Policy and Procedural Guidelines For Bank Financing to...

Volume - II

Confidential

Policy and Procedural Guidelines

For

Bank Financing to NGO-MFIs

Confidential

Policy and Procedural Guidelines

For

Bank Financing to NGO-MFIs (Volume – II: Samples of Forms and Formats)

Prepared By

S. A. Chowdhury

Mahmuda Akter

February 01, 2007

TABLE OF CONTENTS

ANNEX: I LOAN APPLICATION FORM ...............................................................................................................................1

ANNEX: II ORGANIZATIONAL ASSESSMENT FORM ..................................................................................................13

ANNEX: III CHECKLIST OF SECURITY DOCUMENTS/PAPERS ...............................................................................16

ANNEX :IV ASSET CLASSIFICATION AND PROVISIONING SY STEM .....................................................................17

ANNEX: V PARTICULARS OF EXECUTIVE COMMITTEE/ADV ISORY COUNCIL/LIFE MEMBERS ...................20

ANNEX: VI MONTHLY LOAN PERFORMANCE STATEMENT ....................................................................................21

ANNEX: VII CHECKLIST OF MONITORING INSTRUMENTS ......................................................................................22

ANNEX: VIII FORMAT OF LOAN AGREEMENT BETWEEN THE WHOLESALE/NETWORK ...............................23

ORGANIZATION AND THE BORROWER NGO-MFIS

ANNEX: IX MAIN PROVIISONS OF MEMORANDUM OF UNDERSTANDING (MOU) BETWEEN.......................27

THE WHOLESALE/NETWORK ORGANIZATION AND THE BANK

ANNEX – X SAMPLE LETTER FOR NON-PAYMENT OF INSTALLMENT ................................................................28

FINAL REMINDER TO RECOVER OVERDUES.......................................................................................29

LOAN CALL UP NOTICE...............................................................................................................................30

ANNEX : XI SAMPLE OF UNDERTAKING BY THE FACILITATING AGENCY (NETWORK ORGANIZATION) ..31

ANNEX: XII MAIN FEATURES OF THE TERM SHEET FOR A SYNDICATED CREDIT FA CILITY ......................33

ANNEX: XIII CONTENTS OF INFORMATION MEMORANDUM WITH SUPPORTING DOCUMETNS.................35

ANNEX: XIV LIST OF MAIN SYNDICATED LOAN DOCUMENTS ................................................................................37

ANNEX: XV GUIDELINES AND PROCEDURES FOR ON-LENDING TO .................................................................38

TO MICRO ENTREPRENEURS BY NGO-MFIS

ANNEX: XVI STATEMENT OF LOAN DISBURSED UNDER THE MICRO ENTERPSIE ........................................44

REFINANCING SCHEME THROUGH NGO-MFIS

ANNEX: XVII GUIDELINES AND PROCEDURES FOR ON-LENDING .....................................................................45

TO HARDCORE POOR BY NGO-MFIS

ANNEX: XVIII STATEMENT OF LOAN DISBURSED UNDER THE HA RDCORE POOR .......................................49

PROGRAM THROUGH NGO-MFIS

ANNEX: XIX FLOW CHART OF SECURITIZATION PROCESS...................................................................................50

ANNEX: XX CHECKLIST OF SECUR ITIZATION DOCUMENTS ................................................................................51

1

ANNEX: I (Sample)

ABC BANK LTD. Principal Branch

33, Dilkusha, Dhaka-1000

LOAN APPLICATION FORM

(NGO-MFI will fill up the Form)

Managing Director/ Deputy Managing Director/ General Manager/ Executive Vice President ABC Bank Ltd. 33, Dilkusha, Dhaka-1000 I/We............................................................................................................................................... ..........

......................................(Organization’s Name) am/are interested to borrow loan from your Bank for

extension of credit to the poor observing all formalities and conditions.

Particulars of the Organization

1. Organization’s Name:

a. In Bangla: ........................................................................................................................

In English .............................................................................................................. .............

b. Registered Address: ...........................................................................................................

2. Organization’s Permanent Address:

Village/City: ..................................... Road: ......................................... P.O. Box ....................

Thana: ....................................... District: ....................................... Post Code ........................

Tel: ............................................................... Mobile: ..............................................................

E-mail: ......................................................................................................................................

Mailing Address: ......................................................................................................................

.................................................................................................................................................

Photograph of Chairman (Attested)

Photograph of the

Executive Director

(Attested)

2

3. Parti culars of the Executive Director/Chief Executive Officer:

a. Name: In Bangla .................................................................................................................

In English ............................................................................................................................

b. Age: ...................................................................................................................................

c. Father’s Name: .................................................... Mother’s Name: ...................................

d. Husband’s/wife’s Name: .....................................................................................................

e. Academic Qualification: ......................................................................................................

f. Permanent Address: ...........................................................................................................

g. Present Address: ................................................................................................................

h. Tel No./ Fax/ E-mail/ Mobile No. (if applicable) .................................................................

4. Particulars of the Chairperson:

a. Name: In Bangla .................................................................................................................

In English ............................................................................................................................

b. Age: ...................................................................................................................................

c. Father’s Name: .................................................... Mother’s Name: ...................................

d. Husband/wife’s Name: ......................................................................................................

e. Academic Qualification:......................................................................................................

f. Permanent Address: ....... ....................................................................................................

g. Present Address: ................................................................................................................

h. Tel No./ Fax/ E-mail/ Mobile No. (if applicable) .................................................................

5. Year of Establishment: .......................................................................................................... 6. Legal Status:

Registration Authority Registration Number

Date of Registration Place of Registration

Please attach copies of all the registration certificates

7. No. of Branches:.......................................... No. of Regional Offices (if applicable): ......... ......

8. Head Office: (please tick any of it) Own Rented

3

9. Descriptions of Asset and Liabilities: as on_______________________ (if necessary please attach separate pages)

Assets: i. Fixed Assets (Land, Building, Equipment, Furniture, etc.) Taka .....................

ii. Current Assets

(Bank Balance, Fixed Deposit, Investment, Loan Outstanding) Taka ......................

iii. Other Assets Taka .....................

Total Assets (i+ii+iii) Taka .....................

Liabilities and Equity:

i. Long Tem Liability Taka ......................

ii. Current Liabilities Taka .....................

iii. Other Liabilities Taka .....................

iv. Equity/Reserve/Net Income Taka ......................

Total Liabilities and Equity (i+ii+iii+iv) Taka .....................

10. If the organizati on is involved with any network (national , international and both), please

attach membership certificate(s)

11. In case of wholesale credit, please mention the following:

a. Membership ID No. of the Network Organization

b. Annual membership fee paid: Yes No

c. Do your NGO-MFI has any unpaid liability: Yes No

d. Are you a partner organization of PKSF? Yes No

If yes, please mention the nature of involvement (with relevant papers)..................... ....................

Information on Organizational Activities

1. a. Starting year as NGO operation: …………………………………………………....................;

b. Name of Programs of the organization:

• Credit Programs

• Other Programs:

2. a. List of Credit Programs

Fund Received Name of Donor(s)

Date of Fund Receipt

No. of beneficiaries Loan

(Taka) Grant (Taka)

Total (Taka)

Loan maturity/ repayment date

(Please attach program related documents)

4

b. List of other Programs:

Name of projects/programs

No. of beneficiaries

Name of donor(s)

Amount of fund received

Project/program Duration

Date of Fund Receipt

(Please attach all related papers of the programs/projects) 3. Name of other organizations working in the same operational areas (Please specify below):

a……………………………………………………....b……………………………………………………

c. …………………………………………………… d. …………………………………………………

e.………………………………………………………. f. …………………………………………………

Description of Credit Programs

Starting Year of Microfinance: ……………………………………………………………….. 1. Please tick (v) the relevant program(s) that your organization has been operating:

a. Rural Microcredit Program

b. Urban Microcredit Program

c. Micro Enterprise Program

d. Hardcore Poor Program

e. Others, if any

2. Group Information:

No. of Groups No. of borrowers No. of Savers Name of District

Name of Thana

No. of Union M F Total M F Total M F Total

Note: M = Male and F = Female (If necessary, please attach extra page) 3. Member Information:

a. Number of active members (as on ...............) .......................……........... ..........................

b. Member drop out rate (annually): ..........................................…………………....................

4. a. Types of group meetings: (please tick) Weekly Quarterly Monthly

b. Types of group savings: (please tick) Weekly Quarterly Monthly

c. Weekly/quarterly/monthly savings received : Taka………………………………......................

5

d. Forms of savings: (please tick): Normal/Forced savings Special savings (if your organization has more savings product please attach extra page) e. Savings management: (please tick): Group bas is Individual f. Information of credit related staff:

Designation Number 1.

2.

3.

g. Books /registers maintained by the group: (please tick) R esolution book S avings Passbook Loan Passbook Credit Ledger

Others (please name it) ...................................................................................... ..........................

h. Do you pay interest on savings? (please tick) Yes No

If yes, what is the interest rate on savings? ...............................................................................

5. Utilization of Group Savings:

Distribution of net savings No. of groups

No. of savers

Rate of savings

Total savings

(amount)

Savings withdrawal (amount)

Net savings (amount)

RLF Cash in hand

Cash at

bank

6. Current Revolving Loan Fund position (total loan outstanding + cash in hand + cash at Bank)

Revolving Loan Fund

(as on ..............................)

Donor Fund

Own Fund

Group Fund

PKSF Loan

Bank Loan

Others (please specify)

Total Fund

7. Credit information of last three years: (Amount in Taka)

No. of borrowers Total Outstanding

Loan recovered

Overdues Year Total disbursement

Total receivables

M F Total Prin. Int. Prin. Int. Prin. Int.

Recovery rate

6

8. Please mention the following (as on ……………………..)

i. Loan ceiling: minimum Taka .......................... and maximum Taka .............................

ii. Cumulative position of:

a. loan disbursed: Taka.......................................................................................

b. amount recovered: Taka .................................................................................

c. recovery rate: ...............................................................................................%

iii. Last 12 months recovery position:(amount in Taka )................................................%

9. a. Recovery system of different loans:

Installment per thousand Taka Loan Duration

Grace period (if any)

Repayment period (wkly/forntly/mntly)

No. of installment Prin. Int./service

charge Others Total

Up to 1 year

1 – 3 years

3 –5 years

Above 5 years

b. Mention main sector/programs under which loans are disbursed: 1. ........................................ 2. ............... ...................... 3. ............................ 4. ............................. 10. Aging/Classification of Loans:

Past due Loan No. of Groups No. of Borrowers Total Amount Interest rate on dues

5 weeks past due

6-10 weeks past due

11-20 weeks past due



More than 40 weeks

11. a. Loan loss reserve/bad debt reserve(amount in Taka): ........................................................

b.Do you maintain any other risk management fund (yes/no), if yes, mention the amount in

Taka...........................................................................................................................................

7

12. Accounting Information:

Does your organization maintain the following books of accounts? (Please tick):

Cash Book General Ledger Subsidiary Ledgers

Others (please specify):1. ........................................ 2. ..................................... 3. ......................

13. Whether your organization collects money from its members in the following heads:

a. Member Admission Fee ......................................Taka (Non Refundable)

b. Price of Passbook ................................................Taka (Non Refundable)

c. Loan Application Fee ............................................Taka (Non Refundable)

d. Group Insurance ..................................................Taka (Refundable/Non refundable)

e. Group Fund ..........................................................Taka (Refundable/Non refundable)

f. Disaster Fund .......................................................Taka (Refundable/Non refundable)

g. Others (Please mention) ......................................Taka (Refundable/Non refundable)

14. a. Bank Related Information Name of

Bank Name of Branch

Account No. Account Particulars

Name of Signatories

Designation of the

Signatories

b. In case loan application is processed through the wholesale organization, please mention the following: Name of

Bank Name of Branch

Account No. Location of the branch

15. Particulars of Executive Committee:

a. Date of formation of the present Executive Committee ......................................................

b. Particulars of present Executive Committee members

Sl. No.

Name and designation

of the members

Father’s /Mother’s

name

Qualification Present address

Permanent address

Present occupation

01 02 03 04 05 06 07

8

16. a. Profit and Loss position of last 3 (three) years:

Year Net profit/ net loss Higher/lower than previous year

b. Last 3 (three) years Financial Statement:

Particulars

Year 1 ....................... Year 2 ........................ Year 3.......................

Fixed Assets (Less Depreciation)

Current Assets

Current Liabilities

Maintenance Expenses

Service Charge/Interest Income

Other Income

Net Savings

Loan Disbursement

Loan Loss Provision

Information on the Proposed Loan Program

1. Name of the proposed Credit Program:

a. Rural Microcredit Program

b. Urban Microcredit Program

c. Micro Enterprise Credit Program

d. Credit for Hardcore Poor

e. Others

9

2. Particulars of Proposed working areas and groups:

Members Name of District

Name of Thana

No. on Union

No. of Village

No. of Groups Male Female

Savings (Taka)

3. On-lending activities/sectors:

a. ………………………….b. ………………………… c. ……………………… d. ………………….

4. Proposed no. of borrowers: Male …………………………………………………………… ….

Female …………………………………………………………….

Total ……………………………………………………………….

5. Maximum loan amount: per borrower …………………………………………………………..

per group ………………………………………………………………

6. Expected bank loan (amount in Taka) ………………………………………………………….

7. Funding sources for proposed credit program:

NGO-MFI’s own fund: Taka …………………………………………………

Borrowed from PKSF: Taka.......................................................................

Borrowed from Bank: Taka …………………………………………………..

Others (if have any): Taka …………………………………………………….

Total Taka …………………………………………………..

8. Information on loan taken from this Bank:

9. a. Did you apply for loan previously in this Bank? Yes No

b. If loan sanctioned, please mention loan amount: Taka ……………………......................,

c. Date of last disbursement: …………………Loan Outstanding: Taka……………................ (if not fully repaid)

d. If rejected, please attach its photocopy

10

10. Information on bank loans taken from other Banks/FIs:

a. Did you apply for loan previously in any Bank/FI? Yes No

b. If Loan sanctioned, please mention:

Name of the Banks/FIs: ………………………….... Loan amount: ……………………......

Date of last disbursement: …………………Loan Outstanding: Taka……………................ (if not fully repaid) c. If rejected, please attach its photocopy

I/We, the undersigned,......................................................................declare that, I/we will use bank

loan for the purpose of extension of credit facilities to the poor people. I/we will follow all terms and

conditions of the bank that are mentioned and agreed in the Memorandum of

Understanding/Sanction Letter/Loan Agreement.

I/we also declare that, the information supplied by me/us in this Loan Application Form is accurate.

I/we undertake to be legally liable for any false or incorrect information. On the basis of stated

information, I/we am/are hereby, applying for loan of Taka …………………............................ (in

words ...................................................Taka).

Date: ……………………….. 1. Signature of Chairman…………………………………

(Organization’s Name Name: …………………………………………………..

along with Seal)

2. Signature of Executive Director……………………

Name: …………………………………………………..

11

LIST OF ENCLOSURES SL

No.

Documents, Reports, Papers Obtained Not

Obtained

Remarks

01 Attested copy of the Charter

02 Attested copy of the list of Governing

Body/Executive Committee members

03 Copy of Registration (s) including license of

MRA

04 Parti culars of Governing Body, Executive

Committee and life members (as per format

shown in Annex V of volume II)

05 Particulars of the key officials

06 Last 3 (three) years Audit Report (Balance

Sheet, Income-Expenditure Statement,

Receipt-Payment Statement and Cash Flow

Statement)

07 Last 3 (three) years Annual Report (where

applicable)

08 Latest Financial Report attested by the Chief

Executive (if loan application is submitted

after six months of Audit Report preparation)

09 Resolution of the Governing Body/Board of

Directors for obtaining loan

10 Copy of Operational Manual (if applicable)

11 If applicable: • Papers related to collateral securities

• Membership certificate from the network

organization

• Donor Fund Contract

• Copy of NGO Bureau Affairs registration

12 Trade License (if applicable)

13 Power of Attorney

14 Up-to-date Rent Receipt

15 Up-to-date Electricity Bill

16 Up-to-date Telephone Bill

17 Up-to-date Gas Bill

18 Income Tax Clearance Certificate

19 Bank Statement/Loan Account Statement

20 NOC from other bank(s) (if applicable)

12

SL

No.

Documents, Reports, Papers Obtained Not

Obtained

Remarks

In case of Joint Stock Company--

Certificate of Incorporation

Memorandum & Articles of Association

21

Letter of Commencement (In case of Public

Limited Company)

In case of Equitable or Registered Mortgage--

CS, SA, RS, BS Khatians

Mutation Khatian/ Parcha along with DCR

Up-to-date rent receipt (khazna)

Non-encumbrance certificate

Mouza Map

Photocopy of Original Title Deed

22

Photocopy of Baya-deed

23 Certificate of Training Received by the Chief

Executive and other key officials

24 Other papers (as may be specified by the

particular bank)

13

ANNEX: II (Sample)

XYZ Wholesale/Network Organization

....................Address........................

ORGANIZATIONAL ASSESSMENT FORM

Name of NGO-MFI:...........................................................................................................................

Name of Execu tive Director/Chief Executive Officer:.......................................................................

Year of Establishment:.......................................................................................................................

Tel:..................................................Fax/E-mail:.....................................Web:...................................

Score Different aspects of appraisal

4 3 2 1

Remarks

A. System Improvement

1. Regular rotation of EC members

and performance evaluation of CEO

2. EC meetings held and minutes kept

properly as per charter/rule

3. EC reviews budget and analyzes

financial/audit reports

4. Standard supervision and

monitoring tolls and guidelines

5. Installed FIS and MIS

(Manual/Software)

6. Aging schedule practice and

maintenance

7. Written financial procedure and

guidelines

B. Policy and Planning

8. The NGO-MFIs clear vision,

mission and objectives in writing

9. Service rules with job descriptions

and staff evaluation system

10. Administrative policies and

guidelines

14

Score Different aspects of appraisal

4 3 2 1

Remarks

11. Baseline survey for program

planning

C. Operational Strategy

12. Separate books of accounts for

each program and cross checked by

senor manager regularly

13. Exists Microcredit operational

manual/guideline

14. Recovery Rate

a. On time: OTR

b. Cumulative Repayment: RR

D. Resource Generation

15. Budget preparation and review

16. Long Term projection for RLF

increase

17. Affiliation with any forum/network

E. Technical Skill

18. Level of accounting skill and

procedure of accounting method

19. No. of professional staff in the

credit program

20. Group management with working

manual

21. Exist internal audit system and

financial control.

Engages CA firm for external audit

F. Sustainable Approach

22. Cost per unit of money lent

23. Operational self-sufficiency

24. Financial Self-Sufficiency

25. Loan Loss Provision

Total Score

Score Analysis: Good: 80-100, Moderate: 60 -79, Marginal: 40-59 and Unacceptable: 0-39

15

Formula: 1. Operational self-sufficiency:

Financial Income ----------------------------------------------------------------------------------- (Financial Cost + Operating Cost +Loan Loss Provision) X100%

2. Financial Self-Sufficiency:

Financial Income ----------------------------------------------------------------------------------------------------------- (Financial Cost + Operating Cost + Loan Loss Provision + Imputed Cost)X100%

3. Imputed cost:

[Inflation x (Net worth – Net Fixed Assets)+(inflation -interest rate paid x concessional loans) ---------------------------------------------------------------------------------------------------------------------------

Average performance assets

Date:

Signature of the Assessment Officer: ...........................................

Name and Designation: ............................................................

Authentication by the Authorized Officer ...................................

Name and Designation: ............................................................

16

ANNEX: III

CHECK LIST OF SECURITY DOCUMENTS/PAPERS Sl No.

Document Title Required Date of Receipt

1 Sanction Letter Duly Accepted 2 Demand Promissory Note

3 Letter of Arrangement

4 Letter of Continuity 5 Letter of Undertaking

6 Memorandum of Understanding (MOU) 7 Loan Agreement (if applicable) 8 Extract of the Governing Body/Board Resolution to borrow 9 Trade License

10 Corporate Letter of Guarantee 11 Personal Letter of Guarantee 12 Letter of Hypothecation Of Moveable and Immovable assets

13 Letter of Hypothecation Of Receivables 14 Charge On Fixed Assets

15 Letter of Lien and Authority for shares, stocks and securities if accepted as collateral

16 If applicable, Lien of Fixed Deposit/Short Term Deposit/Margin Deposit/Other Deposit Receipts and Reserves

17 Original Title Deeds

18 Deed Of Conveyance (Baya Deed) 19 Mutation Certificate & DCR

20 Rent (Khajna) Receipts & Municipal Rent Receipts 21 All Relevant Land Documents (such as Parchas & Others) 22 Non-Encumbrance Certificate

23 Search Report of The Status of the Land 24 Memorandum Of Deposit of Title Deeds (Mortgage Deed) 25 Irrevocable Power Of Attorney 26 Affidavit Before The Sub-Registrar of Land

27 Mortgage/Power of Attorney Registration Receipt 28 Lenders' Pari Passu Security Sharing Agreement (if

applicable)

29 Insurance Policy (if applicable) 30 Bank Statement of the Borrower

31 Bank Clearance Certificate 32 Any other documents/papers, as may be needed Note: Depending on conditions of funding, documents/papers from serial no. 12 to 29 will be supplied by the borrower.

17

ANNEX :IV

ASSET CLASSIFICATION AND PROVISIONING SYSTEM

(I) SHORT/MEDIUM TERM LOAN FACILITIES (UP TO 5 YEARS):

CLASSIFICATION DETERMINANT TREATMENT OF INCOME

PROVISIONS TO MADE

(1) (2) (3) (4) 1. Special Mention Accounts (SMA)

Where mark-up/interest or principal is overdue (past due) by 90 days or more from the due date.

Not Applicable No provision is required

2. Unsatisfactory Where mark-up/interest or principal is overdue (past due) by 120 days or more from the due date.

Unrealized mark-up/interest to be put in suspense Account and not to be credited to income Account except when realized in cash.

Provision o f 10% of the difference resulting form the outstanding balance of principal less the amount of liquid securities with the bank.

3. Substandard Where mark-up/interest or principal is overdue (past due) by 180 days or more from the due date.


Provision of 20% of the difference resulting form the outstanding balance of principal less the amount of liquid securities with the bank.

4. Doubtful Where mark-up/interest or principal is overdue (past due) by 12 months from the due date.



5. Loss Where mark-up/interest or principal is overdue by 18 months or more from the due date.

As above. Provision of 100% of the difference resulting form the outstanding balance of principal less the amount of liquid securities with the bank.

18

(II) LONG TERM LOAN FACILITIES (OVER 5 YEARS):


PROVISIONS TO MADE

(1) (2) (3) (4) 1. Special Men tion Accounts (SMA)






3. Substandard Where mark-up/interest or principal is overdue (past due) by 12 months or more from the due date.



4. Doubtful Where mark-up/interest or principal is overdue (past due) by 18 months from the due date.





19

(III) CONTINUOUS /DEMAND LOAN FACILITIES :


PROVISIONS TO MADE

(1) (2) (3) (4) 1. Special Mention Accounts (SMA)






3. Substandard Where mark-up/interest or principal is overdue (past due) by 180 days or more from the due date.



4. Doubtful Where mark-up/interest or principal is overdue (past due) by 270days from the due date.





20

ANNEX: V

Particulars of Executive Committee/Advisory Council/ Life Members Of The Partner NGOs/MFIs

When Selected in the Committee

Sl. No.

Name Name of Father/ Mother/Husband

Age Position in the

Committee

Academic Qualification

Profession Present Address

Permanent Address

Membership Date and Duration

Date Duration

Specimen

Signature

21

ANNEX: V I

MONTHLY LOAN PERFORMANCE STATEMENT …………………………….Bank Limited

For the Month of …………… 200…

(Amount in Taka)

Realizable Realized Due/Arrears Disbursement

No. of Borrowers Principal Service Charge Principal Service Charge Principal Service Charge

Sl No.

Name of Borrower

NGOs-MFIs

Current Month

To Date

Current Month

To Date

Current Month

To Date

Current Month

To Date

Current Month

To Date

Current Month

To Date

Current Month

To Date

Current Month

To Date

Outstanding Principal (Portfolio)

Signature Signature:

22

Annex: VII

CHECK LIST OF MONITORING INSTRUMENTS

Banks/FIs along with the borrowers (both wholesale and retail borrowers) will ensure

proper utilization and timely recovery/repayment of loans through constant monitoring. The

following check list may be used as indicative instruments suiting to their requirement.

1. Field visit analysis (including attendance of group meetings)

2. Review of books of accounts

3. Review of collection sheets related to bank credit

4. Loan disbursement master roll and relevant papers

5. Review of the level of loan utilization

6. Review of FIS and MIS reports

7. Evaluation of the aging schedule

8. Review of the loan loss provisions

9. Review of the safety reserve position

10. Assessment of the efficiency of fund management (fund flow statement analysis)

11. Analysis of cash flow statement

12. Trend analysis of savings

13. Analysis of loan recovery statement

14. Review of interest rate fixation both on savings and loans

15. Review of level of ‘Operational Se lf-Sufficiency’ and ‘Financial Self-Sufficiency’

16. Examination of o ther periodical reports and returns based on the lending mode

23

ANNEX: VIII

FORMAT OF LOAN AGREEMENT BETWEEN THE WHOLESALE/NETWORK ORGANIZATION AND THE BORROWER NGO-MFI

1. This agreement is signed on ........................... 2007.

1st Party: XYZ (the wholesale/ network organization), established for the purpose of

coordinating and assisting member NGO-MFIs, located at ....... (address)......... will be

termed as the ‘1 st party’. The Executive Director/ Chief Executive Officer or any other legally

authorized representative of the wholesale/network organization will be treated as the ‘1 st

Party’.

AND

2nd Party: ABC (name and address of the borrower NGO-MFI), will be termed as the ‘2nd

Party’, the ‘borrower’. The Executive Director/ Chief Executive Officer or any other legally

authorized representative shall be treated as the ‘borrower’.

2. WHEREAS, the 1 st Party has constantly been assisting its member NGO-MFIs (who are

involved in poverty alleviation and empowerment of the poor people), to develop their

organizational capability and is willing to extend credit facility through commercial

banks/financial institutions.

And WHEREAS, ...................... Bank/FI has sanctioned a loan of Taka .................... @

.......% interest and is willing to disburse the loan in phases through the 1st Party.

And WHEREAS, the 2nd Party has applied to the 1st Party for loan to support their

microfinance activities to the poor people.

24

Therefore, it has been decided by both the parties to sign this agreement on mutually

agreed terms and conditions to disburse the credit. The agreed ‘Terms and Conditions’ are

as follows:

3. Terms and Conditions:

a. The 1st Party has approved Taka ..................... loan to the 2 nd Party.

b. The loan duration will be of ............ years with a 6 - 12 months grace period.

c. The loan repayment will start after 6 -12 months of disbursement and will be

repaid through .................... equal quarterly/half-yearly installments. The

borrower POs/MOs will repay these installments (principal plus interest) to XYZ

through Demand Draft/ Pay Order.

d. The 2nd Party will keep records and maintain books of accounts in line with the

requirement of the 1 st Party.

e. The borrower POs/MOs will arrange guarantee(s) from members of Executive

Committee /Governing Body, will execute all documents and complete all legal

formalities before disbursement of loan.

f. The borrower or the 2nd Party will pay .........% interest rate annually to the lender

with an agreed rate of service charge to the XYZ on declining method.

4. Both the parties further agreed that,

a. The 2nd Party will have to distribute the loan amount to the poor people as per

their credit manual. All beneficiaries will have to attend weekly group meetings

and save regularly.

b. Collection/recovery of loans from the beneficiaries (poor people) will be the sole

responsibility of the 2nd Party. Repayment of loan will neither be related to

recovery of installments from beneficiaries nor to any other excuses of the 2nd

Party.

25

c. If the 2nd Party fails to repay loan installment, the1st Party can take any legal

action against the 2nd Party as per agreement.

d. The1 st Party reserves the right to supervise and monitor the credit utilization of

the borrower (2nd Party). The 2nd Party will be obliged to supply all required

information, records, reports, etc. to the 1st Party, as and when needed.

e. In case of mismanagement or improper utilization of loan, the 1st Party has the

right to ask the 2nd Party to instantly repay the outstanding loan (before the

expiry of loan duration) along with interest and service charge to the 1st Party.

f. If there are reasons to believe that the credit facility or the loan amount has not

been utilized for the purpose it is actually provided for or is being utilized for

other activities, the 1st Party has the right to cancel the agreement without

assigning any reason whatsoever to the 2nd Party. The 2nd Party will be bound to

repay the outstanding loan amount along with interest and service ch arge to the

1st Party instantly.

g. The following documents will be treated as part of this agreement:

i) Demand Promissory Note

ii) Personal guarantee of the ED/CEO (as the head of the organization)

iii) Guarantee(s) from the member of the Executive Committee /

Governing Body

iv) Repayment schedule

5. Other Terms and Conditions:

a. In case of conflict, dispute, misunderstanding, claims, etc. between the parties,

only the legal advisor(s) engaged by the wholesale/network organization will act

as arbitrator and his/her decision will be treated as final. This arbitration process

will be conducted as per provisions of the Arbitration Laws of Bangladesh.

b. The 2nd Party will take necessary steps and send monthly

statements/reports/returns as per prescribed format of the 1 st Party.

26

c. The 2nd Party will maintain a jointly operated bank account, where ED/ CEO will

be a signatory. This account will be operated by officials nominated by the

Executive Committee/Governing Body of the borrower POs/MOs.

d. The 2nd Party will collect a flat rate of interest (not above 15%) from the

beneficiaries (poor people) annually.

e. The 2nd Party will ensure recovery of loan (principal plus interest) on weekly

basis within the loan period.

f. The 2nd Party will disburse the loan to the selected borrowers (women will get

preference) of a particular area as per operational norms followed by the

borrower. This will also be informed to the 1st Party in writing.

6. We are signing this agreement expressing our consensus on the terms and conditions

laid down and without suffering from any fear or doing any favor to any of the party.

1st Party: On behalf of XYZ 2 nd Party: On behalf of ABC

Signature Signature

...................................... ...................................

Name and Designation Name and Designation

Witness: Witness:

27

ANNEX: IX

MAIN PROVISIONS OF MEMORANDUM OF UNDERSTANDING (MOU) BETWEEN

THE WHOLESALE/NETWORK ORGANIZATION AND THE BANK

The Memorandum of Understanding (MOU) between the wholesaler/network organization

and the lending bank will mainly contain:

1. Purpose of the agreement

2. General conditions

3. Mode of loan disbursement

4. Loan type and duration

5. Interest rate

6. Moratorium/ grace period

7. Loan repayment schedule

8. Bad debt reserve

9. Incentive/rebate

10. Monitoring and reporting

11. Requisites/documents

12. Other conditions (as per agreement)

13. Negotiation and arbitration

14. Termination and provision of legal action

28

ANNEX – X

SAMPLE LETTER FOR NON-PAYMENT OF INSTALLMENT

Date Ref: Name 1 Address 1 Address 2 Address 3 Sub: Non payment of monthly installment. Dear Customer, Thank you for maintaining your valuable banking relationship with …………………… Please be informed that your Loan Account with us is overdrawn (as at date) for Tk. --------- due to non-payment of monthly installment. We would appreciate if you arrange to deposit sufficient amount in your deposit account to adjust the dues and to avoid penal interest over the overdue amount. For any clarification, please feel free to contact our collections department at Tel : XXXXXXXX- XXX, XXXXXXXX.

Please disregard this letter if you have already deposited sufficient amount.

This is a computer-generated letter. It does not require any signature.

29

FINAL REMINDER TO RECOVER OVERDUES Date Name 1 Address 1 Address 2 Address 3 Dhaka Dear Sir, Your Loan Account No. XX XXXXXXX XX Ref. Our previous letters The overdue balance in your above loan account as at date is TK. XX,XXX.XX. Despite our several reminders through our letters & phone calls, we regretfully note that you are not responding towards the regularization of the dues of your above loan account. This letter will be treated as final reminder for the payment. Failure of placing the payment within 10(ten) days after the issuance of this letter will compel us to take the following actions: 1. Shall send your name as “Defaulter” borrower to the Bangladesh Bank /

Microcredit Regulatory Authority as well as circulate this to the all Banks and financial institutions /network organizations.

2. Shall employ collection agent. 3. Shall go for legal action against you. Hope you will perceive the urgency of the issue and come forward to settle this immediately. For any clarification please contact our collection department at telephone numbers XXXXXXX - XXX Ext XXX. Yours sincerely, Signature

XXX XXXXXXXXX XXXXXX XXXXXXX XXXXXXX Copy : XXXXXX XXXXXX, as Guarantor

30

LOAN CALL UP NOTICE Date Ref: --------------/ PL Name 1 Address 1 Address 2 Address 3 Dear Mr.XXXXXXX, Your Loan Account No : XX-XXXXXXX-XX Present Outstanding : Tk. XX,XXX.XX ________________________________________________________________ Please be informed that your above loan account has been irregular since long. Despite our repeated reminders through phone calls and letters to your available address, it is apparent that you have neither taken any steps to rectify the irregularity nor put your accounts in order. Accordingly we are constraint to cancel the above facility. We therefore, call upon you to repay the entire outstanding liability against the above facility together with interest within 15 days from the date of issuing this letter. Please note that in case of your failure to repay the loan within the stipulated time, the Bank will initiate such action against you as deemed appropriate under the law of the land at your cost and responsibility. Hope you will come forward to settle the loan account permanently within the stipulated time. Should you require any clarification, please contact the undersigned at telephone Nos. XXXXXXX-XX Ext. XXX or XXXXXXX (direct). Yours sincerely, XXXXXX XXXXXXX XXXXX XXXXX XXXXX XXX

31

ANNEX : XI

SAMPLE OF UNDERTAKING BY THE FACILITATING AGENCY (NETWORK ORGANIZATION)

WHEREAS .......... Bank (hereinafter referred to as “the Bank”) has agreed to sanction in

favor of ‘XYZ’ (hereinafter referred to as “the Borrower” wish expression shall, wherever the

context so admits, mean and include its successors-in-interest, assigned and legal

representatives) a credit line for an aggregate sum of Taka ..................... only for the

purposes and on the terms and conditions contained in the sanction letter issued by the

Bank to the Borrower.

2. AND WHEREAS under the said sanction letter, the above loan together with interest

and other charges (if any) thereon is payable within a period as mentioned in the

said sanction letter of the Bank.

3. AND WHEREAS the borrower has agreed to accept the terms offered and the Bank

has agreed to accept an UNDERTAKING from the network organization (say CDF)

(hereinafter referred to as “CDF”) ..........................................(address)......................

to secure the repayment of the loan and interest with other charges (if any) thereon.

4. AND WHEREAS CDF has agreed at the request of the borrower to furnish in favor

of the Bank an UNDERTAKING in favor of the borrower.

NOW, in consideration of the aforesaid, CDF hereby agrees and undertakes to the

Bank:

a. To exert its (CDF’s) influence over the borrower with regard to and assist the

Bank in realization of the aforesaid loan and interest thereon with other

charges (if any);

32

b. Due time repayment by the borrower of the loan with interest and other

charges (if any) thereon as and when become due in terms of the said

sanction letter, and

c. Due compliance by the borrower of all other monetary obligations towards

the Bank under the said sanction letter failing which CDF will exert its

influence forthwith and assist the Bank until full realization of the loan plus

interest and other charges (if any) thereon from the borrower.

5. This UNDERTAKING shall remain in force for a period of ............ (from the date of

first disbursement under the limit to recovery of the loan in full).

6. This UNDERTAKING shall be binding on CDF and on its successors-in-interest,

assigns and legal representatives during the period of validity.

7. In the event of any incidence or conduct by the borrower which may have

implications on the repayment of the debts (plus interest and other charges) shall

immediately be brought to the notice of CDF.

For and on behalf of the network organization: Signature :........................................

Name:...............................................

Designation:......................................

Date:.................................................

Witness:

1.

2.

33

ANNEX: X II

MAIN FEATURES OF THE TERM SHEET FOR A SYNDICATED CREDIT FACILITY

1. Name of the Borrower

2. Name of the Lead Arranger

3. Nature of facility

4. Currency

5. Syndicated loan amount

6. Names of participating banks

7. Purpose

8. Final maturity

9. Repayment

10. IDCP (Interest During Construction Period)

11. Debt –Equity ratio

12. Pricing/Interest rate

13. Loan processing fee (flat)

14. Syndication fee/Arrangement fee (flat)

15. Agency fee (flat)

16. Participation fee (flat)

17. Management fee (Annual)

18. L/C commission (if applicable)

19. Escrow account

20. Guarantor and guarantee

21. Availability period/disbursement period

22. Security packages

34

23. Documentation packages

24. Legal Expenses

25. Taxes

26. Transferability

27. Governing laws

28. Syndication strategy

29. Expiry date

30. Requisites

31. Special/other conditions

32. Monitoring and reporting

33. Cancellation process

34. Negotiation and arbitration

35. Termination and provision of legal action

35

ANNEX: XIII

CONTENTS OF INFORMATION MEMORANDUM WITH SUPPORTING DOCUMENTS

A: Contents of Information Memorandum (IM) 1. Circulating page (Cover Page of IM)

2. Disclaimer (second page of IM) (Statement to be made by the Lead Arranger as representative for the syndicate that

certain information provided in the IM was supplied by the borrower. Therefore, it is not the

responsibility of the Lead Arranger to certify the authenticity of such information).

3. Contact persons

4. Table of contents

5. Executive summary

6. Management of the organization

7. Market aspect

8. Financial information of the organization

9. Latest performance of the organization

10. Resource base and credit need of the organization

11. Risk and mitigants

12. CIB reports (contents)

13. Representation

14. Appendices of market survey

15. Other information depending on the nature of the organization

36

B: Copies of supporting documents of IM

1. Copies of Credit report/ Rating report

2. Copies of certification of valuation of land and building

3. Copy of BOI registration, if applicable

4. Trade license

5. NOC from competent authority (i.e., Union parishad, etc.)

6. TIN certificate

7. Copy of MRA’s license

8. Environment clearance (if needed)

9. Proce ss flow chart

10. Bio-data of all Governing Body members/d irectors and ED or CEO

11. Net worth statement of all d irectors

12. Bio-data of all technical persons/key officials

13. Copy of Certificate of Incorporation (for limited companies)

14. Copy of Memorandum of Association and Articles of Association

15. Bank’s certificate/ declaration regarding liability position of the organization

16. Organogram along with job descriptions of key pe rsons

17. A short report on the overview of the organization along with its specialty

The IM will be transmitted to the potential syndicate members (Banks and FIs) for

commitment. The cover letter will be addressed to the Managing Director/CEO of the

prospective participating banks and financial institutions. The letter should indicate the

background and overview of the borrower NGO-MFI along with name of contact persons,

specific closing date of syndicate deal, etc.

37

ANNEX: XIV

LIST OF MAIN SYNDICATED LOAN DOCUMENTS

1. Loan Facility Agreement

2. Pari Passu Security Sharing Agreement

3. Escrow Account Agreement

4. Agreement for Assignment of Insurance

5. Agreement of Assignment of Contract

6. Project Funds and Share Retention Agreement

7. Sub-ordination Agreement

8. Deed of Mortgage

9. Letter of Hypothecation (movable or immovable assets)

10. Letter of Hypothecation of Receivables

11. Power of Attorney to sell the hypothecated assets

12. Letter of Undertaking

13. Personal Guarantee of all Governing Body Members/Directors

14. Corporate Guarantee

15. Demand Promissory Note

16. Letter of Comfort

17. Other documents (as may be required) depending on the structure of loan

38

ANNEX: XV

GUIDELINES AND PROCEDURES FOR ON-LENDING TO MICRO ENTREPRENEURS BY NGO-MFIs

Micro entrepreneurs who have neither access to micro credit nor bank loans have been

identified as the “missing middle” in the credit market. Recently, many NGO-MFIs are

coming forward to finance them and taken this as one of the major lending programs. The

objectives of this program are generation of income, creation of employment through

entrepreneurship development, establishment of backward-forward linkages and also

creation of wage employment for those who are not capable of starting new business. In

order to enable NGO-MFIs to concentrate more on this mode of lending, appropriate

guidelines and procedures are illustrated here.

1. Eligibility for Availing of Loan Facility by a Potential Borrower

The loan applicants (men/women) must have successful business experience for at least 2

years. They must also have to fulfill the following criteria to apply for loan under the “Micro

Enterprise Refinancing Scheme (MERS)”.

• The borrowers must be between the age of 20 to 55 and must be physically fit.

• The entrepreneur must have necessary knowledge and experience relevant to the

business s/he is involved.

• The entrepreneur must have specific source of income and ability to save .

• The borrower entrepreneur must have a bank account in his/her residing area.

• The prospective borrower should have the ability to give token amount of collaterals

depending on the size of loan.

The enterprise/business must satisfy the following criteria:

• The business must be in operation for at least 2 (two) years.

• The business must be legally valid, i.e. it has valid trade license, income tax or VAT

registration (where applicable).

39

• The business place (possession) must be either in the name of the borrower or

his/her spouse’s name and in case of rented possession it must be taken at least for

2 (two) years.

• The premises of the business must be legally occupied and stable enough with no

potential threat of eviction, river erosion, demolition, etc.

• The business must have fixed assets and working capital of at least Taka 1.00 lakh

for highly potential business and Taka 50,000.00 (Taka Fifty Thousand) for potential

business.

2. Target Groups

• The enthusiastic graduated members who have the ability and scope to expand their

business with the loan.

• Non-group members who need money to increase their working capital or fixed assets

of the business and have entrepreneurial ability to handle money.

3. Loan Ceiling

The range of ‘Micro Enterprise Loan ’ will be from Taka 50,000 to Taka 500,000. The

borrowing NGO-MFIs may increase the ceiling based on borrowers’ performance.

Year-wise Loan Ceiling (Potential Bus iness) Amount in Taka

1st Year 2nd Year 3rd Year 4 th Year 5th Year and Above

50,000 to 100,000 150,000 250,000 350,000 500,000

4. Nature of Loan, Limit and Duration

Nature of Loan

Loan Limit Loan Duration Grace Period

Fixed Assets purchasing loan (Term Loan)

Up to Taka 5.0 lakhs

3 to 5 years 2 to 3 months

Working Capital loan Up to Taka 2.0 lakhs

Up to 1.5 years 1 to 2 months

Seasonal Loan Up to Taka 0.50 lakhs

3 to 6 Months no grace period

40

5. Interest Rate

Interest will be 12% - 15% (flat rate) per annum. This rate will be offered based on the

interest paid to the banks by the NGO-MFIs.

6. Admission and Processing Fees

Borrowers will pay admission and processing fees @ 0.5% of sanctioned loan, which will

be non-refundable due to utilization of fees for legal formalities.

7. Rebate

NGO-MFIs may give rebate to the good borrowers for advance repayment of loan

installments. The rebate amount may vary from 10% - 15% of interest paid in advance.

8. Debt –Equity Ratio

The Debt-Equity ratio should be at least 80:20

9. Essential Security

• Borrower must give his/her personal guarantee to repay the full amount of loan in time.

• A third party guarantee acceptable to the lender will be required. In case of possession

deed and rent prepayment as security, the actual owner shall be the guarantor.

• Hypothecation of business assets, memorandum of title deed and mortgage deed will

be needed depending on loan size.

• In Bangladesh, very few women have land, which they can mortgage. Considering this,

NGO-MFIs will arrange third party mortgage for the women. In this case female

entrepreneur can mortgage husband’s/father’s or any other relatives’ land with their

consent.

10. Loan Documents/Papers

• Copy of Trade license and license for specific business like drug certificate, if necessary

• Copy of ownership of possession or possession deed in case of rented possession

• No Objection Certificate (NOC) (if needed)

• Post dated cheques

• General loan agreement

41

• Demand Promissory Note

• Letter of continuity

• Letter of arrangement

• Letter of undertaking

• Letter of hypothecation of goods, stocks

• Letter of hypothecation of plant and machinery (where applicable)

• Letter of installment

• Right of set off

• Letter of disclaimer

• Letter of pledge

• DCR

• Original deed

• Baya deed

• SA/RS/Mutition

• Besides, 90% of value of DPS (Deposit Pension Scheme), FDR (Fixed Deposit Receipt)

and savings certificate.

11. Guarantor Selection Criteria

• The guarantor must be financially sound with good reputation and should have the

ability to repay the loan.

• The guarantor must be aware of his obligations and legal bindings.

• The guarantor must know the entrepreneur very well and reside in the same area.

• Preferable guarantors may include relatives, local elites, government officials,

professionals and man with social standing.

12. Repayment System

Based on the nature of loan, repayment schedule may be fixed either monthly or quarterly.

42

13. Application Process

The eligible borrowers will have to fill-up and submit the prescribed loan application form (to

be supplied by the lender) with all required papers and documents. All loan applications will

be primarily scrutinized by the credit/program officer. The whole process of loan

sanctioning (from receipt of application to disbursement) should not take more than 30 to

45 days.

14. Approval Process

On receipt of loan applications with due recommendation from the credit/program officer,

the program coordinator/manager will appraise the viability of each and every loan proposal

carefully and will ensure that all preconditions are met. Being satisfied about the credit

worthiness of the borrower, he will accord necessary approval and will advice the

credit/program officer to disburse the loan.

16. Disbursement Process • On completion of proper documentation, disbursement of loan installment will be made

by the NGO-MFI through issuance of cheques in favor of entrepreneurs/enterprises.

• Sanctioned loan may be disbursed in a single installment or several phases depending

upon the nature, amount and purpose of loan.

• In case of fixed assets procurement loan, cheques will be issued directly in favor of the

suppliers instead of the borrower.

• Working capital loan, if necessary may also be disbursed like fixed asset procurement

loan.

• The loan giving organization may disburse cash through proper voucher if it deems fit.

17. Recovery Process • The borrowers will pay loan installments based on loan types by equal monthly

/quarterly installments.

• The borrowers will pay loan installments by post-dated cheques duly signed and

submitted to the NGO-MFIs at the time of loan disbursement.

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• Head office or branch will keep post-dated cheques in a safe place and at due date loan

officers will deposit the cheque (s) and will encash the amount.

18. Information Management All lender NGO-MFIs will preserve credit information systematically and maintain separate

loan records. They will prepare periodical reports to track individual borrowers as well as

overall performance of the credit program.

A.19 Monitoring Process Program/credit officers will undertake regular monitoring on the business activity of the

borrowers and submit monthly report to their supervisor about the progress. The loan

officers will use prescribed monitoring/follow-up forms and preserved them in the “Client

File’. In the monitoring process, the program/credit officers will ensure the following:

• Ensure that entire loan has been utilized in the intended manner.

• Ensure that the business is running well

• Scrutinize the production/marketing activities of the business and problems being faced

by the entrepreneur.

• Review the monthly sales revenue (including credit sales), cash flow, etc.

• Check whether money is blocked in raw materials that can create fund (working capital)

crisis.

• Ensure that the loan is repaid as per repayment schedule without disturbing the normal

business operation of the borrower.

44

ANNEX: XVI

Name of the Bank/Financial Institution ....................................

Statement of Loan disbursed under the Micro Enterprise Refinancing Scheme through NGO-MFIs

For the period from ..................... to .............................

(Figures in lakh Taka)

Sl. No.

Name of the NGO-MFI

Address of the NGO-MFI

Nature of loan

Particulars of the micro enterprise

loan program

Amount of fixed asset of the NGO-

MFI

Amount disbursed/ withdrawn

Date of Disbursement

Loan Duration

Remarks

1

2

3

4

5

Signature: ...................................................... Date: ..................................

Authorized Executive ’s Name and designation : ..........................................

45

ANNEX: XVII

GUIDELINES AND PROCEDURES FOR ON-LENDING TO HARDCORE POOR BY NGO-MFIs1

Hardcore Poor means people who live at the lowest level of subsistence and cannot afford

three square meals in a day. Generally, people who a re unable:

§ to earn less than 1.0 US$ per day

§ to ensure quality food especially for elderly, lactating and expecting mother

§ to ensure minimum housing and clothing

§ to ensure their healthcare

§ to establish rights in access to common resources and

§ to establish their existence in the society

2. Target Groups § Beggars

§ Ex and floating sex workers

§ Slum dwellers

§ Landless

§ Day labors and unskilled labors

§ Domestic helpers

§ Bonded labor

§ Female headed household

§ Physically disabled and elderly persons having no source of income

§ Families with irregular income

§ Seasonal labor who are affected by river erosion, monga, etc.

§ Char dwellers, highly indebted poor people (mainly from mohajons)

§ Forward labor sellers

§ Poor tribal people

1 This guideline is prepared in line with the guideline being followed by PKSF in lending to its POs.

46

3. Group Management § Hardcore poor needs to be identified properly

§ A profile of the hardcore member needs to be filled up

§ Group size 10-30 (vary with the availability of the hardcore poor)

§ Separate groups for male and female members

§ No multiple membership

§ Succession in group leadership

§ Flexible group meeting

§ No extra fees or processing fees both in time of admission into groups and

subsequent loan disbursement.

4. Savings Management § Rate of regular savings is flexible but mandatory for subsequent borrowings

§ High and competitive interest on member savings

§ Scope to withdraw savings whenever they need

§ No link between borrowed money and savings especially for first loan

5. Credit Management § Loan ceiling:

o 1st loan: Taka 500 to Taka 4,000

o 2nd loan and later: Taka 1,000 to be added with the previous loan amount

§ Interest rate: 9% to 10% (maximum)

§ Flexible repayment schedule and it should be determined before disbursement

§ Encourage to use the loan for income generating activities. However, a portion of

loan may be given for consumption purpose in Monga/disasterprone areas, if

needed.

6. Formation of Emergency/Disaster Management Fund An emergency/disaster management fund will be created by the NGO-MFIs for facing

disasters or any other emergency by the hardcore poor. This fund may be created out of

47

interest earnings of the participating NGO-MFIs. Grants or loans may be given to the

beneficiaries from this fund as and when emergency arises.

7. MIS and Accounting § Maintain basic information for every member according to the prescribed format

§ Separate MIS with visible classification

§ Separate head of accounts in ledger, cash books and other registers/formats

§ Creation of loan loss provision

§ Maintenance of safety reserve fund

8. Training § NGO-MFIs will impart training for organized members on social mobilization,

environment, healthcare, sanitation, safe drinking water, etc.

§ NGO-MFIs will impart training to beneficiaries to change their mindset and enhance

their confidence level for making appropriate choices and successfully implement

them to achieve desired results.

§ Arrange necessary beneficiary training to ensure development of required skill,

§ Arrange necessary training and workshop for employees of NGO-MFIs in order to

develop their operational knowledge and skill

9. Follow-up and Monitoring § A monitoring cell has to be established separately under the Executive Director/

Chief Executive Officer of participating NGO-MFIs.

§ Constant follow-up by the program/credit officer will have to be ensured so that

identification of problems and instant solution would be possible.

§ Ensure proper review of periodical reports/returns and evaluation of performance to

bring necessary changes for sustenance of the program in consultation with banks

and other funding organizations.

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10. Other issues § Involve beneficiaries in other activities of NGO-MFIs like health, sanitation,

education, etc.

§ Promote labor intensive activities

§ Prepare and take necessary action for proper dissemination of information

Coordination between participating NGO-MFIs operating in a particular region/area will

have to be ensured to help sustain hardcore credit programs on continuous basis.

11. Linkage with Other Interventions

§ Within a given time, hardcore poor beneficiaries may be linked with other

microcredit programs.

§ Linkage with micro enterprise may be encouraged to create wage employment.

§ Projects/programs with focus on crops, livestock and other agricultural activities

may be established.

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ANNEX: XVIII

Name of the Bank/Financial Institution ....................................

Statement of Loan disbursed under the Hardcore Poor program through NGO-MFIs

For the period from ..................... to .............................

(Figures in lakh Taka)

Sl. No.

Name of the NGO-MFI

Address of the NGO-MFI

Nature of loan

Particulars of the hardcore poor loan program

Amount of fixed asset of the NGO-

MFI

Amount disbursed/ withdrawn

Date of Disbursement

Loan Duration

Remarks

1

2

3

4

5

Signature: ...................................................... Date: ..................................

Authorized Executive’s Name and designation : ..........................................

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ANNEX: XIX

FLOW CHART OF SECURITIZATION PROCESS

SPECIAL PURPOSE VECHILE

Or SPV

REVENUE/ RECEIVABLES

Cash flows before securitization

ORIGINATOR

Return of residual cash

Sale price

Administration Asset/

Receivable sale

Cash flows after securitization

Sale price of securities

Return on securities

INVESTOR

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ANNEX: XX

CHECK LIST OF SECURITIZATION DOCUMENTS

1. Accounts Agreement

2. Subscription Agreement

3. Common Terms Agreement

4. Fee Letter

5. Guarantee Documents

6. Counter Guarantee Agreement

7. Recourse Agreement

8. Sale and Servicing Agreement

9. Substitution Deed of Assignment

10. Trust Deed

11. Assignment Agreement

12. Eligible Loan Agreement

13. Consulting Services Agreement, if such services are taken

14. All other documents/letters/undertakings as may be needed (as transaction

documents) depending on the type of securitization.

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