The First Microfinance Bank Ltd

Replacing despair with hope and confidence in a

better future

Acknowledgement
First of all I am very thankful to Allah most
merciful and beneficial, who gave me the
power to take this step. After this I thank
to Mr.Sher Nawaz Khan Branch Manager
Chitral Branch, Zafar Iqbal and Farman Ali
Branch Operation Incharge ,Ghulam Musa
MFO Team Leader and Sahib Nabi Micro Finance
Officer of Chitral branch for
their practical guidance. In short I am thankful
to all those people who helped me.

In the last not the least, I express my heartiest

regards to my parents who supported me financially,
morally, and spiritually and prayed my success to
achieve My aims of life .

DEDICATION

My loving teachers and parents who are

the best source of inspiration and best
gift of life from Almighty Allah.

TABLE OF CONTENTS

S.No.

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Titles

Executive summary
Background
Mission statement
Vision statement
Strategic Objectives
Product & Services
Village Group Financial Services
Housing Finance
Micro Enterprise Finance
Low Salary Employees Loan
Micro Pensioner Loan
Deposit & Saving

Page No.

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EXECTIVE SUMMARY
The First Microfinance Bank is a product of twenty years of partnership of the Aga Khan
Rural Support Program (AKRSP)- a private, non-profit organization- with the communities of
the Northern Areas and Chitral District1 of Pakistan. Hence, it is deemed necessary to first
present a brief introduction of AKRSP and create the setting for the First Microfinance Bank.
The Aga Khan Rural Support Programme was established by the Aga Khan Foundation in
1982 with the mission to alleviate rural poverty through promoting sustainable livelihoods of
the mountain communities of Northern Pakistan. The program area is rugged and
mountainous, located among four of the world highest mountain ranges, - the Himalaya,
Karakoram, Pamir and Hindukush. It has a combined population of above one million (more
then 11,000 households) living over 1,000 villages and scattered over 74,200 sq. km. An
estimated 90% of the regions population makes its living from subsistence farming. Income

from agriculture is insufficient to sustain most families at even a subsistence level, and has to
be supplemented by off-farm income.
AKRSP functions as a flexible catalyst to promote equitable and sustainable improvement in
the quality of life of the inhabitants of Northern Pakistan using the basic principles of
organization, capital formation and capacity building. AKRSP enters into a partnership for
development with villagers of its project area in return for a demonstrated commitment to
establish Village or Women Organizations (V/WOs) and rely on them as the primary vehicle
for village development.
There are both formal and informal sources of credit accessible to rural inhabitants of
Northern Pakistan. Shopkeepers are the most common source of informal credit while the
Agriculture Development Bank, commercial banks; cooperative banks and AKRSP are the
institutional sources. AKRSP first began providing credit services to the poor farmers in
1983, beginning with a small amount of funds from its own resources. The products
introduced were directed to meet the needs of the communities- Corporate Village
Organization Credit (CVOC), Enterprise Credit Program (ECP), Micro Enterprise Credit
Program (MECP), Short-term Loan (STL), Medium Term Loan (MTL) and Village & Women
Organization Credit Program (V/WOCP). In 1998, all the above loan products were
eliminated and replaced by two products Individual loan and Group loan on the basis of
sixteen years experiences. During the year 2001 two new products, Business Group loan and
Business Committee loans were launched to see the need of micro-entrepreneurs in market
towns of Northern Pakistan. When First Microfinance Bank established, the bank is using all
the four loan products of AKRSP (Microfinance Section) as a loan Product of Bank.
In 1994 AKRSP decided to seek a license for a microfinance bank in order to create a
sustainable institution with the capacity to provide a complete range of microfinance services
and not just credit, to the communities of Northern Pakistan as well as the rest of the
countrys poor population, particularly women. According to the international Micro
Banking Bulletin, by the end of 1998 AKRSPs microfinance program had reached the level of
being financially self-sustaining. With the promulgation of the Microfinance Ordinance in
October 2001, AKRSP was ready to apply and in January 10, 2002, the Government of
Pakistan granted a license to the First Microfinance Bank Limited. Where the First
Microfinance Bank established, it takes over or the existing AKRSP (Microfinance Section)
operation, but the outstanding loan will be the property of AKRSP. The First Microfinance
Bank recovers the outstanding loans and returns to AKRSP. When any new loan issued by
First Microfinance Bank it will be the property of First Microfinance Bank.
The mission of the First Microfinance Bank is to provide sustainable services to the people of
Pakistan, particularly to vulnerable groups such as women, based on financial products. It is
making accessible, retail services to underserved rural and urban populations and wholesale
funds to other organizations with the same commitment. It is aiming for a high level of
outreach through the country, at the same time covering its inflation-adjusted costs from its
own revenues over the long term. Particular emphasis is being placed on building up a sound
deposit base, recognizing that learning to save regularly and promoting financial discipline is
the key to helping people graduate out of poverty.

The First Microfinance Bank began operating in January 2002, but is preceded by work
undertaken by AKRSP in credit provision, since 1983.
AKRSPs Microfinance Section demonstrated the ability of small farmers to accumulate
capital through discipline and regular savings. The Village and Women Organizations in
Northern Pakistan have accumulated savings, which they use as collateral to obtain credit for
development activities. Few branches are opened in urban areas of Pakistan, at the end of
2002; seven branches are opened in rural areas, all the branched are in NAC. Now higher
management considers extending banks program to the rural and urban areas coming years,
it will start its activities in the rest of Pakistan.
AKRSP and the First Microfinance Bank are providing services to more than 131,000
households & 602,393 borrowers in Northern Pakistan and the Bank is establishing branches
throughout Pakistan. From 1983 to 2003, AKRSP (Microfinance Section) has trained 2305
people in bookkeeping, accounting and financial management, out of them 850 are females
representing WOs.
The main purpose of the First Microfinance Bank is to provide easy doorstep service to the
rural as well as urban communities of Pakistan. Therefore, the First Microfinance Bank is
starting a mobile banking system throughout Pakistan, particularly in remote rural areas.
Every individual will be able to benefit from the deposit, credit, remittance and other financial
services.
All the products have been designed for rural & urban communities based on research and
experience. The most vulnerable group of the society in Pakistan, especially in Northern
Pakistan is women. There are equal opportunities for men and women in AKRSP & First
Microfinance Bank. There is no any kind of financial institute, which is directly focused on
that group. Secondly, according to the policy of bank, the bank will work 60% with women
and 40% with those people whose income are less then $ 85 per month.
AKRSP (Microfinance Section) is provided group loan mainly for agriculture inputs purchase,
poultry production and many other Households needs, on the other hand Individual loan,
Business Group and Business Committee loans given for entrepreneurial purposes. According
to the Monitoring and Evaluation section of AKRSP about 93% of the respondents are of the
view that the loans provided by First Microfinance Bank suit their needs. The First
Microfinance Bank is owned by AKRSP and the Aga Khan Fund for Economic Development.
It will operate on a national level, opening 30 branches all over the country in the first five
years. Half of the branches will be in Northern Pakistan, as it absorbs AKRSPs existing
program. Some experts of First Microfinance Bank are also working out side Pakistan, the
micro-credit program of Aga Khan Development Network Afghanistan being one example. It
is expected in future, that AKDN will launch regional microfinance banking system in
Pakistan, Afghanistan and Central Asian countries.

Background
The First Microfinance Bank Ltd. (FMFB) came into existence in November 2001 as a nonlisted public limited company and as a licensed Microfinance Institution (MFI) under the
provision of the Microfinance Institutions Ordinance 2001 in January 2002. The initial
sponsors of the bank included the Aga Khan Support Program (AKRSP) and the Aga Khan
Fund for Economic Development (AKFED) with a start-up capital of Rs. 500 million Later on

the International Finance Corporation (IFC) joined the venture in September 2002 with an
additional capital of Rs. 160 million raising the total capital to Rs. 660 million (US $11
million).
FMFB was created to expand upon the highly successful Aga Khan Rural Support Programme
(AKRSP) which had served the populations of Northern Pakistan since 1982 and contributed
significantly towards the objective of poverty alleviation.
The bank operates on the principles of long-term sustainability and broad outreach, in terms of
services and beneficiaries, in order to attain maximal impact. FMFBs central mission is to
reach out to the vulnerable urban and rural communities, particularly women, who are
currently not able to receive adequate financial services from the formal institutions. FMFB
seeks to marry entrepreneurship with capital formation. It wishes to give people scope to
expand their economic base, and over time, to support diversification beyond traditional small
enterprises. It aims to provide to the poor, particularly women, opportunities to access credit,
thereby enhancing the welfare of their families and their contribution to the economy.
Microfinance in Pakistan
The financial sector landscape continues in most developing countries in the Asian Pacific
region with continuing liberalization, improvement in information technology and increasing
competition in the sector. The expansion of microfinance during the last decade has added a
new dimension to these changes in many countries because it is gradually allowing access by
the poor and low income households to institutional financial services for the first time and is
therefore setting in motion, a process towards ending their financial exclusion.
However, the number of poors and low income households outside the frontier of formal
finance is still enormous. Some 90 percent of 180 million poor households. Thus the region
continuous to face a major challenge in expending outreach of microfinance services in a
sustainable way. If the region is to fully harness the potential of microfinance for poverty
reduction, it must make microfinance services accessible to the majority of its poor.
Thus the overarching challage is allowing and facilitating sustainable financial services access
to the majority.
Formal credit and savings for the poor are not recent invention. For decades, underprivileged
and marginalized customers-neglected by commercial banks-have been served by credit
cooperatives and development finance institutions. These organizations have legal charters
that govern their financial operations and allow them access to savings or other public
funding.
But the past two decades have seen the emergence of powerful new methodologies for
delivering microfinance services, especially micro credit. Much of this innovation has been
pioneered by non-governmental organizations (NGOs).However, governments, donors and
practitioners are now talking about new legal structures for microfinance in many developing
countries. Microfinance regulation and supervision has suddenly become a mainstream
development agenda with an international spotlight.
While all approaches to extending microfinance are commendable and depend on the legal
supervisory environment within a country the rationale for adopting a banking approach has
several advantages.

In terms of governance, it is well established that good governance mandates strict adherence
to dully established corporate standards of practice, policies and legal regulations. This
ensures the efficient management of assets and liabilities of the institution and plays a key role
in protecting the interest of the institution, customers and the general public. The banking
approach also enables the generation of a much stronger institutional ownership; this provides
the strength and the ability to maintain a balance
between the community, institutional
interest as well as the option to offer stocks to the general public. It is undoubtedly more
conducive to striking a balance between the corporate and social mission of the institution and
assists in maintaining equilibrium between achieving profitability and maintaining its focus on
serving the marginalized urban and rural sectors.
Moreover accepting deposits from the general public provides the MFI with a stable and
continuous source of affordable funds for operation and investment. Thus the MFI has
a huge potential for attracting equity investors or institutional lenders to expand its operation
and outreach. Thus as a banking institution, the program inherently tunes to long
term sustainability. Furthermore, the costs if transaction fee and services charges on
saving and loans are based in market rates and provides effective integration with
the larger financial markets.
Our experience has synthesized evidence which leads to believe that there is a large unmet
demand at the grass-root oriented financial services sector. This promises
huger potential for future expansion of microfinance activities and especially true
for remote rural areas where the commercial another formal institutional are
non-existent. There is thus a tremendous potential for setting branches, services
posts or mobile delivery schedule to remote communities to expend client outreach.
Once branch viability systems and procedures are established, the potential for
quick replication of the franchise across diverse territories and environments can
be capitalized upon. Finally and mist important an MFI operation has the capability
of offering a full mend of services option both in terms financial services
such as loans, deposits, payments services, money transfers and insurance
and non-financial such as business advisory services .
Like all other clients of financial services the poor also demand products and
services which are better, cheaper and faster. And when given a choice,
poor clients will borrow from the best services one that offers quickest
loan disbursement and at the lowest cost to the providers. The poor also tend to
save where they can find the most security, liquidity, and convenience of accessibility.
When it comes to their savings, poor clients evaluate whether it enables them to withdraw
their funds at any time and frequently and whether the institution is located within
reasonable traveling distance. Although not entirely price incentives, poor clients usually
do not identify the rate of interest earned, as a main reason to save or not to save with an
institution. Another key challenge for the microfinance industry is to do better for the
poor then what they can do for themselves, i.e. to design kind deliver efficient, responsive,
demand driven financial products and services that truly match the financial needs and
aspirations of the poor households. It is important that institutions and indeed policy
makers recognize that the poor are not just one large homogenous mass. Poor
households are legitimate clients of financial services. There is a need to better
understand the existing target market, to define its parameters accurately and to

conduct a segmentation exercise. Only then can we serve poor clients relevantly.
Pakistan has now come full circle to foster microfinance at national level with
out which our ambitious target of sustained growth at the grass root level may remain
unrealized. With the initiation of microfinance sector development initiative by the govt
of Pakistan. Some four years ago, it can be safely assumed that now it is on the
road to sustainable development.
Today microfinance industry is at crossroads- poised for transaction on a grand scale yet
unable to achieve it, it is time for another revolution, one that will mainstream microfinance.
The ultimate goal is to catalyze the development and implementation of standards and
Infrastructure that will mainstream microfinance making small loans, savings and the
financial vehicles available to all types of people every where, regardless their economic status.
There are three unique elements that will help make this initiative distinctive and impactful,
first a focus on technological innovation that leverages the most appropriate technology
e.g. considering high tech systems where the priority is global access and combination of high
and low tech work around where the priority is local access. Second involvement
of the leaders, practioners, and innovators in the microfinance industry. The need of the
hour is one that seeks and leverages upon the giants, integrating the great work that has
already been done and third, the introduction of new actors such as technology
business and financial experts into the process.
The primary beneficiaries of this initiative will be the worlds underserved urban and
rural poor, especially entrepreneurs and their families. It is our goal to integrate
existing solution components and develop new pieces to fill existing gaps, it is believed
that successful implementation will enable microfinance industry to move from its current
ability to serve 40 50 million people.
This industry or movement - as some call it has created an important nexus between
diverse groups of individuals all around the world. These partnerships have included
poor households. Leaders of microfinance institution, donors, microfinance networks
, finance ministers, central bankers and indeed commercial bankers. And it is
partnerships like these that have put Pakistan on to map of microfinance friendly
countries, and helped to construct institution and financial architectures that support
the inclusion of larger numbers of rural and urban poor in to the institutions of
relevant financial systems that promote access to viable financial services for millions
of poor families.

Vision:
To enable the disadvantaged population to build a sound and secure future with dignity and
pride and not merely to survive; alleviation of poverty through sustainable economic
development.

Mission:

To help strengthen the entrepreneurial base of the economically disadvantaged population

across the country by seeking to marry entrepreneurship with capital formation in not only
rural areas but also the major population centres.
To provide people the scope to expand their economic base, and over time, to support
diversification beyond traditional small enterprises.
The Bank will endeavor to introduce good practices, ethical precepts and the highest standards
of rectitude in the conduct of business and will remain respectful of the needs of the poorest
segments of society.

Strategic Objective:
Outreach
Increase access to financial services to the poor populations in rural and rural areas,
particularly women.
Sustainability
Ensure permanence of services to the poor by covering inflation adjusted costs only
Impact
Careful targeting, monitoring and evaluation, and development of social indicators to
maximize impact on the poor.
Transparency
Good practices, integrity, ethical precepts and highest standards of rectitude in business
conduct.

Recent Initiatives
To reach out to the poorest segments of society and ensure that they have access to resources
that can enable them to improve their overall quality of life, alternate distribution channels
along with few products and services have been planned for the 2010.

Business Development Services (BDS)

Based on its vision, FMFB has institutionalized Business Development Services as an integral
part of its operations. The BDS activities focus on developing entrepreneurial capacities and
providing opportunities for capital formation to the chronic poor segment, which in turn will

make them bankable. Undertaking an intra-enterprise approach, FMFB currently offers

market-driven intensive business start up and management trainings coupled with mentoring
services to facilitate business set up and growth.

Reaching Out with the Pakistan Post

The First Microfinance Bank entered into a unique and innovative partnership with the
Pakistan Post, whereby FMFB will be utilizing 4000 Pakistan Post Offices to increase access
and outreach to quality and sustainable microfinance services for the very poor and vulnerable
populations, especially women, residing in the rural and rural areas of Pakistan.

Products and Services

FMFB offers an evolving menu of products and services to meet the unique needs of the poor
population.

Micro Credit

Cash flow based lending in line with borrowers requirements

Solidarity approach/Village Organizaions

Focus on Women entrepreneurs

Social collateral only

No legal procedures

Quick loan processing

Products

Village Group Financial Services

Housing Finance

Micro Enterprise Finance

Low Salary Employees Loan for Private

Micro Pensioner Loan

Savings and Deposits

Account can be opened with PKR 5/= only

No minimum balance required

Safety and security of funds

Competitive / Market based rates of return

Savings Products

First Gharana Bachat Account (PLS Saving Account)

First Current Account

First Term Deposits

First Micro Cash Maximiser

First Special Micro Saving Certificate

First Bachat Tanzeem

Insurance
Offered with credit and saving services to reduce vulnerability to life cycle events and shocks.
Outstanding loan amount written off in case of death or permanent disability. In addition, the
family receives:

Rs.10000 in case of natural death

Rs.20000 in case of accidental death

Village Group Financial Services

Objective of Village Group Financial Service
The First MicroFinanceBank ltd. (The bank) is a licensed microfinance institution regulated
by the State Bank of Pakistan. Its primary objective is to deliver financial services to the poor
for income generating activities and employment creation at gross root level. It has been
recognized that there is a mass level of poverty exists in rural areas which have not yet been
effectively served through financial services. This clientele base live in slums, kachiabadies
and basties. Having varied and specialized skills for income generating activities and easily
accessible markets there is a great need for convenient and accessible financial services for
these population.

FMFB is planning to intervene in these areas through a structured group lending methodology,
a modified form of the rural group lending approach used in Pakistan to reach a large number
of target population. The basic objective is to:
Provide access to working capital finance to microenterprises particularly women

Establish social collateral at community level to ensure repayments

Create sense of collective responsibility, conflict resolution, good governance and

social appraisal for lending.

Ensure formal and informal guarantee at group and network level

Provide a forum to the community for linkages development, awareness and

capacity building of group members.

Provide opportunity to share experiences and synergize productivity

To reach a large number of people.

Solidarity Group
Solidarity Group is peer group lending methodology in which members receive loans
and then make regular (weekly or monthly) payments. All the group members provide
a mutual guarantee for loan repayment. Its main objectives are:
a. Providing financial services to poor
b. Attaining financial self-sufficiency
c. Reaching large number of clients
d. Enforcing social pressure/collateral among members

Area Identification, Research & Profiling

Policy
Within a district/branch area, the concerned Area Manager/Branch Manager in
consultation with research team shall identify potential areas for VGFS intervention.
Research team shall carry area survey and research and submit to COO for approval.
The COO shall review and approve financial services delivery in the area based on
research.

The area selection shall be broadly based on the following factors:

Potential of fair target at least 10,000 clientele base in the area.

Existence of business activities with in residential premises or 10 minutes walking

distance from residences.

Clients are defined as those who have an existing business and a monthly income,
which is less than the prevalent taxable limit.

It is ascertained that financial services (savings & credit) is a significant factor in

expansion/growth of existing businesses.

Existence of market accessibility for the potential clients.

Accessibility to the area for provision of financial services by the bank.

Acceptability by the community towards financial services.

Cultural similarity and existence of social cohesion among community.

No racial, ethnic or religious conflicts exist in the area.

Procedures
The research team in collaboration with branch shall collect map of the area/city and
other secondary data from the municipal corporation office & development authorities.
Research team will visit the area as per plan and identify social activist for the area/ a
respected elder.
Team shall meet community in the area, discuss with people, social activists and local
representatives and religious notables/pesh imam etc
Survey team shall also explore Mohallah/Business Committees managed by women
and men, particularly women operating in the area and meet with Committee
members, take their address and contact numbers.
Team should introduce themselves and the bank, its vision, mission and objectives and
will respond to the queries of community in an effective manner.
Visit sample houses/households, shops, nearest markets, streets to assess the poverty
depth of the area
Meet a focus group of community members arranged by social activist/representative
of the area.

Collect primary data by visiting area, meeting with focus group and general public.
Arrange primary and secondary data in organized form.
Team shall develop maps & zones with in the area
Team will finalize its Area Survey Report ASR (annexure - 1) and submit to COO
The COO shall review the report and approve the area for starting operations and
send back the report to Area Manager. Copy of research shall be retained at COO
office for future reference. Research section shall also retain the copy of ASR.

Area Manager shall formally intimate Branch Manager to start marketing.

Branch shall keep original report (ASR), start marketing and group formation in the
area and fill up Initiation Form (annexure 2) and send copy to AM for information.
Branch shall depute MFO/MFA with at least one years experience in the field to start
marketing in the new area.
Controls
Area Survey Report
Approval by COO
Area initiation form raised by Branch

Direct Marketing
Policy
Bank approach to solidarity group lending is through effective direct marketing/personal
selling and awareness programme. With out proper marketing, financial services shall not
start. Marketing team comprising of BM/SMFO, MFO and FA shall carry out awareness and
marketing activities in newly identified area for at least ONE month and prepare community
for financial services. Marketing process is a continuous activity and will be carried out for
expansion of clientele outreach.
The basic objective of marketing and creating awareness among micro entrepreneurs is to
create a clear understanding and demand for financial services among economically active

poor community and not to impose loans. Focus to be on marketing

1. working capital loans for micro enterprises
2. deposit accounts to generate savings at grass root level,
3. remittances,
4. insurance and
5. other non financial facilities.
Procedures

Marketing Team (lead by an experienced staff with good communication skills &
knowledge of area & bank) before visiting the area shall contact with social

activist/local representative /respectable elder.

Team will also explore Mohallah/business Committees for Banks financial service
marketing. Mohallah/business committees are prepared market for microfinance
service delivery. If borrower is member of any Committee, Team shall ask names of
other members of committee and approach them for banks financial services. Team
will meet individuals of the area, and informal groups to conduct door to door

marketing.
In this process, team will ask community for dialogue/bank introduction meeting and

fix time, date and venue/place for meeting in future date.

On pre-set schedule, the team will meet with individuals/informal group in the locality

with full preparation (Communication Package) and conduct meeting.

Team will effectively respond to questions with logical arguments in order to convince

them for availing banks financial services.

During marketing process the team shall divide the area into zones using the map and
develop map of each zone. Each zone shall be categorized according to potential and

economic activities.
Assessment of activist will be done during marketing process. If team feels that
activist is not upto standard (having financial motives), they will change him/her in a

diplomatic way and inform AM/Survey team.

Team leader shall introduce him/herself, colleagues and start bank introduction, vision,
mission, objectives, policies, procedures, financial products and services delivery
mechanism and competitive advantages of the bank in a comprehensive manner so that

communication is clearly listened, understood by the audience. Communication

Package .
The SMFO shall advise audience to form groups of 5 members each and form a
network of 3-4-5 groups depending upon availability of good/trustworthy/long-term
members living in a close proximity i.e. same mohallah, street, and apartments block,

kachi abadi, basties etc.

The community has the liberty to form groups of their own with trustworthy and good

members. FMFB staff shall NOT intervene in group formation.

Staff to ensure social appraisal by group at this stage so that good and trustworthy

individuals be included in the group democratically by other members.

Staff to communicate membership qualification criteria and policies to the potential

members.
Staff shall discuss benefits of solidarity groups, roles & responsibilities of members,

group leaders and network manager Communication Package

Bank printed pamphlets (loans & deposits) shall be distributed among groups. One to

each group. This will be in urdu or local language version.

Team shall read the Urdu Iqrar Nama - I in the meeting and deliver one copy to each
potential group and advise them to complete the same and bring to branch/Polo on

their visit.
Staff shall guide and advise potential members to visit bank branch/PoLo in form of
groups to fill up loan documentation or documentations can be completed at the place

of meeting.
Meeting will end with closing remarks emphasizing on why the bank is here/in their
area.

Controls
Meeting NFR by Team
Daily activity sheet
Vehicle logbook
Potential Group/Clients Visit to Branch/Unit/PoLo
Policy

Potential clients will visit FMFB branch/Unit/PoLo after group formation in order to complete
their loan documentation (Loan Application Forms) and establish relationship with
bank for long term. This will create an impression on clients about permanent feature of bank
working for their benefit. They will visit branch/Polo in groups for (five members in each
group).
Procedures:

MFO shall receive the group and introduce them with branch manager, AMO and
cashier
incase of visiting branch and other staff if they visit a Unit/Polo.

MFO/SMFO shall ask members some cross questions to ensure that every member is
genuine & eligible and group formation has been done as per policy. He/she will also
ensure social cohesion among members of the group by asking certain questions as

specified in communication package.

Group shall submit their resolution (annexure 1 Urdu Iqrar Nama) to MFO
describing that the group has been formed, all members have been included in mutual
consent of all members and every one guarantees each other for on time repayment of

installments.
MFO shall ask member to confirm the Group Leader and will assist members to fill up
USG Loan Application Form and Certification by member/applicant, Borrowing
member of the group, shall be guaranteed by other FOUR members of his/her group
and two members of other group shall witness that guarantee. This will be applicable

for every member of the group requesting loan from the bank.
It is not mandatory for each group member to avail loan. Loan should not be imposed
on any member however, it is preferred that all members should avail loan. At least

80% of the network members must avail loan facility.

Every member of the group can be borrower as well as deposit holder.
Any member of group, who is saver at formation stage can avail loan facility for
income generating purposes on a later stage for a period of 12 months. However, the
installment payment date of the new borrower/ member will be the same as that for the

remaining group members (who have already availed loan). But his/her loan period

shall be equivalent to remaining period of his/her group members.

MFO shall obtain two photographs from each member requesting for loan.
MFO shall obtain clear copy of Old NIC with Nadra Slip / CNIC / Driving License /
Form B from member, verify with original and place original seen stamp with

his/her signature. Copy of CNIC will be obtained as soon as its issued to borrower.
MFO shall assess the repayment capacity of the member using the information given

on VGFS loan application form (annex 5) - cash flow techniques.

MFO shall check all documents and sign off with date.
MFO shall keep the filled out forms in a separate file marked as Current File

mentioning name and code of the new area.

MFO shall convince members for voluntary savings and assist members to open bank

account with FMFB.

MFO shall fix tentative date, time and venue for 2nd dialogue/Network Meeting with

this group.
The network can be disbursed to two groups also as soon as they are formed however
the size of net work must be increased to 3, 4 & 5 on availability of good and eligible
clients in the same locality subject to policy compliance, checks, verification and
acceptance/cross guarantee of existing groups/members within one month from the

date of first disbursement of the network of 2 groups.

When 2-3-4-5 groups are formed, MFO shall inform/consult with BM/Team leader and

contact the social activist to arrange network meeting with potential clients.
MFO shall ensure with clients that they understand and abide by policies of bank,

utilize the loan for the purpose and zero tolerance for default.
MFO shall also ensure that Group Leader understands his/her role and responsibilities
and fills up, sign off Responsibility of Group Leader (Urdu version - II)

Controls
Loan application form of potential members
Daily activity sheet of MFO
Credit Appraisal
Policy

Qualitative & Quantitative verification and assessment of each potential client is mandatory
which will be carried out during filling up documentation process and as well as at the time of
residence/business verification by the verifying MFO. In this exercise MFO shall assess
character and other qualitative information of potential client. He will verify the appraised
repayment capacity, loan size and terms using cash flow techniques. It is mandatory that the
difference between minimum and maximum size of loan within a group should not be more
than Rs.5,000.
Procedures

During members visit to branch the MFO shall have assessed the repayment capacity
of member using cash flow form. He will observe and check all the facts and

information given by member during verification process.

During verification exercise, the MFO shall carefully assess the qualitative
information given by member and check his credit worthiness and character from
neighbors, close by market, suppliers, relatives, customers and other available sources

to ensure social appraisal.

If the loan size determined using cash flow exercise is excess than loan amount
requested by client, the MFO shall recommend the loan amount requested by the
client. If the amount requested by client is greater than the amount determined using
cashflow techniques by MFO then MFO shall recommend the amount determined
using cashflow techniques. In both cases MFO shall recommend the amount which

ever is lower.
It is preferred that all members within a group take equal amount of loan, in any case
difference between lower and upper loan amounts within a group shall not exceed
Rs.5,000. The objective is to form group of members having equal capacity for

repayment.
If any member is coming from other institution/NGO, on his own accord and
accepted/included by members of the group, his previous record will be checked and
his loan amount will be equal to his/her previous loan amount subject to full guarantee
of the group members and he/she has no outstanding loan from other institution/NGO
have repayment capacity.

ONE loan to one household at one time, in such case women shall be preferred for
loan if she has verifiable business activity.

Controls
Cash flow analysis of member
Daily activity sheet
Vehicle logbook in case appraisal is done at filed.
Verification of Businesses and Residences of Potential Clients
Policy
After group formation and completion of loan application forms and appraisal, it is mandatory
that businesses and residences of potential clients shall be verified by 2 nd MFO. Objective is to
ensure that information given by member is accurate and all information has been captured on
the forms accordingly.

Procedures

Experienced MFO along with Field Assistant shall visit the businesses and residences
of each member of the group. He/she shall carry with him/her Group Iqrar Nama,
Loan Application Forms of the all members of the group to the field. He/she shall fill
up Verification Form for each member of the group during verification exercise and

compare the information provided in the form with the facts on the ground.
The MFO shall check information through cross questions and ensure reliability and

accuracy of information collected/gathered from the potential clients.

MFO shall using his/her best judgment will verify residences of borrowers in same
locality at one time and their respective business in one time keeping in view cost and

time constraints.
During verification if any information given by member is found incorrect, he/she will
be excluded from the group and will inform the group to replace with an other eligible
and good member. MFO shall complete verification of businesses and residences of
remaining members of the group.

MFO shall verify business and residence of replaced member in the same day and also

fill up his/her documents and form on the field.

When MFO completes verification of residences and businesses of all members of all
groups he will finalize time, date and venue for 2 nd dialogue/disbursement meeting

with network members/all groups.

Verifying MFO shall sign off each form after physical verification of residence and
business

Controls
Verification forms completely filled out
Daily activity sheet
Vehicle log book

2nd Dialogue/Network Meeting

Policy
Before BCCs approval, a joint network meeting of all group members is mandatory in house
of network manager or in any group leader or activist place. The objective is to ensure social
cohesion / understanding among group members and establishing informal guarantee on
repayment of loan. BM/Unit In-charge shall attend Network meeting along with concerned
MFO/FA.
Procedures

BM or SMFO, concerned MFO and Field Assistant or Unit/PoLo team shall reach at

network meeting place on pre-fixed time and date.

Staff shall meet all members individually and organize meeting in U shape.
Staff shall introduce the bank its objectives policies & procedures and involve

members in the discussion by asking cross questions.

Urdu Iqrar Nama, name of loanees and Financing Agreement shall be read out loudly

in the meeting so that every member shall listen and understand the wordings.
Group Leaders shall be confirmed in the meeting and Net Work Manager shall be
selected by the group leaders.

One of the group leaders will be the Network Manager.

Tenure of Group Leader and Net work Manager shall be fixed for one loan cycle. They
will be replaced for each new loan cycle on rotation basis through consensus of all

member of group/network.
Staff shall discuss bank competitive advantages (without mentioning name of any

institution/bank), health advocacy and other facilities of the bank.

Staff to reiterate on ZERO TOLARANCE on delinquency/late payments and
emphasize on social collateral and group/network guarantee for on time repayment of

installments.
The benefits of insurance coverage should be discussed to make it clear why a client

pays it?
Loan processing fee should also be clarified segregating that cost of adhesive stamp

and cost of loan documents.

Staff to emphasize on members to establish and maintaining trust and building longterm relationship with FMFB and creating brand loyalty and ownership among the

members.
Team shall advise the group members to visit branch/Polo to get their cash/Cheques.
Team shall decide time and date and venue for monthly Network meeting in this
dialogue for the whole term of loan. Meeting venue shall not be changed unless there
is serious problem.

Controls
Daily activity sheet
Meeting register & MFO remarks on network register, Name of group & network Vehicle log
book.
Branch Credit Committee & Loan Approval
Policy
All loan cases of VGFS shall be presented to branch credit committee (BCC) and approved
for disbursement after due satisfaction.
Procedures
Concerned MFO, after completing loan documentations, clients appraisal, legal documents,
verification and network meeting shall present all loan cases of network members to the BCC
for review and approval.

BM/acting BM incase BM is on leave shall chair the BCC, two MFOs shall be
members of BCC. The concerned MFO (whose case is being presented for approval)

can not be member of the BCC.

BCC shall review the cases one by one, ensure completeness of documentation,
compliance of prudential and policy requirement. BCC shall also ensure that clients is

genuine and eligible, his need, repayment capacity and term of loan.
BCC will ask cross questions from the MFO to ensure that the loan is a good loan.
Concerned MFO shall respond to all questions raised by any member of BCC. BCC

shall use form Minutes of BCC Meeting and sign off the form.
Committee has the power to reject any case on the following basis:

Prudential regulations or IFC requirements are not met

Bank policies are violated

MFO can not defend the case for eligibility, repayment capacity of client.

If BCC feels that any staff member is personally interested to give loan to
particular member and shows/take his/her responsibility for repayment.

BCC can defer the case for re-verification/reappraisal upon justified grounds.
Any deferred case shall be entertained the next day by other MFO to have 2 nd

opinion.
When deferred case is done and BCC is satisfied on 2nd opinion, loan shall be

processed for disbursement.

After approval by the BCC; AMO/Finance Officer will use Pre-disbursement

Check List form for each group before preparing cheque/transfer/cash payment.
After approval by BCC, the concerned MFO shall inform Network Manager, group
leaders to visit branch/PoLo for final dialogue/loan disbursement and confirm the
time, date and venue where 100% attendance of members is mandatory.

Controls
Branch Credit Committee meeting, minutes & approval
Cheque/cash/transfer in account acknowledgement receipts.
Disbursement

Policy
Disbursement to all members of groups/network shall be made at Branch/PoLo. No individual
disbursement to member/group is allowed. Individual order cheque in case of Unit/PoLo, cash
in case of Branch shall be arranged for each borrower equal to his/her loan amount approved
in BCC meeting. Disbursement mode is as follows.
Mode of disbursement
Location
Cash payment/Transfer to borrowers Branch

For 1

a/c (transfer in case s/he opens

amount

savings a/c with FMFB branch for

Rs.20000/-

st

Cycle
loan cycle, loan
less

than

deposit purposes)
Order cheque

Unit/PoL

All loan cycle

FMFB Account

o
Branch

For 2nd & on ward loan

cycles

Procedures

Individual payment mode either cash/cheque/transfer (transfer incase member has

account with branch) shall be prepared as soon as branch credit committee
approves the loan to net work and be ready for delivery to clients in the

disbursement meeting.
Cash disbursement is allowed in Branch only, Unit/PoLo shall disburse through

order cheque to individual borrower and can not disburse through cash.
Urdu Iqrar Nama, name of loanees and financing documents shall be read out
loudly in the meeting so that every member shall listen and understand the

wordings.
Cheque acknowledgement receipt shall be taken from each client (annex IV urdu
version). Client shall place signature /thumb impression on the receipt. Group

Leader & Network Manager shall authenticate and witness the receipt.
Insurance premium and loan processing fee shall be collected in cash before
disbursement and reconciled with number of loans cases. The amount shall be
deposited into FMFB branch in the same day and reconciliation sheet shall be

prepared, checked and signed off by BM. Incase of Unit/PoLo the amount shall be

reconciled with cash in hand and signed by Manager.

Loan installment repayment schedule shall be given to each group leader and read

out in the meeting so that due dates shall be listened and understood by each client.
MFO shall handover a pre-printed, pre-numbered deposit slip (equivalent to
number of installments) to each group leader, where FMFB account number/other
designated bank account number (in case of PoLo) shall be written. The amount of
loan installment, due date, group name and code number shall be mentioned on the

deposit slip.
MFO will obtain acknowledgment of the FMFB deposit slips delivered to group
leader and retain the safe custody/file.

Controls
Receipts of cash & cheque paid to each borrower.
Repayment schedules
Loan Utilization
Policy
FMFB offers loans for income generating activities/purposes (micro enterprises) only with
objective to enhance/improve business activities and income level of the poor. Borrower shall
utilize the loan solely for the purpose it was taken.
Procedures

In monthly meeting MFO shall ensure by asking group clients about utilization.
Borrowers shall use the loan him/herself for income generating activity in which

he/she is directly involved or his/her spouse is active partner in business activity.

ONE loan to one household at one time, in such case women shall be preferred for

loan if she has verifiable business activity.

No two members in a network can from one household.
If any person from the area/any loanee household wants to open deposit account,

he/she could open account with FMFB Branch.

At a time all borrowers of a group could be saver/open account with bank.

Controls
Post disbursement loan utilization in meeting/visits
Group members discussion and recording in minute book

Monthly Meetings
Policy
In order to establish long term relationship and building mutual trust and confidence between
members and the bank it is mandatory to hold monthly meetings with group members in a
network. The monthly meetings will be arranged in NW manager or any group leader house
as agreed at the time of disbursement meeting. Activities during the month shall be carried out
as per below schedule. BM shall internally manage the activities according to holidays.
Activity

Meeting date

Working

Net Work Meetings 1 to 9 every month

1 to 9 the of every

Days
8

&

month

installment

recovery
Disbursement
1st
dialogue
meetings
Credit Appraisal
Verification

Recovery date

Between 10 & 20 of every month

11- 12 & 22-23 of every month

2
4

15-16 & 24-25 of every month

17,18,19 & 26,27,29,30 of every month

4
7

Procedures

MFO/Field Assistant will reach at monthly Network meeting place on a pre

decided date and time. This date and time will have been decided in 2 nd
dialogue/disbursement meeting for whole term of loan and schedule of meeting

will be forwarded to group/net work.

Meeting will be started in an organized manner; members will sit in U shape.
Attendance of members will be taken in meeting register (Network Meeting

Register), meeting should preferably be for short time.

MFO shall check the installment deposit slips and confirm that installment has

been deposited into FMFB/designated bank of FMFB.

MFO should encourage each member to participate in discussions; she/he must
carefully listen to each member and respond respectfully on any question and
clarification asked.

Case studies based on experiences should be shared in the meeting to create

awareness.
MFO to inform the network of any health advocacy planned for the coming weeks

and encourage them to invite non-member community in the camp.

MFO should discuss health, education and other program and advise for linkage

development
MFO to discuss on benefits of participatory development approaches and try to

establish social cohesion among the members.

MFO shall advise network members to deposit regular savings with FMFB and

discuss the benefits of saving in time of emergencies.

Savings shall only be deposited directly in the account of depositor with FMFB
branch.

Controls
Monthly meeting register
Daily activity sheet
Deposit accounts of members
Installment Collections
Policy
Loan installments to be collected on or before due date by concerned group leaders and
directly deposited into FMFB branch or in the FMFB account with any designated branch of
commercial bank. The objective of direct deposit by client is to establish their confidence and
build contact and relationship with the bank. Collection of loan installment from clients/group
leaders by MFOs/FAs is strictly prohibited whether inside or outside of the branch.
Procedures

Group leader shall collect installments from his/her members and deposit into
FMFB branch or In case of PoLo/Unit, any nearest designated commercial bank

where FMFB account is maintained.

To deposit installment payment the Group leader shall use pre-printed serially
numbered deposit slips, which were filled out by the MFO and provided to group
leader at the time of disbursement.

Group leader shall bring group repayment schedule while depositing installments
in the branch and the cashier/tellers counter. Cashier/teller shall receive the cash as
per deposit slip and repayment schedule and credit individual clients account

accordingly.
Every branch shall generate falling due report on a daily/MFO/Area basis, team
will plan every day before going into field and reconcile recoveries on a daily
basis, BM to check and sign off the reports. These report shall kept in a separate

file collection process.

In case any Group Leader is ill or out of station temporarily due to emergency,
she/he may assign installment recovery responsibility to any trustworthy member
of the group for that specific installment recovery. GL shall personally be
responsible for all installments recovery.

Controls
Falling due reports & reconciliation, recovery & MFO wise exception sheets
Deposit receipts
Client wise recovery statement
Collection & Delinquency Management
Policy
FMFB does not allow any overdue in VGFS product. Because it is based on social collateral
and cross guarantee of members and chances of overdue is ZERO. However, if any such event
occurs, the staff must ensure that late installments are deposited into bank using social
pressures of group/network.
Procedures

In case a group deposits an amount which is less than the stipulated installment
amount, the concerned MFO shall visit the concerned group leader and ask him/her
for genuine reasons. The remaining amount of short installment must be collected
the same day. However on an exceptional basis and after examining the genuine
reasons for the shortfall in the installment amount, the branch manager may allow

the reaming amount of the installment to be deposited at the bank latest by the next

working day.
In case of any shortfall in recovery the, concerned MFO shall get Urdu Form (V)

signed by the group leader.

The location can be closed only after seeking approval for the exception from the
Area Manager or COO (only in case of absence of the area manager). Area
Manager is allowed to approve only 6 exceptions in a period of 6 months, which is
to be counted from the time of establishment of the office or implementation of

this policy, whichever occurs later.

In case of non-payment, MFO will visit the group leader and charge Rs. 50/- per

visit.
If the group leader has absconded, MFO will immediately contact all the group
members and intimate Network Manager to initiate consultation with the group for

further action.
If the group leader is available, MFO will get an undertaking (annex- V Urdu)
signed from the group leader that instalment amount of the entire group will be

made the next day.

If the instalment is not paid the next day, contact group members and call an
emergency meeting to identify the actual reason for non-payment and document

the same.
Also get a confirmation signed from all group members that payment will be made

within 24 hours or else legal action will be taken by the Bank.

If the reason is such that change of group leader is required, then emergency
meeting of network is called upon and new group leader is selected by concerned

members. Please get all group leader related documents signed again.
If instalment is late for 5 days, notice shall be issued to borrower under memo
Zero Tolerance for NPL >1 day.

Controls
NPL reports & Daily recovery reconciliation
Incentives Schemes for Group Leaders
Policy
Every Group Leader shall be reimbursed an incentive for their services during loan cycle.

He/she will be awarded cash incentive up to 25% in service charge at the end of loan cycle
when the loan of his/her group is fully repaid.
Procedures

Group leader shall be entitled to receive a cash discount up to 25% in service

charge that he/she will receive at the end of loan cycle,

when total installments of his/her group loan are fully received.

When all installments of his/her group members are received on or before due date

When he/she will deposit all installment of the group in FMFB branch or any
designated bank where FMFB account is maintained.

At least 80% of attendance is maintained in network meeting during loan period

The amount of discount shall be calculated on his service charge and the amount
shall be credited to GL account maintained with FMFB.

Controls
Group repayment history
Discount payment record.
Daily Activity Sheet
Policy
Field staff to maintain daily track of activities in a prescribed format Daily Activity Sheet
DAS .The objective is to apply activity based management in operation to
ensure efficiency and improvement in processes and case loan management. It should not be
perceived negative.
Procedures

Every field staff to fill up DAS on a daily basis.

Branch/unit manager to check the same and sign off
DAS should be kept in a file date/MFO wise.

Controls
DAS
Products Profile
Name of Loan Product
Type of financing

Village Group Financial Service

Working capital for running small businesses, small

Target area
Target client

enterprises, home-based income generating activities.

Chitral and Gilgit Baltistan
Skilled poor men & women, earning monthly income
less then taxable limit, having verifiable running

Lending for Start-up small businesses

businesses.
One client will be allowed in a group for availing
loan for start up business. Group will be responsible
for repayment and ensure loan utilization by the
client.
For start up cases 1 member in each group can avail
loan subject to cash investment equal to 20% of loan

Number of rented clients in a group

size or providing place for business.

One rented client is allowed in a group to avail loan
from bank, subject to guarantee by all members for
repayment.
If the number of rented clients in a group is
exceeding 1 member/client, Exception approval from
COO will be sought through concerned Area
Manager. Maximum number of rented clients in a
group is two and rented clients must be living in the

Service charge rate

area for at least TWO years.

18% on monthly repayment and 26% bullet on

Loan period
Grace period
1st cycle loan size
Frequency of installment
Lending methodology
Collateral type

declining method.
6-12 months, First loan for 6 months only
No grace period
Up-to 20,000 depending upon repayment capacity.
Weekly, Fortnightly, monthly
Solidarity Group lending
Social collateral, cross guarantee within group

Age of client
Identification source
Group size

Between 18-60 years

Copy of CNIC & pictures Place original seen stamp
Five men or women or mixed (mixed where purdah

Network size

cultural is not the barrier)

15-20-25 members in Network having 5 members in
each group. 1st disbursement could be made with 10
members, the preferable size of network is 20.
Small legal businesses/enterprises and income

Purpose of loan

generating activities i.e.

Buy additional inventory stock
Repay expensive loan
Replace loan from supplier
Every borrower shall be guaranteed by four members

Personal Guarantee

of his/her group and witnessed by two members of

Loan size determination basis

other group in the network.

Based on repayment capacity of client & cash flow of

Recovery & monthly meeting dates

Marketing & group-formation dates
Credit Appraisal
Verification
Disbursement dates
Insurance coverage
Loan processing fee
Physical verification
Active number of clients per MFO
Active number of depositors per MFO
Loan renewal/rescheduling
Meeting frequency

the clients business

1st. to 9th of every month
11, 12, 22 & 23 of every month.
15, 16 & 24, 25 of every month
17,18,19 & 26,27,28,29 of every month
Between 10th & 20th of every month.
Applicable as per policy
Applicable as per policy
Clients businesses and residences
500 in rural area shall be maintained during a year
250 in rural area shall be maintained during a year
Not Allowed
Monthly in network, 80% attendance with proxy

Communication Package
Bank Introduction:
1. FMFB is a licensed microfinance bank offering services in deposits, lending, insurance
coverage, remittances to clients. It is regulated by the State Bank of Pakistan dedicated to
serve poor people who want to increase their income level and improve living standard.

2. Its head office is located in Islamabad and branches operating all over Pakistan. It is well
established and permanent organization solely formed for the service of poor.
3. It provides loan for every type of legal small businesses/ small/home based enterprises
/income generating activities at the door steps of enterprising poor without any collateral.
4. It provides deposit services, open bank account with Rs.5/- only and no charges on minimum
balances. Objective is to increase poor capital base slowly and gradually.
5. Our bank believes in trust and long term relationship with poor who had NO access to these
financial services from other banks earlier.
6. Its processes are very simple and service is very quick.
7. The only requirement of accessing our financial services is to provide CNIC and pictures and
making repayments on due date zero tolerance on overdue.
Meeting with Group Member in 1st Dialogue
o

Members must sit in U shape facing to SMFO, SMFO must educate members for meeting
norms

Follow step (1-7) as above

Age of member must be 18-60 years and hold valid CNIC and a photograph

Member must be permanent resident of the locality

Each member must know each other and trust in each other

We want people to be united/come together and strive collectively for a better life. To
make this possible we work with groups, because it synergizes your productivity, builds up
trust and relationship among you and with the bank.

What is a Group Group is a representative forum of the residential area. The group must
not allow any one or two persons to influence the decision making of group. All members
must participate in the decision making process and unanimously agree to the right
decision which is most beneficial for all members.

Who are GROUP members All households of the area interested in availing financial
services and who are approved by all members of the group collectively?

What will the GROUP do Group will select trustworthy and good enterprising poor in
group to take loan and guarantee for each other for repayment. Make regular payment of
loan installment as repayment schedule and meet every month at pre-determined time and
place.

What is the purpose of the meeting Decide on the collective needs of the group and their
solutions which will enable the people of the area to develop. Also at the time of every
meeting each GROUP member will deposit a token amount of savings, which will be
individual savings of each member of the GROUP. This amount will be deposited in
FMFBs account at HBL / SBL and is safe with FMFB.

How is a GROUP managed GROUP members select a GROUP Leader.

GROUP Leader A literate person who is able to maintain records of the GROUP in terms
of loan amount taken and regularity of payments, repayment schedule of each member,
joint guarantee of the group to secure the loan of each group member.

Benefits of Forming a Group: Groups will help the individuals to develop because of the following:
1. Group is informal organization and very effective forum in participatory development, as an
organization, every development agency or service provider can approach you, listen to your
collective and most important needs and then try to address them.
2. Each individual is different from the other and has certain qualities. Working together as an
organization will increase the quality of ideas and decisions that the organization will take and
thus each individual will benefit from others ideas.

3. Resources of all individuals are pooled / combined to sustain each members of the GROUP.
4. Solve common problems together by sharing skills, talents, ideas and contacts of every
individual.
5. As a GROUP, the resource available to each individual gets multiplied by the number of group
members.
6. As a GROUP, individuals can take advantage of opportunities and protect their rights, which
cannot be done on an individual basis.
7. As a GROUP, each member guarantees the other and thus the GROUP supports each member.
8. It ensure participatory appraisal system for identifying good and trustworthy individual to be
included in the group
Borrower recommendation of anyone of the GROUP members to borrow must be based on the
following:
1.

Trustworthiness

2.

Character of the individual.

3.

Family background.

4.

Willingness to pay.

5.

Past record of payments or honoring commitments.

6.

Residential status/history

7.

Need of loan/loan size

8.

Business skills/expertise

Responsibilities of a Group Leader

1.

Group leader will call on the guarantee of the group members in case of
default of one of the group members

2.

Borrowers have utilized the funds for productive purposes/for loan purpose

3.

Collect installments on time from each borrower of the group.

4.

Deposit the installments collected with FMFB / FMFBs account with HBL / SBL

5.

80% attendance at the monthly meetings

6.

The meetings are truly participative

7.

Minutes of the meeting are maintained appropriately (Group maintain register for this
purpose?)

8.

Borrowers file is maintained appropriately

Ask the GROUP what their most immediate need is with regard to financial services.
Action Plan
1.

GROUP to hold a meeting to decide if it is agreeable to all GROUP members to work with
The First MicroFinanceBank.

2.

If yes, then the GROUP should pass a written resolution signed by each GROUP member
(format of the resolution is attached).

3.

The group must also select a group leader and group name

4.

MFO should be provided with a copy of the resolution and should be informed of the place,
date and time of the next GROUP meeting with the MFO.

Competitive Advantages of FMFB

FMFB
1

MFIs/NGOs

Monthly ONE meeting for short time to understand your

Weekly or Fortnightly meeting for long time.

credit needs and improve our service quality

Savings is not compulsory, it is voluntary.

Savings is compulsory, it is forced

You can open account with FMFB with Rs.5/- only.

No savings facility

We will pay market based markup rates on your savings

No/low markup on your savings

No charges on minimum balances

Might be not safe

It is safe in your own account and you can with draw

your money any time during banking hours

We take care of yours and your childrens health, we provide

No organization takes care of your and your

you advocacy and medial camps during the monthly meetings

children.

at you area
Permanent establishment, approved and licensed by the State

Not regulated by State Bank of Pakistan. Can

Bank of Pakistan.
Generates its own funds, a permanent source of business

close down any time.

Depends on donors funding, as soon as

financing for indefinite period of time.

donations are stopped, organization will stop

It is a bank, provides you deposit services, loans, remittances,

financing
Only provides loans to you

insurances facility and business trainings, financial

management trainings, market linkage awareness.
Gives you insurance facility covering death and disability, all

Few covers insurance facility to loan only,

loan outstanding is waived off and cash payout of Rs.10,000/-

no/less cash pay out and mostly do not offer

to deceased family
Network size could be 15, 20 and 25 members depending

this facility to its borrowers.

Number of members is fixed say 20, 25 or

upon availability of good/trustworthy members, selected by

more.

you upon your satisfaction and guarantee. Staff can not

include any member in group/network
Computerized systems which:

10

No authentic computerized record

Ensures accuracy and authenticity in recording of

Chance of errors in record

you amounts even Re. 1

No history of your relationship with

Keeps record of you relationship with bank to

increase your loan amount in future

We understand your need and serve you accordingly

organization
Do not understand your needs

Difference FMFB & Commercial Banks

FMFB
1

Commercial Banks

FMFB has been established solely for poor, who run small

Commercial bank serves rich people of the

businesses and enterprises and had no access to financial

society only. It is not for you.

services from commercial banks earlier.

FMFB lends on the basis of trust and cross guarantee of other

Commercial banks need physical collateral

members in the group. No collateral is required i.e. property

for lending. Pledges assets & properties.

or assets.

They need accounts statements and many

We need copy of CNIC and picture of borrower

FMFB provides services at your door steps, staff come to

other formalities
You have to visit commercial banks for

your places facilitate you in completing loan documents. It

availing loan facility. It increases your

saves your expenses to visit bank

expenses to visit and consume your time.

6
7
8
9
10

It provide deposit facility to you, you can open your account

Commercial banks open account with big

with Rs.5/- and increase your deposit base with regular

amount and charge you on minimum balance

savings of small amount.

on a monthly basis.

FMFB does not charge on your minimum balance

Objective is NOT to maximize bank profits
FMFB provide you facility of loan and life insurance during

Objective is to maximize banks profits

Depends on banks policy. Charges are high

your loan period. Incase of death all outstanding loan will be

and process is complicated. Poor people can

waived off and Rs.10,000/- is paid to deceased family. You

not afford such facility.

will pay minimal charge for the facility.

We know your language and understand your need
Process is simple and quick
Installment is small and can easily be repaid through group

May not understand your need.

Process may be lengthy and complicated
You will have to visit banks for repayment of

leader
Continuous access to future loans, you can avail loan facility

installment.
You can avail one time loan facility.

for many years.

Advocacy on basic health, enterprise development services

No such services is given.

and other development program

Membership Qualification Criteria

Age
Identification
Residential status

Between 18-60 years

CNIC, Pictures
Having own house, Pagri or rented house

Gender mix

One rented member can be included in group of five members

Group can be formed for men, women and mixed, but focusing on

Membership
Character
Entrepreneurship

women
Must be member of any group,
Member must be of good character, track record & trustworthy
Member should have running business/income generating activity or
capable to run business/IGA. For start up business client to invest 20%

Guarantee

of loan size in cash or to provide place for business.

All members of his/her group must guarantee his loan and repayment

Insurance premium
Processing cost
Social cohesiveness

of his/her installment on or before due date

Member shall be willing to pay insurance premium and avail facility
Member shall pay the processing fee as per policy
Member must know each other, their residences, businesses and live in

Meeting
Reference
Monthly Income
Total exposure

close proximity
Member must be willing and attend monthly meeting
Member shall not be included into group on reference basis.
Borrowers monthly income must be less than taxable limit
Total amount of borrower from all other banks/NGOs/MFIs should not

Defaulter
Lawful business

increase Rs.100,000/- at the time of taking loan from FMFB

Borrower of the bank must not be defaulter of any bank/NGO etc.
Borrower must invest the loan in any legal/lawful business

Housing Finance
Rational for a Housing Finance Product
Shelter is a basic human need that helps ensure personal safety and health. A home is a
personal asset for an individual and provides economic security over a long term. For a poor, a
home can be a place to undertake income generating
activities produce goods and store inventories. However, owning a house requires
considerable finances, thus making it difficult for the poor to have their personal dwellings.
Moreover, traditional housing finance has failed to meet the demands of the low income
segments of the society.
Cognizant of the importance of adequate housing for the poor, the Bank launched a Housing
Improvement Loan (HIL) in the Northern Areas and Chitral (NAC) in the year 2003. The
product was conceived, designed and marketed by BACIP the Building and Construction
Improvement Programme of the AKPBS Aga Khan Planning and Building Services. Almost
40 housing improvement products were designed to impact household environment, health
and womens life in particular. However, due to inherent problems in the design and delivery
methodologies, the product failed to achieve the desired results.
The Bank considers that facilitating and targeting the rural and rural poor population in
improving the status of their houses shall facilitate the people in improving the standard of
their living, provide access to better sanitation and healthy lifestyle. It will provide the
security of an asset, which will only appreciate in value in time. Additionally, it will
facilitate the Bank in expanding its outreach. Through this initiative, the vulnerability of the
poor populations will be reduced, which in turn will allow microfinance services to have a
significant real impact on the poors economic status.
Therefore, the Bank believes in developing and launching a housing finance product to cater
for upgrading the existing house premises/settlement as well as new construction.

PRODUCT POLICIES AND PRCOEDURES

The Housing Finance Product is one of the social products to be offered by the Bank. The
product is a stand-along medium term financial product, and would be initially launched in the
rural areas. The product offers financial facilities for both structural and non-structural
improvements in the houses.
The product has been designed to link technical building services along with financial services
to ensure quality of work and safety of the inhabitants. Moreover, the variation of income
patterns of the people of the mountainous rural areas has been kept in view while designing
the loan disbursement and recoveries.
In the following section, policies and procedures for structural and non-structural
improvements have been elucidated separately.

ELIGIBILITY CRITERIA
The potential clientele of housing finance must be members of a V/WO, and must
have a confirmed source of income
The monthly income of the clients household should be within the limits prescribed in
the SBPs Prudential Regulation. At present, borrowersannual household income shall
not exceed Pkr 600,000/ The borrowers age shall not exceed 65 years at the time of loan maturity (final due
date) and minimum age should be 18 years
Borrower shall be bound not to avail loan from other banks/MFIs exceeding Pkr
500,000 or as stipulated by State Bank of Pakistan from time to time until he/she
repays the loan of FMFB. If borrowers total borrowings exceed the specified limit Pkr
500,000, FMFB has the right to ask the client to repay the total outstanding loan
including service charge to FMFB.
Borrower shall have valid computerized national identity card (CNIC)

Product Features

Group Size: Minimum 5 and Maximum 35

Loan Structure: Cash flow based
Loan Size: Minimum: Pkr 25,000/- Maximum: Pkr 500,000/- New borrowers (first
time) can avail loans up to Pkr 100,000/Loan Tenure: Minumum 24 months and Maximum 60 months

Loan Repayment Frequency

Monthly, quarterly and semi annually

Loan repayment shall be linked to the cash flows generation capacity of the household.
Clients having monthly cash flows sufficient to repay the loan on monthly basis shall
not be offered semi-annual/ annual repayment structures.

Loan Service Charge

Monthly Repayments: Effective 19% per annum

Quarterly/Semi-annual Repayments: Effective 25% per annum Flat rate

Collateral

Social collateral i.e. group guarantee of all the members of the V/WO shall serve as
the security for the loan. If the client is unable to repay from his/her own sources, the
V/WO members shall repay the loan installments by
mutual contribution. To ensure group solidarity, role and responsibilities of group
members and meanings of group guarantee must be clearly communicated to group
members;
Housing finance clients in the VO/WO may have different loan maturities. The
VO/WO guarantee shall therefore specifically state that it shall be responsible for the
repayment of all housing loans as per their respective schedules, irrespective of the
loan maturities;
Mandatory savings of the client shall only be en-cashed to adjust against loan defaults
if it
has been established that the client or VO/WO members shall not repay the loan.
Saving of one client in the group shall not be used to settle the outstanding defaulted
loans of the other client. Savings for repayment of the loan shall only be encashed if
desired so by the client herself/himself as per Contractual Saving SOPs;
The clients shall provide open-dated cheques drawn on their checking accounts
maintained at FMFB. The cheques shall have following information/characteristics:
Crossed cheques : A/c payee only;
Un-dated;
Payee: The First MicroFinanceBank Ltd
Amount: Equal to six months installments
Signature of the account holder

Micro Enterprise Finance

Background

The First MicroFinanceBank Ltd (Bank) was established in the year 2002 with a strategic goal
to reach out those who are currently not able to receive adequate financial services,
throughout the country, in rural as well as rural areas; the target audience being primarily the
vulnerable groups, especially women. The Bank aims to achieve a social objective of poverty
alleviation while meeting its inflation-adjusted costs. Over the last eight years almost, and

extending beyond this in its 20-year history of micro financing through the Aga Khan Rural
Support Programme (AKRSP), the Bank is playing
a pivotal role in the economy of Pakistan by reaching out to poor micro entrepreneurs in the
rural areas and improving their income.
Rationale for a Revised MEF Product

The rationale for revising the MEF product is to bring it into conformity with latest regulatory
changes made in the Prudential Regulations. Another objective was to update the product
features in accordance with latest market trends to cater to the varying financial needs of the
target group so that enabling them sustain their economic growth. The target group is micro
entrepreneurs who, despite global down turn, are somehow managing to sustain their
enterprises and contributing to the micro economic growth of the country. The product will
target the market segment of micro entrepreneurs with higher sales volumes/higher turnover in
town areas/rural centres. The product shall mainly provide substitution to suppliers credit
which is usually very expensive and shall target clients with relatively higher resilience to
recessionary conditions. The MEF product features also provides stringent procedures and
controls ensuring enhanced execution of due diligence and compliance to the regulations. It
also ensures simplifying the procedures involving complexities and practical issues at
implementation level.
MEF PRODUCT POLICIES AND PRCOEDURES

The MEF is one of the products being offered by the Bank. The product is a stand-along short
term financial product, and can be launched at all rural & rural towns and cities. The product
offers financial facility for all legal business activities which are not on the negative list of
FMFB.
In the following section, policies and procedures for have been given.
ELIGIBILITY CRITERIA

Target Clients: In order to ensure that the group solidarity exists and the group members can
guarantee each other, it is required that the their shops and residence both or at least their shop
must be located at close proximity of each other and know each other for a period of at least 3
years. Moreover, businesses operating at a higher turnover must be operating in the area for a
period of 3 years. Since in most cases the shops and houses are rented, it is mandatory that at
least the group leader must have either permanently owned shop or house and his house
should be in the vicinity of the branch so that in case of default the traceability and follow up
should not be a problem.
Monthly Income: The monthly income of the clients household should be within the limits
prescribed in the SBPs Prudential Regulation. At present, borrowers annual household
income excluding business expenses shall not exceed Pkr 300,000/Age of Borrower: The borrowers age limit shall be observed so that his/her age may not
exceed 65 years at the time of loan maturity (final due date).

Borrowers Identification: A client must have a valid CNIC at the time of application;
Addresses of all borrowers should be updated in the CNIC. In case of team leader
having permanent residence, it should be in the CNIC.
If the CNIC is expected to expire after disbursement of the loan, it should have
validity at least for 30 days from the expected disbursement date and the borrower
shall be advised to renew it at the earliest and submit a copy to FMFB;
If borrower is a repeat client of FMFB and has taken loan against this product or any
other product, at the time of loan application she/he shall submit the receipt issued by
NADRA for renewal of CNIC. Renewed CNIC shall be submitted to FMFB after
collection from NADRA within a period of one month from the disbursement;
Women clients, who have been recently married and do not have their husbands name
on the CNIC, are required to submit a renewed CNIC. However, if they are repeat
clients of the FMFB, they may be entertained on the basis of receipt issued by
NADRA for renewal of CNIC. Renewed CNIC shall be submitted to FMFB after
collection from NADRA within a period of
one month from the disbursement; If picture in the CNIC is not identifiable or it is
outdated and unrecognizable, then latest photograph shall be taken and attested by the
officer of the bank and stamped as original seen.
Residential Status: In case of member of group, residence may be owned or rented, but
he/she should be residing there for at least last 3 years. Group Leader, however, must have
either owned shop or house and his/her house must be in the same vicinity. He should also be
living in the vicinity for at least 3 years.
Business Ownership: It should be verified that the business is solely owned by the borrower
and there is no other stake holder/partner in the business. In case of family business, where
family members work together in business place, it should be ascertained as to who is legal
owner and NOC from all other business members will be taken to this effect.
If the shop is owned by the borrower, it should be verified from original title deed and
copy of title deed and latest utility bill should be obtained for record. It should also be
verified as to whether the business activity is being continued for the last three years.
If the shop is rented the rent agreement should be in the name of the borrower as
lessee. The veracity of landlord must be verified by MFO by taking a copy of latest
utility bill and from nearby
shops or from the landlord him/herself. The lease period should not expire within the
tenor of the loan. In case it is going to expire soon, a new rent agreement should be
executed and submitted by the borrower. Old rent agreement should also be in record.
In case the rent agreement is not in practice in the vicinity, the MFO will verify this
fact from the other nearby shops, as well as by taking a written confirmation of the
same from the landlord

Product Features

Group Size: This is mandatory in the first cycle; however in the 2nd cycle the group size can
be reduced to minimum 3 members. Though the Manager will ensure that the reduction of
group members may be due to genuine reason.
Loan Type: For working capital needs like Purchase of Inventory, Extend Receivables,
Payment to creditors.
For asset involving smaller capital that can be serviced in the given time like
renovation of the shop.
Loan Amount: Manimum Rs.20000 and Maximum 150000. Loan amount shall be
determined based on the cash flow analysis of the household (taking into account borrowings
from FMFB and other banks and MFIs).
Total loan installments of all loans from FMFB/others taken by the household must not
exceed 70% of the net cash flow of the business.
Loan amount will be decided on the basis of whichever is less of following: Loan requested by the borrower
Loan amount determined on the basis of the cash flow
Borrowers own investment/equity in the business.
Loan Tenure: As short term assets are being financed through this facility, therefore the term
of the loan is also short term.
Loan Pricing/Service Charges

At rural plain areas: 22% flat

At rural mountainous areas: 18% flat
At rural cities: 22% flat

Loan Processing Fee:

Loan Processing Fee shall be received before loan disbursement and proper stamped
receipt shall be issued to client from the cash counter. Collection of processing fee in
field or outside cash counter is strictly prohibited.
Loan processing fee shall include the cost of stamp paper/adhesive stamps as per the
statutory requirements/legal notification for preparation of loan documents,

Collateral:
Revenue stamps of worth Rs.50 (cost to be borne by client), on all DP Notes should be
pasted on the face or at the back of the page. The pasted revenue stamps must be defaced.
The procedure for defacing is that one or two signatures of the clients may be obtained
over the stamps and rest of the stamps should be slashed with pen so that they may not be
usable again.

Low Salary Employees Loan

Introduction

Experiences have indicated that a number of low salaried employees i.e. office boys, peons,
factory laborers, etc. are unable to meet their consumption and social needs from their
monthly incomes, and hence have to undertake other income generating / economic activities
for enhancing and supplementing their monthly income. Families of these low income groups
are most vulnerable and are prone to the vicious circle of poverty.
These individuals undertake various economic generating activities like driving a taxi,
settingup a food/fruit cart, running a tuck shop/PCO on a part-time basis, after the office
hours. In this way, they are able to generate additional income to support their families.
However, low salaried individuals do not have any substantial savings, and neither do they
have any access to formal financial institutions for financing their part-time business needs,
primarily due to lack of tangible collateral and inability to comply with rigid conditions.
Therefore, they rely heavily on en-cashing their long-term savings, inherited properties and/or
valuable possessions, or borrowings from family or friends.
This product has been developed keeping in view the financial needs of low salary employees
of NGOs and other private organizations to facilitate them to undertake income enhancing
activities and improve their standard of living. Loan facilities for low salary employees of the
government departments shall be given separately. This product is required in order to provide
the much needed capital to support part-time economic activities of the target segment and
prevent them from falling below the poverty line.
The LOSEL Product is based on the concept of offering financial facilities against the future
salaries. Under this product, the First MicroFinanceBank Ltd (FMFB) shall offer short and
medium term loan facilities to the permanent employees of an Institution for income
enhancement activities or social dispensation. The Institution shall guarantee the repayment of
the loans installments directly from the future salaries of the employees.
Operational Framework
The Low Salaried Employees Loan (LOSEL) can be offered to the low salaried staff of the
eligible institutions. The institutions interested in offering product to its employees, shall be
required to sign a MOU, as per the agreed format, with the First MicroFinanceBank Limited
(FMFB). This will ensure the smooth implementation of the product, minimize the risks and
ensure the interest of the parties i.e. institution, FMFB and borrower.
Eligible Institutions (EI)
Following types of institutions are eligible to refer their permanent to FMFB:
1) Reputable industrial units, registered as private or public limited companies, and in
existence for a minimum period of 5 years and earning profits;
2) Commercial concerns, registered under Companies Ordinance 1984, Partnership Act or any
other act or ordinance passed and amended from time to time. These concerns must be in
existence for a minimum period of 5 years and earning profits;

3) Reputable non government organizations (NGOs) in existence for a minimum period of 5

years; registered under any law in Pakistan and recognized by the Central Board of Revenue;
Role of the Eligible Institution (EI):
1. Two individuals of the higher rank having authority of signing (both on the Memorandum
of Understanding, loan application forms, and the future repayment cheques) and two Trustees
shall be appointed by the Eligible Institution for dealing with the FMFB. The high ranking
officials must sign the Memorandum of Understanding (MoU) on behalf of the Institution;
The eligible institution will introduce the scheme to its employees through an official circular
to avail loan and meet their requirements. Eligible Institution will also intimate employees to
follow the policies and procedure of FMFB during the agreement period.
3. Identify and recommend an individual employee for financing to the FMFB;
4. Temporarily provide working space to the Micro Finance Officer of FMFB at its premises
for quick execution of the scheme, as and when required.
5. Facilitate FMFB in timely completion of formalities related to the application process.
6. Certify the employment status of the employee and monthly salary, retirement date and
current age, and that there is no history of misconduct or any other legal or punitive action
taken against the recommended employee by the EI;
7. Facilitate its employees and FMFBs staff in completion of formalities for financing;
8. Confirm the available balance in Terminal Benefits, Provident Fund and Gratuity of the
employee. The EI shall also confirm the commencement date of PF and gratuity eligibility for
each individual employee and the number of year of accumulation till the date of loan
application;
9. Undertake that the borrowers shall be bound not to avail loan from other banks/MFIs as
well as from EI exceeding Rs 150,000 or as stipulated from time to time by State Bank of
Pakistan until he/she has repaid the loan of FMFB. If any borrowers total borrowings exceed
the specified limit Pkr 150,000, FMFB shall have the right to ask the client to repay the total
outstanding loan including service charge. In case a borrower intends to borrow a loan from
another bank/MFI, EI, a written NOC must be taken from FMFB;
10. Effect the repayment of the monthly instalments of the borrowing employees through a
crossed cheque in the name of The First MicroFinanceBank Ltd, amounting to the total
amount equal to the monthly instalments of all borrowing staff members or through direct
transfer of salary into the checking accounts of the employees maintained at the respective
FMFB branch, latest by the 10th of each month. A list of all the employees and their
respective repayment amounts and salary amount (format given in the annexure) must also be
forwarded along with the cheque/transfer cover note;
11. If repayment is delayed beyond 29 days, it will be considered as breach of MoU, and the
FMFB shall issue notice to the EI for repayment of all outstanding loans.
12. The EI shall facilitate the FMFB to obtain open-dated cheques for the total loan amount
from the employees, as per the policy of the FMFB;
13. The EI shall ensure to provide an irrevocable undertaking from the trustees of terminal
benefits to assure the repayment of the outstanding loan amounts inclusive of service charges
and any penalties from the terminal benefits of the employee in case of default/
resignation/termination of the employee. The irrevocable undertaking shall be

acknowledged and endorsed by the EI.

14. The trustee shall allow the EI to issue a cheque to FMFB for the settlement of the total
outstanding loan amount inclusive of service charges and any other penalties from the
terminal benefits of the employee in one lump sum in case of transfer of employee/borrower
to other area. The EI shall also ensure that the Final Settlement Dues are not released to the
employee until a confirmation of repayment of total liabilities is received from the FMFB,
based on the cheque issued to FMFB by the EI in this regard;
15. EI will give instructions to employees to open account with the FMFB and encourage
them to transfer their monthly salaries/personal deposits to this account;
16. If the EI desires to terminate this arrangement by giving a notice, the Institution shall also
recover the balances of all the outstanding loans from its borrowing employees and pay the
same to FMFB through a crossed cheque for the aggregate amounts within two weeks of
serving such notice;
17. The MoU shall be valid for a period of 3 years. In case of expiry or termination of the
MOU, the EI shall continue to extend services for a period till such time that the total
outstanding loans including service charges and penalties, if any, is recovered from all
employees;
Role of FMFB shall be:
1) Extend finance facility to the eligible employees of the Institution according to the terms
and conditions of this scheme and as amended from time to time.
2) Nominate a Micro Finance Officer to work at the Institutions designated space, as deemed
appropriate for smooth execution of the scheme.
3) Receive/appraise/verify applications, disburse, monitor and recover the loans.
4) Provide monthly status of the scheme to accounts/finance office of the Institution,
whenever requested.
5) Provide information to prospective/active borrowers regarding the loan scheme/status of
individual cases, whenever required.
6) Collect recovery cheque along with break up of individual cases on a monthly basis.
7) FMFB shall conduct its operations and affairs with due diligence and efficiency and in
conformity with best banking practices.
Authorized Officials of the EI and FMFB
On behalf of EI At least two authorized individuals of the eligible institution shall jointly sign
the MOU with FMFB.
The Board of Directors/Managing Director or General Manager if authorized by BOD of the
institution shall nominate two executives/senior officials to sign MOU with FMFB on behalf
of the institution. They shall also provide a resolution on official Letter Head to FMFB, which
authorizes the signatories for the MOU as well as the future cheques of loan instalment
repayment. The EI shall also provide the names and specimen signatures of TWO trustees of
the terminal benefits of the EI, who would provide irrevocable undertaking on behalf of the
EI, on its official letterhead. The two authorized officials shall also be responsible for all
dealings with the FMFB; all applications shall be routed through them. On behalf of FMFB
Area Managers and Area Risk Managers shall be authorized to sign the MOU jointly with any
organization.

Validity of the MOU

The MOU shall be valid for a period of three years. Subsequently, the MOU shall need to be
renewed and a fresh MOU shall be signed.
Approval of EIs by FMFB
The FMFB branches and Units must seek approval for an EI prior to disbursing any loan
under the LOSEL. The procedure for the approval of the EI shall be as follows:
1. The branch/unit shall prepare a Brief Profile of the institution (as per the standard format);
2. The Brief Profile will be sent to the respective Area Manager for review and approval by
the Branch Manager. The Area Manager may either recommend or reject the institution.
Additional information/documents may be requested by the Area Manager. The Area Manager
shall forward the profile to Head Client Markets for his consent. Head Client Markets shall
forward the profile to the President for Approval;
3. The decision of the President shall be conveyed to the branch in writing;
4. The MOU shall only be executed with the EI after the approval of the President.
PRODUCT POLICIES AND PROCEDURES
Policy Procedure and Controls
MOU and Marketing of Product
Product Marketing
Senior staff members of FMFB shall be involved in the marketing of product through personal
meeting
with the head of departments and employees of the eligible institutions.
Branch Manager, Team Leader and MFO shall prepare the list of eligible institutions working in
the
area.
First marketing meeting shall be held by the Branch Manager and MFO-TL. Subsequent follow
up
meetings can be held by the MFOs.

Staff Orientation
Marketing of this product shall be conducted and delivered by a senior team of the branch.
Junior MFOs, trainee or MFO working on probation period shall not be involved in product
marketing
Staff working as trainee MFOs, who have not completed their probation period, shall not
handle the
product individually. She/he shall accompany a senior staff till the completion of the on-the-job
training and probation period. A new staff can handle the product independent subsequently,
provided
she/he has reflected adequate capabilities to handle it properly.

MOU with EI MOU shall be signed by two authorized officials of the eligible institution
and
FMFB and shall be duly witnessed.
Prior to signing of the MOU with the institution, the Area Manager and the Area Risk
Manager

shall scrutinize the documents of the institution and recommend/reject an institution based on
the criteria of the FMFB .The recommendation of the EI shall be endorsed by Head, Client
Markets and the final approval of the EI shall be taken from the President. The relevant branch
shall be intimated accordingly;
Subsequently, if the institution is eligible, the FMFBs Area Manager or Branch Manager
shall set date and time for signing of the MOU ;
FMFB shall sign MOUs at the corporate level. In case of organizations having offices all
over the
country e.g. AKDN institutions, a single MOU shall be signed at their HO level by a branch of
the FMFB. Subsequently, the copy of the MOU shall be sent to relevant branches for processing
the loans. One copy of the approved and signed copy of MOU will be maintained at HO level.
On the given date and time Area Manager, Area Risk Manager shall visit the institution;
MOU
shall be signed in the presence of two witnesses. Power of Attorney/Authority letter along with
specimen signatures issued by BOD/MD/GM/Senior Management shall be taken to ensure that
authorized persons have signed MOU; names and specimen signatures of TWO Trustees of the
terminal benefits shall also be taken from the issuing authority;
Witnesses shall be adult with sound mind and health, literate and permanent resident
of the
area. Illiterate individuals shall not be considered as witnesses.
After signing of the MOU, one copy shall be given to the institution for further reference
and correspondence;
FMFB shall keep the original copy in the Area Office and maintain a duplicate copy in
the
respective branch from where loan will be disbursed. A file for such MOUs shall be maintained
in branch and area offices.

Client Acquisition
Client acquisition shall be handled by the senior staff members in the areas
Area and Branch Manager shall introduce the product to the management of the
institution,
explain the terms and condition of the product, role and responsibilities of eligible institution
and
FMFB. They will also explain every clause of MOU. The management shall be asked to
introduce the product to employees through official circular introducing and explaining terms
and condition;
If employees are interested to avail the product they shall inform the eligible institution
showing
interest for loan.
Eligible institution shall prepare the list of employees who are interested in loan as per
a standard format provided by FMFB. This shall include names of employees, no of
years working with the institution, current gross salary, any deduction, net salary paid,
loan amount requested and purpose of loan etc.
The list shall be submitted to FMFBs nearest branch or Area Office with covering letter
and shall be signed by the authorized person;

Eligibility Criteria
Target Clients
Permanent employees of Private institutions, Non Government Organizations (NGOs), in
existence in the

area for a minimum period of 5 years Permanent employees working in any private
organization, Non Government Organizations, are eligible, provided:
1. The institution has signed an MOU with the FMFB;
2. The institution is registered under any law in Pakistan;
3. The institution is in existence for a minimum period of 5 years;
4. The institution is earning profits/recognized by Central Board of Revenue;
5. Has a policy for provident fund from the date of confirmation of the employee;
6. Before signing MOU with the EI Area, Zone and Branch Managers shall check the above
given requirements and ensure that EI is not in loss shown in profit and loss account.

Total Income
1) Household annual income including gross salary of the applicant (net of household business
expenses) will no exceed Pkr 300,000/2) Borrowers gross income per month should not exceed Pkr 25,000/The employees household income will be worked out. However, main dependence for
repayment of
loan will be on borrowers gross salary.

Age of Borrower

Minimum 18 years and Maximum 63 years

At the time of loans final due date, the age of borrower shall not be more than 65
years or date of
retirement whichever is earlier.
Loan expiry date must be linked with the retirement date of the borrower;
In most private companies and NGOs, employees are working beyond the age of 60
years; in such
cases, the last loan instalment repayment shall be linked with the retirement date, but shall
not exceed the date of 65th birthday;
At the time of loan disbursement, loan period shall be fixed with the retirement date or
65 years
whichever is earlier. Suppose if a client applies for 3 years loan at the start of 63 years, and
his/her retirement age is on the 65th birthday as per company rule, then in such case loan shall
be given for two years and shall become fully due before the 65th birthday.
As per agreement with New Jubilee Life Insurance Company maximum age limit of
borrower for insurance coverage is 65 years. After 65 years, insurance coverage will
cease to be effective and no claim against death and permanent disability will be
entertained.

Other

Borrowings

Borrowers total exposure from other banks/MFIs/NGOs shall not exceed the limit as stipulated
by State Bank of Pakistan from time to time. At the time of disbursement, the borrower shall
give undertaking to the effect that he his loan exposure from Banks/MFBs and other Financial
Institutions is within the SBP prescribed limit (presently Pkr 150,000/-) and will maintain
his/her loan exposure within this limit during the loan period.

Borrowers Identification
Borrower shall have valid computerized national identity card (CNIC)
1) A client must have a valid CNIC at the time of application;
2) If the CNIC is expected to expire after disbursement of the loan, the borrower shall renew it
within 2 months and submit a copy to FMFB;

3) If borrower is a repeat client of FMFB and has taken loan against this product or any other
product, at the time of loan application she/he shall submit the receipt issued by NADRA for
renewal of CNIC. Renewed CNIC shall be submitted to FMFB after collection from NADRA within
a period of one month from the
disbursement;
4) Women clients, who have been recently married and do not have their husbands name on
the
CNIC, are required to submit a renewed CNIC. However, if they are repeat clients of the FMFB,
they may be entertained on the basis of receipt issued by NADRA for renewal of CNIC.
Renewed
CNIC shall be submitted to FMFB after collection from NADRA within a period of one month
from
the disbursement;
5) If picture in the CNIC is not identifiable or it is outdated and unrecognizable, then latest
photograph shall be taken and attested by the officer of the bank and stamped as original
seen;
6) Women clients, having CNIC without pictures, are not eligible to open an account with the
FMFB. They are required to submit a CNIC having their picture to avail the loan facility.

Residence Status
Employees having permanent and/or rented residences shall be allowed to avail loan Clients
may be having permanent residences or may be living in rented premises.
Employment Term
Employee must be permanent member of eligible institution, His/her service terms must
be at least 5 year. He/she must be entitling for terminal benefits of provident fund and gratuity
and other pay benefits.
Attested copy of Letter of Confirmation of the employee must be attached to the loan
application
to confirm the permanent status of the applicant; 2) Accumulated balance of provided fund,
gratuity
and other benefits shall be provided by the institution with signature of authorized person and
official seal in the space given loan application form.

Borrower Loan History

Loan shall be provided to such borrowers who have good track record of loan repayment, if
they have
taken loans from other institutions/banks. No loan shall be extended to defaulted clients. If
borrower applying for loan Rs 50,000 and above his/her past credit history shall be checked
through eCIB.
1) If Electronic Credit Information Bureau (eCIB) is not available in branches, in such situation,
list of
borrowers shall be forwarded to Area Office or Head Office for verification,
2) The credit history of the applicant shall be checked at HO to know whether he/she has
outstanding loan of other banks or not, and also to know about his credit worthiness,
3) HO shall provide the details of eCIB to branches for further process. If he/she has delayed
repayment of loans of other banks/MFI, then no loan shall be provided to him/her. At the time
of
receiving application, it shall be communicated to the applicant that loan approval shall be
subject to
the satisfactory past track record of loan repayment;

4) In loan cases below Pkr 50,000/-, an eCIB report may be taken in case of doubt;
Product Features
Lending Methodology
Individual lending
methodology shall be applicable
1) Loan shall be provided to individual employees of
the organizations;
2) However, the minimum number of employees taking loan for the first time shall be 5. Any
maximum number of employees can apply for a loan subsequently after the signing of the
MoU.
However, the MFO should encourage a monthly group processing in order to save
transactional
cost for the FMFB;

Purpose of Financing
Loan shall be provided for all legal income generating activities and for social purposes that
shall
contribute to the income of the borrower directly and indirectly. No loan shall be provided for
negative activities as per the policy of the FMFB. Loans can be used for:
1) Various income generating activities i.e. business and small enterprises, etc.;
2) Children/self education expenses;
3) Children/self health expenses;
4) Emergency needs;
5) Repair and maintenance of house, to meet the
cash shortages in house construction;
6) Purchase of household items and equipments;
7) Purchase/repair of vehicle, motorcycle. Motorcycle and vehicle shall not be more than 7
years older. Registration of motorcycle or vehicle shall be in the name of borrower;
8) Purchase of livestock;
9) Purchase/repair of fixed assets for business;
10) Land development;
11) Agriculture machinery etc.
15 Loan Amount Maximum Rs 150,000 or equal to their Terminal Benefit Balance available,
whichever is
Less and Minimum Rs. 5,000
Loan amount shall be determined whichever of the below is less
a) Loan requested by the borrower
b) Loan amount determined on the basis of monthly instalment, which shall not be more than
33% of net monthly salary.
c) Available Balance of Terminal Benefits of the employee as confirmed by the EI and
acknowledged by the Trustees of Terminal Benefits.
d) Total loans instalments should not exceed 40% of household income

Loan period
Maximum 36 months or retirement period which ever is less and Minimum 6 months
Retirement date of the borrower shall be confirmed from Eligible Institution. If he/she will retire
before
the requested loan period, in such situation loan period shall be linked with the retirement
date.

Service Charge
19% flat per annum 1) Service charge @ 19% per annum flat shall be communicated to clients
and mentioned in financing agreement;
2) Service charge will be collected on monthly basis according to the schedule calculated by
MIS on
amortization method. It shall be communicated to clients that service charge will not be
recovered in
equal amount. In the beginning, larger amount of service charge will be collected; gradually it
will
decrease.
Loans Processing Fee
Upto 50,000 Rs.300/50,001-100,000 Rs.500/100,001-150,000 Rs.1000/At the time of disbursement processing fee shall be collected from clients
BOI shall ensure that client has repaid processing fee. Entry shall be passed according
to the
guidelines issued by Finance Department.

Life Insurance Premium

1) Insurance cost will be inclusive in the 1% additional service charges
rate. No premium will be taken from the client.
2) According to the arrangement, client shall be paying life insurance premium on monthly
basis along with his/her service charges.
1. Life insurance premium shall be paid to NJI as per the existing policy between NJI and the
Bank.
2. If a client makes an early repayment of the loan, the insurance coverage will lapse.

Stamp Duty
Charges Stamp duties shall be charged as follow:
Sindh @ 0.2% of loan amount
Punjab Rs. 100
Balochistan Rs. 100
NWFP Rs. 30
Islamabad Rs. 10
Azad Jammu & Kashmir Rs. 30
1) Financing Agreement shall be printed on Non Judicial Stamp Paper of the applicable rate. If
adhesive stamps are available from post offices or government treasury department, in such
case
adhesive stamps shall be affixed on the printed financing agreement.
2) Proper record of stamps on hand shall be maintained as per guideline given by finance
department.
3) Stamp duty charges shall be adjusted from processing Fee Rs. 400

Grace Period
No grace period shall be permissible

The MIS has been updated. Accordingly, there shall be no grace period available under this
product scheme.

Collaterals
The eligible institution and the Trustees of the Terminal Benefits of the employee shall give
assurance for the repayment of the loans Open-dated cheques shall be taken from the clients
1) MOU signed with eligible institution, along with the Irrevocable Undertaking from the
Trustees of
the Terminal Benefits shall serve as a security for loan repayment . The same shall be
communicated to the authorized person of the EI at the time of the signing of the MOU.
2) The clients shall provide open-dated cheques drawn on their checking accounts maintained
at FMFB. The cheques shall have following information/characteristics:
Crossed cheques : A/c payee only;
Un-dated;
Payee: The First MicroFinanceBank Ltd
Amount: Equal to six months installments
Signature of the account holder

3. The number of cheques to be taken shall correspond to the tenure of the loan with a
multiple of 6 months e.g. in case of 24 months loan period, 4 cheques of equal amounts of 6installments shall be taken. In case of 36 months tenure, 6 cheques of equal amounts of 6month installments shall be taken.
4. The FMFB staff shall communicate to the clients that bouncing of a cheque is an unbailable
offence.

Loan Appraisal
Credit appraisal and documentation of the potential clients shall be required
1) After receiving the list and request letter from eligible institution, MFO shall contact the
institution and employee to conduct credit appraisal;
2) MFO shall ensure that MOU has been signed with the eligible institution;
3) During credit appraisal, MFO must ensure and confirm the nature of employment of the
applicant ;
4) It must be ensured that employee has not taken loan from other institution, his/her monthly
salary is below taxable limit, and character of the applicant is clean;
5) The applicants capacity to repay loan instalment, and purpose of loan according to the
policy of FMFB shall be checked;
6) It shall be ensured that repayment of outstanding loans in case of employee termination or
resignation will be entertained by the EI and Trustees of the Terminal Benefits.

Client Verification
Verifying MFO shall verify the information given by the applicant and proposed utilization of
the loan.
MFO shall also verify the location Eligible Institution Team Leader shall verify 30% cases
verified by
verifying MFO. Branch Manager shall verify 10% cases verified by team leader
1) After receiving the completed credit application by the MFO, verifying MFO shall visit the
office
and verify the details given in loan application form
2) For proper screening, MFO must conduct verification of the borrower, his character, credit
worthiness if he/she has taken loan from other banks/institutions;

3) Verification shall be conducted from employees within the institution. Employees, who are
giving
information, shall preferably not be the relatives or friends of the employee. Information from
outside the organization may also be collected.
4) To ensure proper credit appraisal by appraising MFO and verification by verifying MFO, team
leader and branch manager shall further verify the cases verified by verifying MFO. All the
parties shall be involved in proper screening process.

Loan Approval
At Gilgit-Baltistan & Chitral: BCC limit RMD Limit Upto Pkr 20,000 Above Pkr 20,000
At Chinari A.K. Branch BCC limit RMD Limit Upto Pkr 30,000 Above Pkr 30,000
At Plain Rural & Rural Areas: BCC limit RMD Limit Upto Pkr 15,000 Above Pkr 15,000
1) For credit approval above Rs.15,000 in rural plain and rural areas, and above Rs.20,000 in
Gilgit
Baltistan, Chitral areas, the BCC shall forward the case to RMD for approval.
2) For loans above Rs.50,000 the BCC shall forward the case to the AM for recommending the
case to
RMD for approval.
3) The RMD shall be responsible for authorizing relevant staff members in its department for
credit
approval.
4) After completion of credit appraisal and verification, loan cases shall be submitted to
branch credit committed for further process
5) Branch credit committee shall comprise on 5 members, branch manager, team leader,
verifying
MFO, MFO, BOI shall be the part of BCC if 5 members are not available in the branch.
Appraising MFO shall not be the part of BCC, she/he shall attend the meeting to give
clarification about credit appraisal.
6) Loan approval shall be on the basis of 75% of majority of BCC members. 7) Department for
approval, after proper verification RMD shall approve loans.
8) Branch staff shall timely inform the borrowers if loan cases are rejected in BCC or RMD.
Reasons of
rejections shall be communicated to applicants.

Documents Required
Following documents will be completed during loan appraisal
CNIC
Complete Loan Application Form
MOU with eligible institution
Copy of the Letter of Confirmation/evidence of being a permanent employee
Irrevocable
Undertaking from the Trustees of Terminal Benefits regarding confirmation of PF and assurance
of repayment of outstanding loan, duly acknowledged and endorsed by EI;
Salary Slip or letter from the EI duly signed by the authorized person of Accounts or HR
Dept.
Letter by the Borrower to the Company
The MFO shall ensure that on all CNICs submitted, the following statement shall be
written: only for the use of FMFB; 2) The MFO shall ensure that the confidentiality of the
information shall be maintained; especially salary information shall not be divulged to any
other person; Letter from EI to FMFB
Financing Agreement
Letter of Direct Debit of Account

 Open-dated cheques

Loan Disbursement
All loans shall be disbursed through account transfer. Borrower shall open account
with FMFB.
1) Borrowers will maintain accounts with FMFB; loan amount will be transferred to this
account;
2) Loan documentation and processing shall be completed by the 30th of the month, and
disbursement shall be made during the first 15 days of the following month;

Borrower Account with FMFB

Borrower shall open account with FMFB.
1) Account shall be opened with the FMFB;
2) Preferably, monthly salary shall be transferred to this account;
3) The client shall strive to maintain (preferably) a minimum balance equal to one instalment
in
his/her account till such time that the full loan has been repaid.
4) The client will give debit authority to the Bank to deduct the loan instalments from his
account on
Monthly Basis

Loan Repayment
Loan instalments shall be repaid on equal monthly instalments. Loan instalment shall be
transferred through one crossed cheque for all the employees of the institution by the EI itself,
along with a
covering letter evidencing the names and corresponding instalment amounts of the
employees.
Alternatively, the EI can also transfer the monthly salaries of the borrowing employees to their
checking accounts maintained at the respective FMFB branch and intimate the transfer under
its cover letter.
Instalment shall be recovered during first ten working days of the month. Cash collection
outside the
cash counter of FMFB is strictly prohibited.
1) Borrower shall authorize the eligible institution in writing to deduct monthly instalment from
his/her salary for direct payment to the FMFB or transfer his/her monthly salary to their
checking
account with FMFB;
2) The MFO shall provide a list of outstanding borrowers along with the instalment due on the
next due date to the EI, by 25th of each month;
3) The EI shall be responsible for making the repayment or transfer the salaries during the first
10 days of the month;
4) In case of the first instalment, the repayment shall be made from the salary due in the
same month;
Example:
Disbursement has been made on January 8, 2009;
The EI shall deduct the first instalment while making the salary for the month of January
2009 and shall pay the instalment latest by February 10, 2009;
5) Upon receipt of cheque from the EI, the BOI shall adjust the recovery against individual loan
account of the borrower and forward the copy of the list of the employees and corresponding
monthly instalments paid to the concerned MFO for his/her record. In case the salaries have

been transferred to the checking accounts, the BOI shall deduct the monthly instalment
amount from the checking accounts as per the list provided by the EI and adjust the same
against individual loan account; 6) The BOI shall generate receipts on the same working day
for the borrowers and dispatch through courier service on his/her postal address
given in the loan application form. 30 Early Repayments Early repayment is allowed; only
accrued service charge, as determined by the MIS shall be recovered.
1) If borrower wants to repay full loan amount before due date, in such situation she/he shall
contact the MFO for calculation of total due loan amount. MFO shall generate client history to
assess the total repayment made by the client till that date. Subsequently, the MFO shall
determine the final amount to be paid by the client based on the system generated repayment
schedule. The final amount in case of early settlement shall exclude the service charges for the
instalments not yet due only. This procedure shall be
communicated to the client at the time of disbursement.
2) Team leader shall verify the calculation, and the branch manager shall approve; 3) Borrower
shall submit cheque or pay cash for the settlement of loan amount;
4) After collection, recovery shall be booked against the outstanding principal and accrued
service
charge;
5) Branch manager shall issue test key to waive off the service charge of unexpired period;
6) Loan account shall be closed;
7) The Bank shall intimate the EI regarding the full payment of the loan by the respective
client and
advise cessation of future deductions from his/her monthly salary.

Delinquency Management
A Repayment can be delayed for a maximum period of 5 days. If a repayment is delayed by
the EI beyond this time, a follow-up action shall be required by the Branch Manager.
1) If the payment is delayed beyond 5 days by the EI, FMFB will initiate follow-up action on
through telephone;
2) If the repayment is further delayed, Bank shall send a formal written reminder to the EI to
make the repayment at the earliest.
3) The Bank shall send a maximum number of three written reminders to the EI over a
maximum period of 45 days.
4) Other than following up from the institution, the borrower, being the prime debtor, shall also
be pursued in parallel by serving reminders and follow up calls for clearing outstanding
liabilities;
5) The EI is liable to respond to the Bank in writing to explain the delays of repayment.
6) In case of non settlement of the issue it will be referred to the AM for specific guidance from
case to case basis to resolve the case;
7) If despite of official intimations, the EI does not respond/ facilitate or the response received
from the EI is not satisfactory, the AM shall forward the recommendation of breach of MOU to
HCM with appropriate
action for final settlement to protect the interests of the Bank, for approval;
8) Upon approval of the HCM, the AM shall communicate the decision to the EI and ensure
implementation of the same.
9) If all recovery follow up attempts are exhausted, the trustees undertaking will be invoked
for settlement of overdue and outstanding liability and EI will be liable to facilitate FMFB in this
regard.
10) The recovered instalment shall be adjusted against the overdue service charge, due
service charge and the remaining shall be adjusted against the principal loan amount.

Repeat Loan
A borrower can avail repeat loan after 5 days of repayment of his/her previous loan.
1) The gap between the date of repayment of previous loan and disbursement of new loan
shall

not be less than 5 days, after 5 days new loan can be disburse, the purpose is to ensure proper
documentation, credit appraisal, BCC and RMD approval and arrangement of cash for
disbursement.
2) After payment of last instalment of the previous loan, client shall complete the
documentation
process. Subsequently, after 5 days, a fresh loan may be disbursed.
3) In case of early repayment client shall be eligible to avail fresh loan after 5 days of full
repayment
of loan and accrued service charge. 33 Borrowers

Transfer/ Resignation/ Termination

In case of borrowers transfer to another area Eligible Institution/trustees of the PF shall be
responsible for continuing repayment of the loan instalments in the same manner or full and
final settlement of the loan of the borrower.
1) In case the employee/borrower is transferred to another area/city, the EI shall be
responsible to
arrange the continuity of monthly instalment of loan availed by the transferee either by
collecting
from the employee at their own or by any other arrangement acceptable to Bank. This
arrangement will be conveyed to Bank through official letter for record of both institutions.
2) In special cases, Bank may consider transfer of his/her loan account to another FMFB
branch, if
possible, for continuation of monthly loan instalments from monthly salary in the newly
transferred area/city under the same arrangement agreed upon by EI & FMFB in the MOU.
3) If transfer of borrower account to the other branch is not possible due to any reason and EI
can also
not ensure continuity of repayment of monthly instalment, the EI will then facilitate the Bank
to recover the entire liability in one lump sum either by other sources of the
employee/borrower or from terminal benefits.
4) In case of borrowers resignation and/or termination, the Eligible
Institution/employer/trustees of the PF shall collect detail of outstanding loan and deduct
outstanding loan and service charge from his/her final payment and pay to FMFB and get NOC
from FMFB.

Loan Loss Provisioning

Loan loss provisioning shall be as per the SBPs Prudential Regulations. The categories of loan
loss provisioning as per the SBPs Prudential Regulation shall be applicable. The provisioning
shall be directly handled by the MIS in case of defaults.

Periodic Review by RMD

Loan portfolio will be reviewed periodically by RMD. The loan portfolio of LOSEL clients will be
reviewed
every six months by RMD and they will ensure that compliance to the SOPs is being made.

Micro Pensioner Loan

Lending Framework and Mechanism
Lending Technology
Short tem loan shall be provided to pensioners against their pension benefits under the
Individual lending methodology.

Eligibility Requirements
Eligible Borrower
1. The borrower identified shall be a pensioner of government or semi-government
organization.
2. The borrower must have a Pension Book in her/his name, which is acceptable at
any scheduled bank, Treasury office or Pakistan Post Office. In some cases,
Pension Book may also be termed as the Retirement Book (by semi-government
institutions).
3. Spouse of a deceased pensioner, receiving monthly pension in his/her name is also
eligible. In such case, a widow is eligible to receive pension till such time that she
does not remarry.
Age of Borrower
The age of the borrower at the time of disbursement of the loan shall be more than 18 years
and less than 64 years. It must be ensured that the age of the borrower does not exceed 65
years during the loan period.
Identification
The borrower must have a National Identity Card in his/her name. A copy of the identification
document shall be obtained by the FMFB MFO. After comparing it with the original, the
MFO shall affix his/her signature on the copy of the identification document and stamp it as
original seen. A photograph of the borrower shall also be required.
Permanent Residence
Loans shall only be given to those borrowers who have their permanent residence in
the area of FMFB branch/unit.
Location of PPD
The PPD should preferably be located in the jurisdiction of the branch/unit from where the
loan is to be processed, to ensure easy presentation of the documents for pension payments.

Permissible Activities for Financing

Finances shall be made available for the following categories of activities only:

1. Any income generating scheme;

2. Childrens Education or Marriage;
3. Health - hospitalization and medicinal expense;
4. Repayment of outstanding expensive informal borrowing;
5. Housing Improvement;
6. Purchase of a new, old, reconditioned motorcycle or scooter. Old or
reconditioned vehicles shall not be more than 7 years old. Loans shall not be
provided against existing motorcycle or scooter owned by the borrower.
Eligible Guarantor
The collection of pension amounts are linked to the borrowers authorization to the PPD for
releasing the pension payment to FMFB. This validity of this authorization is linked to the
pensioners provision of Certificate of Aliveness on monthly or semi-annual basis. In order to
mitigate default risk in case of expiry of such authorization, the borrower shall be required to
arrange for ONE guarantor. The eligible guarantor must be:
1. Permanent resident of the area;
2. Close relative/acquaintance of the borrower;
3. Must have sufficient financial net worth to pay the FMFBs outstanding dues.
Others
All restrictions on lending under the law and Prudential Regulations as described
under the Loan Manual volume I should be fully complied with.

Loan Characteristics
Loan Size and Amount
1. The amount of loan shall be determined on the basis of the monthly pension
amount of the applicant as indicated in the Pension Book. (In order to calculate
the size of loan, kindly refer to the monthly instalment amount in the
repayment schedule and match it to the monthly pension amount for the
desired tenure);
2. The minimum loan size shall not be less than Rs.5,000/-;
3. The maximum loan size shall not be in excess of 18 months gross pension
amount and not more than Rs.100,000/- whichever is lower;
4. The loan amounts shall be in increments of next Rs.1,000/-; i.e. Rs.5,000/-,
Rs.6,000/-, Rs.7,000/-. Please refer to the repayment schedule attached.
Loan Terms
Minimum loan term shall be 6 months and maximum loan term shall be 18 months.
Loan Price
Service charge rate shall be 10% per annum calculated on flat rate basis.
Loan Instalment
The monthly loan instalment comprising the principal and service charge amount should not
exceed the monthly pension amount of the borrower. In case a borrower is re-employed as per
the Certification provided to the PPD, the instalment amount should not exceed the monthly
basic pension amount i.e. the amount payable by the PPD against pension benefits.
Loan Application and Processing Fee
An amount of Rs.100/- shall be charged from each applicant as loan application and
processing fee at the time of loan appraisal.
Documentation Charges
All documentation charges in providing this loan facility shall be borne by the borrower.
Insurance
1. Life insurance of the borrower is compulsory;

2. An annual premium of Rs.100/- (for a loan up to Rs.50,000/-) shall be

recovered from the borrower at the time of disbursement of the loan. For loans
above Rs.50,000/-, an annual premium of Rs.150/- shall be charged.
3. For loans of 18 months tenure, annual premium amount shall be charged at the
expiry of 12 months.
Number of loans at a time
A borrower shall be entitled to only one loan facility at a time for any one purpose as listed
above. No parallel loans shall be allowed.
Repeat Loans
A borrower can avail repeat or second loan after the repayment of the first or earlier loan on
time.
Loan Appraisal Procedure
1. A potential borrower may directly approach FMFB for financing, or he/she
may be identified by FMFB, the PPD, or the Magistrate.
2. The FMFBs MFO shall identify the borrower as described in the Eligibility
Requirements, and complete a Borrower Identification Form during the initial
interview. In some cases (especially in NAC), where the applicant is already
known to the branch, the Borrower Information Form is not required to be
completed; the MFO will however record the reason for not filling in the form.
3. The MFO shall screen the applicant by undertaking a visit of the residence of
the applicant, and complete a Verification Report. A primary reason to verify
the client is to assess whether basic subsistence needs are not affected by this
loan. This may occur if the pension income is the only source of income. A
pensioner who is solely reliant on the pension income should not be given loan.
In special cases, the case may be sent to COO for approval.
4.

In case of NAC, an influential person of the village instead of the neighbour

may be visited to verify the credibility of the applicant. In case of any deviation
of this procedure in the NAC, a proper note must be put on file specifying
the reasons for the deviation, and justifying the credibility of the applicant. Any
previous experience with the client shall also be specified.

5. The MFO shall also assess the guarantors eligibility. The guarantor must be
capable of discharging the liability of the borrower, in case of any eventuality
of enforcement of the guarantee by the Bank.

Verification of PPDs Pension Payment Mechanism

Each PPD has its own pension payment mechanism. In order to ensure that the payment
mechanism matches our repayment and collection procedure, the branch/unit manager shall
personally visit the PPD to verify the pension payment mechanism, and document the same in
his/her records. One visit of the PPD is sufficient for all application cases to be processed
from that PPD.
In cases where the pension payment mechanism does not match our procedures, a note is to be
sent to COO and Product Manager for incorporation in the Loan Manual before any case is
processed.
Loan Approval and Disbursement Procedure
Completion of Application Form
Based on the Borrower Identification Form, the MFO shall ask the applicant to complete a
Loan Application Form.
Additionally, the applicant shall be asked to provide the following documents:
1. An Authorization/Authority Letter duly signed by the borrower. In all cases
except where the PPD is the NBP, the authorization has to be notarized. The
Authorization must be on stamp paper of Rs.10/-. The cost of the stamp paper
shall be borne by the applicant;
2. Pension Book;
3. Duly signed Pension Receipts (number of pension receipts should match the
number of loan instalments. In some cases, fresh receipt would be required
after six months, and hence the undertaking should specify the same). The
receipt will also contain Certificate of Re-Employed or Not Re-employed and
the Certificate of Aliveness (The PPDs official may require that the pensioner
signs the advance pension receipts in his presence);
4. Undertaking to renew the Authorization and Pension Receipts after six months.
A format for the Undertaking is provided. For NBP, same authorization may be
validated every six months;

5. Personal Guarantee of the Guarantor. For applicants at rural branches, the

personal guarantee shall be executed on a stamp paper of Rs.100/-. For
applicants in rural areas (NAC), the personal guarantee shall be executed on a
stamp paper of Rs.10/-. The cost of the stamp paper shall be borne by the
applicant.
Loan Approval
On the basis of a satisfactory verification report and completed application form, and
documents provided by the applicant, the Branch Loan Committee shall review the case for
financing in accordance with the terms and conditions of this loan product and accordingly
approve/decline the application. The decision of the FMFB shall be conveyed to the applicant.
Loan Documentation
Subject to the approval of the loan application, the applicant shall visit the branch and execute
the Financing Agreement. He/She shall also establish an account of the with the FMFB branch
(not required in Units).
Prior to the disbursement of the loan, the MFO shall provide a copy of the Authorization
together with a covering letter by FMFB to the Pension Paying Department for its records and
necessary action in the future. The PPD will be required to sign a copy of the Authorization to
acknowledge the receipt of this document. The acknowledged copy will have to be obtained
from the PPD in person by the MFO.
Loan Disbursement
Loans shall be disbursed after the Branch Loan Committee has approved the loan and the loan
documentation has been completed. Loans shall be disbursed through a credit advice in the
deposit account of the borrower, through a cheque, or in cash as deemed appropriate. The date
of disbursement shall match the date of pension payment (e.g. the first 10 days of each month)
to facilitate timely monthly recoveries.
Loan Repayments and Collections

Loan Repayment
All loans shall be paid in equal monthly instalments.
The loan instalment shall be recovered from the monthly pension amount payable by the
PPD. Separate collection procedures shall be followed by the MFO for recovery of
pensions from different PPDs:

GPO
The authorized Bank Staff shall visit the GPO, and present duly signed pension receipts and
Pension Books. In some cases, the authorization of the borrowers may also need to be
presented with the documents. The relevant authority of the GPO will examine the receipts
and affix his stamp. The stamped receipts will be presented to the cashier for collection of
pension funds in cash/cheque. The amount collected would be settled against the outstanding
instalments of the respective borrowers, and the balance amount in excess of the instalment
amount shall be transferred to their respective accounts or otherwise as specified by the
borrowers.
Treasury Department
The authorized Bank staff shall visit the Treasury Department and present the Pension Bills
along with the Pension Books. The Treasury Officer will examine the pension bill and affix
his stamp. The MFO will subsequently affix a Rs.2/- revenue stamp on the pension bill and a
rubber stamp of the bank (specimen given in annexures), and deposit the same for clearing. In
case of branches, where the borrower has established an account, the pension amount would
be directly transferred to the borrowers account at FMFB from the PPD. Subsequently, the
account shall be debited by the instalment amount. In case of Units where the borrower does
not have an account, the pension amounts shall be transferred to FMFBs account. The
balance pension amounts in excess of the instalment amounts shall be transferred the
pensioners as per their instructions or adjusted against future instalments.
National Bank of Pakistan
The authorized Bank staff shall visit the NBP and present the Pension Bills along with the
Pension Books. The NBP Officer will examine the pension bill and affix his stamp. The MFO
will subsequently affix a Rs.2/- revenue stamp on the pension bill and a rubber stamp of the
bank (specimen given in annexures), and deposit the same for clearing. In case of branches,
where the borrower has established an account, the pension amount would be directly
transferred to the borrowers account at FMFB from the PPD. Subsequently, the account shall
be debited by the instalment amount. In case of Units where the borrower does not have an

account, the pension amounts shall be transferred to FMFBs account. The balance pension
amounts in excess of the instalment amounts shall be transferred the pensioners as per their
instructions or adjusted against future instalments.

Others
In cases where the PPD directly debits the pensioners account, instructions will be issued to
the PPD by the pensioner for transferring the pension amount directly to his/her account with
FMFB. The branch will then debit the borrowers account by the instalment amount. In case
of Units where the borrower does not have the account, the pension amount shall be
transferred to FMFBs account. The balance pension amounts in excess of the instalment
amounts shall be transferred to the pensioners as per their instructions or adjusted against
future instalments. The pensioner in this case shall be required to provide advance copies of
the Certificate of Aliveness/Pension Receipt to FMFB for presentation at the PPD to effect
transfer of funds.
The authorized Bank staff shall issue receipts in the name of the borrowers, officially
acknowledging receipt of loan instalment.
Early Repayment
1. If any borrower wants to repay advance instalment/s or repay the balance of
outstanding loan before the due date, he/she shall repay the same at the branch.
2. No service charge shall be recovered from the borrower for the unexpired loan
period.
3. If the loan is discharged in full before the maturity date of the loan for any
reason, no new loan shall be issued to that borrower until the un-availed period
of the previous loan has been completed.
4. However, if the branch loan committee feels that the time lag between the
maturity of the loan and early repayment is not too large, then a new loan can
be disbursed to that borrower without applying sanctions as mentioned in para
(3) above.
5. The Pension Book and unused pension receipts shall be returned to the
borrower and a letter shall be sent to PPD to convey the repayment of the loan
and cancellation of authorization.

Grace Period
A ten day grace period shall be allowed after a loan is disbursed. The repayment of the first
loan instalment shall start after the grace period.
Loan Delinquencies and Sanctions
On-time Payments
1. Payment of a loan instalment shall be considered on time, if it is paid within
the due date as specified in the loan repayment schedule.
2. A borrower can avail late payment facility of up to 2 days after the due date
without attracting any penalty.
Delayed Payments
1. A loan shall be considered delayed if an instalment is not paid within 3-7 days
of the due date.
2. Delayed payments will incur additional service charges at the rate of Rs. 0.25/=
on every Rs. 100 per day for the delayed instalment period and the instalment
amount.
Critical Payments
1. A loan shall be considered critical if an instalment is not paid within 8-15 days
of the due date.
2. Critical payments will incur additional service charges at the rate of Rs. 0.50/=
on every Rs. 100 per day for the delayed late instalment period and the
instalment amount.
Delinquent Payments
1. A loan shall be considered delinquent if an instalment is not paid within 16-25
days of the due date.
2. Delinquent payments will incur additional service charges of at the rate of Rs.
1/= on every Rs. 100 per day for the delayed late instalment period and the
instalment amount.

3. The MFO may also recall the outstanding loan to be repaid back in lump sum
after discussing the same in the branch loan committee meeting.
Recovery of additional service charges
1. Additional service charges as computed based on the above procedures may
not be recovered from the borrower until the final instalment of loan is due,
subject to observing the following process.
2. At the time of the final instalment of loan, the branch loan committee shall
consider about levying the additional service charges or not depending on the
circumstances and explanations provided by the client.
3. If the branch loan committee decides not to recover additional service charges
than a note should be put in the clients file to be signed by the members of the
branch loan committee documenting the basis for such a decision for future
reference.
4. In case the amount of additional service charges exceed Rs.5,000/-, approval of
the COO shall be required for such waiver.
Miscellaneous
Scope of Product
The Micro Pensioner Loan product is being launched on a test and trial basis.
Time period
This product will be tested and run for a period of one year from its starting date.
Product Supervision
1. The product shall be supervised by all branches and units by the Branch Loan
Committee on an ongoing basis during the trial phase.
2. The Committee shall document any lessons learnt during the trial phase and
recommend appropriate changes to the COO.
3. On approval of the subject changes by the CEC, revised policies shall be
implemented.

Deposit & Savings

In line with the Client First philosophy, FMFB offers a wide range of deposits to cater to the
specific needs of various business segments classified as follows:
Transacting Accounts

 Current Account
Saving Account
Non-Transacting Accounts
Term Deposits
Current Account
Current accounts are those, which let the client handle the day-to-day expanses efficiently by
allowing drawing cheques against the available balance within the business hours. It can be
further classified as Individual Account and Joint Account.
Individual Current Account:- Individual Account is opened by a single customer, only he
can operate the Account, but he can give the Authority to the other person to operate the
Account, if he is not available, for this he will sign an authority latter.
Joint Current Account:- If there are two or more customers who want to open Current Joint
Account, so they will open a Joint Account. This Account may be Operated: Jointly by all partners
Either or savoir
Any one of the partner
Partnership Current Account:- This account is opened with the Title of the Partnership. This
account is only operated by the Partners of the Partnership, who sign the Partnership deed, and
who sign the Account Opening Form. They can give the Authority to the other partner.
Documents required:

Partnership deed

NIC photocopy of all partners

Partnership manadate

Power of Attorney
Features of Current Account
Main features of the current account are:
Currency options
Rate of Return

PKR
Not Applicable

Unlimited

Checking Facility

Tax Application

Nil

A/C Statement

Monthly

Cheque Book

25,50,100 leaves book @ Rs.2/leaf

Saving Account
Saving account gives higher return with the edit benefit of flexibility of drawing money at any
time within business hours than the Current Account. Different types of Saving Accounts is:

Individual Saving Account

Joint or Partnership Saving Account
Minor Saving Account
Individual Saving Account:
Features of Saving Account
Main features of Saving Accounts are as follows:

Currency Option

PKR

Minimum Balance Requirement

Rs. 05

Checking Facility

Unlimited

Tax Application

Zakat on amount as per SBP role

A/C Statement

Monthly

Cheque Book

25, 50 leave @ Rs.2/leaf

Profit

Monthly/half year/yearly and maturity

Checking Facility

Nil

Term Deposit
It is one of the popular account types. The amount is deposited in this account for fixed i.e.,
from one(1) month to five(5) years. The interest is various with the variation of time
limitation. The rate of profit increases as per increase in time period. The customer does not
withdraw money before maturity of his/her account. The profit is paid after the maturity but in
certain cases money can be withdrawan with the adjustment of rate of profit according to the
time limitation.

Deposit Portfolio Highlight

Deposit Type

(% p.a)

Gharana Bachat Account (PLS saving a/c for individual customers only)
Upto Rs.25000
6%
Rs. 25000 to 1000000
5%
Over Rs.1000000 to Rs.5000000
6%
Over Rs. 5000000
6.50%
Micro Cash Maximiser Account
Rs.25000 to Rs.1000000
3%
Over Rs. 1000000 to Rs.5000000
4%
Over Rs.5000000
5%
Term Deposit (Minimum Rs.5000)
1 Month
8% Maturity
3 Months
9% Maturity
6 Months
10% Maturity
1 Year
11% Maturity and 10 on Monthly
2 Years
11.50% Maturity and 10.50 Monthly
3 Years
12% Maturity and 11 on Monthly
4 Years
12.50% Maturity and 11.50 Monthly
5 Years
13% Maturity and 12 on Monthly

First Bachat Tanzeem (FBT)

The First Bachat Tanzeem is a contractual saving product that provides an opportunity to the
poor to save for the long term, enabling them to realize their goals in life and to meet
unforeseen contingencies. The product is based on the model of local bachat committees/
ROSCAs. The client may save a predetermined amount ranging from PKR 100,300,500, to
1000 on a monthly basis for a predetermined time period of 12, 24, 36, 48 or 60 months. The
FBT saving product is linked with life insurance and pays profit on maturity. In case of natural
death, the unpaid saving amount of the contract is assured by the insurance company. In case
of an accidental death, a lump sum amount of PKR 40000 is paid to the legal heir.
The product has been launched nationwide through 60 branches. Total male female ratio is
43:57, while urban rural ratio of FBT clients is 25:75 clients save for a variety of purposes
such as education of their children, expansion of business and for emergencies.

Policy and Procedure

Monthly Saving: 100, 300, 500 and 1000
Profit rate

: 1 year 7%, 2 years 7.50%, 3 years 8.50%, 4 years 9.50%, 5 years 10.50%

Saving Tenure : 1 to 5 Years

Within a group, each member can have different installment option.

However, duration of the contract for each group member should be the
same.
Profit Accrual:
The system calculates the profit accrued on FBT accounts on daily basis; however, credit of
the profit shall be
given to the client at maturity of the FBC. Amount encashed before 1- year, irrespective of the
contractual tenure, will not be entitled for the payment of profit. In case of premature
encashment, profit payments
would follow the same rules as applicable in case of premature TDR encashments. For
amount encashed
before maturity but any time after one year, profit rate of last completed year will be given.
(example; for a 2-year FBT contract, if amount encashed after 23-months, profit rate
applicable to 1- year will be given on total accumulated deposit and likewise for other years.
Triggers for Termination
The FBT account shall be auto terminated after 85- days of the due date in case a periodic
contribution is not
deposited or a written request for termination is received from the group. After auto
termination, system will auto transfer total accumulated saving amount along with accrued
profit, till the last completed year after deduction of 3-months insurance premium, in his/her
current/ saving account. In case a client submits a written request to terminate his/her FBT
account, account will be terminated manually and will manually transfer total accumulated
saving amount along with accrued profit, till the last completed year after deduction of
insurance premium, in his/her current/ saving account. Insurance premium in this case will be
dependent on time of delay in installment after its due date; 01 premium will be deducted
in case termination after 01- month delay. 02 premiums will be deducted in case of
termination after 02- months delay. 03 premiums will be deducted in case of termination
after 85- days delay.
Maturity of FBT
On maturity of the FBT account, the FBT account shall be auto closed by the system and the
total savings with accrued profit shall be auto transferred to the clients current/saving
account. In case the group requests for a renewal of the FBT, new FBT accounts shall be
opened after the previous accounts are closed. In case the client desires to withdraw his/her
savings at maturity, withdrawal slip shall be presented for payment. The signatures on the
withdrawal slip shall be duly attested by the BOI/Teller before the amount can be withdrawn.
The policies as laid down in the deposit Manual shall be adhered to.

Cash Department
Unlike other departments in the bank, Cash Department also categorises itself as one of the
important department of the bank. Its significance being obvious by the fact that banking

started because of transactions relating to cash its safe keeping, trading etc. Efficient
management of cash is needed to execute payments, collect receivables and maintain liquidity.
Cash Collection
Cash collection is accompanied by cash deposit slip. The slip contains the account number,
title of account and denomination of cash deposited both in words and in figures followed by
the signature of the depositor. The cash received is counted and is verified with the deposit
slip. Entries for cash deposits are recorded before handling over receipts to the customer.
Customers copy of the deposit slip is handed over to the depositor. Before cash deposit slip is
released, it is matched and validated with the entries in the register for cash collection.
Cash Payment
Amount of payment of cash in a single transaction is fixed. Payments beyond a certain limits
are supported to be approved by an appropriate authority. Before payment, the cheque must be
checked for staling, post dated, payees name, crossing, amount both in words and in figures
and authentication of alterations. Tellers verify signatures on cheque before payment. In case
of illiterate account holder the customer is identified through the photograph available in the
banks record and thumb impression attested under the full signature of the teller who is
authorized to approve the transaction.