Premium Gold Finance

The Premium Gold Finance Scheme has been designed to assist customers in middle to junior managerial positions and owners of Small and medium Enterprises to fulfill their personal dreams and ambitions by providing them with top quality financial services in form of a gold VISA card, a gold cheque book, an overdraft facility, personal loans occasionally when justified and a designated cashier at all National Bank of Malawi service centres.

The Premium Gold Finance Scheme has been introduced with the view that if the Bank offers personalized services and tailor made solutions to middle and junior managers of reputable institutions and SME owners the Bank will:

Establish a lasting relationship with the targeted group of customers with the hope that their future business decisions will be in favour of the Bank,
Win back customers who have left the Bank because of lack of a tailor made solution to suit their unique needs.
Remain competitive since this is the current trend in personal banking customer relationship management.
Serve these important clients in the right way by making quick decisions and exercising flexibility in assessing their applications and other bank transactions.
Foster strong lasting relationships with corporate entities, on the understanding that when the current executives who are our premium or executive customers leave employment a strong relationships will already be existent between the Bank and the successors who may be chosen from the middle management level.
Grow the Bank’s revenue through selective lending.

PRODUCT DESCRIPTION

The Premium Gold Finance Scheme has been designed to assist middle to junior managers of corporate customers being managed by the Corporate Banking Division Division and Retail Banking Division Division and SME owners to fulfill their personal dreams and ambitions with top-quality financial services.

STRATEGIC OBJECTIVES

The offering is designed to offer a quality service at a profit and foster goodwill between the Bank and the creditworthy salaried professionals and SME owners. It is from this source that many of our existing and future public sector, business, industrial and community leaders are/will be drawn; therefore the expectation is that having assisted this layer of customers, the Bank will have established a relationship to the long-term mutual benefit of both parties.

TARGET MARKET

The Premium Gold Finance Scheme shall be available to qualifying customers whose regular monthly salary is paid direct into the Bank account in line with the following criteria:

Middle to junior managers of corporate customers and SME owners managed by Corporate Banking Division Division and Retail Banking Division Division who are resident Malawian nationals or exceptionally foreign nationals with a Temporary Employment Permit (TEP) or Permanent Residence.
High networth individuals with important/power standing in the society and currently earning a net salary of not less than MK800,000.00 per month, (where net salary shall mean gross salary less statutory deductions).
Requests from former classified debtors should be referred to the Executive for consideration.
New account holders shall be exceptionally considered provided there is clear motivation and supporting documentation.

THE PREMIUM GOLD FINANCE SCHEME OFFERING

The qualifying customers will be offered the following package:

A gold Visa Card
A gold current account
A gold cheque book
Automatic Overdraft Limit:

Amount - Equal to a maximum of 1.5 times net salary
Review period - Annual
Pricing - Base + 4%
Monthly service fee - As per Tariff currently MK5, 000.00

Automatic personal loan facility under the following terms and conditions:

Maximum amount : MK4, 000,000.00 but subject to customer's monthly income to loan repayment ratio being within 30% of the net monthly salary being deposited to the Bank account.

Maximum repayment period: 36 months

Appraisal Fees : Appraisal fees per tariff will be collected prior to draw down.

Arrangement Fees : 1%.

CUSTOMER RECRUITMENT PROCESS

Account Relationship Managers in Retail Banking Division Division and Corporate Banking Division Division will be responsible for the identification of deserving customers.

The Account Relationship Managers will originate requests for consideration/ Approvals by the Head, Retail Banking Division.

The offers will be restricted to the Middle to junior Management of corporate companies and SME owners. Only in exceptional circumstances of very large corporations which are within the Bank’s top twenty customers or the country’s large corporations, consideration will be given to offer the facilities to senior officers.

The targeted customer’s net salaries should be analyzed before sending a recommendation for approval to ensure that the overdraft facility being offered is matched with net salary to avoid creating bad debts.

WITHDRAWAL FROM THE PREMIUM GOLD FINANCE SCHEME

Where a middle or junior manager under the Premium Gold Finance Scheme has left employment for various reasons including but not limited to natural causes, retirement from work, expiry of contracts dismissal etc. The Account Relationship Manager will engage the customer to agree on repayment plan where the customer has a debt with the Bank. Upon receipt of a sound repayment plan the Account Relationship Manager will submit motivation to Head, Retail Banking Division Division for approval.

Where there is no reliable repayment plan the overdraft facility will be withdrawn immediately and demand letter issued accordingly. In view of this negative change in the member’s employment or financial status, the Bank reserves the right to withdraw membership from the premium gold club and when this happens all credit facilities will be payable to the Bank on demand.

MULTIPLE FACILITIES AND CONVERSION

A customer will be allowed to enjoy both loan and overdraft facility and any other credit facility offered by the Bank which is targeted at personal customers provided the total monthly deductions by the Bank are within 30% of the net income.

Customers will not be allowed to convert a loan facility to an overdraft facility as this may mask potential financial problems/inability to service debt.

Customers will be allowed to access a second loan from the Bank on clean basis provided the initial loan has been repaid up to 50%, the net pay threshold of 30% of net income and the total exposure is within MK4, 000,000.00.

Customers will be allowed to access a second loan which brings total exposure to beyond MK4, 000,000.00 from the Bank provided the initial loan has been repaid up to 50%, the net pay threshold of 30% of net income and the customer has offered the Bank acceptable security to cover the exposure.

UNDERWRITING REQUIREMENTS

Personal Loans andOverdrafts under the Premium Gold Finance Scheme will be made available provided:

There is a Letter of Undertaking from the employer, for middle to junior managers:

For all facilities, a letter of undertaking from reputable employers undertaking to send monthly salary to the applicant's Bank account until loan is repaid plus an undertaking to pay terminal benefits to the Bank in case of any eventualities shall be in place. Letters of undertaking shall be verified with the agent of the employer signing such undertakings by phone.

Any other variation of the letter of undertaking shall be done by the Chief Executive Officer through the Head of Retail Banking Division.

Copy of a Temporary Employment Permit (TEP), for facilities extended to foreign nationals.
Any other acceptable security, in line with bank’s laid down procedures may be acceptable in lieu of a letter of undertaking, where the customer is borrowing amounts beyond the quoted unsecured limits under clause 5.2

All customers shall make a full declaration of assets and liabilities on form ADV 4. This should be checked by an officer and signed off by the Manager

APPLICATION FOR PERSONAL LOAN AND ADDITIONAL OVERDRAFT FACILITIES AND APPROVAL PROCESS

Customers requiring personal loans and additional overdrafts under the scheme will be requested to:

Complete loan and overdraft application forms (Appendix I).

Submit a letter of undertaking from the employer to continue remitting monthly salary through the Bank.

Submit a filled ADV 4.

Any other security documents, where necessary.

On receipt of these documents, PBBD will

Establish the customer’s credit worthiness by scoring the customer using the Bank’s approved credit score sheet.

Analyze the customer's application in line with the Bank’s lending criteria.

Applications for amounts up to MK4,000,000.00 shall be approved by Head, Retail Banking Division. Any exceptions outside this shall be referred to the Chief Executive on a case by case basis.

DRAW DOWN OF FACILITIES UNDER THE SCHEME

Once a facility is approved, a sanction letter is to be issued which should be acknowledged by the customer before draw down of the facility.

Where a facility is secured by a guarantee from the employer, cash or any other security, this should be in place or perfected before draw down is permitted.

MONITORING

The Account Relationship Manager responsible is accountable for monitoring the performance of the Premium Gold customer’s portfolio and submission of various portfolio performance reports to the Executive and Credit Committee.

HANDLING OF NON-PERFORMING DEBTS

Where there is doubt as to whether a loan debt/overdraft is to be recovered by the Bank, the account shall be classified as irregular and treated in line with Substandard Debts Policy.

EXCEPTION TO PRODUCT PROFILE

When a lending officer believes that an application for a loan/overdraft has merit although not conforming to the product profile, the proposal shall be referred to the Chief Executive with the Head of PBBD’s recommendations.

OTHER TERMS AND CONDITIONS

Repayment Mode

Loan Facility

(a) Principal and interest deductions will be made from the customers operating account on monthly basis.

In some instances, employers may prefer to deduct instalments from their employee's salary and remit same direct to the Bank on monthly basis.

Repayments inclusive of interest commence one month after the loan is granted.

Early Repayment - no penalty charge for early repayment.

Reconciliation and Reporting

Computer generated reports are produced every month for credit control purposes.

Accounting

Accounts are accommodated on T24 operating system through a separate memo group.

Risk Management

Approval Process/Risk identification and control.

Credit Risk

The lending conforms with the Bank’s Credit Policy. Lending under this product is on an unsecured basis up to MK 4,000,000.00 subject to letter of undertaking by employers. Facilities over MK 4,000,000.00 to be tangibly secured with acceptable and easily realisable security.

Liquidity Risk

Liquidity Risk comes from funding medium term loans/overdrafts with short-term deposits. Maximum maturity of temporary overdraft is 1 year and loans is 36 months. These overdrafts/loans are funded by demand deposits and time deposits respectively.

The whole concept of which liabilities should fund what assets has not been developed by the Bank. However, the risk is minimised by the fact that our deposits are very stable and the ratio of our credit to resources is at acceptable level.

Operational Risk

The product will go through 4 phases:

Application
Approval
Draw down
Monitoring (repayments, early redemption, etc)

Authorisation

The following considerations will be taken into account before a decision to approve or reject loan/overdraft application is arrived at:

Ability to generate income
Repayment ability
Account history and
Personal stability

Interest

Interest to be paid monthly.

Credit Scoring

Credit Scoring shall be applicable to both loan and overdraft applications using score sheets provided in credit quest.

Head, Retail Banking Division shall approve applications with a credit score of 30 points or less. Chief Executive to consider applications with a credit score in excess of 30 points but under 38 points which carry the Head, Retail Banking Division’s unreserved recommendations.

Applications with a score line in excess of 38 points should be declined and the decision rests with the Head of Retail Banking Division.

Instalment Default

In the event of default on any one payment on due date the outstanding principal amount on the loan plus accrued interest becomes immediately due and repayable. For overdraft Substandard Debts Policy applies.

Set-Off

The Bank may without notice combine or consolidate any outstanding principal or interest on the loan/overdraft with any other accounts maintained in the debtor's name and this shall be incorporated in the sanction letter. And where there is a default the Bank may exercise its right to set off any outstanding balances against funds held in any other account of the customer to the extent allowable by law.

Joint Accounts

Personal loan accounts to be opened in individual names only, even if funded by joint account.

Legal Matters

There will be cases when customers are unable to repay their loans due to a change in circumstances. In such cases, the entire loan balance may be at risk and the Bank will have to take legal action to recover the debt. Some losses will be incurred.

Completed ADV4 with specific details of identifiable assets such as title and plot numbers for landed property and registration numbers for vehicles etc which must be listed overleaf.

Regulatory Issues

No specific regulatory approval is required for the product.

The lending conforms with the Banking Act.

Risk appetite

This product profile will not exceed 50% of the Bank’s unsecured personal lending portfolio.

Product profile review period

This product profile is subject to review after three years or if circumstances demand a review before the expiry of three years.

Approval

Approved by the Credit Committee.