Based on the Central Monetary and Payments Law No. (9) of 2021 AD, especially Articles (6), (39), (40), (41), (42), (43), (44), (45), (46), (62)

And the minutes of the meeting of the Board of Directors of the Central Monetary and Payments Office No. (4) dated 5/11/2024 AD

Co-chairmanship of the Central Monetary and Payments Office

It was decided that: 

Instructions for classifying the portfolio of loans and financing and creating allocations against them

At microfinance institutions

No. (2) for the year 2024 

Article ( 1 )

Definitions

The person who has any relationship with the microfinance institution that may lead to a conflict of interest, in accordance with instructions issued by the Monetary Office.

Enterprise: microfinance institution licensed by the Central Monetary and Payments Office .
Regular wallet: Good loans and financing that are repaid in full and according to the terms of the contract, including repayment of the principal, interest/returns, and fees and commissions related to them .
Irregular wallet: Risky loans and financing that were not repaid according to the terms of the contract and in which the borrower failed to pay the principal, interest/returns, or fees and commissions related to them .
Risk reserve The reserve that is created to face unspecified risks in regular loans and financing.
Allocated : The allowance for expected credit losses and the component against the regular and non-performing portfolio.
Loan scheduling The institution, in agreement with the borrower – after the loan or financing has become irregular – amends the terms agreed upon regarding the loan/financing repayment schedule in the original contract or the loan/financing agreement, in a way that is commensurate with the borrower’s financial situation, for the purposes of collecting risky (irregular) debts. .
Restructuring or financing Making an amendment to any of the terms of the original contract or the loan/financing agreement agreed upon with the borrower, provided that the loan/financing has not become irregular, that is, this process is completed while the borrower is still committed to paying and has not defaulted in paying any installment yet, in order to avoid… Loan/financing default.
Those related to the institution The person who has any relationship with the microfinance institution that may lead to a conflict of interest, in accordance with instructions issued by the Monetary Office.

 

Article ( 2 )

Objective and scope of application

  • These instructions aim to regulate the work of microfinance institutions regarding the classification of the loan and financing portfolio and the formation of allocations against it.
  • The provisions of these instructions apply to all microfinance institutions licensed by the Central Monetary and Payments Office .

Article (3)

Portfolio of regular loans and financing

The institution must adhere to the following:

  • Providing and approving a credit policy (loans and financing policy) and detailed work procedures that include the basic controls and conditions for granting loans and financing, evaluating credit acceptance, acceptable guarantees, pricing, target segments and sectors, classification of loans/financing, formation of allocations, scheduling and restructuring, and other aspects, Provided that this policy and procedures do not conflict with the instructions issued by the Monetary Office and are consistent with international standards and practices.
  • Distribution of the value of (interests/returns) and (fees/commissions) collected in advance from borrowers over the life of the loan or financing and using the effective interest method, with the exception of fees and commissions related to the costs of granting loans and financing, which are worth less than $100. The institution may collect them directly upon receipt and charge them within Revenues for the fiscal period .
  • Create a risk reserve of 1.25% of the regular portfolio of existing loans and financing. The institution may not dispose of this reserve, whether used or reduced, except after obtaining prior written approval from the cash office.
  • The risk reserve must be shown within the items of equity in accordance with the specified form for the statement of financial position.

 

Article (4)

Portfolio of non-performing loans and financing

The institution must adhere to the following:

  • Using any cash collections from irregular loans and financing to pay the entire unpaid principal , and anything in excess of the principal value is used to pay the interest or returns, fees and commissions due and unpaid .
  • Non-performing loans and financing are classified from the non-performing portfolio in the following cases:
  1. A portfolio of non-typical loans and financing in which one or more installments of principal, interest, or returns are past due for a period ranging from 91 days to 120 days , and a 25% provision is created against it.
  2. A portfolio of substandard loans and financing for which one or more installments of principal, interest, or returns are past due for a period ranging from 121 days to 180 days , and a 50% provision is made against them .
  3. A portfolio of doubtful loans and financing for which one or more installments of principal, interest, or returns are past due for a period ranging from 181 days to 270 days , and a provision is made against them at a rate of 75%.
  4. 270 days past due , and a 100% provision is made against them.
  • The institution must complete the detailed table of the troubled portfolio in accordance with Appendix No. (1) The troubled portfolio and allocations attached to these instructions and also included in the quarterly reports.

Article (5)

Interest and outstanding returns

The institution must suspend the interest, returns, fees and commissions due or received in advance on unpaid loans and financing after 90 days have passed from the date of paying one or more installments of the principal of the loan or financing until the full principal is paid for the due installments , provided that they are recorded in a separate account so that they do not It is included in the revenue account .

Article (6)

Acceptance of guarantees

For the purposes of calculating allocations, guarantees are accepted against the regular and irregular portfolio in the following cases:

  • The value of the guarantees provided under loan guarantee programs must be acceptable in accordance with the coverage ratios stated in the agreements signed with any donor or financier, whether local or foreign, provided that prior written approval of these agreements is obtained from the Monetary Office .
  • The risk tolerance ratio provided by donors or financiers, whether from local or foreign entities, under specific-purpose agreements for lending/financing specialized lending institutions, shall be acceptable at 100% of the value of the risk tolerance ratio in accordance with the agreements signed with these entities, for the purposes of calculating allocations, provided that the cash office is informed . on those agreements.

Article (7)

Scheduled loans and financing

These are irregular loans and financing in which the agreed-upon conditions related to the loan or financing repayment schedule have been modified for the purposes of collecting risky (irregular) debts, and the institution must adhere to the following:

  • Scheduling conditions and procedures contained in the institution’s approved credit policy .
  • Loans and financings that were scheduled will be classified as default periods before the scheduling date, while continuing to calculate the provision made against them and moving on to default periods in the following cases:
  • For loans and financing that defaulted after adhering to the scheduling conditions.
  • For loans and financing that defaulted after scheduling during the test period related to the payment of the three installments.
  1. For scheduled loans and financing whose installments are not yet due after the scheduling process .
  • If the rescheduled loans and financings default after the second time , this debt must be classified as losses and a 100% allowance must be made against it, and the outstanding interest/returns, fees and commissions related to these loans must not be recognized until after the full payment of the principal debt.
  • The debt may be excluded from the irregular portfolio and classified as a regular portfolio if the borrower commits to paying three installments after the first scheduling date and without delay.
  • The debt may be excluded from the irregular portfolio and classified as a regular portfolio if the borrower commits to paying six installments after the second scheduling date and without delay.

Article (8)

Loans and financings restructured or refinanced

  • Restructuring means making an amendment to any of the terms of the original contract or the loan/financing agreement agreed upon with the borrower, provided that the loan/financing has not become irregular.
  • The institution may restructure or finance (loans/financing) granted to its borrowers, such that amending any of the following is considered a restructuring (or financing) of the loan/financing granted to the borrower:
  1. The value of the loan/financing, the value of the installment, the value/rate of interest or return, the value/rate of fees or commissions .
  2. The mechanism for calculating and paying interest/return, the date of the first or last installment, the grace period, and any other amendments to the terms of the original contract or loan/financing agreement .
  • The institution that wishes to restructure/finance its loans and financing must adhere to the following:
  • The institution must have a comprehensive policy approved by the institution’s board of directors regarding the terms, controls and procedures for refinancing or restructuring loans and financing.
  • The process of restructuring or financing the borrower’s debt must result from reasons not related to the customer’s default or the possibility of his default, so that it includes only the category of loan portfolio and regular financing.
  • Providing the Central Cash and Payments Office on a quarterly basis and simultaneously with the periodic quarterly reports, with a detailed statement of the loans and financings restructured or financed in accordance with the requirements contained in Appendix No. (2) of these instructions .

 

Article (9)

Loans and financing referred to the judiciary

  • The portfolio referred to the judiciary (in the courts) shall be disclosed within the period of default, while continuing to move during periods of default and making provisions against it until the debt is fully settled and the client commits to paying the installments.
  • The debt referred to the judiciary may not be classified within the regular portfolio except after the first settlement is made with the borrower and it is paid in six successive installments from its own sources.
  • The debt referred to the judiciary is classified as losses and a 100% allowance is collected against it in the following cases:
  • When the borrower’s debt defaults after the first settlement, that is, it defaults after it is classified as a regular portfolio.
  • In the event that there is more than one settlement for the same debt owed by the borrower before the judicial authorities and courts.
  • The files of irregular loans and financing are transferred to the institution’s lawyers according to an official letter issued by the institution.

Article (10)

Excluded and bad loans and financing

These are the loans and financing that the institution wishes to exclude from the budget or destroy them after exhausting all means and procedures for collection in the event of default on the debt or the occurrence of emergency situations affecting the borrower such as death, natural disasters, etc. The institution wishing to exclude or destroy the debt must commit to the following:

  • The institution must have a comprehensive policy approved by the institution’s Board of Directors regarding the conditions, controls , and procedures for writing off and excluding loans and financing.
  • It is not permissible to write off and exclude irregular loans and financing for which all collection and follow-up procedures have been taken before a minimum of two years have passed from the date of their default.
  • It is not permissible to write off or exclude loans and financing belonging to those related to the institution except after obtaining prior written approval from the Central Monetary and Payments Office, in addition to disclosing these loans in the relevant persons’ clarification in the final financial statements (annual) and interim statements (semi-annual) of the institution .
  • Disclosure in the institution’s final (annual) financial statements and interim (semi-annual) statements about the total loans and financings excluded and the movement thereon .

 

Article (11)

Penalties

Anyone who violates the provisions of these instructions will be punished in accordance with the provisions of the Central Monetary and Payments Law No. (9) of 2021 AD and the provisions of Instructions (63/Q) dated 1/24/2024 regarding licensing microfinance institutions .

 

Article ( 12 )

Effectiveness and implementation

All competent authorities in the regions of the Autonomous Administration of North and East Syria, each within its jurisdiction, must implement the provisions of these instructions , and their provisions shall apply from the date of their issuance.

Issued in the province of ……….. on …/…./2024 AD.

 

Co-chairmanship of the Central Monetary and Payments Office

2017- 2 Muhammad Ahmed

 

 

 

Appendix No. (1)

Distressed portfolio and provisions detailed

Attached in ( Excel ) format and available within the quarterly report templates in Excel format

 

 

Appendix No. (2)

Terms that have been modified from the original contract

Loan or financing number Name of customer/borrower The value of the loan or financing Date of first granting of loan and financing Date of restructuring or financing Reason for restructuring or financing Terms that have been modified from the original contract
             
             
             

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