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BASIXEquity for Equity
Monitoring & Risk Management Practices in BSFL
Presentation by:Balgovind Sahu
Manager-MRM
BASIXEquity 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.
BASIXEquity 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
BASIXEquity 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
BASIXEquity 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”
BASIXEquity for Equity
Monitoring Risk ManagementKey function area
Frauds 1. Forecasting 2. Investigating3. Recommending for actions
Field Audit & Customer Visits:· Assessment of operations· Risk Assessment of Triad services· Service Delivery · Policy compliances · Customer relation · End use monitoring of loan
Special Audits Covered1. Business impact study2. MD task3. Dropout study4. Need base special audit
Back Office: · Agreements· Approvals · FTOD and FTNS· Write-offs· Audit Sampling· Fraud investigation
BASIXEquity for Equity
Borrowing RatesLending Rates
CompetitionProduct reach
Delivery Channel
Market
Government RulesRBI Guidelines
KYC NormsLocal Acts
Regulatory
QualificationsDelivery Quality
Customer Satisfaction
Services
ImageMission ComplianceService StandardsCustomer relations
Statutory Compliances
Reputation
GeographicalProductsServicesPolicies
Regulations
Credit
InductionTake & Hand Over
Attrition
HR
GenderEconomic Status
Child LaborNatural Disastrous
Water Pollution
Social & Environment
LiquidityFund ManagementCash ManagementBank Management
Financial
Poor Internal Controls
Lack of MonitoringSystem Lapses
Frauds
ServicesPolicies
ProceduresData Mgt
Operations
Unauthorized/Outdated Tech
Systems SecurityUsers Capacity
Software problems
Technology
Political influence
Caste/Community
State/Regional issues
Political
Internal ExternalC
lass
ifica
tion
of
Ris
k
BASIXEquity 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
BASIXEquity for Equity
Analysis of payment capacity Analysis of family cash-flow
Analysis of willingness to pay Analysis of overall behaviour
What do “neighbours” know about the client?
Decision on loan extension By credit committee
Product characteristics Step 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
BASIXEquity 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.
BASIXEquity for Equity
Investigation by the Risk teamDummy 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.
BASIXEquity 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.
BASIXEquity 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.
