How provisioning is calculated
Provisioning sets aside an expected-loss reserve against the loan book. In Ustawi the provision is a direct function of each loan's classification band: as a loan ages into a worse band its provision rate rises, and the reserve is recalculated automatically. The provision is taken on the exposure net of eligible security, and the resulting entries post through to the general ledger.
Band in, provision out
The provision on a loan is its classification band's minimum rate applied to the exposure. Because the band is derived from days-past-due, you never set a provision rate on a loan by hand — a loan that ages from Substandard into Doubtful moves from the 25% rate to the 50% rate on its own, and the reserve grows to match.
Net of security
The provision rate is applied to the exposure net of the value of eligible collateral or security, not to the gross outstanding balance. A well-secured loan therefore carries a smaller provision than an unsecured one in the same band, which is why keeping collateral valuations current directly affects the reserve you must hold.
The provisioning rates by band
The rates below follow Bank of Tanzania GN No. 679 of 2019, Regulation 45, for a non-deposit-taking microfinance service provider (confirm against the current gazette):
| Band | Days past due | Provision rate |
|---|---|---|
| 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% |
Confirm the exact provisioning percentages against the current Bank of Tanzania gazette before treating them as final — a 2024 draft replacement of GN 679 exists. Deposit-taking microfinance banks (GN 287 of 2014) and SACCOS (GN 675 of 2019) provision on different ladders, so use the schedule for your own institution type.
It posts to the ledger
Provisioning is not a report that lives apart from the books. The provision entries post through to the general ledger, so the reserve reflected in your financial statements is the same figure the classification produced — not a separately maintained number that has to be reconciled back.
A loan with TSh 2,000,000 outstanding, secured by collateral valued at TSh 800,000, sits in Doubtful (50%). The provision is 50% of the TSh 1,200,000 net exposure — TSh 600,000.