BASIX Equity for Equity Monitoring & Risk Management Practices in BSFL Presentation by: Balgovind Sahu Manager-MRM

BASIX Equity for Equity The BASIX Mission….. To promote a large number of sustainable livelihoods, including for the rural poor and women, through the provision of financial services and technical assistance in an integrated manner BASIX will strive to yield a competitive rate of return to its investors so as to be able to access mainstream capital and human resources on a continuous basis.

BASIX Equity for Equity TRIAD Strategy LFS (Livelihood Financial Service) (To manage income) Ag/BDS (Agriculture & Business Development Services) (To increase income) IDS (Institutional Development Services) (To become sustainable) Livelihood Triad

BASIX Equity for Equity The BASIX Livelihood Triad LIVELIHOOD FINANCIAL SERVICES: Credit, Insurance & Savings for lives and livelihoods AGRICULTURAL/BUSINESS DEVELOPMENT SERVICES (AG/BDS) Productivity enhancement, Risk mitigation, Local value addition and alternative market linkages for input supply and output sales INSTITUIONAL DEVELOPMENT SERVICES (IDS) Formation of producers’ groups, federations, cooperatives, Capacity Building, including entrepreneurship development, Human Resource Development and Accounting and management information systems

BASIX Equity for Equity BSFL- Risk Management Guiding Principal “BSFL Risk Management function is guided by the Enterprise Risk Management developed in the COSO Enterprise Risk Management – Integrated Framework”

BASIX Equity for Equity

BASIX Equity for Equity

BASIX Equity for Equity Back Operational risk” is the risk of loss resulting from inadequate or failed internal processes, people, and systems or from external events. Avoid keeping the cash more than 24 Hrs at field and No cash day system Poor handling of Cash at Field Diversifying portfolio, Product wise, Caste wise, Gender wise & Geographical. Concentration Risk Feasibility Study/ Village SurveyGeographical & Scattered Portfolio Unfulfilled promise & poor Communication Risk Aspect Uniformity in communication at all the level and visual communications Mitigation Strategies Data Security & Management / Failure of information technologies Daily data back-up at all branch and disaster data security management

BASIX Equity for Equity Analysis of payment capacityAnalysis of family cash-flow Analysis of willingness to payAnalysis of overall behaviour What do “neighbours” know about the client? Decision on loan extensionBy credit committee Product characteristicsStep by step increase of loan amounts and maturities Repayment schedule is based on clients expected cash flow. Enforcement mechanism“non typical” guaranties – Mutual Guaranties of loan End use of loan Pre & End use monitoring Overdue monitoring FTOD monitoring concept, Different way of follow-up by FX/UH and Field Manager Risk Aspect “Credit risk” is the risk to earnings or capital due to borrowers’ late and non-payment of loan obligations. Mitigation Strategies

BASIX Equity for Equity Lack of improvement in service delivery mechanism / Monitoring of service risk converted into credit/ operation risk Poor monitoring of service delivered FTNS concept, Service delivery monitoring by FX, UH & MRM team. Poor delivery of Service Improper induction to LSA/P about Services Lack of technical skills Lack of knowledge of service delivery mechanism. Risk Aspect Handling of portfolio after completion of orientation & training Recruitment of technical qualified person Building the technical ability by class room & field training 3 month induction & orientation on Product, service, policy & procedure. Mitigation Strategies Back “Service risk” is the risk of inadequate service delivery to customers/clients as promise at the time of enrolment.

BASIX Equity for Equity Investigation by the Risk team Dummy robbery Customer awareness and mechanism to identify within 24 Hrs. Collection of money without issuing of receipt/Prepayment rotation Pre disbursement visit, Appraisal technique & disbursement check Bribe/Kickback/Collusion Tempering of financial data or report Processing of fake claims and unauthorized expenses. Ghost or Benami loan Risk Aspect System will not permit alternation, Cross check system at HO & Unit High degree of Organisation value & ethics. Claiming of expenses on the self judgment. Loan origination & appraisal by the different person/ JLG Mitigation Strategies Back “Fraud risk” is the risk of loss of earnings or capital as a result of intentional deception by an employee or client.

BASIX Equity for Equity Focus on customers satisfactions Customer satisfaction survey and dropout study Competitions Robbery/ Theft Middlemen interference Village level influence persons (Political Risk) Risk Aspect Risk assessment of routes & area before starting any village and categories as Low/Moderate/High Effective communication to customer about the direct approach & deliver channel. Avoid meeting at local influence person ‘s house, using public place for meeting & other livelihood service deliver. Mitigation strategies Back “External risk” refers to the inherent risks of the company business activity and the external business environment.

BASIX Equity for Equity Internal Control System in BSFL Prevention DetectionCorrection BSFL managing the risk through effective internal control system BSFL internal control system provides the 95% prevention, 3% detection & 2% correction.

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