Approval Workflow
Understanding the loan lifecycle from application to completion.
Every loan in the system follows a structured lifecycle that ensures proper oversight, accountability, and tracking from the moment it is submitted through to final repayment or closure. This page explains each status, how loans transition between them, and who is authorized to perform each action.
Status Overview
A loan moves through the following statuses during its lifecycle:
| Status | Display Label | Description |
|---|---|---|
| PENDING | Pending | The loan application has been submitted and is awaiting review by an authorized approver. |
| APPROVED | Approved | The loan has been approved and is awaiting fund disbursement to the borrower. |
| REJECTED | Rejected | The loan application has been denied. A reason is provided by the approver. |
| DISBURSED | Disbursed | Funds have been released to the borrower. The loan is ready for repayment to begin. |
| ACTIVE | Active | The loan is being actively repaid. At least one repayment has been recorded. |
| COMPLETED | Paid | All installments have been paid in full. The loan is settled. |
| DEFAULTED | Defaulted | The borrower has failed to make required payments. The loan is in default. |
| CANCELLED | Cancelled | The loan was cancelled before funds were disbursed. |
The COMPLETED status is displayed as "Paid" in the user interface. This indicates that the borrower has fully repaid the loan.
Status Transitions
Loans follow a defined path through these statuses. Not every transition is possible -- the diagram below shows the allowed movements.
From Pending
A newly submitted loan starts in Pending status. From here, it can move to:
- Approved -- An authorized approver reviews and approves the loan application.
- Rejected -- An authorized approver reviews and denies the loan application, providing a reason.
- Cancelled -- The loan is cancelled before any approval decision is made.
From Approved
Once approved, the loan awaits disbursement. From here, it can move to:
- Disbursed -- Funds are released to the borrower.
- Cancelled -- The loan is cancelled before funds are released (e.g., the borrower no longer needs the loan).
From Disbursed
Once funds are released, repayment tracking begins. From here, it moves to:
- Active -- The first repayment is recorded, confirming the loan is being repaid.
From Active
While the loan is being repaid, it can reach one of two final states:
- Completed -- All installments have been paid in full.
- Defaulted -- The borrower has missed payments and the loan is flagged as in default.
Summary of Transitions
| From | To | Trigger |
|---|---|---|
| Pending | Approved | Approver approves the loan |
| Pending | Rejected | Approver rejects the loan |
| Pending | Cancelled | Loan is cancelled |
| Approved | Disbursed | Funds are disbursed |
| Approved | Cancelled | Loan is cancelled before disbursement |
| Disbursed | Active | First repayment recorded |
| Active | Completed | All installments paid |
| Active | Defaulted | Missed payments |
Who Can Perform Each Action
Access to loan actions is restricted by user role to ensure proper authorization and separation of duties.
| Action | Required Role |
|---|---|
| Submit a loan application | Finance user |
| Approve or reject a loan | Admin, Finance Manager |
| Disburse funds | Admin, Finance Manager |
| Record a repayment | System (automatic payroll deduction) or manual by Finance user |
| Cancel a loan | Admin or the original creator |
How to Approve or Reject a Loan
Reviewing a Loan Application
- Navigate to Finance > Loan > Loan List.
- Click on the Pending status tab to filter for loans awaiting review.
- Click on a loan row to open the detail view.
- Review the following information:
- Borrower -- Is this person eligible for a loan?
- Loan Type -- Is the correct loan type selected?
- Amount -- Is the amount reasonable and within policy limits?
- Interest Rate and Tenure -- Are the repayment terms appropriate?
- Notes -- Does the stated purpose justify the loan?
- Click "Approve" to approve the loan, or click "Reject" to deny it.
- If rejecting, provide a clear reason for rejection so the submitter understands what needs to change.
Disbursing Funds
After a loan is approved:
- Open the approved loan from the Loan List.
- Verify the loan details and confirm the disbursement method.
- Click "Disburse" to record that funds have been released.
- The loan status changes to Disbursed, and the repayment schedule becomes active.
Using the Kanban View
The Kanban view provides a visual representation of your loan pipeline. Each status appears as a column, and individual loans appear as cards within those columns.
To use the Kanban view:
- Navigate to Finance > Loan > Loan List.
- Toggle the view mode to Kanban using the view switcher in the top-right corner.
- Loans are displayed as cards organized by their current status.
- Drag and drop a loan card from one column to another to update its status (where the transition is allowed).
This view is especially useful for finance managers who want to see the overall status distribution of all active loans at a glance.
Once a loan is disbursed and active, it cannot be cancelled. The remaining balance must be fully repaid, or the loan will eventually be marked as defaulted if payments are missed.
Best Practices
- Review promptly -- Do not let pending loan applications accumulate. Borrowers may be relying on timely disbursement.
- Verify eligibility -- Although the system performs automatic eligibility checks, use your judgment to assess whether the loan is appropriate given the borrower's current financial situation.
- Document rejections clearly -- Provide specific, actionable reasons when rejecting a loan so the applicant knows what to address.
- Monitor active loans -- Regularly review the Active and Disbursed columns in Kanban view to identify any loans that may be at risk of default.
- Follow up on defaults -- When a loan enters Defaulted status, work with the borrower to establish a recovery plan.