LOAN POLICY

 

• Loan Application

Prior to submitting an application, the prospective borrower shall discuss the proposal with the Loan Officer or get information from TRACELL website. He/ She can do this by making a phone call or visit TRACELL offices or browse through TRACELL website.

Loan officer/Online system will brief the prospective borrower about certificates/ documents to be produced and his/her eligibility. If eligible, borrower will be issued with Loan Application Form and guided on how to fill the form and attachments required. Prospective borrower prepares loan request including registration of collateral, getting guarantors’ approvals along with required documents before submitting to TRACELL offices or submit an online application.

 

• Evaluating a prospective borrower’s character and sincerity of purpose

Prospective borrower prepares loan request including registration of collateral, getting guarantors’ approvals along with required documents before submitting to TRACELL offices or submit an online application. Once the loan officer receives the application, he/she determines if it’s complete. The Loan officer should then review, recommend and submit to the accountant if all basic criteria’s have been met. Evaluation interview with a loan officer/Accountant may follow, allowing the borrower to explain his/her credit needs. That interview is particularly important because it provides an opportunity for the loan officer/Accountant to assess the borrower’s character and sincerity of purpose. If the borrower appears to lack sincerity in acknowledging the need to adhere to the terms of a loan, this must be recorded as a strong factor weighing against approval to the loan request.

 

• Making site visits and evaluating a prospective borrower’s credit record

If a business or personal loan is applied for, a loan officer/Accountant often makes a site visit to assess the borrower’s location and the condition of the property and to ask clarifying questions.

The loan officer/Accountant may contact other creditors who have previously loaned money to this borrower to see what their experience has been i.e. Did the borrower fully adhere to previous loan agreements and, where required, keep satisfactory deposit balances?

A previous payment record often reveals much about the borrower’s character, the sincerity of purpose, and a sense of responsibility in making use of credit extended by a lending institution.

 

 

• Evaluating a prospective borrower’s financial condition

If all is favorable to this point, the borrower is asked to submit several crucial documents in order to fully evaluate the loan request, including complete financial statements and, in the case of a corporation, board of directors’ resolutions authorizing the negotiation of a loan with TRACELL Finance. Once all documents are on file, the Loan officer/Accountant conducts a thorough financial analysis of the applicant, aimed at determining whether the borrower has sufficient cash flow and backup assets to repay the loan. The Loan officer/Accountant then prepares a summary and recommendation, which goes to the CEO for approval.

 

• Assessing possible loan collateral and signing the loan agreement

If all members of the loan committee (LC) approves the borrower’s request, the Loan officer/Accountant will usually check on the property or other assets to be pledged as collateral to ensure that TRACELL Finance has immediate access to the collateral or can acquire title to the property involved if the loan agreement is defaulted.

Once the Loan officer/Accountant and the CEO are satisfied that both the loan and the proposed collateral are sound, the note and other documents that make up a loan agreement are prepared and signed by all parties to the agreement. All approved loan proposals are passed back to Loan officer/Accountant for proper recording purpose and funds arrangement. Loan officer is expected to communicate in writing to the prospective borrower about the fate of his/her application i.e. whether sanctioned or rejected. If rejected, borrower should be informed on the reasons for declining his/her request. After verifying that all required documents and approvals are duly certified/ notarized, the Accountant will process payment to the specified bank account/s of the borrower.

 

• Monitoring compliance with the loan agreement and other borrower service needs

Loan officer and/or the Accountant then initiates the process of supervision, follow-up, inspection and for the repayment of the principal along with interest. The new agreement must be monitored continuously to ensure that the terms & conditions of the loan are being followed and that all required payments of principal and interest are being made as promised, for larger commercial credits, the loan officer/Accountant will visit the borrower’s business periodically to check on the firm’s progress and see what other services the borrower may need. Usually, a loan officer or other staff members enter information about a new borrower in a computer file known as a borrower’s profile. This file shows what services the borrower is currently using and contains other information required by management to monitor a borrower’s progress and financial service needs.

DOCUMENTATION:

The applicant and TRACELL Finance staff will execute legally binding loan documents to assure that the purposes of TRACELL Finance are achieved and that the loan is adequately secured.

All loan activities related documents shall be maintained in a secure place /location by the Loan Officer/Accountant. Certain records shall be available electronically to provide access to Management, Borrowers, Government officials, etc.

 

The following, at minimum, are some of the documents which must be maintained at all time:

 

• Loan Application:

Loan Application form. This will source information like: Why are you applying for this loan? How will the loan proceeds be used? What assets need to be purchased, and who are your suppliers? What other business debt do you have, and who are your creditors? Who are the members of your management team? Personal Background including previous addresses, names used, criminal record, educational background, etc.

Personal Identification as permissible by Law eg. National ID, Passport and Driving License.

Income details such as pay-slips (for employees), financial records (for businesses), etc.

Other supporting documents such as business financial statements, credit reports, business plan documents, etc.

 

• Terms and Conditions

The Accountant and/ or CEO, may impose terms and conditions on any loan consistent with TRACELL Finance’s policies and procedures.

Prior to closing of the loan, Loan Officer/Accountant shall execute a letter of commitment which shall detail closing requirements and other terms and conditions.

All applicable municipal and relevant government permits must be obtained prior to the loan closing.

 

• Collateral and Security

All loans will require, at a minimum, a lien against the business and the borrower’s personal guarantee.

The type of business and the loan terms will dictate the form and substance of other security requirements.

This includes a security interest, to the extent deemed necessary, in assets (e.g. machinery, equipment’s, inventory, contract rights including securities, lease/purchase option etc.).

All securities held as collateral must be full insured

 

• Insurance

Some borrowers, especially those lending more than TZS 30M, may be required to obtain and keep in full force, for a period beginning with the execution of the loan documents and continuing for at least the term of the loan, insurance on their business as may be reasonably acceptable to TRACELL Finance.

If needed, Borrowers shall submit evidence of insurance to TRACELL Finance. At the discretion of TRACELL Finance, Borrower may be required to have a policy for title insurance in no less than the sum of the full amount of the loan.

TRACELL FINANCE may also require Key Person Life Insurance coverage if the amount is more than TZS 30M and more than six (6) months term period.

 

• Compliance, Permits and Licenses

Depending on a loan’s specific requirements and nature of the borrower, TRACELL Finance may require one or more legal documents. These may include: Business licenses and registrations, Articles of Incorporation, Copies of contracts a borrower has with any third parties, Franchise agreements, Commercial leases, etc.

In-case of business loans, Borrowers (at a minimum) can be required to provide documentation to certify that as of the date of execution of each Loan Document, all permits needed for the project have been identified and those needed to commence activity have been secured;

Also, borrower may be required to provide compliances, permits and licenses such as: Borrower has authority to do business or being employed in Tanzania; Borrower is in full compliance with any and all debt financing; Borrower is in good standing with the government of Tanzania with respect to Taxes, permits, licenses, etc.

 

• Borrower Record Keeping and Reporting

Borrower shall submit financial and operational reports to TRACELL Finance as may be reasonably requested, and TRACELL Finance shall have access to the records of the Borrower during normal business hours or as arranged in advance.

Borrower's failure to provide such information as requested within designated time period and/or the provision of information that appears to be inaccurate or incomplete, unless remedied within 15 days, shall constitute an event of default.

 

LOAN PROCESSING TIME

Generally, once the loan application and all related documents have been submitted by the borrower, the rest of the process can take anywhere from 1 hour to 5 working days (maximum).

 

 

ELIGIBILITY REQUIREMENTS FOR A LOAN

 

1. Borrower's eligibility

• He/ She should be residing in Tanzania
• He/ She should be able to demonstrate experience of profitable operations in the activities for which loan is required
• He/ She should not have any over dues with the Government or any financial institutions.
• Borrower should be at least 18years and with no criminal records or
• No past history of loan default
• Borrower should be willing to provide correct and updated information to TRACELL and understand carefully that false information will lead to serious legal consequences.
• Pay all service charges on or before the date noted in the loan contract.
• Abide by all terms and conditions stipulated in the loan contract.

 

2. Eligible activities

• Acquisition of land, buildings, and fixed equipment
• Site preparation, construction, and reconstruction for non-speculative projects
• Installation of fixed equipment
• Clearance, demolition, removal, rehabilitation or construction of buildings and improvements
• Payment of assessments for sewer, water, street, and other public utilities, if the provision of the facilities help business expand
• Working Capital, which finances short-term operating expenses.
• Downtown facade, historic reinvestment, and streetscape improvements
• Micro financing and Short-term interim financing
• Capital investments for dairy producers that will result in significant long-term increase in capacity to produce milk
• Other activities as may have been identified by the LC and /or the BoD

 

3. Ineligible activities

• Compensation for a fundamental business weakness or a poor credit history
• Gambling activities, including any business whose principal activity is gambling
• Adult Bookstores or adult/companion escort or entertainment services
• Nightclubs and bars without food services, except for facade loans
• Businesses not serving the interests of Tanzanians and Tanzanian government
• Real estate investment speculation.
• Other activities as may have been identified by the LC and /or the BoD

 

TYPES OF LOANS & ACCEPTABLE COLLATERAL

 

TRACELL Finance offers Closed and open-ended loans to its borrowers.

• A closed end application is completed as a single loan and if the borrower wants to borrow additional funds or extend period term, a new loan application has to be filled out.

 

• An open-ended application is completed as a revolving loan and the disclosure is given at the time of application.

 

TRACELL Finance also offers UNSECURED and SECURED loans to its borrowers.

1. UNSECURED LOANS:

An unsecured loan is one that is made without any collateral and is based solely on the character and credit history of the borrower. The maximum amount is TZS 3,000,000/= while the maximum term period is one (1) month.  Example of such loans include:

• Personal Loans
• Working capital finance loans

 

2. SECURED LOANS:

A Secured loan is where the borrower pledges as security something of value equal to or greater than loan amount, and can be sold should the member default on their loan obligation.

• All secured loans for the purchase of consumer goods require a signed purchase offer or bill of sale. It must include the make, model and serial number of the goods being purchased when the application is submitted.
• A copy of the Certificate of Title must be presented for used cars, trucks, etc. purchased from individuals.
• First liens only will be accepted for car, truck, boat, motorcycle, camper and recreational vehicle loans and required insurance coverage (collision and comprehensive) must be carried.

 

3. ACCEPTABLE COLLATERAL:

All loans will require, at a minimum, borrower’s personal guarantee, a security asset and/or a lien against the business (for business loans). This includes a security interest, to the extent deemed necessary, in personal and/or business assets such as motor vehicle, machinery, equipment, inventory, contract rights including securities, accounts receivable and insurance policies now held or hereafter acquired. TRACELL Finance may also obtain a lease/purchase option to secure the loan

 

The type of business and the loan terms will dictate the form and substance of other security requirements.

 

LOAN LIMITS

A maximum loan amount for a borrower, the most that will be provided to a borrower if the loan is approved, is based on a combination of factors such as borrower’s debt-to-income ratio of which the preferred debt-to-income ratios of 40% or less.

TRACELL Finance also consider other factors such as own risk parameters, borrower’s credit score and credit history and portfolio risk diversification in determining the maximum loan amount an applicant can borrow. Below are some limits per product

 

1. UNSECURED LENDING

One of the primary factors Lending Committee members will consider before establishing unsecured loan limit is credit history which includes repayment history, number & value of other debts and the length of a person's credit history. The assessment may take into account an applicant's work/business performance history.

As a rule of thumb, the aggregate amount of unsecured loans to any borrower should not exceed 5% of total debt while the aggregate amount of all unsecured outstanding loans may not exceed 25% of the total loan portfolio.

• INTERNAL BORROWERS LIMIT (STAFF & DIRECTORS)

The aggregate amount of unsecured loans to any an employee should not exceed 2.5% of total debt while the aggregate of all employees outstanding loans may not exceed 10% of the total loan portfolio. If the aggregate balance is above this limit, the excess amount should be fully secured with acceptable collateral at all times.

 

2. SECURED LENDING

With secured loans, TRACELL Finance will use an income-to-expense qualifying ratio which compares the borrower's expenses to their pre-tax income. For personal loans; Expenses generally include other debts (principal and interest) payments, taxes, insurance, fees and other domestic related expenses (for personal loans) or selling & administrative expenses (for business loans).

TRACELL Finance will threshold for an income-to-expense ratio is no less than 130% AND the maximum borrower’s debt-to-income ratio of 40%.

 

3. LOAN LIMITS AS COMPARED TO COLLATERAL VALUE

TRACELL Finance has placed a maximum loan amount on customized loan-to-value thresholds. For secured loans; a maximum total amount of approximately 70% of a secured asset’s collateral value. All secured loans, except for government guaranteed loans, will be evaluated on this rule as part of the decision on how much to lend to a borrower.

 

EXCEPTION:

Any insured or guaranteed portion of a loan made to internal or external borrower in which the government (or it’ institution) insures repayment, guarantees repayment, or provides an advance commitment to purchase the loan in full, is excluded from qualifying ratios and analysis.

LOAN TERMS AND CONDITIONS

 

Loan terms and conditions shall be based on the need and ability to repay. It is the intent of TRACELL Finance to be as flexible as possible while operating in accordance with prudent guidelines and government rules & regulations.

 

Terms and conditions of loans shall include the following:

 

1. Purposes of the loan

       TRACELL Finance will provide loans to borrowers for:

• Domestic social services like education, healthy, etc.
• Purchasing of assets
• Working capital
• Other business/personal needs as deem fit by the LC and BoD

 

2. Interest rate

• Interest rate is fixed and calculated on a daily basis on the decreasing loan balance
• Interest rate (per each loan and per each borrower) will be determined by the CEO and/or Accountant based on, as minimum, cost of capital, loan administrative costs, borrower &activity credit risk, etc.
• Interest shall accrue on the gross amount drawn at the rate specified in the loan agreement
• Interest will be paid in arrears on the dates specified on the loan agreement.
• Interest so accrued shall be due on demand or (in the absence of demand) on the last day of the default interest period in which it accrued. If unpaid, interest shall be compounded on the last day and each successive interest period.
• Interest shall accrue from day to day and be calculated on the basis of actual number of days elapsed over a 30 days’ month period. If the Borrower was permitted to borrow in excess of the relevant limit, he/she will pay interest of the excess amount at the default Interest Rate.
• Any amount outstanding under the loan agreement which is not paid when due, shall bear interest on daily basis from the due date to the date of actual payment.

 

3. Fees

The LC can consider levying service charge fees on providing better and efficient customer services. Some of fees include: processing, legal, debt collection, etc.

 

4. Collateral

Secured loans must be supported by a collateral which is necessary to recover the loan in case of unforeseeable default circumstance/s. Some of the features of the collateral include:

• Should be very liquid and legally possessed.
• Should have a market value of at least 140% of the loan principal amount.

 

5. Borrower’s responsibilities

Prospective borrowers must appreciate & acknowledge that they have an unconditional responsibility and obligation towards repayment of the loan in full according to agreed terms & conditions. This includes:

• Repay the full amount of the loan principal and accrued interest on or before the date stipulated in the Loan Agreement;
• Pay all service charges on or before the date prescribed in their Loan Agreements; and
• Abide by all other Terms and Conditions stipulated in the Loan Contract.

 

6. TRACELL Finance responsibility

TRACELL Finance is legally bound to provide loans as stated in the commitment document, subject to borrower's fulfilling all the terms and conditions.

 

7. Loan repayments

• Loan, principal plus interest, will be paid in instalments by either Direct deposit or electronic fund transfer or mobile money transfer.  
• To minimize default risk, Loans may be repaid in full at any time with no early repayment penalties.  Additional payments to reduce the outstanding loan balance can also be made at any time without any penalties or charges.

 

8. Additional borrowing

• When borrower wants to top-up a loan, TRACELL Finance won’t actually add money to the existing loan balance and instead a new loan will be set up for the remaining balance and the extra amount the borrower wants to borrow.
• The accountant will pay off the old loan from the new loan total amount and transfer the difference/remaining amount into borrowers designated bank account/mobile money account or cash payment.
• The new loan may have a different interest rate from the initial loan, and the term might be different too.

 

9. Cancellation

Loan agreements may be cancelled within 14 days after the loan is advanced to the borrower by:

• Borrower request TRACELL Finance that he/she want to cancel it (for example by telephone) within that 14 days’ period, and
• giving TRACELL Finance written confirmation of cancellation within 5 working days of the initial cancellation request.
• There is no penalty or charge for cancellation, however the loan must be repaid in full together with all unpaid interest which may have accrued. Interest will run from the date of loan issue until the date of cancellation.

 

10. Default

Unless for the act of God factors beyond borrower’s and Tracell Finance control, Should the borrower fail to make payment of any amount due to TRACELL Finance for more than 30 days or become bankrupt, the entire balance outstanding will immediately become due and payable together with all the interest accrued up to that time.

 

11. Termination

TRACELL Finance may terminate the loan agreement and demand immediate repayment of all sums due in respect of the loan agreement after giving any written notice required by law if:

• The borrower shall fail in any material respect to keep any part of the loan agreement.
• The borrower shall have deliberately given false information or given inaccurate information in connection with the loan agreement.
• The borrower shall be the subject of a court action which has the effect of taking away from the borrower’s control of the whole or a substantial part of the borrower’s assets.
• The borrower shall become incapable, in law, of managing his/her own affairs.
• The borrower shall either be declared bankrupt or grant a Trust Deed for their creditors.

 

12. Disclosure

• As part of the processing of any loan application and in order to comply with government rules and regulations regarding Money Laundering, TRACELL Finance may search for borrower’s records from one or more reliable sources including, but not limited, to credit reference agencies, borrower’s employer, borrower’s suppliers, etc.
• If the loan application is successful, details of how borrower’s honors the agreement may be provided to the Bank of Tanzania and/or credit reference agency who may use the information for credit assessment, tracing of absconders and fraud prevention.
• In the event that borrower default on his/her loan or any terms and conditions in relation thereto, TRACELL Finance may disclose details of such default or defaults to other Credit institutions, BoT, debt recovery agencies and courts. 

 

13. Customer care

If borrower is not satisfied with any aspect of TRACELL Finance services or products, he/she can contact management of his/her concerns by: visiting TRACELL Finance office and speak to a staff member ( Mon - Fri : 0800hrs - 1700hrs) or write an email (helpdesk@tracell.co.tz) or make a phone call # +255747103084 or visit www.tracell.co.tz website and fill the “get in touch “ form

 

14. Compliance to terms and conditions

In the event where the borrower is experiencing difficulty complying with the terms and conditions of the loan agreement, the Loan Officer/ Accountant shall attempt to work with the borrower to correct identified deficiencies through mutually agreeable action plans which may include restructuring the loan.

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