Logo
প্রথিক অগ্রযাত্রা ফাউন্ডেশন
PRATHIK AGROJATRA FOUNDATION
Home About Us Our Programs Gallery Policies Contact
Donate
 BN
Back to Policies
Credit

Loan Security & Risk Fund Policy

Loan Security & Risk Fund (LSRF) Policy

14.1 Purpose

The Loan Security & Risk Fund (LSRF) is established by Prothik Agrajatra Foundation (PAF) to protect borrowers’ families and safeguard the financial sustainability of the Foundation in the event of a borrower’s death during the loan tenure. The Fund is designed to reduce the financial burden on the legal heirs of deceased borrowers while maintaining the quality of the Foundation’s loan portfolio. It reflects PAF’s commitment to responsible finance, client protection, and social responsibility.

14.2 Objectives

The objectives of the Loan Security & Risk Fund are to:

  • Protect the family of a deceased borrower from repayment obligations, subject to

the terms of this policy.

  • Reduce credit risk arising from borrower mortality.
  • Improve portfolio quality and reduce loan losses.
  • Promote responsible and compassionate lending practices.
  • Strengthen confidence among members in the Foundation’s financial services.
  • Support the long-term sustainability of the Microfinance Programme.
  • Minimize disputes between the Foundation and the legal heirs of deceased

borrowers.

14.3 Scope

This policy shall apply to:

  • All eligible borrowers enrolled under PAF loan products.
  • Branches operating under the Foundation’s Microfinance Programme.
  • Loan accounts that are active at the time of the borrower’s death.
  • Claims processed in accordance with this policy.

14.4 Coverage

Subject to compliance with this policy, the Loan Security & Risk Fund may provide

coverage for:

  • Outstanding principal balance of an eligible loan.
  • Accrued interest or service charge, where approved under the policy.
  • Other approved loan-related obligations, if specifically authorized by the

Foundation. The Fund does not provide cash compensation to the borrower’s family unless separately approved by the Board of Trustees.

14.5 Eligibility

A borrower shall be eligible for coverage if:

  • The borrower was enrolled in the Loan Security & Risk Fund at the time of loan

disbursement.

  • The required LSRF contribution was collected and recorded.
  • The loan account was active.
  • The borrower’s death occurred during the loan period.
  • Required supporting documents are submitted within the prescribed timeframe.

14.6 Borrower Contribution

To maintain the sustainability of the Fund, every participating borrower shall make a one- time Loan Security & Risk Fund contribution at the time of each loan disbursement. The contribution amount shall be determined and approved by the Board of Trustees and reviewed periodically based on:

  • Portfolio size.
  • Claim experience.
  • Mortality trends.
  • Financial sustainability of the Fund.
  • Operational costs.

The approved contribution schedule shall be communicated to all members before loan

disbursement.

14.7 Suggested Contribution Structure

The Foundation may adopt the following contribution structure, subject to Board approval: Loan Amount Suggested LSRF Contribution

Up to BDT 20,000 BDT 100

BDT 20,001–50,000 BDT 200

BDT 50,001–100,000 BDT 300

Above BDT 100,000 As approved by the Board Alternatively, the Foundation may adopt a percentage- or per-thousand-based contribution model through a separate Board resolution.

14.8 Exclusions

No claim shall normally be approved if:

  • The loan had already been fully repaid before death.
  • Required documents are not submitted.
  • Fraud or misrepresentation is established.
  • The borrower was not enrolled in the LSRF.
  • The death occurred after the loan had expired, unless otherwise approved under

exceptional circumstances.

14.9 Claim Procedure

Upon the death of a borrower: 1. The nominee or legal heir shall inform the Branch Office as soon as reasonably

possible.

2. The Branch Manager shall verify the information.

3. A field verification shall be conducted.

4. Supporting documents shall be collected.

5. The claim shall be reviewed by the designated authority.

6. Upon approval, the eligible outstanding liability shall be settled from the Loan

Security & Risk Fund. 7. The loan account shall be closed in the Management Information System (MIS), and all relevant records shall be updated.

14.10 Required Documents

The following documents may be required:

  • Claim Application Form.
  • Death Certificate issued by the competent authority, or other acceptable evidence

where legally permissible.

  • Copy of National ID of the deceased (if available).
  • Nominee Identification.
  • Recommendation of the Branch Manager.
  • Field Verification Report.
  • Loan Ledger.
  • Outstanding Loan Statement.
  • Any other document required by the Foundation.

14.11 Approval Authority

Claim Amount Approval Authority Up to Board-approved limit Branch Manager / Area Manager (as delegated) Above delegated limit Head of Microfinance Exceptional cases Executive Director / Board of Trustees Delegation of authority shall be defined in the Foundation’s Delegation of Authority Policy.

14.12 Fund Management

The Loan Security & Risk Fund shall:

  • Be maintained separately in the accounting records.
  • Be used solely for approved purposes.
  • Be subject to internal control and audit.
  • Be reviewed periodically for adequacy.
  • Be reported to management on a regular basis.

14.13 Internal Controls

To protect the integrity of the Fund, the Foundation shall implement:

  • Segregation of duties.
  • Independent verification of claims.
  • Proper documentation.
  • Periodic reconciliation.
  • Internal audit reviews.
  • Fraud detection procedures.
  • Management oversight.

14.14 Monitoring and Reporting

The Head of Microfinance shall submit periodic reports to senior management covering:

  • Number of enrolled borrowers.
  • LSRF contributions collected.
  • Number of claims received.
  • Claims approved and rejected.
  • Amount paid from the Fund.
  • Outstanding Fund balance.
  • Claim processing time.
  • Observed trends and recommendations.

14.15 Policy Review

This policy shall be reviewed at least every two years or earlier if required due to changes in law, operational experience, or Board direction.

Standard Forms

  • LSRF-01: Borrower Enrollment Form
  • LSRF-02: Nominee Declaration Form
  • LSRF-03: Death Claim Application
  • LSRF-04: Field Verification Report
  • LSRF-05: Claim Approval Form
  • LSRF-06: Claim Register
  • LSRF-07: Fund Reconciliation Statement
  • LSRF-08: Monthly LSRF Report

End of Chapter 14 – Loan Security & Risk Fund Policy