A loan policy is the written rulebook for how your SACCO lends money. It sets out what you lend, to whom, on what terms, and who can approve it.
Why it matters: Without a written policy, lending decisions drift toward favouritism and guesswork. A clear policy keeps every member treated fairly, protects the savings of others, and gives staff and the board one agreed standard to follow.
What a sound loan policy covers
Loan products — the types you offer (development, emergency, business, school fees) and the purpose of each.
Eligibility — minimum membership period, savings history, and good-standing rules.
Limits — maximum amounts, often tied to a multiple of a member's savings or share capital.
Pricing — interest rates, fees, and the method (e.g. reducing balance) clearly disclosed.
Terms — repayment periods, instalment frequency, and grace periods.
Security — collateral and guarantor requirements, and how each is valued.
Approval authority — who can approve what amount, from loans officer up to the board.
Why a written policy beats memory
Consistency — the same rules apply to every member, every time.
Fairness — decisions rest on criteria, not relationships.
Risk control — limits and security rules cap your exposure to bad loans.
Training — new staff and committee members learn the standard fast.
Keep it alive
Review the policy at least once a year, or sooner if defaults rise.
Approve every change formally through the board, and record the date.
Align it with your liquidity, capital, and any internal lending limits.
In CAMS, loan products and limits are configured to match your written policy, so the system enforces what the policy states.
Quick checklist
[ ] Policy is written, board-approved, and dated.
[ ] Products, eligibility, limits, pricing, and terms are all defined.
[ ] Collateral and guarantor rules are spelled out.
