CREDIT
POLICY
FOR
LOAN PROGRAM IMPLEMENTATION
ASSOCIATE SOCIAL
IMPROVEMENT FOUNDATION (ASIF)
Police Line Road,
Kumarkhali, Pirojpur Sadar, Pirojpur, Bangladesh.
Mobile :
01770-494849 E-mail : ngoasif@gmail.com
CREDIT POLICY/MANUAL
FOR
CREDIT PROGRAM IMPLEMENTATION
Considerable factors for credit program implementation:
Selection of
participants:
a. Who has less than .50 acre of own land,
which costs maximum of Bangladeshi Tk.20,000/-
b. Have sell labour most of the time of
the year for livelihood.
c. Low income groups like fishermen,
weavers, blacksmiths, potters etc. male and female professionals get priority.
Group
Formation:
Savings groups are formed with 15 to 30 members who are
from like minded, same age, same economic & literacy levels, same
professions, same territory, same sex etc. Groups are formed such a way that by
which all the members easily communicate each other and attend weekly group
meetings easily. Before group formation a survey is conducted and kept to know
the socio-economic conditions of the members.
Group Leading:
Each group shall have a 3-5 member Executive Committee
and it has particular responsibilities.
Warning
factors for forming groups:
1.
It creates
difficulties to lead and control the group, if the number of members becomes
higher than a particular numbers.
2.
Priority is given to
those persons, who are gentle, honest & needy but sound in providing
labour.
3.
Groups are formed
with permanent inhabitants of the area and one member from a family.
4.
Age of the group
members shall have to be 18 to 50 years.
5.
Separate groups are
formed for the males and females.
6.
Long time sicked
person should not be included in the groups.
7.
Member of other
group of another NGO and loanee should not be a member of the group.
It should be realised that a good group is the wealth of
the organisation and a bad group is the threat of the organisation also. In
this respect whether the group will be good or bad completely depends on the
group nurturing Worker.
Leaving of a
Group:
For any reason, if any member wants to leave group
willingly, it shall have to be discussed in the group meeting and shall have to
be written in the resolution book and also to be cited the causes of leaving
group if possible. In this case, if the leaving member has the money of loan,
it shall have to be realised and steps to be taken to return his/her savings.
The group leaving members shall not get return the money of emergency fund and
group fund (if there is provision).
Termination:
The group member, who is involved with the anti
disciplines of group, break the rules and regulation of the organisation and
polluted and also threat for the society, can be terminated from the group. In
this case, in the group meeting, the wrong of the member shall have to be
discussed and proved and also to be noted in the resolution book. All the group
members shall be agreed and take decision of termination. In this respect,
steps shall have to be taken to realise the loan of the member, if s/he has and
then return her/her savings. The terminated members shall also not get the
money of emergency fund and group fund (if there is provision).
Assessors
Selection:
The organisation should have provision to select assessors
for the group member to become the owner of the liability and wealth, if
suddenly the member dies. In this case, in the application of membership, a
column should be added and the member shall fill up the column citing his assessors’
names, by which in his absence (death), his particular assessors can take the
liability of loan and return the loan side by side can withdraw his savings
money.
Bank Account
Operation:
Each group shall have a group account in the Scheduled
Bank to deposit the weekly savings. The Group Bank Account shall be operated by
the joint signatures under the following procedures:
a.
The Chairperson,
Secretary and the Treasurer will be the signatories. Money shall be withdrawn
with the signature of the Chairperson and any one of two signatures i.e.
Secretary or Treasurer.
b.
The group meeting
resolution and the advance request letter of the Chief of the organisation to
withdraw the said amount of money must be submitted in case of money
withdrawal.
c.
If it becomes
necessary to withdraw group savings, at first the group shall make a meeting
resolution and submit to the Chief Executive of the organisation. The Chief
Executive shall verify, why the group wants to withdraw the savings money? Then
he would send request letter to the Bank.
d.
Withdrawal special
directions shall have to be given to the Bank in the time of each group account
opening, which shall be cited in the Signature Cards.
e.
If any group member
misused group fund, to realise the money, as soon as possible, group pressure shall
be created, cooperation shall be taken from the local influential and elite
people and the organisation and above all, help shall be taken from the Court
against him/her. After realisation of the misused money, the misused person
shall be terminated as per the rules and regulation of the group.
Training of
Groups:
After the formation of the groups, the groups should be
trained up and made aware about the following subjects/topics/issues by
providing training through weekly group meetings:
1.
Introduction
of development and examples.
2.
Social
analysis and their position in the society.
3.
Leadership
and group management.
4.
Importance
and benefits of group formation.
5.
Activities
of groups.
6.
Why
savings and importance of savings.
7.
Gender
development.
8.
Credit
taking, use of credit and repayment of credit and other necessary topics.
9.
Selection
of profitable IGPs, benefits of other fund building and utilisation.
10.
Male
and female relation development.
11.
Awareness
raising health, nutrition, family planning, MCH and EPI.
12.
Social
afforestation.
13.
Importance
education for the adult and the children.
14.
Professional
skills development.
15.
Women's
rights, legal discriminations and family court affairs.
16.
Importance
and involvement of women in development.
17.
Importance
of environment development and
18.
Importance
of kitchen and homestead vegetable gardening.
19.
Identification
and proper utilisation of local resources.
It creates reciprocal cooperation, confidence and
relation among the group members and develops in a good group. The staff of the
organisation shall provide these training to the group members after the
completion of other usual activities of weekly group meeting. Local
administrative and Government related personnel may be involved in these
training now and then.
Group savings:
Each member of a group shall deposit a fixed amount of
money in weekly meeting. This deposited money shall be deposited opening an
Account in the name of group in a schedule Bank to develop a future group fund.
Warnings:
1.
The
savings rate per week for each member should be same.
2.
Every
member of the group shall be deposited weekly savings positively.
3.
Collected
savings money shall have to be deposited in the group account of the Bank. The
group leaders shall be ensured the deposit of money through showing deposit
slip of the Bank regularly.
4.
The
group account operation should be by the joint signatures of the Chairperson,
Secretary and the Cashier of the group with the consent of the group members.
5.
If
necessary, group savings may be utilised as capital for undertaking income
generating activities by the group members but in this case, group meeting
resolution is must be needed.
Goal and
objectives of Credit Program:
·
To improve the
socio-economic condition through undertaking income and employment generating
activities and side by side to make those activities sustainable through
increasing professional skills by providing IGA management training.
·
To save the poor
people from the indebted of long time and to reduce the present running
exploitation system through organising them and creating social actions.
·
To involve the
organised poor people into economic and productive activities and to establish
control on unutilized resources of the society.
·
To ensure legal
wages in the competitive market through initiating self-employment.
·
To introduce
expanded credit system, through breaking the primitive bad credit cycle/system
and to create the situation of :
low
income--credit--involvement of capital--increased income--increased savings--
increased capital involvement--increased income.
·
To introduce
mortgage less credit system against institutional mortgaged system credit and
to increase the capacity of the poor people in credit utilisation.
·
To ensure their
participation in income earning and productive activities.
·
To initiate and
encourage to participate in greater social movement through establishing the
people's economic status.
Loanee
Selection:
Credit is essential to involve the group members into
different small income generating activities. Very carefully the loanees should
be selected from the groups before giving credit money to the loanees.
Followings are the criteria to select the loanees:
·
The applicant shall
have to be a member of a group of the organisation and involved with group
activities at least for 6-12 months period.
·
S/he shall have at
least Tk.200/- savings in the group fund.
·
The attendance
register shall have her/his signatures as a proof of regular attendance in
weekly meetings.
·
S/he has the
capacity to utilise the loan money.
·
Previous experience
is essential to which work s/he wants to utilise the loan money.
·
The group shall be
guarantor to realise the loan money of the loanee.
·
The loan shall have
to be utilised by herself/himself.
·
The organisation
will finalise how many members & how much money to be given to a group at a
time.
·
The applicants of
the group, who is most needy and can utilise the loan money properly, at first
s/he should be selected gradually.
·
Priority should be
given to those persons in selection of participants, who know the rules and
regulations of having loan, utilisation, repayment, service and other funds.
·
In case of loanees
selection, it should be discussed into the group and should be recorded the
names of the loanees, utilisation trades, amount of loan etc. in the resolution
book.
·
Above all selected
group members should be trained up on adult education, signing, and other
subjects.
·
In case of 2nd. and
3rd. loan emphasises should be given considering the payments of previous loan,
individual amount of savings etc.
Note: At the beginning, this idea should be given
to the group members that the organisation does not give loan to any one but
they take loan from the organisation for their needs, so, all the group members
are liable jointly to return the loan money to the organisation.
The success of credit program is mainly depends on the
selection of credit projects. Appropriate sustainable, viable and profitable
project can help to the loanees to maintain capital and encourage to-repay the
loan instalments. In the weekly group meeting, the objective of the undertaken
project for loan for selected members should be discussed thoroughly carefully
whether it would be profitable or not. With the joint discussion feasibility of
the project should be studied considering the following factors:
·
to
examine whether the project would be profitable or not.
·
to
select those projects, which have easy availability of raw materials and
marketing facilities.
·
to
encourage to accept those project, which are locally well known/ acquainted and
easily profitable,
·
to
undertake small and easy profitable projects at the primary stage.
·
to
decide the profitable season for the project.
·
to
encourage to undertake those project, which will help to create assets for the
members.
·
to
impart skills development training for the loanees, if necessary.
Preparation
of Loan Proposal and Approval:
The group should prepare a loan proposal according to
the demand and as per resolution book of the group and sent to the Office of
the Organisation through the related Field worker. The proposal should be
included with the names of the loanees, objectives of the loan, steps and
proposed loan amounts. In this form, a column will be used for approval, where
approved amount will be written by the organisation. Format may be used for
preparing loan proposal.(Annexure-A)
Considering
factors for Loan approval:
The Authority shall verify/examine the feasibility of
the proposal, when the loan proposal would be submitted to the Office of the
Organisation. In this respects, the following points shall be considered :
1.
To examine the
resolution book of the group, whether the group has given consent or not.
2.
To examine the
signatures of the group's attendance register to verify the duration of the
loanee and the condition of attendance in the group meetings.
3.
To discuss with the
proposed loan applicant directly to know the utilisation of loan money, trade,
profit and risks and how much s/he could be able to utilise and how much s/he
has skills.
4.
To know the financial
transactions of the loanee through examining the savings register and loan pass
book, if s/he took loan before.
5.
To verify, whether
the other members of the group are agreed to take the liability of the loan or
not.
After the above mentioned verifications, the loan
approval authority shall fill up the particular column of the loan approval and
take step to approve the loan.
Loan amount
deciding:
How much the amount of loan will be depended on the
trade undertaken by the group members. But in case first time loan, members
should be encouraged to undertake small projects. In case to 2nd. and 3rd.
times, the loan amounts should be increased gradually. For 2nd. and 3rd. time
loans, merits and demerits of the 1st. loan implementation shall be considered
in fixing the amount of loan.
Warnings:
The loanee and the loan issuer should be remember/aware
that the loan amount as much as small the risk will also be less i.e. it will
be easier to utilise the loan money and also it will be easier for the member to
repay the loan.
Duration of
loan:
At present, all the rural loan systems, most of the
loans are given for one year and repayable within 50 equal weekly instalments.
In this system, instalments are repaid from the income of the income generating
projects fulfilling the demand of the family, by utilising the capital in the
businesses. But considering the nature of loan/trades monthly, quarterly, half
yearly, yearly and bi-yearly income generating projects may be undertaken. Systems may also be kept to repay the loan at
the end of the duration after the sale of production. Under this condition,
loan repayment will depend on the supervision of the organisation and the
honesty and confidence of the groups. Long time loan is generally utilised for
joint venture activities under the management of the groups.
Nature of
loans:
It has been identified that present loan giving and loan
utilisation system is more successful to individual loans under responsibility
of the groups. But many organisations have been running the system of joint
loan or group loan for undertaking big projects to ensure the participation of
all group members. Due to some limitations of groups, the organisations have to
face different difficulties in this loan system, because of project implementation,
supervision, and distribution of profits. Regarding this the organisation
should decide the nature of loans considering the capacity of the groups.
Loan
distribution:
It is necessary every organisation should have a proper
pre-plan for loan distribution. According to plan date, day and time should be
fixed and informed to each group and selected loanee before one week. Then they
could be able to arrange necessary materials for the projects in advance by
which they could be able to utilise the loan money after having with out delay.
Necessary
factors before distribution of loan money:
·
Keep ready loan pass
books as per the loan approval form (Annexure B form).
·
Kept prepared/ready
with filling contract form and take necessary signatures of witnesses(Annexure-C
Form).
·
Keep prepared loan
distribution register (Annexure-D Form).
·
Collect Revenue
stamps in advance and put these in place of loanees signatures in the loan
distribution register.
·
As per need,
necessary loan money to collect from the Bank in advance and keep the loan
amount separate.
·
In case of giving
loan through cheque, a person from the organisation shall attend in the
particular Bank on the date and day of making cash of the cheques.
Activities at
the time loan disbursement:
·
To
provide awareness on the rules and regulations of loan utilisation and
repayments to all the loanees.
·
To
advise to keep the money carefully.
·
To
help in counting if it is cash money.
·
To
keep signatures in the loan distribution register.
·
To
give cash money with pass book to the loanees.
Activities
after loan distribution:
·
To
keep the contract papers properly.
·
To
verify the loan distribution-register and keep properly.
·
To
give posting (individual wise and group wise) in the loan ledger (Annexure-E
Form).
·
To
make entry in the Cash Book.
·
To
give posting in the General Ledger.
·
To
prepare group wise loan accounts.
N.B: In case of group wise loan accounts
preparation, after each loan distribution, adding to day's distribution numbers
and amount of money with previous loan distribution, new sheet should be
prepared and with this previous realisation of loan money and other information
are necessary to add. The group wise loan analysis can help to give a clear
picture of actual loan program.
Fixation of
loan instalments and realisation:
In case of weekly realisation, 100% loan is realised
with 50 equal instalments adding 2% service charge with the total capital money
i.e. (50 x 2%=100%). It makes the loanee easier to repay the loan instalments
making the instalment smaller and other ways it also makes the loan less risky
to the loan giving organisation. Apart from these, in case joint venture/group
loan or fixed durational loan, both loan giving and loanees make a contract
considering the facilities, which mainly depends on the nature of
projects.
Service
Charge:
Most of the loans giving Institutions/Agencies of the
country take service charge more or less (10% to 20%) for their money
involvement. Though there is provision for taking service charge 10% to 20% yearly
but ASIF takes only 10% service charge from its targeted people i.e. if any one
takes loan of Tk.1000/-, he has to return Tk.1100/-(Capital Tk.1000/- +
Tk.100/- service charge).
In this regards, some Institutions/Agencies count the
service charge in declining way but most of the Institutions/Agencies charge a
fixed amount per thousand per year(Tk.100/- to Tk.150/- per year) and in the
time of weekly instalments realisation add Tk.2/- to Tk.3/- service charge with
the principal amount. ASIF has been realising the 10% yearly from the
beneficiaries. Though ASIF takes 10% yearly service charges but it has been
found that actually the service stands 15% to 18%, because, the participants
are given principal loan adding 10% service charge and weekly instalments are
divided adding the total service charge i.e. Loan money is Tk.1000/- + service
charge is Tk.100/- = Tk.1100/- % 50 instalments. But the realised weekly
instalments are again disbursed to other loanees again adding 10% service
charge. In this way, actually the service charge stands Tk.15/- to Tk.18/-
yearly.
In this regards, the organisation shall be fixed the
rate of service charge and realisation system considering the facility of
keeping accounts and realisation. Loan pass book and loan register (please see
the Annexure E Form) and general ledger of loan realisation and service charge
realisation shall be kept separately in separate pages.
Service charge is the income of the organisation, which
can help the organisation to cover some recurring cost later on. so, the
organisation has guide line to utilise the service gained money in future. The
guide lines are prepared such a way that the service charge gained can be
utilised as the Revolving Loan Fund and can help to meet the expenditures of other
program of the organisation. But before utilisation of the service charge, it
shall be approved by the Executive Committee.
Group Fund:
The loanees shall deposit Tk.2% to Tk.5% from the loan
in the group fund to create the own capital at the time of receiving loan. This
group fund can be utilised later on for the need of one or more members for
individual or joint activity with the decision and consent of the group
members. The service charge shall be as usual like general loan system. Only
50% of the total amount may be withdrawn with the consent of the group members
for any loan purpose as mentioned above. The accounts of this loan shall be
maintained in separate register like other loan. For group fund's loan shall be
recorded in the pass book of the loanee(s).
Emergency
Fund:
Emergency fund is identified as Welfare fund. This fund
can be utilised to help to, if any group member dies, for treatment, if any
loanee's project become damaged, if any member of the group become disabled and
also to help the poor and meritorious students for running their educational
expenditures. Each group member shall deposit Tk.1/- or Tk.2/- side by side
savings money. If it is necessary, with the consent of the group members, 50%
money of the fund can be withdrawn. This money generally considered as
donation, it needs not to be returned. The money of this fund also shall be
recorded in the pass book of the group members. The accounts of this fund shall
be kept in the office side by side accounts of savings.
Management of
Group Fund and Emergency Fund:
If the groups have these tow funds shall be managed very
carefully and properly. Each group shall have separate pass books. The weekly
collections shall be recorded in the separate pass books and gradual total sum
shall be recorded in a column. After withdraw of money, the rest money shall be
recorded in the pass book and kept in the office. But the total accounts
keeping of these funds shall be maintained by the organisation in a separate
register. The money of group fund and emergency fund can be kept in the Bank in
same account of savings fund. The group shall also maintain accounts register
to control the accounts.
Loan
utilisation and Supervision:
The related Field Staff shall have the responsibility to
supervise and follow the loanees after the loan disbursement, whether the
loanees have utilised the loan properly or not. The Field Staff shall go to the
houses of the loanees after the completion of the weekly meeting and
practically verify the purchase receipts, memos etc. and also verify whether
the receipted money and loan money same or not, whether the loanees are
utilising the money in actual projects/activities or not and also the loanees
are utilising the full amount or not. If any loanee has utilised part of the
loan money, then the staff shall advise to utilise the full amount of loan
money immediately. The staff shall report to the related Supervisor about the
condition o of the loan after his personnel verification. Group members have
the first responsibility to supervise the loanees, second responsibility lies
to the Chairperson, Secretary, Treasurer of the groups and the related Staff
and third responsibility lies to other Senior Staff of the organisation. A
monthly plan shall be made and follow up it strongly and also prepare a check
list and follow up it strongly. Apart from these, the related staffs regularly
monitor the rate of changes of the loanees regarding socio-economic conditions.
If possible, the staff will collect case studies of the loanees and will keep
in the Office.
Warning:
It should be taken in consideration that due to lack of
strong supervision, follow up and monitoring, a good loan may gradually become
irregular and bad loan.
D u e:
As the loanees are under a contract of weekly instalments
repayment of a fixed amount of money, so, after the distribution of loan, which
amount of money is supposed to repay weekly that shall be called due.
Over Due:
The loanees, which amount of money is supposed to repay
in the weekly meeting, if that amount of money has not been repaid on that
week, this passed date amount of money shall be called over due in the next
week.
Default Loan:
The loanees are under the contract that the loan money
is supposed to repay in a particular duration, if the money or part of money is
not repaid in due time as per contract, that shall be called default loan.
Default Loan
Realisation:
The default loan shall be realised with the decision of
the group under taking the following possible steps:
·
Through
integrating the savings of that member.
·
Through
creating social pressure/group pressure to the defaulter member by the group
members.
·
Through
giving losses by all the group members.
Revolving
Loan Fund Formation:
The loan fund of the organisation shall be utilised as
revolving loan fund to make the loan program more dynamic and to give
opportunity and to cover more group members. Revolving loan fund means the
distributed capital loan money and the realised loan shall be deposited in the
Bank Account and again the money shall be utilised for loan for the new loanees
continuously. As a result, the money may not remain idle in the Bank and it
will help to earn an income for the organisation as well as the beneficiaries.
It is possible to keep the accounts of revolving loan fund easy way.
(Annexure-G).
It shall be considered that with this revolving loan
fund more beneficiaries and new members can be covered. The constitution of the
organisation should be added policy for revolving loan fund utilisation. The
clear directions should be kept in the constitution, how this fund shall be
utilised. ASIF seems, to utilise the revolving loan fund, the organisation
management should be improved and pre-plan shall be taken and implemented
successfully.
Md. Nijamul Huq
Founder & Chairman
Associate Social
Improvement Foundation (ASIF)
Police Line Road, Kumarkhali, Pirojpur Sadar,
Pirojpur, Bangladesh
Mobile : 01770-494849, E-mail : ngoasif@gmail.com
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