Instruction No. 003 on the Classification and Provisioning of Credits for Savings and Credit Cooperatives and Microfinance Institutions

INSTRUCTION NO. 003 TO SAVINGS AND CREDIT COOPERATIVES AND MICROFINANCE INSTITUTIONS RELATING TO THE CLASSIFICATION AND PROVISIONING OF CREDITS

The Central Bank of Congo,

Having regard to Law No. 005/2002 of May 7, 2002, relating to the establishment, organization, and functioning of the Central Bank of Congo, specifically Article 6;

Having regard to Law No. 003/2002 of February 2, 2002, relating to the activity and control of Credit Institutions, specifically Title III;

Having regard to Law No. 002/2002 of February 2, 2002, laying down provisions applicable to Savings and Credit Cooperatives, specifically Articles 58 to 61;

Having regard to Instruction No. 1 to Microfinance Institutions as amended on December 18, 2005;

Hereby adopts the following provisions regarding the classification and provisioning of credits.

Article 1

The entities subject to this Instruction are:
– Savings and Credit Cooperatives;
– Microfinance Institutions.

Article 2

Credits are categorized into two groups, namely:
– Healthy credits;
– Disputed credits.

Article 3

Healthy credits are those that have no overdue payment deadlines.

Article 4

Disputed credits are those whose recovery cannot be realized in accordance with the initial contractual conditions due to the certain default of the beneficiaries, even if secured by guarantees.

They include:
– Prorogued credits;
– Unpaid credits;
– Doubtful credits;
– Contentious credits;
– Irrecoverable credits.

Article 5

Prorogued credits are those whose deadlines have been modified at the request of a member or client, before or after the due date.

The prorogation of a credit is authorized only once.

It is prohibited for the entities subject to this Instruction to grant new credits to members or clients to fully or partially repay a credit that is in arrears.

Article 6

Credits are deemed unpaid when at least one deadline is overdue for payment for one (1) day or more.

Healthy credits currently granted to members or clients who have a disputed credit in the same establishment are assimilated to unpaid credits.

Article 7

Doubtful credits are claims of any nature, even if secured by guarantees, which represent a risk of total or partial non-recovery from the 31st day.

Debit current accounts with no significant credit movement for more than 30 days are included in doubtful credits.

Article 8

Contentious credits are unpaid claims whose files are subject to amicable or judicial resolution.

Article 9

Irrecoverable credits are claims that have been uncollectible for more than 12 months.

Article 10

Irrecoverable credits are recorded as a loss upon the closing of the balance sheet on December 31 and are tracked off-balance sheet.

Article 11

Unpaid interest on disputed credits is tracked off-balance sheet.

They are recorded in the income account only when they are actually received.

Article 12

Disputed credits are subject to provisions to be established each month.

The amount of the provision on disputed credits is determined as follows:
– 1 to 30 days overdue: 5% of the outstanding principal; – 31 to 60 days overdue: 25% of the outstanding principal; – 61 to 90 days overdue: 50% of the outstanding principal; – 91 to 180 days overdue: 75% of the outstanding principal; – More than 180 days overdue: 100% of the outstanding principal.

Prorogued credits are provisioned as disputed credits from their initial schedule.

Article 13

The accounting entries for credits, the allocation, and the reversal of provisions are defined by the Accounting Plan for Savings and Credit Cooperatives and Microfinance Institutions.

The Central Bank of Congo may impose any additional provision or write-off when it deems it necessary.

Article 14

Entities subject to this Instruction that do not respect the determined level of provisioning are subject to a monthly penalty equal to 1% of the insufficiency between the required level and the level observed at the end of each month.

The penalties provided for in this article enter into force on January 1, 2013.

Article 15

Any failure to comply with the provisions of this Instruction results in the application of sanctions provided for by the legal and regulatory provisions in this matter.

Article 16

This Instruction enters into force on the date of its signature.

Done in Kinshasa, on April 14, 2012

J-C. MASANGU MULONGO
Governor