BOT 5-band loan classification explained
Every loan in the portfolio sits in one of five classification bands that reflect how overdue it is. In Ustawi the band is not typed in — it is derived from each loan's actual days-past-due, so classification follows the ledger automatically. The bands, and the day-ranges that define them, are set by Bank of Tanzania regulation; each band carries its own provisioning requirement.
The five bands
As a loan ages past due it moves down a ladder of five classes, from a fully performing loan through to one recognised as a loss. Each step down signals a lower probability of full recovery and, in turn, a higher provision the institution must hold against the exposure.
The classification ladder
For a non-deposit-taking microfinance service provider, the governing instrument is Bank of Tanzania Government Notice (GN) No. 679 of 2019, Regulation 45. The band, day-range and minimum provisioning rate below reflect that schedule (rates apply to the exposure net of the value of eligible security):
| Band | Days past due | Minimum provision |
|---|---|---|
| Current | 0–5 days | 1% |
| Especially Mentioned | 6–30 days | 5% |
| Substandard | 31–60 days | 25% |
| Doubtful | 61–90 days | 50% |
| Loss | over 90 days | 100% |
Institutions must confirm the exact bands and rates against the current Bank of Tanzania gazette before treating them as final — a 2024 draft replacement of GN 679 exists. Note too that different institution types follow different ladders: deposit-taking microfinance banks are governed by GN 287 of 2014, and SACCOS by GN 675 of 2019. Applying the wrong schedule is a common and material error.
How Ustawi derives the band
The loan ledger drives the days-past-due, the days-past-due drive the classification, and the classification drives the provision — a single chain with no manual re-keying between the steps. Because the same delinquency data feeds both the PAR report and the classification, the two always agree: a loan counted in PAR90 is one that has aged into the more severe bands.
A classification that is computed from the ledger rather than entered by hand is reproducible. An examiner can trace any loan's band back to its payment history, which is exactly what an audit of your provisioning expects to be able to do.