.1 Provision of loanable funds to MFIs
PKSF
presently provides loanable funds to its 221 POs – 3 big, 216 small and medium
and 2 Pre-PKSF POs – under its mainstream credit program as well as under some
projects.
The mainstream credit program includes the following components: (i)
Rural microcredit (ii) Urban microcredit, (iii) Microenterprise credit; and
(iv) Hardcore poor microcredit.
The projects
under which credit funds are provided include (i) Second Participatory
Livestock Development Projects (PLDP-II), (ii) Integrated Food Assisted
Development Project (IFADEP) (iii) South-West Flood Damage Rehabilitation Loan
Programme (SRLP); (iv) Financial Services for the Poorest (FSP); (v)
Micro-Finance and Technical Support (MFTS) Project; (vi) Micro Finance for
Marginal & Small Farmers (MFMSF) project; (vii) Programmed Initiatives for
Monga Eradication (PRIME); and (viii) Learning and Innovation Fund to Test New
Ideas (LIFT).
7.1.1 Features
of PKSF Credit Program
a) PKSF provides loans to
three categories of POs- Organizations Operating in Small Areas (OOSA), Big
Partner Organizations Operating in Large Areas (BIPOOL), and Pre-PKSF POs.
b) PKSF charges 4.5% service charge per year
from its OOSA and Pre-PKSF category POs and 7% service charge per year from its
BIPOOL category POs.
c) Loan received by OOSA category POs from
PKSF are repayable within a period of 3 years. First 6 months are considered as
a grace period and loans along with service charge are to be repaid in 10
quarterly installments within the rest 30 months.
d) Loans received by BIPOOL category POs are
payable in 4 years in 12 equal installments with a grace period of 12 months.
e) PKSF charges 1 to 1.25% service charge for
the hardcore poor program and institutional development program.
7.1.2 Implementation
of Credit Program
a) Application in prescribed form:
PKSF receives application
for loan in a prescribed application form that requires the
applicant-organization to include details of information about the
organization, its program, its financing, etc.
b) Preliminary appraisal:
If an
organization has experience of managing credit program for the poor, PKSF
preliminarily selects it for field visit to see if all information provided by
the organization is consistent. PKSF
judges experience in rural credit program using several criteria: (a) number of
years of experience, (b) amount of loan disbursed, (c) number of members and
borrowers, (d) recovery rate of loan, (e) adequacy of skilled salaried staff
and (f) credibility of sponsors.
c) Field
visit:
Once an organization is selected for field visit, an officer visits the
organization. If the performance of the organization is found satisfactory it
is recommended for acceptance as PO. If there is some deficiency, the concerned
organization is kept under observation and suggestions are given for improving
the performance. On the other hand, if
performance of an organization is found unsatisfactory, the application is
rejected. Usually, the main reasons for
rejection are the financial mismanagement, gross inconsistency between
information in the application and that gathered from field verification.
d) Approval
by the Governing Body:
The final power of accepting an organization as a PO rests with the
Governing Body. If the management considers
an organization to be accepted as PO, the proposal is placed with detailed
description of the organization along with the field report, rationale for
accepting it as PO and recommendation of the MD, in a meeting of the Governing
Body. The Governing Body after deliberation accepts or rejects or puts certain
conditions for accepting the organization as a PO.
e) Signing of
Loan Agreement:
(a) Final step in disbursing loan to the newly selected PO is the
signing of a standard loan agreement with PO.
The loan agreement contains terms and conditions of loan (e.g. rate of
service charge, area of loan disbursement, number of installments etc.). The
loan is collateral free. In addition to
a loan agreement, a promissory note is signed by the representative of the PO.
(b) The loan agreement is signed from PKSF's side by the Managing Director and
from PO’s side by the Chief Executive of the PO or sometimes jointly by the
Chief Executive and the Chairman.
f) Verification
of Loan Utilization:
After the first loan is given, the PO is supposed to disburse the loan
immediately after receiving the fund and give a list of borrowers to PKSF. An officer from PKSF in charge of the PO
visits the PO to verify the loan disbursement and utilization of loan by the
members. Usually, PKSF officials visit
the POs at an interval of 3 months.
g) Application
for Successive Loans:
The approval of successive loans to a PO depends on several factors:
(a) satisfactory utilization of previous loan, (b) maintaining high rate of
recovery of loan at the field level (>98%); (c) giving reports regularly to
the PKSF, (d) potential for expansion of loan program; and (e) repayment of
loan installments to PKSF, if due. The successive loan proposals upto Taka 2.5
million are approved by the Loan Committee chaired by the Managing Director.
Similar loan agreement is signed for each installment of loan. Loan beyond Tk.
2.5 million limit is approved by the Governing Body.
h) Pre-PKSF
Partner:
Recently PKSF has taken a decision to select those NGOs which have
potentials for becoming PKSF full partners but cannot meet the criteria for
this. PKSF provides small microcredit funds to these NGOs and give technical
assistance to build their capacity to make them full-partners eventually.
7.1.3 Performance
of Credit Program
PKSF now funds
221 POs. POs are dispersed all over the country. As on November 2006, the POs
of PKSF have been working in all 64 districts of Bangladesh.
Loan Disbursement
PKSF in its first year of
operations could disburse only Taka 3 million.
That was the preparatory year for formulating policies and a period of
learning to disburse loan to institutions. Upto November 2006, it has disbursed
Taka 33,937.70 million.
Loan Outstanding
PKSF has Taka 15,956.34
million loan outstanding with POs as of November 2006.
Borrowers
As of November 2006, total
number of borrowers financed by PKSF fund was 7.28 million of whom more than
91.68% were women.
Recovery of Loan
PKSF has two different
recovery rates: (a) recovery rate of loan between the PO and PKSF, and (b)
recovery rate of POs. Recovery rate of
PKSF is 96.90%. This rate is defined as the percentage of due amount has been
received on time. Loan recovery of POs
at the field level is 99.25%.
7.2 Developing
best practices for microcredit management and operations of MFIs
PKSF reviews
its policies and programs continuously and adjusts them to meet the changing
requirements. PKSF in the last decade has prepared a number of policy
guidelines and standards for the microcredit sector based on the felt needs
involving the practitioners - PKSF staff members and POs representatives and
officials. PKSF has a program to develop standards in further areas and review
and revise ones already prepared. Major policy guidelines and standards
prepared by PKSF are:
