What are Loans?
In Agatabo, loans are funds disbursed from the organization’s pooled savings to members who need credit. Loans have specific terms including principal amount, interest rate, repayment schedule, and optional securities (guarantors, collateral). Loans are the primary revenue source for organizations - interest income from loans generates profits that are distributed to members as dividends.How Loans Work
Loan officer creates loan in Agatabo
Uses 5-step wizard to configure loan rules, securities, and bank details
Loan created and funds disbursed
System automatically creates journal entries and releases cash to member
Key Metrics
Portfolio Outstanding
Portfolio Outstanding is the total amount loaned to all members (sum of all outstanding loan balances). This appears on the dashboard and represents the organization’s loan receivable asset. Example: If you have:- 10 active loans
- Loan balances: 500K, 300K, 200K, 150K, 100K, 90K, 80K, 70K, 60K, 50K
- Portfolio Outstanding = 1,600,000 RWF
Arrears
Arrears are overdue amounts on loans. Includes past-due principal, interest, and penalties. Arrears indicate members who are behind on payments. Example: If a member was supposed to pay 50,000 RWF on June 1 but hasn’t, that 50,000 RWF is now in arrears.Delinquent Loans
Delinquent loans are loans with any amount in arrears (at least one payment overdue). This metric tracks portfolio health. Example: 10 active loans, 3 have overdue payments = 3 delinquent loans = 30% delinquency rateLoan Lifecycle
1. Application & Approval
Application (outside Agatabo):- Member submits loan request
- Provides purpose, amount, proposed securities
- May attend committee interview
- Review member’s savings history
- Check existing loans (is member current?)
- Assess repayment capacity
- Verify securities (guarantors available, collateral value)
- Approved amount (may be less than requested)
- Interest rate and term
- Required securities
2. Loan Creation
Loan officer uses Agatabo:Step 2: Loan Rules
Interest rate, calculation type, installment type, payment allocation, disbursement fees
3. Disbursement
What happens (automatically during loan creation):- Agatabo creates journal entries:
- Debit: Loan Receivable (principal amount)
- Debit: Interest Receivable (total interest, if paid with installments)
- Credit: Cash (principal minus any fees)
- Credit: Interest Income (total interest recognized)
- Credit: Disbursement Fee Income (if fee charged)
- Member’s loan ledger account is created
- Installment schedule is generated
- Cash is released to member (bank transfer, mobile money, or cash)
Note: Loan creation and disbursement happen atomically in a single transaction. There is no separate disbursement step after loan creation.
4. Repayment
Members make payments:- According to installment schedule (monthly, quarterly, etc.)
- Treasurer records each payment in Agatabo
- Payments are allocated between principal and interest
5. Completion or Default
Successful repayment:- Final payment brings balance to zero
- Loan status changes to “Fully Repaid”
- Member can apply for a new loan
- Member stops paying, arrears accumulate
- Organization follows collection process:
- Reminders and follow-up
- Apply penalties
- Contact guarantors
- Seize collateral (if applicable)
- Write-off (last resort)
Loan Rules Explained
Loan rules determine how interest is calculated and payments are structured:Interest Calculation Type
- SIMPLE
- REDUCING_BALANCE
- COMPOUND
Interest on original principal onlyExample: 100,000 RWF at 5% monthly for 12 months
- Total interest = 100,000 × 0.05 × 12 = 60,000 RWF
Installment Type
EQUAL_PRINCIPAL: Same principal each month, declining total payment- Example: 10,000 principal + decreasing interest
- Example: 13,361 every month
- Most common
Payment Allocation Order
INTEREST_FIRST: Pay all interest, then principal- Most tontines use this
- Ensures interest revenue is collected
- Reduces debt faster
- Less common
- Fair for partial payments
Common Loan Operations
Creating Loans
5-step wizard for loan setup
Recording Payments
Track member repayments
Viewing Loan Details
Review installment schedule and history
Applying Penalties
Charge late fees for overdue payments
Modifying Loans
Increase principal or extend period
Loan Analytics
Monitor portfolio health and arrears
Securities
Securities protect the organization in case of default:Types of Securities
Guarantors: Other members who commit to repay if borrower defaults- Example: Jane guarantees 100% of John’s 500,000 RWF loan
- Example: Land title valued at 2,000,000 RWF
- Example: 200,000 RWF of borrower’s savings held as security
Loan Analytics
Agatabo provides insights into loan portfolio health:Key Reports
- Loan portfolio by status: Active, fully repaid, written off
- Arrears aging: 1-30 days, 31-60 days, 60+ days overdue
- Loan performance by member: Track repeat borrowers
- Interest income trends: Revenue generated from loans
- Delinquency rate: Percentage of loans in arrears
Best Practices
Loan management tips:
- Verify member’s savings history before approving loans
- Use REDUCING_BALANCE with EQUAL_TOTAL for standard loans
- Always require at least one security (guarantor or collateral)
- Set first payment date exactly one month after disbursement
- Record payments promptly to keep arrears accurate
- Apply penalties consistently for late payments
- Follow up on arrears within 7 days of missed payment
- Print installment schedule for borrower’s reference
- Document unusual terms or agreements in loan notes
Integration with Other Features
Deposits
Loans are often limited based on savings:- Common rule: “Maximum loan = 3× savings balance”
- Disbursement fees and advance interest can be deducted from savings (configurable)
- Loan payments can be deducted from savings
- Encourages members to save before borrowing
Interest Income
Loan interest generates revenue:- Interest income appears on Profit & Loss statement
- Net income (after expenses) distributed as dividends
- Higher loan portfolio = higher interest income
Financial Reports
Loans appear in multiple reports:- Balance Sheet: Loan Receivable (asset)
- Profit & Loss: Interest Income (revenue)
- Cash Flow: Loan disbursements (cash outflow), loan payments (cash inflow)
Common Questions
What's a reasonable interest rate?
What's a reasonable interest rate?
It varies by region and organization:Typical rates:
- 1-5% per month (12-60% annual)
- Higher than commercial banks (10-20% annual)
- Lower than payday lenders (100%+ annual)
- Commercial bank rates in your area
- Risk of default (higher risk = higher rate)
- Operating expenses (staff, office, etc.)
- Member affordability
Can I change loan terms after creation?
Can I change loan terms after creation?
Limited changes allowed:You CAN:
- Increase principal amount (via loan modification)
- Extend loan period (via loan modification)
- Modify individual installment amounts
- Modify individual due dates
- Apply or waive penalties
- Interest rate
- Interest calculation type
- Installment structure (EQUAL_TOTAL vs EQUAL_PRINCIPAL)
- Payment allocation order
- Decrease principal amount
- Shorten loan period
What if a member defaults?
What if a member defaults?
How do I handle a member who wants to pay off a loan early?
How do I handle a member who wants to pay off a loan early?
Early repayment options:
- Allow without penalty: Member pays remaining balance, saves on interest (if REDUCING_BALANCE)
- Charge prepayment penalty: Compensate for lost interest income (less common)
- Calculate full interest anyway: Member pays all interest even if early (not recommended)
- Record a payment for the full remaining balance
- System automatically allocates to principal and interest
- Loan status changes to “Fully Repaid”
Getting Started
Create Your First Loan
Step-by-step loan creation guide
Understand Loan Rules
Detailed examples of interest calculations
Loan Disbursement Workflow
Complete checklist for processing loans
Recording Payments
Track member repayments