Account 281- Debts awaiting resolution

1. Accounting principles:

a) This account shall be used for reflecting loans awaiting resolution, including loans secured by property put up as collateral for fulfillment of the guarantor’s obligations, which await resolution; debts related to cases awaiting trial;

b) Microfinance institutions shall have to keep a detailed journal of loans specific to lending contracts or agreements, terms, maturity dates, qualified borrowers and paid amounts, etc.;

c) Microfinance institutions shall move loans under surveillance at the account 201 and 251 to this account for continued surveillance while they are awaiting resolution.

2. Account 281 can be subdivided into tier-2 accounts, including:

Account 2811- Loans secured by the guarantor’s collateral which are awaiting resolution

This account shall be used for reflecting loans secured by property which is put up as collateral by the guarantor for discharge of obligations on behalf of a borrowing customer, but have not yet been transferred to microfinance institutions (otherwise called security or security property).

Debit side: – The number of loans awaiting resolution which is increased.

Credit side: – The number of loans awaiting resolution which is decreased.

Debit balance: – This section reflects unrecovered guaranteed loans awaiting resolution.

Detailed accounting: Accountant may use subaccounts for specific customers taking out loans awaiting resolution.

Account 2812- Debts associated with cases awaiting trial

This account shall be used for recording debts related to cases awaiting trial under the jurisdiction of law enforcement authorities. Microfinance shall consult lending and other related documents to refer outstanding debts associated with cases awaiting trial to this account.

Debit side: – Debts related to cases awaiting trial which are increased.

Credit side: – Debts related to cases awaiting trial which are decreased.

Debit balance: – This section reflects debts related to cases awaiting trials under the jurisdiction of law enforcement authorities.

Detailed accounting: Accountant may use subaccounts for specific customers incurring debts related to cases awaiting trial.

Article 11. Account 291- Written-off debts

1. Accounting principles:

a) This account shall be used for recording a microfinance institution’s loans granted to borrowing customers of which writing off is accepted by competent regulatory authorities without having to pay interest;

b) Microfinance institutions shall have to keep a detailed journal of loans eligible for writing-off according to lending contracts or agreements, terms, maturity dates, qualified borrowers and paid amounts.

2. Account 291 can be subdivided into tier-2 accounts, including:

2911- Short-term loans

2912- Medium-term loans

2913- Long-term loans

3. Structure and entries of the account 291:

Debit side: – Loan amounts already written off.

Credit side: – Borrowing customer’s debt repayment amounts.

– Loan amounts of which writing-off is accepted.

Debit balance: – This section reflects the existing number of written-off loans of a microfinance institution.

Detailed accounting: Accountant can use subaccounts for specific borrowing customers whose loans are eligible for being written off.

Article 12. Account 299- Loan loss provisions

1. Accounting principles:

a) This account shall be used for reflecting a microfinance institution’s setting aside funds for provisions and treatment of provisions against loss of loans in accordance with laws on setting aside of funds for and use of provisions against risks arising from lending operations of microfinance institutions;

b) In order to deal with losses incurred by potential risks arising from lending operations and control fluctuations in business results during an accounting period, microfinance institutions shall have the burden of setting aside funds for provisions against loss of loans which are accounted for as their expenses;

c) Microfinance institutions must keep a journal of provisions specific to loans and borrowers;

d) Setting aside of funds for and reversal of provisions against loss of loans and disposal of irrecoverable debts must conform to existing laws on setting aside of funds for and use of provisions against losses incurred from lending operations of microfinance institutions.

2. Account 299 can be subdivided into tier-2 and tier-3 accounts, including:

2991- Provisions against loss of loans granted to microfinance customers

29911- Specific provisions

29912- General provisions

2992- Provisions against loss of loans granted to other borrowing customers

29921- Specific provisions

29922- General provisions

2993- Provisions against loss of loans granted by using funds held in trust

29931- Specific provisions

29932- General provisions

2994- Provisions against loss of debts awaiting resolution

29941- Specific provisions

29942- General provisions

2995- Provisions against loss of written-off debts

29951- Specific provisions

29952- General provisions

3. Structure and entries of the account 299:

Debit side: – Provisions against loss used for treating loan risks.

– Reversal of the surplus of provisions already created in accordance with regulations in force.

Credit side: – Already created provisions charged as expenses.

Credit balance: – This section reflects existing provisions against loss of loans of a microfinance institution.

Detailed accounting: Accountant may use one subaccount for this account.