Group Formation & Minimum Savings Policy

1. purpose

Prothik Agrajatra Foundation's microfinance program has formulated this policy to inculcate saving habits among members, maintain financial discipline and build a strong member-based association.

2. Prerequisite for formation of association

The following conditions must be fulfilled for the formation of a new group/centre—

• An association will be formed with 20-40 members from the same area.
• All members should be between 18 to 60 years of age.
• Members must have national identity card or birth certificate.
• Permanent address and identity must be verified.
• Members must have a regular source of income.
• More than one member of the same family cannot be a member of the same association (except with special approval).
• Members must complete training.

3. Minimum weekly savings

Every member of Prothik Agrajatra Foundation has to save regularly before taking loan. Recommended Minimum Savings—

If the institution wants, this amount can be increased according to the approval of the board of directors.

4. Minimum savings before taking loan

Before any member borrows at least—

• Save regularly for 10 weeks; or
• Deposit a minimum of Rs 500 (if saving Rs 50 per week).

If this condition is not met, the loan will not normally be sanctioned, unless there is an exception in the special policy.

5. Member admission fee

A one-time admission fee may be charged at the time of membership registration. Suggested Admission Fee:

• 100 taka (one time)

This amount is non-refundable and may be used for administrative expenses.

6. Share Deposit (if applicable)

One time from each member—

• 100 rupees or
• 200 rupees

Share deposits can be accepted. It will be conducted according to the institution's own policy.

7. Minimum savings to start association

The minimum savings of each member for commencing the activities of a society may be as follows—

That is, a new society can be considered suitable for starting loan operations if it achieves a collective savings of at least Rs.10,000.

8. First loan eligibility

For availing first loan the member shall—

• Must attend regular meetings.
• The prescribed savings must be deposited.
• Training must be completed.
• A loan utilization plan must be presented.
• Must pass field worker verification.

9. Withdraw savings

• Savings will be considered as member's own assets.
• Full savings cannot be withdrawn during the loan period (as per institution policy).
• Savings will be refunded upon termination of membership and payment of all financial liabilities.

10. Important recommendations

A realistic and member-friendly model for Prothik Agrajatra Foundation can be—

There is no general provision in the MRA rules as to "minimum percentage of profit to be paid" on savings. However, as per the existing circular of MRA, there is a directive to pay a minimum of 6% annual profit/interest on deposits in the case of microfinance institutions authorized to accept deposits.

ie:

• Minimum Profit: 6% per annum
• Maximum loan service charge: 24% per annum (declining balance)

example

If a member's savings is Rs.10,000 and your organization's policy offers 6% annual profit, then—

• Principal savings = Rs.10,000
• 1 year profit = Rs.600
• Total receivable = Rs.10,600

"The savings account managed by Prothik Agrajatra Foundation shall pay annual profit at a rate determined by the Board of Directors. This rate shall be in accordance with the applicable law, the instructions of the MRA and the financial capacity of the institution and shall not be less than 6% per annum in respect of approved deposit products."