How to be partner of PKSF

Guideline for selection POs and Borrowers.

2.            Guideline for Accounts: PKSF follows accrual basis of accounting alongwith double entry system for keeping books of accounts.  For POs PKSF has a Fund Management Manual which gives procedures to keep records of accounts at field and head office level. There should be a firewall boundary to allocate shared costs or revenues between financial, non financial or social services and commercial activities. Expenses related to actual or anticipated loan losses should be shown separately from other expenses in the income statement. Revenue from donations should be shown separately from income generated by an MFIs financial services and commercial activities.

3.         Policy for Loan Classification and Debt Management Reserve: Loan outstanding among beneficiaries or portfolio is the important asset of an MFI. Due to various reasons it may not be possible to recover some loans in full amount. The core fund of any PO for microcredit would be eroded if it does not consider this phenomenon and fails to create adequate ‘Debt Management Reserve”. If the qualitative aspect of portfolio on a continuous basis are classified properly, it helps to create necessary reserve against doubtful and bad loan in a prudent manner. Through provisioning, MFI recognizes the losses it can reasonably expect to have in its portfolio.

4.            Guidelines for Designing Internal Control System for POs of PKSF: This guideline helps to strengthen and in built within the organogram, systems of accountability alongwith prevention of errors and irregularities.

5.            Management of Savings: This policy provides a detailed guideline on marketable savings products and associated record keeping system along with direction for using savings fund with a view to ensure protection of depositors.

6.            Guideline for Management of Service Charge Earnings: This gives policy guidelines for allocating service charge earnings to operational cost components of different categories including loan loss provision, disaster management fund and capital acquisition fund so that maximum amount of surplus can be generated for increasing POs equity base.

7.            Guideline for Avoiding Overlapping: When a household receives microcredit from more than one MFI, this will be treated as an instance of overlapping. Adoption of overlapping policy will help in mitigating the emerging problem of overlapping at field level.

8.            Management Information System (MIS): Formats used for in-house reporting of field level activities and for reporting to PKSF provide a good basis for analyzing portfolio quality of MCP. POs use these formats for reporting to PKSF on a monthly basis. Some of the donors has accepted the PKSFs reporting format for their own funded activities. Uniform reporting saves time for MFIs.

9.            Guideline for Performance Standards and categorization of POs: PKSF has set up performance standards for its POs in relation to various aspects of microcredit management, overall institutional strength and fund absorption capacity of POs and to categorize POs under different grades, which is used as in house evaluation for credit rating of PO before any further disbursement.

10.            Financial Ratio Analysis: PKSF has developed a program for financial ratio analysis covering the following areas: (a) effective financial structure (b) portfolio quality (c) self-sufficiency (d) operating efficiency (e) rates of return and cost, and (f) growth. Financial analysis allows MFI management to identify strengths and weaknesses in their microfinance services and provides a basis for business planning and projections.

11.       Policy for the Utilization of Disaster Management Fund: PKSF has provided Tk10m to its POs as grant for creation of a Disaster Management Fund (DMF) by each PO. Each PO will contribute a portion of their service charge earnings to this fund following DMF policy developed by PKSF. This fund will be used for strengthening the disaster coping ability of microcredit clients through interest free loans following DMF policy guidelines of PKSF.

12.            Indicators of Early Warning System: PKSF has set up a policy to detect downward trend in MCP through some indicators and to take preventive measures sooner.

13.            Business Plan for POs: In order to implement an effective and sustainable MCP, the POs are required to have a five-year business plan. The guideline are in two parts. The first part is to prepare an expansion plan (horizontal & vertical) and the next is to formulate some institutional development strategies for implementing the above plan having considered the existing strength and weakness of the organization. Both of them have targets that would be annually implemented.

14.            Guideline for Management Audit: This is a policy guideline to evaluate the internal governance, accountability, transparency and reporting of PO through assessment questionnaires.

15.            Guidelines for Internal Audit: Rigorous management and financial audits are carried out by internal audit cell of PKSF for each PO. At least 5 field visits are made in a year for each PO for this purpose. A comprehensive internal audit Terms of Reference (TOR) is followed in this regard.

16.       Audit TOR for external auditor of PKSF for auditing PKSF

17.       Audit TOR for external auditor of PKSF for auditing its POs: At present external auditors, shall audit 75% of PKSF POs during external audit of PKSF, in future this will be 100%. A comprehensive TOR is there to follow uniform auditing and reporting standard.

18.       Audit TOR for auditors appointed by POs: For uniformity of accounting and reporting standard PKSF has given a TOR for external auditor of POs appointed by them.

19.       Policy for loans for institutional development.

20.       PKSF microcredit program funding policy for indigenous ethnic minorities