officer (member)
4. The respective district core process officer (member and secretary)
The approval authority limit of the district level team is from Birr 300,001 to
400,000.00.
The District loan appraisal and approving team approves the loan of under its
authority limit and the District Director sign and issue the letter of approval
notification that to be sent to the requesting branch, respective zonal office and
to the deputy managing Director for the core process.
B. At Core Process Level
The second loan approving team is a team that is organized at core process level
with the loan. The team constitutes:
1. Deputy Managing Director-Core process (chair person)
2. The three District Directors (members)

28
3. Team Leader of the respective District in which the loan is requested

(member and secretary)
The approval authority limit of the Core Process is from Birr 400,001.00 to
500,000.00.The core process level loan approving team appraises and
approves the loan and letter of loan approval notification to all concerned
bodies shall be signed by the deputy managing Director for the core process.
C. At Management Level
The third loan approving team is a team that is organized at Management

team level. The team constitutes:
1. The Managing Director (chair person)
2. The two Deputy Managing Directors(Member)
3. All process Directors(Member),
4. District Director of the respective branch in which the loan is

requested(member and secretary)
The approval authority limit is from Birr 500,001.00 to 5,000,000.00.
D. At Board of Directors’ Level
The fourth loan approving team is board of directors’ team for all loans above
Birr 5,000,000.00. The managing director and in his absence the DMD-Core
process shall be member and secretary
 Before the loan request passes to the Board of Directors (BoD) the
Management team reviews, evaluate and appraises the loan requested.
 The Managing Director presents the loan requested to the BoD with the
recommendation of the management team.
The Managing Director notifies the decision of the loan that shall be approved by
the management team as well that will be approved by the BoDs’ to the branch

29
through official letter after all the management team and the members of BoDs’
sign the minutes.
As a general remark, no loan is disbursed at head office or Zonal office. The loan
disbursement is made at OCSSCOs’ lending branch in which the loan request
was primarily generated. But if the approved loan is directly paid to third party
(suppliers), who lives in the towns where the head office is located, the lending
branch and the borrowing enterprise or individual should delegate Head office to
effect the payments to third party beneficiary on behalf of the borrowing
enterprise/individual and the lending branch.
11. Portfolio Quality Management

11.1 Loan Delinquency Management; Once a payment is not made on the
due date it will be considered delinquent. By observing the following, the
Loan Officer/Supervisor will avoid instances of loan delinquency:
11.1.1 Payment is delayed one day; The CSO should visit client and discuss
the reasons for delay and agree on the exact date when the missed
installment shall be paid. The client must commit in writing the agreed
date of repayment by signing the visit report form. The CSO will inform the
Branch Manager of the status after the visit.
11.1.2 First Demand Notice: If the borrower does not make a payment by the
agreed date a formal demand notice must go out to the borrower bearing
the signature of the Branch Manager or designated Supervisor in the
Branch. This letter will give the borrower 14 days notice to clear the
arrears.
11.1.3 Second Demand Notice: If after the First Demand Notice the installment
remains unpaid for the next 14 business days, the Branch Manager will
issues the Second Demand Notice. This notice shall inform the client to
pay the missed installments principal and interest plus any installment

30
that may fall due by the time of payment, within 14 days, to bring the loan
status to current.
11.1.4 Third and Final Demand Notice; If the borrower fails to appear within
the said 14 days after the Second Demand Notice and no agreement is
reached for the borrower to pay the total missed installments plus interest
due, the entire outstanding loan plus interest and costs thereof, will
become due and payable immediately. The Third which shall be the Final
Demand Notice shall be sent to the client stating the intent to collect the
entire debt plus costs thereof.
12. Monitoring
The success of the WEDP loan will ultimately depend on a proper monitoring
system. Loan reports and indicators must be generated regularly to:
 Track the status of the loan portfolio in a timely, accurate comprehensive

manner;
 Improve work of field staff, ensuring better monitoring of the loan portfolio
and providing more efficient services to an increasing number of customers;
 Enable Supervisor to spot check and monitor his/her areas of responsibility,
and focusing on priority areas that most require attention; and
 Help clients understand their obligation to pay on time.
 Customer Service Officers are able to know how the various businesses are
performing and detect early warning signals. When detected client can be
helped to better address the potential risks that have been identified. Loans
must be monitored:
 Before 1st loan repayment
 At least every quarter thereafter
 After any catastrophic event
One day after delinquency & Loan monitoring report attached

31
Annexes
Annex 1. Women Entrepreneurs’ Business Plan format

Any Women Entrepreneurs’ business plan should contain at least the following
general information.
1. Full name of the Business Owner _____________________________

2. Business Name _______________________________________________
3. Sex______________________ Age___________
4. Addresses:
4.1 Of Individual –Home address
Zone/Sub City ______________________, Woreda_______________________, Town

______________________________, Kebele_____________________, House
No._____________________, Telephone Residence_______________________,
Mobile _________________________
4.2 Business address;

Zone/K/ketema_________________________,Town____________________,Woreda
_________________, kebele __________________________, House
No._______________________, Tele No. ___________________________________
5. Marital Status; Single______, Married_____, divorced ______, or widowed ______,

Marriage certificate or evidence of marriage from authorized office.
6. If married, Full name of the Spouse,

___________________________________________________
Occupation; _________________________________________________________
If he/she is an employee, Full Name of his/her Organization

___________________________________________________________________________
Address; Zone/Sub City ______________________, Woreda

_______________________, Town ______________________________,

32
Kebele_____________________, House No._____________________, Telephone

Residence _______________________ Mobile _________________________, Email;
______________________________,
7. License No. and Date of Licensed_____________________________________________
8. Tax Identification Number or TIN ____________________________________________
9. Economic sector _____________________________________________________________
10. Type of the business & Products

________________________________________________________________________________
________________________________________________________________________________
11. Year of the plan: from _________________ to_________________________
12. Purpose of the Loan Requested
 To Expand the existing business (for investment __________or for working

capital _______________)
 To diversify ______________ (for investment __________or for working capital
_______________)
13. Initial Capital in Birr when the business was commenced
___________________________________________________
14. Current Capital in Birr ___________________________________________________
15. Business Status: New________, Growing ____________or Matured _________
16. Working premises; Own_____________, Rental_________ or leased _____________
17. Previous Sales Trend
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
____________________________________________________________________________

33
18. Real Demands of the product/s

_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
19. Total Loan Required for the Business in Birr _______________________________
20. Amount of Loan Requested in Birr _________________________________________
21. Own Cash Contribution in Birr ____________________________________________
22. Previous Credit History of the Enterprise; if any
_____________________________________________________________________________
_____________________________________________________________________________
Date settled
S/N Lender Amount in Birr Date Lent Remark
(Last Settlement)
I
II
III
23. Management competency, especially financial record keeping &

material management
________________________________________________________________________________
_______________________________________________________________________________
24. Audit report and other relevant information on the business.
25. Soundness of the business; Monthly cash flow statements
 Monthly Gross Sale ___________________________________________

 Expense (for purchase of raw materials) ________________________
 Other Expenditure _____________________________________________
 Repayment (interest) ___________________________________________

34
 Total expenses _________________________________________________

 Gross Profit ____________________________________________________
 Net income before tax ___________________________________________
26. Credit provision to the business created job opportunity for _____
employees
27. Type of collateral presented for loan; if it is house,
Zone/Sub City ______________________, Woreda_______________________,

Town ______________________________, Kebele_____________________, House
No._____________________
Balance sheet as at ___________________: (If any)
S/N ASSETS Amount Remark

1 Cash: a) in hand
b) in bank
c) in MFI
d) Total Cash
2 Current Receivables
a) Accounts/Iqub
b) Other Receivables
c) Goods in stock
d) Total Current Receivables
3 Payment on merchandise (prepayment)
Total current asset (1, 2 & 3)
4 Fixed Assets (Business)
Equipment and machineries
Vehicle
Building
Furniture and fittings
Business assets
Total fixed assets
TOTAL ASSETS ( 1, 2, 3 & 4)
LIABILITIES
5 Current Liabilities
a) Accounts/Iqub
b)Tax payable
c) Bank loans (short term)
d) Other Short term loans
Total Current liabilities (a, b, c & d)

35

6 Long Term Liabilities
a) Long term debt - Banks/
b) Long term debt - Others
Total Long term Liabilities (a & b)
Total Liabilities (5 & 6 )
7 Capital & reserve
TOTAL LIABILITIES AND CAPITAL (5, 6
& 7)
INCOME STATEMENT
INCOME STATEMENT
INCOME Average Projected %

Monthly after loan increase
1 Sales
2 Cost of Goods sold (expenses)
Beginning Inventory as at _________
Add purchases for the period
Less ending Inventory as at __________
Total Cost of Goods sold
3 Gross Margin [1- 2 (Total)]
4 Expenses
Wages & salary expense
Business premises rent
Utilities
Transportation
Maintenance & repair
Tax
Insurance
Total Business Expenses
5 Personal/Households (including
residential
Food rent) expenditures
and related
Education/health
Rents

36

Utilities
Payments for Social obligations (Iqub---)
Transportation
Others
Total Personal/Households Expenses
6 Other Households incomes
7 Net Income [(1 + 6) – (4 + 5)]
Applicant's Name __________________

Sig.__________________
ANALITICAL & COMPARATIVE RATIOS
ANALITICAL & COMPARATIVE Calculation Note

RATIOS
1 Liquidity Current asset/current >1.2
liabilities
2 Profitability over sales Net profit/sales >15%

3 Debt to asset (Leverage ratio) Total debt/total assets <50%
4 Working Capital increase Working capital after <=200%

loan/working capital before
loan
5 Cash to loan Cash on hand or in >=20%
bank/loan
6 Collateral to loan Collateral value/loan >=125%

requested

37
Explanations on Financial Statements
(To be filled by Branch Staff)
Key Descriptions Amount

Items
Processed by ________________________________
Position ___________________
Sig. _______________________
Annex 2. Instructions on filling the Appraisal tool
General Information Sheet

This is the initial information collected immediately following a client’s successful
completion of the pre-screening process at the branch or during first business
visit.
Customer & Business Information

All demographic information about the borrower and spouse, with supporting
documents.
Information on Loan Request
Initial loan request from the client, before analysis is done. The actual
recommended loan amount will be calculated and confirmed in the financial
analysis pages and may require that this initial request be adjusted to meet
repayment capacity.

38
Credit History & Exposure
Review OCSSCO’s records for previous borrowing history, and indicate any slow
or past due payments. Ask the client for borrowing history from another lender,
which could be a bank, MFI, family member, friend, or business. Any type of
borrowing history should be shown here. If the applicant borrowed from an
unofficial source (family or friend) also get their contact information to verify
repayment history.
Savings and deposit balances should be existing balances only, but previous
savings history should be entered in the notes section as an indication of the
applicant’s practice of saving.
Business Information
Choose the most accurate description of the economic sector, in which the
business is operating, from the drop-down options, with a more detailed
description in the Core Business Activity section. Paid FT (full-time) employees
should include family members working in the business, excluding the business
owner themselves. If an employee works part-time, estimate the full-time
equivalence. For example, two employees working half of a day would equal 1 FT
employee.
Worksheet
All of the information is collected at the business visit through interviews with the
applicant and verified by walking around the business, later interviews with
suppliers, and other information collected. Print blank pages of the Worksheet
and carry to the business to complete by hand, and later enter on the computer.
Assets
Cash represents the actual cash sitting in the cash drawer at the business. Bank
and MFI balances are automatically brought forward from the General
Information sheet.

39
Stock / Inventory are the actual inventory sitting in the shop at the time of the
visit. It needs to be counted by the CSO and its value estimated based on records
the applicant can show from recent purchases.
Fixed Assets are also those assets present at the business, such as furniture,
coolers, processing equipment, vehicles or the building in which the business
sits. These values must be estimated through a discussion between the client and
CSO, and can be confirmed through interviews of other business owners or staff
at OCSSCO, but are generally rough guesses.
Liabilities
Accounts Payable includes any bills outstanding at the business at the time of
application. This includes inventory that was purchased on credit or other
business expenses that have been billed but not yet paid.
Loans or any debt to a family member, friend, or other business have been
divided into short-term and long-term in order to calculate liquidity on the
Financial Sheet. Applicants should be encouraged to be honest about revealing
this debt, so OCSSCO can calculate a realistic repayment plan that supports
their business and that allows them to be successful.
Cash Flow Historical Estimate

Sales are estimated by the applicant for the period which is easiest for them to
calculate and for which they can produce some written record. Some businesses
make a daily handwritten record, which is later recorded in a ledger. Both the
records should be reviewed to arrive at an average. A detailed breakdown of each
type of item sold is not necessary, if written records are consistent and a daily or
monthly total average can be safely estimated.
Seasonality in sales are months that have significantly larger or smaller sales due
to large public holidays or slower periods due to weather or crop cycles. The
amount of average sales in these low or high months should be indicated and
compared to the later calculation of the monthly loan payment amount to be sure

40
the applicant is prepared to make payments even through seasonal changes in

sales.
Inventory Purchases are estimated by the applicant for the period in which they
normally make purchases. For example, if some supplies are purchased daily,
while others are purchased weekly or monthly, use those columns to record
average amounts. Daily and weekly amounts will automatically be converted to
monthly estimates in the excel program when entered on the computer.
Operating Expenses are all other business expenses. They should be recorded in
the column that best reflects the frequency of their payment – daily, weekly,
monthly.
Household Finances are all other income and expenses the family incurs. For
example, if a spouse has income from a job or another business outside of the
applicant’s business that income should be recorded. Conversely, any expenses
associated with that outside business, and all household expenses should also be
recorded.
Collateral Valuation
This section is used to identify and value any collateral available for supporting
the loan. Once entered on the computer, a collateral coverage ratio is
automatically calculated.
Financial Sheet
Loan Request Summary

This section is automatically generated from the previous General Information and Work
Sheet.
Balance Sheet Projection Analysis

All entries in the section are automatically generated from the information entered on the
Work Sheet.

41
Loan Capacity Analysis

While all of these entries are also automatically generated, the CSO should review
the results of the calculations of the loan amount to ensure compliance with
OCSSCO policy on maximum loan amount:
Estimated Loan Amount must be less than Max. Loan Size (including
interest)
If the estimated loan amount exceeds the maximum allowed, a conversation with
the applicant is needed to explain that either the loan amount must be reduced
or the credit committee will be asked to make an exception to policy. If a lower
loan amount is possible, reduce the loan request amount recorded on the General
Information sheet.
Business and Character Assessment

The following are summary judgments of each aspect of the owner’s capacity to
run their business and their willingness to deal with OCSSCO honestly as an
indication of their willingness to repay the loan. After selecting an option in the
drop-down box for each, a total score will be calculated. In general, the score
should be greater than 50%, but in exceptional cases a situation may occur that
produces a score that does not reflect the situation completely, so CSOs are
encouraged to add further notes to explain differences.
Business:
Management Competence – does the owner/manager have sufficient business

knowledge, such as recordkeeping, and inventory management to be successful
at managing cash flows and other aspects of the business? Also, do they have
adequate skills for managing and supervising employees so they are productive?
Key Customers / Suppliers – are supplies and inventory sources reliable and
sufficient? Are all aspects of the supply side of the business adequate and not
prone to undue risks, so an uninterrupted supply (at stable prices) is reasonably
assured?

42
Sales Prospects – is demand for the products reasonably strong and competition
not expected to change significantly during the loan period? Can sales be
expected to remain relatively constant during the loan period?
Technical Expertise – how experienced is the applicant in the technical aspects

of running the business. For example, if it’s a bakery, does the owner have
sufficient experience and expertise in all aspects of baking the goods being offered
or is he or she dependent on one or two employees for that expertise?
Character:
Recordkeeping - the quality of the records being kept and expertise running the
business.
Responsiveness - the willingness to share information about the business and

family financial information. Can he or she be trusted to work with OCSSCO
honestly in the future?
Credit History – results of investigation into the applicant’s previous borrowing

history.
Third-party Opinion – interview other business-owners in vicinity of business or

families near family home to get their opinion on whether applicant can be
trusted to do his or her best to repay the loan, and whether they are likely to have
the resources from which to make the payments.
Analysis & Appraisal Sheet

This sheet provides a summary of the key analysis and ratios, from which the
CSO and credit committee can make its final decisions about the application.

43
Ratio Analysis
The following ratios are calculated automatically using the following formulas:
Normal
Ratio Formula Policy Interpretation
A measure of the owner’s investment in the
Short & Long term
Debt ratio business in relation to outside investment. Does
loans / Capital < 50%
before loan the business owner have more at risk than the
(Equity)
lender?
Net profit Net profit after taxes / > cost of Does the client generate enough net profit after
margin total sales credit paying taxes to pay the cost of the credit?
Current liabilities / Is enough cash and near-cash available to pay
Liquidity >1
current assets debts now or nearly due?
Forced sales value of
Collateral to
collateral / loan’s > 100% Could collateral be liquidated and entirely pay off
loan
principal plus interest the loan?
A measure of how much the size of the business

Loan to Inventory / loan will increase due to the loan; excessive increases
< 100% in inventory may not create a corresponding
inventory principal
increase in sales. Use this ratio on retail sales
businesses only.
A measure of the amount of the item being
Cash on hand / loan purchased that is financed versus paid for by the
Loan to cash < 80%
principal client – the % of risk carried by the lender versus
the business owner.
To be updated with agreed upon ratios and values
Recommendations
In this section the CSO and supervisors make recommendations for whether the loan
should be approved or changes made in the loan terms before presenting the application
to credit committee. An column next to each ratio calculation shows check marks (√)
when the ratio meets the norm set by OCSSCO management. If an X appears the loan
does not meet policy and will either need to be restructured or an exception made by the
credit committee.
The Decision section documents the credit committee decision and provides space for
each member to sign the approval.

44
LOAN MONITORING REPORT
Borrower’s Address Amount of

Name Loan/Term
Loan officer Branch Annual %

name rate
Before Date Date Date Date Date

loan
1. Actual Outstanding
Balance of Loan
2. Principal in Arrears
/
Overdue days:
3. Forecasted Sales
4. Existing Sales
5. Cash
6. Accounts
Receivables and
advances
7. Accounts payable

45
8. Working capital
9. Capital investment
# of visit and Describe the stages and quality of the use of the loan, any changes in the
date of market or competitive environment, reasons for changes in company
monitoring profitability, risks associated with A/R and A/P. Taking out money from the
business by the borrower and other risks emerging over the implementation of
the project.

46
Key information from the Client for cash flow analysis
BUSINESS
Applicant Name TIN No. Gender
Spouse
Spouse Name
occupation
Home Address Phone
Work Address Phone
Marital Status Education level Age
INFORMATION ON LOAN
REQUEST
Inventory/Raw
Loan Request Repayment Material
Loan Purpose split
Term (in Months)
Annual Interest
Cash contribution total
Rate
Grace period Months

CREDIT HISTORY &
EXPOSURE
Lender Amount Balance Maturity Status
OCSSCO 0
OCSSCO 0
OCSSCO 0
BUSINESS &
CHARACTER (Site visit)
Economic Sector Core Business Activity Pharmacy

47
Years operating
Paid FT employees: Current Planned
Business Score
(experienced,
organized,
competent,
resourceful)
Management Competence Superior 5 Average 3 Poor 1
Computerized bookkeeping, excellent knowledge of management and her field
Comments
(quality goods,
reliable, flexible)
Supplier quality Consistant 5 Satisfactory 3 Unreliable 1
She has 3 regular suppliers: Ephram, Robobot, and Vision
Comments
(loyal base, frequent,

on-time payers)
Sales prospects Very good 5 Good 3 Poor 1
The shop is busy.
Comments
(innovative, detailed, feasible, realistic)

Project idea/plan Very good 5 Good 3 Poor 1
Excellent plan - she's very experienced, has a good location, and knows the
Comments business
Character
Bookkeeping Complete 5 Some gaps 3 Very incomplete 1
Responsiveness Cooperative 5 Hesitant 3 Uncooperative 1
Legal compliance All in order 5 Incomplete 3 Not compliant 1
3rd Party Opinion Very good 5 Good 3 Poor 1

48
She has daily, weekly, and monthly computerized records of sales and expenses
Comments
Scoring area Max. Actual

Exposure
Business
Character
Financial
Score
Cut off
Status: Acceptable
Collateral cover:
Lists and scoring master
Gender Interest Rate

Male
Female
Repayment
Monthly
Quarterly
Bi-annual
LoanPurpose1 LoanPurpose2
Inventory/Raw
Material
Fixed asset
Infrastructure Infrastructure
Economic Sector
Trade

49
Service
Mnfctrng/Handicrafts
Construction
Crops
Livestock
Other
Education Level
Primary
Secondary
College
University
Illiterate
Marital Status
Single
Married
Divorced
Widowed
Status
Settled/on time
S/>30 late
S/>90 late
Regular
Irregular
Default
Management Competence

50
Superior
Average
Weak
Supplier quality
Consistent
Satisfactory
Unreliable
Customer base
Very good
Good
Poor
Project idea/plan
Very good
Good
Poor
Character
Perfect
Doc. Consistency Acceptable
Inconsistent
Prompt/willing
Repeated
Responsiveness
inquiry
Uncooperative

51
Registered
Business Formality In-progress
Unregistered
High
3rd Party Opinion Medium
Low
Score rating
Acceptable
Questionable
Reject

52
CASH FLOW ANALYSIS
Expenses
Income all Net
Month/Yr. all HH Exp. Net CF
Activities Income
Activities
1
2
3
Total Qtr
Annualized
Net CF times loan term
CF margin over total loan
OPTIONAL WORKSHEETS Monthly Equivalent Assumptions

Daily
Projected
Monthly Projected
Business Expenses Detail Daily Weekly Monthly Increase Weekly
Equivalent (Birr)
(%)
Supply purchases
Rent
Salaries & Admin. Exp.
Water, Electricity, Utilities
Repairs
Transport
Other:
Other:
Taxes
Total
Total Monthly Expenses
Projected
Projected
Monthly Projected
Sales: Major Items Daily Weekly Monthly Increase
Equivalent (Birr)
(%)

53
0 0
0 0
0 0
0 0
0 0
Total
Total Monthly Sales
Projected
Other Economic
Activities/ Other Income Expenses
Household Income
Total 0 0
Net 0
Monthly
HH Outflows
outflows
Food
Rent
Water, Electricity
Clothing
Cell Phone
Transportation
Education, Health

54
Iqub
Other:
Total HH expenses
Excel Part Financial
Assessment No. 0 Dated 00/01/00

Branch 0 Analyst 0
Client Name Client TIN 0
LOAN REQUEST SUMMARY

Interest
basis
Loan Amount
Flat No. Pmts/yr
Requested Annual interest rate
Term requested
Installment amount
(months)
Total no. of Monthly
Cash contribution Installments equivalent Declining
Cash after Total principle +
contribution interest
Interest basis
RATIO ANAYLSIS Flat Monthly equivalent
Declining
Scoring
Financial Ratio Calculation Norm Check Score √ x
Current Assets / Current > 1.2 √
Liquidity Liabilities
Net Profit/Sales/ Net Profit/Sales > 15% √
Debt to Assets Total debt / Assets < 0.5 √
For Working Capital Working capital after <= 200% x
Increase loan/before loan
Cash on hand or in
For Total Loan bank/loan
> 20% √
Collateral to loan Collateral value / Loan >= 1.00 √

55
request
REPAYMENT CAPACITY ANALYSIS
ANNUALIZED ANNUALIZED
Current Current
INCOME EXPENSES
Total business
Total Income expenses
Total HH expenses
TOTAL INCOME TOTAL EXPENSES
NET
PROFIT/LOSS
Annual loan
payment
PROFIT/LOSS
after loan
Installment to Profit Loan + Interest
√ x
Ratio capacity
√
RECOMMENDATIONS AND CREDIT DECISION
Recommendations:
1. Branch credit
expert
2. Branch manager
3. HO credit expert

56
Decision:
Credit Committee
Amount approved
Term approved
Interest rate
approved

57
Annex 3. WEDP Loan Agreement
LOAN AGREEMENT
Between
OROMIA CREDIT SAVING & SHARE COMPANY
(OCSSCO)
OCSSCO ____________________________ Branch office (hereinafter

referred as the ‘lender’) & legally represented by the Branch Manager,
_________________________________________________________, on the other hand),
Address of Branch Office: ___________________ Zone,

_____________________Woreda & __________________Town.
P.O. Box _______________________________

Fax No. _______________________________
Tele. No. _______________________________
E-mail _______________________________
And
Borrower __________________________________________________ May be it can be

MSE/ PLC/Share Company/ Individual/ or Partnership (hereinafter referred as
the “Borrower”) & legally represented by
____________________________________________________________, on the other
hand),
Address: ______________________ Zone _____________________ Woreda

______________________Town ______________________ Kebele, house
No.___________________ Tell. No. _____________________________

58
Specific Address of the Business; __________________ Zone _________________

Woreda ______________________ Town ___________________ Kebele, house
No.___________________ Tell. No. _________________________
1. Date of the Agreement

This Loan Agreement is made on _______________/20____ between Oromia
Credit Saving & Share Company _______________________ Branch, the
‘lender’
And
_________________________________________________________________________, the
‘borrower’.
2. Amount of the Loan

The Lender: Oromia Credit Saving & Share Company ____________________
Branch Office has lent Birr _________________
(__________________________________________________________________________)
for Working Capital and Birr _____________
(____________________________________________________________________________)
for Investment purpose which altogether is equals to Birr ___________
(____________________________________________________________________________)
for the above acknowledged Borrower.
3. Loan Repayment Condition
The Borrower is obliged to repay the borrowed loan as follows;
i. The outstanding loan of the Working capital shall be on installment,

Monthly , Quarterly or Semi-annually based
on the nature of the business again by putting capital ‘X’ in the box of the
agreed installment.
The working capital outstanding loan repayment shall start from
_______________/20______ and ended on _______________/20_____ with
____________ installments. The amount of principal loan
Birr___________(___________________________________________________) and
Interest Birr_____________(_______________________________________________)

59
which is totally equals to Birr_____________

(___________________________________________________________________________)
as per the agreed & signed installments by both parties.
ii. The outstanding loan of the Investment capital shall be on installment,
Monthly , Quarterly or Semi-annually based
on the nature of the business again by putting capital ‘X’ in the box of the
agreed installment.
The Investment capital outstanding loan repayment shall start from

_______________/20______ and ended on _______________/20_____ with
____________ installments.
The amount of principal loan Birr___________

(______________________________________________________) and Interest
Birr___________(____________________________________________________) which is
totally equals to Birr_____________
(_____________________________________________________________________) as per
the agreed installment by both parties.
iii. Both outstanding loans of working & investment capitals shall come join on
______________________/ 20_______. Then onwards, the amount of principal loan
Birr_______________ (___________________________________________________) and
Interest Birr_____________(___________________________________________________)
which is totally equals to Birr_____________
(____________________________________________________________________________)
shall be repaid as per the agreed & signed installments by both parties.
iv. The total outstanding loan shall be ended on __________________/20 _____ with
____________ installments which will be agreed and signed by both parties.

60
4. Grace Period
It is the period given to the loan borrowers to demonstrate the business.
4.1 A grace period for investment loan is up six months. So for this specific
loan the grace period is up to ______________________/20_____.
4.2 A grace period for working capital loan is up two months for new
borrowers. So for this specific loan the grace period is up to
______________________/20_____. But there is no grace period for repeat
working capital borrowers.
5. Application Fee, Interest Rate and Penalty

5.1 Application Fee: is considered as a service charge for processing the loan.
OCSSCO has been charging 2% of the approved loan as an application fee
for processing the loan which the borrower shall be paid before release of
the loan.
5.2 Interest rate: is the price of the loans. OCSSCO has been charging 10%
interest rate on its loans on declining bases. The interest rate starts
accrue on the date that the loan is released partially or fully.
5.3 Penalty: OCSSCO has been imposing penalty on daily bases in order to
enforce its loan repayment. Penalty will be effective on the borrower if the
borrower is unable to pay the stated of amount of matured loan on the
agreed installment/s. it is 0.25% of the matured principal which will start
accruing from the next day of the loan past due date.

61
6. Collaterals
OCSSCO has been implementing different kinds of loan guarantee and property
collateral mechanisms for the loan its loans as stated in collateral options of
this manual.
6.1 Types of Loan Guarantee

a. House -----------------------------------------------------------------
b. Salary of permanent Employees ---------------------------------
c. Time deposit certificate /Evidence of blocked account --------
d. Vehicles-----------------------------------------------------------------
e. Machines ---------------------------------------------------------------
The type of loan guarantee among the stated options can be described by
putting capital ‘X’ in the box of the loan guarantee option.
6.2 Name and Address of Loan Guarantor
Name_________________________________________
Address: __________________________Region/Town Administration,
_____________________________ Zone/Sub city, ____________________ Woreda
__________________________, Town, _____________________ Kebele, House No
_______________________ and Telephone No. _________________________________
The loan guarantee management will be as the described in detail under
collateral options of this manual.

62
7. Obligation of the Loan Guarantor/s

7.1 The loan borrower/s has obligated to pay the outstanding loan both
principal and interest without break off each agreed and signed
installments. If the borrower is unable to pay the matured outstanding
loan, both principal and interest and pass due over thirty days, it will be
considered as the borrower him/herself has barged the agreement. Then,
the lender has a mandate of enforce the guarantor to pay the past due date
loan including penalty and un matured once by considering that the
borrower is not a faithful borrower.
7.2 Concerning collateral loan guarantee, unless provide by law, the lender
shall run on unpaid stipulated or default due for payment by law as
mentioned under Article No.97/1990 and on Proclamation No.98/1990
under Sub Article No.27 (2) the lender can own and sell the collateral.
7.3 If the guarantor is salary based guarantee, of Government Employee or

NGO’s, the lender can collect the defaulted loan, including all other related
expenses as pre the law authorize.
8. Renewed Insurance of the House
If the borrower is borrowed the loan with housing collateral, the borrower
should renew insurance agreement with the insured Company & present the
renewed insurance agreement until the loan is fully repaid. If the borrower is
unable to renew insurance agreement of the house, the lender can renew and
collect its insurance expense.
9. Loan Utilization
9.1 The borrower should make use of the loan only for the purpose the loan is
requested. If the borrower wants to change his/her business, he/she must
agree with the lender and gets permission because the lender has the right
to check the business.

63
9.2 If the borrower has changed the business without knowledge of OCSSCO
lender branch, the lending branch has a mandate of enforcing to refund the
loan including the interest.
10. Resident House and its documents for collateral loan guarantee
The lender should have the following full information and evidences of the
house held as a collateral.
10.1 Original plan__________________
10.2 Boundary (location) of the House
In Northern Direction___________________________
In Southern Direction____________________________
In Eastern Direction____________________________
In western Direction __________________________
10.3 Information of the House or Buildings
Address Standards
Ownership of the Price
of the
house Zone Town Kebele House No. estimation
House
10.4 If classes are built as an extension on the already held house, the classes
can be considered as additional values of the pervious house for
repayments.
11. The House held as collateral must be free of any other guarantee.
The house which is held as a collateral ought to be free of any other guarantee
or not held by any legal issues. The owner of the house both husband & spouse

64
must singe the agreement that it is forbidden to sell or transfer the ownership
to third parties until the loan is fully repaid.
Name and Signature of the Collateral Agreement
1. Lender
Representative;
OCSSCO _______________________ Branch
Name___________________________________ Position __________________
Signature_______________________ Date ___________________
Address of Branch Office: ___________________ Zone,

_____________________Woreda & __________________Town.
P.O. Box _______________________________
Fax No. _______________________________
Tele. No. _______________________________
E-mail _______________________________
2. Borrower
Representative;
Name_____________________________________ Position __________________
Signature_______________________ Date ___________________
Address: ___________________ Zone, _____________________Woreda &

__________________Town.
P.O. Box _______________________________
Fax No. _______________________________
Tele. No. _______________________________
E-mail _______________________________

65
2.1 Husband /wife of the Borrower
Name_____________________________________
Signature_______________________ Date ___________________

__________________Town.
P.O. Box _______________________________
Fax No. _______________________________
Tele. No. _______________________________
E-mail _______________________________
3. Guarantor of the loan
Name_____________________________________
Signature_______________________ Date ___________________

__________________Town.
P.O. Box _______________________________
Fax No. _______________________________
Tele. No. _______________________________
E-mail _______________________________
3.1 Name and Signature 0f husband/wife of guarantor
Name_____________________________________
Signature_______________________ Date ___________________

__________________Town.
P.O. Box _______________________________
Fax No. _______________________________

66
Tele. No. _______________________________
E-mail _______________________________
Name and signature of Evidences’
1.______________________________ signature _________________
2.______________________________ signature _________________
3.______________________________ signature_________________
Stampe of the lender Stampe of the Borrower

67
Annex 4. Report Formats
Minimum Records to be kept by MFI
Head Office
 Separate bank Account for DBE Funds
Branches
 Separate Control Ledger for the WEDP Borrowers
 Separate Subsidiary ledger of WEDP Borrowers
 Separate file for each borrower (to keep Loan Applications, Credit
agreement, etc - MFIs will be required to obtain and retain information
from each Women-borrower and make it available for Bank supervision
and project audits)
Required Reports
Report Content Due date
Monthly reports WEDP loan performance by the end of the following month.
Indictors
Quarterly Report As above by the end of the month following the end of the quarter.
(Same date to NBE Report)
Quarterly Report Key Financial Ratios As above
The External auditors Auditor’s Opinion on the 6 months after the end of the financial year
accuracy of the above reports

68
Monthly Report
No. Name of ID No. Of the Date of agreement Amount lent to

Women Women- between MFI Women-
Borrowe Borrower and Women- borrower
r borrower

69
Quarterly Report
Quarter Ending Date ----------
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Number of WEDP loans

disbursed by OCSSCO
Amount of WEDP loans

disbursed by OCSSCO

repayed to OCSSCO

repayed to OCSSCO

outstanding

outstanding
PAR > 30 days
Number of trained CSO

at OCSSCO

70
Quarterly Monitoring Report of Key Financial Indicators by MFI as Prepared in

Quarterly NBE report
Indicator Quarter 1 Quarter 2 Quarter 3 Quarter 4
Regulatory liquidity ratio

(as defined by NBE)
Liquid assets (as defined

by NBE) to total assets
Capital adequacy ratio (as

defined by NBE)
Single Credit Exposure

limit
Aggregate credit exposure

to related parties
PAR > 90 days
Quarterly Monitoring Report of Key Financial Indicators by MFI
Indicator Quarter 1 Quarter 2 Quarter 3 Quarter 4
Equity investments
Net fixed assets
Net Income

71
Defining Ratio terminology
 Liquid Assets: cash on hand, balances on deposits with banks or MFIs, Short-
Term Debt Instruments, e.g. TBs, other instruments that can easily be turned
into cash, without much Loss in value.
 Deposits: Regular or irregular savings which may be withdrawn partially or

totally any time by the account holder.
Liquidity Ratio: Total Liquid Assets/Deposits
Ratio Benchmark: Minimum 20%
Source: NBE MFI Directives -15/2002
Capital Adequacy Terminology

Total Capital : The sum of Paid- up Capital, donated capital, Retained Earnings and
any other free reserves of the MFIs
Total Risk – Weighted Assets: Assets of the MFI determined by weighing each asset
item by the weight assigned to it and aggregating the results. Refer to Directive
16/2002 for the weight assigned to each category of asset.
Ratio: Total Capital/ Risk weighted Assets
Ratio benchmark: Minimum 12%
Source: NBE MFI Directives -16/2002
Credit Exposure
Single Credit Exposure limit: Top ten Individual borrowers
 Benchmark: Max 1% of capital
Aggregate credit exposure to related parties:
Bench mark: Max 15% of capital

72
PAR 90
Total balances of all loans with arrears of over 90 days/Total Gross Portfolio -
Max 5% of gross loans
External Auditors Report
 EA’s Report - will be required as part of each MFI’s annual statutory

audit to provide a certified report to DBE regarding the accuracy of :
 The MSE loan balance information supplied by the MFI to the

DBE when determining the amount of its MSE lending eligible
for WEDP financing.
 Monthly and Quarterly reports sent by the MFI to DBE
NB –it is the responsibility of the DBE to hire the external auditors.

73

WEDP - Loan Policy & Procedures Manual - Final

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Oromia Credit & Saving Share Company [OCSSCO]

Oromia Credit & Saving Share

WEDP Business Loan Delivery Manual

2. Cardinal Issues of the Company ............................................................................................... 5

3. Binding Rules, Regulations, Policies and Directives ............................................................ 7

4. Major Policies & Procedures of the Manual ........................................................................... 7

5. Priority Sectors in WEDP Loan Provision ............................................................................... 8

8. Women Entrepreneurs’ Business Plan Receiving, Appraising and Approval Procedures

9. Collateral options ........................................................................................................................ 20

10. WEDP Loan Approval and Authority Limit ........................................................................ 25

11. Portfolio Quality Management ............................................................................................... 30

12. Monitoring .................................................................................................................................. 31

Annex 1. Women Entrepreneurs’ Business Plan format ....................................................... 32

Annex 2. Instructions on filling the Appraisal tool ................................................................. 37

Annex 3. WEDP Loan Agreement ........................................................................................................... 58

Annex 4. Report Formats ...................................................................................................................... 68

WEDP Business Loan Delivery Manual

The wide-range and continuous escalation of the Company’ development trend

 Capital formation from Birr 9,378,759.00 to Birr 573,262,551.00, Staffing

WEDP Business Loan Delivery Manual

Hence, Women Entrepreneurship Development Programme (WEDP) is one of its

WEDP Business Loan Delivery Manual

2. Cardinal Issues of the Company

Aspire to be a financially self-sustaining model MFI enhancing mainly the

2.3 Core Values and Principles of the Company

 Zero tolerance to irregularities, delinquencies and embezzlement.

 Commitment to serve and satisfy the client.

 Commitment to work in line with working manual

 Enhancing women participation

WEDP Business Loan Delivery Manual

 Team work/ spirit,

 Commitment to excellence and

 Commitment to quality and professional competence

 Enhancing women participation and empowerment

 Regular and intensive monitoring and follow up,

 Effective and efficient management,

 Binding to rules and regulations,

 Continuous learning from experiences and improving and

 Timely decision and reporting

2.4 Major Objective of this WEDP Loan Policy and Procedures

 To make the optimal utilization of the newly coming up of the programme,

WEDP Business Loan Delivery Manual

 To realize the ever intention of the Company, i.e., enhancing of women

 To provide some optional opportunities for women owned business, being

3. Binding Rules, Regulations, Policies and Directives

4. Major Policies & Procedures of the Manual

4.1 WEDP Loan Deliver Policies

The targeted women can be of educational background, being graduates from

WEDP Business Loan Delivery Manual

Since there may be high failure rate of new business start-ups, it is

4.2 Targeting and Marketing WEDP Loan

 One Stop Service Centers-to be provided with accurate information about

 Cross selling to walk in’s and existing clients

 Viable business plan,

 Renewed or valid Business License,

 Job related experience and skills of operating business,

 Appropriate working and sales outlets

 Audited financial report for the businesses so far in the market,

 Able to present appropriate matching collateral/s,

WEDP Business Loan Delivery Manual

 Textile and  General  Domestic  Transport  Modern

WEDP Business Loan Delivery Manual

6.1 Compulsory Savings