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Computer Aided Processing in the MF-Industry: Loan Tracking: the Case of SUMS in South Africa

Topic :

S-U Management Service Limited (SUMS) is a South African based company offering a variety of management services to MFIs, focusing on transaction processing and administration. They administer the South African Land Bank’s microfinance ‘Step Up’-project. This paper describes their method of loan tracking which utilises computer aided processing. In terms of effective loan enforcement, time plays a crucial role: The shorter the period from arrears to action, the higher the credit discipline and the probability of loan recovery. This raises the following questions:

  • How to recognize arrears as early as possible?
  • How to react as soon as possible?

In the case of a MFI with several branches or outlets, a third question arises:

  • How to distribute the information about arrears as quickly as possible throughout the organization so that loan officers can take action?

The SUMS computer system is based on an infrastructure provided by Microsoft (SQL Server, Transaction Server, Visual Studio) and Crystalreports. The main aim of its operation is threefold:

  1. Serving information to agents and loan officers: A simple internet access is enough to enable them to log on to the data base and obtain real-time data on clients social data, actual repayment performance, repayment history etc.
  2. Administering arrears tracking: The operator runs a process four times per month to download some 30 – 40 000 small repayments to a centralized bucket account at a Commercial Bank. This information is electronically identifiable and reconciled to the individuals loan account. The system then automatically runs a process once a month to check for the status of defaulters against a matrix holding the defined rules of the product. Warning letters are generated to send to clients, ranging from friendly reminder to severe warning.
  3. Delivering statistics on individual as well as on a aggregated level. Loan officers can access both individual and aggregate statistics via the Internet making it easy for SUMS to keep loan officers updated all the time. This has reduced the numbers of call-ins from loan officers asking for information.

The management services provided by SUMS are expected increase the organizational efficiency of participating MFIs, allowing them to focus on their core business; and since the positive effects of computerization grow with the number of clients to be managed at a time, additional benefits will be realised due to pooling clients from several MFIs.

An annex contains a copy of a loan agreement as used by the Step-Up project.

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