OPERATIONS & INTERNAL CONTROL
MANUAL
Document History
Version Year Description Approval DATE
1.0 2024 Operations
&Internal Control
Manual
1. Introduction
1.1 Purpose
The purpose of this credit control policy is to establish guidelines for extending credit to
customers, managing outstanding debts, and minimizing the risk of financial loss due to non-
payment. It ensures that credit is granted responsibly and that collection efforts are efficient and
timely.
1.2 Scope
This policy applies to all departments involved in the sales process, including sales, finance, and
collection. It governs the assessment of customer creditworthiness, the setting of credit limits,
and debt collection activities.
1.3 Objectives
To ensure effective management of credit risk.
To establish clear guidelines for granting credit to customers.
To maintain healthy cash flow by minimizing overdue receivables.
To reduce the incidence of bad debts through proactive credit management.
2. Credit Approval Process
2.1 Creditworthiness Assessment
Before extending credit to a new customer, the following steps must be followed to assess their
creditworthiness:
Credit Application Form: Customers must complete a credit application form,
providing details about their financial status, business history, and references.
Credit Checks:
-The Credit department will run a credit check on the customer using Credit Reference
Bureau (CRB).
-Credit will confirm that all KYC documents have been obtained prior to loan processing.
Refer to Annexure 1
-Credit will confirm that the client’s loan amount is within the minimum and maximum
loan amount per product
-Credit will confirm that for secured loans the collateral is jointly registered
-Credit will confirm that for secured loans the collateral has been valued, and the
valuation will remain valid for 6 months
-Credit will confirm that for secured loans the loan amount is in line with XXpercenatge
of the forced value as per the valuation report
-Credit will confirm that the client’s loan form has been fully filled and signed by both
parties
Affordability: Credit team will assess the affordability of the client based on the salary
slip, bank statements and ensure compliance to 1/3rd rule for salaried loans
Financial Statements: customers will be required to submit recent bank statements for
review.
2.2 Credit Limit Approval
All loans will be approved by the Credit Manager prior to payment processing.
All loan payments will be approved by the Finance Manager and the Managing Director
as defined in the approval matrix.
3. Credit Terms and Conditions
3.1 Payment Terms
Standard payment terms is 30 days from the disbursement date unless otherwise
negotiated.
3.2 Penalties for Late Payments
A penalty of XXXX per month may be applied to overdue balances.
No further credit will be extended to customers with overdue invoices until full payment
is received.
4. Monitoring
4.1 Customer Communication
Reminder Notices: A reminder notice will be sent to customers with outstanding dues
approaching the due date.
Late Payment Notices: Once an invoice is overdue, a late payment notice will be sent
immediately, followed by phone calls to the customer.
Escalation: For invoices over 90 days past due, the account will be escalated to the
collections team or an external collection agency if necessary.
5. Debt Collection Procedures
5.1 Internal Collection
A collection report will be generated weekly and reviewed by the finance department.
The report will classify outstanding loan portfolio by age (e.g., 0-30 days, 31-60 days,
61-90 days, and over 90 days). These reports will be reviewed by senior management to
monitor overall credit control performance.
After 7 days past due, customers will receive a formal demand letter requesting
immediate payment. If no payment is received another demand letter will be issued on
day 15
After 15 days if no payment is received, for secured loans the collateral will be issued for
repossession
The finance team will negotiate payment arrangements or settlement plans with
customers who are unable to pay the full amount upfront.
5.2 Legal Action
For debts exceeding a set threshold XXX the company may pursue legal action if internal
collection efforts fail.
Legal action will be taken as a last resort, and customers will be notified of the
company’s intention to take legal steps to recover the debt.
5.3 Bad Debt Write-Offs
A loan will be written off only when deemed uncollectible and all necessary collection
measures have been taken and sufficient documentation to support the write-off has been
obtained.
All write-offs will be done in line with Microfinance Act Regulation and the Income Tax
Act of Tanzania
After 180 days, uncollectible debts will be classified as bad debts.
The decision to write off a debt must be approved by senior management and
documented in the financial records.
6. Credit Risk Management
6.1 Risk Assessment
The finance department will conduct periodic reviews of all customers' credit limits and
payment histories to reassess their creditworthiness.
Credit limits may be adjusted based on the customer’s payment history or changes in
their financial standing.
6.2 Credit Insurance
The company will purchase credit life insurance for its client to cover against death.
7. Policy Review
This credit control policy will be reviewed annually to ensure its continued effectiveness.
Any amendments or updates will be communicated to all relevant staff.
Annexure 1: KYC Documentation
Below is the list of required documents for new clients:
i. Work ID
ii. National ID, Driving License, Voter Registration ID, or Passport.
iii. ATM card
iv. Passport size photo
v. Employment contract – applies to clients with less than a year at work
vi. Employer introduction letter – applies to clients with less than a year at work
vii. Salary slips for three consecutive months.
viii. Voucher
ix. Joint registration card-applies to secured loans
