Back Office Procedures In Debt Management

By Themba Andreas Dlamini
July 2009

Back Office procedures and functions form the bedrock of effective and pro-active debt management. The way forward with respect to enhancing Back Office procedures requires the following;
1. Regular update of institutional and coordination structures for debt management back office procedures;
2. Implement appropriate legal frameworks and coordinated policies;
3. Review institutional roles and responsibilities as and when necessary; segregation of duties in debt management;
4. Strengthen the supervision so as to reduce inefficiencies and avoid duplication or gaps;
5. Provide adequate resources; train and retain mass of staff with requisite expertise and experience; and
6. Develop, document and implement systems and procedures that enhance debt office operations and institutional memory.
Numerous documentations have identified that incomplete and inaccurate debt data provide a serious bottleneck to countries’ efforts to improve debt management. Countries, International Development Institutions and regional organisations have attempted to provide solutions to Back Office functions and operations through;
1. Rearrangement and restructuring of Institutional arrangements to conform to international best practice of front, middle and back office functions;
2. Development of assessment tools to identify functional and process gaps (i.e. DeMPA);
3. Implementation of computerised debt management systems. Choosing the best computer based debt management system is critical to Back Office procedures.

It was clear from all the countries that were included in the study that institutional arrangements and the availability of a computerised system for debt management are the two most important factors that define the role and function of debt management Back Office operations.

It was also apparent that countries have adopted, or are aware of the best practice of debt management institutional arrangement that is Front, Middle and Back offices. However, there was clear contrast in how the structure was adopted or implemented in developed or high-income countries and those from the MEFMI region.

The key question is whether MEFMI countries, in their quest to improve debt management, should adopt the structures, policies and tools used by developed countries for Back Office operations or MEFMI countries should adopt their own models that takes into account existing structures and environment whilst conforming to the best practice for debt management. It is recommended that multi-institutional arrangement which conforms to best practice (Front, Middle and Back Offices) at least for now would suffice for MEFMI member states which should be transitional to a single and independent DMO in the near future.
It is further recommended that MEFMI member countries should develop procedures manual which should be adhered to and updated as and when required. Of paramount importance also is for MEFMI member states to develop good internal controls that would automatically identify discrepancies in loan transactions and allow an accurate and timely servicing of the debt.

The findings and recommendations drawn from this report should form the basis for a further in-depth study that will produce a tangible solution for Back Office operations in MEFMI countries.