Securities and Guarantors

Overview

Securities protect the organization against loan default by providing recoverable assets or guarantees. When you add securities to a loan, Agatabo automatically blocks the pledged amounts to prevent double-pledging and enforces recovery during loan defaulting.

Types of Securities

Guarantor

Personal guarantee from another organization user (member). How it works:

Guarantor pledges a specific amount from their savings
Amount is blocked - cannot be withdrawn or re-pledged
If borrower defaults, guarantor’s savings are automatically debited
Multiple guarantors allowed per loan

Example: Jane guarantees 200,000 RWF of John’s 500,000 RWF loan

Jane’s blocked security: 200,000 RWF
Jane’s available for withdrawal: Savings balance - 200,000 RWF

Requirements:

Guarantor must have sufficient available savings
Available savings = Total savings - Already blocked amounts
Guarantor must be an organization user with savings account

Collateral

Physical asset pledged against the loan. Common types:

Land titles
Vehicles
Equipment or inventory
Livestock
Property deeds

How it works:

Borrower pledges asset with estimated value
If borrower defaults, collateral recovery is marked as pending
Important: If collateral exists, guarantor savings are NOT charged
Organization must manually follow up to seize/sell collateral

Documentation captured:

Description of asset
Estimated value
Location (optional)
Condition (optional)

Example: Land title #12345, valued at 2,000,000 RWF, located in Kigali District

Savings Lien

Borrower’s own savings pledged as security. How it works:

Specified amount of member’s savings is blocked
Cannot be withdrawn until loan is fully repaid
If borrower defaults, savings are automatically debited
Reduces organization’s risk

Example: John borrows 500,000 RWF and pledges 200,000 RWF from his 600,000 RWF savings

John’s blocked security: 200,000 RWF
John’s available for withdrawal: 400,000 RWF (600,000 - 200,000)

Security Blocking Mechanism

When you add securities to a loan, Agatabo blocks the pledged amounts to prevent members from:

Withdrawing pledged savings
Using the same savings to guarantee multiple loans
Over-pledging their available balance

How Blocking Works

For Guarantor Securities:

Pledged amount is blocked from guarantor’s available savings
Guarantor can still see full balance, but cannot withdraw blocked amount
Blocked amount cannot be pledged for new loans

For Savings Securities:

Pledged amount is blocked from borrower’s available savings
Borrower cannot withdraw the blocked amount
Reduces available balance for future loan guarantees

For Collateral Securities:

Does not block savings (physical asset, not cash)
Captures asset details and estimated value

Calculating Available Savings

Formula: Available Savings = Total Savings - Blocked Security Amounts Example:

Jane's total savings: 800,000 RWF

Active loans Jane is guaranteeing:
- Loan A: 200,000 RWF guaranteed
- Loan B: 150,000 RWF guaranteed

Jane's blocked amount: 350,000 RWF
Jane's available savings: 450,000 RWF (800,000 - 350,000)

Can Jane guarantee 500,000 RWF? NO (only 450,000 available)
Can Jane withdraw 500,000 RWF? NO (only 450,000 available)

Security Capacities

You can view security capacities to see how much each member has available for pledging: Navigate to: Loans → Security Capacities Information shown:

Organization User
Has Active Loan (yes/no)
Savings Balance
Blocked Security Amount
Available Security Amount

Use this to:

Verify guarantors have available capacity
Check before creating new loans
Monitor over-pledging risks

Coverage Ratio

The coverage ratio is an organization setting that determines the minimum security required for loans. Default: 100% (security must equal or exceed loan amount) How it works:

Total security value must be ≥ (Loan Amount × Coverage Ratio)
System validates during loan creation
Prevents under-secured loans

Example with 100% coverage:

Loan Amount: 500,000 RWF
Required Security: 500,000 RWF (500,000 × 100%)

Valid Security Combinations:
✅ 1 guarantor pledging 500,000 RWF
✅ Collateral valued at 500,000 RWF
✅ Borrower's savings lien of 500,000 RWF
✅ 2 guarantors (300,000 + 200,000)
✅ Mix: 200,000 savings + 300,000 guarantor

Invalid:
❌ 1 guarantor pledging 400,000 RWF (insufficient)
❌ Collateral valued at 300,000 RWF (insufficient)

Example with 80% coverage:

Loan Amount: 500,000 RWF
Required Security: 400,000 RWF (500,000 × 80%)

Valid:
✅ 1 guarantor pledging 400,000 RWF
✅ Collateral valued at 400,000 RWF

Changing coverage ratio: Settings → Loan Settings → Coverage Ratio

Adding Securities to Loans

During Loan Creation Only

Important: Securities can ONLY be added during loan creation. You cannot add or modify securities after a loan has been created.

Start loan creation wizard

Loans → Create Loan

Complete Steps 1 and 2

Basic information and loan rules

Step 3: Add Securities

Click “Add Security” button

Select security type

Choose: Guarantor, Collateral, or Savings Lien

Fill security details

For Guarantor:

Select organization user
Enter amount guaranteed

For Collateral:

Enter description (required)
Enter estimated value
Optional: Location, condition

For Savings Lien:

Amount to pledge from borrower’s savings

Add multiple securities (optional)

Click “Add Another Security” to add more

Validation

System validates:

Guarantor has sufficient available savings
Borrower has sufficient savings for lien
Total security meets coverage ratio

Complete loan creation

Proceed to Step 4 (Bank Details) and finalize

Validation During Creation

The system performs these checks: For Guarantor Securities:

Guarantor exists and has savings account
Guarantor’s available savings ≥ pledged amount
Available = Total savings - Blocked from other loans

For Savings Securities:

Borrower has sufficient savings
Available = Total savings - Blocked - Post-disbursement deductions
Post-disbursement deductions: fees + advance interest (if configured)

For Collateral Securities:

Description is provided
Value is specified

Overall:

Total security value ≥ (Loan amount × Coverage ratio)

Common validation failures:

“Insufficient available savings for guarantor” - Guarantor has already pledged too much on other loans
“Insufficient savings for borrower” - Borrower doesn’t have enough savings after accounting for fees
“Total security below required coverage” - Need more security or higher pledged amounts

Automatic Enforcement During Default

When you default a loan, securities are automatically enforced - there is no manual “invoking guarantors” or “seizing collateral” step.

Automatic Recovery Hierarchy

Step 1: Borrower’s Savings

System automatically debits from borrower’s savings
Up to pledged savings lien amount
Limited to actual available balance

Step 2: Collateral (if pledged)

System marks collateral recovery as pending
Records pledged collateral value as recovered
Skips guarantors (guarantor savings are NOT charged if collateral exists)
Requires manual follow-up to physically seize/sell collateral

Step 3: Guarantors’ Savings (only if NO collateral)

For each guarantor:
- Automatically debits from guarantor’s savings
- Up to pledged guarantee amount
- Limited to guarantor’s available balance
- Respects blocked amounts from other loans

Step 4: Bad Debt Write-off

Any remaining unrecovered amount
Automatically posted as bad debt expense

Learn more about loan defaulting →

Example: Automatic Recovery

Loan: 500,000 RWF principal, 100,000 RWF interest outstanding

Securities:
- Borrower's savings lien: 150,000 RWF
- Guarantor A: 200,000 RWF pledged
- Guarantor B: 200,000 RWF pledged

When you click "Default Loan":

1. Borrower's savings: 150,000 RWF recovered
2. Guarantor A savings: 200,000 RWF recovered
3. Guarantor B savings: 200,000 RWF recovered
4. Total recovered: 550,000 RWF
5. Outstanding: 600,000 RWF
6. Written off: 50,000 RWF (600,000 - 550,000)

Result: Automatic journal entry created, loan status changed to DEFAULTED

Automatic Release of Securities

Securities are automatically released when a loan is no longer active. No manual action required.

When Securities Are Released

Loan Completed:

All installments paid
All penalties paid
Loan status changes to COMPLETED
Securities automatically unblocked

Loan Defaulted:

Loan status changes to DEFAULTED
Securities automatically unblocked
Recovery amounts already deducted

How Release Works

Blocking calculation:

System only counts securities from ACTIVE loans
COMPLETED and DEFAULTED loans are excluded
Blocked amount automatically decreases when loan completes

Example:

Jane's savings: 1,000,000 RWF

Active loans Jane is guaranteeing:
- Loan A: 300,000 RWF (ACTIVE)
- Loan B: 200,000 RWF (ACTIVE)

Jane's blocked: 500,000 RWF
Jane's available: 500,000 RWF

Loan A is fully repaid → status changes to COMPLETED

Active loans Jane is guaranteeing:
- Loan B: 200,000 RWF (ACTIVE)

Jane's blocked: 200,000 RWF (automatically updated)
Jane's available: 800,000 RWF (automatically increased)

Guarantor Considerations

Before Agreeing to Guarantee

If someone asks you to guarantee their loan, consider: Financial Risk:

Your savings will be blocked (unavailable for withdrawal)
If borrower defaults, you’ll lose the pledged amount
May affect your ability to get your own loans

Relationship Risk:

Can strain friendships or family ties
Borrower may feel entitled to default (“it’s just savings”)
Collection efforts may damage relationship

Monitoring:

You cannot see borrower’s payment status
No notifications when borrower misses payments
Find out only when loan defaults

Guarantor best practices:

Only guarantee if you deeply trust the borrower
Understand you may lose the pledged amount
Consider it a gift, not a loan
Don’t guarantee more than you can afford to lose
Verify borrower has repayment capacity

Guarantor Rights

What you can do:

View your own security capacities
See your blocked amounts
Check which loans you’re guaranteeing

What you CANNOT do:

Remove yourself as guarantor after loan creation
Reduce pledged amount after loan creation
View borrower’s payment history
Request release before loan completes

Organization Settings

Settings that control security requirements and behavior:

Coverage Ratio

Path: Settings → Loan Settings → Coverage Ratio Default: 100% (security must equal loan amount) Range: 0% - 200% Purpose: Controls minimum security required for loans

Disable Loan Defaulting

Path: Settings → Loan Settings → Disable Loan Defaulting Default: false (defaulting enabled) Effect: Prevents loan defaulting organization-wide

Max Loan Percentage

Path: Settings → Loan Settings → Max Loan Percentage Default: 300% (loan can be 3× savings balance) Purpose: Limits loan amount relative to borrower’s savings

Deduct Fees from Savings

Path: Settings → Loan Settings Options:

Deduct Disbursement Fee from Savings
Deduct Advance Interest from Savings

Effect: When enabled, fees/interest are deducted from savings instead of cash disbursement Security Impact: Reduces available savings for pledging

Viewing Securities

On Loan Details Page

Navigate to loan

Loans → Select loan

View Securities section

Shows all securities attached to the loan

Information displayed

Type (Guarantor, Collateral, Savings)
Organization User (for guarantor/savings)
Amount/Value
Description (for collateral)

Security Capacities Report

Navigate to capacities

Loans → Security Capacities

View all members

Table shows:

Organization User
Savings Balance
Blocked Security Amount
Available Security Amount

Use for planning

Check before asking someone to guarantee

Common Scenarios

Scenario 1: Member Wants to Guarantee Multiple Loans

John's savings: 600,000 RWF

Request 1: Guarantee Jane's 300,000 RWF loan
✅ Available: 600,000 RWF → Can guarantee

After guaranteeing Jane:
Blocked: 300,000 RWF
Available: 300,000 RWF

Request 2: Guarantee Peter's 400,000 RWF loan
❌ Available: 300,000 RWF → CANNOT guarantee (insufficient)

Solution: John needs to increase savings or Jane must repay first

Scenario 2: Loan with Mixed Securities

Loan Amount: 1,000,000 RWF
Coverage Ratio: 100%
Required Security: 1,000,000 RWF

Securities added:
- Borrower's savings: 200,000 RWF
- Guarantor A: 300,000 RWF
- Guarantor B: 300,000 RWF
- Collateral (vehicle): 200,000 RWF

Total: 1,000,000 RWF ✅ Meets requirement

If borrower defaults:
1. Recover 200,000 from borrower
2. Mark 200,000 collateral as pending (skips guarantors)
3. Write off remaining 600,000

Scenario 3: Guarantor Has Active Loan

Jane's savings: 500,000 RWF

Jane's own loan:
- Borrowed: 300,000 RWF
- Pledged savings: 100,000 RWF

Jane's blocked: 100,000 RWF
Jane's available: 400,000 RWF

Request: Guarantee Peter's 500,000 RWF loan
❌ Available: 400,000 RWF → CANNOT guarantee full amount
✅ Can guarantee up to 400,000 RWF

Option: Peter finds second guarantor for remaining 100,000 RWF

Best Practices

Security management tips:

Require securities for all loans (coverage ratio ≥ 100%)
Verify guarantor capacity before loan approval
Use Security Capacities report during loan committee meetings
Mix security types (savings + guarantor + collateral) for large loans
Conservative collateral valuation (80% of market value)
Document collateral thoroughly (photos, ownership proof)
Communicate security requirements clearly to borrowers
Don’t allow same savings to be pledged multiple times (system prevents this)
Monitor guarantor concentration (one member guaranteeing too many loans)

Permissions Required

Action	Permission	Scope
View loan securities	`loans:read`	ANY
Create loan with securities	`loans:write`	ANY
View security capacities	`loans:read`	ANY
Change coverage ratio	`settings:write`	ANY

Creating Loans

Add securities during loan setup

Loan Defaulting

How securities are automatically enforced

Viewing Loan Details

Check securities on existing loans

Loan Analytics

Monitor security coverage metrics

​Overview

​Types of Securities

​Guarantor

​Collateral

​Savings Lien

​Security Blocking Mechanism

​How Blocking Works

​Calculating Available Savings

​Security Capacities

​Coverage Ratio

​Adding Securities to Loans

​During Loan Creation Only

​Validation During Creation

​Automatic Enforcement During Default

​Automatic Recovery Hierarchy

​Example: Automatic Recovery

​Automatic Release of Securities

​When Securities Are Released

​How Release Works

​Guarantor Considerations

​Before Agreeing to Guarantee

​Guarantor Rights

​Organization Settings

​Coverage Ratio

​Disable Loan Defaulting

​Max Loan Percentage

​Deduct Fees from Savings

​Viewing Securities

​On Loan Details Page

​Security Capacities Report

​Common Scenarios

​Scenario 1: Member Wants to Guarantee Multiple Loans

​Scenario 2: Loan with Mixed Securities

​Scenario 3: Guarantor Has Active Loan

​Best Practices

​Permissions Required

​Related Operations

Creating Loans

Loan Defaulting

Viewing Loan Details

Loan Analytics

Overview

Types of Securities

Guarantor

Collateral

Savings Lien

Security Blocking Mechanism

How Blocking Works

Calculating Available Savings

Security Capacities

Coverage Ratio

Adding Securities to Loans

During Loan Creation Only

Validation During Creation

Automatic Enforcement During Default

Automatic Recovery Hierarchy

Example: Automatic Recovery

Automatic Release of Securities

When Securities Are Released

How Release Works

Guarantor Considerations

Before Agreeing to Guarantee

Guarantor Rights

Organization Settings

Coverage Ratio

Disable Loan Defaulting

Max Loan Percentage

Deduct Fees from Savings

Viewing Securities

On Loan Details Page

Security Capacities Report

Common Scenarios

Scenario 1: Member Wants to Guarantee Multiple Loans

Scenario 2: Loan with Mixed Securities

Scenario 3: Guarantor Has Active Loan

Best Practices

Permissions Required

Related Operations