Demo Horizon Finance: microfinance operations day

Demo Horizon Finance serves 48,000 small businesses through branches in Kenya, Tanzania, and Rwanda. It lends in KES, TZS, and RWF, collects through agents and mobile money, and reports portfolio quality to regulators. OSERP links customer identity, credit assessment, loan contract, repayment schedule, disbursement, cash collection, arrears, collateral, provisioning, and the general ledger.

1. Onboard the borrower and group

Create a borrower with legal name, national ID, tax number, date of birth or incorporation, mobile number, address, country, branch, relationship officer, risk class, consent, screening result, and preferred collection channel. A group-lending profile adds group ID, meeting day, chairperson, members, guarantee rule, and joint-liability percentage. Duplicate identity numbers are blocked within the tenant and a possible-match queue records the reviewer.

Field	Demo value	Impact
Borrower	Amina Fresh Produce Ltd	Customer and ledger sub-account
Branch	Kisumu Central	Portfolio and officer ownership
Currency	KES	Contract and repayment currency
Risk grade	B2	Pricing, limit, and approval route
Collection channel	M-Pesa agent	Settlement and reconciliation
Consent version	KYC-2026.04	Evidence for lawful processing
Group guarantee	20%	Exposure and recovery rule
Screening result	Passed 17 Sep 2026	Compliance gate

The KYC record stores evidence type, document number, issue/expiry date, verification method, reviewer, and attachment hash. Expired identification suspends new disbursement but does not erase repayment history.

2. Assess credit and create the loan application

Open Lending → Application → New. The header records borrower, product, branch, officer, requested amount, currency, purpose, tenor, repayment frequency, proposed rate, collateral policy, guarantors, affordability result, application date, and status. Detail lines record income source, sales evidence, existing debt, household obligations, seasonality, and verified expenses.

Amina requests KES 600,000 for a six-month produce cycle, repaid monthly. The assessment records average monthly sales KES 1,450,000, gross margin 22%, existing monthly debt KES 90,000, and verified operating costs KES 1,050,000. The affordability service calculates sustainable cash surplus and returns a decision with model version, inputs, overrides, and reason. A manual override requires a role, comment, and second approval.

3. Approve the product and terms

The product master stores product code, accounting method, nominal rate, effective rate, fee rules, tax treatment, minimum/maximum amount, tenor limits, grace period, repayment calendar, penalty policy, provisioning class, and active dates. Use product version SME-WC-2026-09; never change a live version after contracts exist.

The approval workflow checks exposure to borrower and group, branch limit, risk grade, collateral coverage, affordability, KYC status, segregation of duties, and sanctions screening. The approval decision records approved amount, rate, fees, conditions precedent, approver, decision time, and expiry. Rejection records a reason code rather than deleting the application.

4. Disburse and post the loan

The loan contract header records contract number, borrower, product version, principal, currency, rate basis, start date, maturity date, repayment frequency, first due date, grace period, settlement account, branch, officer, and approval reference. Charges include origination fee, insurance, tax, and net proceeds. The customer must see gross principal, deductions, and amount received.

For the approved KES 600,000 loan, OSERP deducts a 2% origination fee of KES 12,000 and KES 1,500 insurance, so mobile-money proceeds are KES 586,500. The disbursement journal debits loan receivable for principal, credits cash for net proceeds, and credits fee or payable accounts for approved deductions. A failed mobile-money callback leaves the contract approved but undisbursed; it cannot create a second disbursement.

5. Generate the schedule and accrue interest

The schedule stores instalment number, due date, opening principal, scheduled principal, scheduled interest, fee, tax, total due, currency, payment priority, and status. With a simple monthly rate of 2% and equal-principal repayment, the first month contains KES 100,000 principal and KES 12,000 interest before fees. The schedule engine stores the formula, rounding mode, calendar, and version so a reviewer can reproduce every amount.

Daily accrual journals debit accrued interest receivable and credit interest income. Suspended or non-accrual loans follow policy; OSERP stops income recognition when the non-accrual rule is met and records the reason. A backdated rate amendment creates an adjustment journal with effective date and approver.

6. Collect through branches, agents, and mobile money

A receipt records borrower, contract, channel, provider, external transaction ID, value date, currency, gross amount, provider fee, net amount, collector, branch, and allocation status. An incoming M-Pesa payment of KES 112,000 is matched by contract number. Allocation follows configured priority—penalty, fee, tax, interest, then principal—and displays the resulting balances before posting.

Duplicate provider IDs are idempotently rejected. Unidentified cash remains unapplied, with suspense account and ageing. A reversed mobile-money transaction creates a reversal linked to the original receipt; it never edits the original audit event. Branch cash counts reconcile collector, device, denomination, deposit slip, and bank statement.

7. Arrears, restructuring, and collateral

The collections work queue calculates days past due from the oldest unpaid due item, not from the last promise date. It stores contact attempt, channel, outcome, promise amount/date, visit location, collector, next action, and vulnerability flag. A 17-day delinquency enters the configured P2 strategy and may require supervisor approval before field recovery.

Restructuring records reason, hardship evidence, old contract, new schedule, capitalised interest policy, waived charges, approval, and effective date. It preserves the original schedule and produces a before/after comparison. Collateral records asset type, owner, valuation date, forced-sale value, lien reference, insurance expiry, custodian, and release condition. A valuation expiry raises a control exception before further limit increases.

8. FX, provisioning, and regulatory close

The group reports in USD while contracts remain in local currency. Each disbursement and receipt stores transaction rate, source, timestamp, and realised FX. Month-end revaluation of open KES, TZS, and RWF balances posts unrealised FX without changing customer contractual amounts.

Portfolio close reconciles applications to approvals, approvals to contracts, contracts to disbursements, schedules to accruals, receipts to mobile-money settlements, arrears to collections, collateral to registers, and sub-ledgers to GL. The expected-credit-loss run stores portfolio segment, probability of default, loss-given-default, exposure at default, model version, overlay, and approval. Regulatory reports show active borrowers, gross portfolio, PAR30/PAR90, write-offs, recoveries, capital, and liquidity with a report snapshot ID.

KPI	Before OSERP discipline	After OSERP discipline	Improvement
Disbursement turnaround	2.8 days	0.7 days	75% faster
Mobile-money allocation accuracy	93.1%	99.7%	+6.6 points
PAR30 reporting lag	6 days	1 day	83% lower
Duplicate borrower rate	2.4%	0.3%	88% lower
Month-end portfolio close	12 days	4 days	67% faster

Practice challenge

Onboard a borrower and group, upload KYC evidence, run affordability, approve a versioned product, disburse net proceeds, generate an equal-principal schedule, accrue interest, allocate a mobile-money receipt, reverse a duplicate callback, place the account in arrears, restructure it, revalue collateral, calculate ECL, and reconcile the regulatory snapshot. Explain every header and detail field, formula, permission, journal, currency rate, exception, API identifier, and audit event.

Related: Business Partner field guide, Payment Receipt field guide, Journal Entry field guide, Multi-currency operations, and API cookbook.