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MAHASHAKTI FOUNDATION (MF)
CODE OF CONDUCT ASSESSMENT FOR
MAHASHAKTI FOUNDATION
Date of Report 04th January, 2016 Valid Till 03rd January,2017
MAHASHAKTI FOUNDATION (MF
RATING
Code of Conduct Assessment Score : COCA Rating – COCA 3 (Above Average Level of Adherence)
RATING SCALE
Rating
COCA 1
COCA 2
COCA 3
COCA 4
COCA 5
COCA 6
MATRIX
82%
81%
Integrating Social
Values Into
Operations
Relationship
Management and
Feedback
Mechanism
Compliance Status
of MFI vis-à-vis
the Recent RBI Guidelines
MAHASHAKTI FOUNDATION (MF)
Code of Conduct Assessment Score : 81% COCA 3 (Above Average Level of Adherence)
Rating Definition
Very High Level of Adherence
High Level of Adherence
Above Average Level of Adherence
Average Level of Adherence
Below Average Level of Adherence
Low Level of Adherence
82%
81%
83%
75%
80%
80%
81%
0%
100%
Client Origination
& Targeting
Loan Pricing &
Transparency
Loan Appraisal
Privacy of Client
Information
Staff Behaviour &
Client Grievance
Handling
Performance
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Rating Definition
Very High Level of Adherence
High Level of Adherence
Above Average Level of Adherence
Average Level of Adherence
of Adherence
Low Level of Adherence
Loan Appraisal
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MAHASHAKTI FOUNDATION (MF)
EXECUTIVE SUMMARY
The Code of Conduct report for Mahashakti Foundation (MF) evaluates the company’s adherence to
various code of conduct parameters. The study examines and comments upon the common minimum
indicators such as:
• Client Origination & Targeting
• Loan Pricing & Transparency
• Loan Appraisal
• Privacy of Client Information
• Staff Behaviour & Client Grievance Handling
• Integrating Social Values Into Operations
• Relationship Management and Feedback Mechanism
• Compliance Status of MFI vis-à-vis the Recent RBI Guidelines
SMERA believes that MF exhibits Above Average Level of Adherence to all parameters and
consequently complies well with the code of conduct laid out. This document details SMERA’s approach
and methodology for this study and gives observations of its assessment team while conducting the
evaluation. The Approval; Documentation; Dissemination and Observance (ADDO) framework has been
used for assessment and measuring MF adherence towards ethical operational practices.
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MAHASHAKTI FOUNDATION (MF)
SNAPSHOT
MFI Name MAHASHAKTI FOUNDATION
Registered Office Address
Madanpur Rampur,
Kalahandi – 766 102, Odisha India
Telefax (91) (6676) (250507)
Fax (91) (6676) (250607)
Administrative Office
In front of State Ware House
Railway Station Road, Balangir – 767 001 Odisha India
Line of Business Microfinance services using Self Help Groups, Education loan, Housing loans etc and Livelihood Development Projects
Chief Executive Mr. Jugal Kishore Pattnayak,
Managing Director
Legal Form NGO-MFI (Trust)
(Registered in Odisha under India Trust Act,1882)
Incorporation Date 19/Oct/2004
Date of Commencement of Microfinance Operations
01/Apr/2005
Total Employees 180 (As on Dec 31, 2015)
No. of Active Branches 19 (As on Dec 31, 2015)
Geographical Reach Odisha
Visit of the Assessment Team 27th to 29th December, 2015
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MAHASHAKTI FOUNDATION (MF)
BACKGROUND
Mahashakti Foundation (MF) was established in 2004 as a trust (Registered in Odisha under India
Trust Act, 1882) in Kalahandi district of Odisha with support from FARR-CARE CASHE project of
DFID (Govt, of UK).It was set up with the objective of providing financial inclusive services in
underserved and unserved parts of Odisha. MF has significantly expanded its reach and has
presence in seven Districts carrying out various social and economic projects under the guidance of
218 qualified and experienced staff members.
MF with deeper penetration in the under-served parts of Odisha is an organization of social
entrepreneurs focusing on following areas
• Promoting Pro-Poor Livelihoods & micro-enterprises including entrepreneurship,
• Micro-finance way to promoting Social & Economic Enterprises including Healthcare and Sanitation,
• Safe Drinking Kits,
• Nutrition,
• Creating a cadre of community based Village Health Guides,
• Community School Teachers
• Micro-Planning with Village Councils with public and private service institutions.
The above diversity of services also supplements and supports the Micro-Credit Products of MF and also
enhances the credentials and trustworthiness of relationship between MF and Micro-Finance borrowers
in a very matured way The targeted communities mostly includes Minority groups, Youth, Artisans,
Women, Marginal farmers and many others who are in a still very deprived and disadvantageous
condition.
Vision
“Mahashakti Foundation Visualizes an egalitarian society of justice, economic independence,
empowerment and peace”
Mission
“Organize the poor, build up their capacities and provide them access to relevant sustainable livelihood
development services with dignity and transparency”
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MAHASHAKTI FOUNDATION (MF)
Governing Body Profile
Name Position Educational Qualification Profile
Mrs. Aradhana Nanda President MA Economics (Utkal
University)
More than two decades of
experience in the field of social
development. Served in different
NGOs since 1978 with the
responsibility of planning and
coordination of entire program,
staff assessment, monitoring &
supervision of women, child
development, training &
development, HIV/AIDS
counseling, gender training,
capacity building & livelihood
development.
Mr. Santosh Kumar
Mishra
Vice
President
M.A (Mathematics),
Odisha Administrative
Service (Retd)
More than 40 years of experience
in the field of rural development.
Served as ASO, Tahasildar, and
Block Development Officer in
different blocks of rural Odisha.
Mrs. Rojaleen Bhuyan Secretary MSW, B.ED (Utkal
University)
Development Practitioner for the
last 10 years and has 5 years of
experience in the field of
programme operations in
livelihood development
Mr. Prakash Chandra
Sahu
Treasurer B.A, PGDCA 20 years of experience in social
sector, micro finance & livelihood
development.
Mr. Sanjeeb Nayak Asst
Secretary
B.A (Hons), LLB An Ex-banker with 28 years of
experience in formal banking
sector and also involved in social
development forums for more
than a decade.
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MAHASHAKTI FOUNDATION (MF)
Mr. Sanjaya Kumar
Makhija
Member M.Com, Chartered
Accountant
More than 15 years experience in
the field of financial management,
Internal Audit, Taxation, Audit of
different Public Sector Banks and
financial institutions.
Mr. Jugal Kishore
Pattnayak
Member cum
CEO
MA (Political science &
Rural development),LLB,
Diploma in Micro Finance
(IIBF), Mumbai
Two decades of experience in the
field of livelihood development
and worked as Project officer of
FARR CARE CASHE (Credit and
Savings for Household
Enterprise) of CARE (DFID
supported)
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MAHASHAKTI FOUNDATION (MF)
Management’s Profile
Name Position Qualification Profile
Mr. Jugal Kishore
Pattnayak
Managing Director MA (Political science & Rural
development),LLB, Diploma in
Micro Finance (IIBF), Mumbai
Two decades of
experience in the field of
livelihood development
and worked as Project
officer of FARR CARE
CASHE (Credit and
Savings for Household
Enterprise) of CARE
(DFID supported).
Mr. Devarshi Negi Director - Finance MBA (Finance) from Institute for
Technology and Management,
Chennai, Diploma in Strategic
Management, IIM Kolkata.
An ex-banker with
experience of almost
two decades in various
capacities with different
banks & financial
institutions. In his
previous assignment
with Sahaj E Village
Limited, he is also
credited for successfully
establishing a
profitability business
model in financial
inclusion space.
Mr. Mohan
Baliyarsingh
Director
Operations
Post Graduate Diploma in
Management from Bhanjavihar,
Berhampur University and Post
Graduation in History, Utkal
University.
Two decades of
experience in livelihood
and microfinance
operations. A major part
of his career has been
devoted towards
management of
Microfinance Projects
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MAHASHAKTI FOUNDATION (MF)
and training programs
on various facets of
microfinance including
financial literacy in
English, Hindi and local
languages.
Mr. Jyoti Ranjan
Mohapatra
Director
Administration
M.com, ICWAI Along with co-founder
of Mahashakti
Foundation, he has
diversified experience in
operations, finance,
audit, management
information system
(MIS).Also works on
capacity building of
community level
institutions on
institutional
development
Mr. Bikram Kesari
Patra
Head - Finance B.Com (Utkal University) Almost a decade of
experience in various
discipline like finance,
audit, management
information system
(MIS).
Mr. Jogananda
Behera
Head – Social
Development
operations
MBA (Human Resource) More than 10 years of
working experience on
livelihood promotion
and community health.
Mr. Arun Kumar
Pattnaik
Head - Head
Internal Audit &
Risk Management
MBA (Finance) Expertise in Internal
Audit /Risk
management of Social
development accounts
as well as Micro Credit.
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MAHASHAKTI FOUNDATION (MF)
Mr. Saroj Kumar
Sahoo
Head - Operations MBA (Marketing) Worked with different
MFIs like SKS, Asmita,
and Muthoot Finance in
various capacities. Have
a rich experience
management as well as
monitoring of micro
credit operations for
almost a decade.
Mr. Rama Ballav
Pattnayak
Head Information
Technology
M.com, HWA - IT More than a decade of
experience in
information and
technology and MIS
management.
Mr. Narayan Sahu Head – Human
Resource
Post-Graduate Diploma in
Industrial Relations & Personnel
Management (HRM),L.L.B. & M-
Phil in IR&PM(HRM)
Expertise in human
resource management
as well as monitoring
the total administration.
Mr. Jayaram Parida Internal Auditor M.Com More than 20 years of
experience in financial
management, audit and
overall financial
management of NGOs
as well as financial
institutions.
Ms. Ruby Tripathy Manager – Social
Security
M.A More than 07 years of
working experience in
the field of management
of NGOs as well as
social security program
Mr. Bimal Kanta
Panda
Regional Manager Master in social work More than three decades
of experience in
Livelihoods, Human
rights and microfinance.
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MAHASHAKTI FOUNDATION (MF)
Mr. Simanchala
Pattnayak
Regional Manager M.A More than three decades
of experience in
Livelihood, social and
Microfinance projects.
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MAHASHAKTI FOUNDATION (MF)
HIGHLIGHTS OF OPERATIONS
Particulars 31/Mar/2013 31/Mar/2014 31/Mar/2015 30/Nov/2015
No. of States 01 01 01 01
No. of Districts 5 6 6 7
No. of Branches 11 11 16 19
No. of SHGs 413 1017 2040 2814
No. of active borrowers 4178 11057 23688 32630
No. of employees 43 72 108 142
No. of field officers (FOs) 30 44 63 79
Cumulative
loan
disbursements
(` thousands)
MSF*
630,407 685,371 744,584 784,350
YBL* 0 45,838 280,154 503,991
Loan
disbursements
during* the
year (` in
thousands)
MSF 43,401 54,964 59,213 39,766
YBL 0 45.838 234,316 223,837
No. of Loans
Disbursed
during the year
MSF 3,953 4,909 5,832 3.426
YBL 0 3,167 14,884 12,599
Portfolio
outstanding
(`in thousands)
MSF 46,441 56,857 76,572 91,247
YBL 0 44,722 196,577 246,239
Loan
outstanding
per borrower
(In Rs.)
MSF 11,115 7,206 10,864 9,742
YBL 0 14,121 11,846 10,629
Active
borrowers per
FO
MSF 139 251 368 401
YBL 0 251 384 425
MSF – Mahashakti Foundation
YBL –Yes Bank Limited
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MAHASHAKTI FOUNDATION (MF)
ORGANOGRAM
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MAHASHAKTI FOUNDATION (MF)
PRODUCTS & SERVICES
Loan product
Loan Amount (Rs.)
Loan term / tenure
Fees and other
charges
( %)
Interest Rate
(Reducing
%)
Insurance Premium
(Rs.)
Repayment Method
Small Business
Loan 6,000-14,000 01 Year
1 % Loan Processing
Fees
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Rs.100 for
Aam Admi
Bima
Yojana of
LIC and
Rs.5/- per
Rs.1,000/-
for Other
General
Insurance
of LIC
Bi-Weekly
Micro Enterprise
Loan
16,000-
48,000 02 Years 26 Bi-Weekly
Education Loan
10,000-
20,000-
30,000
01 Year to
02 Years 18 Monthly
Solar Energy 1,800-6,600 12 months 18 - Monthly
House Repair
Loan 20,000 18 months 18
Rs.100 for Aam Admi
Bima Yojana of
LIC and Rs.5/- per Rs.1,000/- for Other General Insurance of LIC
Monthly
Housing Loan 50,000 &
1,00,000 24 months 18 Monthly
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MAHASHAKTI FOUNDATION (MF)
INSURANCE
Products Name Janashree Bima Yojana
(LIC) Ordinary General Insurance (LIC)
Feature It is a Group policy It is a Group policy
Mode of Payment Yearly once Yearly once
Validity 1 year 1 year
Premium Amount Rs 100/-
0.5% of Loan Amount +
Service Tax 14.50 %
Benefits
Natural Death Rs 30,000/- Loan Amount
Accidental Death Rs.75,000/- Loan Amount
Permanent disability Rs.75,000/- NA
Partial disability Rs.37,500/- NA
Age Limit 18-59 years 18-59 years
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MAHASHAKTI FOUNDATION (MF)
FRAMEWORK AND SCOPE
The current perception surrounding Indian microfinance paints all entities across the sector in the same
shade. However the fact that microfinance organizations display significant variations is important and
needs to be adequately brought out. SMERA has always comprehensively and holistically assessed the
risks involved in MFI operations and the resultant social impact of MFI operations.
Besides evaluating creditworthiness of MFIs, SMERA also assess trustworthiness, operational excellence,
quality of loans of MFIs, socio-economic impact and MFIs emphasis towards ethical behavior and
responsible lending.
SMERA has used the following framework for assessment of MFIs - The Approval; Documentation;
Dissemination and Observance (ADDO) framework for measuring adherence of MFIs towards ethical
operational practices.
As part of the assessment, SMERA visited 05 branches and head office of MF based at various locations.
The assessment was conducted as per a specific methodology and questionnaire.
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MAHASHAKTI FOUNDATION (MF)
Corporate Governance
Governance, broadly defined, is the system of people and processes that keep an organization on track and
through which it makes major decisions.
“Good governance is the ability of the board members to monitor the status of the organization, make good
strategic decisions, and hold executives accountable for their execution. Ultimately, that comes down to the
quality of the board members, the culture and practice of the board, and the power relationships among
board members and executives.”
For a MFI, Corporate governance should cover,
• Client Grievance/Protection
• Employee Grievance/Protection
• Women Harassment Issues
• Credit Bureau Check etc.
As per discussion held with Mr. Jugal Kishore Pattnayak (Managing Director) it can be seen that
management of MF is very dedicated towards improving their operational efficiency. MF conducts board
meetings on regular basis and points discussed therein are implemented by second line of management &
operations team. It is observed that MF exhibits Above Average Level of Adherence of compliance
towards corporate governance needs of an MFI.
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MAHASHAKTI FOUNDATION (MF)
OBJECTIVE OF THE STUDY
The objective is to evaluate NEED adherence to the code of conduct laid down by Sa-dhan, MFIN, best
practice guide by multilateral agencies and Reserve Bank of India.
The broad parameters for assessing the Code of Conduct are as follows. Also the respective scores are
mentioned in the adjacent column.
Code of Conduct Parameters % Performance
Client Origination & Targeting 82%
Loan Pricing & Transparency 81%
Loan Appraisal 83%
Privacy of Client Information 75%
Staff Behavior and Client Grievance Handling 80%
Integrating Social Values Into Operations 80%
Relationship Management and Feedback Mechanism 82%
Compliance Status of MFI vis-à-vis the Recent RBI Guidelines 81%
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MAHASHAKTI FOUNDATION (MF)
Client origination is central to ethical microfinance operations. The code of conduct requires MFIs to
practice ethical client origination while extending access to financial services. Also, an MFI’s commitment
to targeting low income clients demonstrates its social mission. The way an MFI identifies and grows its
client base must be approved by the board. The board should also ensure that the MFI’s product and
services reach suitable clientele.
MF has a structured approach for operational area identification.
Village /Locality Survey After identification of a village, a staff member
travels to the village to collect basic details about
socio-economic situation, livelihood profile,
infrastructure facilities, and existing level of
indebtedness of people, other MFIs and financial
institutions in catchment area.
�
Village Meeting It is the process of making local people/target
segment aware about organization, its
mission/vision, customer’s eligibility, product,
services, process, and documentation, policies and
procedures. This process is normally undertaken
by concerned FO/BM.
�
Primary Member Selection, House Visit & KYC
Verification
FO will select 12 to 15 members and conduct
household visit and business verification for them.
In this process all the necessary client details will
be collected and will be sent to credit bureau for
clearance
�
Credit Bureau & Members Finalization After collection of primary data of potential
members by FO, it will be filled by Accountant in
the prescribed format. Then it will be checked by
CLIENT ORIGINATION & TARGETING
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MAHASHAKTI FOUNDATION (MF)
BM and send to SMIT with a copy to RM for HIGH
MARK check. After getting HIGH MARK clearance
the BM will prepare the list of members for CGT
and the same will be checked by RM
�
Compulsory Group Training (CGT)
To avail loan from MF members must successfully
complete 2 days of training. Under this awareness
is created among the client regarding the
organizational mission and vision, pledge,
importance of SHG, loan products, documents
required, importance and conduct of center
meeting, center leaders responsibility,
disbursement and collection process and other
related norms and procedures. This facilitates MF
to know more and more about the customers
before actually lending them.
�
GRT & Appraisal BM conducts GRT in a specific format to ensure
that all the members selected for disbursement are
aware of the products and policies of MF and fix
loan amount as per cash flow of borrowers.BM will
then visit each and every household and collect
KYC documents to ensure the authenticity of
borrowers and the list of members finalized for
disbursement is sent to regional manager
�
Cross Verification RM does verification of loan applications on
sample basis to ensure the viability of loan amount
and enterprise.
.
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MAHASHAKTI FOUNDATION (MF)
Approval Documentation Dissemination Observance • MF has approved policies of ethically originating clients. This includes ensuring identity of clients before application of loans through
appropriate documentary evidences and non-involvement of unauthorized agents in the client origination process.
• Any change in client origination practice is affected only after the Board approval.
• Policy document clearly specify the guidelines in relation to identification of operational area, branch establishment and identification of
target client .
• MF has adequate system of dissemination of its approved policies through CGT.
• Interviewed Staff members were aware of the client origination process and products.
• The client origination process was effectively implemented by the staff as framed by MF.
• SMERA recommends operational manual to be printed in the local language (Oriya) so
that the field officers will have a better understanding of the same.
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MAHASHAKTI FOUNDATION (MF)
The transparency observed by the MFI in terms of pricing of loans is examined in detail. The pricing of
loans covers interest rate, loan processing charges, additional charges (service tax). Considering these
costs while pricing the loans may change the effective interest rate charged to the clients. The scientific
determination of loan price (interest rates) reflects well on the MFI’s management and it also shows how
effective the MFI is in providing loans to the clients at the least possible cost.
SMERA covers transparency by assessing honesty, communication, and accountability of the practices of
MFI through sub parameters such as frequency of training given to clients, disclosure of terms and
conditions of MFI, measuring awareness of the terms and conditions through client visit, language used
in the disclosure and surprise visit conducted by the MFI staff.
MF maintains high transparency in the interest rates charged to its clients. The organization discloses all
terms & conditions of all financial products to the borrowers including interest rate on the loan and
processing fees in local language as well as verbal communication at the time of training. The details are
printed on the loan card which is available with the borrowers.
MF offers different types of loans like small business loans, education loan, housing loan, solar projects
etc. The loan amount sanctioned depends on different parameters like product, loan cycle, repayment
track record of previous loan and attendance in centre meetings.
LOAN PRICING & TRANSPARENCY
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MAHASHAKTI FOUNDATION (MF)
Approval Documentation Dissemination Observance
• MF board has approved principles of pricing loans and
transparency in a responsible manner.
• The loan pricing criteria and method of charging have
been clearly documented in the loan policy document of the organization.
• Interest rate, loan processing fee on the loans and insurance
charges are mentioned clearly on the loan card provided to the
borrower at the time of disbursement.
• Members are also given the loan
repayment schedule on loan card which clearly shows the installment amount.
• Awareness level of the borrowers about the interest rates and
method of application and other charges was observed to be good.
• Interest rate, loan
processing fee on the loans and insurance charges are mentioned clearly on the loan card
provided to the borrower at the time of disbursement and are also displayed in the branches.
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MAHASHAKTI FOUNDATION (MF)
LOAN APPRAISAL
The selection of the right kind of borrower and proper assessment is critical for the success of the MFI.
The appraisal processes followed by the MFI, the checks and balances, know your customer (KYC)
documents collected by the MFI to verify the genuineness of the borrowers, the process adopted by the
MFI to avoid multiple lending / over-indebtedness and requirement of the loan are assessed in detail.
The loan appraisal should take into account the repayment capacity of the clients given the loan sizes and
the duration of the loan.
MF has good process to ensure that clients are strictly lent according to RBI directions on avoiding client
over-indebtedness (Rs 50,000 total indebtedness and loan from maximum of two sources). Yes bank
conducts credit check for the loans given under managed portfolio of MF whereas MF conducts credit
check for its owned portfolio.
MF has a policy to conduct Loan Utilization Check (LUC) for all the loans by its LUC team within 15 days
from the date of the disbursement
Approval Documentation Dissemination Observance
• MF policy requires adequate loan appraisal should be conducted before disbursing a loan and properly examines the repayment capacity of the borrowers.
• MF as per the
directions of RBI has a policy to check multiple lending / indebtness of the
borrower through credit bureau check.
• The guidelines for appraising a loan application are clearly documented in the loan policy document.
• The branch staffs were found to be aware of how to conduct the loan appraisal and LUC as per the guidelines.
• MF staff has not been trained on aspect of analyzing cash flow and take credit
decisions on it.
• MF diligently verifies each loan through credit bureau to check over indebtedness of the borrowers.
• LUC were properly conducted by the branch manager. However the date of LUC undertaken was
not documented in the loan card and LUC register.
• MF needs to have
effective mechanism to track the cash flow of borrowers.
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MAHASHAKTI FOUNDATION (MF)
PRIVACY OF CLIENT INFORMATION
Client confidentiality is an important function of any organization. MFI collects personal information
about its clients that is either required or necessary to provide with financial products or services. The
MFI should not disclose or misuse non-public personal information to affiliates or non-affiliated third
parties, except as permitted by law or client privacy policy disclosure. For this, SMERA assessed whether
MFI maintains physical, electronic and procedural safeguards for the client information.
MF has an adequate system of storage and retrieval of documents and information collected from the
clients. The files containing documents and members profile are kept at the respective branches. The
relevant data is entered into the web based MIS software “e FIMO (Financial Information Monitoring
Organiser) developed by Jayam Solutions Private Limited, Hyderabad.
Approval Documentation Dissemination Observance
• MF policy requires that the information received from the clients is stored properly and unauthorized access is prohibited.
• The software has well-defined security
features.
• MF provided adequate guidelines on how the client documents and information has to be recorded and files have to be stored.
• Branch staff is well informed about how to handle important documents provided by clients.
• All the files are kept properly in all the branches. Branch staffs have access to entire data of client.
• Awareness needs to be created among borrowers about importance of privacy
of client information.
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MAHASHAKTI FOUNDATION (MF)
STAFF BEHAVIOUR
This section evaluates the process of the MFI with respect to staff selection, appraisal and incentive
mechanism, staff behavior with clients, effectiveness of the client grievance mechanism.
Staff Behavior -
MF does not have well defined policies that lay adequate emphasis on the conduct of its staff members
towards the members. MF has written HR circular related to selection, recruitment, training, evaluating
the staff performance and promotions.
Approval Documentation Dissemination Observance
• MF does have well defined policies in relation to expected
staff conduct with the clients.
• Guidelines on the expected conduct of the staff members with
the client are documented.
• The entire branch staff members interviewed displayed good level of
awareness on staff behaviour & client grievance handling.
• All staff was found to be aware of the rules of staff conduct and
grievance handling.
• Behaviour of staff towards clients was found to be
professional in almost all situations encountered.
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MAHASHAKTI FOUNDATION (MF)
INTEGRATING SOCIAL VALUES INTO OPERATIONS
Sustainability is an increasingly relevant issue for MFIs; accordingly sustainability management strategies
and practices are significant. For example, appropriate environmental and social performance objectives,
targets and indicators need to be integrated with quality, cost and other more conventional performance
measures. SMERA assess governance, board composition, and area of expertise of the board, how social
values are assessed by the management or board and the transparency in financial accounting.
MF maintains a high standard of governance and integrity by inducting persons with good and sound
reputation in the industry and understanding of microfinance as members of board of directors or
governing body. MF has qualified and professional board having diversified functional expertise. The
board members are actively involved in policy making and approvals, fund mobilization, responsible for
all decisions at a strategic level, approving business plan & new products, reviewing the performance and
other important decisions pertaining to MF.
MF vision is to facilitate provision of financial services the rural people in the Kalahandi, Balangir and
Rayagada districts (Economically backward regions of odisha) in a viable manner with focus on small
loans mainly to stimulate client’s income generating activities. It aims to spread its operations to different
states of India. MF does not charge any prepayment charges or onetime membership fee from the
borrowers. MF has provided insurance cover to its borrowers and their guarantor.
Approval Documentation Dissemination Observance
• MF has approved principles of
integrating social values into operations.
• MF mission is to help improve financial
position of lowest strata of population through economic activities.
• MF objective is to poor, build up the capacities
of poor and provide them access to relevant sustainable livelihood development services
with dignity and transparency.
• MF has a system of dissemination of its
social values.
• Staffs are made aware of social and environmental policy
of MF
• MF maintains an adequate standard of
governance and integrity in operation.
• MF regularly tracks the social and
economic progress of its clients.
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MAHASHAKTI FOUNDATION (MF)
RELATIONSHIP MANAGEMENT AND FEEDBACK MECHANISM
MFIs need to build sustainable and long term relationship with clients. Sound relationship management
enhances the quality of the clients’ experience with the MFI. This allows the MFI to better understand
clients’ needs and grievances. MFIs need to have formal mechanisms to GRT feedback and complaints
from the clients. Customer complaints should be taken seriously, investigated and resolved in a timely
manner. Responsibilities relating to receiving client grievance, feedback and action plans need to be
clearly identified and allocated. SMERA evaluates these practices in detail.
MF has a sound procedure to be responsive to client feedback and to established dedicated feedback and
grievance redressal mechanisms. As per the policy every branch has to have a complaint register in
branch & complaint box outside the branch for clients.
For any grievance Head Office number is provided in the loan card provided to the clients. Members
have been informed of this mechanism during training and group formation.
Approval Documentation Dissemination Observance
• The board has provided formal and
informal channels for feedbacks and suggestions to handle complaints of clients
• MF guidelines regarding collection of
feedback from clients and actions to be taken are documented.
• Branch and Head office number is provided to
the clients on their loan card
• Head Office number is mentioned in the loan
card provided to the clients for reporting their grievance. Members have been
informed of this mechanism during training and group formation.
• Almost all the branches have drop boxes and grievance redressal register.
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MAHASHAKTI FOUNDATION (MF)
COMPLIANCE STATUS OF MFI VIS-À-VIS THE RECENT RBI GUIDELINES
SMERA examines the adherence level of the MFIs with respect to the recent draft guidelines issued by
RBI. Thus the Code of Conduct exercise involves a comprehensive review of MFIs policies and systems
and whether these translate into ethical microfinance practices.
Conditions as per RBI Guidelines MF’s Policy Compliance
Household annual income levels for
eligible borrowers in
Rural Areas not exceeding :
` 1,00,000
Non-Rural Areas not exceeding:
` 1,60,000
The Annual income of the
clients should be below ` 60,000
in rural areas and below
` 120,000 in non-rural areas
MF is following its board
approved policies
Loan size should not exceed
1st cycle loan : ` 60,000
2nd cycle loan : ` 1,00,000
Tenure of the loan should be 24
months for amounts in excess of
` 15,000.
MF loan ranges from ` 16,000 to
` 48,000. The loan amount
depends on the loan cycle,
repayment track record of
previous loan and attendance
of centre meeting.
MF is following its board
approved policies. In some
cases it was observed that client
was directly inducted into
second cycle loan.
Total Indebtedness of the borrowers
should not exceed to ` 1,00,000
The company checks the credit
report of borrowers with Credit
Information Company (CIC) i.e.
“Highmark”.
MF meets the criteria.
Tenure of the loan not to be less
than 24 months for amounts in
excess of ` 15,000
The maximum loan size is
` 30,000 repayment tenure is 24
Monthly Installments.
In some branches it was
observed that loans in excess of
15,000 were disbursed for
tenure of less than 24 months.
Repayment frequency should be
weekly, fortnightly or monthly at
the choice of the borrower
Repayments of loans are
collected on fortnightly basis. MF meets the criteria.
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MAHASHAKTI FOUNDATION (MF)
With effect from the quarter
beginning April 01, 2014, the
interest rates charged by an NBFC-
MFI to its borrowers will be the
lower of the following:
a) The cost of funds plus margin as
indicated in para (i) above; or
b) The average base rate of the five
largest commercial banks by assets
multiplied by 2.75. The average of
the base rates of the five largest
commercial banks shall be advised
by the Reserve Bank on the last
working day of the previous
quarter, which shall determine
interest rates for the ensuing
quarter.
MF charges 26% per annum on
diminishing balance method for
all loans.
MF meets the interest rate
criteria.
Loan pricing to include processing
fee (not exceeding 1% of the loan
amount)
MF is charging processing fee
of 1.00% on the disbursed loan
amount plus applicable service
tax
MF meets the processing
charges criteria fully.
Collateral free loans
MF does not accept any
collateral for extending the
credit.
No collateral have been
accepted from the clients.
MFIs shall not collect any Security
Deposit / Margin from the
borrower.
MF does not collect any
security deposit / margin from
the borrower.
MF meets the criteria fully.
No late payment or prepayment
penalties
MF does not take late payment
or prepayment penalties from
the clients.
MF meets the criteria fully.
Membership of SRO (Self
Regulatory Organization)
MF is empanelled as member of
Sa-dhan MF meets the criteria fully
Share complete client data with at
least one Credit Information
Company (CIC) established under
the CIC Regulation Act 2005, as per
the frequency of data submission
prescribed by the CIC.
Currently MF is availing credit
bureau check from Highmark
and shares the data with them.
MF meets the criteria fully.
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MAHASHAKTI FOUNDATION (MF)
Aggregate amount of loans, given
for income generation, is not less
than 50 per cent of the total loans
given by the MFIs
MF provides loan only for the
income generation activities. MF meets the criteria fully.
Net owned funds (NOF) of Rs 50.00
million.
NOF stands at 32.09 as on
31/Mar/2015 MF does not meet the criteria
NBFC-MFIs shall maintain a capital
adequacy ratio consisting of Tier I
and Tier II Capital which shall not
be less than 15 percent of its
aggregate risk weighted assets.
CRAR of MF stands at 33.2% as
of 31st March 2015 MF meets the criteria fully
Approval Documentation Dissemination Observance
• The policies framed by board of MF mostly adhere with respect to the guidelines issued by RBI.
• Circulars have been issued to follow the RBI guidelines.
• Policies were updated / modified on most of the recent guidelines issued by RBI.
MF being an NGO-MFI almost adhere all the
guidelines issued by RBI.
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MAHASHAKTI FOUNDATION (MF)
LIST OF BRANCHES VISITED
SMERA has used the following framework for assessment of MFIs - The Approval; Documentation;
Dissemination and Observance (ADDO) framework for measuring adherence of MFIs towards ethical
operational practices. The assessment requires visits to the MFI’s head-office as well as branch offices.
This assessment includes:
1. Discussions with key staff members and the senior management at the head office and branch office,
particularly the senior operational management team as well as the human resources team. These
discussions focus on key issues of the code of conduct identified above and systems and process of
MFI.
2. Review of manuals and policy documents at the head office. These are reviewed in order to assess the
policy as well as documentation regarding important aspects.
3. Sampling of branches at the head office. The assessment team selected eight branches as samples, as
per the size of the MFI for review. Care is exercised to include old & new branches as well as
branches that are distant from the regional office and branches with the overdue.
4. Discussions with the branch staff at the field office. Discussions with field office managers and center
managers are carried out to assess their understanding of the key code of conduct principles and
systems and process.
5. Selection of groups from the sample branches. A judgmental sampling is performed on the MFI’s
clients by the assessment team to draw respondents from the interest group. Two/three centers from
each sample branches was selected for interviews. Out of which few respondents are those that have
been having problems in attending meetings. SMERA has also selected respondents those have
defaulted in the past or started repaying on defaulted loans.
6. Interview with the clients. Information from the clients is collected ideally during the centre meetings
as well as visits are made to the clients’ locations for collecting information.
7. Review of loan application at the branch office. This review focuses on loan appraisal performed
before disbursing loans as well as the documents collected from the clients.
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MAHASHAKTI FOUNDATION (MF)
As part of the assessment, SMERA visited 06 branches and head office of MF based at various locations.
The details of the branches visited are provided below.
Sr. No. Branch Names Region No. of Borrowers
Visited
1. Balangir
Odisha
25
2. Titilagarh 45
3. M. Rampur 38
4. Tusura 36
5. Dunguripali 24
6. Kesinga 20
8. Head Office -
34
MAHASHAKTI FOUNDATION (MF)
SITE VISIT
Management Meeting
Compulsory Group Training (CGT / GRT)
35
MAHASHAKTI FOUNDATION (MF)
Disbursement
Center Meeting (Interaction with borrowers)
36
MAHASHAKTI FOUNDATION (MF)
METHODOLOGY
1. Collecting minimum documents from the MFI to understand in detail the scope of operations in
terms of areas, products, borrower profile etc.
2. Sample selection of branches (sample may be decided by taking into account the loan
outstanding portfolio, recency customer grievances received, different products concentration,
location, type of borrowers, PAR, etc.).
3. Visit to head office and understanding the code of conduct, vision and mission statement,
policies, procedures and processes of MFI pertaining to loan appraisal, loan pricing, collection
mechanism, documentation, re-scheduling & write off, etc.
4. Interacting with CEO/ Managing Director and the core team and seeking relevant information.
5. Detailed review of the processes framed for selection of areas and villages, client orientation,
group formation and pricing of loans.
6. Interaction with the groups to find out the extent of transparent disclosures, the MFI has made to
them in terms of product & services, pricing, insurance, terms and conditions, overleveraging or
multiple borrowings, frauds or corruption / commission kickbacks asked by the officers for
sanctioning of loans if any. Unethical behavior of the staff, if any, would be specifically
addressed.
7. Interaction with the COs on sample basis to assess compliance with policies and obtain their
feedback / opinion on the policies and systems with specific focus of customer grievances and
feedback mechanisms. The incentive structure for the staff would also be assessed.
8. Prepare detailed report and submit to management for review.
9. Prepare final report and submit to the management.
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MAHASHAKTI FOUNDATION (MF)
Questionnaire for the field visit
1 Name of the Member
2 How did members came to know about the MFI and who motivated to form the group
3 What Kind of training provided before sanctioning of loan?
4 Does anyone visited the house pre and post disbursement
5 Loan amount taken
6 Amount Applied for (If sanctioned is less – Reason)
7 Interest Rate and any other Charges
8 Any commission paid to anyone for availing loan
9 Purpose of Loan
10 Mode of Repayment
11 Installment amount
12 Aware of pending installments or balance outstanding
13 Any penalty charged
14 What are the KYC documents submitted?
15 Where the disbursement of loan happens and under who’s presence?
16 Where collections of loan take place?
17 Any delays / default at present or in past, If Yes, what is the reason?
18 Number of Family members
19 Earning Family Member
20 Occupation of Spouse
21 Monthly Family Income
22 Number of Childers going School
23 Aware about any other MFIs operating in the area
24 Loan from Any other MFIs’ / Bank / Moneylender / others
25 If Yes,
26 Name of the MFIs’ / Bank / Moneylender / others
27 Amount Taken and Interest Rate
28 Is the group formed by the persons living in nearby vicinity?
29 Knows the house / name of each group member?
30 What are the responsibilities of the group?
31 Attendance of members
32 Saving habit among the group members?
33 Dominant nature of group leader?
34 Familiar with the branch manager / staff?
35 How are the interaction / behaviour of the MFI staff?
36 Process / Awareness of feedback / Complaints mechanism?
37 Have made any complaints in past?
38 Any Request / demand
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