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FRANCHISE AGREEMENT

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					                                  FRANCHISE AGREEMENT


This Franchise Agreement (the „Agreement‟) is made and executed, on this, the [insert date]day
of [insert month] 2008;


BY AND BETWEEN


Intellectual Capital Advisory Services (P) Limited, a company incorporated under the
provisions of the Companies Act, 1956 and having its registered office at 701-B, Churchgate
Chambers, 5 New Marine Lines, Mumbai – 400020 (hereinafter referred to as “Intellecap”
which expression shall unless repugnant to the context thereof mean and include its successors
and assigns) of the One Part; and


[insert name of the franchisee], a company incorporated under the provisions of the Companies
Act, 1956 and having its registered office at [enter address of the Franchisee] (hereinafter referred
to as the “Franchisee” which expression shall unless repugnant to the context thereof mean
and include its successors and permitted assigns) of the Other Part.


(Intellecap and the Franchisee are collectively referred to as the “Parties” and individually
referred to as “Party”)


WHEREAS


   A Intellecap is one amongst the fastest growing consulting companies in the development
       sector, with a vision to create and deliver replicable mainstream solutions to global
       development problems by coordinating people, information and capital internationally;
   B The Franchisee is in the business of or desirous of entering into the business of
       promoting productive, humane, and sustainable livelihood among the poor and
       marginalized, especially women and is currently planning operations in [enter the
       geographic area];
     C Intellecap is currently incubating “IntelleCash”, a comprehensive franchise programme
        for conducting Microfinance Operations in [enter the geographic area], the operations of
        which it wishes to franchise by setting up IntelleCash Franchises;

     D Intellecap had made a proposal to the Franchisee on [enter date of proposal], which the
        Franchisee has accepted by his letter dated [insert date of acceptance by Franchisee];

     E The Parties desire to formalize the terms of their understanding to be spelt out in an
        agreement and have hence, entered into this Agreement in relation to the Project on the
        terms and conditions set out herein below.


NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND THE
TERMS AND CONDITIONS HEREINAFTER SET OUT, IT IS AGREED AS FOLLOWS:


1.      DEFINITIONS
In this agreement, unless the context otherwise requires, the following words shall have the
meaning ascribed to them by this Clause.
“Aavishkaar Goodwell” means Aavishkaar Goodwell India Microfinance Development
Company;
“Package Fee” means the fee payable by the Franchisee to Intellecap in accordance with
Clause 6, consisting of an amount of Rs. 15,00,000;
“Affiliate” in relation to Intellecap shall mean any person that directly or indirectly through
one or more intermediaries Controls, is Controlled by, or is under the common Control of
Intellecap;
“Agreement” shall mean and include this agreement including all terms and conditions
mentioned herein, and the Annexures attached hereto, as may be amended from time to time
as consented by both the Parties in writing;
“Annexures” shall mean and include Annexures attached hereto, including the amendments
made to them from time to time by mutual consent of the Parties in writing;
“Below Poverty Line” means a collective family livelihood that does not exceed USD 4 per
day;

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“Confidential Information” means the contents of the Programme, the Operations Manual
and all non-public information disclosed (whether in writing, orally or by another means) by
or through Intellecap or its Affiliates and any other information specified as Confidential
Information in this Contract, or subsequently identified as such, in writing, by Intellecap. Such
information includes information expressly or implicitly marked or disclosed as confidential,
including all forms and types of financial, economic, business, and information which
Intellecap is required to keep confidential pursuant to an agreement with a third party;
“Control” shall mean the beneficial ownership directly or indirectly of more than 50% of the
voting securities or interest of any person or control of the majority of the composition of the
board of directors or control substantially the day to day affairs and management of the
person or power to direct the management or policies of such person by contract or otherwise;
“Effective Date” means the date on which this Agreement is signed by the Parties hereto;
“Event of Default” means an event as set out in Clause 17;
“Expiration Date” means the date falling after a period of five (5) years from the Effective
Date;
“Exit Fee” means the fee payable by the Franchisee to Intellecap in accordance with Clause
6.10;
“Fees” shall include the Franchise Fee, the Up-front Fee and the Package Fee;
“FINO” means and refers to Financial Innovation Network Organisation, which is the
provider of the MIS to Intellecap and its Franchisees;
“Financial Year” means the year beginning on 1st April every year and ending on 31st March of
the subsequent year;
“Franchise” means the central office of the Franchisee, along with the complete set up of all
the branch offices, and the Franchisee staff, as described in the Operations Manual;
“Grants” means donations availed from a foundation, charity, governmental organization,
non-governmental organization, financial institution or any other entity which extends capital
without the expectation of any financial repayment;
“Franchise Fee” means the fee payable by the Franchisee to Intellecap which shall be a
percentage of the Monthly Revenue and calculated as set out in Clause 5.1;


                                            3
“Institutional Strategic Assessment” means the appraisal carried out by Intellecap or any
third party appointed by Intellecap on the business of the Franchisee;
“IntelleCash” or “IntelleCash Package” or “IntelleCash Programme” refers to the
IntelleCash Microfinance Franchise Programme provided to the Franchisee by Intellecap
pursuant to this Agreement, and includes certain information and services, such as all
manuals, training, operations and support services and linkages in relation to Microfinance
Operations, as updated from time to time;
“Intellectual Property Rights” means all intellectual property rights and includes copyrights,
patents, trade marks, service marks, database rights and rights to extract data, trade secrets,
trade dress, the trade names/ trademarks and other proprietary rights, all whether registered
or not, applications for any of the foregoing and all other similar rights recognized in any part
of the world associated with Intellecap, IntelleCash and any trade name and / or logos and/
or brands and/ or signage associated therewith and all goodwill attached thereto;
“MIS” means the management information system to be installed by the Franchisee pursuant
to Clause 4.1.2 (v);
“Microfinance Operations” means the provision of credit, and other financial services to the
Target Base     as specified in this Agreement and in such manner as is described in the
Operations Manual provided in the Programme;
“Monthly Revenue” means the gross revenue earned by the Franchisee on a monthly basis;
“Operations Manual” means the set of documents prepared by Intellecap that provide
guidelines and procedures for carrying out the Microfinance Operations, as annexed hereto at
Annexure C;
“Target Group” means and includes women whose collective family livelihood is Below
Poverty Line;
“Up-front Fee” means the aggregate fee payable by the Franchisee to Intellecap in accordance
with Clause 6, consisting of an amount of (i) Rs. 5,00,000 towards the IntelleCash Package and
(ii) Rs. 2,50,000 towards the training.


2.     INTERPRETATION
In this Agreement, unless otherwise specified:
                                            4
i.      Headings are for convenience only and do not affect the interpretation of this
        Agreement;
ii.     All references to a “person” or “Person” include an individual, company,
        partnership, trust, joint venture, association, corporation or other body corporate
        and any Governmental Agency;
iii.    The term “control”, together with its grammatical variations, when used with
        respect to any person, means and includes the power to direct the management
        and policies of such person, directly or indirectly, whether through the
        ownership of vote carrying securities, by contract or otherwise howsoever
iv.     A reference to a “Party” to any document includes that party‟s successors,
        executors and permitted assigns, as the case may be;
v.      All references in this Agreement to any statute or statutory provision shall
        include:
           a. all subordinate legislation made from time to time under that provision
              (whether or not amended, modified, re-enacted or consolidated);
           b. and such provision as from time to time amended, modified, re-enacted or
              consolidated (whether before or after the date of this Agreement) to the
              extent such amendment, modification, re-enactment or consolidation
              applies or is capable of applying to any transactions entered into under
              this Agreement and (to the extent liability thereunder may exist or can
              arise) shall include any past statutory provision (as from time to time
              amended, modified, re-enacted or consolidated) which the provision
              referred to has directly or indirectly replaced;
vi.     All references in this Agreement to any agreement, deed, document, schedule or
        anexure shall include all a reference to such agreement, deed, document,
        schedule or annexure as may be amended, modified, supplemented and/or
        restated from time to time;
vii.    Words denoting the singular include the plural and vice-versa;
viii.   Words denoting one gender only shall include the other genders including the
        „neuter‟ gender;
                                      5
      ix.     Unless otherwise specified, whenever any payment to be made or action to be
              taken under this Agreement, is required to be made or taken on a day other than
              a Business Day, such payment shall be made or action be taken on the
              immediately following Business Day;
      x.      All references in this Agreement to Clauses and Annexures shall be construed as
              references respectively to the Clauses and Annexures of this Agreement;
      xi.     The terms “herein”, “hereof”, “hereto”, “hereunder” and words of a similar
              purport refer to this Agreement as a whole;
      xii.    In the computation of periods of time from a specified date to a later specified
              date, the words “from” and “commencing on” mean “from and including” and
              “commencing on and including”, respectively, and the words “to”, “until” and
              “ending on” each mean “to but not including”, “until but not including” and
              “ending on but not including” respectively;
      xiii.   Save where the contrary is indicated, any reference in this Agreement to a time of
              day shall be construed as a reference to local time in Mumbai, India;
      xiv.    The Annexures shall form an integral part of this Agreement and all provisions
              contained in the Annexures hereunder written shall have effect in the manner as
              if they were specifically set forth herein; and
      xv.     The recitals contained herein shall constitute an integral operative part of this
              Agreement.


3. GRANT OF LICENCE
3.1   Intellecap hereby grants the Franchisee a non-exclusive and non-transferable license, to
      operate the Franchise during the Term of this Agreement, subject to the terms and
      conditions contained herein.


4. ELIGIBILITY CRITERIA
4.1   The Franchisee shall be permitted to operate the Franchise subject to strict compliance
      with the following minimum requirements prior to initiation of Microfinance
      Operations:
                                             6
      4.1.1   Staffing Requirements
                 i. A Chief Executive Officer who may either be the promoter or a nominee
                    of the promoter who is an appropriate individual who can assume the
                    designated role and responsibility of a CEO and has the requisite
                    professional background, ability to communicate, management experience
                    and general competency to operate such a business;
                  ii. A Chief Operations Officer;
                  iii. Securing a minimum of one branch location having an area of [300 square
                     feet];
                  iv. Minimum of one Branch Manager, one MIS Executive, and one Cashier;
                  v. Minimum of 5 Centre Managers
      4.1.2   Additional Requirements
                  i. The Franchisee should be a legally existing entity, registered with the
                     appropriate authority (such as a Trust, Section 25 Company, Pvt. Ltd.
                     company);
                  ii. Hardware and software necessary to run the MIS system.
                  iii. The Franchisee should have a signed agreement with FINO or, if no
                     reasonable agreement could be reached with FINO, an MIS system that
                     has been approved by Intellecap in writing prior to such usage;
                  iv. The Franchisee should have signed an agreement letter with Aavishkaar
                     Goodwell giving them the right of first refusal for equity investment as
                     and when the Franchisee is raising equity.
      4.1.3   Financing Requirements
                  i. In addition to the Up-front Fee, the Franchisee should have a minimum
                     start up capital of at least Rs. 25 lakhs


5. SCOPE OF SERVICES
5.1   The Franchisee herein undertakes to provide Services to the Target Base, as detailed in
      the Scope of Services attached herein as Annexure A.


                                            7
5.2    It is expressly understood and agreed that maintaining the Franchise and the expenses
      for operating and maintaining the Franchise including, but not limited to, costs towards
      acquisition of capital assets, recurring expenses, and establishment cost, shall be borne
      solely and exclusively by the Franchisee.
5.3   The Parties agree that the profit and loss arising from the establishment and operation
      of the Franchise shall be entirely to the account of the Franchisee subject to payment of
      the Fees and/or expenses to Intellecap as stipulated hereunder.
5.4   If requested by Intellecap, the Franchisee shall provide Intellecap with a detailed
      program and a schedule of its resources showing to Intellecap‟s satisfaction how it
      intends to proceed with the Franchise, this Agreement and Annexures annexed hereto.
5.5   Subject to complying with the necessary conditions under this Agreement, the
      Franchisee shall be entitled to set up additional branches of the Franchise. Intellecap
      may, at its sole discretion, assist the Franchisee in setting up such additional branches,
      at an additional fee payable to Intellecap.


6. FEES
6.1   Intellecap shall be entitled to the following Fees at specified intervals throughout the
      term of the Agreement, as stipulated in the table below:
                Fee payable             Amount                         Due Date
                                         (in Rs)
Up-front Fee                            7,50,000     30 days from the Effective Date
Package Fee                             15,00,000    Equal instalments payable 90 days from
                                                     the Effective Date; 180 days from the
                                                     Effective Date and 270 days from the
                                                     Effective Date.
Franchise Fee                                        Payable quarterly
The Franchise Fee shall be calculated as a           within forty five (45) days from the end
percentage                                           of each quarter of every Financial Year.
                                  3.0%
of the Monthly Revenue (MR), on a slab- of MR
wise basis                              2.5 % of MR + Rs.
                                            8
- If the MR is less than Rs. 5,000,000      2.0 % of MR + Rs.
- If the MR is between Rs. 5,000,001 and
      40,000,000
- If Monthly Revenue is greater than
Rs. 40,000,000
6.2      To facilitate the capacity building of the Franchise, the Franchisee is entitled to avail
         Grants and Intellecap may assist the Franchisee in this regard.
6.3      The Up-front Fee is payable by the Franchisee to Intellecap within 30 days of the
         Effective Date of the Agreement.
6.4      Notwithstanding what is stated in Clause 6.3 above, the Parties agree that if the
         Franchisee is able to source Grants, the complete Up-front Fee and the Package Fee shall
         be payable to Intellecap within 15 days from the date of receiving such Grants by the
         Franchisee. The Franchisee shall use the Grant, at its sole discretion, provided that the
         payments due to Intellecap as per Clause 6.1 are made on their due dates.
6.5      In the event that the Franchisee does not make the payment of the entire Up-front Fee
         or the entire Package Fee as specified herein, as and when the Franchisee receives any
         Grants, it shall immediately pay the balance Up-front Fee, and / or the balance Package
         Fee to Intellecap.
6.6      Any further support required by the Franchisee, other than those covered by Annexure
         A, shall be subject to payment of additional fees to Intellecap.
6.7      Within seven (7) days of each subsequent quarter (three month period) of operation of
         the Franchise during the first Financial Year, the Franchisee shall pay to Intellecap, an
         Package Fee of Rs. 5,00,000.
6.8      Within thirty (30) days of the end of each quarter (three month period) of operation of
         the Franchise during each Financial Year, the Franchisee shall compute the Monthly
         Revenue for the corresponding period. The Franchisee shall then calculate the amount
         due to Intellecap, based on the slabs mentioned at Clause 6.1 above, and pay that
         amount to Intellecap within forty five (45) days from the end of each quarter.
6.9      In the event that the Franchisee is able to procure a Grant(s), it shall ensure that one-
         third of such Grant is paid to Intellecap within 15 days from the date of receiving such
                                               9
        Grants by the Franchisee. This advance payment shall be set off against the Franchise
        Fee due by the Franchisee to Intellecap at the end of each quarter.
6.10    In the event of termination of the Agreement by the Franchisee at any time prior to the
        Expiration Date, the Franchisee shall be liable to pay Exit Fees to Intellecap in the
        manner set forth hereunder. The payment of the Exit Fees by the Franchisee to
        Intellecap shall be in addition to the payment of the Up-front Fee, the Package Fee and
        the Franchise Fee. The Exit Fees shall be paid by the Franchisee to Intellecap within 15
        days from the date of termination of the Agreement.
6.11    The Exit Fee shall be calculated in the following manner:


Fee payable                                  Amount              Due Date
                                              (in Rs)
1. Upon termination of the Agreement by 20,00,000                15 days from date of Termination
the Franchisee within 3 years from the                           of the Agreement
Effective Date and prior to the Expiration
Date


                                             Average        of    the
2. Termination of the Agreement by                               15 days from date of Termination
                                             Franchisee          Fees
the Franchisee after 3 years from the                            of the Agreement
                                             payable by
Effective Date and prior to the Expiration
                                             the Franchisee
Date.
                                             in the six months
                                             preceding the
                                             date of
                                             Termination,
                                             multiplied
                                             by 12.




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7. TERM
7.1   This Agreement shall become effective from the Effective Date and shall continue to be
      in full force and effect until the Expiration Date, unless sooner terminated under the
      terms of this Agreement.
7.2   The Parties shall, 60 days prior to the Expiration Date, mutually decide whether to
      renew the Agreement, with or without any changes to the current document, which
      decision shall be made not later than thirty (30) days prior to the Expiration Date.
      Failing such decision being taken within the time specified herein, this Agreement shall
      terminate on the Expiration Date.
7.3   In the event of termination of the Agreement by the Franchisee at any time prior to the
      Expiration Date, the Franchisee shall be liable for such payments as is contained in
      Clause 6.10.


8. OPERATION OF THE FRANCHISE
8.1   The Franchise shall begin Microfinance Operations within [insert number of days] of the
      conclusion of the training pursuant to the IntelleCash Programme (as reasonably
      determined by Intellecap).
8.2   The Franchisee shall operate the Franchise in accordance with the IntelleCash
      Programme, Scope of Services, Operations Manual and any other written directives
      prepared for use in Franchise operations and provided to the Franchisee, which may or
      may not be made an Annexure to this Agreement. The IntelleCash Programme and
      such written directives may be periodically revised by Intellecap, in consultation with
      and/or upon receiving suggestions from the Franchisee or other franchisees.
8.3   The Franchisee shall forward to Intellecap within five (5) days of Franchisee's receipt
      thereof, copies of all inspection reports, warnings, certificates and ratings issued by any
      governmental entity during the Term of this Agreement, in connection with the conduct
      of the franchised business.
8.4   The Franchisee acknowledges that the material aspect of the IntelleCash Programme is
      the (i) Operations Manual and (ii) Quality of service standards and undertakes to :


                                           11
         a.      Offer only such products and services that are a part of the IntelleCash
                 Programme and ensure that such products and services are prepared, offered
                 and served or delivered in accordance with the Operations Manual to the
                 Target Base;
         b.      Offer all products and services required by Intellecap and in the manner
                 required by Intellecap;
         c.      refrain from any deviations which are unauthorised by Intellecap, from the
                 IntelleCash Programme until cash breakeven is reached and thereafter not
                 deviate without Intellecap‟s prior written approval;
         d.      discontinue selling or offering any product and services to which Intellecap
                 may, in their sole discretion, fail to consent, or revoke its consent, in writing.
8.5   If the Franchisee comes up with an innovative product and service, while operating the
      Franchise in the manner laid down above, the Franchisee shall be obliged to share that
      product or service with Intellecap. Intellecap, in turn, shall determine on a case to case
      basis whether to allow such an innovation in product and service in writing. For the
      betterment of all Intellecap‟s franchisee‟s clients, Intellecap shall have the right to share
      such an innovation in product and service and utilise the same across the franchisee
      network.
8.6   The Franchisee acknowledges that Intellecap has extensive expertise in the field of
      microfinance and is ideally suited to take decisions vis-à-vis the addition of a new
      product and/or services which would be in the best interests of the Franchisee and the
      Franchisee therefore agrees to be bound by the suggestions of Intellecap vis-à-vis
      business plans and operations.
8.7   The Operations Manuals, written directives and any other Confidential Information
      shall be kept in a secure location in the Franchise and returned to Intellecap upon
      termination or expiration of this Agreement.
8.8   The Franchisee shall keep the manuals, the standards, and the written directives of
      Intellecap up to date. In the event of any dispute as to the contents, the copy maintained
      by Intellecap shall prevail.


                                             12
8.9    The Franchisee shall have the right to establish branches of the Franchise, in accordance
       with Clause 5.5.
8.10   Intellecap reserves the right to conduct interviews with member of the Target Base,
       their families, and neighbours as regards the quality and construction of their housing
       and their neighbors housing, a measurement of the families fixed assets and so on.


9. INTELLECAP’S DUTIES AND OBLIGATIONS
9.1    Intellecap shall provide to the Franchisee the following as part of the IntelleCash
       Package:
        (i). Manuals
           a.        Registration & Legal Forms
           b.        Area Lucrativeness Index (ALI)
           c.        Funding
           d.        Human Resources
           e.        Recruitment & Training
           f.        Operations
           g.        MIS (provided in accordance with Clause 4.1.2(v))
           h.        Accounts
           i.        Internal Audits
           j.        Progress Report
       (ii). A customized financial model with growth and break-even projections and
                business plan adapted to the local context of the Franchisee
       (iii). Promoter and Senior Staff Microfinance Training Materials


9.2    Intellecap shall ensure the Franchisee‟s introduction to FINO and to Aavishkaar
       Goodwell for the purpose of compliance with Clause 4.1.2 of this Agreement. However,
       the Franchisee shall negotiate and thereafter enter into independent agreements with
       FINO and Aavishkaar Goodwell.
9.3    The Franchisee acknowledges that Intellecap, in addition to providing the initial
       training, details of which are specified at Annexure B, and field exposure, either directly
                                               13
      or through any third party, will also provide continuous mentoring support besides
      direct onsite support, for a period not to exceed four (4) months from the Effective Date,
      in accordance with the Annexure A. The Franchisee further acknowledges that the
      Franchise Fee mentioned herein is a fair compensation for the services to be provided
      by Intellecap.
9.4   Any additional visits of Intellecap, made upon the Franchisee‟s request, would be
      charged at a per diem rate to be agreed upon at the time of the additional visit request,
      per person, excluding the costs incurred towards ravel, food and lodging, which would
      be borne by the Franchisee on actuals.
9.5   Both Parties acknowledge that this engagement is aimed at taking the Franchisee to a
      larger scale in its areas of operation. The Intellecap also acknowledges that with
      significant growth of the Franchisee, the absolute amount of the Franchise Fee, will also
      increase significantly. Intellecap further acknowledges that the Franchise Fee should be
      payable, pursuant to the services provided by Intellecap. Hence, an upper cap of [Rs.
      3,00,000] will be applicable on the Franchise Fee that will be payable to the Intellecap.
9.6   Intellecap shall provide the Franchisee access to new IntelleCash Programme
      developments from time to time. The Franchisee may be required to attend meetings at
      its own expense to discuss such developments.
9.7   Intellecap shall provide the Franchisee with access to written materials concerning
      improvements to the IntelleCash Programme. Intellecap shall also provide training or
      demonstrations at the franchise of new products or other changes to the IntelleCash
      Programme. The Franchisee shall bear or reimburse the expenses in connection with
      such demonstrations.
9.8   Subject to Clause 7.2, Intellecap, shall provide continued mentoring support to the
      Franchisee across all the microfinance functions including, but not limited to
      operations, accounting, internal audits and human resources.
9.9   Intellecap shall provide to the Franchisee, on the Effective Date, the format and
      frequency of all progress and performance reports required under Clause 10.3.


10. FRANCHISEE 'S DUTIES AND OBLIGATIONS:
                                           14
10.1   The Franchisee shall, at all times, meet the requirement for facilities and equipment as
       set forth in the Operations Manual, the eligibility criteria set out at Clause 4 and the
       business plan prepared for the Franchisee in consultation with Intellecap.
10.2   The Franchisee shall maintain all equipment in good working order, and procure the
       appropriate version and number of copies of the required materials for each Franchise
       as required and prescribed in the Operations Manual.
10.3   The Franchisee shall provide all the relevant progress and performance reports
       pursuant to the operations and the performance of the Franchise. The necessary format
       and frequency of such reports will be made available to the Franchisee on the Effective
       Date, and may be revised periodically by Intellecap.
10.4   In the event that the Franchisee wishes to avail of funding by offering equity in the
       Franchisee, it shall first approach Aavishkaar Goodwell. If Aavishkaar Goodwell rejects
       such application in writing, the Franchisee shall be free to approach any other entity for
       such form of funding.
10.5   The Franchisee shall enter into an independent agreement with FINO for the
       installation and use of the MIS. Failing such agreement, the Franchisee shall install such
       MIS as is otherwise approved by Intellecap in writing, prior to such installation and use.
10.6   The Franchisee shall employ sufficient personnel, to assist in operating the Franchise
       over the Site, and shall at all times maintain the minimum staffing requirements
       prescribed by Intellecap, as set out in Annexure D.
10.7   Intellecap shall at its sole discretion, carry out a periodic inspection and evaluation of
       the Franchise and have the right to assess the training, documentation, and the
       performance level of the Franchisee‟s staff, facilities and equipment. Intellecap‟
       representatives may with or without prior notice, conduct checks on the quality of the
       Franchisee's training course during the assessment and recommend in writing, plans to
       correct any deficiency in, or requirement for additional training equipment or materials.


11. INSTITUTIONAL STRATEGIC ASSESSMENT
11.1   To monitor the working of the Franchise, Intellecap shall be entitled to conduct a
       Franchisee Institutional Strategic Assessment exercise every quarter until termination of
                                            15
       this Agreement. As part of the exercise, one or more consultant(s) representing
       Intellecap shall visit the Franchise for three (3) days, conduct meetings and interviews
       with the Franchisee staff and management, make visits to the Franchisee‟s field, review
       the Franchisee‟s overall performance, and then provide an Institutional Strategic
       Assessment Report to the Franchisee within 30 days after completing the visit and
       audit.
11.2   The Franchisee acknowledges that maintaining the quality standards and adhering to
       the practices of the IntelleCash Programme is critical to the success of the Franchisee, as
       well as the Franchise, and that the Franchisee Institutional Strategic Assessment is an
       important exercise towards improving the quality of the Franchise. Hence, the
       Franchisee agrees to share its reports, documents, financial statements and any other
       relevant information as requested by Intellecap during the Franchisee Institutional
       Strategic Assessment. Any deficiency in or requirement for additional training
       equipment or recommendations on the improvement of materials submitted in writing
       to the Franchisee by Intellecap under Clause 11.1 above, shall be acted upon and
       rectified immediately by the Franchisee.
11.3   As part of the Institutional Strategic Assessment (to be carried out by Intellecap on a
       quarterly basis) Intellecap shall also be entitled to review the Franchisee‟s Monthly
       Revenues for the preceding quarter. Any difference in the calculation of Monthly
       Revenues will be corrected by the Parties during this exercise and the balance amount,
       if any, will be paid to the Franchisee or Intellecap (whichever is applicable) by the other
       Party within fifteen (15) days from the submission of the Institutional Strategic
       Assessment report.
11.4   The costs of the quarterly Institutional Strategic Assessments to be carried out by
       Intellecap under Clause 11.1, shall be borne by Intellecap.
11.5   The checklist of information required for the Institutional Strategic Assessment will be
       annexed as Annexure E to this Agreement.
11.6   The Franchisee shall, within thirty (30) days from the Institutional Strategic Assessment
       report from Intellecap, comply with all the recommendations set out therein.
12. INTELLECTUAL PROPERTY:
                                            16
12.1   The Franchisee is authorized to use the IntelleCash Programme for the sole and
       exclusive purpose of conducting Microfinance Operations .
12.2   The Franchisee is authorized (on a non exclusive basis) to use the Intellectual Property
       entrusted under this Agreement in connection with its advertising and marketing, but
       only in accordance with Intellecap‟s policies, and only during the subsistence of this
       Agreement. The Franchisee must get the prior written approval of Intellecap for such
       advertising and marketing.
12.3   The Franchisee recognizes Intellecap‟s sole ownership and title to Intellectual Property
       and the goodwill attached to the Intellectual Property and agrees not to use, employ or
       attempt to register any marks or trade names, which are similar to Intellectual Property
       in any manner whatsoever. Franchisee shall not, directly or indirectly, apply for,
       register, and attempt to obtain, or obtain control of the Intellectual Property which
       resemble, or are deceptively or confusingly similar to, the Intellectual Property, in any
       country or political sub-division thereof.
12.4   During the Term or after termination of this Agreement, Franchisee shall not use any
       business trade or industrial information of Intellecap which may come to its knowledge
       in connection with its activities, nor make such information available to third parties.
12.5   During the Term, Franchisee shall identify itself as a "licensed IntelleCash franchisee" of
       Intellecap (i) In conjunction with any use of the Intellectual Property including, without
       limitation, invoices, order forms, receipts, contracts, stationary and business cards; and
       (ii) In a notice of such content and form and at conspicuous locations in the Franchise as
       Intellecap may designate in writing;
12.6   Franchisee shall immediately notify Intellecap of any (i) Infringement of the Intellectual
       Property or challenge to the use of any thereof or (ii) Claim by any person of any rights
       in or to any of the Intellectual Property. Franchisee shall not communicate with any
       person except Intellecap and Intellecap‟s counsel in connection with any such
       infringement, challenge or claim and such information shall be considered to be
       Confidential Information.
12.7   Intellecap will supply to the Franchisee, course materials, including but not limited to
       updates for instructors and trainees, slides, overheads, videos, manuals, workbooks,
                                              17
        product documentation and selected handouts developed and required for training the
        staff of the Franchisee. All training course materials are protected by copyright and
        shall not be reproduced in any manner whatsoever. This is an additional cost for the
        Franchisee and would be recovered as an up-front bundled fee.
12.8    Any unauthorized reprinting, photo-copying, or copying of Intellecap‟s training
        materials, by any means whatever will constitute a material breach of this Contract and
        will be grounds for termination under Clause 18 of the Contract.
12.9    All training materials shall be returned to Intellecap‟s at the Expiration or Termination
        of this Agreement
12.10   Any other use of any Intellectual Property/ IntelleCash Programme/ training materials
        other than as aforesaid shall constitute an infringement of Intellecap‟s rights therein.
        Franchisee expressly acknowledges and agrees that a breach of any of the provisions of
        this section on Intellectual Property by Franchisee shall constitute a material breach of
        this Contract, and shall be grounds for termination by Intellecap of this Contract under
        Clause 18 of the Agreement
12.11   The provisions of this Clause on Intellectual Property shall survive the expiration or
        termination of this Agreement. All licenses given to the Franchisee under this
        Agreement (whether with respect to the IntelleCash Programme or with respect to the
        Intellectual Property or the training materials or otherwise) shall expire upon
        termination/ expiration of this Agreement, unless specifically agreed otherwise by the
        parties in writing. Upon the Expiration Date or termination of the Agreement, the
        Franchisee agrees to erase all display, advertising and use of any and all Intellecap
        Intellectual Property. Franchisee agrees not to alter, cease or overprint any notice
        provided by Intellecap and not to attach any additional trademarks without prior
        written consent of Intellecap.


13. CONFIDENTIAL INFORMATION
13.1    Franchisee shall not communicate, disclose or use any Confidential Information except
        as (i) permitted herein or (ii) required by law, and shall use all reasonable efforts to
        maintain such information as secret and confidential. Franchisee shall not, without
                                            18
       Intellecap‟s prior consent, copy, duplicate record or otherwise reproduce any
       Confidential Information. Confidential Information may be provided to employees,
       agents, consultants and contractors only to the extent necessary for such parties to
       provide services to the Franchisee. Prior to such disclosure of any Confidential
       Information each of such employees, agents, consultants and contractors shall (a) be
       advised by Franchisee of the confidential and proprietary nature of the Confidential
       Information and (b) agree to be bound by the terms and conditions of this Agreement
       relating to confidentiality.
13.2   Immediately upon any termination or expiration hereof, Franchisee shall return the
       Confidential Information including, without limitation, that portion of the Confidential
       Information which consists of analyses, compilations, studies or other documents
       containing or referring to any part of the Confidential Information, prepared by
       Franchisee, their agents, representatives or employees, and all copies thereof.
13.3   Intellecap has the right to use anonymous information pertaining to the Franchise to
       demonstrate qualitatively and quantitatively, the growth and improvement of the
       Franchise. In the event that Intellecap wishes to use any Franchisee Confidential
       Information, it shall first obtain the prior written approval of the Franchisee.


14. ACCOUNTING AND RECORDS
14.1   Franchisee shall prepare in accordance with the IntelleCash Programme and generally
       accepted accounting principles i.e., the Indian Accounting Standards issued by the
       Institute of Chartered Accountants of India (ICAI), and preserve for the periods
       specified in the Operations Manual, complete and accurate books, records accounts and
       MIS with respect to the Franchise and other reports or disclosures required or permitted
       herein and in the Manuals including, without limitation, statement of account of all
       loans and advances, purchase orders, invoices, payroll records, bank statements, tax
       records and returns, cash receipts and disbursements, journals and ledgers, in a form
       and manner prescribed in the Manuals or otherwise in writing.
14.2   Franchisee shall submit to Intellecap such additional reports, records, data, information,
       financial statements (including, without limitation, quarterly, half-yearly and annual
                                             19
       statements of Cash Flow, Profit and Loss and Balance Sheet of the Franchisee) as
       Intellecap may reasonably require or as specified from time to time in the Operations
       Manuals in a form reasonably required. Intellecap may inspect copy and audit all of the
       documents and information and the books, records and tax returns of Franchisee at any
       time during normal business hours upon five (5) days prior notice.
14.3   The annual financial statements requested by Intellecap shall be audited and certified
       no less than once in a year by a reputable, independent, certified chartered accountant,
       all to be done at the cost of the Franchisee. All financial statements or reports shall be
       accompanied by a certificate of the Franchisee to the effect that such statements or
       reports fairly and accurately reflect the matters reported therein and are complete and
       correct.


15. FRANCHISEE'S REPRESENTATIONS AND WARRANTIES AND COVENANTS
15.1   The Franchisee represents and warrants to Intellecap as follows:
   i   Franchisee is duly organized, validly existing and in good standing under the laws of
       the jurisdiction of its organization with all requisite power and authority to own,
       operate and lease its assets (real or personal), to carry on its business, and to enter into
       this Agreement and perform its obligations hereunder.
   ii Franchisee is duly qualified to do business and is in good standing in each jurisdiction
       in which its business or the ownership of its assets requires and satisfies the eligibility
       criteria prescribed by Intellecap, for obtaining the Franchise;
   iii The execution, delivery and performance by Franchisee of this Agreement has been
       duly authorized by all requisite action and no further action is necessary to make this
       Contract or such other agreements valid and binding upon it and enforceable against it
       in accordance with their respective terms.
   iv The Franchisee‟s performance of the Contract shall not constitute a violation of any
       judgment, order, or decree.
   v Certified copies of Franchisee's Memorandum and Articles of Association, partnership
       or shareholders agreements, other governing documents and any amendments thereto,


                                             20
       including board of director's or partner's resolutions authorizing this Agreement, will
       be delivered to the Franchisor before the signing of this Agreement.
15.2   Franchisee affirmatively covenants with Intellecap as follows:
   i   Franchisee shall perform its duties and obligations hereunder and shall require each of
       their employees to dedicate their respective full time and best efforts to the
       development, construction, management, operation, supervision and promotion of the
       Franchise in accordance with the terms and conditions hereof.
   ii Franchisee shall promptly share with Intellecap all information concerning any new
       process or improvements in the development, construction, management, operation,
       supervision or promotion of the Franchise developed by Franchisee without
       compensation. The Franchisee understands that this is necessary in order to encourage
       information and innovation sharing in the franchisee network. By following this, the
       Franchisee also stands to benefit from process innovations, product development etc. of
       other franchisees in the network.
15.3   Franchisee acknowledges to and/or negatively covenants with Intellecap that it shall
       not amend its articles of incorporation, by-laws, partnership agreement or other
       governing documents in a manner which is inconsistent with this Agreement;
15.4   Franchisee shall receive valuable unique training, trade secrets and Confidential
       Information which are beyond the present skills, experience and knowledge of any
       Franchisee's employees. Franchisee acknowledges (i) That such training, trade secrets
       constitute Confidential Information (1) are essential to the development of the Franchise
       and (2) provide a competitive advantage to the Franchisee and (3), access to such
       training, trade secrets and the Confidential Information is a primary reason for their
       execution of this Agreement.. In consideration thereof, Franchisee covenants that,
       during the Term and for a period of one (1) Year after the expiration or termination
       hereof, Franchisee shall not, directly or indirectly employ or seek to employ any person
       (or induce such person to leave his or her employment) who is, or has within one (1)
       year been, employed by Intellecap.
15.5   This clause shall survive the expiration or termination of this Agreement.


                                            21
16. TRANSFER & ASSIGNMENTS
16.1   Intellecap may not assign this Agreement or any of its rights herein, to any person or
       entity without Franchisee's consent.
16.2   Franchisee acknowledges that the Franchisee's rights and obligations herein are
       personal to Franchisee and that Intellecap has entered into this Agreement relying upon
       the business skill, experience and aptitude, financial resources and reputation of
       Franchisee. Therefore, Franchisee, their respective successors or permitted assigns, shall
       not complete any transfer/ assignment without Intellecap prior written consent. Any
       purported transfer, by operation of law or otherwise, without Intellecap consent shall
       be null and void and constitute an event of default.


17. CONSENT AND WAIVER
17.1   As and when required, the Franchisee shall obtain the prior approval of Intellecap, in
       writing. Neither Intellecap‟s nor the Franchisee's consent shall be unreasonably
       withheld under this Agreement. The foregoing not withstanding, where either Party's
       consent is expressly reserved to such Party's sole discretion, the exercise of such
       discretion shall not be subject to contest.
17.2   Intellecap makes no representations or warranties upon which Franchisee may rely and
       Intellecap assume no liability or obligation to Franchisee or any third party by
       providing any waiver, advice, consent or services to Franchisee or due to any delay or
       denial thereof.
17.3   A waiver by either of the Parties hereto of any breach by the other Party of any of the
       terms, provisions or conditions of the Agreement or the acquiescence of either Party
       hereto in any act (whether commission or omission) which but for such acquiescence
       would be a breach as aforesaid, shall not constitute a general waiver of such term,
       provision or condition of any subsequent act contrary thereto.


18. EVENT OF DEFAULT
18.1   The following events shall constitute Events of Default by the Franchisee:


                                              22
   i   Failure to (a) Commence or complete the roll out plan of the Franchise in accordance
       with Clause 8.1 or (b) Open and thereafter continually operate the Franchise, as
       described herein;
   ii The breach or falsity of any representation or warranty made in Clause 15;
   iii Failure to comply with or perform its covenants, obligations and agreements herein;
   iv Any assignment or transfer that occurs other than as provided in this Agreement;
   v Failure to make any payment of Up-front Fees, Package Fees or Franchise Fees on or
       before the date payable; and
   vi Failure to maintain the standards required of it.
18.2   If any Event of Default occurs then Intellecap shall upon notice to Franchisee in
       accordance with Clause 27, provide a reasonable cure period of 30 days for the same
       and the Franchisee shall ensure that the Event of Default is cured within such period. In
       the event the Franchisee fails to cure such Events of Default within thirty (30) days from
       receipt of the notice, Intellecap shall be entitled to terminate this Contract in accordance
       with Clause 22.
18.3   Upon the occurrence of an Event of Default by Franchisee, Intellecap may exercise one
       or more of the following remedies or such other remedies as may be available at law or
       in equity:
18.4   The following shall constitute Events of Default by Intellecap:
   i   Failure to comply with or perform Intellecap obligations and agreements herein for a
       continuing period of thirty (30) days from the date on which a notice of non compliance
       is provided to Intellecap by the Franchisee;
18.5   Upon the occurrence of an Event of Default by Intellecap, Franchisee shall, provide a
       thirty (30) day notice of cure to Intellecap. In the event Intellecap fails to cure such
       Events of Default within thirty (30) days from receipt of the notice, the Franchisee shall
       be entitled to terminate this Contract in accordance with Clause 22.


19. INDEMNIFICATION
19.1   The Franchisee shall at all times, indemnify and hold harmless, Intellecap, to the fullest
       extent permitted by law, from all losses and expenses incurred in connection with any
                                            23
       action, suit, proceeding, claim, demand, investigation or inquiry (formal or informal), or
       any settlement thereof (whether or not a formal proceeding or action has been
       instituted) which arise out of or is based upon any of the following:
   i   The infringement, alleged infringement, or any other violation or alleged violation by
       Franchisee of any Proprietary Mark, patent, mark or copyright or other proprietary
       right owned or controlled by third parties.
   ii The violation, breach or asserted violation or breach by Franchisee of any contract, law,
       regulation, ruling, standard or directive or any industry standard.
   iii Libel, slander or any other form of defamation of Intellecap or the IntelleCash
       Programme, by the Franchisee.
   iv The violation or breach by Franchisee of any warranty, representation, agreement or
       obligation in this Contract.
   v Acts, errors or omissions of Franchisee or any of its agents, servants, employees,
       contractors, partners, affiliates or representatives.
19.2   The Franchisee agrees to give Intellecap immediate notice of any such action, suit,
       proceeding, claim, demand, inquiry or investigation.
19.3   Intellecap does not assume any liability whatsoever for acts, errors, or omissions of
       those with whom Franchisee may contract, regardless of the purpose, without the prior
       written consent of Intellecap. Franchisee shall hold harmless and indemnify Intellecap
       for all losses and expenses, which may arise out of any acts, errors or omissions of these
       third parties.


20. INSURANCE
20.1   Throughout the term of this Agreement, Franchisee shall maintain at its own expense,
       and require its Assignee, in the event of an Assignment approved by Intellecap under
       Clause 16.2, to maintain at their own expense or Franchisee's expense, insurance of the
       type and in the amounts set forth herein below:
       (i). Workers' Compensation and Employer's Liability Insurance in accordance with the
       applicable laws. The policy limit under the Employer's Liability Insurance section shall
       not be less than Rs. [amount to be inserted];
                                              24
             (ii)      Commercial General Liability Insurance covering the Franchisee‟s duties and
             obligations and everything incidental thereto, under this Contract with limits of not less
             than Rs. [amount to be inserted];
             (iii)     Errors and Omissions or Professional Liability/Errors and Omissions Liability
             Insurance in the amount of not less than Rs. [amount to be inserted] to meet
             indemnification claims of Intellecap under.


20.2         Certificates of Insurance listing the required coverage maintained by the Franchisee, in
             a form acceptable to Intellecap shall be filed with Intellecap within 60 days from
             execution of this Agreement.


21. FORCE MAJEURE
21.1          “Force Majeure” means and includes any of the following events:
         i.         Fire, explosion, cyclone, floods;
        ii.         War, revolution, acts of public enemies, blockage or embargo;
       iii.         Accident, death, illness or bereavement of any personnel deputed to provide the
                    Services;
       iv.          Any law, order, proclamation, ordinance, demand or requirements of any
                    Government or authority or representative of any such government including
                    restrictive trade practices or regulation;
        v.          Strikes, shutdowns or labor disputes which are not instigated for the purpose of
                    avoiding obligations herein, or;


21.2         No Party shall be liable for any inability to perform resulting from Force Majeure;
             provided, however, that nothing herein shall excuse or permit any delay or failure (i) to
             remit any Fees on the date due; or (ii) for more than one hundred and eighty (180) days.
21.3         The Party whose performance is affected by an event of Force Majeure shall, within
             three (3) days of the occurrence of such event, give notice thereof to the other Party
             setting forth the nature thereof and an estimate of its duration.


                                                        25
21.4   Notwithstanding the foregoing, if, through no fault of Franchisee, the Franchise is
       damaged or destroyed by an event such that it cannot, in Intellecap‟s judgment,
       reasonably be restored within one hundred and twenty (120) days thereafter, then
       Franchisee may, within sixty (60) days after such event, apply for Intellecap consent to
       relocate and/or reconstruct the Franchise, which consent shall not be unreasonably
       withheld.


22. TERMINATION AND OBLIGATIONS UPON TERMINATION OR EXPIRATION
22.1   Termination for cause by either Party
   i   In the event of one Party becoming bankrupt or having a receiver appointed for its
       assets or any proceedings being commenced for the dissolution, liquidation or
       bankruptcy of such Party, or it being incapacitated for any reason from acting as such
       and performing its duties and obligations hereunder, the other Party shall have the
       right to terminate this Agreement by providing 7 Days‟ written notice.
   ii In the event that a Party commits an Event of Default, the other Party may terminate the
       Agreement, after giving thirty (30) Days‟ written notice to the other Party to rectify such
       breach. In the event that such Event of Default has not been rectified at the end of the 30
       Day notice period, or is incapable of rectification, the other Party shall be entitled to
       terminate the Agreement immediately.
   iii In the event that an event of Force Majeuere continues for more than one hundred and
       eighty (180) Days.



22.2   Termination by Intellecap
22.2.1 Intellecap may terminate this Agreement immediately,
   i   For breach of the provisions pertaining to protection of Intellectual Property under
       Clause 12;
   ii For failure by the Franchisee to comply with any of the Eligibility Criteria set out at
       Clause 4;
   iii For breach of the provisions pertaining to Confidential Information under Clause 13;
   iv For breach of the representations and warranties set out in Clause 15;
                                            26
       v If the Franchisee provides Microfinance Operations to any person other than belonging
          to the Target Base;
       vi If the Franchisee employs any illegal means and / or physical violence and / or
          threatens the Target Base or any family members of such Target Base, as a method for
          recovery of the microfinance credit;
       vii If, in the opinion of Intellecap, there has been any act of gross mismanagement by the
          Franchisee; and
       viii If the Franchisee fails to comply with any law for the time being in force, as applicable
          to such Franchisee.


22.2.2 Upon any termination or expiration of this Contract, all rights granted to the Franchisee
          herein shall terminate and the Franchisee shall:
i.        Immediately cease to use any Intellectual Property;
ii.       Return all IntelleCash Programmes, Operation Manuals, related material, and the
          training materials detailed in Clause 12;
iii.      Make payment of Package Fee and Up-front Fee, if any, due and pending to Intellecap
          under Clause 6;
iv.       Make payment of all Franchise Fees which are due and pending to Intellecap for all
          months from the Effective Date till the date of termination.
v.        Make payment of the Exit Fees to Intellecap under Clause 6.10;
vi.       Within thirty (30) days after the termination or expiration hereof, make such alterations
          to the Franchise as may be necessary, in Intellecap‟s reasonable judgment, to distinguish
          the appearance of its offices, branches and locations where it carries on its operations to
          ensure that the same do not indicate any continuation of the arrangement between the
          Franchisee and Intellecap including, but not be limited to:
          - Removal of Neon/Glow Sign Board
          - Removal of Certificate of License and
          - Removal of Poster, Banners, Laminates;
          - Removal of Hoardings, Road Markers etc; and
          - Removal of Authorized Franchise Certificates.
                                                 27
22.3   Subsequent to any termination or expiration of this Agreement, the Franchisee shall not:
i.     Use the Intellectual Property or any reproduction, counterfeit, copy or imitation of any
       of the Intellectual Property which could cause confusion, mistake, or deception as to the
       source of origin or which could dilute Intellecap‟s rights in and to any part of the
       Intellectual Property;
ii.    Utilize any designation of origin, description or representation which suggests an
       association or connection with Intellecap; or
iii.   Replicate the IntelleCash Programme or any part thereof.


23. NON-COMPETE
23.1   The Franchisee shall not accept a license similar to the license granted under Clause 3
       of this Agreement , nor undertake to perform duties and obligations similar or identical
       to those stipulated under this Agreement, for any third party, during the Term of this
       Agreement


24. SEVERABILITY
24.1   If any term or provision of the Agreement thereof to any person or circumstances shall,
       to any extent and for any reason, be invalid or unenforceable, the remainder of the
       Agreement thereof to persons or circumstances other than those as to which it is held
       invalid or unenforceable, shall not be affected thereby and each term and provision of
       the Agreement shall be valid and be enforced to the fullest extent permitted by law.


25. INDEPENDENT CONTRACTOR
25.1   The Franchisee is an independent contractor and the Parties agree that nothing herein
       shall create the relationship of principal and agent, legal representative, joint ventures,
       partners, employee and employer or master and servant between the Parties.


26. NON-EXCLUSIVITY


                                            28
26.1   The Parties agree that the license is non-exclusive and Intellecap retains the right to
       enter into similar or other with any other entity as it may deem fit at its sole discretion
       from time to time.


27. NOTICES
27.1   All notices required or desired to be given hereunder shall be in writing and shall be
       sent by personal delivery, facsimile or certified mail, return receipt requested to the
       following addresses


If to Intellecap:
Fax No.:
Postal Address:


If to Franchisee:
Fax No.:
Postal Address:


27.2   Notices by personal delivery shall be deemed given at the time of delivery. Notices
       given by facsimile shall be deemed given the next business day after transmission.
       Notices posted by certified mail shall be deemed received three (3) Business Days after
       the date of posting. Any change in the foregoing addresses shall be effected by giving
       fifteen (15) days written notice of such change to the other Party.


28. DISPUTE SETTLEMENT & ARBITRATION
28.1   Any dispute or difference arising out of or in connection with this Agreement including
       any question regarding its construction, meaning, effect, existence, validity or
       termination or the respective rights, duties or liabilities of the Parties hereunder shall be
       referred to the Dispute Settlement Committee.




                                             29
28.2   The Dispute Settlement Committee will comprise of two trustees from the Franchisee‟s
       Board and two consultants from Intellecap, both at the Associate Vice President Level
       or above.
28.3   The Dispute Settlement Committee will try to resolve any or all the issues in connection
       with this Contract by reaching a consensus. However, in the event of the Dispute
       Settlement Committee not being able to reach a consensus, the dispute will be finally
       resolved by arbitration by a Sole Arbitrator to be appointed under the Arbitration and
       Conciliation Act, 1996.
28.4   The language of arbitration shall be in English and the place of arbitration shall be
       Hyderabad.
28.5   Awards relating to any dispute shall be final, conclusive and binding on the Parties to
       such dispute as from the date they are made.


29. COUNTERPARTS
29.1   The Agreement may be executed in any number of counterparts, each of which shall
       constitute an original and all of which together shall constitute one and the same
       instrument.


30. ENTIRE AGREEMENT; AMENDMENTS
30.1   Except as expressly provided in the Agreement, this Agreement represents the entire
       agreement between the Parties with respect to its subject matter, and there are no other
       representations, understandings or agreements between the Parties relative to such
       subject matter. No amendment to, or change, waiver or discharge of, any provision of
       the Agreement shall be valid unless in writing and signed by authorized representatives
       of both Parties.


31. GOVERNING LAW AND JURISDICTION
31.1   This Agreement and the validity and performance thereof shall in all respects be
       governed by the laws of India and the Parties agree that the courts at Hyderabad will
       have exclusive jurisdiction in connection with disputes arising out of this Agreement.

                                           30
IN WITNESS WHEREOF the parties hereto have set their respective hands and seals to this
Agreement on the day month and year first above written


In presence of Witnesses


1)




2)




[INTELLECAP]




Authorised Signatory




[FRANCHISEE]




                                         31
                                                   Annexure A
                                                 Scope of Services
Services Outline
Each IntelleCash franchisee is assisted with various services, tools, and the benefit of the extended
franchisee network as they pass through the six stages of the franchisee lifecycle:

      1. Assess:                 Calculates the franchisee‟s needs and requirements
      2. Design:                 Produces a detailed plan of action for the franchisee
      3. Fund:                   Assists the franchisee in acquiring on-lending and capacity building
                                 funds
      4. Recruit &Train:         Ensures that the franchisee has a capable workforce
      5. Launch:                 Provides on-site handholding for the franchisee
      6. Grow:                   Guides the franchisee to rapid and sustainable growth

1. Assess
Once an entrepreneur has completed our screening process and been selected as a potential franchisee,
the Assess phase begins. This consists of IntelleCash‟s Area Lucrativeness Index (ALI), a surveying tool
designed to calculate the commercial potential of the microfinance business in a particular geography. 1
This process is carried out by the IntelleCash Sales Team and the results of this effort are shared with the
franchisee through the ALI Report.

Each ALI survey is carried out through a mixture of infield research and secondary data. The Sales Team
measure the Franchisee‟s chosen area of operations on six criteria: Demographic Profile, Economic
Indicators, Socio- Political Environment, Microfinance scenario, Competition and Infrastructure. Each of
these factors is assessed and given a rating in terms of its impact on future microfinance operations. At
the end of this process, the ratings are totalled, weighted according to their significance and a final ALI
rating between one and five is calculated. According to our projections, a minimum ALI score of two is
needed for a franchisee to operate profitably.
IntelleCash also provides an ALI guide to the franchisee so that they can thoroughly understand ALI
methodology, and eventually conduct their own ALI surveys for further branch expansion.

2. Design
If the district which the franchisee has selected meets the ALI parameters, the next step is to design the
franchise. Working with IntelleCash, the franchisee completes a business plan and chooses the
appropriate MIS technology for their operations. IntelleCash has a business planning template which is
structured enough to ensure that all aspects of the proposed company have been addressed, but flexible
enough to ensure that it can apply to a variety of different local conditions. This includes financial
requirements, human resources, expansion plan, marketing strategy, organizational and governance
structure, and the opportunities and risks they face in successfully executing their business plan.

To supply franchisee software needs, IntelleCash has partnered with FINO, whose specialist MFI MIS
system is considered an industry leader. Uniquely among microfinance MIS software, FINO‟s system can
be upgraded to incorporate additional BOP financial services (including smart cards) at a later date.

Finally, the entrepreneur will need to decide on the legal form that the MFI should take. IntelleCash has
created a Registration Guide, a step-by-step manual to help the entrepreneur understand the strengths
and weaknesses of the different organizational options available for carrying out microfinance operations.
This guide helps franchisees understand the different legal forms and the opportunities and constraints
afforded by each.

3. Fund




1
    See Annexure Area Lucrativeness Index Tool
                                                     32
IntelleCash‟s ability to assist entrepreneurs with securing on-lending and capacity building funds is a
major part of its value proposition. The resources and requirements of each franchisee will differ, but in
general they follow a progression from grants and soft loans, moving on to commercial debt, guarantees
and bonds as the franchisee achieves scale.
Although IntelleCash is not itself a funding body, franchisees are given expert guidance on how to choose
and apply for appropriate forms of funding.

Suggestions for suitable grant funding agencies and assistance with grant application writing are often
given in the early stages of a franchisee‟s growth. Franchisees are also encouraged to make us of our
debt funding relationships with banks, including ICICI Bank, Citibank and others.
For more established MFIs, IntelleCash has an equity funding agreement with Aavishkaar Goodwell, a
for-profit business development company. Aavishkaar Goodwell is committed to providing equity finance
to promising microfinance organizations.

4. Recruit & Train
To begin operations in earnest, the entrepreneur needs to build a team. IntelleCash provides the
entrepreneur with a Recruitment Manual, and intensive handholding during the recruitment phase,
allowing the franchisee to be staffed with well qualified, well motivated staff from the outset.

The recruitment requirements of a start-up franchisee are particularly pressing, and require careful
preparation.

Of the all staff positions, the most urgent is the COO, since he/she will recruited first, and will have a
significant input into all future hiring decisions. The COO‟s role is pivotal in other respects: as the middle
management of the franchisee, he/she forms the link between field operations and the executive decision
makers.

Because the relationship between CEO and COO is so important, IntelleCash encourages start-up
franchisee promoters to select the COO themselves. Nevertheless, the COO is expected to be educated
to degree level or beyond, have substantial experience in the microfinance sector, be financially literate,
as well as familiar with the area of operations. Ideally they will have lived or grown up in the same region
as the first franchisee branch.

Both CEO and COO undergo an intensive induction process with IntelleCash staff, lasting 5 days. The
induction process is intended to thoroughly prepare both parties for their role in the franchisee, to build up
a close relationship with IntelleCash and to answer any queries that they may have about the IntelleCash
lifecycle.

The remaining staff are recruited following a standard procedure of recruitment camps in the local area of
operations. For their first recruitment drive, the franchisee receives close guidance from IntelleCash staff.
However, as subsequent recruitment will have to take place with less input from IntelleCash, the
franchisee is encouraged to take charge of the procedure from the outset.

Planning a recruitment camp follows a six point action plan, laid out in the Recruitment Manual:
        1. Manpower estimates
        2. Selection of recruitment site
        3. Creation of timetable for entire recruitment programme
        4. Advertising for candidates
        5. Holding the camp
        6. Short listing candidates
Among the key considerations are the balance between local knowledge and relevant qualifications; the
pressure to maintain candidate quality and still meet recruitment numbers; and the balance between
franchisee autonomy and IntelleCash guidance.

For existing MFIs the pressure to recruit is generally less acute. Nevertheless, IntelleCash reserves the
right to veto any member of staff who is felt to be unsuitable, regardless of seniority and longevity in the
institution.

                                                     33
Because existing franchisees are expected to grow rapidly after joining IntelleCash, recruitment camps for
new staff are generally necessary soon after joining IntelleCash. They follow the same template as for
start-ups.

Once the entrepreneur has a team in place, they are sent for two or more weeks training and field
exposure in Varanasi. Our leading training partner CASHPOR provides each recruit with in-class
instruction and extended on-the-ground exposure. Each staff member is attached to a CASHPOR
employee of similar rank and function so they can observe the model in action. This experience, ranging
from two to four weeks, gives the franchisee‟s staff the skills and knowledge required to begin operations
in the field.

Training and exposure support is complemented with a series of written reference manuals that cover
subjects such as Operations, Internal Audits, the MIS, Accounts, and Training manuals. These manuals
serve as a refresher guide for the staff and reinforce the CASHPOR training programme.

5. Launch
During the Launch phase, the franchisee begins making their first loans according to the IntelleCash
model, and inducting loan clients into the IntelleCash system.

In the case of a start-up, there will also be the need to open new branches. For existing MFIs,
considerable effort also needs to be expended on planning the transition between the previous lending
model and the IntelleCash system. Franchisees in this position are provided with a Transition Manual,
and are assisted in timetabling the full changeover to IntelleCash.

During the Launch phase, all franchisees also have an IntelleCash Franchising Implementation Expert
(FIE) stationed with them for hand holding and troubleshooting support for up to three months.

FIEs are trained in the franchising process and provide help in a number of areas including MIS,
accounts, operations, and client outreach.

During their posting with the Franchisee, the FIE works out of one of IntelleCash‟s mobile field offices,
generally within walking distance of the Franchisee main office. This proximity to field operations has
proved to be essential in generating credibility and confidence in the franchisee as it begins operations.
Mobile branches are minimally furnished are closed or opened according to IntelleCash‟s assessment of
franchisee needs.

The FIE‟s main tool in communicating the franchisee‟s needs to IntelleCash is the weekly Progress
Report, which follows a strict format for monitoring areas of concern and progress made in resolving any
issues.

Sample page from the Weekly Progress Report that will be used for each franchisee

6. Grow
All franchisees are given ambitious growth targets from the outset. To help them achieve these ambitions,
IntelleCash remains closely involved in all its franchisees‟ activities after the Launch phase is complete
(generally no more than four months). .
To ensure that the franchisee is reaching its growth targets and adhering to the IntelleCash model,
quarterly Franchisee Strategic Assessment are conducted on every MFI for the first two years. These
audits then occur twice-yearly thereafter. For IntelleCash, this mechanism ensures that brand equity is
being created and maintained, that standards are adhered to and that royalty repayments correspond
with franchisee growth. For the franchisee, the audit is an opportunity to troubleshoot persistent problems,
identify areas of weakness and receive expert guidance. Each Franchisee also receives an Assesment
Grade from IntelleCash, based on a star system.


       Franchisee Assessment Grade                            Condition of Franchisee
                                                   Unsatisfactory
                     1 Star
                                                   Franchisee is either falling significantly below
                                                    34
                                                  its projected growth and outreach targets or
                                                  failing to adhere to the IntelleCash model.
                                                  Remedial action is recommended, beginning
                                                  with discussion between IntelleCash and the
                                                  CEO.
                                                  Satisfactory
                                                  Franchisee is meeting growth and outreach
                    2 Stars
                                                  targets, and is broadly adhering to the
                                                  IntelleCash model.
                                                  Outstanding
                                                  Franchisee has significantly exceeded growth
                    3 Stars
                                                  and outreach targets and is adhering to the
                                                  IntelleCash model.

The assessment grading system is of particular importance to franchisees as they seek external funding
and outside investment. A two or three star audit grade will act as a benchmark of quality and credibility
for even relatively small start-up MFIs.

In addition to the audit system, the franchisee is entitled to an Annual Refresher Visit which gives the
franchisee and two members of his staff a two day visit to CASHPOR training facilities and a one day
discussion at IntelleCash head office to address problems or brainstorm around opportunities the
franchisee may be facing.




                                                   35
                                            Annexure B
                               Institutional Strategic Assessment

Field operations

    Timely arrival of CM and clients in the center meetings
    Sitting arrangement (whether clients know their place and sitting properly)
    Checking of deposit slip against due on the CDS and verbal verification of the
     installments paid by each members
    Loan amount verification with the clients, its purpose and utilisation, also check the
     Targeting (UM/AM will visit 2 member's houses in every center visit to check on
     targetting/loan utilization)
    Whether all the clients know that they will not handover cash(like prepayments or weekly
     collections) to any staff other than the Branch office in presence of BM. Also check on
     knowledge of clients on grievance redressal procedure
    Check for dormant members
    Attendance trend of the clients over last month (5 weeks) from Signature
    Client’s knowledge of interest rate
    Client’s knowledge of conditions of rescheduling and visit to defaulters
    Standardization of application, registration, appraisal and mutual support.
    Microfinance program is supportive and responsive to requirements of the clients
    OTRR
    PAR

Accounting/Financial management

    Presence of required persons during the collection and disbursement and all procedures
     followed
    Key registers and physical verification of the keys
    Physical tally of cash with vault register and cash books
    Checking of collection and disbursement of last working day against due collection and
     disbursement, CDS, cash book and vault register
    Checking of Bank register and its updation (reconciliation/rectification) according to
     financial procedure
    Whether any excess idle fund lying at the branch.
    Checking of expenses against allocated budget and whether it is supported by proper
     vouchers.
    Whether necessary loan documents executed at the time of loan disbursement including
     KYC and it is available in centre file

Efficiency

      Loan clients recognition rate against targets
      Loan outstanding against target
      GRT: IAD verification of targeting
      Week since clients waiting for loan disbursement
      Repayment rate and corrective measures taken if it is below 100%
                                             36
    Staff motivation/mobilization
    Quick compliance with guidelines issued from HO and irregularities pointed out
    Rotation of staff amongst the existing centers when due (semi-annual)

Branch Management

    Mixed staff population
    Standard furniture and placement with special attention to updation of notice board
    Fixation of sign boards with HO and DO telephone nos.
    Systematic Record Keeping (centre files, CDS, manual vouchers)
    Cleanliness of the Branch Office, toilet, kitchen and utensils
    Updation of records and registers at the branch with special attention to monitoring,
     movement, and attendance register.
    Team work: all staff live at the branch; take meals together, proper services of cook etc.
    Staff discipline and punctuality
    Reporting, planning motivation at the night by MBM

Systems and processes
    Does the manual exist
    Are administrative procedures formal and functional
    Internal audit is regular function
    Proper information system in place with organized data collection, analysis and
      dissemination, with computerization
    Data is consolidated and shared across every level of the organization, used in decision
      making.
    Data is consolidated and shared with external agencies when necessitated, used in
      planning.
    Business planning is completed
    Business planning is done in consultation with the staff and adhered to by the staff.

Human Resource and Development
   HR policy exists and is adhered to
   Well developed recruitment strategy based on background , experience and field
     exposure
   Staff development needs are assessed and used to develop training plans.
   Staff skills and background match with the microfinance program
   HRD plan in place. Performance appraisal are comprehensive

Financial statements
    Audited financial statements available
    Diverse source of funding which help in meeting the requirements of the organization
    Assets generating revenues for the organization
    Organization can meet its liabilities from its income sources
    OSS

Management
   Attendance in board meetings
   Management style:
                                              37
           oAutocratic directive style of management
           oManagement style is directive and controlling
           oManagement decisions are delegated, board-staff relationship is more consultative
           oDemocratic style of functioning with mechanisms to seek staff inputs and
            enabling staff to be proactive
    Delegation of power and responsibilities

Penalty System for different types of irregularities/non -compliance committed by staff
members at different level:
S.no.   Irregularities/Non-Compliance               Punishment

    1   Client Selection:                           For CM-
                                                    If it is less than 5% of total LC, issue advisory
                                                    note
                                                    If it is more than 5% & less than 10% of total LC,
                                                    issue show cause that
                                                    why not penalty @Rs.10/- each loan client
        Wrong targeting                             should be imposed
                                                    If answer is unsatisfactory, then penalty will be
        Client from distant village                 imposed
                                                    If it is more than 10% of total LC, impose
        Kin relation                                penalty@Rs.20/- per client
        Staff did not visit client house before
        selection                                   and also initiate disciplinary action against staff

                                                    For MBM/any higher field functionary directly
                                                    responsible for GRT-
                                                    If it is less than 5% of total LC, issue advisory
                                                    note
                                                    If it is more than 5% & less than 10% of total LC,
                                                    issue warning letter
        (if any of four is not being done
        properly, monetary punishment will          If it is more than 10% of total LC, issue show
        be same and if there will be any            cause notice, if reply is unsatisfactory, we will
        additional item, punishment will be         deduct the salary of one month of concerned
        multiplied by No. of items not done         supervisor and if the charges are serious, we
        properly)                                   may take action as per procedure.

    2   Credit discipline
                                                    For CM-
        Less attendance of clients, Late
        arrival of staff & clients at the Centre,   If it is less than 5% of total Centers, issue
        improper sitting arrangement,               advisory note
                                                    If it is more than 5% & less than 10% of total
        habitual default in weekly payment of       Centers, issue show cause that why not penalty
        due installment                             @Rs.10/- each loan client should be imposed
                                                    why not penalty @Rs.10/- each centre should
                                                    be imposed
         (if any of five is not being done
        properly, monetary punishment will
        be same and if there will be any
        additional item, punishment will be
        multiplied by No. of items not done         If answer is unsatisfactory, then penalty will be
        properly)                                   imposed
                                                    If it is more than 10% of total Centers, impose
                                                      38
                                               penalty@Rs.20/- per Centre
                                               and also initiate disciplinary action against staff.

                                               For MBM/any higher field functionary directly
                                               responsible for monitoring -
                                               If it is less than 5% of total Centers, issue
                                               advisory note
                                               If it is more than 5% & less than 10% of total
                                               Centers, issue warning letter
                                               If it is more than 10% of total Centers, issue
                                               show cause notice, if reply is unsatisfactory, we
                                               will deduct the salary of concerned supervisor
                                               for one month and if the charges are serious, we
                                               may take action as per procedure


3   Loan approval and utilization              For CM-
                                               If it is less than 5% of total LC, issue advisory
                                               note
    Approval of loan beyond                    If it is more than 5% & less than 10% of total LC,
    ceiling/repayment capacity of client,      issue show cause that
    improper utilization of loan, pipelining   why not penalty @Rs.10/- each loan client
    of loan                                    should be imposed
     (if any of four is not being done
    properly, monetary punishment will
    be same and if there will be any
    additional item, punishment will be
    multiplied by No. of items not done        If answer is unsatisfactory, then penalty will be
    properly)                                  imposed
    (If there is any phantom loan              If it is more than 10% of total LC, impose
    detected at Centre of CM,                  penalty@Rs.20/- per client
    concerned CM must be terminated in
    due course and                             and also initiate disciplinary action against staff.
    concerned disbursing authority must
    be demoted)
                                               For MBM/any higher field functionary directly
                                               responsible for monitoring-
                                               If it is less than 5% of total LC, issue advisory
                                               note
                                               If it is more than 5% & less than 10% of total LC,
                                               issue warning letter
                                               If it is more than 10% of total LC, issue show
                                               cause notice, if reply is unsatisfactory, we will
                                               deduct the salary of concerned supervisor for
                                               one month and if the charges are serious, we
                                               may take action as per procedure

4   Client's knowledge & awareness

    Clients knowledge about terms and
    conditions of the loan                     For CM-
    and awareness about the Company            If it is less than 5% of total Centers, issue
    with special attention                     advisory note
                                               If it is more than 5% & less than 10% of total
    to interest rate, policy regarding         Centres, issue show cause that why not penalty
    rescheduling of loan, -                    @Rs.10/- each loan client should be imposed

                                                 39
    grievance redressal procedure,        why not penalty @Rs.10/- each centre should
    procedure of prepayment, weekly       be imposed
                                          If answer is unsatisfactory, then penalty will be
    installment collection etc.           imposed
                                          If it is more than 10% of total Centre, impose
                                          penalty@Rs.20/- per client
    (if any of six is not being done
    properly, monetary punishment will
    be same and if there will be any
    additional item, punishment will be
    multiplied by No. of items not done
    properly)                             and also initiate disciplinary action against staff.

                                          For MBM/any higher field functionary directly
                                          responsible for monitoring-
                                          If it is less than 5% of total Centres, issue
                                          advisory note
                                          If it is more than 5% & less than 10% of total
                                          Centres, issue warning letter
                                          If it is more than 10% of total Centres, issue
                                          show cause notice, if reply is unsatisfactory, we
                                          will deduct the salary of concerned supervisor
                                          for one month and if the charges are serious, we
                                          may take action as per procedure


5   Cash collection & disbursement        For MBM-

    Presence of required persons at the   If there is any client whom disbursement is
    time of disbursement                  made in previous
                                          month without following procedures, issue
    (If any of them is missing)           advisory note
                                          If it is more than 5% of total clients whom
                                          disbursement is made in previous
                                          month issue show cause notice, if reply is
                                          unsatisfactory, we will deduct the salary of
                                          concerned supervisor for one month and if the
                                          charges are serious, we may take action as per
                                          procedure

                                          If there is pipelining of loan

                                          1) For CM

                                          If there is any case of pipelining, CM has to
                                          deposit the amount equivalent to amount in
                                          pipelining immediately at the Branch, whenever
                                          it is detected

                                          2) For MBM
                                          If MBM has not been able to detect the case of
                                          pipelining loan during verification of Centres, we
                                          will recover his/her one month salary if pipelining
                                          amount has already been recoved, if pipelining
                                          amount has not been recovered, then he has to
                                          pay both

                                            40
                                               3) For all other supervisors and IAD team above
                                               rule for MBM will be applied.


                                               If there is any case of phantom loan

                                               above rule regarding pipelining will be applicable
                                               in the same way and we will also initiate
                                               disciplinary action against everyone concerned.


    If there is any misappropriation of
6   collection amount                          1) For CM
    which will include misapprppriation of     If CM embezzled it from Centre, whole maount
    advance installment, embezzlement          is to be recovered from him and initiate
    of prepayment, hiding of arrears etc       disciplinary action against him/her.

                                               2) For MBM
                                               If CM disapperaed after embezzling Centre
                                               Collection, all the staff of MBM have to make the
                                               loss good of the Company upto 60% and 40%
                                               amount will be recovered from MBM.

                                               3) If CM and MBM both have got the collision
                                               and by chance AM has not visited that MB in
                                               that week, AM has to pay the whole amount and
                                               in addition, AM will be demoted to the position of
                                               MBM. In this case definitely concerned CM and
                                               MBM will loose their job. In this case DM will get
                                               warning letter
                                               4) and if repeated DM will be demoted to the
                                               position of AM and AM will be terminated

7   i) Physical verification of key register   For MBM
    ii) Physical tally of cash with vault
    register and cash book
                                               If 5 cases found in a month of any type, MBM
    iii) Safe keeping of cheque books          will get advisory note
    iv) Checking of Bank Register and its      If more than five and less than 10, s/he will get
    updation                                   warning letter
    v) Checking of expenses against            If more than 10 cases, one month salary will be
    allocated budget                           deducted
    vi) KYC compliance and necessary
    loan documentation (if any of six is
    not being done properly, monetary
    punishment will be same and if there
    will be any additional item,               If more than 20 cases, appropriate disciplinary
    punishment will be multiplied by No.       action will be taken alongwith imposing penalty
    of items not done properly)                of deducting one month salary.

                                               For AM

                                               If 20 cases found in a month of any type, MBM
                                               will get advisory note
                                               If more than 20 and less than 40, s/he will get
                                                 41
                                          warning letter
                                          If more than 40 cases, one month salary will be
                                          deducted
                                          If more than 80 cases, appropriate disciplinary
                                          action will be taken alongwith imposing penalty
                                          of deducting one month salary.

                                          For DM

                                          If 80 cases found in a month of any type, MBM
                                          will get advisory note
                                          If more than 80 and less than 160, s/he will get
                                          warning letter
                                          If more than 160 cases, one month salary will be
                                          deducted
                                          If more than 320 cases, appropriate disciplinary
                                          action will be taken alongwith imposing penalty
                                          of deducting one month salary.

    Reconcilliation/Rectification of
8   Bank Accounts                         For MBM

                                          If it has not been reconciled/rectified timely,
                                          MBM will get the warning letter
                                          If pending for more than two months, one month
                                          salary will be deducted
                                          If any fraud took place due to non rectification of
                                          Company's account with banker's account,
                                          amount involved in fraud would be recovered
                                          from MBM and appropriate disciplinary action
                                          will be initiated.

                                          For AM

                                          If any bank account in his/her area is not
                                          rectified timely, s/he will get the warning letter
                                          If any account is pending for more than two
                                          months, one month salary will be deducted
                                          If any fraud took place due to non rectification of
                                          Company's account with banker's account,
                                          amount involved in fraud would be recovered
                                          from AM and appropriate disciplinary action will
                                          be initiated.

                                          FOR DM

                                          Same procedure to be followed as in the case of
                                          AM.


    If any excess idle fund is lying at
9   the Branch                            For MBM
                                          If there are 5 occasions in a month when there
                                          is a cash balance of more than Rs.80,000/- in
                                          bank account, MBM has to pay interest on
                                          excess amount for days it remained idle in Bnak.
                                            42
                                                If there are more than 10 occasions when there
                                                is a cash balance of more than Rs.80,000/- in
                                                bank account, MBM will be demoted to the
                                                position of CM.

                                                For AM

                                                If there are 5 occasions in a month when there
                                                is a cash balance of more than Rs.80,000/- in
                                                bank account, MBM has to pay interest on
                                                excess amount for days it remained idle in Bnak.

                                                If there are more than 10 occasions when there
                                                is a cash balance of more than Rs.80,000/- in
                                                bank account of his/her area, AM will be
                                                demoted to the position of MBM.

                                                For DM

                                                Same procedure has to be followed as in the
                                                case of AM.


     i) Rotation of staff amongst existing
10   centres on semi annual                     For MBM
     basis
     ii) Standard furniture and placement       If 5 cases found in a month of any type, MBM
     with special attention to                  will get advisory note
                                                If more than five and less than 10, s/he will get
     notice board                               warning letter
     iii) Fixation of sign board with DO and    If more than 10 cases, one month salary will be
     HO telephone Nos.                          deducted
                                                If more than 20 cases, appropriate disciplinary
     iv) Availability of operations manual in   action will be taken alongwith imposing penalty
     Hindi at MB                                of deducting one month salary.
     v) Cleanliness of Branch Office,
     kitchen, toilet & utensils
     vi) Updation of records/files and
     registers                                  For AM

     (if any of six is not being done
     properly, monetary punishment will
     be same and if there will be any
     additional item, punishment will be
     multiplied by No. of items not done        If 20 cases found in a month of any type, MBM
     properly)                                  will get advisory note
                                                If more than 20 and less than 40, s/he will get
                                                warning letter
                                                If more than 40 cases, one month salary will be
                                                deducted
                                                If more than 80 cases, appropriate disciplinary
                                                action will be taken alongwith imposing penalty
                                                of deducting one month salary.

                                                For DM

                                                  43
If 80 cases found in a month of any type, MBM
will get advisory note
If more than 80 and less than 160, s/he will get
warning letter
If more than 160 cases, one month salary will be
deducted
If more than 320 cases, appropriate disciplinary
action will be taken alongwith imposing penalty
of deducting one month salary.




  44
                                                                             Annexure C
                                                               OPERATIONS MANUAL

                                                                  CONTENTS
CHAPTER 1: INTELLECASH FRANCHISEE - AN OVERVIEW .................................................................... 47
  1.1 VISION AND MISSION ......................................................................................................................................... 47
  1.2 PRINCIPLES & PRACTICES ................................................................................................................................ 47
  1.3 ORGANIZATIONAL STRUCTURE AND OPERATIONAL MODEL ............................................................................ 49
  1.4 ROLES OF STAFF IN LENDING PROCESS .......................................................................................................... 51
  1.5 CREDIT OPERATIONS ........................................................................................................................................ 52
CHAPTER 2: CHANNELS AND PRODUCT ........................................................................................................ 55
  2.1 CHANNEL FOR LENDING: JOINT-LIABILITY GROUPS (CENTRES) ...................................................................... 55
  2.2 LOAN PRODUCT ................................................................................................................................................ 55
  2.3 APPROPRIATE INTEREST RATE ......................................................................................................................... 55
CHAPTER 3: LAUNCHING AND RUNNING THE OPERATIONS ................................................................. 57
  3.1 SETTING UP A BRANCH ..................................................................................................................................... 57
  3.2 TARGETING AND MOTIVATION OF POOR W OMEN............................................................................................. 57
  3.3 GROUP FORMATION .......................................................................................................................................... 65
  3.4 CONTINUOUS GROUP TRAINING (CGT) ........................................................................................................... 65
  3.5 CONDUCTING THE GROUP RECOGNITION TEST (GRT) ................................................................................... 66
  3.6 THE LENDING PROCESS ................................................................................................................................... 68
CHAPTER 4: FINANCIAL PROCEDURES AT THE FRANCHISEE............................................................... 74
  4.1 IMPORTANCE OF FINANCIAL PROCEDURES ....................................................................................................... 74
  4.2 SIGNING AUTHORITIES ...................................................................................................................................... 74
  4.3 FRANCHISEE BANK ACCOUNTS ........................................................................................................................ 76
  4.4. FUND MANAGEMENT AND TRANSFERS AMONG BRANCHES ............................................................................ 77
  4.5 VOUCHER & CHEQUE PREPARATION ............................................................................................................... 78
  4.6 BANK ACCOUNTS OF CLIENTS .......................................................................................................................... 79
  4.7 CHEQUES NOT UTILIZED................................................................................................................................... 79
  4.8 ANNUAL BUDGETS ............................................................................................................................................ 80
  4.9 QUARTERLY MONITORING OF ANNUAL BUDGETS ............................................................................................ 80
  4.10 PURCHASING & THE PURCHASE COMMITTEE ................................................................................................ 81
  4.11 PETTY CASH ................................................................................................................................................... 82
  4.12. LOAN APPROVAL............................................................................................................................................ 83
  4.13. CLEARING THE DEPOSIT POSITION OF THE CM AND DAILY CLOSING .......................................................... 84
CHAPTER 5: CREATING CREDIT DISCIPLINE & DELINQUENCY MANAGEMENT ............................ 88
  5.1 CREATING CREDIT DISCIPLINE ......................................................................................................................... 88
  5.2 DELINQUENCY MANAGEMENT ........................................................................................................................... 89
CHAPTER 6: MONITORING AND SUPERVISION ........................................................................................... 97
  6.1 REPORTING AND MIS........................................................................................................................................ 97
  6.2 FIELD VISITS BY BRANCH MANAGERS AND AREA MANAGERS....................................................................... 100
  6.3 CONDUCTING GRT ......................................................................................................................................... 104
CHAPTER 7: STAFF AND OFFICE RULES ...................................................................................................... 105
  7.1 THE FRANCHISEE IS IDENTIFIED WITH THE CONDUCT OF ITS STAFF .............................................................. 105
  7.2 RESPECT TO ALL ............................................................................................................................................. 105
  7.3 RELATIONSHIPS WITH FELLOW STAFF ............................................................................................................ 107
  7.5 IMPORTANT FINANCIAL RULES ........................................................................................................................ 108
  7.6 OFFICE RULES ................................................................................................................................................ 109
                                                                                 45
   7.7. DISCIPLINARY PROCEDURES ......................................................................................................................... 111
CHAPTER 8: HUMAN RESOURCE DEVELOPMENT .................................................................................... 117
   8.1 RECRUITMENT & TRAINING OF STAFF ............................................................................................................ 117
   8.2 PRODUCTIVITY INCENTIVES ............................................................................................................................ 119
   8.3 PROMOTION/CAREER DEVELOPMENT ............................................................................................................ 120
   8.5. OTHER BENEFITS ........................................................................................................................................... 120
   8.6 STAFF GRIEVANCE/SUGGESTION PROCEDURES ........................................................................................... 121
   8.7 JOB DESCRIPTIONS ......................................................................................................................................... 121
ANNEXURE 1: CHECKLIST OF APPROVED SETUP FOR BRANCH AND DISTRICT OFFICE ........... 128
ANNEXURE 2: OTHER ALLOWANCES ........................................................................................................... 129
ANNEXURE 3: FORM NO.1 ................................................................................................................................. 130
ANNEXURE 4: GRT FORM ................................................................................................................................. 131
ANNEXURE 5: STAFF UNDERTAKING ........................................................................................................... 133




                                                                                 46
                      Chapter 1: IntelleCash Franchisee - an Overview
This manual is intended to guide new IntelleCash franchisees throughout their initial period of
operations, and provide a reference point for key material covered in the IntelleCash training
programme. It is intended to work as a supplement to the specific manuals aimed at BMs, CM
and other staff, as well as providing COO and other senior staff with an overview of the whole
operating system.


                                   1.1 Vision and Mission
Each IntelleCash franchisee undergoes training with our main training partner, Cashpor.
Cashpor‟s microfinance philosophy is grounded in a far reaching mission and vision of
microfinance practice and is given below.


       Cashpor Vision:
       “We see the day when all poor women in rural India have access to efficient and
       sustainable microfinance services, and many are utilizing them to reduce the poverty of
       their households, while gaining self respect and better social position for themselves”.


       Cashpor Mission:
       “Our mission is to identify and motivate poor women in rural areas and to deliver
       financial services to them in an honest, timely and efficient manner so that our vision is
       realized and our organization becomes financially sustainable microfinance institution for
       the poor”.


                                  1.2 Principles & Practices
IntelleCash Franchisees operate according to a number of key guiding principles, which are
followed at all times. They are as follows:

   1. Exclusivity for Below Poverty Line (BPL) Women
   2. Joint Liability Groups
   3. Compulsory Attendance
   4. Small loans for Income-generation
   5. Timely, Honest Loan Disbursement
   6. Checking Loan Utilization
   7. Weekly Repayment
   8. Appropriate Interest Rate
   9. Provide Insurance Products as and when possible
                                               47
10. Re-scheduling of Loans
11. No Harsh Recovery Tactics or Language
12. Subsequent (larger if necessary) Loans




                                             48
                      1.3 Organizational Structure and Operational Model

The IntelleCash Franchisee is a Microfinance Institution (MFI) (called “the Franchisee”
hereafter), engaged in providing microfinance services to poor women. It provides small loans
to below poverty line (BPL) women who do not have access to banks. Its objective is to reduce
poverty in its area. The Franchisee operates on a branch model. Under this model, there is a
district office and each district office has 10 branch offices distributed in its command area.


District is headed by the District Manager (DM) (also know as the Chief Operations Officer or
COO) who is assisted by two Area Managers (AM). Each Area Manager looks after 5 branches.
The District Office has complete infrastructure like computers, generators, furniture etc. The
Management Information System (MIS) is maintained at the district level. The district has
support staff represented by an Accounts Officer and two MIS Executives. Each AM has an MIS
Executive for his area.


                     The Board                  CEO


           District Office                  DM/COO


                Accounts Officer                                    Internal Audit Officer


                    Area Manager                                         Area Manager




    Branch     Branch       Branch    Branch               Branch     Branch    Branch       Branch
       1          2            3         4                    1          2         3            4

 Branch Office                        Branch
                                      Manager


    MIS Executive     Cashier      CM Organizational         of     District
                                Fig.1: 1 CM 2 CM 3 structureCM 5the CM 6 CM 7
                                                     CM 4                                    CM 8



If there is more than one district, the district offices send out weekly reports to the head office.
After a period of one year the district will also have an Audit Officer for internal control.


Each branch is located at a reasonably central location, close to field operations, but still with
access to basic business infrastructure.

                                                      49
A branch is headed by Branch Manager (BM), who supervises 8 Centre Managers (CM) at each
branch. CMs are the front line staff that deal directly with clients, create and carry on the
business. CMs report daily to the branch office. One of the senior CMs is designated as the
Assistant Branch Manager (ABM), discharging the responsibilities of the BM in his or her
absence. All disbursements are made at the branch. Repayments are collected at the branch by
the cashier. The cashier handles all the back office work in the branch.


The BM reports once in a week to the district office. All the records- Collection Disbursement
Sheets (CDS) and Vouchers for the week are received and entered in the MIS, while the reports
(CDS) for the coming week are printed and handed to the officer reporting to the district. The
branch structure is as follows-


                                              Branch Manager


         Accountant / Cashier                Centre Manager (7)                    ABM / Sr. CM


                                       .                         Manage Centres at
                                                                   Village level



                                                                 Centre             Centres
                                                    Member 1

                                       Member 9                  Member 2




                                Member 8                                Member 3
                                                    Centre
                                                    Leader
                                                     (10)

                                  Member 7                            Member 4



                                             Member 6      Member 5




                  Fig.2: Organizational structure of the Branch and Centres




                                                          50
                           1.4 Roles of Staff in Lending Process
Centre Manager (CM)
CMs are the public face of each unit. A CM is allocated a cluster of about 20 wards. He/she will
have 3 or 4 field routes in order to cover all the areas. The CM is responsible for group
formation, conducting weekly group meetings, originating/accepting loan proposals and
ensuring loan recovery. The strategy would be to maintain maximum effective borrower contact
hours by minimizing unnecessary travel and physical strain. The CM will make a mandatory visit
to the Branch Office (B.O.) every day for reporting and meetings, if any. A CM's performance is
measured in terms of number of loans given, outstanding loan portfolio and PAR.

Branch Manager (BM)
The Branch Manager is the head of the branch and supervises 8 Centre Managers (CM). The
BM conducts Group Recognition Tests (GRTs) and disburses the loans at the branch. S/he is
required to continuously monitor the CMs‟ work to develop and maintain a healthy loan portfolio
with 0 % Portfolio at Risk (PAR).

Cashier
The cashier is responsible for back office work, receiving cash repayment and collecting
previous CDS. S/he is also responsible for managing the office in the absence of BM.

District Manager (DM)
The DM is the overall in-charge of the district to whom all the staff members report to. S/he is
responsible for planning the district's business as also the implementation and attainments of
the overall business targets. The DM100 spends most of his/her time in the field to establish
and maintain good practices in executing the business and achieving the results. The DM is
also responsible for reporting to the HO on various matters as appropriate.

Accounts Officer (AO)
 The Accounts Officer does back office work with the support of the MIS Executive. He is the
head of Accounts as well as the Administration. S/he provides necessary information and
support to BMs, AMs and DM. AO is responsible for all accounting, bank related transactions,
communication (reports) between the Head Office and external agencies such as funders,
regulatory authorities etc.

MIS Executive
S/he is responsible for data entry and processing of transactions at the district office. They help
the AO in maintenance of Accounts at the district level.

Internal Audit Officer (IAO)
 One of the senior BMs after completion of one year is appointed at the District as an Audit
Officer. S/he works independently, makes surprise branch and Centre visits and conducts
internal audit. The IAO furnishes his/her reports to the CEO.




                                                51
Internal Audit Officer (IAO): One of the senior BMs after completion of one year is appointed
at the District as an Audit Officer. S/he works independently, makes surprise branch and Centre
visits and conducts internal audit. The IAO furnishes his/her reports to the CEO.


                                      1.5 Credit Operations

                                Different Processes at the Franchisee


                                    Group formation        Continuous Group
                                                            Training (CGT)


          Use CHI to identify                                                      Group
            target clients                                                     Recognition Test




                                                                               Weekly Meetings
             Next Cycle




              Center                                                            Loan Proposal
           Rehabilitation




            Follow up of                                                        Sanction and
              arrears                                                           Disbursement


                                    Repayment              Utilization Check




                                Fig.3: Overview of Credit Operations


1.5.1 Identification of Poor Households & Group Formation


1. Selection of Villages or Slum Areas
Following Cost-effective Targeting, villages or slum areas having a sufficient number of poor
households are identified.


2. Scoring Poor Households

                                                      52
The number of poor households in an area is determined by the use of the CASHPOR Housing
Index (CHI). Only women who score 3 or less on the CHI will be identified as Below Poverty
Line (BPL).


3. Group formation
Once the BPL women in a village or slum are identified, they are motivated to form Centres of at
least 10 members, from among those whom they know and trust in matters of money. The
members of the Centre cross-guarantee each others‟ loans.
.
1.5.2 Qualification of the Group


1. Continuous Group Training (CGT)
After being organized in a centre, the members are trained on the objective, rules, regulations,
systems and procedures of the credit program. There is a provision for providing 7 days
Continuous Group Training (CGT) to newly formed group.


2. GRT (Group Recognition Test)
It is a process by which a supervisor (BM/AM/DM) ascertains the poverty status of the clients
and their acquaintance with products and services offered by the company, loan disbursement
process and other terms and conditions.


1.5.3 The Lending Process
1. Loan Proposal
Applications for loans, known as loan proposals, are made at weekly centre meetings.             A
minimum 90% attendance is required for at a meeting for loan proposals to take place. The
proposals of the first 60% of the group are filled in the first meeting after the GRT. The proposal
of the rest of the members is taken in the fourth meeting. The Centre Manager recommends the
loan amount to Branch Manager for approval.


2. Loan Sanction
The BM takes the decision of sanction if amount is up to Rs. 8,000, while higher loans are
sanctioned by the AM and DM.


3. Loan Disbursement

                                                53
The Loan amount in cash or cheque is given to the Centre Leader in presence of Branch
Manager and concerned Centre Manager.


4. Utilization Check
The CM conducts Loan Utilization Check within one week of the disbursement.


5. Loan Repayment
The borrower makes the repayment in 50 equal weekly instalments. The repayment of the
whole centre is deposited at the Branch by one centre member.




                                             54
                               Chapter 2: Channels and Product



2.1 Channel for lending: Joint-Liability Groups (Centres)
The channel for lending are joint liability group or „centres‟, made up of groups of poor women.
Women forming a new centre need at least 10 members, chosen from among those they know
and trust in matters of money. The members of the centre cross-guarantee each others‟ loans. It
is therefore important for them to know each other well, and to be able to choose who they want
in their centre. In the process of selecting their sister members, the BPL women indicate to our
field staff who among the BPL women in the village or slum are creditworthy. It is important for
the women to form their own JLG so that they take collective responsibility.


2.2 Loan Product
Small Loans for Income-generation
The Small Loan for Income-Generation (SLIG) is currently the only offered loan product. It can
be approved only for investment in income generation. The laon period is normally 50 weeks.
There is no minimum amount, but the maximum varies with the loan cycle (periods of 50
weeks), with maximum of Rs.8000 for the first loan; Rs.10,000 for the second and Rs.14,000 for
the third and subsequent loans.




                                          Interest    Max amount       Max No. of Moratorium
  Sl no.       Product Name
                                          rate        In Rs            Installments   Period
    A          SLIG (First cycle)                26             8000            50
    B          SLIG (Second cycle)               26            10000            50
    C          SLIG (Third Cycle)                26            14000            50




                                2.3 Appropriate Interest Rate
For the institutional financial sustainability, the cost of funds and the operational cost would
have to be covered by the interest rate charged to clients.
The factors that must be considered in setting an appropriate interest rate are well-known:


                                                                % of Average Portfolio
                                Factors
                                                              (Best Practice Franchisees)

                                                 55
         1      Average cost of funds                                        10 to 12%
         2      Administrative cost at break-even                            10 to 15%
         3      Loan loss provision                                            2 to 5%
         4      Profit for capital build-up                                    1 to 3%

               Appropriate Interest Rate Range                             23% to 35%


The above items have to be covered by the interest rate charged to clients if a Franchisee is to
have a reasonable chance of breaking even financially. The high operational costs of
Franchisees as compared to banks and other conventional finance companies are due to the
delivery by Franchisees of the financial services to the poor in their villages/slums. This is
essential for poor women to be able to access the financial services, at least initially, as their
responsibilities tie them to the home and the village or slum.


Usually between 50 to 70% of a Franchisee‟s operational costs are made-up of the salaries,
incentives and travel costs of its field staff. These costs have to be borne by the clients if the
services are to be delivered to them in their local community.




                                                56
                      Chapter 3: Launching and running the Operations



                                   3.1 Setting up a Branch
A market area should be chosen as the place where the branch is set up. The logic is that most
people, including the poor, visit the market periodically for their supplies. So this place is
accessible to most of the catchment area of the market. It provides the poor with the
convenience to access credit without excessive additional transportation cost. There are
obviously also more chances of getting an office space on hire. Also, amenities like water,
electricity and roads are better in a market location. The Branch Manager is asked to identify a
suitable space/building for the office. The hired space includes the residence of the BM. Save
the residence of the BM, the office should ideally have at least two rooms- one room for the BM
and another for other office staff and records. Electricity and water supply must be ensured but
the establishment should not be very costly. Care should be taken to hire premises within Rs.
2000 per month.


Once the building is finalized, the branch office should be set up with minimal furniture and
fixtures (List provided in Annex 1). Once the branch is set up all the staffs are posted at the
branch. A quick survey is conducted and with the help of a map, villages or slum districts are
allocated to the CMs. The CMs now make extensive visits in their area to identify target clients.


                      3.2 Targeting and Motivation of Poor Women
The overriding objective of the IntelleCash Microfinance Package is reduction of poverty through
the provision of sustainable financial services to poor women. Care must be taken in identifying
poor households, that is, our potential clients. If this work is not done properly much of our
subsequent effort (and money) will be wasted through leakages to the non-poor. To ensure that
we are reaching the poorest households, they must be distinguished from the Non-Poor (NP).
However, this must be done in a cost-effective manner, so as to cover all the operating costs
through interest income. This will help the franchisee to provide services to the poor at low cost
enabling us to make a significant impact on poverty.


3.2.1 Selection of Villages or Slum Districts
Following the CM Training on Cost-effective Targeting, we begin our work in villages/slums that
have a sufficient number of poor households to make possible the establishment of a full
Centre. IntelleCash expect only about half of poor households in a given area to become clients,
there should be at least forty poor households in the village or slum.
                                                57
3.2.2 Identification of Poor Households in a Rural Setting
Identification of suitable client households involves different indicators in an urban and a rural
setting. In a rural setting, the number of poor households in an area is determined by use of the
rural CASHPOR House Index (CHI). Each house in a village is viewed systematically from the
roadside. Large houses made of brick or concrete and having reinforced concrete or tiled roofs
that are unlikely to contain poor households are excluded. Small houses made from inexpensive
materials and not having a permanent roof are listed. The whole village is covered in this way,
and the number of potentially poor households is determined. If this number is forty or more,
step two in our process of cost-effective targeting of the poor can commence.


The CHI has been further adapted for use in eastern UP and Bihar. If the CHI is being applied
outside these areas, it should be adapted accordingly. As eastern UP and Bihar are areas of
long established settlement, houses tend to be larger than in more recently settled areas.
Double-storey houses are still excluded, but otherwise, size of the house is not a critical
indicator. Rather height and materials of the walls and materials of the roof have become the
key indicators. Further in view of the recent government policies, various state governments
have been issuing patta land and/or one-room houses to the poor people. Such land and
houses are to be ignored, provided their occupants fulfil the asset norms of the Franchisee




3.2.2 Identification of Poor Households in an Urban Setting

The CHI is appropriate for franchisees operating in rural areas. Franchisees operating in slum
areas of towns or cities use the Urban Housing Index instead . The Urban Housing Index is
based on the same principles as the CHI, but takes into account that BPL families in urban
areas have access to a different range of housing materials and building qualities than rural
families.


As with the CHI, the factors considered are height of wall (of ground floor rooms), material used
for walls, and material used for roofing. Just as the CHI was created for use in rural Bihar and
UP, so the Urban Housing Index is based on slum conditions in Delhi. As a result, it is open to
alteration to take into account local conditions of the franchisee.
.



                                                 58
                        The CASHPOR Housing Index (Rural)


      a)     Height of the Walls and Materials Used:
             Score
             i) More than 5 feet and made of brick                         4
             ii) More than 8 feet and made of Mud                                  2
             iii) Between 4 and 8 feet and made of Mud                             1
      b)     Materials of Roof:
             i) Concrete/Pucca/Patia/New Tiles/GI Sheet                            2
             ii) Old Tiles/GI Sheet                                        1
             iii) Thatch/ Straw/ Plastic/Leaves                                    0


Maximum Score                                                                      6


Scoring
             Non Poor                                4 or more
             Moderately Poor (MP)                           3
             Very Poor (VP)                                 2 or less
      If the score is equal to or less than 3, the occupants can be considered for an
      asset interview. For the occupants of Government allotted houses, you must
      conduct the Asset Interview, regardless of housing index score.




                                        59
                   The Urban Housing Index (Urban slums)
                                                                      Score
   c)     Height of ground floor room:
                  i)      Above 8 feet                                  1
                  ii)     Below 8 feet                                  0
   d)      Materials used for walls:
                  i)      Concrete or plastered brick                   2
                  ii)     Strongly Cemented Bare (or Painted) brick             1
                  iii)    Mud/Plastic/Wood/Uncemented Brick                     0


   e)     Materials of Roof:
                  i) Concrete/Pucca/Patia/New Tiles                             2
                  ii) Old Tiles/Metal Sheet                                     1
                  iv)     Thatch/ Straw/ Plastic/Leaves
                  v)
                  vi)     aximum Score
                                            5


Scoring
          Non Poor                               4 or more
          Moderately Poor (MP)                            3
          Very Poor (VP)                                  2 or less
   If the score is equal to or less than 3, the occupants can be considered for an
   asset interview. For the occupants of Government allotted houses, you must
   conduct the Asset Interview, regardless of housing index score.




                                       60
5.4.4 Example Scores: Urban Housing Index




           Criteria               Description of House        Urban Housing Index
                                                                     Score
Height of ground floor room   Below 8 feet                             0
Materials used for walls      Mud/Plastic/Wood/                        0
                              Uncemented Brick
Materials used for roof:      Thatch/ Straw/ Plastic/Leaves            0
                                                              TOTAL: 0 (Very Poor)




                                             61
           Criteria               Description of House    Urban Housing Index
                                                                Score
Height of ground floor room   Above 8 feet                        1
Materials used for walls      Strongly Cemented Bare or           1
                              Painted Brick
Materials used for roof:      Old Tiles/Metal Sheet               1
                                                               TOTAL: 3
                                                           (Moderately Poor)




                                              62
           Criteria               Description of House        Urban Housing Index
                                                                    Score
Height of ground floor room   Above 8 feet                            1
Materials used for walls      Concrete or plastered brick             2
Materials used for roof:      Concrete/Pucca/Patia/New Tile           2
                                                                   TOTAL: 5
                                                                  (Not Poor)




                                             63
If any household member has any type of motor vehicle, like a motor bike, car, jeep, van,
tractor, hand tractor, etc.; or a house is built with brick walls and a reinforced concrete roof
(excluding the Government allotted houses), then automatically the household is not eligible for
our program. Form No.1 (Annex 4) need not be filled-in for such cases, unless they appeal that
despite their motor vehicle or big house they are below the poverty-line income (BPL). In such
cases, Form No.1 is to be filled and they are to be told that the Branch Manager will come to
interview them. The appeal case is to be handed over to the Manager in the Branch Office.
3.2.3 Scoring and Classification
Step two of targeting is a brief interview with the occupants of houses that scored less than four
on the HI. It determines the poverty status of the household from its sources of income/number
of earners and ownership of productive assets. These, along with the score on the HI are
recorded on Form No.1. [See Annex 4] Together they determine whether the household is
classified as Very Poor (VP), Moderately Poor (MP) or Non-poor (NP). If at any time during the
interview, it becomes clear that a household is NP, the interview is politely terminated, and the
Form No.1 discarded.
1. Households with the following characteristics are classified as Very Poor (VP)
          Households that score two or less on CHI
          have only sources of income that are traditionally low, like agricultural, domestic or
           casual labour or artisan fisheries or forest gathering, etc.,
          which have no more than 2 earning members, and which own no irrigated
           agricultural land nor large farm animals or a Dependency Burden (no. of household
           members/no. of income earners) of 4 or more are classified
          If the wife regularly does agricultural labour, the household is usually VP.
2. Households with the following characteristics are classified as Moderately Poor (MP):
       1. 3 on the CHI, or
       2. At least one source of income from self-employment, or
       3. More than 3 income earners, or
       4. Irrigated land, or one or more large farm animals, or
       5. A Dependency Burden of less than 4
3. Appeal cases:
       Sometimes when the CM is interviewing in houses that scored less than four points on
       the CHI, occupants of neighbouring houses that scored four or more, will ask to be
       interviewed, saying that they are also poor. In such cases, Form No.1 is to be filled and
       they are to be told that their request will be referred to the Branch Manager/Supervisor
       who will come to interview them.

                                                 64
4. Fill up the surety agreement and get the same duly signed by the members, which is to be
    counter checked by the Branch Manager/Supervisor.


                                     3.3 Group Formation
Moderately Poor and Very Poor households should be motivated so that the wife can become
their representative. After explaining our micro finance program carefully, the CM should
encourage them to try to form a Centre with 10 to 20 members of similar socio-economic status
but from different households, whom they can trust in matters of money. They should inform
him/her when the Centre has been formed.
The Group or Centre can be defined as an association of
       10-20 self selected poor (as per CHI) women
       of same economic status
       living in the same village/slum district for minimum three years
       of same age group
       almost of same educational level,
       having no more than two kin/relatives
       who can trust each other in financial transaction
       coming together to access the financial services
The CM should take care that all the above characteristics are met. If any of the characteristics
are overlooked, the CM will later face challenge in imposing credit discipline and collective
responsibility.


                           3.4 Continuous Group Training (CGT)
After being organized in a group, group members have to be trained on the objective, rules-
regulations, systems and procedures of the credit program. There is a provision for providing 7
days Continuous Group Training (CGT) to newly formed group.
Points to remember while conducting the training
   CGT requires attention and interest of each member of the group. Therefore, the training
    should not stretch more than an hour in a day.
   The training must be continuous for 7 days (not a single day gap)
   Training program should start in presence of all the members. No absenteeism should be
    allowed during the training, because it is a platform for creating discipline among the group
    members.
   All the members should be present by the decided time.

                                                65
   Every Centre meeting begins with a verbal contract between Centre Manager (Franchisee
    representative) and clients.


                                   Verbal Contract/Pledge


The verbal contract/pledge that all clients repeat at every meeting is nothing but the 5 steps that
need to be strictly followed by them in the weekly meetings. It plays a great role in assuring
100% repayments from the Centre, therefore it is important for the Centre managers to explain
explicitly the importance of the 5 steps.


Client’s Contract/Pledge
“We pray to god that
1. we will come to the Centre on time
2. will utilize the loan for the purpose we have taken
3. will pay instalments on time
4. will utilize the surplus for the wellbeing of our family
5. and will take collective responsibility”


Centre Manager’s Contract /Pledge
“If you will follow your commitments, I promise to keep providing you the credit services in a
timely, honest and efficient manner.”




After completing the training the CM should fill the names and paste photographs of the clients
along with their husbands in the GRT Format (Annex 5) and seek the supervisor‟s time for
conducting GRT.


                    3.5 Conducting the Group Recognition Test (GRT)
GRT is the final stage of quality control in our targeting of the poor. They are a check on the
identification of poor households and on the quality of client training under CGT. GRT can be
carried out only by an authorized officer of the rank of Branch In charge/Area Manager or
higher. They are to be carried out at the time and venue that is convenient for the prospective
clients.
3.5.1 Purposes of the GRT
                                                  66
The purpose of the GRT is:
a) to verify the poverty status (Very Poor, Moderately Poor and Non Poor - who should be
excluded) of the prospective client by re-indexing her house and talking with her and her
husband (to see if he is in agreement with her participation):
b) to determine whether the prospective clients meet the conditions of group formation, and that
they know and trust each other well, by questioning them;
c) to determine the prospective clients‟ knowledge and understanding of and agreement with the
objectives and important rules of the micro finance program, particularly the verbal contract, by
testing them verbally (each member must pass before the Group can be passed).
The GRT can be used as a tool to get useful feedback from the prospective clients and their
husbands about the attractiveness of the micro finance program and how it could be made more
attractive.
3.5.2 The Process of GRT
The GRT process is conducted in order to ascertain the eligibility of the group, and its members,
to become Franchisee clients, and subsequently avail their financial products.
Following are the steps in GRT:
    1. The supervisory staff (BM/AM/DM) accompanies the CM to the centre.
    2. The supervisory staff (SS) goes to each member‟s house to ratify the CHI that has been
        assigned by the CM, and confirm if the member is living below the poverty line.
    3. While visiting the houses, the SS also asks the family members (Father, Husband etc) if
        they would be willing to take guarantee for the group member – the member is
        disqualified if there is no guarantor.
    4. After covering all the houses, the group assembles at the centre where the SS asks
        each member, questions to verify group solidarity and their understanding of Franchisee,
        its policies, the loan product:
              a. What Franchisee is, and its mission?
              b. What is the loan product, repayment terms and installment amounts?
              c. Is the group ready to take joint liability for all its members?
              d. Would the group collectively repay the default amount, if any?
    5. The SS ascertains if all the members know each other and are aware of their family
        details, income levels and repayment capacities in case a particular member avails a
        loan
    6. Once the members answer the questions satisfactorily, and group solidarity is
        ascertained, the group is passed



                                                    67
     7. The SS then briefs the group on the importance of Joint Liability in availing a loan and
        takes verbal confirmation from the client. The same is ticked in the GRT form and each
        member signs against it.
3.5.3 Result of the GRT: The GRT must be recorded in the GRT Format (Annex 5). The result
must be announced verbally by the senior officer conducting it, immediately after the GRT is
completed. There is to be no delay. Reasons should be given in case of failure of a potential
Group, and they should be encouraged to resume their CGT. The Group starts weekly meetings
after passing the GRT.


3.5.4 Regular weekly meeting
a. Meeting starts with verbal contract by clients
b. The CM recites his verbal contract after the clients
c. Signing of the of the attendance register
d. Verification of the attendance and loan instalment of each member
e. Submission of deposit slip to the CM as a proof of repayment
f.   Loan proposal if any
g. Approval or rejection of the proposal by the group
h. End the meeting with verbal contract


                                   3.6 The Lending Process
3.6.1 Loan Proposal
     1. Loan proposal is always filled in weekly Centre meetings.
     2. At the time of loan proposal minimum 90% attendance is compulsory.
     3. Centre Manager starts the Centre meeting with the pledge, after requisite attendance.
     4. The CM enquires about the loan instalments and ascertains if any loan outstanding
        exists.
     5. For the first proposal, only 60% members are eligible. These members are selected
        during the CGT on the 4th day.
     6. The proposals of the first 60% are filled in the first meeting after the GRT. The proposal
        of the rest of the members is taken in the fourth meeting.
     7. The selected Clients propose their loan demand with the purpose to the Centre in the
        weekly Centre meeting with prior consent of her husband.
     8. Centre assesses the genuineness of her demand by analyzing her absorption and
        repayment capacity.


                                                 68
   9. The Centre/group members and Centre leader may reduce the loan amount. On
      consensus the Centre leader will recommend the loan amount
   10. Centre leader finally proposes the amount to the Centre Manager.
   11. Centre Manager fills up the loan proposal form and gets the signature of the Centre
      leader and clients whose proposal has been taken.
   12. The CM should enquire about the husband‟s approval for the loan. Signature of the
      client‟s husband is also to be taken along side the client‟s signature.
   13. Based on his own judgment, the Centre Manager will recommend the loan amount. The
      CM can reduce the loan amount, if he/she feels that the proposed loan amount is more
      than the client‟s capacity. But the CM cannot increase the loan amount under any
      circumstance.
   14. The Centre Manager recommends the loan amount to Branch/Unit Manager for
      approval.
3.6.2 Loan Sanction
   1. The loan sanctioning powers are delegated as under:
       Staff                                        Sanctioning authority (Amount)
       Branch Manager                               Up to Rs 8,000
       Area Manager                                 Rs 8,000-10,000
       District Manager                             > Rs 10,000
   2. The recommendation is placed before the BM for approval. The BM takes the decision of
      sanction if amount is up to Rs. 8,000.
   3. The AM sanctions the amounts more than Rs. 8,000 and up to Rs. 10,000.
   4. Only the DM is empowered to sanction loans above Rs. 10,000.
   5. The maximum amount of loan and the other terms depend on the proposed loan product
      as per the norms described in Section 2.2
   6. However, if all the loan amounts proposed by a CM are equal to the maximum
      permissible limit, the sanctioning authority must investigate the case and only then
      approve.
3.6.3 Loan Disbursement
   1. All disbursements are to be scheduled post lunch so that the CMs and Centre members
      can complete their meetings.
   2. Minimum 90% attendance is compulsory in the meeting after which loan will be
      disbursed. If the attendance falls short, the disbursement should be deferred.
   3. As always, the meeting starts with the pledge which is followed by ensuring the due
      collections.

                                               69
   4. The Centre Manager will carry a Collection and Disbursement Sheet (CDS) in duplicate
       copies for every meeting. The approved amount appears as To Be Disbursed (TBD) on
       the CDS.
   5. The CM will ensure loan utilization of previous loan and no outstanding arrears. CM will
       then ask the members to come to the branch office with the Centre leader.
   6. At the branch the CM completes the Demand Promissory (DP) Note and gets it signed
       by the client before the loan disbursement.
   7. The BM enquires the members about their loan amounts and end use. He should seek
       clarifications to see whether the first time borrowers have understood the program.
       Before giving the amount BM must clarify all the terms and conditions and stress on the
       following:
       i.     This loan is being given by the Franchisee and it is not the decision of any one
              individual.
       ii.    The amount has been given on verification for their purpose and they must not
              hand it over to anybody else.
       iii.   Since they are taking the loan from the branch of the Franchisee, they must return
              it there and no other person or place.
       iv.    The repayment has to be in 50 weekly instalments
       v.     The awareness of the amount of weekly instalment of each individual member and
              the group
   8. The Loan amount in cash or cheque is given to the Centre leader by the Branch
       Manager in the presence of the concerned Centre Manager. The disbursed amounts
       are entered on the CDS and sent for entry into the MIS during weekly reporting.
3.6.4 Loan Utilization
In the next meeting after disbursement, the Centre Manager physically checks for the utilization
of every productive loan. If it is found that the loan has not been utilised for the purpose it was
taken, the Centre Manager must make efforts to recover the loan amount in full immediately.
3.6.5 Loan Repayment
   1. Each loan is for a term of 50 weeks
   2. The MIS breaks up the loan repayment into equal weekly instalments.
   3. The weekly instalment of every member is reflected in the CDS. The CM informs each
       borrower of the amount of the instalment.
   4. In every meeting, the CM reminds the Centre Leader of the total instalment that is due
       from the Centre for the next week. The CM hands over the advance receipt to the Centre



                                                 70
      leader with the due amount and Centre details written on it. One of the CDS is left with
      the Centre, while one is carried by the CM for record.
   5. It is the responsibility of the Centre to deposit the instalment at the Branch before the
      next meeting.
   6. The Centre Leader collects the due instalment of each member. By rotation two
      members visit the branch with the aggregated amount for depositing it.
   7. The Cashier collects the cash from the members along with advance receipt with the
      Centre id and village or slum district name. The transaction is recorded in the cash
      register and the receipt is stamped and returned to the members.
   8. In the next meeting the CM has to collect the receipts with paid stamp and paste it at the
      back side of the CDS for record. He must write the amount of collection for each client in
      the CDS.
   9. The Centre copy of the CDS has to be left at the Centre, while the CM must take the
      updated office copy and deposit it at the Branch which is sent to DO for entry in the MIS
      during weekly reporting.
3.6.6 Recording the Transactions
   1. The BM will report to the district on a decided day. All the CDS and proposals are
      collected at the branch and sent with the BM for being entered in the MIS.
   2. The MIS Executives (MIS-X) have to print all the CDS of this Branch for the next week.
      In fact they may print and keep it ready before the BM reports. The BM has to carry
      these CDS to the Branch where they are distributed to respective CMs.
   3. The MIS-X later must enter the data from the received proposals and CDS into the MIS.
   4. Both the Accounts Officer and the AM are responsible for monitoring the data entry
      process.




                                                71
                                                   Lending Process

                                               Is the             YES          CM fills the loan
                                            attendance                         proposal for 60%
                                           at least 90%?                          members


  CM visits the first                              NO
 Centre meeting after                          ,                                                         Loan proposal submitted
GRT with loan proposal          Loan proposal postponed                                                   in Branch for sanction
        form                      for the next meeting




                                                                                                     Amount up to
                                                                                          Sanctio     Rs. 8,000
                                                                                          n by BM

                                                                                                                     Amount more
                                                           2 weeks for                                              than Rs. 8,000
 Proposal of next 40%
                                                               1st
  members, if min.
  attendance is 90%
                                                           disburseme
                                                               nt                          Sanctio
                                                                                           n by AM
                                                           CM watches
                                                            discipline
                             In the Centre                 for the first
 CM collects the bank           Meeting                        week
 receipts and matches                                                                                      DM sanctions
with demand in the CDS                                     1 week for                                    amounts up to Rs.
                                                           subsequent                                        14,000.
                                                           disburseme
                                                               nts
                  Weekly repayment of                              Disbursement in cash
                  the disbursed loans at                            or by cheque at the
                   the branch by clients                               Branch by BM
Fig.4 : The Lending Process at the Franchisee




                     73
                   Chapter 4: Financial Procedures at the Franchisee
                      4.1 Importance of Financial procedures
Financial Procedures are of importance in all organizations, but they have additional
importance in financial organizations like ours. Finance is our product, and money is of
great interest to everyone. We must have the tightest-possible financial procedures so
as to ensure that none of it goes missing or is misused. For this reason, violation of any
financial procedures is a serious offence, certain to result in disciplinary action and likely
in termination of service of the offender.
An effective set of financial procedures identifies where funds are at a particular time,
who is responsible for them, who has authority to move them and when and to whom the
funds and that responsibility have been transferred? It leaves, in other words, a clear
“paper trail” as far as the flow of cash is concerned that can be followed by any
concerned party.
                                4.2 Signing Authorities
All cheques of the Franchisee must have at least two signatures. The First Signing
Authority represents the Accounts Department and certifies that the necessary approval
for the transaction was obtained, the supporting voucher(s) and documents are original,
complete and in order, and that the funds are available in the bank account upon which
the cheque will be drawn. The CEO is the second (final) signing authority. He/She is
authorized to put the final signature on any and all transactions of the Franchisee and for
an unlimited amount. He is also empowered to delegate in writing his final signing
authority to specified officers of his choice for specified amounts and purposes for clearly
stated time periods. In the absence of the CEO, any other of the Board of Directors of
the Franchisee is the final signing authority. The CEO also appoints other Signing
Authorities by name and/or position for clearly stated time periods and amounts. Signing
authorities appointed by permission can be changed, from time to time, by the CEO in
writing.




                                             74
 4.2.1 The powers of various officials are as under:
 The Bank Accounts maintained at district level (Branch Model) will be operated in the
 following manner
 Final Signatory:
     1. CEO
     2. District Manager /COO
        (Up to a limit of Rs. 25,000)
     3. Area Manager
        (Up to a limit of Rs. 10,000/-)                       .
 First Signatory:
     Accounts Officer
 The mode of operation will be any one person from the final signatories’ along
 with the first signatory.
 And in case of transfer of fund from one Bank account to another Bank account of the
 Franchisee, no ceiling of amount will be applicable for any of the signatories.


4.2.2 The Bank Accounts maintained at branch level under Branch model will be
      operated in the following manner:
 Final Signatory:
     1. CEO
     2. District Manager
        (Up to a limit of Rs. 25,000)
     3. Area Manager
        (Up to a limit of Rs. 10,000/-)
     4. Branch Manager
        (Up to a limit of Rs. 10,000/-)
 First Signatory:
                                            Nominated by District Manager
      Cashier                               and approved by CEO

 The mode of operation will be any one person from the final signatories’ along
 with the first signatory.
 And in case of transfer of fund from one Bank account to another Bank account of the
 Franchisee, no ceiling of amount will be applicable for any of the signatories.




                                             75
4.2.3 Signing limits are not to be abused by the issue of multiple cheques for the same
purpose. Specific authorizations will be given by the CEO/OH through the In-Charge
Accounts when necessary.


                             4.3 Franchisee Bank Accounts
Bank Accounts are to be kept to the minimum number that will allow for smooth flow of
funds to and among the Franchisee offices and village/slum-based Centres. New
accounts at the Head Office and District-levels can be opened only with the signature of
a Director, and a copy of the account details should be sent to the Statutory Auditor.
4.3.1 District-level Bank Accounts are to be normally only two:
          a) For fund transfer from Head Office to the lead bank; and for inter-
             branch/block transfers among lead bank branches; and
          b) For inter-branch/block transfers within the District with the RRB;
 4.3.2. Reconciliation of District-level and Branch-level bank accounts is to be
done on the prescribed form by the 15th of the following month, and any shortfall in
Franchisee funds deposited immediately by the In-Charge concerned. The immediate
Supervisor of the said In-Charge is responsible for checking and counter-signing the
Bank Reconciliation statement within three days, for ensuring that any shortfall is
deposited immediately by the In-charge concerned and for providing a certified true copy
of the reconciled Bank Reconciliation form to the Operations Head by the 20th of the
month. If there are any discrepancies in any of the Bank Accounts at District/Branch
level, it has to be reported to the CEO by 21st of the month.
4.3.3. Reconciliation of Head Office bank accounts is to be made on the prescribed
form by the In-Charge Accounts by the 20th of the following month, with any shortfall in
Franchisee funds being deposited immediately by the In-Charge concerned. The In-
charge Accounts is to hand over the certified reconciled Bank Reconciliation forms to the
OH/CEO for checking and counter-signing by the 21st of the month.
If no discrepancies being reported, on 22nd of the month Accounts Officer has to
give the certificate for all Bank Accounts of the Franchisee to the OH/CEO to this
effect.


4.3.4. Reconciliation of Transfer Accounts between Head Office and Districts and
Branches is to be done on the prescribed form, with the concerned In-Charge depositing
any shortfall in Franchisee funds, by the 15th of the following month, and to be


                                              76
supervised by his/her immediate supervisor, in the same manner as indicated in 4.3.2
and 4.3.3 above.


            4.4. Fund Management and Transfers among Branches
This responsibility rests with the COO, with reference to the Branch Weekly Cash Flow
Report and according to his signing limits. He must ensure that no idle funds, i.e., funds
that will not be needed that week or on Monday of the following week, are lying in any of
the District/Branch accounts. Idle funds are to be returned to Head Office to reduce
interest charges to the District/branches.
4.4.1. Fund Management and Transfers from Head Office to District/Branches: At
least one-week before the first funds are needed, the District Manager will send a
consolidated request to the In-Charge Accounts, with the break up of branch-wise
requirements along with particulars of bank accounts, to reduce DD charges, The
request should also be supported by the actual and projected branch-level Due
Disbursement and Weekly Cash Flow reports. It is the responsibility of both the In-
Charge Accounts and the District Manager to make sure there are no idle funds, i.e., no
funds raised during the specific week should remain unutilized on the Monday of the
following week, at the district or Branch-levels.
4.4.2. Fund Management and Transfers from Districts/Branches to Head Office:
payments of interest and principal to funders will be made by Head Office. If it needs
funds from the Districts/branches, at least 20 days notice will be given for such transfers.
In-Charge Accounts will send the consolidated request to the District Manager, and he
will allocate the request among the branches, so as to satisfy it by the required date.
Signing limits are not to be abused by the issue of multiple cheques for the same
purpose. Specific authorizations will be given by the CEO through the In-Charge
Accounts when drafts that exceed signing authority limits will be required by
Branches/Districts. The liquidity reserve for District Office/Branch offices will be
Rs.50,000/-.


4.4.3. Fund Management at the Head Office is the responsibility of the In-Charge
Accounts reporting to the CEO. Subject to a liquidity reserve of Rs. 25,000/- to be kept in
the Head office current account, idle funds, i.e., funds that will not be needed during the
current week or on Monday of the following week should be kept in interest-bearing




                                             77
deposits. Fund transfers should be done in such a manner so as to minimize bank
charges.
4.4.4. Interest @ 15% per annum will be charged by HO on the funds borrowed by
District Office and District Offices will charge @ 18% on the funds borrowed by the
branches/units.




                        4.5 Voucher & Cheque Preparation
No Franchisee cheques can be prepared without appropriate authorizing vouchers
(cash, bank or transfer), and the necessary supporting documents. These must be
original documents that specify the amount to be paid, to whom, for what and that it was
properly received by the Franchisee. There should be a purchase order of the
Franchisee/Franchisee for local purchases of Rs.2,500/- and above or a letter of request
signed by the appropriate officer and approved by the In-charge of Accounts
Department, an original invoice of the supplier and a delivery order signed by a person
authorized to receive goods on behalf of the Franchisee. The approval of the CEO must
be obtained. Vouchers are prepared by the Accounts Department, based on a complete
set of supporting documents, and countersigned by the In-Charge Accounts or the
Accounts Officer. The person preparing the voucher must also initial the original
supporting documents so that they cannot be used again.


4.5.1 Precautions before issuing any Cheques: before issuing any cheques the
authorized person should count the cheque leaves in the cheque book to make sure that
none have been stolen. If any are missing, the servicing bank manager and the In-
charge Accounts should be informed immediately in writing, listing the missing numbers.
4.5.2 Writing Cheques: once the supporting documents have been checked and
initialed, then the cheque can be drawn. Care should be taken that the figures and words
should be written very close to the space provided for and no gap should be left in
between the printed matter on cheque and the matter to be written to avoid scope for
subsequent alterations in the amount/name of payee.
4.5.3. Loan Disbursement Cheques at the Branch: Disbursement should normally be
done in cash. Only in cases where there is insufficient cash in the office cheques are to
be disbursed. These are to be prepared and signed by the designated first signatory,
and then signed by the Branch Manager as the second signatory, on the basis of the list


                                           78
of due disbursements printed out from the computer, after daily closing, the day before
the disbursement is due. All cheques drawn must be entered into the Bank Register
(BR), which must be initialed by both signatories. Cheques signed by both officers must
be entered in the Vault Register and kept in the Cash box until disbursed.


                           4.6 Bank Accounts of Clients
Clients are to be encouraged to open accounts in the servicing bank. Those with bank
accounts are to be issued A/C payee cheques only. Similarly cheques issued for and
over Rs.20,000/- must be A/c payee cheques. Those without accounts are to be issued
Bearer cheques, and warned that they are as good as cash. Bearer cheques are to be
handled securely by all staff concerned, and are not to be left unattended at any time.
Bearer cheques are to be signed on the back by the recipient client at the time of
disbursement, in front of all the Centre members. The recipients must also sign a second
time on the CDS to acknowledge receipt of the cheque.


                              4.7 Cheques Not Utilized
4.7.1 Cheques Not Disbursed as Scheduled
In cases where a cheque is not disbursed as scheduled, the CM must indicate this in the
appropriate disbursement box by cancelling the disbursement with two neat lines and
affixing his/her initials. Then the undisbursed cheque(s) must be returned to the cashier
in the office. By signing the CDS, the Manager/Supervisor acknowledges that the
cheque(s) is/are back in the Branch/District Office. The cashier must also up-date the
CIR and the Vault Register and place the cheque(s) back into the Cash box. Such
cheque(s) can be kept in the Cash box only for another week and if they are not
disbursed at the next Centre Meeting, they must be cancelled.
4.7.2 Cancellation of Cheques
In case the need arises to cancel any cheque before distribution, the reason should be
mentioned in the Bank Register and Cheque Cancellation Register and signed by the In-
Charge/Manager. After tearing the signed portion of the cheque, the cancelled cheque
should be kept with the cheque book for audit and inspection.
4.7.3 Lost Cheques
Cheques should be handled and kept carefully and every effort should be made to
ensure that they are not lost. In the event that a cheque is lost, however, the person
responsible for it at the time of its loss must inform the servicing Bank concerned in


                                            79
writing immediately that it has been lost and to stop payment. The particulars of the
cheque i.e., the number and date of cheque, amount of cheque and payee‟s name must
be included in the communication to the Bank. He/she must get the signature of the
bank officer under official seal to whom the stop payment request was handed over, on a
copy and give it to the District Incharge as soon as possible. Provided the stop payment
order has been acknowledged and non-payment of the cheque confirmed by the Bank,
another cheque can be issued. A cross-reference to the lost (previous) cheque should
be made in the CIR. A mention against the previous cheque should be marked as
“payment stopped” in the CIR.


                                4.8 Annual Budgets
Each Division, Department, District and Branch of the Franchisee must have an Annual
Budget, detailing therein the major Heads of Expenditure drawn from the Franchisee‟s
Business Plan for every Fiscal Year. At the beginning of each Fiscal Year, an allocation
will be proposed by the In-Charge Planning/Accounts to the Franchisee as a whole and
its accounting units, submitting the same to the CEO‟s Office, detailing therein the
Division wise, Department wise, District wise and Branch wise allocations of the
Franchisee to cover the approved budgeted expenditures by Quarter. The CEO and the
In-Charges have the authority to approve expenditures up to the total of their annual
allocation, and to transfer not more than 20% of the total allocated amount from one
Head of expenditure to another, as long as the total allocation is not exceeded. The CEO
must obtain written permission in advance from the Board to exceed the total budget
allocation for the Franchisee, and the In-Charges must obtain written permission in
advance from the CEO for exceeding their total allocations. Approval of expenditures
must be made on the prescribed form [Appendix D], and passed to the Purchasing and
Accounts Departments.


                  4.9 Quarterly Monitoring of Annual Budgets
The Accounts Department will monitor the accounting unit spending against the quarterly
budgets, and report the same to the CEO before each Quarterly Monitoring & Evaluation
Meeting.




                                          80
                   4.10 Purchasing & the Purchase Committee
The purpose of the Purchase Committee is to ensure that major purchases made by the
Franchisee are bought at market quality and prices and to share the responsibility for
this among the senior officers of the Franchisee.
4.10.1 Purchases of single items/batches costing more than rupees 10,000/- per
reference must be decided by a majority of the members of the Purchase Committee at
a formal meeting of the Committee which is to be minuted, with each member present
signing the Minutes as a true reflection of what was decided.
4.10.2 Purchases of single items/batches less than Rs.10,000/- rupees can be made by
the CEO. However, he will obtain quotations from at least two independent suppliers in
case of expenditure of over Rs.5000/- per reference. Generally the supplier quoting the
cheapest price for goods of the same quality will be selected. If not, the reasons should
be recorded and signed by the CEO.
4.10.3 The members of the Purchase Committee are the CEO, the Accounts
Officer, COO and one AM. In the absence of CEO, the Accounts Head/Officer will
be the chairperson of the Committee. A quorum of three of the members must be
present at the meeting for any decisions to be taken. Decisions will be by simple
majority, with the Chairperson having a casting vote in the case of a tie. Members
strongly opposed to a decision of the majority may request that their opinions be
recorded in the Minutes. Generally there should be at least one week’s notice in
writing of meetings. Members of the Committee should not normally have any
contact or relationship with any of the suppliers. If they do, they must declare the
contact/relationship at the appropriate meeting of the Committee and it must be
recorded in the Minutes.


4.10.4 Generally the supplier quoting the cheapest price and being able to deliver the
goods by the dates required will be chosen. Possible reasons for not doing so could be
bad previous experience with the supplier, uncompetitive warranties and/or lack of
capacity for after sales service where relevant, etc. If the lowest quotation(s) is not
chosen, the reasons must be recorded in the Minutes.
4.10.5 Telephone/Communications Expenses: The maximum limit for Telephone and
other communication expense is Rs. 1,000 per month for District Offices and Rs. 500 per
month for Branch offices. The Accounts Department HO is responsible for monitoring the




                                            81
same. In case of bills of excessive amounts, the DIC/Branch in-charges and staff will
have to bear the expenses over and above the limits fixed as above.
4.10.6 Personal Advances at the Head/District Offices. A personal advance should
be given to responsible staff members for necessary expenditures over Rs.300 and/or
for which Petty Cash cannot be used. It must have a letter of authorization from the
Supervisor of the employee or CEO. Personal advances should be settled within 15
days, with proper documentation. A responsible officer is entitled to have two personal
advances outstanding at the same time, but he/she must settle one of these before
asking for third one. The total advance(s) outstanding should not exceed Rs.5,000/- for
one staff member.


                                    4.11 Petty Cash
To cover small necessary expenses of less than Rs.300/-, such as for photocopy or
office supplies or to buy tea for guests, etc., the Petty Cash should be used. The Petty
Cash must be kept in a locked Cashbox that is not used for other purposes. It must be
kept in a locked drawer/almirah. Only the Accounts Officer, at the districts and Cashier at
the branches can hold the key. Petty Cash cannot be used for fuel for the jeep or
generator, nor for substantial repairs of either. It cannot be used also for payment of staff
travel claims.
The In-Charge of Districts is allowed to approve request in the name of the Accounts
Officer/Assistant for Rs.1000/- at a time for petty cash, up to two times a month only.
Further allocations require the signature of the Operations Head/CEO.
4.11.1 For payments from Petty Cash, original receipts/ signed payment slips should
be kept temporarily in the Petty Cash Box. The cash balance in the Petty Cash box and
the receipts/payments slips should always tally with the amount withdrawn for Petty
Cash from the Bank. Under no circumstances anyone should be allowed to “borrow”
from the Petty Cash. At the end of each month, the Petty Cash Advance should be
settled. A petty Cash Book should be maintained.
4.11.2 Petty Cash at the Branches: Branch managers are not allowed to use collection
or disbursement money for petty cash. The Petty Cash must be kept in a separate
cashbox. For payments from Petty Cash, original receipts/signed payment slips should
be kept temporarily in the Petty Cash Box. The cash balance in the Petty Cash box and
the total of receipts/payments slips should always tally with the amount withdrawn for
Petty Cash from the Bank. Under no circumstances anyone is allowed to “borrow” from


                                             82
the Petty Cash. At the end of each month, the Petty Cash Advance should be settled. A
petty Cash Book should be maintained.


                                 4.12. Loan Approval
4.12.1. Loans to Clients are to be Approved by the Centre, which takes collective
responsibility for their repayment, the Franchisee will not refuse to disburse a loan
approved by a Centre leader, but retain the right to reduce the amount, if necessary.
4.12.2 The Branch Managers have authority for final approval of loans up to and
inclusive of Rs.8000/-. Final approval for larger amounts is to be given by the District
Incharge.
4.12.3 The Area Managers have authority for final approval of loans up to and including
Rs.10,000/-. Final approval for amounts not exceeding Rs.14,000/- must be given by the
District Incharge. No loans above Rs. 14,000 are to be approved for the 1st 2 years of
operations.
4.12.4 Entering Approved loans into the Computer: MIS executive is responsible for
ensuring that this is done on the same day as the records are received in the district. In
case of extreme unforeseen circumstances (such as failure of system etc.), necessary
entries are made in the computer at the earliest available opportunity and information
regarding failure should be brought to the notice of the Area Incharge.
4.12.5 Management of Centre Meetings: Centre Meetings must continue as
scheduled. However, they should be managed efficiently, so as not to waste the time of
the clients. Seating arrangement of clients should be in a rectangle, with the Centre
Leader on the right of the Centre Manager. All the rules of Centre discipline (see
Chapter 2) must be followed and enforced. After the exchange of pledges, the CDS
should be circulated for signature. If the collection deposit was made in full, and
attendance is 90% or better, then any due disbursement can take place. Otherwise, it
must be postponed to the next meeting. If the collection deposit is still not in full or
attendance is not at least 90% at the next meeting, the disbursement must be cancelled.
4.12.6. Short Deposit: Sooner or later, most CM face a short deposit, i.e., the collection
deposit was less than that mentioned in the deposit slip or not made at all.
 1. The Centre Meeting should go ahead as scheduled, with the CM recording on the
     CDS that short or no deposit was made and getting the signature of the Centre
     Leader on confirmation.




                                            83
 2. Then the clients must be requested to accept their collective responsibility, and to
     try again to deposit the money that day.
 3. If the full deposit is not made, no further loans can be disbursed to clients in the
     Centre, until they have accepted their collective responsibility again.
 4. If the short instalment was due to the death of the client or her husband, and if the
     Centre agrees to pay on behalf of the client, the loan can be re-structured, with the
     written permission of the CEO.
 5. If there is no case for re-structuring, then the CM should continue to request that
     the clients accept their collective responsibility, attend the weekly Centre Meetings,
     and accept whatever deposits are made.
 6. Request for subsequent loans will have to be rejected as long as there are any
     arrears. Clients should be warned to keep their repayment schedule up-to-date in
     order not to be disqualified from further loans once the problem is solved.
 7. When the arrears have been collected, the client(s) that caused the problem should
     be removed and the Centre re-formed.


       4.13. Clearing the Deposit Position of the CM and Daily Closing
In the Districts having branches, the clearing of the deposit position and daily closing
must be completed by each Branch Manager by 4:00 p.m., after surplus cash has been
deposited in the servicing banks.


4.13.1 Deposit of Surplus Cash: As part of the daily closing procedures, the BM must
ensure that surplus cash of any amount is deposited in the servicing bank on the same
day. The BM must check the deposit receipt provided by the servicing bank to ensure
that the amount deposited is correct, and that the bank officer acknowledges the receipt
by affixing the rubber stamp properly on the receipt. On Wednesdays or bank holidays,
when it cannot be deposited, it must be held in the Cashbox overnight, with all the
proper entries made. Otherwise only Petty Cash can be kept in the Branches overnight.
BM or SS (Second Signatory) are permitted to carry up to Rs.20,000/- between
branch and bank alone. For larger amounts up to Rs. 40,000 both must be present.
The cash should be shared and carried in the pockets of the officer(s) or in a money belt
with a buckle. In no circumstances should it be carried in a separate bag that could be
snatched easily. In no circumstances should the person depositing the cash leave
the bank without the deposit receipt.


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4.13.2 Approval for District Administrative Expenses: The Operations Head/ CEO
must approve any travel claims of the District Manager. Any travel claims of the Area
Managers or Branch Managers are to be approved by the District Manager. However,
the incentive payments are to be approved by the Head Office.
4.13.3 Safekeeping of Cheque Book, the Passbooks and the Bank Statement: All
these important documents should be kept in the locked drawers in the almirah. The
cheque book strip showing the balance in the account should be kept up-to-date.
4.13.4 Bank Pass book and Reconciliation with Bank Statement: The bank
passbook should be up-to-date at all times showing the transactions and balance.
Reconciliation of the pass books with the bank statements should take place before the
15th of the following month. Any discrepancy should be settled immediately with the
servicing bank manager, with the In-Charge settling any shortfall immediately from
his/her own pocket.
4.13.5 Cash for Branch Administrative Expenses: Cash required for monthly branch
staff salaries, travel allowance, office rental, and branch staff incentives etc., should be
withdrawn, after the preparation of the appropriate vouchers from the bank, through a
cheque on the day it is required. Cheques should be prepared carefully. The amounts
and figures should be written properly, with no space left for another figure or word to be
entered by someone else. If any expected payment does not take place, the excess
cash must be deposited back into the bank account the same day, within the servicing
bank‟s cash closing time. If the last working day of the month falls on a Wednesday, the
BM is allowed to make the administrative expense payments on Tuesday. All cash
payments must be made against the name and signature of the recipient.
4.13.6 Approval for Branch Administrative Expenses: Any travel claims of the
Branch Manager must be approved by the District Manager. Incentive payments must be
approved by the Head Office.
4.13.7 Safekeeping of Cheque Book, the Passbooks and the Bank Statement: All
these important documents should be kept in the locked drawer in the almirah. The
cheques book strip showing the balance in the account should be kept up-to-date.
4.13.8 District Office/Branch Bank Accounts: An account in a nearby servicing bank
should be opened before a District/Branch becomes operational. Attention should be
paid as to how the funds will be transferred inter-bank from HO accounts to the
District/branch servicing bank. The A/c at the branches and districts should be opened in
the branches of the same bank where the HO has an account. If not, and if there is no



                                            85
alternative, HO will have to open such an account before the District/branch becomes
operational. The In-Charge Accounts and the CEO together are authorized to open the
accounts mentioned above, with written notification of the new Account to the Statutory
Auditor. To make fixed deposits up to any amount on behalf of the Franchisee, and to
open OD accounts in the name of the Franchisee against such fixed deposits, they are
authorized together to appoint and change the ex-officio signatories for these accounts
when necessary.
4.13.9 All requests for Emergency Cash Transfers must be made by the District
Manager/Branch Manager in writing and co-signed by the District/Branch Second
Signatory (BSS), at least one week in advance. They will have to be backed up by a list
of loans pending for more than two weeks, approved by the OH/CEO or the appropriate
DIC, and the District/Branch Weekly Cash flow Statement; and only the net amount
required to cover the pending loans will be transferred. Without such documentation,
no emergency cash transfer (ECT) will be contemplated. This means that there
can be no requests for ECT verbally or through the telephone.
4.13.10 ECT requests and their supporting documents must be submitted directly to the
Accounts Officer, who will keep a register for the same. He/She will countersign the ECT
request and DM/BM, will advise on the justification and possibility of the ECT.
Disbursement will be in the form of a personal advance in the names of both the BM and
the Cashier authorized by a payment voucher made out by the Accounts Department to
which all the necessary documentation is attached. If all is in order, a cheque is made
out to the BM. Accounts Officer will check that everything is in order, and sign the
cheques as first signatory. It will then be passed to the CEO or District Officer who will
again check that all the documentation is in order, for the second signature. This whole
process should be completed prior to the date of disbursement, so that there is no
rush on that day.
4.13.11 A Cash Vault is to be opened at the Branch Office (BO). It is to have a two key
lock, with one key to be kept by Branch Manager/Asst. Branch Manger (Centre Manager
designated to act as in-charge in the absence of the BM), and the other by the Cashier,
and the appropriate Key and Vault Registers are to be maintained. All cash collected
and disbursement cheques including any ECT, once signed are to be kept for
safekeeping in the vault, with this being recorded by the Cashier. Deposit slips are to be
kept in the vault for safe custody.




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4.13.12 The ECT cheques are to be taken from the Disbursement Vault at the time of
disbursement, which should be before 11:00 a.m., with this being recorded by the
Accounts Officer in the Vault Register and ECT Register which will be signed by the
Accounts Officer and the payee(s) of the cheques. They will also sign a pay slip in
duplicate. The BM and Cashier and a four wheeler with trusted driver, depending on the
amount involved, will go directly to the Bank, encash the cheque and proceed directly to
the Servicing Bank branch to deposit the cash. This means that ECTs can take place
only on days when the servicing banks are open for deposit and on those days only if
there is enough time for the cash to be deposited in the servicing bank branch.
A copy of the pay slip will go to the CEO/DIC who will check, on their next visit to the
District/branch, that the funds were deposited in the servicing bank on the day that they
were received, and disbursed to the clients with the pending loans within time. This will
be recorded on the copy of the pay slip, which will be returned to the In-Charge
Accounts to close the personal advance.
4.14 Inter-bank Transfers (IBT)
This is the normal way to transfer funds from the HO to DO and to the Branches. They
should be done keeping in view the time it will take to clear the transfer advice. Separate
requests must be made for on lending and operating funds at least a week in advance,
with each being backed up with the necessary documentation (list of approved loans in
the case of requests for on lending funds or detailed lists of expenses in the case of
funds for administrative expenses) and the Weekly Cash flow Statement. In urgent
cases, the DM/BM can come to the HO/DO, and carry the transfer advice to the
servicing bank, but he should keep in mind that the funds may not be available
immediately from them.
ECT and IBT Reconciliation: At the end of every month, the District Office/branch
office ECT and IBT accounts (separate accounts should be kept for them) must be
reconciled with the balance in Head/District office accounts by the end of the first week
by the Accounts Department. For this purpose, and also to ensure that they are made by
the due dates. Any discrepancy in the ECT/IBT accounts should be reported
immediately to the CEO by Accounts Head of the Franchisee.




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           Chapter 5: Creating Credit Discipline & Delinquency Management


                             5.1 Creating Credit Discipline
Credit Discipline refers to repayment of loan principal and payment of interest on loans.
If both are made in full on time, then there is perfect credit discipline. Efficient
Franchisees strive for perfect credit discipline; but usually experience a trade-off
between attaining it and maximizing institutional operating efficiency. For example,
extending Centre meetings, perhaps for several hours, until all due payments have been
made might result in perfect repayment, but at what cost? Field staff efficiency would
decline, and client dropouts would increase. The experience of many GB-type
Franchisees is that nearly all clients, about 97 to 98%, will repay in full on time, if they
are satisfied with the quality of micro finance services. Getting the other 2 to 3% may be
more costly than it is worth. Intellecash franchisees strive for the highest possible credit
discipline that is consistent with maximizing our institutional operating efficiency.
5.1.1 Important determinants of credit discipline are:
a) Cost-effective identification of poor women in their communities
As per experience, the poorer the women the higher her repayment rate, contrary to the
conventional wisdom. This is because the poorest women usually have no other
opportunity to acquire capital, and will do almost anything to keep our credit line open.
The greater the leakage to the non-poor, the lower will be the repayment rate.
b) Thorough client training that emphasizes the importance of the verbal contract.
c) Thorough Group Recognition testing that ensures that clients know and trust each
other.
d) Insistence on timely attendance at Centre meetings, and proper seating among
clients.
e) Opening and closing meetings with the client and staff pledges.
f) Unanimous approval of loan applications by the Centre: this authority for the Centre
goes along with collective responsibility for full and timely repayment of the loans it
approves.
g) Thorough loan utilization checking by the Group Chairperson, Centre Chief and Field
Staff. If loans are not properly utilized repayment is likely to be affected adversely.
h) Under the No Cash Policy, if there are any arrears, there will be no further
disbursement, until they are cleared. This must be implemented strictly.
5.1.2 Effective Negative Inducement


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Each of these is a step toward perfect credit discipline. Notice that there are both
positive and negative inducements for clients: the major positive inducement is of course
the opportunity for a subsequent larger, if necessary, loan upon perfect repayment of the
current loan. The ultimate negative inducement is loss of eligibility for subsequent loans,
if there are any arrears in a Centre. That means if the full due collections have not been
deposited before a Centre Meeting, arrears will arise. No further disbursement is allowed
in the Centre, until the arrears have been cleared.
5.1.3 Continuous Group Training (CGT)*
   As soon as there are 2 potential groups ready, CGT must be commenced.
   CGT must be continuous for at least 6 days.
   There should be timely and complete attendance, every day or the CGT must be
    started again from the beginning.
   This is the start of building credit discipline; so there should not be any compromise
    on this.
   When the groups are ready for GRT, within a week the Branch in charge should be
    informed, so as to give him time to schedule a visit.
5.1.3 Group Recognition Test (GRT)


(See Sections 3.7 to 3.7.4 in Chapter 3)


                               5.2 Delinquency Management2
5.2.1 Understanding the Causes & Costs of Delinquency
What is Delinquency?
Payments not made when due, are delinquent. These delinquent payments are referred
to as payments in arrears or, simply as “arrears”, if they take place during the tenor of
the loan. Arrears that persist after the tenor of the loan are termed "defaults". It is the
policy of the Franchisee to treat all arrears that have not been collected for more than 4
weeks (30 days) as Portfolio at Risk (PAR), and arrears that have not been collected for
more than 12 weeks (90 days) as Non-Performing Assets (NPAs).
Causes of Delinquency

2
 This section draws heavily on the training materials provided by CGAP World Bank for its course on
Delinquency Management. These materials may be downloaded free of charge from the CGAP website:
www.cgap.org.

* For detail consult Training Manual on Targeting


                                                    89
The overwhelming evidence from two decades of micro finance for poor women around
the world is that they want to repay their loans in full on time. If they are not doing so,
something must be stopping them. It is the job of the field staff of the Franchisee to find
out what. Very often it will be rigidity or inflexibility on the part of the Franchisee itself.
For example, if a poor woman's husband or child becomes ill or dies, she will have to
pay for the medical treatment, medicine and/or funeral expenses. Given the small
margins with which poor women work, these unexpected additional expenditures may
make it impossible for her to meet her weekly instalment. Her relatives and friends
probably will help her out with repayment for a few weeks, but they too live with narrow
margins. Eventually they may not help her any longer. If we do not have an effective
policy to deal with such situations, she is likely to fall into arrears. It must be recognized
that poor people live on the edge of disaster and frequently fall into it. Also their incomes
are often irregular. There will be weeks during the year when some of them cannot pay
their instalment from their own funds. In addition, periodically the Franchisee will
encounter a few clients who do not want to repay. The CASHPOR-Intellecap Best
Practices has a comprehensive policy for dealing with these realities.
Costs of Delinquency & Default
Delinquency is expensive for the Franchisee. It affects the Program by:
   Slowing rotation of the loan portfolio
   Delaying earnings
   Increasing collection costs (visits, tracking, reporting, etc.)
   Decreasing Operating Spreads
   Causing program to lose creditability
   Leading to ever-increasing repayment problems
   Threatening long-term institutional viability
Financial Impact of Delinquency & Default
   Loan loss provision (provision for doubtful and bad debts (PAR, NPAs, defaults)
    reduces surplus
   Loss of the non recoverable portion of the outstanding loan
   Written-off loans require de-capitalization
5.2.2 Measuring & Tracking Delinquency (Loan Portfolio Quality)
Our outstanding loans (not yet repaid or due for repayment) are our "portfolio", defined
as the principal amount of loan balances outstanding. Features of the loan portfolio:
   Largest asset


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   Generates income (interest & fees)
   Main product of the business; demanded by clients
   Reason for our existence: how we reduce poverty
Because the loan portfolio is so important, its quality must be measured and tracked. For
all ratios claiming to measure loan portfolio quality, only those with "portfolio
outstanding" in the formula measure the quality of the portfolio.
Notice that Repayment Rate, usually calculated, as Amount Collected over Amount Due
for the Period does not have Portfolio Outstanding in the formula. It does not measure
the risk of potential losses. At most it measures the actual losses to date.




5.2.2.1 Performance Ratios & Loan Portfolio Quality
Indicator                      Ratio                           Measurement
Portfolio at Risk (PAR) by Unpaid principal balance of Answers               the        question:
Age                            all loans with arrears of "How          much        could           the
                               more than 4 weeks of age / Franchisee            lose         if    all
                               Outstanding portfolio           borrowers with arrears of
                                                               more than 4 weeks default?
                                                               Ageing of arrears separates
                                                               the more risky loans from
                                                               the less risky. (the longer a
                                                               loan   goes      unpaid,            the
                                                               higher the risk that it will
                                                               never be paid)
Arrears Rate or Past Due Amount            of     arrears   / Answers the question: How
Rate                           Outstanding portfolio           common      place        is        non-
                                                               payment?                 Measures
                                                               amount lf loan principal due
                                                               but not paid.
Annual Loan Loss Rate          Amount of loans written-off Annual        cost      of     default,
                               as unrecoverable / Average which must be balanced by
                               outstanding portfolio           higher interest income.




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PAR is the best indicator for assessing the risk of potential losses. As loans are repaid
weekly, PAR must be tracked weekly. Arrears rate over-estimates portfolio quality by
ignoring the risk of potential losses. Annual Loan Loss Rate measures the actual loan
losses for a period.
5.2.2.2 Tracking PAR Weekly
The Weekly Loan Arrears Report provides management at the Branch/Unit/District and
Head Office levels with the loan portfolio quality information it needs, down to the field
staff and client levels if necessary, to know when and where to take corrective action.
Operations‟ managers must remember at all times that arrears can spread as quickly as
a fire in dry grass, if not attended to in a timely manner. See annex D for format of
Weekly Arrears Report.




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5.2.2.3 Measuring Repayment Rates
The following are the two most useful measures of repayment rate.
Indicator                      Ratio                          Measurement
Repayment Rate                 Collections    of   principal Shows       amount         collected
                               (current & past due) less compared to amount due to
                               any pre-payments / Total date. Useful for cash flow
                               amount due for this period analysis             and      planning.
                               + amount in arrears from However, it is a historical
                               previous periods               measure          that    does    not
                                                              include the risk of future
                                                              losses.
Current Repayment Rate         Collections of current due Shows current repayment,
                               amounts for this period / exclusive of arrears and
                               Amount of current due for prepayments.                 Useful   for
                               this period                    cash      flow     analysis      and
                                                              planning. However, it does
                                                              not include the risk of future
                                                              losses.




5.3 Guidelines on Centre Rehabilitation
5.3.1 Full Implementation of No Tolerance of Arrears Policy (NTAP) If the NTAP is
implemented fully and consistently right from the time of the first arrears, it will prevent
their spread and, before long, result in their elimination, due to the peer group pressure
generated on the defaulters. However, young inexperienced field staff must be trained to
implement the NTAP when they face their first arrears. Clients usually oppose it strongly,
and will make all kinds of threats. The Centre Managers must have been trained to face
and manage this difficult situation. They must not lose their cool, but must remind the
Centre members of their promises to pay in full every week and to assist sister Centre
members who are having difficulty in paying. The CM must remind the clients that we
have only their word, through the Surety Agreement/Verbal Contract, that they will take
collective responsibility for all the loans to Centre members. If they break their promise,
how can we do any more business with them? They will not like this, but they will




                                             93
understand and accept it, if the CM is firm. CM must report any arrears to their Branch
Manager/Unit Supervisor as soon as possible by telephone.
5.3.2 District In charge and Branch Managers should be ready to act as soon as cases
of arrears are reported. They should accompany the CM concerned to meet the Centre
Chief as soon as possible, and definitely before the next Centre Meeting, to back-up
his/her insistence that the Centre clear its arrears immediately, by depositing the arrears
before the next Centre Meeting. Often this is not done quickly enough, as arrears can
spread very fast. Before the District Manager knows, he has a repayment crisis in the
district. See Section 5.3.4 for guidelines for the rehabilitation of such Centres.
5.3.3 Re-structuring of Loans of deceased clients/husbands. In the event that an
arrear has been caused by the death of a client and/or her husband and no insurance is
available, the balance outstanding can be re-structured, with the agreement of the
District Manager, the Head of Operations and the CEO, upon production of a certified
true copy of the Death Certificate. Re-structuring can involve either re-scheduling of re-
payment to make it easier, or re-finance to generate additional income, or both, at the
discretion of the officers concerned and in discussion with the client/heirs and Centre
Chief. Centre members should be required to cover the weekly repayment for the
deceased/widow until the re-structuring is completed.
5.3.3.1 Reporting of Restructuring: Any loans re-structured must be reported in the
next Board meeting, with a certified true copy of the Death Certificate. They must also
appear in the Quarterly Loan Portfolio Report, and on the next audited Balance Sheet.
5.3.4 Rehabilitation of Centres with Arrears:
5.3.4.1 Identification of Wilful Defaulters The first step in Centre rehabilitation is the
identification of defaulters who have the ability to pay but have decided not to. These
wilful defaulters can be identified with the help of the clients still in good standing. Make
a list of defaulters with arrears of 5 weeks or more, and go through it client by client
asking the members in good standing to identify the wilful defaulters. They know and
will reveal the information for the sake of resumption of loan disbursement.
5.3.4.2 Letter of Expulsion for Wilful Defaulters. In most circumstances, wilful
defaulters with arrears of 12 or more weeks of age should be expelled from the micro-
finance program. However, District In charge may wish to give one last chance to them
by means of a letter requesting them to resume attending the Centre Meeting and
paying their instalment in full by a specified date. In experience, such letters have had
little effect in terms of improving repayment, but in some cases they have made the



                                             94
subsequent expulsion of the client more socially acceptable. Ultimately a letter of
expulsion will have to be sent to most of the wilful defaulters with arrears of more than 4
weeks. It should make it clear that they are no longer entitled to attend the Centre
meetings or to participate in the financial services offered by the Franchisee, but their
debt to The Franchisee continues and interest on it continues to increase. It would be
best for them to settle it by paying what they can at any subsequent meeting of their
Centre. Otherwise, the Franchisee will have no choice but to try to collect the debt at
their house, with all the associated embarrassment.


5.3.4.3 Write-off of Debt of Expelled Members. Clients are expelled only when the age
of their arrears is such that the chances of their collection are near zero. Such debt
should be put up to the Board for write-off at its next meeting. Loans written-off should
be reported separately in the Loan Portfolio Quality Report.
5.3.4.4 Motivation for Wilful Defaulters with Arrears of < 12 Weeks. Wilful defaulters
with arrears of less than 12 weeks may decide to repay if they are motivated well. If their
arrears cross 5 weeks, they should be asked to resume attendance at Centre Meetings,
if they have stopped attending, and then they should be motivated first not to allow their
arrears to cross 12 weeks and to clear them gradually. In such case they should be
eligible for a subsequent loan smaller than the previous loan by the total amount of
instalments that they missed, prior to settling the loan.
5.3.4.5 Restructuring for Non-wilful Defaulters. Non-wilful defaulters can be identified
with the help of the Centre members still in good standing. They will be clients whose
income-earning capacity has been reduced suddenly by means of an accident, serious
illness or loss of an important productive asset (e.g., death of a milk cow or buffalo that
was purchased with the loan and for which there is no insurance). Or they could be
clients with children that are seriously ill. They should be motivated first to resume
attendance at Centre meetings, and then a plan should be developed with them for their
rehabilitation. It could include refinance (disbursement of supplementary funds) or
lengthening the loan term or both. Such restructuring can be done only with the approval
of the CEO, for which sufficient evidence must be provided, and must be reported in the
Loan Portfolio Quality Report, to the next meeting of the board and on the next audited
Balance Sheet. Prior to any restructuring, the Centre must cover the arrears of any non-
wilful defaulters.
5.3.4.6 Incentives for Perfect Quarterly Repayment



                                             95
Positive inducements to improve quickly the current repayment rate in badly affected
areas that have been effective are:
a) A ten-rupee rebate for perfect quarterly repayment
b) A lucky draw for attractive prizes, among those with perfect repayment for a quarter
However, such inducements should be used only as a last resort, and must be
withdrawn once they have achieved the desired objective.


5.3.5 Prospect of the Subsequent Loan
The strongest incentive for perfect repayment is the consequent eligibility for a
subsequent loan, larger if justified by the loan proposal. This, in addition to the desire to
keep their word, is what makes most clients repay in full on time. It should be used to
motivate clients not to miss instalments. Also, there should be a relationship with the
number/amount of instalments missed by a client and her eligibility for a subsequent
loan and its amount. Wilful defaulters who had arrears of 5 weeks or more should not be
eligible for a subsequent loan, as the risk attached to it would be too high, regardless of
the fact that they eventually settled their arrears on the previous loan. Wilful defaulters
with arrears of less than 5 weeks and who subsequently settled them should be entitled
to a subsequent loan, but less than the amount of the previous one by the amount of
their arrears before they settled them. Non-wilful defaulters who have settled their
arrears should be eligible for a subsequent loan of only the same amount as their
previous loan, as their ability to repay in full on time has not yet been demonstrated. [For
additional information, see the Training Manual on “Creating & Maintaining Credit
Discipline”]




                                             96
                         Chapter 6: Monitoring and Supervision


Strict Supervision: Key to Success
Supervision of subordinate staff is a central process in the running of an effective and
efficient micro finance institution. It must never be simply assumed by supervisors that
work is being carried out by their subordinate staff, as they have directed. Each
supervisor has the responsibility of continuously check to ensure that the work is being
carried out properly, i.e., procedures and internal controls as outlined in this manual are
being complied with. If a supervisor does not check the work of his/her subordinate staff
thoroughly and frequently, they will assume s/he does not really care how they do their
work.
Recording, maintaining and reporting essential information is absolutely necessary for
the management of the MFI/Franchisee. Apart from the usual procedural information
flow, supervisors must regularly go to the field to verify whether what is being reported is
correct and accurate.


                               6.1 Reporting and MIS

6.1.1 Reporting and the information flow

   1. IntelleCash Franchisees use the FINO MIS system, custom made for
        microfinance and recognised as such in the industry .The FINO MIS is
        maintained at the branch level by MIS Executives (MIS-X). The BMs report all the
        data to be entered into the MIS. The MIS-Xs enter the data into the MIS and print
        the CDS for Centre Meetings.
   2. The Centre Managers must report to the Branch every day. If a CM fails to report
        explanation should be sought for his absence. Action may be taken as per the
        rules mentioned in the Operations Manual.
   3. The CM must carry the office copy of the CDS with details of repayment to the
        Branch office.
   4. The Cashier collects the CDS and Form no.1 and GRT forms from the all the
        CMs and maintains them in the Branch office.
   5. The Branch Manager reports to the District on a specified day every week.
        During his/her visit, the BM carries all the CDS with recovery and disbursement
        details and the GRT forms of the new groups and replacements.



                                            97
6. The records are received at the district, and later fed into the MIS software by the
   MIS-X.
7. The BM also carries a reporting register, in which he/she mentions all the reports
   submitted and received at the District Office. This Register is signed by the AO or
   the DM.
8. A similar reporting register is maintained at the district where the BM signs on
   reporting.
9. The MIS-Xs keep ready the next week CDS for the Branch printed, usually
   before the arrival of the BM or print it during his visit and hand it over to him.
10. The BM carries the CDS to the branch where they are filed by the Cashier who
   distributes the CDS to respective CMs on their next reporting.
11. The CMs carry the CDS for their Centre Meetings




                                         98
6.1.2 Reporting Structure
1. All District Managers report to the Operations Head /CEO.
CEO has the responsibility and authority for all District-level operations as well as for the
following:
             a. Appointment and termination of personnel
             b. Disciplinary Action that could result in termination and/or transfer of
                  District Manager
             c. Expenditure in excess of the approved budgets
             d. Changes in the official Business Plan
             e. Changes in the Operations Manual
2. District Manager (DM)/ District Manager (DIC) has the responsibility and authority
    for all the personnel, assets and activities in their Districts, except for:
             a.   Transfer of personnel for which the provisions of Transfer policy are
                  applicable
             b. Expenditure in Excess of the approved budgets
The District Manager supervises the Area/Branch Supervisors. He should receive
weekly reports from them on their planned and actual supervisory activities, including
copies of their Surprise Centre and Branch Visit Reports that require his attention. In
cases of serious violation of operating procedures as described in the Operations
Manual, the District Managers should schedule as soon as possible a surprise visit to
the concerned Centre/Branch to ensure that corrective action has been taken.
3. Area Managers (AM) are responsible for supervising the Branch Managers/Centre
Managers placed under their authority by the District Manager. One of the Area
Managers acts as the Deputy District Manager (DDIC), and substitutes the DIC when
he is out of the district or on leave.
The Area Managers should make both planned and surprise visits to Branches and
their community-based Centre meetings, where most of the business of the microfinance
program is carried out. Each Area Manager should make a surprise visit to each Branch
once a month. Before the surprise visit to the Branch, the AM should make surprise
visits to at least two of its Centre meetings, under different CMs. A surprise visit should
be made by the AM to at least two Centre meetings for each CM per Quarter. AMs give
their Surprise Visit Reports to the BM for follow-up action. Copies of Reports showing
serious violations of operating procedures, such as following must be given to the
District Manager, by the end of the week:


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-   The Centre meeting not taking place on the scheduled time and day
-   Attendance below 80%
-   Any suspected cases of phantom loans or under-disbursement
-   Loan utilization of less than 90%
-   PAR > 5%
4. Branch Manager is the head of one operating unit (Branch) of the Franchisee. All
    the CMs in the branch report to him or her. The Branch Manager must ensure the
    following:
    1. To take day-to-day responsibility for all the work to establish/successful
       functioning of branch where ever posted.
    2. To implement the CEO‟s plans and the aims of the franchisee by following the
       procedures in place at various existing/proposed Districts.
    3. To increase the outreach of the branch for the attainment of financial viability in a
       cost effective way.
    4. To supervise the field staff working under him/her including their work in the field.
       He/she must make extensive field visits, and surprise visits to check on the work
       of CMs. His/her success depends on this.
    5. To ensure that the targets allotted to each field staff and branch as a whole are
       achieved and also to ensure that targets are achieved.
    6. To get the daily records updated and necessary periodical reporting made to the
       higher authorities.
    7. To conduct all GRTs with rigour and sincerity. GRTs may be postponed but
       quality should not be compromised.
6.1.3 Important Registers to be maintained
All offices of the Franchisee should maintain the following registers:
   Cash Register
   Petty Cash Register
   Vault Register
   Bank Register
   Attendance Register
   Movement Register
            6.2 Field Visits by Branch Managers and Area Managers
Generally, good supervision involves issuing clear instructions (written if possible) to
subordinate staff, making a record of them (in a diary), carrying out both planned and


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surprise visits to ensure that field operations are being carried out as directed. If not,
asking why and changing the original instructions if necessary. Brief, summary, written
reports of surprise visits should be made on the prescribed form to the supervisor of the
manager who carried them out. A copy should go into the personal file of the officer-in-
charge of the unit that received the surprise visit. Apart from the regular management
supervision visits, the Internal Audit Officer conducts independent surprise visits which
are detailed in the Internal Audit Manual. Surprise visits should not be taken personally.
They are a normal and essential part of the supervisory work in a micro finance
Franchisee.
6.3.1 Surprise Centre Visit (SCV)
The AM /BM/Officer carrying out SCV should arrive at the Centre Meeting place ten
minutes before the scheduled time for the meeting. It should be recorded whether the
CM arrives on time and he/she is wearing a crash helmet if travelling by two wheeler.
Attendance of Centre members should be observed and recorded and the Centre
Attendance Register should be checked to determine if it is being kept properly and to
calculate the average weekly attendance over the past month. If it is less than 80%, the
AM/BM should bring it to the attention of the Centre members.
The conduct of the Centre Meeting should be observed and recorded.
   Are the members seated correctly? Does the Centre Leader run the meeting?
   Is the Centre Leader queried about any absentees, and sent to fetch any that are
    unexplained?
   Are the official receipts handed out, and do the Centre Leader check for the CM's
    signature, and for any alterations not signed by him?
   Are the receipts kept neatly in a folder, according to date?
1. AM/BM to receive the Deposit Slip during Surprise Centre Visits
The officer performing the SV should receive the Deposit Slip from the Centre Leader,
so as to spot quickly any irregularities. Is the deposit complete? If not, the officer must
find out why. Does each Deposit Slip circulate independently on its own clipboard for
signature, to save client time? How long does the meeting take place?          The Officer‟s
observations should be entered on the Surprise Centre Visit Report.
2. After the Meeting, the visiting official should check loan disbursement and utilization at
the houses of the clients who have received loans since the last Surprise Visit (based on
the CDS report). The observations should be recorded in the following form in the
Surprise Cente Visit Report.


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Disbursement from records                               Observation/Finding




Supervisor:                                             Signature:


3. The Surprise Centre Visit Report (given in Audit Manual) should be completed by the
visiting officer during the Centre Meeting and discussed with the CM and the Centre
Chief, and immediately after that, all should sign in the appropriate spaces. A photocopy
should be made by the BM for his follow-up action, when the Officer visits the Branch
after the SCV. Another copy should be given to the Supervisor of the Officer who made
the SCV, in case of serious violations of operating procedures and rules (see above).
The Manager‟s Supervisor should schedule a surprise visit to the Centre, and carry the
SCV Report with him/her during the visit.
6.2.2 Surprise Branch Visit (SBV)
Upon arrival at the branch to be audited, the officer carrying out the SBV should ask for
the key register, cashbox, cash book, vault register and bank registers. He should check
to see that the keys are with the designated persons, and obtain them. The cashbox
contents are to be checked against the cashbook and the vault register, and any
discrepancies recorded, with the explanation(s) of the staff responsible. If the closing
balance was not nil and preceding day was not a holiday, then the BM should be asked
for an explanation, and instructed to follow the nil balance rule in future. The officer must
have received the details of any payments of funds, by cash, cheque or transfer, from
the District Office to the Branch since the last audit, and verify their proper receipt
through the cashbook or bankbook. Also, the officer conducting the SBV must check to
see that there are no “idle funds” in the Branch bank account(s)3.
1. Verification of Loan disbursements & Checking for Pending Loans:
The officer conducting the SBV should ask for the Due Disbursement Report for the
Branch for the previous week to be printed out and should check the appropriate CDS to
ensure that disbursement actually took place. If not, the case should be reported in the
SBV Report, including the reason(s) and what happened to the funds. Any pending loan
applications, i.e., those that were approved by the Centre more than a week ago and



3
    Idle Funds Explained in Chapter 7 under Financial Rules


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have not yet been approved/ disbursed should be identified and each case reported in
the SBV Report.
2. Verification of Salaries & Incentives Paid: The officer doing the SBV must check
the incentives and salaries paid to the staff for the previous month against original
documents, including the Branch Staff Attendance Register, the Monthly Staff
Productivity Report and monthly staff movement register (for reimbursement of local
conveyance purposes.)
3. Posting to Subsidiary Ledgers: The officer carrying out the SBV must satisfy
himself that in the Branch staff is posting entries from the Cash book to the subsidiary
ledgers on daily basis. This can be done by checking the Subsidiary Ledger balance
with that on its Top Sheet and the Cash Book. Staff whose ledgers are not up-to-date
should be warned verbally; and their name and staff number should be entered into the
SBV Report.


4. Verification of Monitoring Data: The officer making the SBV should carry a copy of
the latest Branch Monthly Data Report to the DO. Items on Active Loan clients, Total
Loans Outstanding, Portfolio at Risk and Interest Income Received should be verified
against the appropriate original documents. Any discrepancies should be brought to the
attention of the Branch Manager and should be recorded in the SBV Report.
5. Compliance with Staff & Office Rules: the officer doing the SBV should have
familiarized himself with the Office Rules. Any violations observed during the visit should
be brought to the attention of the staff concerned by means of a verbal warning &
recorded in the SBV Report.
6. Feedback to BM from Surprise Centre Visit: A Surprise Branch Visit should always
follow a Surprise Centre Visit, and the Officer who carried out the SCV should brief the
BM on the visit and a photocopy of the SCV Report be handed over to him for follow-up
action.


7. Surprise Branch Visit Report: See Audit Manual
Completed SBV forms should be filled out in duplicate, discussed with the Branch staff
collectively before the supervisor leaves and a copy left with the Manager. The original
should reach the respective DIC within a week.
8. Regular Visits keep the BMs aligned to their Managerial role




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Branch Managers are in a difficult position. They are part of the management of the
Franchisee, but they are posted in the field alone. They interact daily with their
subordinate staff, and may come to take their point of view rather than that of the
management, unless visited frequently and motivated by their Area /District Managers.


                                 6.3 Conducting GRT
The GRT must be conducted by an authorized officer not below the rank of a Branch
Manager. The officer should never delegate this responsibility even to a senior Centre
Manager. It should be remembered that all their future sanctions would be made on the
basis of this one interaction. They should not shy even to enter the houses of the clients
and verify their status.
All questions must be put to prospective clients. The Client Pledge must be recited
individually by each prospective client, and the Group must not pass until its members
can do so.
Poverty Status Verification is to be done by the Internal Audit Officer during their
regular internal audit visits. Initially 20% GRTs are to be checked for each Branch
Supervisor. Clients‟ houses are to be visited and the CHI score on Form No.1 is to be
verified. Next, the rest of the items on Form No.1 are to be checked to verify the poverty
status of the household. If more than one non-poor household is discovered in a Centre,
then all other Centres of that Supervisor must be checked and follow-up action taken
through the District Incharge. All cases of leakage must be reported to the CEO.




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                             Chapter 7: Staff and Office Rules


             7.1 The Franchisee is identified with the conduct of its Staff
All staff of the Franchisee must remember at all times that they are representatives of
the IntelleCash Franchisee and that it will be judged by the way they look, act and talk.
Similarly we will be judged by the cleanliness and order in our offices, and by the quality
of service provided to our clients. Most importantly, we will be judged by our honesty.
Corruption of all kinds surrounds us; but a corrupt private financial institution
cannot survive for long. We must make every effort to prevent the cancer of
corruption from infecting the Franchisee. The following are some obvious but
important rules that should be followed:


7.1.1 Maintenance of Relationship with Clients & the Public
7.1.2 Remembering and being guided by our vision and mission statements
7.1.3 Vision: We see the day when all women living in poverty in our area of operation
have access to sustainable financial services, and many of them are making use of
these to lift their families out of poverty and to improve their social position.
7.1.4 Mission Statement: To provide sustainable financial services to poor women in a
timely, honest, and efficient manner.


                                      7.2 Respect to all
Clients, potential clients, and indeed everyone you meet in the course of your work, are
to be treated with respect, politeness and honesty.
7.2.1 Satisfaction of clients and the continuous recruitment of new clients are essential
for the successful performance of the Franchisee‟s mission. In addition, the staff must
remember that the Franchisee is prospering because of our clients, and treat them as
our partners.
7.2.2 Staff members are not permitted to accept anything personally from clients and
potential clients, not even tea. Violation of this rule will attract disciplinary action.


7.2.3 Staff members are not permitted to enter into any personal, social or business
relations with clients or potential clients, without getting prior written permission from the
CEO. Violation of this rule will attract disciplinary action.




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7.2.4 Staff members are to motivate potential clients who are afraid to become clients,
by making them and their husbands realize the good opportunity we are providing for
them to lift their family out of poverty with their own efforts. However, the staff is not
permitted to give any material inducement to clients to participate in the program. Nor
can they use any pressure or force. Violation of this rule will attract disciplinary
action.
7.2.5 Staff must always dress smartly and neatly, while on duty. They must keep their
personal appearance neat and tidy.
7.2.6 In all other ways, ensure that their conduct is beyond reproach.
7.2.7 They must do what they can to assist persons you find in distress, particularly poor
women.
7.2.8 Even off duty, especially at the beginning of your work in a new location, keep in
mind that you are being observed, and the Franchisee‟s status/reputation is adjudged by
your behaviour both on and off the job. Any staff member who is involved in any
activity which brings the Franchisee into disrepute will be automatically
dismissed. Violent acts of any kind, including verbal abuse of clients, the public or
fellow staff also will attract strict disciplinary action.
7.2.9 Staffs with grievances of any kind toward the Franchisee or its officers are required
to place them before their immediate supervisor. If satisfactory remedial steps are not
found, staffs are permitted to write to the CEO or to contact him through the
Franchisee‟s Internet e-mail. They will be answered as soon as possible. Staff must not
be penalized in any way for raising legitimate grievances.
7.2.10 All work in the Franchisee is to be done according to the directions/procedures
laid down by IntelleCash. Violations of these procedures will result in disciplinary action.
Staff aware of violations on the part of other staff is required to bring them to the
attention of their supervisor or the CEO. Amendments to the OM will be made through
Staff Circulars. These Circulars should be inserted into the appropriate place in the OM.
It is a requirement that the copy of the OM with each staff member should be up-to-date
at all times.


7.2.11 All staffs are to strive to avoid the temptation to cover-up their mistakes. Problems
covered-up are not solved and likely to arise again in a worse form. It is realized by the
Franchisee that anyone can make a mistake. Problems arising from mistakes should be




                                            106
faced squarely and honestly. Nobody will be punished for honest or bonafide mistakes;
but nobody should repeat the same mistake twice.
7.2.12 All staff members are encouraged to continually think of ways to improve the
Franchisee‟s financial products and services, as well as its efficiency and financial
performance. Staff can write to the CEO directly, or e-mail him if they think they have a
good idea. Staff ideas adopted by the Franchisee will result in a letter of commendation
from the CEO a copy of which will go into the personal file of the staff member, plus a
monetary reward if the idea saves the Franchisee‟s money or otherwise improves the
efficiency or financial performance.


                           7.3 Relationships with Fellow Staff
7.3.1 Fellow staff members are to be treated by the staff with same degree of courtesy,
politeness and honesty with which they would like to be treated.
7.3.2 Female staff members are to be treated with respect and dignity and equality in all
works of the Franchisee.
7.3.3 Superior staff members are to be treated with respect and decorum. Every effort
should be made by subordinate staff to assist them in their work.
7.3.4 Subordinate staff members are to be treated with respect and dignity. They are not
personal servants of their superior staff. A strict line should be drawn between official
work and personal affairs. It is neither binding on the subordinate staff to assist in the
personal affairs of their superiors, nor can they be punished if they refuse.
7.3.5 The incidents of illicit relations with co-workers/sexual harassment of colleagues
will be viewed seriously. In case of such incidents, the staff involved will be subject to
severe disciplinary action.
7.3.6 Staff must inform the CEO in writing, with a copy to their immediate supervisor
about his/her near relatives/blood relation working in the Franchisee and/or applying for
work in the Franchisee. There is no rule against relatives working in the Franchisee, but
the information must be furnished upfront.


7.3.7 Supervisory staff involved in preparing Staff Evaluation Reports on their
subordinate staff is required to be honest and conscientious in doing so. To give false
information or opinion in such reports is an offence in the eyes of the Franchisee and
will result in disciplinary action.




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7.4 Staff Undertaking
All staff members have to sign the staff undertaking, included in Annexure 6 Staff
Undertaking.


Newly recruited staff are required to sign the undertaking before commencing any work
for the Franchisee. In cases of embezzlement of Franchisee or client funds by a staff
member, his/her supervisor must inform the CEO by telephone, and take immediate
action to recover the fund.


                              7.5 Important Financial Rules
All staff must be aware at all times that our organization is a financial institution and that
money is our product. Utmost care must be taken in handling it. Surprise checks will be
carried out at any time by one‟s supervisors and the Internal Audit Department. These
are not to be taken personally, and full co-operation is to be given to the audit staff, as
such checks are essential in a financial institution. Staff who do not give full co-
operation to officials who conduct surprise visits or internal/statutory audit visits
or do not provide requested documents in reasonable time, will invite disciplinary
proceedings against them.            To ensure that the staff are not in violation of any
important financial rules, observe the following:
7.5.1 Daily closing of cash, bank and transfer voucher books is to be practiced by all
offices in the Franchisee by the officer-in-charge. It is the responsibility of their
immediate supervisors to conduct surprise checks frequently to ensure that this is being
done, and that cash in the box matches with the figure in the cash book, that the
denominations match those in the Vault Register, and that the cash box keys are with
the persons named in the Key Register. Officers–in-charge are to be required
immediately to make-up any difference from their own funds and the matter is to
be reported to the next superior officer as soon as possible. Failure of the officer-
in-charge to make up the difference by the end of the day will result in initiation of
disciplinary proceedings.
7.5.2 No staff member is allowed to keep/carry Franchisee‟s money over night. Violation
of this rule will result in serious disciplinary action.
7.5.3 Any misuse of Franchisee or client’s money is considered a serious offence
that will result in dismissal.




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7.5.4   Errors in Franchisee financial books and documents are not to be erased,
written-over or covered with “whitener” or in any other way. They must be crossed out
neatly with two parallel lines, the correct figure must be written clearly nearby and the
initials of the person making the correction must be affixed.
7.5.5   CDS from community-based Centre Meetings must have the same totals as the
temporary receipts left in the village/slum, and cannot be altered in any way by CM after
they have left the village/slum. Only the Branch Manager/Unit Supervisor, who must sign
and stamp both sheets accordingly, can make corrections. One of the corrected copies
is to be returned to the Centre at its next meeting, with the correction(s) being
incorporated in it. The temporary receipt is to be destroyed when the corrected official
receipt is handed over to the Group Chairperson.
7.5.6   The general ledger and all subsidiary ledgers are to be up-dated and balanced
daily. Failure to keep account books up-to-date is a serious offence that will result in
disciplinary action.
7.5.7 “Idle funds” are amount of funds that the Branch will not need in the next week.
The amount needed over the next week can be estimated by verifying the branch due
disbursement report. Prospective salary and incentive payments to Branch staff must be
considered. After assessing the estimated total fund requirements of the Branch for the
next week, any excess funds in the bank(s) should be transferred inter-bank to the
District Office account of the respective Bank.
7.5.8 All other financial procedures and internal controls of the Franchisee, as listed in
Chapter 4, are to be followed strictly. Failure to do so will result in disciplinary action.


                                      7.6 Office Rules
Perceptions of respectability and soundness of a financial Franchisee are reflected to a
considerable degree by what its offices look like and how they are kept. All offices of the
Franchisee are to be neat and tidy at all times, including the toilets, which are to be
clean, supplied with water and functioning and well lit. Every office is required to have a
toilet for its exclusive use. Buildings cannot be taken on rent by the Franchisee, if they
don‟t have a toilet for the exclusive use of the staff.
7.6.1   Each office of the Franchisee is required to have a clearly readable external
signboard in a prominent place, giving the IntelleCash logo, the name of the Franchisee
and the office, its address and telephone number, along with office timings.




                                              109
7.6.2 Members of the public or clients coming into the office are to be treated
courteously, and helped if possible.
7.6.3 Office furniture and equipment must be used with care, kept clean and maintained
in good condition. Damage or loss caused by negligence of the staff must be paid by
them.
7.6.4 Office Notice Boards should be placed in a prominent position by which staff
passes frequently, and kept up-to-date. The Franchisee‟s vision and mission statements
in English and the relevant local language, in good condition, should be displayed, along
with a copy of the Franchisee‟s registration certificate. A section of the Notice Board
should be reserved and marked for current Staff Circulars. Current ones should replace
old circulars. Another section should be reserved and marked for Monitoring Reports. It
should contain information as of the end of the previous month displaying the number of
Active Loan clients, Total Loans Outstanding, Interest Income and Portfolio at Risk,
compared to Quarterly Targets from the Business Plan. In addition, a complete list of
Centre Meetings, showing the day, time, village/slum name, CM in-charge and number
of Groups should be posted. A copy of this Operations Manual should be kept in a
prominent place in the office, for consultation by the staff. There should also be an up-
to-date organization chart of the office, with a photo of each staff member. Branch and
Office Managers are required to keep their Notice Boards complete, neat, tidy and up-to-
date.
7.6.5   Staff tables should be cleared at the end of the day, with all account books and
other documents stored neatly in their proper place.
7.6.6. Staff members are expected to stand up by their work places and are prepared to
identify themselves and to discuss their work, when a senior officer of the Franchisee
visits their office. Staff members must be able to recite from memory the vision and
mission statements of the Franchisee. They must know also the current quarterly targets
of their branch/office, and its financial break-even.
7.6.7 Office supplies and utilities, like water supply and electricity, are to be used with
economy. Remember that these are costs of operation of your branch/office, and that
excessive use will delay your financial break-even.
7.6.8 None should smoke in Franchisee‟s offices and while on duty. Signs thanking
people for not smoking should be prominently displayed in all branches and offices.
Each office should be equipped with a fire extinguisher for electrical fires. It should be
maintained in good working order, and all staff should be trained to use it. Each office



                                             110
should be equipped with a torch and batteries to be used for emergencies during power
failures at night.
7.6.9. The office hours for the office/support employees are 9:30 a.m. to 6:00 p.m.
However, the field staff may not abide by this timing in case of field visits. They must be
guided by their targets as completing the targets would necessitate early morning and
evening field visits.
7.6.10 No business other than the Franchisee‟s business is to be conducted in its
offices.


                                  7.7. Disciplinary Procedures
Non-compliance of these staff and office rules, procedures framed in Operations Manual
in general or with any other notified procedures or rules of the Franchisee from time to
time will result in suitable disciplinary action against the staff member by the appropriate
officer(s) of the Franchisee. Such disciplinary action must comply fully with the UP
Industrial Employment (Standing Orders) Rules 1946, as amended subsequently. (Ref.
Labor Laws in UP, Vol. II, 1281-6)
7.7.1 Acts or omissions constituting misconduct:
           1) Wilful insubordination or disobedience whether alone or in other combination
                with another or others of any lawful and reasonable order of a superior.
           2) Striking work or adopting go slow pen down strike either singly or with any
                other employee without giving due notice prescribed by any law for the time
                being in force.
           3)   Inciting, whilst in the establishment, any officer/ or employee to strike work.
           4) Theft, fraud or dishonesty or misappropriations in connection with the
                employer‟s business or property or property belonging to other employees.
           5) Taking       or     giving   bribe         or   any   illegal   gratification   from
                subordinate/guest/clients/customers of the establishment.
           6) Habitual absence without leave or absence without leave for more than three
                consecutive days.
           7) Late attendance repeated on not less than three occasions within three
                months.
           8) The collection or canvassing for the collection of any money whatsoever for
                purpose not authorized by the employer within the premises of the industrial
                establishment.


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9) Drunkenness, fighting, riotous or disorderly behaviour or conduct likely to
   cause a breach of the peace or conduct endangering the life of safety of any
   other person or any act subversive of discipline and efficiency and any act
   involving moral turpitude, committed within the establishment or outside.
10) Negligence or neglect of work repeated on not less than three occasions
   within six months.
11) Indiscipline or breach of any rules or instructions for the maintenance and
   running of any department or maintaining its cleanliness, repeated on not less
   than three occasions within six months.
12) Smoking within the premises of the industrial establishment except in places
   where smoking is permitted.
13) Damage to work in process or to any other property of the industrial
   establishment.
14) Failure to observe safety instructions, unauthorized removal, interference or
   damage to machinery, guards, fencing and other safety device installed in
   premises of the industrial establishment.
15) Distributing or exhibiting inside the premises of the industrial establishment
   any news papers, handbills, pamphlets or posters without the previous
   sanction of the employer.
16) Refusal to work on another machine of same type.
17) Holding meetings inside the premises of the industrial establishment without
   the previous sanction of the employer.
18) Threatening or intimidating any employee in the establishment.
19) Disclosing to an unauthorized person any information in the regard to the
   working process of the establishment.
20) Gambling within the premises of the industrial establishment.
21) The sale of canvassing for the sale of tickets or chance in any lotteries or
   raffles within the premises of the industrial establishment.
22) The sale or canvassing for the sale of tickets, coupons or other tokens in
   connection with any scheme for the sale of any commodity or article within
   the premises of the industrial establishment, without the previous sanction of
   the employer.
23) Sleeping while on duty.
24) Insubordination, malingering, deliberate delaying of carrying out of order



                                    112
25) Any habitual breach of standing orders.
Explanation: - No act of misconduct which is committed on less than three
occasions within the space of one year or a lesser period shall be treated as
habitual. Acts or omissions as applicable by Certified Standing Orders of the
Franchisee would apply on all the Employees of the Franchisee beyond the
above act or omissions.




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7.7.2 Penalties for misconduct
   1. Any workman who is adjudged by the employer on examination of the workman, if
       the present, and of the facts to be guilty of misconduct is liable to be summarily
       dismissed without notice or compensation in lieu of notice, or alternatively to be
       suspended for a period not exceeding four days.
   2. The order of dismissal and suspension shall be in writing and must also briefly
       mention the reason on which it is based. The written order of dismissal and
       suspension shall be communicated to the workman.
   3. No order of dismissal or suspension for misconduct shall be made unless the
       workman concerned, if present, is informed in writing of the misconduct alleged
       against him and is given an opportunity to explain the circumstances alleged
       against him. The explanation given by the workman shall be reduced to writing
       and he shall be given an opportunity to produce evidence in his defence.
   4. In awarding any punishment under this standing order, the employer shall take
       into account the previous record, if any, of the workman and any other
       extenuating circumstances that may exist.
7.7.3 All cases of alleged misconduct by staff will be considered by the relevant
Disciplinary Authorities /Appellate/Reviewing Authorities for different categories of staff,
as appointed by HRD.
7.7.4 Principles of Natural Justice: all disciplinary action taken by the Franchisee must
follow the Principles of Natural Justice, including the right to the delinquent to know the
charges and evidence against them and the right to be heard and represented.
7.7.5 Any staff member who is adjudged by the Franchisee's Disciplinary Authority on
examination of the person, if present, and of the facts to be guilty of misconduct is liable
to be summarily dismissed without notice or compensation in lieu of notice, or
alternatively to be suspended for a period not exceeding four days.
7.7.6 The order of dismissal and suspension shall be in writing and must also briefly
mention the reason on which it is based. The written order of dismissal and suspension
shall be communicated to the staff member concerned.
7.7.7 No order of dismissal or suspension under para 7.7.1.2.1 above for misconduct
shall be made unless the staff member concerned, if present, is informed in writing of the
misconduct alleged against him/her and is given an opportunity (show cause) to explain
the circumstances alleged against him/her. The explanation given by the staff member




                                            114
shall be reduced to writing and he/she shall be given an opportunity to produce evidence
in his/her defence.
7.7.8 In awarding any punishment, the Disciplinary Authority will take into account the
previous record, if any, of the staff member and any other extenuating circumstances
that may exist.
7.7.9   Acts or omissions for which censure notice or fines may be imposed:
   1. Workman may be fined or alternatively be given a censure or warning notice if
        found guilty of any of the above noted acts or omissions provided that for
        offences under standing order 24 (b) and standing order 24 (d) a censure or
        warning notice only may be issued.
   2. Late attendance or absence from duty without leave, without sufficient cause.
   3. Negligence in work or neglect of work.
   4. Entering or leaving the premises of the industrial establishment except by the
        gate or gates provided for the purpose.
   5. Absence without leave or without sufficient cause from appointed place of work
        or machine.
   6. Breach of any rules or instructions for the maintenance and running of any
        department and maintaining its cleanliness.
   7. Expectorating or otherwise committing a nuisance on the premises of the
        commercial establishment.


Any act or omission which is committed on three occasions within the space of
one year or a lesser period shall be treated as "habitual".
7.7.10 Fines may be imposed only by a Disciplinary Authority of the Franchisee, after
following the procedures outlined above for dealing with cases of alleged misconduct.
7.7.11 Notices of Censure may be issued by the CEO, CEO, Heads of Departments,
District Manager, Area/Unit Supervisors and Branch Managers to their subordinate staff,
provided they are in writing and only after the staff member concerned has been given
an opportunity of explaining the act or omission alleged against him/her. The explanation
of the staff member must be reduced to writing and he/she should be given an
opportunity to produce evidence in his/her defence.
7.7.12 Summary suspension pending enquiry into alleged misconduct
7.7.13 Where a disciplinary proceeding against a staff member is contemplated or is
pending or where criminal proceedings against him/her in respect of any offence under



                                             115
the Standing Orders are under investigation or trial and the Franchisee is satisfied that it
is necessary or desirable to place the staff member under suspension it may by order in
writing suspend him/her with effect from such date as may be specified in the order. A
statement setting out in detail the reasons for such suspension shall be supplied to the
staff member within a week from the date of suspension. The initial period of suspension
must not exceed ninety days.
No other allowances such as Productivity bonus, conveyance allowance/depreciation
etc. which are directly related to performance of duties are payable during suspension.


7.7.14 If on the conclusion of the enquiry or of the criminal proceedings, the staff
member has been found guilty of the charges framed against him/her and it is
considered, after giving the staff member concerned a reasonable opportunity of making
representation on the penalty proposed, that an order of dismissal or fine or reduction in
rank whichever would meet the ends of justice, the Franchisee may pass the order
accordingly.
7.7.15 When an order of dismissal is served under Para 7.7.2.3.2 above, the staff
member shall be deemed to have been absent from duty during the period of
suspension and shall not be entitled to any further remuneration for such period.
7.7.16 If on the conclusion of the enquiry or of the criminal proceedings, as the case may
be, the staff member has not been found to be guilty of any of the charges framed
against him/her, the management may consider the period of suspension as period
spent on duty and in that case, he/she shall be entitled to the same wages as he/she
would have received had he/she not been placed under suspension.




                                            116
                       Chapter 8: Human Resource Development

The Franchisee is aware of the critical importance of its staff, its human resources, to the
success of its mission. It is through the field staff, in particular, that the Franchisee
interacts with the poor. It will succeed, if the Centre Managers (CM) are trained and
motivated to do their work efficiently and effectively.


Training of CM is mostly on-the-job where they learn by observing the experienced CM
at work, asking questions and trying to do it themselves during their field training.


Motivation of CM to work efficiently and to attain their share of the Business Plan targets
of the Franchisee can be achieved only by offering them an attractive package of
benefits/incentives. Part of the job satisfaction is certainly derived from seeing the results
of their labour that is seeing poor households come out of poverty as a result of the
micro finance services provided; but there is no substitute for an attractive and
competitive package of material benefits. Key components of this package are salary,
productivity-related incentive payments and promotion/career prospects.


The Franchisee has two core HRD policies that underlie the package of specific benefits:
1) an open promotions policy in which paper qualifications determine only the entry point
into the organization. Thereafter, actual work performance is the main determinant of
promotion. 2) Priority to filling positions by promotion from within the organization.
Recruitment from outside should be done only when there is no suitably qualified
candidate within, and nobody who can be trained in time.


                         8.1 Recruitment & Training of Staff
Recruitment and Training is done through a rigorous process. For full details of this
process, please refer to the IntelleCash Recruitment Manual. The recruitment process of
the Centre Managers is given below. Similarly, all other recruitments involve written
examination, interview and on the job performance. All appointment letters are signed by
the CEO. Appointees that accept the offer must sign in the appropriate place on the
duplicate copy, and return it to the designated person by the required date; else, the
offer of appointment lapses. Upon receipt of the signed offer of appointments the
Accounts Department/Accounts Officer will add the new staff member to the salary roll.



                                             117
Without the execution of this document, no payment of salary/benefits can be
made.


The minimum eligibility criteria for different positions are as follows:
  S.
             Designation                                          Eligibility
 No.
  1                CM                                             Class 10th
  2                BM                           MBA/PGDMA/PGDRM/MSW/equivalent
  3             AM/IAO                   As for BM and minimum 1 Year experience in MF
  4                DM               As for BM and minimum 3 yrs. managerial experience in MF
  5                AO                        M. Com. / B.Com. with 2 yrs. of relevant exp.
  6             Cashier                B.Com. / Min 1 yr. experience as CM or Loan Officer




                                  Recruitment Process of Centre Managers


                                                                       Education
     Advertisement of                      Applications
                                                                       Men> 12th          YES          Applications short
     vacancies through                  collected at HO &              Women>10th                            listed
   Local Dailies and word              concerned regional              Age<30 yrs
          of mouth                            office


                                                                                NO

                                                                                                     Candidates issued call
                                                                        Rejected                     letters to appear on a
  Posting as trainee CM                                                                                specified date and
                                                                                                              time
                                             Asked to try again
                                              after 3 months
                      NO                                                               Rs. 100 collected from
                                                                                    candidates towards expenses

                                                                                                       Two day Briefing
       YES      Qualified?                                                                          about the Franchisee’s
                                                                                                    Operations & duties of
                                                                                                       Centre Manager


                                                      NO



                                                                                                      4 day Field Work (On
                                       YES      Marks> 30%                                            the job training with
             Personal Interview                                         Written test                      existing CMs)
                                                                         (50 Mark)


                                      Fig.5: Recruitment Process of CM



                                                            118
                              8.2 Productivity Incentives
IntelleCash believes that the staff members who produce more output for the Franchisee
should earn more income. It offers therefore an attractive set of monetary incentives
based on staff productivity. As these are on top of the statutory minimum wage for all
categories of employees, they are paid on an entirely voluntary basis by the Franchisee.


The exact pay and incentive structure of each franchisee will vary considerably based on
location, supply of qualified labour, industry norms and other factors. As a result the pay
structure is set out on a case by case basis by IntelleCash, and stated in full in the
franchisee‟s business plan.


An example system of incentives open to franchisees is given below.


Staff remuneration is partly based on performances: All the staff must attain their
business plan targets to receive their full incentives. The targets that could not be
achieved in a Quarter will be added to those of the last Quarter of the fiscal.
The CM gets a part of the income the Centre brings for the Franchisee, as incentive. As
the quality of the Portfolio has to be maintained, the incentive reduces with reducing
quality of portfolio (increasing Portfolio At Risk (PAR)). This is designed to act as a self
motivator for performing higher volume of work with requisite quality. The eligibility of
incentive with differing level of PAR is as follows:


             PAR                    Incentive (% of the Income earned by the Staff)
        Less than 1%                                       5%
      1% - less than 2%                                   4.5%
      2% - less than 3%                                    4%
      3% - less than 4%                                    2%
        More than 4%                                       0%


There will be no incentive for CMs with a PAR of more than 4%, unless otherwise
notified by the Franchisee as a special case. All CMs who do not get an incentive for
more than 3 months on account of high PAR may be asked to leave.
The current salary and maximum productivity incentives are listed for each position in
Annex 2.



                                             119
                         8.3 Promotion/Career Development
   The staff requirement and eligibility is to guide all promotions within the Franchisee.
    Offices have to be filled at all times, for the smooth functioning of the Franchisee.
   If there are no staff in the appropriate positions, then a staff member of the next
    lower position should be appointed as acting in the appropriate position. Acting
    positions have a maximum duration of one-year, after which the staff member
    concerned should be confirmed in the position.
   Staffs that do not perform satisfactorily in “acting” positions should be returned to
    their original position before six months have elapsed.
   Salaries are increased annually according to experienced inflation.
   As indicated above, promotions are based primarily on work performance and not
    only on seniority or paper qualifications.
   All promotional vacancies in the Franchisee are announced periodically, and
    competitions are held among eligible staff.
   Currently the minimum work experience for CM (since confirmation) to be considered
    for promotion to Senior CM is one year. For Senior CM to be eligible for promotion to
    Branch Manager, the minimum work experience (as SCM) is two years. For Branch
    Managers to be eligible for promotion to Senior Branch Manager, the minimum work
    experience as a BM is two years. For SBM to be eligible for promotion the minimum
    work experience as SBM is two years and for BM to be eligible for promotion to DM,
    the minimum work experience as BM is two years.


                                   8.5. Other Benefits
Annual Entitlement of Leave
Each confirmed staff member is entitled to 2 days-earned leave per month worked in any
given fiscal year.
Casual leave of 6 days and medical leave of 6 days are also provided.
Leave not taken cannot be carried forward to the next year.
Maternity and Paternity Leave: 60 days maternity leave without pay is available to
female staff for two times in entire service period. One-week paternity leave with full
salary is available to male staff upon birth of children for two times in entire service
period.
Other Allowances




                                             120
The Franchisee pays the cost of all official travel undertaken on behalf of the
Franchisee, with prior written permission. The current rates of remuneration for approved
official travel are as stated in Annex 3.
Fuel Allowances are paid to staff authorized to use vehicles in their official work. The
current rates are provided in Annex 3
                    8.6 Staff Grievance/Suggestion Procedures
All employees are permitted to express their grievances and encouraged to make
suggestions to improve the work of the Franchisee, through the appropriate channels.
All grievances should be raised initially with the immediate supervisor of the employee
concerned, even if the grievance is with that person. If no satisfactory action is taken by
the supervisor within reasonable time, then the grievance can be reported to the next
higher supervisor, and so on up to the CEO who is the highest authority in the
Franchisee. No employees are to be penalized in any way for voicing legitimate
grievances through the appropriate channels.
The Franchisee realizes that valuable suggestions for improving our work can be
obtained from employees. All are encouraged to make such suggestions in any way they
wish, including directly but in writing to the CEO. Suggestions that are adopted will be
recognized by a letter of commendation from the CEO, a copy of which will go into the
personal file of the staff member who made it.
                                  8.7 Job Descriptions
1. District Manager (DM):
   1. DM is the overall in-charge of the district and all staff members report to him. He
       is responsible to plan the district's business, implement and achieve overall
       business targets in terms of disbursements, outstanding and PAR of 0%.
   2. The DM should oversee that the AO completes all the back office work and
       sends timely the reports to the funders.
   3. DM should see that the MIS is updated on time.
   4. DM spends most of his time in the field to establish and maintain good practices
       in executing the business and achieving the results.
   5. DM is also responsible to report to HO on all matters felt necessary from time to
       time.
   6. The District Manager supervises the Area/Branch Supervisors. The DM has to
       approve their reimbursements.




                                            121
   7. The DM should receive weekly reports from them on their planned and actual
       supervisory activities, including copies of their Surprise Centre and Branch Visit
       Reports that require his attention.
   8. In cases of serious violation of operating procedures as described in the
       Operations Manual, the District Managers should schedule as soon as possible a
       surprise visit to the concerned Centre/Branch to ensure that corrective action has
       been taken.
2. Accounts Officer (AO)
AO is primarily responsible for smooth functioning of the Accounts and Administrative
Functions at the DO. His responsibilities include:
   1. To obtain, verify and update the periodical returns from branches and to get the
       irregularities, if any, rectified.
   2. To process the bills of revenue/capital expenditure of the Franchisee received
       from the District and branch offices and present the same to appropriate
       authorities for approval and releasing payment thereof.
   3. To keep proper track over Companies‟ operative accounts with various Banks
       and reconcile the same on monthly basis.
   4. To keep a track over funds position of the Franchisee at DO level and to ensure
       that the repayments to the funding agencies are made in time.
   5. To process the requests for fund requirements of various District offices/units and
       timely remittance of funds after obtaining proper approvals.
   6. To prepare salary bills of DO and disburse the same as per schedule. Also to
       ensure that TDS aspect is taken into consideration while disbursing salaries to
       employees, deduct and remit tax to the concerned department. Also to ensure
       that periodical returns are submitted to the concerned authorities.
   7. To facilitate timely completion of statutory audit. For the purpose, he has to
       ensure that the District Office/branches are updating the entries as per
       Franchisee‟s accounting software and their accounting systems are up to date.
   8. Reconciliation of accounts of various branches/District Offices maintained with
       various     banks     and     to     ensure   that   Franchisee‟s   funds   are   not
       misappropriated/misused. For the purpose he may take assistance of the audit
       department.
   9. He has to supervise the work of MIS Executives and Cashiers in the branches.




                                               122
   10. To train the staff (Cashiers and MIS Executives) in accounts for smooth fulfilment
       of duties of the departments.
   11. Will be reporting to the DM
   12. Any other assignment entrusted either verbally or in writing.
   13. To ensure updating/maintenance of performance reports of the branches and
       district office.
   14. Compilation and preparation of monthly Consolidated Trial Balance and Financial
       Statements of the Franchisee. To ensure that the return is placed before higher
       authorities by 12th of following month.
   15. Compilation/preparation of monthly/quarterly Fund Utilization report by 10th
       working day of the following month and ensure submission of the duly signed
       reports to all funding agencies and networks on the prescribed format by 15th of
       following month.
   16. Compilation and preparation of Quarterly “ECB-2 Reports” and “Franchisee
       Update” within a week of completion of the quarter and submission of the same
       to   higher    authorities.   Similarly    any   requirement   of   data   by   Funding
       agencies/partner Franchisees/organizations are required to be compiled and
       submitted.
   17. Any other duty assigned either orally or in writing.
3. Area Manager (AM)
Area Managers are responsible for supervising the Branch Managers and Centre
Managers placed under their authority by the District Manager.
   1. One of the Area Managers acts as the Deputy District Manager (DDM),
       substitutes for the DM, when he is out of the district or on leave.
   2. The AMs should make both planned and surprise visits to Branches and their
       village-based Centre meetings.
   3. Each AM should make a surprise visit to each Branch under his supervision,
       once a month. Before the surprise visit to the Branch, the AM should make
       surprise visits to at least two of its Centre meetings, under different CMs.
   4. A surprise visit should be made by the AM to at least two Centre meetings for
       each CM per Quarter. AMs give their Surprise Visit Reports to the BM for follow-
       up action. Copies of Reports showing serious violations of operating procedures,
       such as following must be given to the District Manager, by the end of the week:
             The Centre meeting not taking place on the scheduled time and day,



                                                 123
           Attendance below 80%
           Any suspected cases of phantom loans or under-disbursement
           Loan utilization of less than 90%
           PAR > 5%
   5. AMs also perform GRTs whenever there is too much pressure on the Branch
      Managers.
   6. The AM should make sure that the data of their area is fed into the MIS and is up
      to date
   7. AMs should provide mentoring support to the CMs in their area. If felt necessary
      s/he can organize training sessions for the Centre Managers
4. Branch Manager
   The duties of Branch Manager involve:
   1. To take day-to-day responsibility for all the work to establish/successful
      functioning of branch where ever posted.
   2. To implement the Franchisee‟s model branch plans by following the
      procedures/systems being in vogue at various existing/proposed Districts.
   3. To increase the outreach of the branch for the attainment of financial viability in a
      cost effective way.
   4. To conduct Group Recognition Tests for groups in his branch.
   5. To supervise the field staff working under him including their work in the field.
      The BM must visit minimum 20 different Centres per week. One copy of the
      Centre Visit Reports must be sent to the DM, while another maintained at the
      Branch.
   6. The BM must keep vigil and take immediate action over detected
      frauds/irregularities by staff and inform the same to the supervisors.
   7. To ensure that the targets allotted to each field staff and branch as a whole are
      achieved positively and also to ensure that net increase as per target is achieved
      positively.
   8. To get the daily records updated and necessary periodical reporting made to the
      higher authorities.
   9. To report weekly the transactions of the branch (with CDS) for entry into MIS at
      the District Office
   10. To ensure maintenance of the furniture and other items like computers etc. at the
      branch and keep them; in good working condition.


                                           124
   11. To ensure that the expenditure of the branch is well within the allocated budget.
   12. To ensure that the branch premises is maintained in good condition.
   13. To update/keep a track over the various agreements with landlord etc. and
       ensure that proper timely action is taken to avoid any inconvenience for proper
       functioning of the branch.
   14. Preparation and submission of Periodical monitoring and financial
       reports/statements for the branch to appropriate authorities.
   15. Any other duty/function that would assist the Franchisee to reduce poverty in the
       area of operation.
5. Centre Manager
The CM is the frontline staff who has direct interface with clients and therefore critically
important.
The main duty of the CM is to manage the Centres under his/her responsibility so that
the Business Plan (BP) targets of the Franchisee are achieved, particularly for Active
Loan Clients, Loans Outstanding, Interest Income and Loan Portfolio Quality. To
succeed in this work the CM will have to get the confidence of the BPL women and their
husbands, by giving honest, timely and efficient service to them. In order to carry out his
her responsibility the CM will have to do the following particular duties:
   1. Identification of BPL women in their communities by means of the CASHPOR
       House Index (CHI), and Asset Test.
   2. Promotion of Groups among them.
   3. Training of Group members in the objectives and rules of CASHPOR India.
   4. Creating and maintaining strict Credit Discipline.
   5. Setting a good example for your clients by coming to the weekly Centre Meeting
       on time, and conducting the meeting in a business-like way, according to the
       procedures laid down inby IntelleCash.
   6. Carrying out a thorough check on the utilization of the loan funds within one week
       of disbursement, to ensure that they have been invested in the activity approved,
       and advising the Centre officials to monitor the subsequent use of the funds, so
       that there will be no difficulty with weekly repayment
   7. Enforcing collective responsibility among Centre members for weekly repayment
       which must be deposited at the branch by Centre officials before the Centre
       Meeting, where the CM should collect the deposit slip showing the correct
       amount.



                                             125
   8. Up-date of the CDS as necessary, and circulation of the CDS for signature of the
       members attending. A second signature must be obtained for each loan
       disbursement.
   9. Receiving loan proposals approved by the Centre
   10. Visiting the Branch Office daily for reporting (CDS and proposals)
In addition, the CM is expected to do whatever else he/she can, or are asked, to assist
the Franchisee to reduce poverty in the area of operation, by providing honest, timely
and efficient access to micro finance services for BPL women.
6. MIS Executive
   The duties of the MIS Executive include the following
   1. The work of data entry and processing of transactions in the MIS
   2. Maintenance of computer hardware and software at the district
   3. Help the AO in maintenance of Accounts at the district level.
   4. Acting as point of contact with FINO


7. Cashier
   The cashier is responsible for all the following functions:
   1. Collecting cash repayment from borrowers
   2. Writing Cheques for disbursement, salaries or other official purposes
   3. Maintenance of Accounts at the Branch
   4. The Cashier must update the Cash Book, the Bank register and the Vault register
       at the end of the day
   5. Executing all back office work with the support of BM

8. Internal Audit Officer (IAO)
The last Chapter of the Operations Manual has been provided separately in the form of
the Audit Manual. The Audit Manual talks in detail about internal audit and the
responsibility of IAO. The IAO is based in the district Office, but functions independently
and reports directly to the CEO. The Franchisee does not require the IAO in its first year
of operation. Initially, the Franchisee can depend on the Franchisor for its Audit function.

   1. Internal Audit Officer is responsible for implementing the Audit Manual. The IAO
       has to determine whether or not the internal controls of the MFI are being
       followed in practice and to ensure such compliance.
   2. The IAO will ensure that s/he will not only point out the irregularities, but will also
       ensure that all the irregularities are rectified during the tenure of audit itself.



                                              126
3. The Internal Audit Officer (IAO) must sample Centres and Branches and carry
   out surprise visits.
4. While submitting audit reports of various branches/offices the IAO must also
   submit two separate lists mentioning therein the irregularities observed and got
   rectified during audit and irregularities observed and could not be rectified during
   audit along with the reasons for the same.
5. It is also expected from the IAO that all the spade work for finalization of
   accounts on half yearly/yearly basis is done well in advance in coordination with
   the Accounts Officer to avoid delay in finalization of accounts by external
   auditors.
6. The IAO should carry with him/her the immediately previous External Audit
   Report and IA compliance Report for verification of compliance.
7. A format for the IA Compliance Report is to be provided to the In-Charge of the
   Office, along with the draft Audit Report, within one-week of the completion of the
   visit of the IAO. The IA Compliance Report must be submitted to IAO within 2
   weeks. It is to be verified by the IAT during its next visit.
8. When carrying out the internal audit, the IAO is to work in co-operation with the
   External Audit (EA), and to complete the External audit formats. These are to be
   exchanged with the EA for its ongoing reports.
9. All serious violations of the Operations and Accounting manuals are to be
   served through a letter of warning to the In-charge, signed by the CEO. A copy
   is to be put in the Personal file of the In-Charge.
10. Monthly bank reconciliation is of particular importance at all levels. The IAO
   must check to see that the Reconciliation Reports are ready by the 15th of the
   following month, each and every entry stands reconciled and, if not, reasons for
   the same be investigated. In case of detection of misappropriation/misuse of
   funds, matter must be immediately reported to the CEO.




                                         127
Annexure 1: Checklist of approved setup for Branch and District Office




                         District Office Set Up
   S.                                               Allocated
   No.               Item                Quantity   Amt.(Rs.)
      1   Chair(executive)                      5             2500
      2   Chair(regular)                      10              2500
      3   Table(regular)                        5             6000
      4   Table(large)                          3             6000
      5   Computers & UPS                       3            90000
      6   Telephone                             1             2000
      7   Godrej Type Almirah                   2             8000
      8   Racks & Cabinets                      3             3000
      9   Line Printer                          1           125000
    10    Power generator                       1            25000

     11   Electric and other Fixtures                       10,000




                         Branch Office Set Up
   S.                                                Allocated
   No.                Item               Quantity    Amt.(Rs.)
      1   S Chairs                              3             1500
      2   Plastic Chairs                      12              3000
      3   Tables (Big)                          2             2000
      4   Tables (Small)                        2             1500
      5   Almirah with Safe                     1             4000
      6   Iron frame racks                      2             2400
      7   White Board                           1             1000
      8   Notice board                          1             1000
      9   Fans                                  3             2400
    10    Other Installations                                 3000




                                   128
                        Annexure 2: Other Allowances



                   Travel Allowance for Employees

S. No.   Designation       Travel allowance     Local Conveyance
1        CEO               Bus/AC II            Taxi
2        DM/AM/IAO/AO      Bus/AC III           Shared Taxi/auto or Bus

3        BM/CM             Bus/Sleeper Class    Shared Taxi/auto or Bus



                       Fuel allowance for Employees

         S. No.         Designation            Fuel Allowance

           1               CM                     20 Litres
           2                BM                    22 Litres

           3                AM                    25 Litres
           4             DM & IAO                 50 Litres




                                        129
Annexure 3: Form No.1




         130
Annexure 4: GRT Form




        131
GRT Form: Backside




                     132
                          Annexure 5: Staff Undertaking

                                   STAFF UNDERTAKING


      As a staff member of the
_____________________________________________, I undertake the following:


   1. To familiarize myself with my Job Description and the Franchisee‟s Operations
      Manual.


   2. To carryout my responsibilities with care, diligence and thoroughness, according
      to my Job Description and the Operations Manual, and to obey its Staff and
      Office Rules.


   3. To supervise subordinate staff, if any, systematically and thoroughly to ensure
      that instructions given are actually carried out, and in ways consistent with the
      procedures and internal controls outlined in the Operations Manual.


   4. To be honest and sincere in all my work, to set a good example so as to build
      continuously the public image of the Franchisee, and to do nothing that would
      detract from its goodwill.


   5. To assist in whatever other ways I can, the Franchisee to realize its Vision and
      Mission of reducing poverty by providing timely and honest access to
      microfinance services to large numbers of BPL households, in an efficient and
      financially-sustainable manner.


   6. To take responsibility over and to reimburse the Franchisee for any
      embezzlement of the Franchisee or client funds by me or any staff under my
      direct or indirect supervision.




                                          133
   7. I understand any material violation of the Undertaking will be deemed to be
      misconduct that, if proven, will result in punishment as permitted under the
      appropriate Standing Orders.




   Signed:__________________________ Date:____________


   Name of Staff Member:______________________________


   Id. No. of the staff:__________________________________


   Position:__________________________________________


Present place of Posting:_____________________________




                                         134

				
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