Interest-Free Banking Department revised workflows including recommendations– Post Automation

Delays in the current process are caused by objective (related to a client) and controllable (related to
current lending practices) factors.
Objective reasons, such as delay in providing necessary documentation, should be managed by:
 Including the list of the necessary documents which the client must submit in the product
brochure. This could be as a typed insertion rather than an alteration to the brochure.
 Define priority sectors and products
 Providing additional training to front office personnel on product eligibility criteria, and
customer guidance. This is critically important especially in view of the anticipated changes after
automation.
Controllable aspects, related to process gaps, bottlenecks, and inefficiencies, can be eliminated or
reduced utilizing automation of process and introduction of the back-office support:
 Create a new set of procedures in a user-friendly formatincluding the new automation
procedures.
 Continuous training of branch, district managers, IFB officers (in the full-fledged IFB branches),
and IFB window staff on product knowledge, specific product features, documents required for
financing request processing. Emphasize products and services which are considered a priority
(based on reviewed product portfolio book)
 Segregation of duties on front and middle/back office. Branch Manager, LO and Finance and
Investment are front-office (sales), and Asset Management logistics division back-office (quality
control).
 Assign dedicated IFB quality support staff (Asset Management and logistics division) for duties
such as: ensuring that all promotional IFB material is placed at the IFB window, collecting, and
checking documents before the CC, and pre-disbursement and post-disbursement monitoring.
IFB quality support staff should be assigned to the districts with most IFB business.
 Initiate testing with % pass grade. Specifically, on product knowledge, specific product features,
documentation required for financing requests, financial analysis, documentation checklist.
 Initiate training for the branch and district managers in the Oromia region and Addis in
investment finance/investment appraisal. One of the bottlenecks is the lack of knowledge and
skills in the analysis, assessment, and processing of investment-type financing at the branch
level. To expedite the process, assessment of financial proposal could be done at the HQ level,
but with time this task should be transferred to the branch/district level.
 Initiate differentiation between Export, Corporate, and SME type requests by the industry.
 For complex cases it is recommended that industry specialistsare introducedat the HQ Finance
and Investment division level.
 Ideally the automated system will contain preprepared documentation that can be selected as
appropriate. One person should be trained to perform all/the majority of these tasks rather than
having so many process breaks. Collateral valuation division, and the Legal Advisory division
should be treated as service providers for the official responsible for the application.
 The automated system must consolidate the assessment forms/tools. All assessment forms
should be reviewed and simplified prior to automation
 Revised IFB financing workflow (Murabaha and Qard revolving export)
Steps in the process
1 Client acquisition and Branch
opening an IFB account specialist
(Amanah/Wadiah)
2 Consultancy services on IFB
products
3 Paying a visit to a customer
and his/ her business for
confirmation of active
operation and insuring Sharia
compliance of the business
4 Collecting & checking, Branch
documents submitted by the specialist
customer. The branch IFB
specialist should ensure that
all required documents are
provided as quickly as
possible
5 Preparing due diligence
Performed by Time Challenges
IFB 0.5 day  Low effort to recruit IFB customers at
the branch level
 Lack of product knowledge
 Sharia compliance concerns
 Potential clients think that IFB
products are for the Muslim
population only, which is not the case
Define priority sectors and products
Sales training for the specific products
IFB specialist 1 hour  No clear IFB procedures
 Low level of product knowledge
 IFB LOs are not at all branches except
full-fledged IFB branches
Create a new set of procedures in a user-
friendly format.
Include the list of necessary documents
which the client must submit as a typed
insert in the product brochure. Highlight
the importance to receive certain
documents on time.
Branch IFB 0.5 day  Delay due to other tasks performed
specialist, by the BM and LO (collecting
BM + Director, financing repayment, insurance, and
Division Manager + guarantee follow-up, etc.)
LO (IFBD)
IFB 30 min  No checklist available
 The customer is not aware of
required documents that need to be
submitted
 Documents received without cross-
checking against the checklist
 Documents are not authenticated
against originals
In exceptional circumstances some
documents can be presented by the client
at a later stage while financial data is
being evaluated and collateral
assessment takes place.
Branch IFB 1 hr.  Lack of product knowledge &
 report specialist underwriting criteria at the branch
level
Continuous training and testing of the
front-level staff in product knowledge and
the underwriting criteria
6 Conducting credit and risk Branch IFB 1 hr.  The appraisal review report should be
appraisal including specialist linked to other assessment formats
recommendations(in complex (Industry specialist, filled at the branch level
cases this can be with input Finance, and  Most financing officers/branch
from Industry specialist) Investment managers may lack training to deal
division) with most standard financing
applications.This should be rectified
as a priority
Estimating values of the Engineers, CVD 2 hrs.  Delay in report writing
collateral property Financing  No sufficient vehicles in districts
Department
Checking collateral valuation Branch IFB 1 hr.  Carbon copy estimation report not
report specialist provided to the IFB Department
Inquiring Financing Branch IFB 1 hr.  Financing history check on clients is
information – for Addis specialist, not performed in one step
Ababa and Outlying Centers Branch + CIDD,  Limited Wi-Fi (Requests for financing
CMD check must be delivered physically to
the Credit Bureau)
 Carbon copy of CIC report not
provided to IFB Dept
Legal advice for company and Branch IFB 1 hr.  Failure to get a full document of the
POA specialist+ Legal company and POA on time.
Dept
 Many of these processes (financial assessment, financing history check can be performed by the Branch IFB
specialistonce they have been trained. They then request branch service providers to conduct their specialties (e.g.,
collateral valuation, and legal advice). These requests should be flagged through the automated system. The
service providers should have access to the automated application details and can see progress of the case. This
will permit many tasks to be performed simultaneously.
7 Revise customer risk rating Branch IFB 30 mins Financing risk rating tool can be linked to
specialist, FID, IFB the financial assessment forms, updated
Decision on Dept with the collateral data (security
approval/conditional strength)
approval/rejection
8 Presentation format to the Branch IFB 1-2 hrs.  Delay in obtaining documents
Financing Committee specialist  Delay with obtaining legal advice
(Financing Resume) FID, IFB Dept  Delay in getting collateral estimation
Reviewing, recommending on report
the financing request  Delay in getting CIC report
 Inexistence of Procedures –
The above mentioned bottlenecks should
 be eliminated with the proposed
approach
Financing and risk analysis/appraisal be
linked to the financial assessment forms
 At this stage, all missing documentation should be collected by the Branch IFB specialist, authenticated, and
provided to the FID in electronic or original format.
9 Reviewing financing proposal Concerned 1-2 hrs.  In case of incomplete
by the approving team Committees: DPCC, documentation, the application is
Making decisions on MCC, and EMCC returned to the branch
financing proposals by the This bottleneck should be resolved
approving team following the restructured workflow
process
System updated as
approved/rejected by
authorized official
10 Communicating financing Asset Management 30 mins  The decision is communicated via
decision to the customer & Logistics division, automated system update
using pre-loaded approval IFB Dept or Branch  Communication with a client is in
letter. The financing contract IFB Specialist writing using preloaded system
will also be selected from letters
uploaded selection. The
approval authority can advise
which form should be used
11 Getting collateral insured Branch IFB 2 hrs.
specialist

12 The signing of longer-term BM 30 mins

financingcontracts
13 Getting longer term financing Branch IFB 1 hr. The long registration process at
contracts registered and specialist + Asset government offices
checking documents Management 6
Logistics division,
IFB Dept
14 Disbursement (preparing, Asset Management 30 mins  Under Murabaha financing, payment
authorizing, and conducting & Logistics division, for goods goes to the supplier. No
purchase i.e., payment to a IFB Dept or LO goods in stock (per contract) causes a
supplier in case of Murabaha delay
and Crediting to customer’s
account in case of Qard)
18 Filing of Murabaha, security Asset Management 20 mins  Delay due to receiving documents
and sales contract, purchase & Logistics division, from branches
forms i.e., purchase IFB Dept and/or or
requisition, promise to Branch IFB
purchase offer to purchase, Specialist
bank acceptance, personal
 guarantee, and other
documents like undertaking
Post-disbursement IFB back-office 1 Hr.  Periodic collection of the financial
monitoring support staff (at data, taking photos of the business
the Branch/District and collateral (once per year)
level
Post-disbursement AML/Monitoring
monitoring Division

1. Financing Collection follow-up workflow

Financing collection follow-up (including overdue management) and NPL procedures are governed by
the Financing Procedure Manual Part III. Specifically, collection follow-up (arrears management) is set
under 2.9 Financing Procedure Manual Part III.

No Steps in the process Performed by Time Challenges and way forward

Financing Collection follow-up workflow and recovery management

1 Contacting the client Automatic repayment Autom  To ensure that the client is reminded
SMS reminder ated on time, automatic repayment SMS
generated by the MIS messa should be generated by the MIS
system ge system 7 days before repayment, and
system on the day of the repayment

2. Contacting the client BM or LO or 10 min

when the payment is <15 Financing
days past due, client visit Monitoring officer

3. Issuing the notice per Branch IFB specialist 15 min

Annex 8 – FRLC or Financing
Monitoring officer

4. Contacting the client Branch IFB specialist 15 m

when the payment is <30 or Financing
days past due, client visit Monitoring officer

5. Record (photos, Branch IFB specialist 10 min

supporting documents) or Financing
gathered (Electronic Monitoring officer
filing)
6. Supporting documents Branch IFB specialist 5
will be part of the or Financing mins.
electronic filing Monitoring officer

7. Issuing the notice per Branch IFB specialist 10 min

Annex 9 – FRLC or Financing
Monitoring officer

8. Contacting the client Branch IFB specialist 1 hr.

when the payment is >30 or Financing
days past due, client visit Monitoring officer

9. Resolution mechanism - Branch IFB specialist 15 min

the payment is over 60 or Financing
days past due, but less Monitoring officer
than 90days past due District/department
level

Non-Performing Financing Management (financing is classified as non-performing on the 91 days it falls in

arrears).
When the client was not able to amicably meet his repayment obligations

1 Put financing on Branch IFB 10

non-accrual status specialist or mins.
Financing
Monitoring officer

2. Update client file Branch IFB 10

with the relevant specialist or mins
actions taken Financing
prepare a summary Monitoring officer
report

3. The client file is Branch IFB 10

transferred to the specialist or mins
Financing Recovery Financing
Committee Monitoring officer

4. Financing recovery LRC (Financing 1 Hr.

proposal Recovery Committee)
5. Draw up an action LRC (Financing 1 Hr.
plan Recovery Committee)
Negotiation process Financing
Monitoring officer

6. Foreclosure/ Legal department 15  If all efforts for financing recovery

Litigation process mins. are not successful, the case is
transferred to the Legal department
for the legal action

7. Financing write-off Credit Monitoring 15

and Recovery mins
Management
department