Loan Loss Provision
An expense set aside for expected loan losses, calculated by applying a rate to loans in each days-past-due class.
Formula
Provision = Σ (balance in class × provisioning rate for class)
Example
With 1% on current loans and 100% on loans over 180 days late, a KES 50,000 loan 200 days late needs a KES 50,000 provision.