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INTERNAL CONTROLS, SYSTEMS AND PROCEDURES

Direct Lending – Post Approval Amendments & Pre- Disbursement Process

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TABLE OF CONTENTS

1. DEFINITIONS AND ABBREVIATIONS ......................................................................................... 3

2. GUIDING PRINCIPLES ................................................................................................................ 4

3. POST APPROVAL AMENDMENTS & PRE- DISBURSEMENT PROCESS FLOW CHART ........ 6

4. ACCOUNTABILITY AND RESPONSIBILITIES............................................................................. 7

5. SUPPORTING NARRATIVE ......................................................................................................... 8

6. ANNEXURES.............................................................................................................................. 12

6.1. DECISION RECORD (COVER SHEET) .............................................................................................. 12

6.2. AMENDMENT MEMORANDUM .......................................................................................................... 13

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1. DEFINITIONS AND ABBREVIATIONS

Abbreviation / term Description / Definition

Approval An approval is only valid once the decision record has been

duly signed by all authorised signatories

CPs Conditions Precedent – these are the conditions that must

be met by the client before a disbursement is made

Disbursement A disbursement occurs when a pay-out is made from sefa to

the client’s and/or suppliers’ bank account

Decision Record This is a record that reflects the decision of the Credit

Committee as well as applicable covenants

Loan Sheet A document that is prepared to guide the legal unit when

drafting loan agreements

Material changes Changes that:

o negatively affect the viability of the client’s

business (e.g. changes in profitability ratios,

gearing and liquidity position of the business

enterprise, contract expiry date, etc.)

o alter the legal status of the client

o affect regulatory and/or industry compliance

PIM Post Investment Monitoring

Sanctioning authority Authority that is mandated to take decisions in terms of the

Delegations of Authority and/or other related documents

(e.g. Mancom, SME Credit, EXCO)

IO Investment Officer

HoR Head of Regions

RM Regional Manager

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2. GUIDING PRINCIPLES

This section outlines guidelines and principles that must be adhered to at all times when

managing facilities that have been approved but not yet disbursed:

Regional Offices are responsible for managing all approved facilities prior to

disbursement

The IO must ensure that the decision record reflects the CP’s as well as other relevant

covenants as set by the relevant Credit Committee

The IO must ensure that the CPs are clearly defined and can be practically implemented

before a loan sheet is prepared to draft the legal agreements

IOs will be responsible for managing the undrawn facilities

All sefaLAS tasks have to be completed in respect of facilities that have been approved

by the respective Credit Committees once a decision is taken by the relevant Credit

Committee

The IO must ensure that the relevant Credit Analyst has altered the status on sefaLAS

from “Credit Committee” to “Credit Committee Approved”

IOs must communicate with the approved clients on a weekly basis to ensure that they

are made aware of any material changes to the business operations.

A verbal confirmation with the client with respect to material changes is to be followed by

a written (email) communication

All changes to the business operations must be recorded on sefaLAS

Material changes must be compiled by an IO and be presented by the RM to the relevant

sanctioning authority for approval and/or noting

No disbursements will be made unless any material changes have been approved by the

relevant sanctioning authority

Upon receipt of an official request for disbursement from the client, an IO must write an

email to the Operations Hub unit informing the unit about such a request

The handover email drafted by the IO must alert the Administration Hub of any unique

circumstances that the Operations Hub must be aware of (e.g. purchase order or

supplier quote about to expire,)

Post Disbursement an email must be sent by the IO to the client advising of the PIM

official to be involved with the client going forward (the IO must copy the relevant Post

Investment Monitoring official with the email)

A handover memo is to be drafted by the IO and addressed to Head: PIM, when the first

disbursement takes place to be allocated to the relevant PM for the respective region.

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All facilities not disbursed within 6 months will lapse and the new application will have to

be lodged for approval in respect of the release of the unutilized facility

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3. POST APPROVAL AMENDMENTS & PRE- DISBURSEMENT PROCESS FLOW CHART

1. Confirm the

(approval)

decision of the

Credit

Committee

2. Ascertain that

the deal details

have been

accurately

captured and

uploaded on

sefaLAS

3. Liaise with the

client to establish if

there are any

changes to the

original application

4. Are there

changes to the

original

applications?

Yes

5. Draft a memo

seeking necessary

approvals

6. Present the memo to

the sanctioning

authority

7. Memo

request

approved?

No8. Inform the

client

Yes

10. Inform the

Operations Hub

about the details

of the approval

No

9. No

material

changes to

the client’s

business

11. Transfer

the file to the

Operations

Hub

Process Ends

Process Ends

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4. ACCOUNTABILITY AND RESPONSIBILITIES

A = Accountable / R = Responsible / C = Consult

Activity / Task IO RM HoR Credit

1. Confirm the (approval) decision of the Credit Committee R A

2. Ascertain that the deal details have been accurately captured on sefaLAS R A

3. Liaise with the client to establish if there are any changes to the original

application

R A

4. Are there changes to the original applications? R A

5. Yes – Draft a memo seeking necessary approvals R A C

6. Present the memo to the sanctioning authority R A

7. Memo request approved? R A

8. Yes – Transfer the file to the Operations Hub R A

9. No – Inform the client R A

10. No material changes to the client’s business R A

11. Inform the Operations Hub about the details of the approval R A

12. Transfer the file to the Operations Hub R A

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5. SUPPORTING NARRATIVE

Activity / Task linked to flow

diagram

Narrative

Tools

Document output

Turnaround time

1. Confirm the (approval)

decision of the Credit

Committee

IO need to liaise with Credit and get a

copy of the decision record and/or

minutes of the Credit Committee meeting

The IO must also inform the Operations

Hub to commence with the compilation

of the loan sheet which triggers the

drafting of legal documents – the

compilation of the loan sheet must

commence after the finalisation of the

decision record

Decision record

Minutes

48 hours (2

business days)

2. Ascertain that the deal

details have been

accurately captured on

sefaLAS

Upon receipt of the decision

record/minutes, IO need to verify that the

information on sefaLAS was correctly

captured in accordance with the signed

decision record

3. Liaise with the client to

establish if there are any

IO need to telephonically liaise with the

applicant on a weekly basis to establish

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changes to the original

application

the status of the applicant’s business

and establish when will the client request

the disbursement

Once Weekly

4. Are there changes to the

original applications?

The IO need to establish if there are

material changes to the client’s business

48 hours (2

business day)

5. Yes – Draft a Memo

seeking necessary

approvals

In case where there are material

changes, the IO must compile a memo

outlining such changes and forward to

the RM for sign-off

The RM must consult with Credit in

cases where there are material changes

and (Credit) must be co-signatories to

the memo that outlines the material

changes before it’s presented to the

Sanctioning Authority

Memo template

6. Present the memo to the

sanctioning authority

The RM must then present such

changes to the relevant sanctioning

authority

24 hours (1

business day)

7. Memo request approved? Upon approval of the amendments by

the sanctioning authority, the IO must

transfer the file to the Operations Hub

8. Yes – Transfer the file to

the Operations Hub

9. No – Inform the client In cases where the amendments are not

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approved by the sanctioning authority,

the IO must inform the client and the

client have the right to appeal if not

satisfied with the sanctioning authority’s

decision

24 hours (1

business day)

10. No material changes to

the client’s business

In cases where there are no material

changes, the IO must handover the file

to the Operations Hub Unit and inform

the client regarding the PIM official who

will be responsible for managing the

client’s account

11. Inform the Operations

Hub about the details of

the approval

12. Transfer the file to the

Operations Hub –

Process Ends

Once all the material changes have been

approved (if any) and the IO has

communicated with the client regarding

the PIM official who will be handling the

application, the file must be transferred

to the Operations Hub.

The RM will have to draft an email to the

Operations Hub informing the unit that

the client has made a request for

disbursement and there are no material

changes in the business that that have

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not been approved by the Sanctioning

Authority.

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6. ANNEXURES

6.1. DECISION RECORD (COVER SHEET)

Name of the Committee: (SME Credit Committee / Mancom)

Membership:

Committee Members Members - see signed record sheet

Date : (of the Credit Committee meeting)

Declaration of Interest:

Name Nature and extent of Interest Action Taken Signature

Represented at Credit Committee by: (Name of Investment Officer and Credit Analyst)

Approved Declined Deferred Recommended to Mancom

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6.2. AMENDMENT MEMORANDUM

INTERNAL MEMORANDUM

TO : Indicate the relevant approval authority

FROM : Indicate the name of the regional office

DATE : Date the memo was drafted

SUBJECT : Name of client

1. BACKGROUND

a) Client Brief Background and Nature of Business (Here provide brief details of the

company, when was it established & what does it do)

b) Attach extract of the minutes where the facility was approved

c) sefa’s Involvement (Here provide details of the sefa funding, when was it approved,

how much was approved, what type of funding & what was it to be used for)

Approval

Date

Amount

Approved

Undrawn

Amount

Current

Exposure

Facility

Type

Application of

Funds

Security Details

Security Type Value Status (indicate whether registered)

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2. REQUEST

a) Outline the nature of the material change

3. MOTIVATION

a) Motivate the impact of the material change to sefa’s risk exposure

4. RECOMMENDATION

a) Tabulate your recommendation(s)

Signature Date

Compiled by:

(Name of Investment Officer)

Supported by:

(Name of Credit Analyst)

Recommended by:

(Name of Regional Manager)

Approved by:

(Sanctioning Authority

Chairperson)