Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

Map of the Project Area

Abbreviations and Acronyms
ADB
Asian Development Bank
ADP
Annual Development Plan
AWPB
Annual Work Plan and Budget
BARI
Bangladesh Agricultural Research Institute
BARC
Bangladesh Agricultural Research Council
BAU
Bangladesh Agricultural University 
BBS
Bangladesh Bureau of Statistics
BIDS
Bangladesh Institute of Development Studies
BRRI
Bangladesh Rice Research Institute
BUET
Bangladesh University of Engineering and Technology
BWBD
Bangladesh Water Development Board
CC
Climate Change
COSOP
Country Strategic Opportunities Paper
DA
Designated Account
DAE
Department of Agricultural Extension
DFID
Department for International Development
DLS
Department of Livestock Services
DoF
Department of Fisheries
DPP
Development project pro
EIRR
Economic Internal Rate of Return
ERD
Economic Relations Division
FAO
Food and Agriculture Organisation
FEDEC
Finance for Enterprise Development and Employment Creation 
FID
Financial Institutions Division (of Ministry of Finance)
FIRR
Financial internal rate of return
FY
Financial year
FYP
Five year plan
GDP
Gross Domestic Product
GoB
Government of Bangladesh
hh/HH
household
HIES
Household Income and Expenditure Survey
HILIP
Hoar Infrastructure and Livelihood Improvement Project
IFAD
International Fund for Agricultural Development
NGO
Non-Governmental Organization
IT
Information Technology
LGED
Local Government Engineering Department
ME
Microenterprise
M&E
Monitoring and Evaluation
MIDPCR
Market Infrastructure Development Project in Charland Regions
MFMSP
Micro Finance for Marginal and Small Farmers Project

MFTSP
Micro Finance and Technical Support Project
MFI
Microfinance Institution
MIS
Management Information System
MoF
Ministry of Finance
MoU
Memorandum of Understanding
MSME
Micro, small and medium enterprise
MTR
Mid-Term Review
NATP-2
National Agricultural Technology Project 2
p.a.
per annum
PACE
Promoting Agricultural Commercialization and Enterprises
PCR
Project Completion Report
PDR
Project Design Report
PKSF
Palli Karma-Sahayak Foundation
PMU
Project management Unit
PO
Partner Organization
R&D
Research and development
RMC
Rural microcredit
SoE
Statement of Expenditure
SLGA
Subsidiary Loan and Grant Agreement
TA
Technical Assistance
USAID
United States Agency for International Development
VC
Value chain
VCD
Value chain development
WA
Withdrawal Application
WFP
World Food Programme

Executive Summary
An IFAD design mission[1] visited Bangladesh from 6 to 28 February 2019 to assist the Government of the People's Republic of
Bangladesh in designing the Rural Microenterprise Transformation Project (RMTP)[2]. An earlier mission worked with the Palli Karma-
Sahayak Foundation (PKSF), Economic Relations Division (ERD) of Ministry of Finance (MoF), and other stakeholders to prepare the
concept note of the project, which was later agreed with PKSF and endorsed by ERD/MOF in September 2018.
IFAD experiences in Bangladesh have demonstrated that supporting small farmers to increase agricultural productivity and output has
positive effects on household income growth, poverty reduction, and food security. Similarly, supporting micro-entrepreneurs to start
and/or expand micro-enterprises generates income growth, improves food security, and reduces poverty. However, it has become
clear that fragmented investment in primary production and micro-enterprises, without meaningful integration in profitable value chains
connected with expanding markets, does not generate growth of the scale necessary to transform the rural economy and sustainably
eliminate poverty.
Limited experiences in Bangladesh, and well-documented experiences globally, indicate that successful small farmer and micro-
entrepreneur integration within commodity value chains with comparative advantage, market demand and growth potential can
sustainably reduce poverty and food insecurity, improve the competitiveness of the agricultural sector, generate employment
opportunities in the rural economy, and create broad economic multiplier effects that transform the rural sector. Such value chain
integration requires the development of mutually beneficial commercial linkages between small farmers/micro-entrepreneurs and
larger-scale consolidators such as private sector agribusiness. Participation of agribusinesses is fundamental to generate demand
and create markets that reliably absorb output from small farms and micro-enterprises; agribusinesses serve as engines of rural
transformation.
In light of the above, the project will support small farmers and micro-entrepreneurs (or their organisations) and agribusinesses to
improve their operations and integrate contractually within selected value chains. In this perspective, commodity selection is
fundamental. Commodities that respond to growing demand from domestic, regional and global markets, ensure nutritional benefits for
both producers and consumers, and can be aligned to comply with food quality and safety standards, will be prioritised under the
project. It should be noted that the robust macro-economic growth experienced by Bangladesh over the past decades have led to
sharp growth of the middle class. This has resulted in rapidly increasing demand for meat, vegetables, fruit, and milk products.
Quality and food safety concerns among these consumers is increasing, creating rising demand for certified high quality food.
Goal and objective. The project goal is to sustainably increase the income, food security and nutrition of marginal and small farmers
and micro-entrepreneurs across selected value chains. The development objective is the sustainable growth of selected rural
commodity value chains with comparative advantage, market demand, growth potential, and backward linkages to small farmers and
micro-entrepreneurs. Multiple output and outcome related data will be developed in order to measure RMTP's progress towards
attaining the goal and objective. The project is designed for a period of six years, 2020-2025.
Project area. The project has a national mandate and will invest throughout Bangladesh. Specific focus areas will be selected based
on poverty incidence, economic opportunity, implementability, and complementarity with ongoing investments in agricultural value
chain development.Two additional considerations will be taken into account: (i) avoiding investments in the same value chains and
same sub-districts already covered by other PKSF programmes (while seeking complementarities with World Bank-financed
Sustainable Enterprise Project); and (ii) focusing on areas where Partner Organisations (POs) have lending programmes and have
the capacity to implement value chain financing. A list of districts/sub-districts with high potential for the selected value chains is
presented in the Project Implementation Manual (PIM).
Beneficiaries and benefits. The project's direct target groups consist of marginal and small farmers and micro-entrepreneurs. It
indirectly supports all value chain actors (input suppliers, traders, processors, advisory services). In terms of poverty, the project
targets the (i) poor, (ii) transitional poor, and (iii) enterprising poor. An estimated 445,000 households will be direct beneficiaries of the
project, of which 100,000 microenterprise borrowers, and 345,000 will benefit from value chain development activities. The benefits
include enhanced financial and social service delivery; improved technical capacities of livestock para professionals and para
extension service providers; food safety in the project area and beyond; better awareness of food safety and nutrition intake among
beneficiaries; improved animal health; and value chain development through improved market access, and development and
expansion of rural businesses.
Gender and youth. The Government, IFAD and PKSF place great importance on specifically supporting women to participate in the
mainstream of social and economic life, particularly poor women, women-headed households, and young women. The predominance
of women in microfinance programmes is well-established, and has improved women's access to finance, interaction with markets as
producers, sellers and consumers, and status as family decision makers. Based on the experiences of the IFAD financed Promoting
Agricultural Commercialization and Enterprises (PACE) project, it is expected that about 75% of micro-enterprise borrowers under
RMTP will be women. Bangladesh is considered to have a young population. According to ILO, the share of population between 15-
24 years is close to 20%, whilst the median age of the entire population is a little over 26 years old. Youth labour force participation is
low at 41%, while youth unemployment stands at 13%; however, of employed youth, some 20% are in irregular jobs. About 27% of
youth are neither in the labour force nor in education. The Government is committed to creating a positive environment for youth
empowerment. It has endorsed a National Youth Policy 2017 which promotes youth engagement in environment education and
protection, ICT growth, environment-friendly agriculture and industrialisation, good governance, sustainable development, and safe
food and commodity marketing.
Nutrition. The project will apply a nutrition lens to select value chains as well as project activities along value chains and micro-
enterprise interventions in ways that improve nutrition status of communities. Examples of nutrition sensitive value chain activities that
will be promoted are commodity-specific nutrition education, nutrition-sensitive extension, safe storage and introduction of food safety
standards. RMTP will establish partnerships with agencies active in nutrition awareness campaigns, including WFP, UNICEF, NGOs,
the on-going Enhancing Resources and Increasing Capacities of Poor Households towards Elimination of their Poverty (ENRICH) and
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Ujjibito projects of PKSF, and the Bangladesh National Nutrition Council.
The project has three complementary components as follows:
Component 1: Value Chain Enhancement. This component will enable 445,000 microenterprises to sustainable expand their
activities through adoption of efficient production methods, compliance with internationally recognised food safety and
traceability standards, and strong market linkages. It will contribute to creating an enabling environment that promotes the
growth of micro and small enterprises, and strengthens their linkages with the agribusinesses and other value chain actors. It
has five sub-components: (i) organisation of producers; (ii) provision of technical and business services (including GGAP
compliance) to producers through private advisory services; (iii) integration of actors across selected value chains; (iv)
strengthening of downstream agribusinesses (including GGAP and HACCP compliance as required); and (v) policy dialogue
with Government.
Component 2: Financial Services. This component will provide sustainable financial services to micro-enterprises and to
growing/larger enterprises and agribusinesses. It has three sub-components: (i) provision of financial services to micro-
enterprises through partner organisations (microfinance institutions); (ii) provision of commercial finance to larger micro-
enterprises as well as small/medium agribusiness companies, through non-banking financial institutions (NBFIs); and (iii)
optimal utilisation of remittances through training to the family members of overseas workers.
Component 3: Institutional Strengthening and Project Management. This component aims to strengthen PKSF and PO
capability as development organisations by leveraging trends in Information Communication Technology (ICT), financial
services, commercial platforms and new technologies, and to ensure that the project is managed satisfactorily. It has three
sub-components: (i) PKSF capacity building; (ii) POs capacity building; and (iii) project management (see organisation and
management section).
Project Management. RMTP will be managed by PKSF, an apex development organisation with an independent Board of Directors.
PKSF works through 200 licensed microfinance institutions (known as partner organisations or POs) which have a combined 9,500
branches across the country. Through this network, PKSF is currently providing inclusive finance and other services to 13 million poor
households. PKSF's aggregate assets amount to USD 707 million, including its active loan portfolio which currently stands at USD
178 million, with a recovery rate exceeding 99%. PKSF is supervised by the Financial Institutions Division of the Ministry of Finance.
PKSF will establish a Project Management Unit, integrated within its structure, for overall project management purposes. The PMU
will be headed by a Project Coordinator appointed from PKSF's pool of senior officials. PMU staff will consist of three officers
seconded from PKSF's core team and nineteen recruited from the market. The PMU will work with PKSF's Loan Operations Division
to implement the financial services programme through POs as per established processes and norms. This Division will assist with
the selection of qualified NBFIs for financing larger enterprises and agribusinesses. It will work with POs and selected service
providers for the implementation of the value chain component. PKSF’s support divisions such as Audit, Administration, Agriculture,
Human Resources, Accounts and Finance, Livestock, Research, Training, M&E, MIS and IT will provide relevant services to the
project.
IFAD has financed 4 projects implemented by PKSF, of which three are completed and one is ongoing. All projects financed have
been rated as highly successful. The projects are: (i) the USD 20 million Microfinance and Technical Support Project (MFTSP), which
covered 2003-10; (ii) the USD 22 million Microfinance for Marginal and Small Farmers Project (MMSFP), which covered 2005-11; (iii)
the USD 58 million Finance for Enterprise Development and Employment Creation Project (FEDEC) which covered 2008-14; and (iv)
the USD 93 million PACE which is currently ongoing.
The IFAD loan for RMTP will be passed on by MoF to PKSF in the form of: (i) a loan for the financial services component (component
2, with the exception of subcomponent 2.3); (ii) a grant for the value chain component (component 1); and, (iii) a grant for the
institutional strengthening and project management component (component 3). MoEWOE will directly receive grant funding from MoF
for implementing subcomponent 2.3.
Planning and M&E. The PMU/PKSF will be responsible for preparing the annual work plan and budget for RMTP, and for obtaining
approval from FID and IFAD. The plan will include activity plan along with targets and expenditure plan and should reflect overall
project targets and activities. IFAD supervision missions and mid-term review mission will offer opportunities for review of progress
and assessment of effectiveness of the project. An effective M&E system will be developed to measure indicators included in the log
frame. It will be part of a larger MIS system which will serve as an information and knowledge sharing platform. The M&E system will
be utilised as a management tool and will include assessment of progress and compliance, identification of constraints and proposed
remedial actions. All data will be disaggregated by gender, age, and geographical location.
Knowledge Management (KM) and Learning. The project's KM activities will support the effective flow of relevant information among
project staff, beneficiaries and other stakeholders. A comprehensive KM action plan will be developed in the early stages of
implementation. Output, outcome and impact data generated by the M&E system will inform case studies, briefs and reports. These
will be used for policy dialogue, peer-learning, and potential scaling-up. KM products will be communicated through multiple sources
including blogs, written publications, video and social media.
Sustainability and Exit Strategy. PKSF and its POs are institutionally and financially viable organizations that offer multiple loan
products to POs, and savings and loan products to four categories of borrowers respectively. ME loan is nearly half of POs’ loan
portfolio. Both PKSF and POs will continue to offer financial services beyond the project period. PKSF generates surplus every year
from its operations and will continue to raise funds and refinance its loan operations.
Economic and financial analysis: The Financial Internal Rate of Return (FIRR) is 35%. The Economic Internal Rate of Return (EIRR)
for the 20-years period is 30% with benefit cost ratio of 1.29. The project earns a Net Present Value (NPV) of USD 275 million for the
20-year period with 6.2% discount rate.
Various technologies, business services, production techniques, and marketing arrangements are expected to be adopted and
continued way beyond the project period. From the start, the project will promote commercial provision of business services.
Technologies and farm practices such as use of high quality compost, motorized deep placement of urea/DAP and compost/DAP
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briquettes for aromatic rice will reduce urea use by 30%, contribute to reduction of greenhouse gasses by 30% and increasing yield by
15%. These practices coupled with the commercial approach for provision of services and inputs and the institutional arrangement of
the project will ensure a high likelihood for long-term sustainability and ensure safe exit of the project support
Financial management. PKSF has an effective FM system managed by a strong team of accountants and finance professionals. It
consistently applies the International Financial Reporting Standards (IFRS) across its operations. Partner POs are registered and
supervised by the Micro Credit Regulatory Authority. POs are governed by General Bodies and Governing Bodies/Executive
Committees in order to ensure good governance and transparency. It is evident that there are significant improvements in PO
governance due to regular interventions of PKSF. There is an adequately staffed Internal Audit Unit (IAU) in PKSF. The IAU prepares
an annual plan for internal audit reviews within PKSF and POs. These audits mainly focus on compliance review and checking of
payment vouchers prior to issuing payments to suppliers/vendors. There may be room for the inclusion of risk review in the internal
audit process; this will be assessed during implementation. RMTP accounts will be audited annually by the private firm that audits
PKSF in accordance with International Standards on Auditing (ISA) and in compliance with IFAD's Handbook for Financial Reporting
and Auditing. The audited project financial statements together with the auditor’s opinion will be submitted to IFAD in English within 6
months of the end of the fiscal year. PKSF will open a Designated Account and an Operating Account for the purposes of the project.
MoEWOE will open a Designated Account for the administration of the grant proceeds.
Project financing / co-financing strategy and plan. The project financing plan is presented in table 3. It will be financed an IFAD loan of
USD 80.0 million, an IFAD grant of USD 1.0 million, PKSF contribution of USD 13.0 million, cofinancing of USD 8.3 million, private
sector contribution of USD 4.6 million, POs contribution of USD 82.2 million, NBFIs investment of USD 10.0 million, and beneficiary
equity of USD 0.9 million. Subject to approval by relevant authorities in Denmark, the Embassy of Denmark in Bangladesh is
intending to provide DKK 55 million (equivalent to approx. USD 8.3 million at prevailing exchange rates) for the project. The potential
Denmark funding would be administered by IFAD, and utilised to cofund Component 1 (Value Chain Development). The USD 1
million grant will be utilized to finance activities under subcomponent 2.3. The objective is to develop the skills of households receiving
remittances so that they can invest in micro-enterprises and improve their economic status in a sustainable manner.
1. Context
A. National context and rationale for IFAD involvement
a. National Context
With a population of 168 million (May 2019), a land area of 130,170 km2, and a population density of 1,291 people per km2,
Bangladesh is one of the most densely populated countries in the world.
1.
Political context. The Constitution of Bangladesh, adopted in 1972, establishes the country as a parliamentary republic.
Bangladesh has been politically relatively stable over the past decade. The 2018 general elections proceeded in an orderly
manner and resulted in a landslide victory for the Awami league. Prime Minister Sheikh Hasina, leader of the Awami league,
presented the new cabinet early January 2019. However, underlying risk factors include selective application of the rule of law,
transparency concerns, and potential political conflict.
2.
Macroeconomic context. Bangladesh's economic growth has been phenomenal, and the country has graduated to lower middle
income status. Real GDP growth averaged 6.3% p.a. over the past decade, and reached 7.3% in 2017, the highest in Asia. This
growth is driven by increasing private consumption, public spending, private investment flows, manufacturing exports (mainly
garments), agricultural growth and remittance inflows. Furthermore, at 27% the debt-to-GDP ratio is among the lowest in Asia.
However, inflation reached 5.8% in 2018, driven mainly by food-price inflation of 7.1% caused by supply shocks. Both the current
account deficit and fiscal deficit increased in 2018. Despite these weaknesses, the macroeconomic fundamentals are solid, and
GDP is projected to grow annually at an average of 7.7% over the next five years. With the right set of policy reforms, growth
could be even stronger.
3.
According to the central bank (Bangladesh Bank, Annual Report FY2016), the sectoral composition of output continues to shift
from agriculture to services and industry. Services now accounts for 53.1% of GDP, industry for 31.5%, and agriculture for 15.4%.
However, 40.6% of the population is employed in agriculture. It is noted that the rural non-farm sector accounts for 36% of GDP.
4.
By 2015, Bangladesh had made significant progress on the MDG targets, substantially reducing poverty and the poverty gap
ratio, reducing child malnourishment, increasing school enrollment, improving gender parity in education, reducing infant
mortality, and enhancing health care. However, much more needs to be done to achieve the SDGs by 2030, particularly in
reducing hunger and poverty, increasing employment opportunities, and creating decent jobs for women.
5.
Poverty. Although Bangladesh has made impressive progress in tackling poverty over the past two decades, the incidence of
poverty remains significant. It is estimated that the national poverty rate declined from 49% in 2000 to 24.3% in 2016; during the
same period, the proportion living in extreme poverty fell from 34% to 13%. However, this means that some 41 million people still
live below the poverty line. Rural poverty halved over this period, from 52% to 26.4%, but remains higher than urban poverty
(18.9%).
6.
Key drivers of rural poverty in Bangladesh include: (i) small farm sizes; (ii) landlessness; (iii) unemployment and under-
employment; (iv) insufficient productive infrastructure; (v) outdated technology; (vi) limited access to financial services; (vii) lack
of social services; (viii) weak local institutional capacity; and, (ix) climate change. Productive investment is needed in rural areas
to accelerate inclusive economic growth, create employment and decent work, and reduce poverty.
7.
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b. Special aspects relating to IFAD's corporate mainstreaming priorities
Policies. Vision 2021 aims to transform Bangladesh into a middle-income country, eliminate food deficits and attain self-
sufficiency in food production. The Seventh Five Year Plan (2016-2020) focuses on: (i) economic growth and poverty reduction;
(ii) inclusiveness; and (iii) sustainable development resilient to climate change and natural disasters. Within this Plan, the
Government has set ambitious targets for poverty reduction (to 18.6%) and extreme poverty reduction (to 8.9%).
8.
Agriculture policy. With respect to agriculture, the Plan aims to accelerate the transformation from semi-subsistence to
commercial agriculture through productivity gains, diversification, value addition and agro-processing. It supports diversification
into higher value-added activities and employment opportunities for surplus agriculture labourers into non-farm activities. It aims
to integrate environmental, climate and disaster risk reduction considerations into all activities. The National Agriculture Policy
encourages sustainable and profitable agriculture through new technologies, increased productivity, remunerative employment,
commercialisation, quality standards, agro-processing, nutrition-sensitive cropping, and women's empowerment.
9.
Agricultural trade. While the volume of agricultural exports remained relatively stable over the past five years, significant export
increases have been observed for fisheries products. Food grains (rice and wheat), edible oil and oilseeds, milk and milk
products, spices, sugar and coconut oil were the main agricultural imports. The value of imported edible oil and oilseeds has
surged since 2011, while rice imports declined due to increasing domestic production.
10.
Microfinance. Currently about 33 million clients are accessing microfinance (and related non-financial services) in Bangladesh,
offered by some 700 microfinance institutions (MFIs). These institutions include 3 large MFIs, around 50 medium sized MFIs, and
200 small and 450 very small MFIs. Bangladesh is often named the cradle of microfinance and the sector has been growing
steadily since its inception four decades ago. The correlation between growth of microfinance and poverty reduction in
Bangladesh is well-documented.
11.
Access to microfinance. A recently published DFID funded study concludes that the demand for microenterprise loans is
increasing fast, with the outstanding loan balance doubling between 2011 and 2016. In 2016, the demand for microcredit
amounted to roughly USD 8.7 billion while the supply amounted to only USD 2.7 billion. Microenterprises are currently unable to
access commercial finance, with around 80% of microenterprises still largely depending on their own capital or microcredit to
finance their operations. The vast majority of microenterprises still consider access to finance as their main constraint for
sustained growth.
12.
Climate change. Bangladesh ranked second in the 2016 Climate Change Vulnerability Index, and it will likely suffer more from
climate change by 2025 than any other country. Rainfall during monsoon seasons is expected to increase by 10%-15% by 2030
and 27% by 2075; a rising sea level is expected to inundate 11% of the land area by 2050; 14% more of the country may become
extremely prone to floods by 2030; cyclones in the Bay of Bengal will occur more frequently due to increasing temperature; and
the peak intensity of cyclones may increase by 5%-10%. Coastal salinity problems will likely worsen as changing rain patterns
reduce the amount of dry season drainage water supply from upstream rivers. Overall, crop production might be reduced by 30%
by the end of the century; rice production could fall by 8%, and wheat production by 32% by 2050. These types of impacts make
adaptation a necessity, not only for farmers in terms of cropping choices, but also for other value chain actors and service
providers. Producers across rural areas are demonstrating signs of autonomous adaptation. In addition, the Government and
development partners have implemented a wide range of climate change adaptation projects, which have built knowledge and
capacity that RMTP can leverage.
13.
Nutrition. Good nutrition is vital for economic and social development; undernutrition can lead to economic loss of 2%-16% of
GDP, and child malnutrition carries irreversible consequences in cognitive and physical development. Current levels of
malnutrition in Bangladesh are alarming. Child stunting (low height-for-age) is estimated at 36%, acute child undernutrition (low
weight-for-height) stands at 14%, and low birth weight affects 22% of new born babies. Micronutrient deficiencies (also known as
hidden hunger) remain a major challenge: 21% of children are vitamin A deficient, 45% are zinc deficient and 40% are iodine
deficient, while 50% of pregnant women are anemic (iron deficient).
14.
Although household food security has improved in recent years, intra-household food distribution is uneven, and sacrifices are
mostly made by women and adolescent girls. At national level, 66% of women do not meet minimum dietary diversity standards;
this rises to 70% in rural areas. Only 28% of children meet the minimum dietary diversity requirement. Diets are overwhelmingly
dominated by rice consumption, with very low consumption of fruits, vegetables (where intake barely reaches half the minimum
requirement), pulses and livestock products. At the same time, there is a rapid increase in overweight and obesity, which affects
24% of women and is associated with increased consumption of trans-fats, ultra-processed foods and sugar-sweetened
beverages.
15.
Climate change is expected to have detrimental consequences for food security and nutrition, reducing crop production as well
as micronutrient content of foods due to increased salinity. Despite improvements in gender equality, women still lag behind in
educational attainment and literacy, which coupled with high rates of early marriage and early pregnancies (24%) are major
factors affecting food security and nutrition.
16.
Gender. Gender equality in Bangladesh has been improving over time, and the country is seen as making good progress on
various gender indicators. For example, gender parity has been achieved in primary and secondary education, and maternal
mortality is declining by 5.5% per year. The Global Gender Gap Index (WEF, 2017) ranks Bangladesh as the best performer in
South Asia, one of the best performers across all of Asia and the Pacific, and the 47th best performer globally of 144 countries
rated. However, significant gaps remain; women continue to face disadvantages in access to economic opportunities, social
services, political participation, and financial control. Rates of violence against women are alarming; UNWOMEN estimates that
two-thirds of married women have experienced some form of partner violence. The Gender Development Index (UNDP, 2017)
ranks the country in 136th position of 189 countries rated.
17.
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c. Rationale for IFAD involvement
B. Lessons learned
Microenterprise development. This has proved to be an effective instrument for rural poverty reduction and job creation.
However, demand for microenterprise finance far exceeds supply; substantial incremental investment is required. The high
cost of funds as well as regulatory constraints prevent microfinance institutions (MFIs) from expanding microenterprise lending
substantially. As a result, loan sizes for microenterprises average only USD 1,395, while the majority are not served at all.
Microenterprise employment. Under the ongoing Promoting Agricultural Commercialisation and Enterprises Project (PACE),
the Palli Karma-Sahayak Foundation (PKSF), an apex development financing organisation, has financed 604,566 cottage
microenterprises (far above the design target of 61.200), generating 1,399,032 full time jobs (2.31 jobs per microenterprise).
This demonstrates the positive employment effects of investing in microenterprises.
Missing middle. About 87% of enterprises are microenterprises, of which 58% are rural. Household microenterprises employ
on average 2.0 people, microenterprises 5.4 people, small enterprises 7.7 people, medium enterprises 99.4 and large
enterprises 660.4 people. There is a large gap in scale between small and medium enterprises. MFIs are not able to scale up
operations to serve larger enterprises, while financial institutions have not been able to scale down operations to reach smaller
enterprises. There is scope to involve smaller financial institutions, particularly non-banking financial institutions, to reach the
missing middle.
Service delivery. Project experiences have demonstrated the importance of combining financial and non-financial services to
maximise results and impact at microenterprise level. Non-financial services include advisory and business services, improved
technologies, value chain integration, and market promotion. Under previous PKSF projects, this combination of services had
positive effects on microenterprise turnover and income.
Food safety. Project experiences have demonstrated the importance of introducing systems for ensuring compliance with food
quality and safety standards. The Bangladesh Institute of Public Health indicated that 50% of food items tested between 2001-
2009 was adulterated (particularly pesticide residue), posing health risks for domestic consumers and preventing export.
Under PACE, introduction of standards on fisheries products has proved to be successful; this needs to be expanded to all
food products.
In rural areas, women play a large, vital and growing role in agriculture, nutrition, food security and a wide range of income-
generating activities. However, women have little participation in decision-making as their economic contributions are rarely
recognized by the family and society.
18.
Youth. Bangladesh is considered to have a young population. According to ILO, the share of population between 15-24 years is
close to 20%, whilst the median age of the entire population is a little over 26 years old. Youth labour force participation is low at
41%, while youth unemployment stands at 13%; however, of employed youth, some 20% are in irregular jobs. About 27% of
youth are neither in the labour force nor in education.
19.
The Government is committed to creating a positive environment for youth empowerment. It has endorsed a National Youth
Policy 2017 which promotes youth engagement in environment education and protection, ICT growth, environment-friendly
agriculture and industrialisation, good governance, sustainable development, and safe food and commodity marketing.
20.
The poverty, food insecurity and malnutrition indicators outlined above confirm that: targeted productive investments are required
in rural areas to accelerate inclusive economic growth, reduce poverty sustainably and improve food security; and, such
investments need to increasingly focus on sectors and commodities with maximum positive impacts on nutrition.
21.
IFAD experiences in Bangladesh have demonstrated that supporting small farmers to increase agricultural productivity and
output has positive effects on household income growth, poverty reduction, and food security. Similarly, supporting micro-
entrepreneurs to start and/or expand micro-enterprises generates income growth, improves food security, and reduces poverty.
However, it has become clear that fragmented investment in primary production and micro-enterprises, without meaningful
integration in profitable value chains connected with expanding markets, does not generate growth of the scale necessary to
transform the rural economy and sustainably eliminate poverty.
22.
Limited experiences in Bangladesh, and well-documented experiences globally, indicate that successful small farmer and micro-
entrepreneur integration within commodity value chains with comparative advantage, market demand and growth potential can
sustainably reduce poverty and food insecurity, improve the competitiveness of the agricultural sector, generate employment
opportunities in the rural economy, and create broad economic multiplier effects that transform the rural sector. Such value chain
integration requires the development of mutually beneficial commercial linkages between small farmers/micro-entrepreneurs and
larger-scale consolidators such as private sector agribusiness. Participation of agribusinesses is fundamental to generate
demand and create markets that reliably absorb output from small farms and micro-enterprises; agribusinesses serve as engines
of rural transformation.
23.
In light of the above, the project will support small farmers and micro-entrepreneurs (or their organisations) and agribusinesses to
improve their operations and integrate contractually within selected value chains. In this perspective, commodity selection is
fundamental. Commodities that respond to growing demand from domestic, regional and global markets, ensure nutritional
benefits for both producers and consumers, and can be aligned to comply with food quality and safety standards, will be
prioritised under the project. It should be noted that the robust macro-economic growth experienced by Bangladesh over the past
decades have led to sharp growth of the middle class. This has resulted in rapidly increasing demand for meat, vegetables, fruit,
and milk products. Quality and food safety concerns among these consumers is increasing, creating rising demand for certified
high quality food.
24.
In Bangladesh, IFAD has financed 33 projects with a total value of USD 2.1 billion. The points below summarise key lessons
learned which are relevant for the project under review.
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PKSF institutional capability. IFAD's strategy in working with PKSF has been to expand core PKSF programmes, and to
introduce innovations which PKSF then takes to scale using core resources as well as other partners' financing. This strategy
has proven to be very successful. The first project (MFTSP) supported PKSF to graduate from lending only to lending with
associated services; this is now practised across all PKSF operations. The second project (MFMSP) helped PKSF to enter
into agricultural lending; agriculture loans now constitute 12% of its portfolio. The third project (FEDEC) assisted PKSF to
introduce micro-enterprise lending and business clusters; micro-enterprises now account for 31% of its portfolio. The fourth
project (PACE, ongoing) is helping PKSF to upgrade agriculture lending towards a commercial approach, proving that small
farms and rural microenterprises are economically viable. The lesson is that PKSF is capable of growing institutionally on an
incremental basis.
Key principles for IFAD engagement
build on PKSF/PO successful microfinance programmes, but focus on selected sub-sectors and commodities that have
comparative advantage, market demand and growth potential;
combine financial and non-financial services to enable microenterprises to participate sustainably and effectively in high value
commodity supply chains;
facilitate direct linkages between microenterprises and agribusinesses to create market efficiencies;
develop micro-entrepreneur integration within commodity value chains to create broad economic multiplier effects that
transform the rural sector and reduce poverty;
apply a nutrition-sensitive approach to the selection of commodities to be promoted, to ensure better nutrition for producers
and consumers;
specifically target women through the selection of commodities/value chains in which women are heavily involved (poultry,
livestock, homestead production);
introduce compliance with food safety and quality standards at producer and processor levels, to ensure the supply of safe
food for producers and consumers;
leverage commercial finance through non-banking financial institutions for investment in larger enterprises and agribusinesses
to expand the market for micro-enterprise output;
strengthen the capability of PKSF and POs as development institutions by leveraging trends in financial services, commercial
platforms and new technologies.
2. Project Description
C. Project objectives, geographic area of intervention and target groups
First, PKSF will identify districts/sub-districts that have: (i) already developed production clusters of the selected value chains;
and, (ii) the potential to develop production clusters of the selected value chains.
Second, PKSF will map the incidence of poverty in all districts/sub-districts of the country.
Third, PKSF will make a final selection of the target areas covering districts/sub-districts with existing/potential value chain
clusters and with greater incidence of poverty.
Ultra-poor (approx. 10% of beneficiaries): The ultra-poor are typically landless (or have up to 0.04 acres of land) and depend
on unskilled wage labour and seasonal migration. They have poor literacy and numeracy skills. They typically spend around
BDT 4,300 per year to purchase food items. The ultra-poor are involved in producing commodities such as poultry and small
ruminants. This group is directly targeted by PKSF's pro-poor lending programme (Buniad).
Transitional poor (approx. 27% of beneficiaries): The transitional poor typically possess between 0.5 and 1.49 acres of land,
including homestead land, and/or are involved in sharecropping and wage labour. On average, they spend BDT 5,600 per year
to purchase food items. They participate in crop, livestock and poultry value chains, and sometimes supply output to micro-
The project has been conceptualised on the basis of the elements outlined below.
26.
Project goal and objective. The project goal is to sustainably increase the income, food security and nutrition of marginal and
small farmers and micro-entrepreneurs across selected value chains. The development objective is the sustainable growth of
selected rural commodity value chains with comparative advantage, market demand, growth potential, and backward linkages to
small farmers and micro-entrepreneurs. Multiple output and outcome related data will be developed in order to measure RMTP's
progress towards attaining the goal and objective.
27.
Project area. The project has a national mandate and will invest throughout Bangladesh. Specific focus areas will be selected
based on poverty incidence, economic opportunity, implementability, and complementarity with ongoing investments in
agricultural value chain development. The following procedure will be applied to select districts/sub-districts (upazilas) where
project activities will take place:
28.
Two additional considerations will be taken into account: (i) avoiding investments in the same value chains and same sub-
districts already covered by other PKSF programmes (while seeking complementarities with World Bank-financed Sustainable
Enterprise Project); and (ii) focusing on areas where Partner Organisations (POs) have lending programmes and have the
capacity to implement value chain financing. A list of districts/sub-districts with high potential for the selected value chains is
presented in the Project Implementation Manual (PIM).
29.
Target groups. RMTP will directly target marginal and small farmers and micro-entrepreneurs engaged in producing or
processing field crops, horticulture, aquaculture and livestock. Within these groups, the project will focus on the ultra poor, the
transitional poor, and the enterprising poor. These are characterised below:
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enterprises. The transitional poor have been able to gradually increase their asset base over the past 5-10 years by
diversifying their income base, and in some cases by receiving remittances. This group is targeted by PKSF’s household
income-generating activities lending programme (Jagoron) or seasonal agricultural lending programme (Sufolon).
Enterprising poor (approx. 63% of beneficiaries). The enterprising poor typically possess more than 1.5 acres of land, and
spend an average of BDT 7,500 per year to purchase food items. between 30 and 90 decimals of land (30% to 90% of an
acre). They operate micro-enterprises in crops/horticulture, aquaculture, livestock and poultry value chains, and supply output
to markets or larger enterprises. The enterprising poor are expanding land ownership, and in some cases receive remittances.
This group is targeted through PKSF’s Jagoron,Sufolon, and Agrosor (micro-enterprise) loan products.
Geographical targeting: outlined in paragraph 28 above.
Procedural targeting: existing procedures will be applied for targeting under PKSF's four standard loan products. Standard
loan packages will correspond to the financial capacities of the ultra-poor, transitional poor and enterprising poor respectively.
Similar procedures will be established for the participation of non-banking financial institutions in lending to larger/ growing
enterprises and to agribusinesses.
Direct targeting: POs will identify and directly target microfinance groups that have the potential to upgrade production and
develop market linkages, and that have a higher proportion of ultra-poor borrowers.
Self-targeting: Micro-finance groups engaged in the selected value chains will have the option of forming into producers'
associations, with project support.
Empowering measures. Women are actively targeted as recipients of microfinance loans and PKSF financial literacy training.
D. Components/outcomes and activities
In addition, the project will indirectly target all other value chain actors, such as input suppliers, advisory service providers,
traders and processors.
31.
Microfinance groups will be the main entry point for value chain activities, although participation will also be open to micro-
entrepreneurs outside these groups. As per POs' regular practices, borrowers are included in microfinance groups for
administrative, transactional and organisational purposes. Microfinance groups typically consist of borrowers of all four loan
products. POs will make efforts to increase participation of Buniad borrowers in these groups.
32.
Targeting strategy. The project's targeting mechanisms are outlined below:
33.
Gender. The Government, IFAD and PKSF place great importance on specifically supporting women to participate in the
mainstream of social and economic life, particularly poor women, women-headed households, and young women. Bangladesh
has made important progress in these areas through education, health, rural development and microfinance. The predominance
of women in microfinance programmes is well-established, and has improved women's access to finance, interaction with
markets as producers, sellers and consumers, and status as family decision makers. Based on PACE experiences, it is expected
that about 75% of micro-enterprise borrowers under RMTP will be women.
34.
Under RMTP, women will be specifically targeted through: (i) selection of commodities/value chains in which women are heavily
involved (poultry, livestock, homestead production, high value horticulture); (ii) focus on activities in which women are
disproportionately involved (such as post-harvest and basic processing activities); (iii) customised skills training, business training
and financial literacy for both enterprise operation and command over household expenditure; (iv) nutrition training and focused
awareness communication; (v) access to financial services; (vi) training to PKSK and POs on creating an enabling environment
for women's participation. All planning and monitoring indicators will be gender-disaggregated, while the assessment of value
chain activities will include indicators to assess gender impact. Efforts will be made during implementation to introduce tools such
as 'Gender Action Learning System' (GALS) within PKSF.
35.
Youth. Rural youth (both women and men) in Bangladesh today are generally better educated than previous generations, and
are in a better position to adopt new technology, acquire management skills, manage larger enterprises, and cope with business
risks. Drawing on experiences from PACE, and given country demographics, it is foreseen that youth will be automatically
targeted in multiple project activities. The project will proactively seek to encourage and include rural youth in its activities by: (i)
providing micro-enterprise loans based on specific business proposals to young people; (ii) offering customised business
management training; (iii) develop youth as master GGAP trainers and/or local service providers (such as paravets, lead farmers,
and technology promoters); and (iv) organize the youth to receive advanced technologies in production, basic processing, value
addition, and land-based fish farming. Youth-disaggregated data will be included in the project's M&E system.
36.
The project has three inter-linked components: (i) value chain enhancement; (ii) financial services; and (iii) institutional
strengthening and project management. The main investment components (1 and 2) reflect the strategy of combining financial
and non-financial services to achieve maximum impact for micro-enterprises, while the third component institutionally
strengthens PKSF and POs.
Component 1: Value Chain Development
37.
This component will enable 445,000 microenterprises to sustainably expand their activities through adoption of efficient
production methods, compliance with internationally recognised food safety and traceability standards, and strong market
linkages. It will contribute to creating an enabling environment that promotes the growth of micro and small enterprises, and
strengthens their linkages with the agribusinesses and other value chain actors. It has five sub-components: (i) organisation of
producers; (ii) provision of technical and business services (including GGAP compliance) to producers through private advisory
services; (iii) integration of actors across selected value chains; (iv) strengthening of downstream agribusinesses (including
GGAP and HACCP compliance as required); and (v) policy dialogue with Government.
38.
The microfinance groups supported by POs are the main entry point for investments under component 1 (Figure 1). Based on the
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principles of self-selection, cohesive microfinance groups can request additional support and become informal producers' groups
under sub-component 1.1. These groups will receive technical and business services to increase productivity and ensure
compliance with GGAP and HACCP (where required) under sub-component 1.2. Value chain integration support will connect
microenterprises to agribusinesses and markets under sub-component 1.3. Agribusinesses will be supported to adopt new
technologies, comply with HACCP (where required) and expand their market linkages under sub-component 1.4. The relevant
policy environment, and any needed reforms, will be covered by sub-component 1.5.
Sub-component 1.1: Organization. Where there is demand, the project will utilize the existing microfinance groups of PKSF POs
and organize producers into informal groups. These groups will serve as the main platforms for: (i) provision of training and
services to farmers and micro-enterprises; (ii) aggregation of output for marketing purposes; and, (iii) establishing linkages with
market actors. Linkages will be established with informal/formal private sector businesses[3] and their associations, service
providers, and other stakeholders.
40.
Producers' groups will systematically receive a training package, organised by participating POs either directly or through
contracted service providers. This will include financial literacy, social issues, women's rights, environmental challenges, and
climate change impacts and mitigation. In addition, hands-on training will be provided on business management and contract
farming. Refresher training will be provided based on regular review of PA performance.
41.
Nutrition awareness and related social and behavioral change communication (SSBC) messaging will also be provided to
producers' groups in order to enhance knowledge of the elements of a healthy diet. This will encourage and assist rural
households to make choices on how to spend incremental incomes in ways that improve diets and nutrition. Reinforcing
household messaging with publicity campaigns at community/market level regarding nutritious foods (and related processed
foods) is expected to increase demand for these foods.
42.
PKSF will generate a long-list of agribusinesses that may be interested in buying agriculture, aquaculture and livestock produce.
POs will cluster producers' groups to enable them to meet the quantities and quality required by partner agribusinesses. The size
and proximity of clusters will be influenced by availability of public and private advisory services. Groups will be supported by
POs to enter into contractual arrangements with interested agribusinesses.
Figure 2
43.
Sub-component 1.2: Technical and business services. The project will support micro-enterprises to better engage in selected
value chains. Key services will include: privatised advisory services to optimize production; preparation of business models and
plans; support to microenterprises for GGAP compliance; support to agribusinesses for HACCP compliance; assistance to source
financing; and development of contract management arrangements.
44.
Private Advisory Services: A pool of highly knowledgeable and skilled local service providers such paravets, trainers, and certified
local agricultural technicians will be gradually developed to provide privatised technical and business services. PKSF will develop
a pre-qualification system for developing this pool of private advisors. It will issue periodic calls for interest inviting qualified
persons to apply. Candidates will be evaluated according to educational background, technical knowledge and experience; ability
to specifically target women microentrepreneurs and the youth will also be assessed.
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Crops/horticulture/legumes: (i) high value cereal crops (e.g. aromatic and fine rice); (ii) high value fruits and vegetables
(including dark green leafy vegetables); and (iii) pulses (e.g. lentils, mung bean, chickpeas), beans, and seeds; (iv) related
trading and processing.
Livestock: (i) dairy production; (ii) red meat (e.g. cattle, goats, sheep, and buffalo); (iii) poultry (including water birds and
turkey) and eggs; (iv) related trading and processing.
Aquaculture: (i) technology-based aquaculture (e.g. mud crab, carp and tilapia, crayfish and high value local species,
particularly small fish); (ii) related trading and processing.
PKSF/POs will organise generic and advanced training for pre-qualified advisors in commodity-specific crop, livestock, and
aquaculture management. For cropping, specific attention will be devoted to the selection, application and safe handling of
pesticides. For livestock, training will cover para-veterinarian activities such as vaccinations and health care. For aquaculture,
training will focus on environmentally-sustainable production practices and fish health care. All advisory services will comply with
food safety protocols and standards for crops, fresh vegetables, livestock and aquaculture products.
46.
Training modules will be prepared for each commodity value chain. To the extent possible, existing materials developed by PKSF
and POs will be updated, and new modules developed if needed. If required, PKSF will engage a qualified third party to assist
develop training materials. Upon completion, relevant expertise will be engaged to validate all training material to ensure the
highest quality possible. Accreditation of pre-qualified advisors will be issued upon passing a final examination. It is envisaged
that the majority of private advisors will be young (ie between 22 and 35 years of age).
47.
POs will draw from the pool of accredited private advisors to meet value chain actors’ requests for services, ideally on cluster
basis. The provision of advisory services will be cost-shared by the project over three years on declining basis (80% in the first
year of operation; 50% in the second year; 30% in the third year). A transparent pricing system to establish the cost of private
advisory services will be developed.
48.
GGAP. To address the increasing concern about food safety in Bangladesh, the project will assist to introduce Global Good
Agriculture Practices (GGAP) and the GGAP Chain of Custody Standard (Traceability) for groups of small farmers and clusters of
microenterprises involved in production of crops, livestock and aquaculture. Support will also be provided to enterprises involved
in produce handling/transport, feed manufacturing, and hatcheries to obtain GGAP if required.
49.
PKSF will engage a recognized and accredited organization (international or national) to develop group food safety protocols for
selected commodities. These will be coordinated with the work of the Bangladesh Food Safety Network organized by FAO, as
well as the relevant activities of other development partners. This organization will train the private advisors to become GGAP
Master Trainers to train small farmers and micro-enterprises to introduce the relevant protocols. PKSF will also engage with an
different national institution accredited to undertake annual audit and certification of small farmers and microenterprises.
50.
HACCP. Support will be provided to enterprises engaged in crop/meat/fish processing to obtain Hazard Analysis Critical Control
Point (HACCP) certification. The project will engage national HACCP experts to guide processors on obtaining HACCP
certification; if national experts are not available, training will be organized to develop this expertise. The training will cover the
Codex Alimentarius Commission's Good Manufacturing Practices and preliminary steps to full HACCP. Subsequently, PKSF will
engage an in-country company to support enterprises to undertake the necessary steps to obtain HACCP certification, as well as
an in-country certification authority for audit and certification. Halal standards will also be introduced where required by the
market.
51.
Through mass media, the project will raise public awareness on the benefits to be derived from GGAP and HACCP compliance
for domestic consumers, producers, processors and exporters. If required, the project will contract an advertising company to roll
out the campaign.
52.
Technology. Working through private advisors, the project will promote appropriate modern technologies in the selected value
chains, such as deep placement of urea; vertical production systems for aquaculture; driers for vegetables and fruits; drip and
micro irrigation; and modern rice mills. Financing is allocated for feasibility studies, training, technical assistance and, in
appropriate situations, machinery and equipment.
53.
Sub-component 1.3: Value chain integration: The project will focus on a number of sub-sectors and commodities that have
comparative advantage, market demand and growth potential; that are produced by small farmers and micro-entrepreneurs; that
are aggregated in geographical clusters to ensure economies of scale and the possibility of private sector linkages; and that have
potential to improve food and nutrition security for both producers and consumers. The value chains the project support fall into
three broad categories:
54.
Within these broad categories, over time the project will assist POs to select other commodities that have high value and growing
demand, and that are nutrition sensitive. Additional factors, such as environmental considerations and food safety, will also be
strengthened.
55.
Value chain governance. Where needed, the project will assist to establish commodity-level multi-stakeholder platforms (value
chain committees) bringing together microenterprise groups, agribusinesses, input suppliers, transporters, researchers, public
advisory services, private advisors and end market representatives. These platforms will promote linkages among buyers,
producers and service providers as well as contract farming and similar mechanisms. They will liaise with line ministries to ensure
cooperation among value chain actors and Government.
56.
Value chain subprojects. The project will support PKSF to undertake countrywide value chain analyses for selected commodities
to identify entry points for implementation. On this basis, PKSF will issue requests for proposals (RFPs) from POs to develop and
implement value chain subprojects. Experiences from FEDEC and PACE show that such subprojects are a flexible, effective and
scalable method to implement value chain development. With the final package of interventions being decided after a value chain
study, activities can be targeted to directly address local value chain bottlenecks. Under FEDEC and PACE, tailormade value
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chain activities are brought to a given local context. Some initial value chain activities introduced by FEDEC have already been
scaled-up by PACE to new regions.
Each subproject will consist of an integrated package of activities including: selection of interested downstream agribusinesses
interested to purchase the specific commodity from producers; selection of producers and/or their organisations; demonstrations
and training for producers; development of linkages (or contractual arrangements) among producers and agribusinesses;
technology transfer for producers and processors; provision of advisory services from privatised advisors and/or supply chain
managers; integration with other value chain actors; mechanisms to share market information; technical assistance; exchange
visits; and related activities. A typical subproject would link 3,200 producers to 7 downstream agribusinesses, and is expected to
cost an average of USD 100,000. The selection process for subprojects would be competitive; criteria would include the scale of
impact, financial viability, environmental sustainability, compliance with food safety standards; poverty targeting, gender focus
and nutrition benefits. POs whose proposals are selected for financing would be supported with qualified value chain facilitators
to manage and monitor subproject implementation. The detailed criteria and procedures for the competitive selection of value
chain subprojects are contained in the PIM (Annex 8).
58.
Nutrition sensitive value chains: It is expected that 30%-50% of subprojects will be selected based on their nutritional potential
combined with business potential. Development of these subprojects will follow IFAD's guidance note on nutrition-sensitive value
chain approaches. As a first step, an analysis of the nutritional situation will be undertaken to obtain a better understanding of the
major nutritional challenges in the project areas, and to outline the nutrition potential of various commodities. Commodities that
can address nutritional problems while also having potential for market growth will be prioritized. A study that has been recently
conducted by the Centre for Tropical Agriculture (CIAT, Appendix III) outlines how such analysis can be carried out and identifies
nutrition opportunities in cropping, aquaculture and livestock. Context- and commodity-specific studies will then be carried out to
identify challenges and opportunities in developing the relevant value chains, followed by stakeholder consultations and definition
of specific investments. These studies may best be commissioned at the PKSF or PO level, to take advantage of a consolidated
analysis that can cut across locations or commodities. Nutrition-sensitive value chain activities will include the use of nutrition-
sensitive inputs, nutrition-sensitive extension and communication, safe storage and food safety.
59.
Recognising that improved incomes do not automatically lead to better nutrition outcomes, the project will hire a nutrition
specialist to assist the POs with the design, implementation and monitoring of nutrition-sensitive value chain investments and
social behavior change communication. The specialist will work with PO staff to develop appropriate training courses and
materials to raise awareness and understanding of nutrition issues, and so ensure that nutrition-sensitive subprojects are
designed and implemented well. In order to take advantage of existing knowledge and expertise on nutrition in the country, RMTP
will pursue partnerships with relevant UN organizations, NGOs, PKSF projects like ENRICH and Ujjibito, and the Bangladesh
National Nutrition Council.
60.
Sub-component 1.4 Enterprise strengthening: The project will provide specialised consultancy support to downstream
agribusinesses in: (i) food safety standards and traceability; (ii) introduction of new products like dried fruit, fruit juice, etc.; (iii)
market entry studies for both domestic and export markets; (iv) trial shipments for domestic and export markets as required; (v)
product branding including geographical indication, accompanied with GGAP, including GGAP labelling; and (vi) operational
business planning for small downstream agribusinesses with potential for rapid growth.
61.
Agribusinesses supported under component 2.2 and promising producers' groups will be the main beneficiaries of enterprise
strengthening services. PKSF will cooperate with non-banking financial institutions to identify agribusinesses in need of such
services. A rapid assessment shall identify qualified third parties to be contracted by PKSF for the provision of the services.
62.
The project will generally not provide direct subsidies for the business operations of farmers, microenterprises or agribusinesses.
However, PKSF will develop a scale for provision of targeted subsidies to training recipients and downstream enterprises to
catalyse the introduction of new technologies, specific services and products, and contract farming arrangements.
63.
Sub-component 1.5: Policy dialogue. Supported by the IFAD Country Office, PKSF will undertake policy dialogue with concerned
Government institutions on key topics relevant for the project. Possible topics may include: reviewing regulations governing PO
loan portfolio structure; the revision of outdated sectoral policies; increasing micro-enterprise loan ceilings to enable introduction
of new technologies; revisiting regulations governing the livestock sub-sector; allowing establishment of commercial hatcheries
for mud crablets; establishing an ISO 17025 accredited laboratory for analysis of residue of pesticide and heavy metal; and other
issues in financial services and selected sectors. Key policy outputs are: relevant sector policies reviewed and adjusted where
appropriate; regulations governing PO loan structure reviewed and adjusted where appropriate; and relevant livestock sector
policies reviewed and adjusted where appropriate. IFAD will also follow the process of UN reform and the role of the Resident
Coordinator in refining policy engagement.
64.
PKSF will undertake the following steps for successful policy dialogue: (i) identify the policy issue in consultation with relevant
stakeholders and experts; (ii) prepare an evidence-based policy paper with assistance from independent experts; (iii) organize
awareness building activities to share the analysis and recommendations; (iv) propose policy changes to relevant authorities; and
(v) ensure continuous follow-up of the policy recommendations.
Component 2: Financial Services
65.
This component will provide sustainable financial services to micro-enterprises and to growing/larger enterprises and
agribusinesses. It has three sub-components: (i) provision of financial services to micro-enterprises through partner organisations
(microfinance institutions); (ii) provision of commercial finance to larger micro-enterprises as well as small/medium agribusiness
companies, through non-banking financial institutions (NBFIs); and (iii) optimal utilisation of remittances through training to the
family members of overseas workers.
66.
Sub-component 2.1: Financial services through POs: As mentioned earlier, PKSF offers four loan products through POs: (i)
Buniad (ultra-poor loans); (ii) Jagoron (household income-generating loans); (iii) Sufolon (seasonal agricultural loans); and (iv)
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Agrosor (microenterprise loans). Demand for micro-enterprise loans across the country is very high, and growing faster than the
other three loan products. Interest rates to final borrowers typically range from 22% to 25%.
The project will provide substantial resources to PKSF to expand its microenterprise lending programmes through POs. These
resources will be utilised exclusively for financing the selected commodities/value chains. It is estimated that an additional
100,000 microenterprises will be financed, with an average loan size of BDT 120,000. Since lending resources will revolve at PO
level, it is envisaged that these new borrowers will receive several cycles of loans.
68.
PKSF will apply its existing business model, standard operating procedures, and lending terms and conditions to administer these
resources. It will lend to POs for lending to small farmers and micro-entrepreneurs. Similarly, POs will apply their standard
operating procedures and lending terms and conditions. Repayments from borrowers to POs will be revolved for similar
investments for the duration of the project. PKSF and POs are expected to adjust the terms and conditions for microenterprise
loans from time to time in line with market conditions, weighted average cost of funding, and approval by their managements and
governing bodies. PKSF will continue its existing loan approval, supervision and monitoring processes for PO lending
programmes, and make adjustments over time as necessary. As practiced by all previous and ongoing PKSF projects financed
by IFAD, PKSF will monitor increases in the outstanding loan portfolio from PKSF to POs to measure the utilization of the
project's lending resources, and will report accordingly.
69.
Microenterprise borrowers within the value chain subprojects will receive loans in line with the existing practices of the respective
POs. Leasing (hire-purchase) will be encouraged for investments in power tillers, tractors, mechanical/motorized rice planters,
solar-powered drip/micro irrigation systems, automatic poultry slaughter houses, and other relevant activities.
70.
Subcomponent 2.2: Commercial finance. The objective of this sub-component is to develop a new channel of financing for larger
microenterprises and small/medium agribusiness companies (the 'missing middle') which are currently neither clients of
microfinance institutions nor commercial banks. This financing will be administered by licensed non-banking financial institutions
(NBFIs), with interest rates to final borrowers typically ranging between 9% and 18%. NBFIs currently lend to small enterprises
(in one case offering special loan products for women entrepreneurs), but their agribusiness portfolios are limited due to financial
constraints.
71.
The project will provide resources through PKSF to selected licensed NBFIs for this purpose. This would substantially expand the
market for the output produced by small farmers and micro-enterprises, which are the primary target groups of the project, and
improve their integration within the selected value chains. Larger agribusinesses will be encouraged to also enter into contract
farming arrangements with producers' groups and micro-enterprises, obtaining NBFI financing where required, with project
support in the form of technical assistance, technology transfer, and organisation of producers.
72.
NBFIs will be a new type of PO for PKSF. RMTP is the first project through which PKSF will engage with POs that are not
registered under the Microfinance Act, but rather are licensed by Bangladesh Bank under the Financial Institutions Act (1993).
PKSF regulations have recently been adjusted to allow working with NBFIs.
73.
The selection of NBFIs under the project will be competitive, based on an approved assessment process. PKSF will issue a
request for EOI from NBFIs interested to participate in the project. On this basis, a number of NBFIs will be invited to submit
proposals. In addition to standard financial criteria, NBFI selection criteria would include their interest to venture into this sector
leveraging their experience in other sectors, their willingness to lend to downstream value chain actors, their proposed lending
terms and conditions, and the amount of cost-sharing from their own resources. PKSF will enter into an agreement with each
selected NBFI which outlines the terms and conditions of project financing, and the parameters governing how the funds will be
utilised. This process may be repeated periodically during implementation.
74.
NBFIs will assess the profitability, cash flow, reputation and credit history of entities applying for loans. Entities who are financed
by NBFIs will be supported by the project (under component 1) to enter into relationships with microenterprises and producers'
groups. The possibility of financing larger enterprises and agribusinesses also through a state-owned bank, such as
Karmasangsthan Bank, may be explored.
75.
Participating NBFIs will finance agribusiness investments in capital equipment (on debt or hire-purchase basis) for relevant value
chain activities. Repayments will be revolved into new loans for the duration of the project implementation period and beyond.
Agribusiness selection criteria would include their commitment to enter into commercial relationships with targeted micro-
enterprises.
76.
Sub-component 2.3. Utilisation of remittances. Millions of Bangladeshis live and work outside the country and send home an
estimated USD 20 billion annually in the form of remittances. These remittances are used for consumption, house improvements
and in some cases the purchase of land. Remittance receivers often do not invest these funds in sustainable economic activities
due to lack of skills, and fall back into poverty when the expatriate worker returns home.
77.
A small in-loan grant will be provided to the Ministry of Expatriates' Welfare and Overseas Employment (MoEWOE), which is
mandated to handle non-resident Bangladeshi (NRB) affairs, for the promotion of diaspora investment and optimal utilisation of
remittances under the project. The objective would be to develop the skills of households receiving remittances so that they can
invest a portion of the remittances received into micro-enterprises, and sustainably improve their economic status. The MoEWOE
would identify remittance-receiving households in the project areas, and link them to project component 1.2 for the provision of
business and technical training to expatriate family members (mainly women and the youth). They would also be linked to sub-
component 2.1 for the provision of microfinance where required.
78.
Most remittance-receiving families are headed by women, and have underemployed youth. This sub-component will provide an
important contribution to women's economic empowerment any youth employment in the project areas. Piloted methodologies
will subsequently be scaled up across rural areas of Bangladesh.
79.
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E. Theory of Change
Component 3: Institutional Strengthening and Project Management
This component aims to strengthen PKSF and PO capability as development organisations by leveraging trends in ICT, financial
services, commercial platforms and new technologies, and to ensure that the project is managed satisfactorily. It has three sub-
components: (i) PKSF capacity building; (ii) POs capacity building; and (iii) project management (see organisation and
management section).
80.
In leveraging ICT solutions, the project will collaborate with and build upon the knowledge generated by the IFAD grant-funded
ongoing research by the Consultative Group to Assist the Poor (CGAP). The aim of this grant is to overcome the persistent digital
divide between women and men in the mobile money market in Bangladesh. CGAP supports the introduction of new smart phone
apps to POs, as the penetration of smart phones in rural areas is increasing. Together with financial literacy training, the grant
expects to improve the role of women in financial decision making.
81.
Sub-component 3.1 PKSF capacity building. Over time, PKSF has introduced numerous software modules covering financial
management, human resources management, PO management, and mobile financial service systems for POs. Through the
provision of technical assistance and training, the project will assist PKSF to gradually and carefully integrate additional ICT-
based solutions into its operations. The ICT solutions proposed below will be subject to feasibility studies and pilot phases, and
the availability of local service providers will be assessed, before they are introduced.
82.
Distributed digital ledger technology (transparency engine). A recent technical assessment commissioned by IFAD investigated
the opportunities, risks and alignment of partners, and found the introduction of distributed digital ledger technology within PKSF
to be feasible. The project will support PKSF to create an information management and sharing platform built on distributed
ledger blockchain technology to ensure improved management of records and greater transparency in fund management. This
will allow borrowers, producers, associations, organisations, public entities, POs and PKSF to track sources of funding and to
better monitor the detailed credit history of clients. Over time, this will translate into lower interest rates for proven credit-worthy
borrowers and will facilitate their integration into the national banking system. Other financial institutions may eventually be invited
to use the platform as an input for loan appraisal decision making. ICT applications for blockchain use will also be developed.
PKSF will contract a qualified fintech service provider to develop the platform, related applications, a user guide and training
materials, and to train potential users. Other options, such as using blockchain application for commodity traceability, will be
assessed during implementation.
83.
E-commerce platform. The project will upgrade PKSF's e-commerce platform for rural products and integrated business services,
which was established under PACE. It will leverage technology to connect rural producers (women, small farmers and micro-
entrepreneurs) with new sets of customers, creating a parallel marketplace. POs will be assisted to connect borrowers to the
platform and orient them on transactional methods – business to business (B2B) and business to consumer (B2C). The option of
technical cooperation with Alibaba/Ant Financial in upgrading this platform will be assessed.
84.
Crowd-funding (fraternity funding) platform. Crowd-funding, which enables entrepreneurs to raise funding from multiple
individuals/investors, including migrant remitters, is now the second-largest financier of enterprises globally (after venture capital).
Subject to a positive assessment by a feasibility study, the project will support PKSF to create a crowd-funding platform and
associated marketing campaign. Two approaches will be promoted – initially the lending-based, peer to peer (P2P) model; and
eventually the equity-based model (such as the 'Bangladesh Angels' model, a pioneering angel investment network. The platform
owner (PKSF) will provide financial due diligence and legal/contractual services as it links investors to micro-enterprises and
agribusinesses. Interested entrepreneurs will be trained to prepare and disclose the financial information required. Technical
assistance on regulatory aspects will be provided to relevant authorities.
85.
Microenterprise ICT. PKSF will develop an ICT platform and a mobile phone application for the sharing of advisory services
related to selected value chains (as well as household health and nutrition information). Users will be able to download illustrated
training modules. The platform will include an expert panel to respond to queries of producers' groups.
86.
Subcomponent 3.3: PO Institutional Strengthening. The project will provide capacity building for POs in: (i) IT systems; (ii) value
chain management, integration, technology and contract intermediation; (iii) nutrition-sensitive value chain design and
implementation; and, (iv) new product development where required.
87.
Millions of small farmers and microentrepreneurs in Bangladesh are unable to transition from subsistence production to
commercialised operations due to a range of factors: low productivity, outdated technologies, lack of differentiated produce, poor
quality of output, limited processing to add value, inadequate advisory services, insufficient access to financial services, absence
of structured markets, and competition from neighbouring countries. Moreover, unsafe application of pesticides and antibiotics, as
well as unhygienic transportation and distribution systems, raise serious consumer concerns about food safety. On the other
hand, medium and larger agribusinesses are interested in sourcing reliable and quality produce from small farmers and micro-
entrepreneurs. However, insufficient financial resources, an unorganized production base, and irregular supply of unreliable
quality prevent them from meeting the market demand. The project aims to address these constraints and foster win-win
commercial linkages between small farmers/micro-entrepreneurs and agribusinesses.
88.
The project will offer small farmers and micro-entrepreneurs access to improved production technologies, financial services and
market linkages. Producers will be organised and equipped with the necessary skills to comply with food safety standards. This
will allow producers to increase the quantity and quality of output, while upgraded market linkages will reduce market volatility
and ensure higher financial returns. It will also increase the availability of high quality produce available for agribusinesses, which
will be supported through commercial finance from NBFIs and technical assistance. In summary, the project will create synergy
among producers and agribusinesses, enabling sustained income growth and employment creation.
89.
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F. Alignment, ownership and partnerships
Targeting
policy
The project includes marginal and small farmers and microentrepreneurs in selected value chains in rural
areas. It will cover the ultra-poor, the transitional poor and the enterprising poor.
Gender equality and
empowerment policy
Women, especially young women, are at the centre of the project: more than 50% of value chain
participants will be women; about 75% of microenterprise loans will be disbursed to women borrowers;
and a proportional number of women will receive training on production techniques and business
management. Women will be the main participants in nutrition, social and environmental campaigns, and
agents of change at community level. Women's social and economic roles will be greatly enhanced. The
M&E system will generate gender sensitive data.
Mainstreaming
nutrition
The project promotes nutrition-sensitive value chains. Most of the commodities selected for value chain
development are likely to improve diets and nutrition of both producers and consumers. Good nutrition
practices in rural households will be promoted through campaigns and training; this will cover
consumption of nutritious foods from own production and promotion of healthy diets. RMTP will partner
with other projects in the country that promote food security and nutrition, as well as primary health care
and sanitation. The logframe has indicators to measure progress in nutrition security.
Rural youth
Young men and women are at the core of the project: educated youth will be trained as service providers
in all three sectors, and as master trainers in GGAP implementation; young microentrepreneurs will
receive larger loans to expand businesses and create wage employment; younger generations of the rural
population who are investing in agribusiness will be targeted for quick transfer of technologies.
Rural finance policy
PKSF is a renowned apex development finance institution that lends to more than 200 NGO-MFIs (partner
organizations). The project will expand PKSF’s portfolio of microenterprise loans to POs, which in turn will
lend to an additional 100,000 microenterprises. All participating POs are financially viable organizations
that will continue to offer financial services to microenterprises and other borrowers beyond the project
period. Finally, the project will engage in policy dialogue on rural finance issues.
IFAD environment and
climate change
strategy
The project promotes commercially viable solutions to specific environmental issues faced within the
selected value chains through appropriate technologies and proper production and processing practices.
Impact of climate change will be taken into consideration in the analysis of country-wide value chains,
promotion of business and livelihoods, and implementation of value chain subprojects.
While market demand will be the primary selection criterion for value chains, the project will promote several impact pathways to
improve food security and nutrition of small farmers. For food crops with nutrition improvement potential, food and nutrition
security will be improved through: (i) increased production of nutritious foods that meet dietary gaps; (ii) reduced post-harvest
loss and waste; (iii) increased consumption of these foods from own production; or (iv) increased consumption from local markets
due to the increased availability, affordability, quality and safety of these foods. For cash crops, improvements to food and
nutrition security will be generated by increased incomes and purchasing power. Nutrition campaigns and training on behavior
change communication will raise nutrition awareness and create demand for healthier food.
90.
Alignment with SDGs. The project aims to assist the Government to address major elements of those Sustainable Development
Goals (SDGs) that fall within IFAD's comparative advantage. In particular, it will tackle SDG 1 (end poverty in all its forms
everywhere), SDG 2 (zero hunger), SDG 3 (ensure healthy lives and promote well-being for all at all ages), SDG 5 (gender
equity), SDG 8 (promote inclusive and sustainable economic growth, employment and decent work for all), SDG 9 (industry,
innovation, infrastructure), and SDG 12 (responsible consumption and production).
91.
Alignment with national policy. The project's rationale is guided by the Government's Seventh Five Year Plan, which covers
2015/16 to 2019/20. In particular, it addresses two of the Plan's key themes: (i) GDP growth acceleration, employment generation
and rapid poverty reduction; and, (ii) inclusion with a view to empower every citizen to participate in and benefit from the
development process. It is aligned with Bangladesh' renewed commitment on nutrition, shown through the re-establishment of
the Bangladesh National Nutrition Council (BNNC) and the recent approval of the Second Bangladesh National Plan of Action for
Nutrition (NPAN2) 2016-2025. In addition, it is in line with the Agricultural and Rural Credit Policy and Programme 2018-2019 of
the central bank.
92.
Alignment with IFAD policy. The project rationale is anchored in IFAD's mandate of rural transformation, its Strategic
Framework 2016-2025, and the specific COSOP strategic objectives (SOs) of economic and social empowerment of
disadvantaged groups (SO1), as well as their market access improvement and integration into profitable value chains (SO2).
Alignment with IFAD policies is further detailed in Table 1.
Table 1: Alignment with IFAD Policies
93.
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Knowledge
management
The project has applied new guidance on best practices for logframes and results hierarchies, and will
have a dedicated M&E system as well as significant budget resources for knowledge management related
activities.
G. Costs, benefits and financing
a. Project costs
IFAD
IFAD
Grant
Co-
Financiers
PKSF
all
Private
sector,
NBFIs &
Pos.
Beneficiaries
Total
Total
Component
Amount %
Amount %
Amount
%
Amount %
Amount
%
Amount
%
Amount %
A. Value Chain
Development
Organization
363
5
0
0
1 016
13
498
7
5 808
76
0
0
7 685
100
Technical and
Business
service
2 071
20
0
0
2 307
22
691
7
4 646
44
877
8
10 592
100
Value chain
sub-project
implementation
10 862
72
0
0
4 243
28
0
0
5 808
0
0
0
7 685
100
Enterprise
strengthening
500
60
0
0
334
40
0
0
4 647
0
0
0
5 481
100
Policy Dialogue
600
60
0
0
400
40
0
0
5 808
0
0
0
7 685
100
Subtotal
14 397
41
0
0
8 300
24
1 189
3
10 454
30
877
3
35 216
100
B. Financial
Services
0
0
Micro-Finance
through PO
48 215
36
0
0
0
0
10 756
8
76 405
56
0
0
135 377
100
Commercial
Finance
10 000
50
0
0
0
0
0
0
10 000
50
0
0
20 000
100
Subtotal
58 215
38
0
0
0
0
10 756
7
86 405
56
0
0
155 377
100
Partnerships. RMTP will actively seek partnerships with RBAs, development partners and the private sector. In particular, the
project builds on research generated by WFP and FAO on nutrition, as both institutions have developed a substantial knowledge
base in this area. Synergies will be developed with FAO's food safety, livelihoods, marketing and extension activities.
Complementarity with other development initiatives will be ensured through the annual Bangladesh Development Forum, which
provides a platform for policy, investment coordination, and partnership fostering, and also through the relevant Local
Consultative Groups (Government and development partners). RMTP will furthermore explore partnerships with: (i) the private
sector, including FinTechs; (ii) agencies leading on GGAP and HACCP; and (iii) relevant organisations operating in the fields of
rural enterprise development, financial services and new technologies; and (iv) relevant line ministries.
94.
During implementation, there shall be substantial cooperation and learning between RMTP and other IFAD-financed projects,
particularly PACE. Agricultural value chain investments under PACE could receive additional support from RMTP when the
business case is convincing; the same applies for the PACE e-platform developed with Korean supplementary funding. For
extension services and productivity improvement, RMTP will seek partnerships with SACP and NATP2 (both implemented by
MoA). In due course, synergies with youth vocational training under PROVATi³ may be explored. Finally, practical experiences
from the IFAD-funded HILIP-CALIP project will be utilised during implementation. This project was able to establish effective
linkages at local level between the project, relevant Government departments such as DLS and DAE, as well as the Bangladesh
Forest Research Institute and World Fish.
95.
For nutrition, RMTP will collaborate with PKSF’s ENRICH and Ujjibito projects. Both projects work with ultra-poor families on food
security, nutrition, health care and income generating activities. At the PO level, synergies will be sought with other health and
nutrition programmes.
96.
The total project cost amounts to USD 200 million over a six-year implementation period. All costs are estimated based on
currently prevailing prices in Bangladesh. Project costs by component are presented in Table 2.
Table 2: Project Cost Summary (USD '000)
97.
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C. Capacity
Building of
Remittance
Earners
0
0
1 000
100
0
0
0
0
0
0
0
0
1 000
100
D. Institutional
Strengthening
and Project
management
0
0
PKSF's
Capacity
Building
1 961
100
0
0
0
0
0
0
0
0
0
0
1 961
100
POs Capacity
Building
335
86
0
0
0
0
55
14
0
0
0
0
390
100
Project
Management
5 092
84
0
0
0
0
964
16
0
0
0
0
6 055
100
Subtotal
7 388
88
0
0
0
0
1 019
12
0
0
0
0
8 407
100
Total
80 000
40
1 000
1
8 300
4
12 964
7
96 859
48
877
0
200 000
100
b. Project financing/co-financing strategy and plan
(US$ '000)
Local '000
Foreign
Local
Total
Percent
Foreign
Local
Total
Percent
IFAD
132
79 868
80 000
40.0
11 124
6 708 877
6 720 001
40.0
IFAD Grant
-
1 000
1 000
0.5
-
84 000
84 000
0.5
PKSF
-
12 039
12 039
6.0
-
1 011 243
1 011 243
6.0
Co-Financiers
-
8 300
8 300
4.1
-
697 199
697 199
4.1
Private Sector
-
4 646
4 646
2.3
-
390 269
390 269
2.3
POs
-
82 213
82 213
41.1
-
6 905 898
6 905 898
41.1
NBFI
-
10 000
10 000
5.0
-
840 000
840 000
5.0
Beneficiaries
-
877
877
0.4
-
73 664
73 664
0.4
 PKSF-Tax
-
925
925
0.5
11 124
16 788 876
16 800 000
100.0
Total
132
199 868
200 000
100.0
11 124
16 788 876
16 800 000
100.0
c. Disbursement
The project financing plan is presented in Table 3. It will be financed an IFAD loan of USD 80.0 million, an IFAD grant of USD
1.0 million, PKSF contribution of USD 13.0 million, cofinancing of USD 8.3 million, private sector contribution of USD 4.6 million,
POs contribution of USD 82.2 million, NBFIs investment of USD 10.0 million, and beneficiary equity of USD 0.9 million. A total of
USD 300.000 has been identified as IFAD climate finance. 
Table 3: Project Financing Plan
98.
Disbursement Profile
99.
RMTP´s withdrawal of funds and its use of loan proceeds are governed by the IFAD’s Loan Disbursement Handbook (LDH) and
Financing Agreement between IFAD and the Bangladesh Government. Applicable procedures of disbursement, financial
reporting and maintenance of appropriate project records will be described in details in a Letter to the Borrower subsequently
after signing the Financing Agreement between IFAD and the Bangladesh Government.
100.
After the Financing Agreement for RMTP enters into force, PKSF will sign a subsidiary Loan and Grant agreement in which the
Government of Bangladesh will on-lend a portion from the proceeds of the Loan as a subsidiary loan to PKSF. The remaining
portion of the loan will be provided in the form of a Grant to PKSF and for the Components of: Value Chain Enhancement and
Institutional Strengthening/Project Management.
101.
An online guided overview of IFAD financial management practices and procedures is available for project staff[1]. Project staff is
encouraged to avail this training to ensure an efficient disbursement and an appropriate fiduciary control.
102.
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1. Advance withdrawal
2. Direct payment
3. Reimbursement
Three standard disbursement procedures are available for RMTP withdrawal of financing:
103.
Advance withdrawal
104.
This modality is used to advance and/or replenish funds to a bank account as designated by the borrower. The Fund places a
limit on the amount to be advanced and/or replenished. Relevant details on the modality – which is project specific – are to be
agreed between the borrower and the Fund, and be detailed in the LTB.
105.
The ceiling amount will be a reasonable limit, sufficient enough to cover average projected eligible expenditures of RMTP for a
period of six months. The ceiling amount may be set depending on the level of expenditures as to be incurred based on (i) the
approved AWPB; and (ii) the project’s specific reporting of actual and projected expenditures foreseen within that AWPB period.
The Fund will ascertain and certify clearance of the figure to be advanced, which may vary during the implementation of the
project, depending on the projected expenditure requirements.
106.
Should it be found necessary to revisit the ceiling figure considered a reasonable limit at any time during project implementation,
this shall be subject to prior agreement between the borrower and the Fund, with communication by IFAD to the borrower
through modification of the LTB.
107.
The advance withdrawal is foreseen to be the principal method to be used for the disbursement of RMTP. The main conditions
precedent to withdrawal the initial advance from the Loan to the Designated Account (DA) of the Project are: (i) evidence that the
DA has been opened; (ii) authenticated specimen signatures of each authorised person that will operate the DA; and (iii)
sufficient evidence of the authority of the persons who will sign the withdrawal applications on behalf of the PKSF. The Project
Coordinator (PC) will ensure a proper cash flow from the Loan Account to the DA to ensure the implementation of the project is
not hindered. RMTP will use the IFAD Client Portal (ICP) for the submission of withdrawal applications.
108.
Subject to the recommendation of the first IFAD supervision mission, the project is expected to enter into the Straight Through
Processing (STP) to justify advances and seek replenishments. This facility was incorporated in the last stage of PACE.
109.
Supporting documentation and records of the expenditures claimed under the STP facility should be maintained and be readily
available for review by IFAD's supervision missions or any other review team assigned by IFAD and external auditors. The PMU
will be responsible to ensure the SOEs are elaborated in accordance with IFAD requirements.
110.
Direct payments
111.
This modality is used for eligible project expenditures to be paid directly by IFAD as per the request of the PMU, generally for
large contracts, to suppliers, contractors, consultants or third parties, as authorized by the borrower.
112.
This procedure is generally suitable for payment of large civil works, consultant fees (when these are of substantial), importation
of goods for which a letter of credit is not practical, and when exchange rate control regulations are present in the country. The
minimum value threshold for direct payments is specified in the LTB.
113.
Under this procedure, RMTP requests the fund to pay the supplier directly on its behalf from the loan account in IFAD. RMTP
must indicate in the WA the date on which payment becomes due to the supplier. The WA will need to be accompanied by a
signed copy of the contract and relevant supporting documents evidencing the eligibility of the expenditure.
114.
Reimbursement
115.
This is applicable when eligible project expenditures, reimbursable under the financing, have been pre-financed by the project or
incurred (that is, the suppliers of goods, works, consulting or other services has already been paid by the project from its own
funds). This reimbursement procedure is generally suitable for payment of: (i) local currency costs; (ii) petty cash or small
purchases; (iii) small civil works payments; and (iv) the borrower’s provision of financial resources to the project when, for
example, requests for advance replenishment to the designated account have not been submitted promptly, thus enabling the
project to continue uninterrupted implementation.
116.
Usually, IFAD will reimburse the project in the currency of payment as affected by the borrower. Nevertheless, the borrower may
request reimbursement to be made in the currency of the Financing Agreement. However, the amount to be paid will be
determined by the Fund, using the rate of exchange determined by IFAD Treasury. This methodology is used as a safeguarding
principle.
117.
Requests for reimbursement are to be submitted to the Fund within ninety calendar days from the date of payment by the project.
Should special circumstances prevail for the loan, these will be described in the agreed-on, project-specific LTB.
118.
Flow of Funds.
119.
RMTP shall maintain and operate two Designated Accounts (DAs) denominated in US dollars in the Bank of Bangladesh open
under the SAFE modality, to receive the loan and grant proceeds. The DAs are administered following imprest arrangements, in
which an initial amount of the loan and grant is advanced and then replenished periodically based on justified expenditures. The
maximum advances provided by IFAD to the DAs are established as an Authorized Allocation (AA) in the LTB.
120.
An additional DA in US dollars shall be maintained by the Ministry of Expatriates' Welfare and Overseas Employment
(MoEWOE) following the same arrangements to receive funds for the Sub-component 2.3. Optimal utilisation of remittances.
121.
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RMTP shall maintain two Project Accounts (PA) in Bangladesh Taka (BDT) in a commercial bank for day-to-day project
management operations and activities. One Project Account for the loan proceeds and the other one for the grant proceeds. An
additional Project Account following the same arrangements shall be maintained by MoEWOE.
122.
Transfers to POs, NBFIs and VC development projects will be transferred from the Project Accounts in local currency following
similar imprest arrangements for quarterly replenishment.
123.
Transfers for Component 2: Financial Services to the POs and NBFIs from the PAs of RMTP will be governed by specific
contracts in which quarterly financial reporting will be established.
124.
Transfers for Component 1: Value Chain Enhancement to the POs will be governed by Approved sub-projects under imprest
arrangements for disbursement.
125.
Both funds will be disbursed to a specific bank account in the POs and NBFIs, but two different account ledgers in each case will
be maintained.
126.
Specific details for enabling further transfer of advance resources are described in the LDH. Towards project completion, the
Fund initiates procedures and takes steps to ensure recovery of advances provided.
127.
PKSF contribution
128.
PKSF counterpart to RMTP is for the Subcomponent 2.1 Financial Services through Partner Organizations (POs) and taxes
and duties.
129.
PKSF contribution will be incorporated in the Annual Work Plan and Budget (AWPB) cycle for all PO’s and NBFIs and will be
consolidated and reported by the PMU level.
130.
Non-Banking Financing Institutions and Partner Organizations contribution
131.
The PMU will establish appropriate procedures with POs and NBFIs to ensure that the matching contribution of its part is done in
a timely manner.
132.
Private sector contribution
133.
The private sector contribution will be contingent upon the production and market linkages that are facilitated by the POs. No
cash contribution to the project is foreseen by the private sector. Their contributions represent an estimate in the form of training
to beneficiaries, advisory services, etc. The PMU will ensure that the private sector contribution is accounted and tracked
properly to ensure its reporting by the PMU level.
134.
Beneficiaries contribution
135.
Beneficiary contributions for RMTP are in kind. The PMU will ensure that this counterpart is tracked and quantified at fair market
value. The PMU will ensure that the beneficiaries’ contribution is accounted and tracked properly to ensure its reporting by the
PMU level.
136.
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d. Summary of benefits and economic analysis
[1]https://www.ifad.org/web/knowledge/publication/asset/39631355
137.
Beneficiaries and benefits: The project will directly benefit an estimated 445,000 households, including small farmers, micro-
entrepreneurs and other value chain participants (input suppliers, traders, service providers). Of these, 100,000 households will
receive several rounds of microfinance as well as value chain services, while 345,000 households will receive value chain
services. Considering an average household size of 4.5, the project will benefit 2 million people within a period of six years.
138.
The project will generate multiple social, nutritional, financial, economic and institutional benefits. A preliminary financial analysis
indicates that all selected value chains are financially viable. Aromatic rice, representing high value cereals, has Return on
Investment (ROI) of 51%; banana representing fruits 30%; potato representing vegetables 38%; technology-based aquaculture
67%; dairy 20%; red meat 40%; poultry meat 29%; and poultry eggs 37%.
139.
RMTP will generate significant positive effects on rural household incomes, food security and nutrition. Other benefits include
improved advisory services; better food safety; improved animal health (dairy, beef cattle, poultry and fisheries); improved market
access, and growth of rural businesses. RMTP will also generate employment opportunities for women and men, particularly the
youth through their involvement of the value chain activities and related backward and forward linkages.
140.
Economic and financial analysis: The Financial Internal Rate of Return (FIRR) is 35%. The net benefit flow was discounted at
10%, which is the current average interest rate, to ascertain the break-even point of the project cash flows. The Economic
Internal Rate of Return (EIRR) for the 20-years period is 30% with benefit cost ratio of 1.29. The project earns a Net Present
Value (NPV) of USD 275 million for the 20-year period with 6.2% discount rate.
141.
Sensitivity analyses were carried out to assess whether the project is economically robust in light of potential risks in terms of
increased cost of production of enterprise, decreased benefits or delay in realising benefits. These three risk factors represent
most of the potential adverse climatic conditions (heavy rains, floods, cyclones) and market failures. Both cost increase by 10%
and 20% and benefit decrease by 10% and 20% yield EIRRs that are higher than the opportunity cost of capital and therefore
indicate that the enterprise models are indeed robust. However, the production models show the highest drop of EIRR in the
scenario of 20% benefits decrease and one-year delay in generating benefits. As such, PKSF will have to closely monitor the
timeframes and quantities of benefit-generation during implementation.
142.
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e. Exit Strategy and Sustainability
3. Risks
H. Project risks and mitigation measures
Impact
Likelihood
Risk
Assessment
Mitigation Measures
Organization and Staffing
Adequate FM staff in PMU and POs/NBFIs.
Low capacity of the FM POs/NBFIs FM staff.
Medium
Medium
Medium
RMTP will reinforce its FM capacity
through hiring adequate FM staff at
PMU level.
Periodic trainings will enhance the
capacity of the POs and NBFIs FM
staff.
Budgeting
AWPB process suffers delays and
inconsistencies that affect the monitoring and
implementation of activities.
Medium
Low
Medium
Budgets will be developed by each
implementing agency using the
agreed work planning templates and
as defined in the Financial
Management Manual.
The project cost tables will serve as
a reference for the preparation of
AWPBs.
The PMU will need to provide their
own annual work plan supporting
budgets. These will be used to
develop the cash flow of the project.
PKSF’s POs are institutionally and financially viable organizations that offer multiple loan and savings products. Analysis of PO
financial statement suggest that the POs are financially sustainable and well positioned to continue offering financial services
beyond the project period.
143.
The underlying business relations to be fostered between producers markets are key to the sustainability of the project. It is
expected that the various technologies, business services, production techniques, and marketing linkages will be adopted and
sustained beyond the project period. Introduction of GGAP and HACCP across commodity value chains will allow for improved
health and sustainable agricultural practices. Likewise, introduction of bio agents for pest control through adoption of IPM and
introduction of new crop varieties tolerant to climate change, pest pressure, increased nutritional values and high productivity will
also contribute to sustainable agriculture and food security. Promotion of high quality compost, motorized deep placement of
urea/DAP and compost/DAP briquettes for aromatic rice will reduce urea use by 30%, contribute to reduction of greenhouse
gasses by 30% and increase yields by 15%. Increased use of compost for all crops will contribute to restoring organic matter in
the soil. The use of compost will improve water quality infiltration to the aquifer, increase soil water holding capacity, reduce soil
temperature, reduce the negative effect of wind on soil moisture, improve soil fertility and increase carbon sequestration.
144.
Introduction of new breeds of livestock/poultry, both exotic types and natural by selection, improved feeding and watering and
health service will contribute to sustainability. Introduction of on-land recycling aquaculture systems will reduce pressure on the
natural resource. Selection of brooders for both fish and crustaceans will increase productivity for the same quantity inputs.
Training of farm enterprises, introduction of GGAP, and business linkages to secure markets will increasingly make
microenterprises attractive clients for financial institutions. Combined with commercial approaches for provision of services, and
institutional strengthening, will ensure a high likelihood of long-term sustainability.
145.
The Integrated Risk Framework (IRF) is included in annex 9 and the fiduciary risks are provided in detail below. Identified risks
are addressed in the project design through mitigation measures.  The overall risk profile is medium and the combined impact of
individual risks is medium as well.
146.
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Funds flow and disbursement arrangements
Possible delays in the submission of financial
reports to the PMU by PO’s.
High
Low
High
The PMU will ensure that the fund
flow of the project (from PMU to PO)
is managed under imprest
arrangements. An adequate
threshold will be established for POs
for a quarterly replenishment to their
bank accounts. The reporting line
will be established under the
premise of no delays in the
implementation of activities. The FM
staff of the PMU will carry out review
of the PO’s to guarantee the quality
of the financial reporting.
In this regard each PMU FM staff will
visit to one PO periodically, thus
most of the POs will be visited once
in a year by PMU FM staff.
Internal Controls
Adequacy of internal controls for the type of
activities to be carried out by the project
Medium
Low
Low
RMTP will follow the Finance
Manual of PKSF.
An addendum will be prepared to
specify matters related to RMTP.
Accounting             
RMTP will apply the International Financial
Reporting Standards (IFRS).
PO’s: There are inconsistency in regard to the
basis of accounting applied by the PO’s.
Some PO applies accrual basis of accounting
for whole organisation and some are not.
Medium
Medium
Medium
RMTP will apply IFRS.
The accounting will be carried out on
a comprehensive and standardized
FM system at the PMU level, which
will consolidate the reports provided
by the PO.
Exchange rate fluctuation
Medium
Medium
Medium
If Possible, to minimize the impact of
foreign exchange fluctuation IFAD
will provide the loan in USD. The
implementation will take place in
BDT.
Financial Reporting and Monitoring
20/25

IFAD funded projects implemented by PKSF
produce Financial Reports consistently.
The financial reporting is not seen as a tool
for decision making. The lack of appropriate
financial information reduces its utility for
monitoring implementation of activities.
Low
Low
Low
RMTP will follows IFRS.
RTMP will prepare annual financial
statements and semiannual interim
financial statements.
The PMU FM staff will conduct
periodic visits to the POs to perform
spot verifications to the SoE’s
submitted by Pos and NBFIs to
confirm with Books of Accounts,
compliance and cost efficiency etc.
Monitoring will be strengthen to
verify the eligibility of expenditure
incurred by POs.
Internal Audit
The internal audit function is well developed
in PKSF. However, the diversity of project
warrants close monitoring through effective
internal audit.
Low
Low
Low
PKSF internal audit unit would carry
out the complete review of financial
activities (including those of the
POs) at least once per year. A copy
of the internal audit plan and audit
report shall be submitted to the IFAD
for each audit period.
By the second year, a detailed
compliance & risk review will be
carried out by the Internal audit unit
of PKSF following the international
practices.
External Audit
RMTP audit performed by a chartered
accountant’s firm
PO audit by chartered accountants’ firm: The
quality of audits needs to improve further.
Medium
Medium
Medium
RMTP’s annual financial statements
will be continued to be audited by an
independent Chartered Accountancy
firm in accordance with International
Standards on Auditing (ISA) and
IFAD Handbook for Financial
Reporting and Auditing.
This is also in alignment with what is
practiced for PACE
The ToRs for the auditors will be in
accordance with IFAD Handbook for
Financial Reporting and Auditing.
Similar arrangement will be
incorporated for the PO external
audits.
Overall Project Fiduciary Risk
Medium
I. Environment and Social category
The environmental and social category for the project is B. The potential negative impacts are those linked to micro-enterprises
and larger agribusinesses, and are small and site-specific. The primary environmental risk relates to the cumulative/aggregated
impact of various micro-enterprises and small agribusinesses in a cluster, thereby posing a considerable risk in terms of waste
streams and pollution. This risk can however be managed using mitigation measures already identified and accessible to
implementers and target groups. The project will integrate activities to proactively address these issues, such as introduction of
climate-smart technologies and environmentally sustainable practices (balanced fertilizer use, integrated pest management, etc.).
Social risks are minimal, with project interventions aimed at the inclusion of women and the youth in value chains. An
147.
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J. Climate Risk classification
4. Implementation
K. Organizational Framework
a. Project management and coordination
Environmental and Social Management Framework (ESMF) has been developed for the project.
The climate risk category for this project is rated as Moderate, based on the proposed selection of value chains and target areas.
Although the project area is highly vulnerable to the impact of climate change, the project will be well-positioned to leverage
several ongoing climate change-related initiatives in the area. Given the high number of studies already carried out in
Bangladesh, a basic climate risk analysis has been carried out for the value chains to be supported as part of the ESMF. The
ESMF incorporates and refers to an inventory of proven measures to adapt to climate change and reduce greenhouse gas
emissions that can be promoted. This may include the introduction of flood and drought tolerant varieties, mechanisation enabling
cultivation on ridges, aquaculture in the valleys and land-based vertical recycling production systems for mud crab. Emission
reduction interventions will be especially important for the meat (beef, poultry and goat), dairy and rice value chains.
148.
RMTP will be managed by PKSF, an apex development organisation with an independent Board of Directors. PKSF works
through 200 licensed microfinance institutions (known as partner organisations or POs) which have a combined 9,500 branches
across the country. Through this network, PKSF is currently providing inclusive finance and other services to 13 million poor
households. PKSF's aggregate assets amount to USD 707 million, including its active loan portfolio which currently stands at
USD 178 million, with a recovery rate exceeding 99%. PKSF is supervised by the Financial Institutions Division of the Ministry of
Finance.
149.
IFAD has financed 4 projects implemented by PKSF, of which three are completed and one is ongoing. All projects financed have
been rated as highly successful. The projects are: (i) the USD 20 million Microfinance and Technical Support Project (MFTSP)
which covered 2003-10; (ii) the USD 22 million Microfinance for Marginal and Small Farmers Project which covered 2005-11; (iii)
the USD 58 million Finance for Enterprise Development and Employment Creation Project (FEDEC) which covered 2008-14; and
(iv) the USD 93 million PACE which is currently ongoing.
150.
The IFAD loan for RMTP will be passed on by MoF to PKSF in the form of: (i) a loan for the financial services component
(component 2, with the exception of subcomponent 2.3); (ii) a grant for the value chain component (component 1); and, (iii) a
grant for the institutional strengthening and project management component (component 3). MoEWOE will directly receive grant
funding from MoF for implementing subcomponent 2.3.
151.
The project will be outside the Annual Development Plan (ADP) and therefore does not require any Development Project Pro-
forma (DPP). PKSF will sign a Subsidiary Loan and Grant Agreement (SLGA) with MoF to receive loan and grants and to
implement the project activities as per the final project design report. The resources under the financial services component will
be onlent through individual Subsidiary Financing Agreements. The MoF will review and clear AWPBs before submission to IFAD
for concurrence. To monitor performance and progress towards objectives, IFAD will undertake annual supervision missions.
152.
The management of value chain development activities has evolved under PACE and other two IFAD-funded projects, and a
number of similar projects implemented by PKSF. The PDR and PIM (Annex 8) further explain the management system,
emphasis and various new activities incorporated in the value chain component. The management system will be further
strengthened by capacity building of PKSF and POs.
153.
Under PACE and other similar projects, PKSF strengthened it capability to manage value chain development activities. The PIM
will further articulate the RMTP management system. PKSF will: (i) continue to review and evaluate value chain subproject
proposals through its Value Chain Evaluation Committee; (ii) organise and fund the capacity building of its own staff as well as
that of POs and value chain actors; (iii) identify potential value chains to invest in and outsource commodity/sub-sector/market
studies; (iv) provide clear guidance to POs on preparation and management of value chain subprojects; (v) contribute to the
preparation of value chain proposals by POs by providing guidance and sharing relevant sector and marketing studies; (vi) share
experiences with other value chain development operations and rationalize common activities; (vii) engage in policy advocacy for
necessary changes in rules, laws, and standards; and, (viii) identify suitable technical assistance providers or individual experts
to provide capacity building to PKSF staff, POs, and value chain actors and associations.
154.
POs will: (i) undertake or outsource an initial mapping of key actors in each selected value chain (producers, service providers,
input suppliers, traders) as well as marketing channels and relevant associations; (ii) prepare proposals for value chain
subprojects; (iii) provide and manage microenterprise credit and other financial products for producers and entrepreneurs; (iv)
guide the upgrading of the selected value chains; (v) ensure the availability and linkages of qualified providers of services to value
chain actors; (vi) advise producers on input supply and market access; (vii) ensure that all services to producers are supplied by
the private sector (where feasible) on commercial basis; and, (vii) monitor, evaluate and report on progress, and analyze issues
and lessons.
155.
For the purposes of the project, PKSF will establish a Project Management Unit, integrated within its structure, for overall project
management purposes. The PMU will be headed by a Project Coordinator appointed from PKSF's pool of senior officials. PMU
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b. Financial Management, Procurement and Governance
1. Financial management (FM). The inherent FM risk for RMTP is considered to be medium due to the diversified and
decentralised set of activities involving multiple POs and NBFIs. This assessment takes into account the overall environment
surrounding FM, the existing emphasis on improving FM practices, and the experience gained by PKSF within IFAD’s
portfolio.
2. PKSF has an effective FM system managed by a strong team of accountants and finance professionals. It consistently applies
the International Financial Reporting Standards (IFRS) across its operations. Partner POs are registered and supervised by
the Micro Credit Regulatory Authority. POs are governed by General Bodies and Governing Bodies/Executive Committees in
order to ensure good governance and transparency. It is evident that there are significant improvements in PO governance
due to regular interventions of PKSF.
3. Some POs and NBFIs apply the accrual basis of accounting, while others utilise the cash basis. During implementation, it is
expected that all POs and NBFIs gradually move to an accrual-based system for the preparation of financial reports. POs are
audited annually by independent audit firms appointed by PKSF. These audits cover only microfinance operations. For RMTP,
it is agreed that the same independent auditors will also audit value chain activities.
4. The internal control arrangements for RMTP will consider: (i) appointment of qualified personnel with clear responsibilities and
adequate segregation of duties; (b) establishment of an adequate financial records management system which has a complete
audit trail; (c) set up of physical safeguards; (d) independent checks, with procedures subject to random independent reviews.
5. There is an adequately staffed Internal Audit Unit (IAU) in PKSF. The IAU prepares an annual plan for internal audit reviews
within PKSF and POs. These audits mainly focus on compliance review and checking of payment vouchers prior to issuing
payments to suppliers/vendors. There may be room for the inclusion of risk review in the internal audit process; this will be
assessed during implementation.
6. RMTP accounts will be audited annually by the private firm that audits PKSF in accordance with International Standards on
Auditing (ISA) and in compliance with IFAD's Handbook for Financial Reporting and Auditing. The audited project financial
statements together with the auditor’s opinion will be submitted to IFAD in English within 6 months of the end of the fiscal
year.
7. Procurement. PKSF has effective governance and internal control mechanisms for procurement and contract management. It
has experience in handling procurement under IFAD financing. Procurement managed by POs is moderately satisfactory, with
continuous follow up by PKSF.
8. Procurement under the project will be undertaken in accordance with IFAD's Procurement Guidelines and Procurement
Handbook. Specific procurement arrangements, procedures and thresholds will be elaborated in the PIM, aligned with PKSF
procurement policies as applicable. Controls will be ensured, and risk mitigation measures will be strengthened. Procurement
under RMTP will be undertaken by the Administration Department of PKSF, which currently manages all procurement for the
organisation. All project-related procurement by POs will also be undertaken in accordance with IFAD guidelines. PKSF will
assist POs to develop/upgrade their procurement policies and processes as required.
9. Governance. PKSF was established in 1990 by the Government. Unlike Government agencies, it is an independent
organization which operates according to its memorandum and articles of association and rules and regulations introduced by
its Governing Body. It has a three-tier governance system: a General Body (currently 15 members); a Governing Body (7
members) chaired by a Chairperson; and Management headed by the Managing Director (CEO). The Chairperson is
appointed by the Government, while the Managing Director is recruited by the Governing Body through a competitive process.
10. Over the years, PKSF has established management systems for programmes, finance, human resources and other elements.
These systems are perceived to be transparent by partners such as IFAD, WB, ADB, DFID, SDC and EU. PKSF has also
helped POs to develop good management and control systems. Indeed, PKSF is able to attract substantial development
funding due to its reputation of good governance, transparent management, and successful operations.
staff will consist of three officers seconded from PKSF's core team and nineteen recruited from the market. The PMU will work
with PKSF's Loan Operations Division to implement the financial services programme through POs as per established processes
and norms. This Division will assist with the selection of qualified NBFIs for financing larger enterprises and agribusinesses. It will
work with POs and selected service providers for the implementation of the value chain component. PKSF’s support divisions
such as Audit, Administration, Agriculture, Human Resources, Accounts and Finance, Livestock, Research, Training, M&E, MIS
and IT will provide relevant services to the project. The TORs of all project staff will include attention to nutrition and gender-
sensitive value chains.
RMTP will continue to invest in PKSF skills development through training on topics such as business management, financial
analysis, value chain analysis, project management, M&E system design, & IT project management. This will be supported by
technical assistance and exchange visits, both in-country and overseas.
157.
Governance. PKSF was established in 1990 by the Government. Unlike Government agencies, it is an independent organization
which operates according to its memorandum and articles of association and rules and regulations introduced by its Governing
Body. It has a three-tier governance system: a General Body (currently 15 members); a Governing Body (7 members) chaired by
a Chairperson; and Management headed by the Managing Director (CEO). The Chairperson is appointed by the Government,
while the Managing Director is recruited by the Governing Body through a competitive process.
158.
Over the years, PKSF has established management systems for programmes, finance, human resources and other elements.
These systems are perceived to be transparent by partners such as IFAD, WB, ADB, DFID, SDC and EU. PKSF has also helped
POs to develop good management and control systems. Indeed, PKSF is able to attract substantial development funding due to
its reputation of good governance, transparent management, and successful operations.
159.
Good governance under RMTP aims to ensure transparency, accountability in use of resources, and participation of stakeholders
in design and delivery of services. This encompasses all aspects of project management: project activities; annual planning;
institutional arrangements; implementation procedures; financial management and procurement; internal and external audit;
supervision and compliance; and M&E. Key aspects of good governance that have been identified and considered during RMTP
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inclusive targeting of microentrepreneurs, small/marginal farmers, women, youth, and disadvantaged households;
participation of all stakeholders in design and execution;
transparent selection of POs for microfinance and value chain development; supervision and M&E of POs;
compliant FM, accounting, procurement and recruitment systems; rigorous internal and external audit;
intensive IFAD supervision and compliance control, including spot checks by regular supervision missions, review of
FM and procurement, and technical audits if needed;
regular outcome surveys that provide information on how well project outputs are being delivered, in terms of both
coverage and quality;
reporting of results to Government and other stakeholders, with key information and reports published as part of
knowledge management.
L. Planning, M&E, Learning, KM and Communication
a. Planning, M&E, Learning, Knowledge Management and Communication
b. Innovation and scaling up
M. Implementation plans
a. Implementation readiness and start-up plans.
b. Supervision, Mid-term Review and Completion plans.
design are as follows:
Planning and M&E: The PMU/PKSF will be responsible for preparing the annual work plan and budget for RMTP, and for
obtaining approval from FID and IFAD. The plan will include activity plan along with targets and expenditure plan and should
reflect overall project targets and activities. IFAD supervision missions and mid-term review mission will offer opportunities for
review of progress and assessment of effectiveness of the project.
161.
Monitoring and evaluation: An effective M&E system will be developed to measure indicators included in the log frame. It will be
part of a larger MIS system which will serve as an information and knowledge sharing platform. The M&E system will be utilised
as a management tool and will include assessment of progress and compliance, identification of constraints and proposed
remedial actions. All data will be disaggregated by gender, age, and geographical location. Participatory M&E including
qualitative surveys will be undertaken on a regular basis. A baseline survey will be undertaken at start up, and outcome surveys
will be carried annually. The key production and financial indicators of small farmers and microenterprises will be monitored
annually to assess the emerging results of the project.
162.
Knowledge Management and Learning: The project's KM activities will support the effective flow of relevant information among
project staff, beneficiaries and other stakeholders. A comprehensive KM action plan will be developed in the early stages of
implementation. Output, outcome and impact data generated by the M&E system will inform case studies, briefs and reports.
These will be used for policy dialogue, peer-learning, and potential scaling-up. KM products will be communicated through
multiple sources including blogs, written publications, video and social media.
163.
Website: The project will have a website to share reports, impact studies, case studies, training materials, videos and application
technologies. It will discourage printing of reports and other documents. POs will be encouraged to follow the same, and
communications with beneficiaries will be via mobile phones.
164.
RMTP will undertake a number of innovative activities: (i) introduction of HACCP and GGAP; (ii) channeling of funds through
NBFIs; and (iii) introducing distributed digital ledger technology (blockchain), crowdfunding and e-commerce.
165.
Start-up readiness: PKSF has established systems, policies, procedures and skilled managers and staff. The project will not
require revision of existing policies or procedures. Similarly, the methodology for value chain activities has been developed under
PACE and will be strengthened and applied under RMTP. PKSF and POs will be ready to commence implementation upon
signature of the Financing Agreement.
166.
Start-up activities: PKSF will perform the following start up activities: (i) second key PKSF officials to the project ahead of time;
(ii) recruit project staff ahead of project start up to jump-start project activities and provide time for training of new staff members;
(iii) invite POs to submit proposals in the very early stages of implementation; (iv) organize the start up workshop involving all
potential POs to explain the project, particularly Component 1; (v) complete the feasibility studies on crowdfunding and
blockchain ahead of start up; (vi) complete procurement procedures for the carrying out of the baseline survey, and launch the
survey as soon as project funds are available.
167.
IFAD will conduct regular supervision and implementation support missions as per standard procedures. These missions will
review project performance, progress towards achievement of objectives, and compliance with fiduciary requirements.
168.
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Footnotes
1]/       The design team consisted of Mr Dewan A. H. Alamgir (team leader), Mr Jens Kristensen (agribusiness specialist), Mr Anura
Herath (economist), Mr James Garrett (nutrition specialist), Mr Prasun Kumar Das (agricultural finance / secretary general, APRACA),
Ms Krajai Chowdhury (gender and targeting specialist), and Mr Mahmud Hossain (financial management specialist). It was supported
by Mr Michael Hamp (lead regional technical specialist, rural finance, markets and enterprises), Ms Sherina Tabassum (country
programme officer), Ms Christa Ketting (programme officer), Mr Alvaro Fernandez (finance officer), Mr Nabil Rahaman
(implementation support specialist) and Mr Omer Zafar (country director).
[2]/           Formerly called the Rural Enterprise Transformation Project (RETP).
[3]/          A broad definition of 'private sector' is applied under RMTP. This includes farmers, producers' groups, informal/formal
microenterprises, service providers, input suppliers, traders, business associations, informal and formal businesses, processors,
transporters, domestic marketers, and exporters.
25/25

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex 1: Logframe
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

Rural Microenterprise Transformation Project
Logical Framework
Results Hierarchy
Indicators
Means of Verification
Assumptions
Name
Baseline
Mid-
Term
End
Target
Source
Frequency
Responsibility
Outreach 
Direct beneficiaries receiving project services
1 Persons receiving services promoted or supported
by the project
implementing partners' records
and project records
annually
PMU
Females
111250
222500
Males
111250
222500
Young
10
10
1.a Corresponding number of households reached
implementing partners' records
and project records
annually
PMU
Households
180000
445000
1.b Estimated corresponding total number of
households members
implementing partners' records
and project records
annually
PMU
Household
members
810000
2002500
Project Goal 
To increase the income, food security and nutrition
of farmers across selected value chains.
70% of project supported households increase
income by >30%.
surveys of households,
qualitative assessment of
participating HH and quantitative
assessment of micro-
enterprises.
at baseline,
mid-term
and
completion.
PMU
• Economy
maintains or
increases growth
rates • Terms of
trade for rural
communities shall
not deteriorate •
Price inflation for
staple food remains
below 10% • Rural
and peri-urban
infrastructure
available
Households.
30
70
Beneficiaries reporting improved food quality in their
diet.
surveys of households,
qualitative (PRA) assessment of
participating HHs and
quantitative assessment
(profitability analysis) of micro-
enterprises
at baseline,
mid-term
and
completion.
PMU
People.
15
30
1/6

Development Objective 
The sustainable growth of selected rural commodity
value chains with comparative advantage, market
demand, growth potential, and backward linkages to
small farmers and micro-entrepreneurs.
1.2.4 Households reporting an increase in production
impact surveys of households,
qualitative (PRA) assessment of
participating HHs and
quantitative assessment
(profitability analysis) of micro-
enterprises
at baseline,
mid- term
and
completion
PMU
• Government
maintains favorite
policies for small
businesses •
Government
continues to support
micro-finance
programs and NGO
activities • Absence
of political unrest
that could adversely
affects business and
economic growth
Households
75000
150000
% increase in sales of microenterprises in the value
chains
-Quantitative assessment of
production, sales, and
profitability of randomly selected
sample of microenterprises.
Year to
year
PMU
% increase in sales
15
30
% increase in profit of microenterprises in the value
chains
-Quantitative assessment of
production, sales, and
profitability of randomly selected
sample of microenterprises.
Year to
year
PMU
% increase in.profit.
10
20
Results Hierarchy
Indicators
Means of Verification
Assumptions
Name
Baseline
Mid-
Term
End
Target
Source
Frequency
Responsibility
2/6

Outcome 
1. Beneficiaries adopt improved productions
methods and establish sustainable market linkages.
1.2.2 Households reporting adoption of
new/improved inputs, technologies or practices
impact surveys of households,
qualitative (PRA) assessment of
participating HHs and
quantitative assessment
(profitability analysis) of micro-
enterprises
at baseline,
mid- term
and
completion
PMU
• PKSF and POs
successfully
establish
collaborative
business
arrangements
between enterprises
and mainstream
businesses • Private
business companies
are interested in
sourcing products
from micro-
enterprises and
willing to engage in
partnership in the
selected value
chains • POs
establish separate
non-financial
services units and
enhance capacity to
manage value chain
projects PKSF and
POs successful
identify technologies
and products for
small producers
within value chain
subprojects and
outside
Households
200000
400000
2.2.3 Rural producers’ organizations engaged in
formal partnerships/agreements or contracts with
public or private entities
impact surveys of households,
qualitative (PRA) assessment of
participating HHs and
quantitative assessment
(profitability analysis) of micro-
enterprises
at baseline,
mid- term
and
completion
PMU
Number of POs
500
1500
Output 
1.1. Organization.
2.1.4 Supported rural producers that are members of
a rural producers' organization
implementing partners' records
and project records.
quarterly
PMU
Beneficiaries are
willing to participate
in producer groups.
Females
111250
222500
Males
111250
222500
1.1.8 Households provided with targeted support to
improve their nutrition
implementing partners' records
and project records.
quarterly
PMU
Results Hierarchy
Indicators
Means of Verification
Assumptions
Name
Baseline
Mid-
Term
End
Target
Source
Frequency
Responsibility
3/6

Households
222500
445000
Output 
1.2. Technical and business services.
Training days provided to farmers on GLOBAL GAP
and HACCP.
implementing partners' records
and project records
quarterly
PMU
• Targeted
beneficiaries are
motivated to provide
extension services.
Days
2.1.2 Persons trained in income-generating activities
or business management
implementing partners' records
and project records.
quarterly
PMU
Females
100
500
Males
2000
5500
Young
1875
3750
Output 
1.3 Value chain integration.
1.1.4 Persons trained in production practices and/or
technologies
implementing partners' records
and project records
quarterly
PMU
• PKSF enhance
overall capacity to
manage value chain
projects, supervise
POs in these areas
Women trained in
crop
40000
80000
Men trained in crop
40000
80000
Men trained in
livestock
20000
40000
Women trained in
livestock
20000
40000
Men trained in
fishery
3000
6000
Women trained in
fishery
3000
6000
Output 
1.4 Enterprise Strengthening.
2.1.1 Rural enterprises accessing business
development services
implementing partners' records
and project records
quarterly
PMU
• PKSF and PO
have disposition
over adequate
human resources to
implement these
activities.
Rural enterprises
300
550
Results Hierarchy
Indicators
Means of Verification
Assumptions
Name
Baseline
Mid-
Term
End
Target
Source
Frequency
Responsibility
4/6

Output 
1.5 Policy dialogue.
Policy 1 Policy-relevant knowledge products
completed
implementing partners' records
and project records
mid-term
and
completion
PMU
-identified topics
remain relevant
throughout the
project period.
Number
1
2
Outcome 
2. Enterprises have access to sustainable financial
services.
1.2.5 Households reporting using rural financial
services
impact surveys of households,
qualitative (PRA) assessment of
participating HHs and
quantitative assessment
(profitability analysis) of micro-
enterprises
at baseline,
mid- term
and
completion
PMU
• POs/NBFIs remain
institutionally and
financially viable
and offer
competitive loan
products • No
regulatory
constrains or
policies are
developed inflicting
upon financial
service delivery
Households
50000
100000
Output 
2.1. Sustainable financial services offered through
Partner Organizations.
1.1.5 Persons in rural areas accessing financial
services
implementing partners's records
and project records
quarterly
PMU
• POs are financially
sustainable and
able to reach out to
the targeted
beneficiaries. • POs
have human
resources to reach
out to targeted
beneficiaries. •
Continued demand
from beneficiaries to
borrow from POs.
Men in rural areas
accessing financial
services - credit
15000
25000
Women in rural
areas accessing
financial services -
credit
35000
75000
Total persons
accessing financial
services - credit
100000
100000
Results Hierarchy
Indicators
Means of Verification
Assumptions
Name
Baseline
Mid-
Term
End
Target
Source
Frequency
Responsibility
5/6

Output 
2.2. Commercial finance.
Enterprises supported by non-bank financial
institutions
implementing partners' records
and project records
quarterly
PMU
• Presence of non-
bank financial
institutions in project
area. • Non-bank
financial institutions
have the human
resources to monitor
the outstanding loan
amount. -
Beneficiaries remain
interested in
borrowing from non-
bank financial
institutions.
enterprises
300
550
Output 
2.3 Utilisation of remittances.
Number families of overseas workers trained on
capacity building.
implementing partners' records
and project records.
quarterly
PMU -
MoEWOE
-No changes in the
policy environment
for remittances. -No
external events
affecting the number
of overseas
workers.
Households
2000
4500
Output 
3.3 Partner organizations institutional strengthening.
1.1.6 Financial service providers supported in
delivering outreach strategies, financial products and
services to rural areas
implementing partners' records
and project records
mid-term
and
completion
PMU
POs are interested
in receiving support
on the proposed
topics.
Service providers
15
25
Results Hierarchy
Indicators
Means of Verification
Assumptions
Name
Baseline
Mid-
Term
End
Target
Source
Frequency
Responsibility
6/6

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex 2: Theory of change
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

Challenges
Inadequate dietary 
practices cause 
malnutrition.
Output indicators.
1. Supported rural producers 
that are member of rural 
producer organizations.
2. Households provided with 
targeted support to improve 
their nutrition. 
3. Persons trained in 
production practices and/or 
technologies.
2. Number of persons in rural 
areas accessing financial 
services.
3. Number of rural producers’ 
organizations supported.
4. FSPs supported  in 
delivering outreach strategies, 
products and services.
5. Number of policy-relevant 
knowledge products 
completed.
6. Rural enterprises accessing 
business development 
services .
Outcome indicators.
1. Persons reporting an 
increase in production. 
2. Persons reporting using 
rural financial services.
3. Supported rural enterprises 
reporting an increase in profit.
4. Rural producers’ 
organizations engaged in 
formal. 
partnerships/agreements or 
contracts with public or 
private entities.
5. Households reporting 
adoption of inputs, 
technologies or practices. 
6. % of women reporting 
improved food quality in their 
diet.
RMTP 
Interventions
Outcomes
Development 
objective
Core indicators
Rudimentary production 
methods.
1. Financial products 
for producers 
working in selected 
VCs through. 
8. Nutrition 
interventions at 
household level. 
Inadequate technologies 
present to attain growth.
There is 
market 
demand, yet 
strategic 
enabling 
conditions for 
sustainable 
market 
growth are 
absent.
Scope to 
improve food 
safety 
standards and 
improve 
dietary 
challenges 
through the 
food system. 
Higher incomes due 
to higher selling 
prices.
More efficient 
production methods 
adopted and more 
efficient aggregation 
of produce to 
establish sustainable 
market linkages.
2. Formation of 
producer 
associations. 
3. Enhanced 
productions 
methods. 
4. Market linkages 
and value chain 
advisory services.
5. Policy 
engagement. 
6. Agribusinesses 
financed by NBFI’s.
7. Business 
development 
services.
Sustainable growth 
of selected rural 
commodity value 
chains with 
comparative 
advantage, 
nutrition potential, 
market demand, 
growth potential 
and backward 
linkages to small 
farmers and micro-
entrepreneurs.
Increased availability 
of high quality 
produce both for 
auto consumption as 
well as  on local 
markets. 
Enterprise level
Production & smallholder level
Little aggregation of 
production due to absence 
of producer organizations.
No finance for working 
capital.
Limited compliance to 
food safety standards.
Smaller enterprises/ 
Agribusinesses have 
limited access to finance
Unstable supply of high 
quality produce.
9. Assistance on food 
safety standards. 
Agribusinesses are 
better placed to 
make sustainable 
market linkages due 
to access to financial 
services. 
Opportunities
Market level
Huge market demand for 
certified food. 
Scope to improve market 
supply by improving 
production methods.

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex 3: Project cost and financing: Detailed costs tables
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

31 
 
Annex 3: Project cost and financing: Detailed costs tables 
Rural Micro-Enterprise Transformation Project (RMTP) 
 
Introduction and Assumption 
 
 
Appendix 3 describes the parameters used to formulate the project costs, and presents summary 
1.
and detailed cost tables and financing plan. The project cost is derived using COSTAB programme on the 
basis of the following assumptions. Box below shows the rates. 
 
(a)
The unit cost of all the project activities including the programme management cost and 
salaries was estimated in close consultation with the PKSF staff on the basis of the rates that 
are used in on-going operations of PKSF;  
 
(b)
All costs are based on 2019 prices;  
 
(c)
The current inflation rate of 5.5% and the current exchange rate of BTK 84 for 1 US $ 
(Bangladesh Bank, 2019) were used. 
 
(d)
Prices are inclusive of all taxes, i.e. including custom duties and Value Added Tax (VAT). 
The tax rates retained are similar to those used for the on-going projects of PKSF. Base 
costs for goods and services purchased locally are derived from local sales prices (market 
prices), including all taxes as they are real costs for the project. 
 
(e)
Project period is for 6 years starting from 2020. The project year one has the cost for many 
initial preparatory activities which would facilitate implementation of other project activities. 
 
(f)
Taxes apply to all expenditure categories except for the credit line, Salaries and Allowances, 
Grants, and Training and Workshops. All taxes and duties will be paid by PKSF and 
accounted for as PKSF counterpart contribution in COSTAB in addition to the identified 
counter-part finding from PKSF. 
 
(g)
Physical and Price Contingencies are used to accommodate changes in quantities, unit 
costs and/or methods of implementation of the project. They are expressed as a percentage 
of base costs. The physical contingency of 3% for value chain development and 
implementation activities was used, and 0% for credit line and salaries were used. Price 
contingencies are intended for facing up to the effects of inflation and devaluation of the 
exchange rate in terms of the US dollar (USD). They are computed by COSTAB based on 
the rates assumed for the inflation at national and international levels. 
 
(h)
Expenditure and Disbursement Accounts are in line with the IFAD standardization of 
expenditures categories based on circular IC/FOD/02/2013.

32 
 
 
Project Costs 
The total project cost is USD 200 million over a six-year implementation period ( 
 
 
 
 
 
 
 
 
 
Table 2 summarises the project component cost distributed by the financier. The first component, 
2.
Value chain development takes 17% of the total project cost; second component, the Financial services, 
78%; and fourth component, institutional strengthening and project management, 4.2%. 
 
 
 
 
 
 
 
 
 
 
Table 2). IFAD Loan will finance USD 80 million (40%) of the total project cost, IFAD Grant will 
3.
provide USD 1 million; PKSF will provide USD 12 million (6%); co-financiers will contribute USD 8.3 
million (4%); and POs will provide USD 82.2 million (41%) for the financial services activities; Non-
Banking Financial Institutions contribute USD 10 million (5%); the private sector will contribute with USD 
4.6 million (2.3%), the beneficiaries’ equity would be USD 0.9 million (0.4%). PKSF will also bear tax, 
amounting to USD 0.925 million. 
Table 1: Financing plan of the Project Budget 
Up to
Up to
Project
Negotiation
Start
2020
2021
2022
2023
2024
2025
Inflation (in %'s)
 
Most
 
Annual rates
 
Local
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
Foreign
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Compounded rates
 
Local
5.5
5.5
8.5
14.5
20.8
27.5
34.6
42.0
Foreign
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Zero
 
Annual rates
 
Local
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Foreign
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Compounded rates
 
Local
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Foreign
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Exchange rates (Local/Foreign)
 
Most
 
Rates actually used
84.0
84.0
84.0
84.0
84.0
84.0
84.0
84.0
Constant purchasing parity rates
84.0
88.7
96.2
101.5
107.1
113.0
119.3
125.9
% deviation
0.0
-5.2
-12.6
-17.2
-21.6
-25.7
-29.6
-33.3
Zero
 
Rates actually used
84.0
84.0
84.0
84.0
84.0
84.0
84.0
84.0
Constant purchasing parity rates
84.0
84.0
84.0
84.0
84.0
84.0
84.0
84.0
% deviation
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

33 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 2 summarises the project component cost distributed by the financier. The first component, 
4.
Value chain development takes 17% of the total project cost; second component, the Financial services, 
78%; and fourth component, institutional strengthening and project management, 4.2%. 
 
 
 
 
 
 
 
 
 
Table 2: Project Cost: Components by Financiers (USD 1000) 
 
 
Financing Plan
(US$ '000)
(Local '000)
Foreign
Local
Total
Percent
Foreign
Local
Total
Percent
 IFAD
132
79,868
80,000
40.0
11,124
6,708,877
6,720,001
40.0
 IFAD Grant
-
1,000
1,000
0.5
-
84,000
84,000
0.5
 PKSF
-
12,039
12,039
6.0
-
1,011,243
1,011,243
6.0
 Co-Financiers
-
8,300
8,300
4.1
-
697,199
697,199
4.1
 Private Sector
-
4,646
4,646
2.3
-
390,269
390,269
2.3
 POs
-
82,213
82,213
41.1
-
6,905,898
6,905,898
41.1
 NBFI
-
10,000
10,000
5.0
-
840,000
840,000
5.0
 Beneficiaries
-
877
877
0.4
-
73,664
73,664
0.4
 PKSF-Tax
-
925
925
0.5
-
77,725
77,725
0.5
Total
132
199,868
200,000
100.0
11,124
16,788,876
16,800,000
100.0
IFAD
IFAD Grant
PKSF
Co-Financiers
Private Sector
POs
NBFI
Beneficiaries
PKSF-Tax
Total
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
A. Value Chain Development
 
Organization
 
363
4.7
-
-
392
5.1
1,016
13.2
-
-
5,808
75.6
-
-
-
-
105
1.4
7,685
3.8
Technical and Business service
 
2,071
19.6
-
-
-
-
2,307
21.8
4,646
43.9
-
-
-
-
877
8.3
691
6.5
10,592
5.3
Value chain sub-project implementation
 
10,862
71.9
-
-
-
-
4,243
28.1
-
-
-
-
-
-
-
-
-
-
15,105
7.6
Enterprise strengthening
 
500
60.0
-
-
-
-
334
40.0
-
-
-
-
-
-
-
-
-
-
834
0.4
Policy Dialogue
 
600
60.0
-
-
-
-
400
40.0
-
-
-
-
-
-
-
-
-
-
1,000
0.5
Subtotal
 
14,397
40.9
-
-
392
1.1
8,300
23.6
4,646
13.2
5,808
16.5
-
-
877
2.5
796
2.3
35,216
17.6
B. Financial Services
 
Micro-Finance through PO
 
48,215
35.6
-
-
10,756
7.9
-
-
-
-
76,405
56.4
-
-
-
-
-
-
135,377
67.7
Commercial Finance
 
10,000
50.0
-
-
-
-
-
-
-
-
-
-
10,000
50.0
-
-
-
-
20,000
10.0
Subtotal
 
58,215
37.5
-
-
10,756
6.9
-
-
-
-
76,405
49.2
10,000
6.4
-
-
-
-
155,377
77.7
C. Capacity Building of Remittance Earners
 
-
-
1,000
100.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000
0.5
D. Institutional Strengthening and
 
Project Management
PKSF's Capacity Building
 
1,961
100.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0
-
1,961
1.0
POs Capacity Building
 
335
85.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
55
14.1
390
0.2
Project Management
 
5,092
84.1
-
-
890
14.7
-
-
-
-
-
-
-
-
-
-
74
1.2
6,055
3.0
Subtotal
 
7,388
87.9
-
-
890
10.6
-
-
-
-
-
-
-
-
-
-
129
1.5
8,407
4.2
Total PROJECT COSTS
 
80,000
40.0
1,000
0.5
12,039
6.0
8,300
4.1
4,646
2.3
82,213
41.1
10,000
5.0
877
0.4
925
0.5
200,000
100.0

34 
 
 
The total project cost is disbursed under ten expenditure categories (Table 3). The credit line has 
5.
two sub-categories to segregate the IFAD loan financing resources downloading to PKSF partner 
organizations (POs) and Non-Banking Financing Institutions (NBFIs).  
Table 3: Project Cost: Expenditure Categories by Financiers (USD 1000) 
 
 
 
IFAD
IFAD Grant
PKSF
Co-Financiers
Private Sector
POs
NBFI
Beneficiaries
PKSF-Tax
Total
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
I. Investment Costs
 
A. Credit
 
PKSF's ME Loan through POs
48,215
35.6
-
-
10,756
7.9
-
-
-
-
76,405
56.4
-
-
-
-
-
-
135,377
67.7
PKSF's ME Loan through NBFIs
10,000
50.0
-
-
-
-
-
-
-
-
-
-
10,000
50.0
-
-
-
-
20,000
10.0
Subtotal
58,215
37.5
-
-
10,756
6.9
-
-
-
-
76,405
49.2
10,000
6.4
-
-
-
-
155,377
77.7
B. Equipment & Materials
90
96.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4
4.0
93
-
C. Management fees /a
-
-
-
-
-
-
664
100.0
-
-
-
-
-
-
-
-
-
-
664
0.3
D. Grants & subsidies
10,750
74.9
1,000
7.0
-
-
2,599
18.1
-
-
-
-
-
-
-
-
-
-
14,349
7.2
E. Operating Cost
301
8.4
-
-
571
16.0
1,144
32.1
234
6.6
-
-
-
-
877
24.6
438
12.3
3,566
1.8
F. Salaries & allowances
3,975
92.6
-
-
319
7.4
-
-
-
-
-
-
-
-
-
-
-
-
4,293
2.1
G. Technical assistance
1,136
39.1
-
-
-
-
444
15.3
1,012
34.9
-
-
-
-
-
-
310
10.7
2,902
1.5
H. Studies & workshops
1,479
77.7
-
-
25
1.3
400
21.0
-
-
-
-
-
-
-
-
-
-
1,903
1.0
I. Training
3,984
23.8
-
-
368
2.2
3,048
18.2
3,401
20.4
5,808
34.8
-
-
-
-
103
0.6
16,712
8.4
J. Vehicles
70
50.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70
50.0
140
0.1
Total PROJECT COSTS
80,000
40.0
1,000
0.5
12,039
6.0
8,300
4.1
4,646
2.3
82,213
41.1
10,000
5.0
877
0.4
925
0.5
200,000
100.0

35 
 
 
Table 4 presents the project cost by components and by expenditure categories and Table 5 
6.
outlines the component cost distribution by the years. Most of the project funds, particularly the funds 
allocated in the Financial Service component, have been allocated during the fist three years. These 
would be provided to PKSF in the 1st three years of the project for lending to POs and NFBIs and the later 
institutions would on-lend these funds through their loan products to end borrowers.

36 
 
Table 4: Project Cost Expenditure Accounts by Components - Base Costs (USD 1000) 
 
Table 5: Project Components Cost by Year -- Totals Including Contingencies (USD 1000) 
 
Project financing / co-financing strategy and plan 
 
The project will be financed by an IFAD loan; IFAD grant of USD 1 million; PKSF funds; DANIDA as 
7.
a co-financier; the private sector who are involved in processing, aggregation and marketing of VC 
commodities; POs; NBFIs, and the beneficiaries (Table 1). Three fourth of the IFAD loan funds will be 
made available on highly concessionary terms and the balance on the blend terms. PKSF funds will flow 
through POs under its prevailing on-lending terms to POs. DANIDA Grants will finance several activities of 
the Value Chain Development Component (1st component) of the project. The private sectors’ funds will 
be contingent upon the production and market linkages that are facilitated by POs. POs and NBFIs will 
use their standard on-lending procedures to provide the funds expected. Most of the beneficiary 
contribution would be in terms of their own non-financial resources. PKSF will also make funds available 
to pay all taxes against relevant project expenditure. 
 
 
Table 6 presents the project cost distributed by the expenditure categories by the project year. It is 
8.
noted that the project cost in most of the expenditure categories is front loaded with view that the project 
development activities would be completed the 4th year of the project.  
Value Chain Development
Capacity
Institutional Strengthening
Technical
Building
and Project management
and
Value chain
Financial Services
of
PKSF's
POs
Physical
Business
sub-project
Enterprise
Policy
Micro-Finance
Commercial
Remittance
Capacity
Capacity
Project
Contingencies
Organization
service
implementation
strengthening
Dialogue
through PO
Finance
Earners
Building
Building Management
Total
%
Amount
 I. Investment Costs
 
A. Credit
 
PKSF's ME Loan through POs
-
-
-
-
-
135,377
-
-
-
-
-
135,377
-
-
PKSF's ME Loan through NBFIs
-
-
-
-
-
-
20,000
-
-
-
-
20,000
-
-
Subtotal
-
-
-
-
-
135,377
20,000
-
-
-
-
155,377
-
-
B. Equipment & Materials
-
-
-
-
-
-
-
-
-
-
84
84
3.0
3
C. Management fees /a
-
-
664
-
-
-
-
-
-
-
-
664
-
-
D. Grants & subsidies
-
-
11,017
-
-
-
-
1,000
-
-
-
12,017
-
-
E. Operating Cost
-
1,520
887
-
-
-
-
-
-
-
762
3,169
1.9
59
F. Salaries & allowances
-
-
-
-
-
-
-
-
-
-
4,293
4,293
-
-
G. Technical assistance
15
1,394
-
810
-
-
-
-
-
357
-
2,576
3.0
77
H. Studies & workshops
24
-
101
-
1,000
-
-
-
-
-
767
1,891
0.2
4
I. Training
6,287
5,511
-
-
-
-
-
-
1,673
19
-
13,491
3.3
439
J. Vehicles
-
-
-
-
-
-
-
-
-
-
126
126
3.0
4
Total BASELINE COSTS
6,326
8,425
12,669
810
1,000
135,377
20,000
1,000
1,673
376
6,031
193,688
0.3
585
Physical Contingencies
224
253
16
24
-
-
-
-
50
11
6
585
-
-
Price Contingencies
 
Inflation
 
Local
1,134
1,914
2,420
-
-
-
-
-
238
3
18
5,728
-
-
Foreign
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Subtotal Inflation
1,134
1,914
2,420
-
-
-
-
-
238
3
18
5,728
-
-
Devaluation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Subtotal Price Contingencies
1,134
1,914
2,420
-
-
-
-
-
238
3
18
5,728
1.8
104
Total PROJECT COSTS
7,685
10,592
15,105
834
1,000
135,377
20,000
1,000
1,961
390
6,055
200,000
0.3
689
 
 
Taxes
105
252
-
-
-
-
-
-
-
55
74
487
3.3
16
Foreign Exchange
-
-
-
-
-
-
-
-
132
-
-
132
2.9
4
Totals Including Contingencies
2020
2021
2022
2023
2024
2025
Total
A. Value Chain Development
 
Organization
1,344
2,338
2,110
1,419
474
-
7,685
Technical and Business service
225
2,948
3,303
2,500
1,617
-
10,592
Value chain sub-project implementation
187
3,490
6,875
4,137
208
208
15,105
Enterprise strengthening
0
10
515
309
-
-
834
Policy Dialogue
150
450
250
150
-
-
1,000
Subtotal
1,906
9,236
13,052
8,516
2,298
208
35,216
B. Financial Services
 
Micro-Finance through PO
103,233
16,072
16,072
-
-
-
135,377
Commercial Finance
10,000
10,000
-
-
-
-
20,000
Subtotal
113,233
26,072
16,072
-
-
-
155,377
C. Capacity Building of Remittance Earners
333
333
333
-
-
-
1,000
D. Institutional Strengthening and Project management
 
PKSF's Capacity Building
550
596
712
102
2
-
1,961
POs Capacity Building
-
15
192
184
-
-
390
Project Management
1,192
946
1,066
994
946
911
6,055
Subtotal
1,742
1,557
1,969
1,280
948
911
8,407
Total PROJECT COSTS
117,215
37,198
31,426
9,796
3,247
1,119
200,000

37 
 
 
Table 6: Project Expenditure Accounts by Year – Base Cost (USD 1000) 
 
 
 
The distribution of price and physical contingencies, showing proportion of the project base cost 
9.
distributed by expenditure categories are summarised in Table 7.  
Table 7: Project cost by base cost and allowances for two contingencies (USD 1000) 
 
 
Detailed tables with project targets, unit costs and base costs are presented below. These tables 
10.
with 
all 
other 
details 
are 
presented 
in 
the 
Cost 
Tables 
excel 
sheets.
Base Cost
Foreign Exchange
2020
2021
2022
2023
2024
2025
Total
%
Amount
 I. Investment Costs
 
A. Credit
 
PKSF's ME Loan through POs
 
103,233
16,072
16,072
-
-
-
135,377
-
-
PKSF's ME Loan through NBFIs
 
10,000
10,000
-
-
-
-
20,000
-
-
Subtotal
 
113,233
26,072
16,072
-
-
-
155,377
-
-
B. Equipment & Materials
 
84
-
-
-
-
-
84
-
-
C. Management fees /a
 
-
133
133
133
133
133
664
-
-
D. Grants & subsidies
 
333
2,972
5,631
3,082
-
-
12,017
-
-
E. Operating Cost
 
256
1,388
944
206
206
170
3,169
-
-
F. Salaries & allowances
 
716
716
716
716
716
716
4,293
-
-
G. Technical assistance
 
13
863
1,179
511
11
-
2,576
-
-
H. Studies & workshops
 
362
562
469
298
100
100
1,891
-
-
I. Training
 
1,832
3,175
3,922
3,063
1,499
-
13,491
1.0
129
J. Vehicles
 
126
-
-
-
-
-
126
-
-
Total BASELINE COSTS
 
116,954
35,880
29,064
8,008
2,664
1,119
193,688
0.1
129
Physical Contingencies
 
77
171
185
107
45
-
585
0.7
4
Price Contingencies
 
Inflation
 
Local
 
184
1,147
2,178
1,681
538
-
5,728
-
-
Foreign
 
-
-
-
-
-
-
-
-
-
Subtotal Inflation
 
184
1,147
2,178
1,681
538
-
5,728
-
-
Devaluation
 
-
-
-
-
-
-
-
-
-
Subtotal Price Contingencies
 
184
1,147
2,178
1,681
538
-
5,728
-
-
Total PROJECT COSTS
 
117,215
37,198
31,426
9,796
3,247
1,119
200,000
0.1
132
 
 
Taxes
 
106
193
152
34
2
-
487
-
-
Foreign Exchange
 
-
-
66
66
-
-
132
-
-
Physical
Cont.
Plus
Base Cost
Physical Contingencies
Price Contingencies
Total Incl. Cont.
Base Costs
Price
Local
Local
Local
Local
+ Price
Cont. on
For.
(Excl.
Duties &
For.
(Excl.
Duties &
For.
(Excl.
Duties &
For.
(Excl.
Duties &
Cont. on
Physical
Exch.
Taxes)
Taxes
Total
Exch.
Taxes)
Taxes
Total
Exch.
Taxes)
Taxes
Total
Exch.
Taxes)
Taxes
Total
Base Costs
Cont.
 I. Investment Costs
 
A. Credit
 
PKSF's ME Loan through POs
-
135,377
-
135,377
-
-
-
-
-
-
-
-
-
135,377
-
135,377
135,377
-
PKSF's ME Loan through NBFIs
-
20,000
-
20,000
-
-
-
-
-
-
-
-
-
20,000
-
20,000
20,000
-
Subtotal
-
155,377
-
155,377
-
-
-
-
-
-
-
-
-
155,377
-
155,377
155,377
-
B. Equipment & Materials
-
80
3
84
-
2
0
3
-
7
0
7
-
90
4
93
91
3
C. Management fees /a
-
664
-
664
-
-
-
-
-
-
-
-
-
664
-
664
664
-
D. Grants & subsidies
-
12,017
-
12,017
-
-
-
-
-
2,332
-
2,332
-
14,349
-
14,349
14,349
-
E. Operating Cost
-
3,169
-
3,169
-
59
-
59
-
338
-
338
-
3,566
-
3,566
3,497
69
F. Salaries & allowances
-
4,293
-
4,293
-
-
-
-
-
-
-
-
-
4,293
-
4,293
4,293
-
G. Technical assistance
-
2,311
265
2,576
-
69
8
77
-
211
37
249
-
2,592
310
2,902
2,818
85
H. Studies & workshops
-
1,891
-
1,891
-
4
-
4
-
9
-
9
-
1,903
-
1,903
1,899
4
I. Training
129
13,277
85
13,491
4
431
4
439
-
2,769
13
2,782
132
16,477
103
16,712
16,187
525
J. Vehicles
-
63
63
126
-
2
2
4
-
5
5
11
-
70
70
140
136
4
Total
129
193,142
417
193,688
4
567
14
585
-
5,672
56
5,728
132
199,381
487
200,000
199,311
689

38 
 
Detailed Cost Tables 
 
Rural Micro-Enterprise Transformation Project
 
Table 1. Value Chain Development
 
Detailed Costs
 
Unit Cost
Unit Cost
Quantities
(Local
(US$
Totals Including Contingencies (US$ '000)
Unit
2020
2021
2022
2023
2024
2025
Total
'000)
'000)
2020
2021
2022
2023
2024
2025
Total
 I. Investment Costs
 
A. Organization
 
1. Start-up Training
 
Information & Orientation on financial literacy for MC & PO members /a
Nb Persons
30,700
45,600
32,100
-
-
-
108,400
1.2
0.014
527
826
614
-
-
-
1,967
Training on Nutrition, climate, environmental and social issues /b
Nb Persons
50,000
100,000
100,000
100,000
34,000
-
384,000
0.8
0.01
561
1,185
1,251
1,320
474
-
4,791
Prepare information sheet and dicussion notes for village meetings /c
Number
200
-
-
-
-
-
200
25
0.298
72
-
-
-
-
-
72
TOT on financial literacy for PO trainers by POs
Nb Batches
100
100
-
-
-
-
200
5
0.06
7
8
-
-
-
-
15
Training on business management for ME and PA members /d
Nb Batches
52
172
108
-
-
-
332
80
0.952
58
204
135
-
-
-
397
Developing and revising training module by PKSF
Number
2
-
-
-
-
-
2
500
5.952
14
-
-
-
-
-
14
Subtotal
1,240
2,223
2,000
1,320
474
-
7,256
2. Training on Nutrition
 
Information campaign for nutrition education
Lump sum
-
1
1
1
-
-
2
Development of training material for nutrition training /e
Lump sum
-
1
2
-
-
-
3
Allocation of funds to undertake apecial studies at PO level
Lump sum
12
12
-
-
-
-
25
TOT on Nutrition Sensitive Value Chain
Lump sum
3,750
3,750
3,750
3,750
-
-
15,000
2
0.024
92
92
92
92
-
-
368
Subtotal
104
106
94
93
-
-
397
3. Training on Climate Issues and Environment /f
 
Training on contract farming and exchange visits for PA members
Nb Batches
-
15
25
10
-
-
50
40
0.476
-
9
16
7
-
-
31
Subtotal
1,344
2,338
2,110
1,419
474
-
7,685
B. Technical and Business Service
 
1. General Basic Training /g
 
Generic technological and management training on Horticulture
Nb Batches
250
1,000
1,000
1,500
250
-
4,000
2
0.024
7
30
31
50
9
-
126
Generic technological and management training on Fisheries
Nb Batches
250
1,000
1,000
1,500
250
-
4,000
2
0.024
7
30
31
50
9
-
126
Generic technological and management training on Poultry
Nb Batches
250
1,000
1,000
1,500
250
-
4,000
2
0.024
7
30
31
50
9
-
126
Generic technological and management training on livestock (Fattening and Dairy)
Nb Batches
250
1,000
1,000
1,500
250
-
4,000
2
0.024
7
30
31
50
9
-
126
Subtotal
28
119
125
198
35
-
505
2. Subject Specific Advanced Training
 
Advanced technological and management training on Horticulture /h
Nb Persons
-
-
500
1,000
1,000
-
2,500
12
0.143
-
-
94
198
209
-
501
Advanced technological and management training on Fisheries
Nb Persons
-
-
550
1,000
1,000
-
2,550
12
0.143
-
-
103
198
209
-
510
Advanced technological and management training on Poultry
Nb Persons
-
-
2,000
4,000
2,000
-
8,000
12
0.143
-
-
375
792
418
-
1,585
Advanced technological and management training on Livestock
Nb Persons
-
-
1,100
2,000
1,000
-
4,100
12
0.143
-
-
206
396
209
-
811
Subtotal
-
-
779
1,584
1,045
-
3,408
3. GLOBAL GAP & HACCP Protocol /i
 
Contracts with certification authorities for developing training modules
Lump sum
140
370
391
-
-
-
902
Training of Master Trainer & Protocol Development /j
Sessions
5
15
25
20
-
-
65
9.5
0.113
1
2
4
3
-
-
10
Training of PA or Groups /k
Nb Batches
1,200
2,600
3,000
1,200
-
-
8,000
0.6
0.007
10
23
28
12
-
-
73
Audit / certification /l
Nb Batches
-
1,300
2,600
4,000
1,300
-
9,200
0.65
0.008
-
13
26
43
15
-
97
Training of farmers on GAP /m
Nb Batches
-
200
450
400
300
-
1,350
100
1.19
-
296
704
660
522
-
2,182
Subtotal
151
704
1,153
718
537
-
3,263
4. Training of Special Advisory service
 
Generic training material
Number
3
-
-
-
-
-
3
50
0.595
2
-
-
-
-
-
2
Generic training
Number
5
10
15
5
-
-
35
2
0.024
0
0
0
0
-
-
1
Specialised training material
Number
10
10
5
-
-
-
25
5
0.06
1
1
0
-
-
-
2
Specialised training
Number
5
10
15
5
-
-
35
2
0.024
0
0
0
0
-
-
1
Printing material
Number
5,000
10,000
5,000
-
-
-
20,000
0.01
1
1
1
-
-
-
3
Privatised advisory services
Lump sum
-
993
469
-
-
-
1,462
Cost Sharing of Advisors /n
Lump sum
42
137
181
-
-
-
359
Subtotal
45
1,132
652
0
-
-
1,830
5. Piloting of technologies in horticulture, livestock, fisheries and others /o
Number
-
993
594
-
-
-
1,587
Subtotal
225
2,948
3,303
2,500
1,617
-
10,592
C. Value chain sub-project implementation
 
1. Value chain analysis by PKSF /p
Number
4
-
-
-
-
-
4
2,000
23.81
112
-
-
-
-
-
112
2. Value chain investment and implementation /q
 
Value chain packages /r
Number
-
25
55
30
-
-
110
7,054
83.976
-
2,536
5,889
3,390
-
-
11,816
Investment in innovative new VCs
Number
-
2
2
2
-
-
6
16,800
200
-
483
510
538
-
-
1,532
Value chain facilitators
Lump sum
-
262
267
-
-
-
530
Value chain Implementation:IFAD Direct Cost /s
Lump sum
75
75
75
75
75
75
450
Value chain Implementation:IFAD Indirect Cost /t
Lump sum
-
133
133
133
133
133
664
Marketing and Enterprise Visibility Fares
Lump sum
-
1
1
1
-
-
2
Subtotal
75
3,490
6,875
4,137
208
208
14,993
Subtotal
187
3,490
6,875
4,137
208
208
15,105
D. Enterprise strengthening /u
 
Specialized Agribusiness Consultant providing TA to POs & undertaking studies
Lump sum
0
10
515
309
-
-
834
E. Policy dialogue
 
Policy dialogue on identified areas
Lump sum
150
450
250
150
-
-
1,000
Total
1,906
9,236
13,052
8,516
2,298
208
35,216
 
_________________________________
\a Information and orientation meeting on financial literacy of POs' microfinance and PA members
\b Training would be provided to Organization Leaders (harmonized with other projects), and no money is allocated
\c Prepare information sheet and dicussion notes for village meetings on financial literacy for beneficiary by POs
\d Training on business management (fours areas of business management, record keeping, profitability and cash flow analysis) for ME and PA members
\e Nutrition training material will be provided to NGOs, POs etc
\f Awareness building on climate, environmental, nutrition and social issues for PA members (harmonized with other projects) through other on-going training
\g MEs operating in VC will be provided with timely & quality advisory services to increase productivity and ensure delivery of certified produce to agribusinesses
\h On partial payment by trainees who would eventually provide a fee based extension service
\i Development of GLOBAL GAP & HACCP Protocol (horticulture, Fisheries and livestock). The 3 activities below in combination will make the protocol
\j Each Master Trainer will be trained twice
\k Groups (sessions) of 25 each
\l Groups (sessions) of 25 each
\m Master Trainers will provide training to farmers on a fee paid by the farmers
\n The project will pay the advisors on a decreasing scale of 80% (Yr 1); 50%; 20% and 0%.
\o Sectors that are relevant to individual VC can also be supported
\p The analyses will include horticulture, fisheries and livestock VCs. The VC proposal will also include VC Flat Form and methodologies for sharing information
\q Cost component of one VC package: linking farmers to 7 downstream enterprises wanting to buy the produce from 28,700 agro enterprises averaging 4100 agro enterprise per downstream enterprise.
\r Av cost/downstream Enterprise VC formation (USD 8000/VC); demos (USD 2000/VC); FE to FE visits (USD 500/VC); Lead Firm training visits (USD 1500/VC); support to PA (USD 1000/VC); Value Chain Facilitators - 4/PO for 3 years(USD 1200/one)
\s Cost of managing DANIDA funds, financed by DANIDA and an operating cost to IFAD. Cost for the 6th year is to assess the impact of DANIDA interventions, which would be a part of overall project impact assessment. 
\t Management fee paid to IFAD by DANIDA (8% of the total DANIDA Funds spread over last 5 years).
\u Public good required to initiate and operate VC related production and marketing activities, para-extension staff will also be trained for providing advice

39 
 
 
 
 
 
 
 
 
 
Rural Micro-Enterprise Transformation Project
 
Table 2. Financial Services
 
Detailed Costs
 
Base Cost (Local '000)
Totals Including Contingencies (US$ '000)
Unit
2020
2021
2022
2023
2024
2025
Total
2020
2021
2022
2023
2024
2025
Total
 I. Investment Costs
 
A. Line of credit for PKSF's ME loan program /a
 
1. Line of credit for PKSF's loan program: IFAD Resources /b
Lump sum
1,350,029
1,350,029
1,350,029
-
-
-
4,050,087
16,072
16,072
16,072
-
-
-
48,215
2. Line of credit for PKSF's loan program:PKSF Resources
Lump sum
903,523
-
-
-
-
-
903,523
10,756
-
-
-
-
-
10,756
3. Line of credit for PKSF's loan program: POs Resources /c
Lump sum
6,418,057
-
-
-
-
-
6,418,057
76,405
-
-
-
-
-
76,405
Subtotal
8,671,609
1,350,029
1,350,029
-
-
-
11,371,667
103,233
16,072
16,072
-
-
-
135,377
B. Line of credit to PKSF for ME loan through NBFIs
Lump sum
840,000
840,000
-
-
-
-
1,680,000
10,000
10,000
-
-
-
-
20,000
Total
9,511,609
2,190,029
1,350,029
-
-
-
13,051,667
113,233
26,072
16,072
-
-
-
155,377
 
_________________________________
\a PKSF will provide credit to POs for on-lending to end Borrowers
\b PKSF will provide credit to POs for on-lending to end Borrowers
\c POs will contribute with their own resources
Rural Micro-Enterprise Transformation Project
 
Table 3. Remittances Management
 
Detailed Costs
 
Base Cost (Local '000)
Totals Including Contingencies (US$ '000)
Unit
2020
2021
2022
2023
2024
2025
Total
2020
2021
2022
2023
2024
2025
Total
 I. Investment Costs
 
A. Remittances - Project Implementation
Lump sum
28,000
28,000
28,000
-
-
-
84,000
333
333
333
-
-
-
1,000
Total
28,000
28,000
28,000
-
-
-
84,000
333
333
333
-
-
-
1,000

40 
 
 
Rural Micro-Enterprise Transformation Project
 
Table 4. Institutional Strengthening and Project management
 
Detailed Costs
 
Unit Cost
Quantities
(Local
Unit Cost
Totals Including Contingencies (US$ '000)
Unit
2020
2021
2022
2023
2024
2025
Total
'000)
(US$ '000)
2020
2021
2022
2023
2024
2025
Total
 I. Investment Costs
 
A. PKSF's Capacity Building
 
1. PKSF's capacity building through ICT based solutions
 
Development of block chain platform, e-commerce & crowd funding platform
Lump sum
550
581
613
-
-
-
1,744
2. PKSF HR (Staff) Development (training, exchange visits)
 
Business management and financial analysis
Number
-
10
15
15
-
-
40
25
0.298
-
4
6
6
-
-
16
Value chain analysis and VCD subproject design - training
Lump sum
-
10
-
-
-
-
10
25
0.298
-
4
-
-
-
-
4
Project design and management
Number
-
-
5
5
-
-
10
50
0.595
-
-
4
4
-
-
8
M and E system design and management
Number
-
5
-
-
-
-
5
50
0.595
-
4
-
-
-
-
4
ICT based platforms: Overview and management
Number
-
5
5
10
-
-
20
25
0.298
-
2
2
4
-
-
8
Development project management
Number
-
-
10
10
-
-
20
50
0.595
-
-
8
8
-
-
16
Financial services and institutions
Number
-
-
5
10
5
-
20
20
0.238
-
-
2
3
2
-
7
ICT based Realtime MIS
Lump sum
-
5
5
-
-
-
10
25
0.298
-
2
2
-
-
-
4
Exchange visits (VCD) /a
Lump sum
-
-
20
20
-
-
40
300
3.571
-
-
76
76
-
-
152
Subtotal
-
15
99
102
2
-
217
Subtotal
550
596
712
102
2
-
1,961
B. POs capacity building
 
1. Value chain integration and contract intermediation
Lump sum
-
1
-
-
-
-
1
1,000
11.905
-
15
-
-
-
-
15
2. Other training - Nutrient Sensitive, M&E etc.
Lump sum
-
-
8
-
-
-
8
3. New financial product development
Lump sum
-
-
1
1
-
-
2
15,000
178.571
-
-
184
184
-
-
368
Subtotal
-
15
192
184
-
-
390
C. Project management
 
1. Office Facilities - Procurement
 
SUV: 4-Wheel Vehicle for Field Visits
Number
10,000
-
-
-
-
-
10,000
1
0.012
140
-
-
-
-
-
140
Laptops
Number
18
-
-
-
-
-
18
100
1.19
25
-
-
-
-
-
25
Printers
Number
2
-
-
-
-
-
2
50
0.595
1
-
-
-
-
-
1
Photocopy machine
Number
1
-
-
-
-
-
1
500
5.952
7
-
-
-
-
-
7
Office furniture
Number
17
-
-
-
-
-
17
50
0.595
12
-
-
-
-
-
12
Cellphones
Number
18
-
-
-
-
-
18
50
0.595
13
-
-
-
-
-
13
Training and recording equipment
Number
1
-
-
-
-
-
1
2,500
29.762
35
-
-
-
-
-
35
Subtotal
234
-
-
-
-
-
234
2. Operating expenses - Salaries & Allowances
 
Project Co-ordinator
Lump sum
1
1
1
1
1
1
6
4,725
56.25
56
56
56
56
56
56
338
Deputy project Co-ordinator (Technical)
Lump sum
1
1
1
1
1
1
6
4,460
53.095
53
53
53
53
53
53
319
Deputy project Co-ordinator (Financial Service)
Lump sum
1
1
1
1
1
1
6
4,460
53.095
53
53
53
53
53
53
319
Sectoral Specialist (Livestock)
Lump sum
1
1
1
1
1
1
6
3,260
38.81
39
39
39
39
39
39
233
Sectoral Specialist (Horticulture)
Lump sum
1
1
1
1
1
1
6
3,260
38.81
39
39
39
39
39
39
233
Sectoral Specialist (Fisheries)
Lump sum
1
1
1
1
1
1
6
3,260
38.81
39
39
39
39
39
39
233
ICT Specialist
Lump sum
1
1
1
1
1
1
6
3,260
38.81
39
39
39
39
39
39
233
Financial Analyst
Lump sum
1
1
1
1
1
1
6
3,260
38.81
39
39
39
39
39
39
233
Procurement Specialist
Lump sum
1
1
1
1
1
1
6
2,730
32.5
33
33
33
33
33
33
195
Communication, Publication & Knowledge Management Specialist
Lump sum
1
1
1
1
1
1
6
2,530
30.119
30
30
30
30
30
30
181
Monitoring and Evaluation Specialist
Lump sum
1
1
1
1
1
1
6
2,730
32.5
33
33
33
33
33
33
195
Nutrition Specialist
Lump sum
1
1
1
1
1
1
6
2,730
32.5
33
33
33
33
33
33
195
Value Chain Project Manager
Lump sum
6
6
6
6
6
6
36
2,330
27.738
166
166
166
166
166
166
999
Assistant Manager (Accounts)
Lump sum
2
2
2
2
2
2
12
1,820
21.667
43
43
43
43
43
43
260
Computer Operator cum MIS Officer
Lump sum
1
1
1
1
1
1
6
1,040
12.381
12
12
12
12
12
12
74
Driver
Lump sum
1
1
1
1
1
1
6
780
9.286
9
9
9
9
9
9
56
Subtotal
716
716
716
716
716
716
4,293
3. Operating expenses - Other
 
Monitoring and Travel
Lump sum
36
36
36
36
36
-
179
Overhead - Office Rent, electricity /b
Lump sum
95
95
95
95
95
95
571
Start-up workshop
Lump sum
12
-
-
-
-
-
12
Subtotal
143
131
131
131
131
95
762
4. M &E, studies and dissemination
 
Studies (baseline, Mid-term and end-project impact studies)
Lump sum
100
100
100
100
100
100
600
Sector impact studies
Lump sum
-
-
119
-
-
-
119
Results sharing (websites, seminars/workshops, video production etc.) /c
Lump sum
-
-
-
48
-
-
48
Subtotal
100
100
219
148
100
100
767
Subtotal
1,192
946
1,066
994
946
911
6,055
Total
1,742
1,557
1,969
1,280
948
911
8,407
 
\a Overseas training in countries including Thailand, Philippines, and India
\b Office rent, electricity, fuel, repair and maintenance, meeting costs
\c Production of hard copies of all documentation is discouraged and electronic filing and dissemination will instead be applied.

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex 4: Economic and Financial Analysis
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

1 
 
ANNEX 4 
ECONOMIC AND FINANCIAL ANALYSIS 
Rural Micro-Enterprise Transformation Project (RMTP): DRAFT 
1. 
INTRODUCTION AND METHODOLOGY 
 
The design mission of RMTP carried out the Economic and Financial Analysis (EFA) to asses the 
1.
financial and economic viabilities of the investments RMTP. The project targets to reach 400,000 
households within 6-year period as direct beneficiaries with credit and non-credit support to increase the 
productivity and quality of crops and livestock, and establishing micro-enterprises (MEs). The project will 
engage with commodities from four broad National Value Chains: (i) high value cereal, fruit and vegetable 
crops; (ii) pond and tank aquaculture; (iii) livestock cattle (milk and beef), buffalo (milk and beef), goat and 
sheep and (iv) poultry including egg and meat of chickens, turkeys, geese and ducks. These four were 
subdivided into seven more specific VC to facilitate the EFA. A total of 24 enterprise models that 
represent the VC operations were analysed to assess the financial and economic viability of these VCs. 
 
Methodology and Approach of EFA: The representative farm models and likely value chain 
2.
operation unit models were developed based on information collected during the field visits of the design 
team through direct observation, focus group meetings with producers and the staff of POs visited and the 
PKSF staff, and information extracted from various publications of the POs.1 Other sources of information 
include Bangladesh Bank, World Bank Commodity Forecast, UNDP2, IFAD3 and Bangladesh Bureau of 
Statistics. The main types of data that were used for the FEA include (i) crop and enterprise budgets for 
farm models; (ii) market prices; (iii) capital and working capital expenditure of processing facilities; (iv) 
cost of machineries; (v) international prices for computing parity prices of exportable commodities; and (v) 
cost of application of GGAP and HACCP standards. 
 
  A total of 24 enterprises (crops, livestock and non-agriculture small enterprises), representing the 
3.
seven VCs, were analysed using the partial budgeting approach to assess their financial viability and the 
demand for credit. Incremental benefits were estimated based on expected physical outputs during the 6-
year implementation period of the project and potential incremental benefits that would realise during the 
balance 14-year period of post-implementation project life. The enterprises that were analysed include 
three types of rice including aromatic rice, vegetables (6 type of vegetable), potatoes, bananas, mung 
beans, fish, fingerlings production, dairy milk, beef fattening, poultry eggs and broiler, food processing 
(dairy milk cooling and storage), and handloom and basket weaving representing non-agriculture micro-
enterprises.  
 
Attribution: The EFA methodology needs to identify a clear linkage between the beneficiaries and 
4.
one or more project interventions to elicit benefits and corresponding costs. RMTP mainly has a value 
chain focus. The beneficiaries’ investments are assisted by collateral free loans. In order to create an 
appetite to credit financing and making investment in the agriculture sector, the project would facilitate an 
array of activities. The EFA recognises these as the contributory factors to create incremental costs and 
benefits of the enterprises that were selected for the analysis. These activities include: 
 Undertaking areas-vise VC studies to identify appropriate and competitive products to be 
(a)
linked with in-bound and out-bound markets; 
                                                           
1 The references include: (i) Society for Social Service (2017), “Dairy Value Chain - Income Augmentation and Employment 
Generation Through Dairy Cattle Rearing in the Char Areas”, PACE Project. (ii) Society for Development Initiative, (October 2018), 
Annual Report. (iii) POMIS-1 Report (2019), Mohila Bohumukhi Shikkha Kendra (MBSK), Balubari, Dinajpur. (iv) Society for 
Development Initiative, (Jan 2019), Ghorakanda Safe Vegetable Production Association, Winter Vegetable Production – Tomato, 
Cabbage, Cauliflower, Bottle Gourd production data. (v) Mohila Bohumukhi Shikkha Kendra (MBSK), Annual Report, 2017-2018, 
Balubari, Dinajpur-5200. 
2 Power and Participation Research Center and UNDP, (2016), “Politics, Governance and Middle Income Aspirations: Realities and 
Challenges – An Empirical Study.  
3 Arslan, A. and Higgins, D. (2019) [Draft]. Impact assessment report: Coastal Climate Resilience Infrastructure Project (CCRIP), 
People's Republic of Bangladesh. IFAD: Rome, Italy

2 
 
 Establishing multiple platforms consisting of farming enterprises, agro-business, input 
(b)
suppliers, advisory services and PO’s value chain facilitators to create linkages among 
the stakeholders so that interest is developed for increasing production; 
 Raising public awareness of the benefits derived from GGAP and HACCP for domestic 
(c)
consumers, producers, processors and exporters, through mass media; 
 Fine-tuning farming practices according to the market demand; provide technology; in 
(d)
support of interested entrepreneurs, help obtaining GGAP with Chain of Custody 
Standard (Traceability) and HACCP certifications with cost sharing methods between the 
project and the beneficiaries; 
 Firming a pool of skilled local service providers such paravets, trainers, certified local 
(e)
agricultural technicians and pay-based advisory service providers for each sector to 
provide the technical and business services to beneficiaries; 
 Assisting preparing or updating all required training material as demanded; and 
(f)
 Promoting appropriate modern technologies in the selected value chains, such as vertical 
(g)
production systems for aquaculture; driers for vegetables and fruits; drip and micro 
irrigation etc; 
 
These assistances would be available to any beneficiary and along with this package and 
5.
determined by the capital cost demand, micro-credit will be provided with IFAD and counterpart funds. 
2. 
PROJECT COST, BENEFICIARIES AND ASSUMPTIONS 
 
The estimated cost of the RMTP, generated from COSTAB, was used as the project cost. DANIDA 
6.
grant financed some activities of the first componenet. An allowance for the continues overhead cost of 
PKSF, which is assumed to be 50% of the project management cost of the 6th year of the project has 
been included from year 7 (2026) onwards. 
 
Table 1 shows the distribution of 445,000 direct beneficiaries of RMTP by the enterprises. Three 
7.
parameters determined the yearly distribution of them: (i) spread of the project development budget which 
results in making the contact with the beneficiaries; (ii) the adoption rate of the technologies; and (iii) 
realization of the premium price for GGAP certified products through VC linkages. 
Table 1: Total and cumulative distribution of beneficiary households in VC enterprise receiving full benefits

3 
 
 
Notes: GAP – GGAP is adopted in “with project” situation; No P-price – premium price for GAPP certified product has not been 
realized due to inadequate VC linkages or not realizing the expected product quality. 
 
The basis of segregating the total number of beneficiaries of 400,000 into these enterprises was 
8.
the distribution of loan recipients in these sectors in the lending programme of PKSF with their partner 
organizations for the period of 2017 to 2018. The distribution of the development budget of the project 
cost is the following: 8% is for the 1st year; 26%, 32%, and 34% for the 2nd, 3rd, and the 4th year 
respectively. It is assumed that all beneficiaries have been reached at the end of the 4th year. The project 
budget for the balance period is mostly for follow-up, monitoring and programme management which 
would hardly impact on reaching beneficiaries. It is also assumed that all production costs and benefits of 
the project beneficiaries would start in the 2nd year of the project once the micro-financing Partner 
Organizations (POs) of PKSF have prepared VC proposals and made contacts with the beneficiaries.  
 
The adoption rate varies with the enterprise. The typical rates applied are: 1st project year – 50%, 
9.
meaning only 50% of the beneficiaries reached by the project in this year would apply all production 
technologies; 2nd year – 60%; 3rd year – 60%; 4th year – 90%; 5th year – 90% and 6th year – 100%. The 
focus group discussions that the design team had with the members of the existing Producers 
Associations (PAs) during the field visits gave indications to derive the adoption rates. 
 
The EFA was based on the following general assumptions: 
10.
 The current enterprise budgets that were elicited through field discussions held with the 
(a)
producers represented the “without project - WOP” scenarios. The existing technologies 
and the prevailing prices of inputs and outputs were used to derive the WOP enterprise 
budgets. The respective WP situations were constructed using conservative estimates of 
potential changes to the costs and benefits of the models on the advice of the Agricultural 
Value Chain expert of the design team. 
 All benefits were estimated using 2019 prices. The incremental costs and benefits of the 
(b)
project supported enterprises will continue for a 20-year period which include the 6-year 
project implementation period. 
 For all activities which used labour, a financial rural daily wage rate of BDT 420 per 
(c)
person-day for unskilled labour and BDT 588 per person-day for skill labour who work in 
technology demanded enterprises (large fish tanks, milk cooling plants etc) were used. 
These are the prevailing rates in the project area. The same wage rate was used to value 
Yr 2020
Yr 2021
Yr 2022
Yr 2023
Yr 2024
Yr 2025
Yr 2026
Aman Rice
GAP, No P-price
11,949
478
1,864
2,294
3,656
10,754
11,949
11,949
Boro Rice
GAP, No P-price
11,949
478
3,107
3,824
4,063
11,949
11,949
11,949
Aromatic Rice
From Boro To Aroma.
11,949
478
1,864
2,294
3,656
10,754
11,949
11,949
Potato
GAP, No P-price
7,170
287
1,118
1,377
1,706
5,019
5,736
7,170
Banana
GAP, No P-price
14,339
459
1,864
2,294
3,900
11,471
12,905
14,339
Aman Rice
GAP, With P-price
40,628
1,625
6,338
7,800
12,432
36,565
40,628
40,628
Boro Rice
GAP, With P-price
11,949
478
1,864
2,294
3,656
10,754
11,949
11,949
Aromatic Rice
GAP, With P-price
23,899
956
3,728
4,589
7,313
21,509
23,899
23,899
Vegetables (6 veg)
GAP, With P-price
11,949
478
1,864
2,294
3,656
10,754
11,949
11,949
Mung Beans
GAP, With P-price
11,471
459
1,790
2,202
3,510
10,324
11,471
11,471
Potato
GAP, With P-price
11,949
478
1,864
2,294
3,656
10,754
11,949
11,949
Banana
GAP, With P-price
21,987
879
3,430
4,221
6,728
19,788
21,987
21,987
Fish ponds
Improved practices
10,000
400
1,560
1,920
3,060
9,000
10,000
10,000
Large Fish ponds
GAP, With P-price
3,932
157
613
755
1,203
3,538
3,932
3,932
Poultry - Eggs
Better feeds
23,825
762
3,097
3,812
4,860
14,295
19,060
23,825
Poultry - Broiler
Better feeds
22,420
897
3,498
4,305
6,860
20,178
22,420
22,420
Beef fattening: bull
Faster fattening
22,620
905
3,529
4,343
6,922
20,358
22,620
22,620
Dairy Milk [1]
Better Feeds/Breed
91,069
6,557
23,678
29,142
30,963
91,069
91,069
91,069
Poultry - Broiler
GAP, With P-price
22,620
905
3,529
4,343
6,922
20,358
22,620
22,620
Banana+Potato: Drip
GAP, With P-price
47,797
3,824
12,427
15,295
16,251
47,797
47,797
47,797
Micro-Enterprises:
Milk Collection Centre
With GAP Standard
200
16
52
64
68
200
200
200
Hand Loom ME
Women ME
5,335
427
1,387
1,707
1,814
5,335
5,335
5,335
Basket weaving
Women ME
3,795
304
987
1,214
1,290
3,795
3,795
3,795
Fingerling production
5 ponds in 5 ha
200
16
52
64
68
200
200
200
Total
445,000
22,702
85,104
104,743
138,217
406,520
437,368
445,000
Enterprises 
representing the VCs
Total 
Bene.HH
Technology adopted 
& market linkages
Cumulative Distribution of Beneficiaries of RMTP estimated with the adoption rate

4 
 
household family labour too because of the availability of wage labour opportunities in the 
project areas. 
 Full production of the crops, livestock, and fisheries models have been valued. It is 
(d)
possible that a part of the production is domestically consumed, and it is in fact 
encouraged by the project to do so to provide enhanced nutrition to the family members. 
This portion is also however valued at the same farm-gate price to reflect the full financial 
and economic value of the production models. 
 The capital cost and 50% of the working capital of the 1st year of each enterprise model is 
(e)
provided as credit using the project-initiated credit lines. The annual interest rate of the 
POs existing financial products, which is 22% on average, is used to derive the credit re-
financing flows.   
 It is also assumed that the project beneficiaries have appetite for credit and application of 
(f)
new technologies, which would be enhanced through the awareness programmes and 
training interventions of the project. 
3. 
FINANCIAL ANALYSIS 
Enterprise Budgets and Demand for Credit 
 
The enterprise budgets that were used for the EFA analysis are summarised in Table 2. The net 
11.
benefits and return on investment (ROI: net return divided by total cost) of all the models have increased 
in the WP case. The ROI was estimated using the present value of total cost and the present value of 
total net return for a 20-year period with a discounted rate of 10% for dairy cattle, milk collection centers, 
handloom, basket weaving and fingerling production. It should be noted that the increased income from 
all crop models are obtained not with substantial increase in labour use which is beneficial for the 
farmers.  
 
The incremental financial 
12.
benefits 
of 
the 
agricultural 
enterprise 
models 
would 
be 
realised in two stages: (i) yield 
increase 
owing 
to 
adopting 
technologies and GGAP would be 
expected in the same year that the 
technology 
is 
adopted 
– 
for 
example 50% of the rice growers 
who would be reached by the 
project in the 2nd year would adopt 
the technology and secure the 
incremental yield in the same year. 
This WOP to WP increase for 
three types of rice varieties is 
shown in the bar-chart and it is 
assumed that this benefit increase 
would last for three years before 
the farmers graduate to the next 
step with the premium price; and 
(ii) price increase as a premium 
price for the beneficiaries, which 
would take about 3-years due to the time required to mature VC related market linkages. This required 
two types of models for one enterprise: one model reflecting only the yield increase for WP scenario 
(labeled as GAP, No P-price [single effect] models in Table 1), and the second model reflecting both yield 
and price increase with the premium price (labeled as GAP, With P-price [double effect] models in Table 
1). The business maturity period to get the premium prices realised is assumed as three years (see the 
bar chart above). 
Table 2: Budgets of all enterprise models representing the VCs used for the EFA of RMTP

5 
 
 
 
As such, it is assumed that one group of beneficiaries practicing an enterprise that would get 
13.
increased yield in the same year of adoption together with the premium price advantages three years 
after, and another group of the same enterprise would get only the yield advantage through out the 
project period and beyond. The enterprise models with “single effect” and “double effect” are listed in 
Table 2. These differences are modeled in the EFA. All the enterprises listed in Table 1 are financially 
viable to receive project support and credit. For all crop models, including annual crops, the NPV at the 
project level (10% DR & 20-years) was estimated and presented in Table 2 above (details in the EFA 
excel sheets). 
 
Discount rate for the financial analysis: There are two options to choose from: (i) PKSF average 
14.
lending rate since they function as the vehicle for IFAD to provide credit to the beneficiaries; and (ii) the 
current average lending rates in the financial markets of Bangladesh, which is 10%. The latter was used 
as the financial discount rate. PKSF and its Partner Organizers (POs) apply an average interest rate of 
22% and it varies upto 24%. This is to cover the overhead cost of these institutions. These rates do not 
reflect the financial market returns of the country. IFAD is interacting with the mainstream institutions, and 
in this case the project is using the PKSF as a vehicle to deliver loans to the IFAD target groups. Given 
this scenario, it prudent to use the mainstream bank rates as the DR for financial analysis. 
 
Credit delivery: There are four types of loans among the financial products of PKSF: (i) Buriad, 
15.
targeting at very poor with land plots less than 30 decimal (250 decimal = 1 ha) for seasonal crops and 
rice cultivation; (ii) Sufolon, targeting at enterprising poor having larger land plots and livestock; (iii) 
Jagaron is a larger loan targeted at beneficiaries with several enterprises including livestock; and (iv) 
Agressor loan is targeting at micro-entrepreneurs who also have few agricultural activities. There will be 
demand for all four types of loans. The farm model analysis shows potential demand for each type of 
loans. 
Farm Models 
 
Several typical farm models were developed to assess the income increase that the beneficiaries 
16.
would expect with the interventions of the project and the demand for credit (technical details of the farm 
models are presented in Annex 3). The farm models represent typical cropping calendars that prevail in 
the project area. Farm Model 1, with production and financial indicators presented in Table 3, is based on 
the following cropping calendar. Boro rice would also be cultivated on a separate block of land in the 
Production 
(kg)
Total 
labour use 
(md)
Net 
benefits 
(USD)
ROI
Production 
(kg)
Total labour 
use (md)
Net 
benef.(USD)
ROI
Aman Rice
GAP, No P-price
1 ha
3,850
127
150
16%
4,130
42
351
43%
1,438
462
Boro Rice
GAP, No P-price
1 ha
4,550
127
177
16%
5,050
39
318
29%
1,006
550
Aromatic Rice
From Boro To
1 ha
5,750
142
336
27%
2,925
139
620
51%
2,031
828
Potato
GAP, No P-price
1 ha
16,500
190
349
21%
18,000
75
591
38%
1,641
1,133
Banana
GAP, No P-price
1 ha
15,060
120
239
12%
22,500
78
772
30%
3,577
2,116
Aman Rice
GAP, With P-price
1 ha
4,130
39
337
41%
4,130
42
405
48%
670
501
Boro Rice
GAP, With P-price
1 ha
5,050
39
177
91%
5,050
39
759
102%
715
411
Aromatic Rice
GAP, With P-price
1 ha
2,925
139
708
62%
3,360
60
1,030
90%
2,249
703
Vegetables (6 veg)
GAP, With P-price
1 ha
8,146
365
993
156%
8,957
383
1,440
189%
3,199
1,130
Mung Beans
GAP, With P-price
1 ha
280
17
102
61%
380
20
150
65%
346
196
Potato
GAP, With P-price
1 ha
16,500
191
408
26%
19,500
56
1,142
82%
4,559
1,004
Banana
GAP, With P-price
1 ha
22,500
78
989
41%
22,500
78
1,237
48%
2,170
2,116
Fish ponds
Improved practice
30 decimal
210
10
261
64%
300
15
385
67%
888
537
Large Fish ponds
GAP, With P-price
1 ha (total)
2,500
100
5,388
206%
4,100
250
11,089
209%
40,757
4,686
Poultry - Eggs
Better feeds
300 birds
19,200
100
630
29%
30,240
150
1,197
37%
3,624
2,874
Poultry - Broiler
Better feeds
150 birds
180
20
61
13%
270
20
182
29%
862
578
Beef fattening: bull
Faster fattening
1 per Yr
175
20
68
12%
245
20
248
40%
1,290
564
Dairy Milk [1]
Better Feeds/Breed
1 Cow
1,440
15
1,423
19%
2,880
60
2,398
20%
2,398
1,400
Poultry - Broiler
GAP, With P-price
150 birds
180
20
61
13%
270
25
233
33%
1,227
650
Banana+Potato: Drip
GAP, With P-price
7 ha
938
16,649
41%
1,008
35,735
82%
5,102
2,030
Micro-Enterprises:
Milk Collection Centre
GAP Standard
500 kg/day
182,500
300
24,883
27%
24,883
6,725
Hand Loom ME
Women ME
300 Lungy
300
889
36%
889
72
Basket weaving
Women ME
200 Basket
200
486
30%
486
69
Fingerling production
5 ponds in 5 ha
9,600
700
125,013
23%
125,013
39,584
Model Type
Unit of 
Production
With Project (WP)
Enterprises 
representing the VCs
Without Project (WOP)
Demand for 
Loan: 22% An. 
Int. (USD)
Incre. NPV 
at project 
level 
(USD/ha)[2]
GAP: Global Good Agricultural Practices; P-Price: Premium price with Value chain linkages; ROI: Return on Investment; [1] Dairy milk: net benefit is in NPV (10% DR); Milk collection: building with GGAP 
standards; All ME s are new and the WOP benefits is assumed as the opportunity cost of labour involved. Net benefits are in NPV (10% DR) and IRR for 20 years. Drip - Drip Irrigation. [2] Incremental (Wp-WOP) 
NPV /ha is presented for the cash flows started in 2nd Yr. The rest is in EFA excel sheets.

6 
 
same farm. The land size of this farm model is smaller than the typical farm size and also this represent 
beneficiaries who belong to “very poor” category. This farm model represents “single effect” model where 
only the increased yield advantage has been realised. 
 
Rice and vegetable cultivation use Global Good Agricultural Practices, i.e. low chemical-based inputs and 
more of organic based inputs, no insecticides and pesticides, and mechanized (hired machinery) land 
preparation and harvesting of paddy in “WP” production scenario. Better feed formulae and 
management practices represent WP scenario. There would be a more productive family labour 
(women) re-arrangement in the model. Wage labour that was practiced in the WOP case, has been used 
for basket weaving. This shift is more domestic-friendlier since women remain at home with some 
income generating work instead of venturing into wage labour.  
 
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Cauliflower
Okra 
Beans 
Maize 
Cauliflower
Okra 
Beans 
Maize

7 
 
 
Table 3 shows that the WP net benefits have increased and the elevated average daily per capita 
17.
income is close to the average per capita rural income level of BTK 190 per day.4 Wage labour income, 
although reduced in WP case, forms an important part of the family income. Women in the family 
contribute to the income by earnings baskets weaving. This model could demand Buriad type of loans of 
about BTK 13,000 per year. These are very short-term loans and usually repayment is done bi-weekly. 
With nutritional education provided by the project, it is expected that about 300 eggs would be consumed 
at home. However, these also valued and added to the benefit flow. 
 
 
                                                           
4 Source for rural income: Arslan, A. and Higgins, D. 2019. Impact assessment report: Coastal Climate Resilience Infrastructure 
Project (CCRIP), People's Republic of Bangladesh. IFAD: Rome, Italy

8 
 
Table 3: Farm model 1 – Representing beneficiaries who would demand Buriad type of credit 
 
 
Table 4 demonstrates a typical farm with crops, two types of livestock activities, fish ponds and a 
18.
non-farm activity as income sources. The cropping calendar is similar to the one presented above. The 
farm model is financially beneficial and earns an annual income which is higher than the average rural 
income. The credit demand is above one thousand BTK and represent Sufolon type seasonal loans. 
Table 4: Farm model 2 – Representing beneficiaries who would demand Sufolon type of credit 
 
Table 5 and 6 shows representative farm models demanding Jagoron type loans and moderately poor 
beneficiaries. The relevant cropping system is presented below.  
 
Production 
(kg)
Total labour 
use (md)
Net benefits 
(USD)
Productio
n (kg)
Total 
labour use 
(md)
Net benefits 
(USD)
Effective Farm (ha)
0.392
Boro Rice
GAP, No P-price
0.26
1,183
33
46
1,313
10
83
37
Vegetables (6 veg)
GAP, No P-price
0.132
1,075
48
131
1,182
51
190
59
149
Poultry - Eggs
Better feeds
150 Birds
9,600
50
315
15,120
75
598
283
Basket weaving
Women ME
972
972
Wage Income: Family
1,800
900
Total Income
2,292
2,743
149
Average daily per capita income (USD)
1.40
1.67
Average daily per capita income & demand for the Loan (BTK)
117
140
12,531
Farm Model 1: Poorest 
[BUNIDA]
Model Type
Land 
Allocation 
(ha)
Without Project (WOP)
With Project (WP)
Increase in net 
farm income 
($/Yr)
Demand for 
Loans 
(USD)
Production 
(kg)
Total 
labour use 
(md)
Net benefits 
(USD)
Producti
on (kg)
Total 
labour use 
(md)
Net 
benefits 
(USD)
Effective Farm (ha)
0.928
Vegetables (6 veg): 1st
GAP, With P-price
0.264
2,150
96
262
2,365
101
380
118
298
Mung Beans
GAP, With P-price
0.264
74
4
27
100
5
40
13
52
Potato
GAP, With P-price
0.4
6,600
76
140
7,800
22
457
317
401
Large Fish ponds
Improved practice
0.112
280
11
603
459
28
1,242
639
525
Poultry - Broiler
Better feeds
300 birds
360
40
122
540
50
465
343
Hand Loom ME
1,778
1,778
Total Income
1,154
4,362
1,276
Average daily per capita income (USD)
0.70
2.66
Average daily per capita income & demand for the Loan (BTK)
59
223
107,276
With Project (WP)
Increase in 
net farm 
income 
($/Yr)
Demand 
for Loans 
(USD)
Farm Model 2: Seasonal 
Loan [SUFOLON]
Model Type
Land 
Allocation 
(ha)
Without Project (WOP)

9 
 
 
Table 6 has almost the same system but without rice. 
19.
 
Table 5: Farm model 3 with Aromatic Rice– Beneficiaries who would demand Jagoron type of credit 
 
 
 
 
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Banana for one year
Potato/Veg
Aman Rice
Fallow
Rice>
Aromatic Rice 
Production 
(kg)
Total labour 
use (md)
Net benefits 
(USD)
Productio
n (kg)
Total 
labour use 
(md)
Net benefits 
(USD)
Effective Farm (ha)
0.732
Aman Rice
GAP, With P-price
0.2
826
8
67
826
8
81
14
100
Aromatic Rice
GAP, With P-price
0.2
585
28
142
672
12
206
64
141
Banana
GAP, With P-price
0.2
4,500
16
198
4,500
16
247
50
423
Vegetables (6 veg)
GAP, With P-price
0.132
1,075
48
131
1,182
51
190
59
149
Poultry - Eggs
Better feeds
300 birds
19,200
100
630
30,240
150
1,197
567
2,874
Dairy Milk
Better Feeds/Breed
2 Cows
1,440
15
1,423
5,760
120
4,797
3,373
2,800
Total Income
2,591
6,718
6,487
Average daily per capita income (USD)
1.58
4.09
Average daily per capita income & demand for the Loan (BTK)
133
344
545,195
Increase in net 
farm income 
($/Yr)
Farm Model 3 - Micro-
Credit, Moderately 
Poor [JAGORON]
Model Type
Land 
Allocation 
(ha)
Without Project (WOP)
With Project (WP)
Demand for 
Loans 
(USD)

10 
 
Table 6: Farm model 4 with many livestock- beneficiaries who would demand Jagoron type of credit 
 
 
Both farm models generate substantial income with project interventions and also represent 
20.
“double effect” advantage. Livestock forms an important element in the farming system. The GGAP 
technology in all farming activities and limited mechanization in paddy farming would be anticipated. 
Poultry farming would be similar to what is practiced in Model 1. Dairy cattle farming will have improved 
feeding with both improved varieties of grasses, concentrates, mineral, and adequate water. Artificial 
Insemination (AI) would be practiced to get better cress breeds. The milk yield would be increased from 9 
liters per day to 12 liters per day with the improved practices and management. With VC linkages, there 
would be assured market for milk, but a premium price cannot be expected for milk since there is no fat-
rate based selling at the farm-gate. Similar to eggs, it is anticipated that the domestic milk consumption 
will slightly increase. However, the volume consumed has also been valued in the EFA. The loans are co-
lateral free, with monthly repayment arrangements. 
 
Table 7 represents a typical micro-entrepreneur model with larger scale drip-irrigation banana 
21.
cultivation and fingerling production. The demand for credit, which is of Agrosor type, is high and it could 
be made available by Non-Banking Financing Institutions. The ME generates adequate cash flow to repay 
the loan (details in EFA excel sheets). About 5 non-skilled labourers would be employed full time in the 
ME. The irrigation is done using gravity systems in WOP scenarios. This system has resulted in many 
diseases and fugus growth which lead plat death and low yield. The sprinkler irrigation systems which is 
based on low cost sprinklers and a tube well, would prevent such yield losses. The beneficiaries are 
willing to adopt the system with the availability of financing as credit. Technical details are presented in 
Annex 3. 
Table 7: Farm model 5 with Micro-enterprise beneficiaries who would demand Agrosor type of credit 
 
 
 
Production 
(kg)
Total labour 
use (md)
Net benefits 
(USD)
Productio
n (kg)
Total 
labour use 
(md)
Net benefits 
(USD)
Effective Farm (ha)
0.932
Banana
GAP, With P-price
0.4
37,650
48
96
9,000
31
495
399
846
Vegetables (6 veg)
GAP, With P-price
0.132
1,075
48
131
1,182
51
190
59
149
Potato
GAP, With P-price
0.4
6,600
76
140
7,800
22
457
317
401
Dairy Milk
Better Feeds/Breed
2 Cows
2,880
30
2,846
11,520
240
9,593
6,747
2,800
Beef fattening: bull
Faster fattening
2 bulls
350
40
136
490
40
497
361
1,128
Total Income
3,349
11,232
5,325
Average daily per capita income (USD)
2.04
6.84
Average daily per capita income & demand for the Loan (BTK)
171
575
447,575
Farm Model 4 - Micro-
Credit, Moderately 
Poor [JAGORON]
Model Type
Land 
Allocation 
(ha)
Without Project (WOP)
With Project (WP)
Demand for 
Loans 
(USD)
Increase in net 
farm income 
($/Yr)
Production 
(kg)
Total labour 
use (md)
Net benefits 
(USD)
Productio
n (kg)
Total 
labour use 
(md)
Net benefits 
(USD)
Banana+Potato: Drip
GAP, With P-price
7
938
16,649
1,008
35,735
19,086
2,030
Average daily per capita income (USD)
10.14
21.76
Average daily per capita income (Tka)
852
1,829
170,622
Fingerling production
9,600
700
125,013
39,584
Average daily per capita income (USD)
76.11
Average daily per capita income & demand for the Loan (BTK)
6,397
3,327,036
ME Model 5: Micro 
Enterprise [AGROSOR]
Model Type
Land 
Allocation 
(ha)
Without Project (WOP)
With Project (WP)
Increase in net 
farm income 
($/Yr)
Demand for 
Loans 
(USD)

11 
 
 
Table 8 and 9 represent the possible changes in land sizes of crops and type of crops respectively. 
22.
The total farm size will remain the same in both cases. In the first case, the land size under potato would 
be increased with the support of the project and the increased land extent will come from a reduction in 
the extent of vegetable farming and mung bean cultivation. This change would result in a notable increase 
in the farm income. 
 
Table 9 represents the changes in crops as a result of the project support. Mung bean cultivation, in 
23.
this representative farm model would be replaced with banana which will yield better net return. This 
model too will provide a substantial incremental net revenue.

12 
 
Table 8: Farm model 6 with beneficiaries who would demand Sufolon type of credit and change land sizes of 
crops  
 
Table 9: Farm model 7 with beneficiaries who would demand Sufolon type of credit and change the crops  
 
Credit demand 
 
The 24 enterprises listed in Table 2 were aggregated into 7 VCs as shown in Table 10 to present 
24.
the total demand from credit by the value chain. Same Tables shows the land extent that would be 
developed under each VC. The analysis estimated the credit demand for each enterprise and aggregated 
for each VC listed in Table 10. The amount of credit demanded was based on (i) total requirement of 
capital expenditure and working capital of the enterprise models; and (ii) 50% of the cost of labour. It is 
assumed that the balance 50% of labour comes from the family labour pool. On the basis of these two 
assumptions, the total potential demand for different type of credit would be USD 285 million during the 6-
year project period. The project with IFAD and co-financiers would provide USD 155 million and normally 
the reflows would also be available to meet the full credit demand. With one round of reflows, the project 
will be able to meet the estimated total credit demand during the project period. 
Table 10: Group of enterprises, beneficiary households engaged credit estimated demand 
Type of VC 
Crops / Enterprise Included 
HH 
Land (ha) 
Production 
Units 
Loans 
Cereal 
All Rice including aromatic rice 
112,323 
23,373 
  
13,286 
Fruits and Vegetable 
Vegetables, potatoes and 
banana 
115,191 
35,800 
  
68,137 
Pulses 
Mung Beans 
11,471 
1,514 
  
297 
Aquaculture 
Fish ponds, fingerling and spawn 
14,132 
2,240 
10,839 
Livestock 
Dairy, Beef fattening, poultry 
(eggs & broiler) 
182,553 
153,331 
190,470 
Food processing 
Milk collection, cooling & selling 
200 
200 
1,345 
Non-agric MES 
Hand looms, Basket weaving 
9,130 
  
9,130 
646 
  
Total 
445,000 
60,687 
164,901 
285,022 
Production 
(kg)
Total labour 
use (md)
Net
benefits 
(USD)
Production 
(kg)
Total
labour use 
(md)
Net benefits 
(USD)
Effective Farm (ha)
0.928
0.928
Vegetables (6 veg): 1st
GAP, With P-price
0.264
0.132
2,150
96
262
1,182
51
190
-72
149
Mung Beans
GAP, With P-price
0.264
0.132
74
4
27
50
3
20
-7
26
Potato
GAP, With P-price
0.4
0.664
6,600
76
163
12,948
37
758
595
666
Large Fish ponds
Improved practice
0.112
0.112
280
11
603
459
28
1,242
639
525
Poultry - Broiler
Better feeds
300 birds
450 birds
360
40
122
810
60
545
423
1,949
Hand Loom ME
1,778
1,778
Total Income
1,178
4,533
3,355
3,316
Average daily per capita income (USD)
0.72
2.76
Average daily per capita income & demand for the Loan (BTK)
60
232
282,016
Farm Model 6: Seasonal 
Loan [SUFOLON], 
changing land sizes
Model Type
WOP: Land 
Use (ha)
Demand 
for Loans 
(USD)
Increase in 
net farm 
income 
($/Yr)
WP: Land 
use (ha)
Without Project (WOP)
With Project (WP)
Production 
(kg)
Total labour 
use (md)
Net benefits 
(USD)
Production 
(kg)
Total 
labour use 
(md)
Net benefits 
(USD)
Effective Farm (ha)
0.928
Vegetables (6 veg): 1st
GAP, With P-price
0.264
0.264
2,150
96
262
2,365
101
380
118
298
Mung Beans
GAP, With P-price
0.264
Potato
GAP, With P-price
0.4
0.4
6,600
76
140
7,800
22
457
317
401
Large Fish ponds
Improved practice
0.112
0.112
280
11
603
459
28
1,242
639
525
Poultry - Broiler
Better feeds
300 birds
300 birds
360
40
122
540
50
465
343
0
Banana
GAP, With P-price
0.4
9,000
48
96
9,000
31
495
399
846
Total Income
1,223
3,039
1,816
2,071
Average daily per capita income (USD)
0.74
1.85
Average daily per capita income & demand for the Loan (BTK)
63
156
152,640
Demand 
for Loans 
(USD)
Farm Model 7: Seasonal 
Loan [SUFOLON], 
changing cropping 
pattern
Model Type
WOP: Land 
Use (ha)
WP: Land 
use (ha)
Without Project (WOP)
With Project (WP)
Increase in 
net farm 
income 
($/Yr)

13 
 
 
Production increase in enterprises 
 
The project direct beneficiaries would be expected to increase their production with technical and 
25.
financial assistance as credit. The EFA estimated the annual production levels of VC commodities at full 
development. There would be 75 million mt of rice available per year for all type of rice, 6% increase from 
the base; 538 million mt for vegetables (potato, all vegetables, and mung beans), 17% increase; 683 
million mt for fruits (banana), 3% increase; 254 million liters for milk, 79% increase; 5.5 million mt for beef, 
40% increase; 504 thousand eggs, 58% increase; 10.3 million mt for poultry, 50% increase; and 2.3 
million mt for fish, 59% increase (Table 11). 
Table 11: Increase in production of commodities at full development 
VC Commodity 
Total Production at Full 
Development (Mt/Yr) 
Total Production: WOP 
(Mt/Yr) 
% increase WP 
Rice (all types) 
75,187 
71,093 
6% 
Vegetable (Potato, all veg, mung bean) 
538,225 
458,072 
17% 
Fruits (Banana) 
683,977 
662,640 
3% 
Milk 
254,572 
141,886 
79% 
Meat (Beef) 
5,542 
3,958 
40% 
Eggs 
504,326 
320,207 
58% 
Poultry 
10,345 
6,896 
50% 
Fish 
2,285 
1,437 
59% 
 
Impact on Family Income and poverty reduction 
 
The net enterprise income that is expected at the full development stage of the project, in 2024-25, 
26.
would vary from USD 2,743 per year per household for the poorest category; USD 4,362 for emerging 
farmers; USD 6,718 for moderately poor; and USD 11,232 for micro-entrepreneurs as demonstrated in 
the farm models. In comparison to average rural income of USD 3,712 (Source: op.cit) in the project area, 
the expected income of the RMTP beneficiaries would be substantially higher. As such the project will 
have a positive impact on poverty reduction. 
Impact on Employment 
 
The project has a net gain of employment for 9,266 persons, or 2 million man-days per year. Some 
27.
crops use less labour due to partial mechanization and others are using more due to adopting good 
agricultural practices based on organic measures etc. It is expected that changing the cropping practices, 
type of crops and land extents etc, the losses in labour use would be balanced. Table 12 summarises 
changes in labour use and employment at full development.

14 
 
Table 12: Increase in employment due to changes in farming systems at full development 
 
Overall Financial Analysis 
 
The cashflows of all the enterprise models populated with appropriate targets over the project 
28.
period were aggregated to compute the total gross benefit flow of the project. The total cost is comprised 
of (i) the RMTP project cost, based on 2019 prices, net of the provision for loans; and (ii) the incremental 
cost of all enterprise. The incremental benefits of all enterprise models provided the benefit flow. The EFA 
excel sheets presents the details. The Financial Internal Rate of Return (FIRR) is 35%. The net benefit 
flow was discounted at 10%, which is the current average interest rate, to ascertain the break-even point 
of the project cash flows. At the 9th year (2028), the project will be able to breakeven the total project 
investment and the beneficiaries’ investment during the project period and start generating a positive net 
benefit flow. 
4. 
ECONOMIC ANALYSIS 
 
The economic analysis was carried out by adjusting the cost and benefits flows that were used in 
29.
the financial analysis of the project to reflect economic values. In addition to the assumptions made in the 
financial analysis, the following assumptions were used in the economic analysis. 
 The economic investment cost is based on the project cost net of financing for loans 
(a)
during the 6-year implementation period generated by COSTAB programme, which 
deducts the amounts payable for taxes and provisions for price contingencies from the 
financial costs and applies the shadow exchange rate to convert the cost portion in 
foreign exchange into local currency. The funds provided to PKSF under the micro-
financing has not been included. Both taxes and credit funds are transfer payments which 
are excluded from the economic analysis. 
Aman Rice
2,581
127
42
327,793
108,404
-219,389
-997
Boro Rice
3,107
127
39
394,565
121,166
-273,399
-1,243
Aromatic Rice
2,390
142
139
339,360
332,190
-7,170
-33
Potato
1,434
190
75
272,444
107,544
-164,900
-750
Banana
2,868
120
78
344,139
223,690
-120,449
-547
Aman Rice
8,126
39
42
316,895
341,271
24,377
111
Boro Rice
2,390
39
39
93,204
93,204
0
0
Aromatic Rice
4,780
139
60
664,380
286,783
-377,597
-1,716
Vegetables (6 veg)
1,577
365
383
575,108
604,784
29,676
135
Mung Beans
1,514
17
20
25,742
30,284
4,543
21
Potato
2,390
191
56
456,462
133,832
-322,631
-1,467
Banana
4,397
78
78
342,992
342,992
0
0
Fish ponds
1,600
10
15
16,000
24,000
8,000
36
Large Fish ponds
440
100
250
44,034
110,085
66,051
300
Poultry - Eggs
16,677
100
150
1,667,745
2,501,617
833,872
3,790
Poultry - Broiler
15,694
20
20
313,879
313,879
0
0
Beef fattening: bull
22,620
20
20
452,398
452,398
0
0
Dairy Milk [1]
75,720
15
60
1,135,793
4,543,173
3,407,380
15,488
Poultry - Broiler
22,620
20
25
452,398
565,498
113,100
514
Banana+Potato: Drip
23,134
141
70
3,269,578
1,619,366
-1,650,211
-7,501
Micro-Enterprises:
Milk Collection Centre
200
185
365
36,960
73,000
36,040
164
Hand Loom ME
5,335
120
150
640,200
800,250
160,050
728
Basket weaving
3,795
14
140
53,130
531,300
478,170
2,174
Fingerling production
200
300
365
60,000
73,000
13,000
59
Total
0
0
0
12,295,199
14,333,711
2,038,512
9,266
Enterprises representing the 
VCs
Area (ha)
WOP 
(md/ha)
WP 
(md/ha)
WOP: Tot 
Labour (md)
WP: Tot 
Labour (md)
Labour: 
Loss or 
Gain (md)
Labour: Loss 
or Gain 
(Persons)

15 
 
 The following procedure was used to convert all prices of farm and livestock production to 
(b)
economic prices:  
 
 using border prices, import parity prices were estimated to value tradable goods 
(i)
(all paddy and all fertilisers), the computation is presented in the EFA excel sheets;  
 for all non-tradable goods, standard conversion factor (SCF) of 0.84 was used to 
(ii)
adjust the prices – the market distortion includes some degree of protection and over-
valuation of BTK in terms of the dollar – the SCF was computed taking the ratio 
between Exchange Rate (ER)5 and Estimated Shadow Exchange Rate (SER)6 
[SCF=ER/SER]; EFA excel sheets presents details; and  
 overhead cost of PKSF, which is 50% of that of the final year of the project, and it 
(iii)
is needed to continue to provide some VC focused service to the enterprises. 
 Shadow wage rate factor is assumed at 0.84 to account some out-migration, seasonal 
(c)
labour shortages, and peri-urban labour demand. Labour is idle during some period of the 
year indicating full employment point has not reached. 
 The economic discount rate of 6.2%, which is the Opportunity Cost of Capital 
(d)
representing the Average Annual Deposit Rate (Bangladesh Bank, Dec 2018, IFS 2019, 
M01 EcoIndicators). 
 
After making the required adjustments to the cash flows of the financial analysis on the basis of the 
30.
above assumptions, the economic analysis for the RMTP was carried out. The Economic Internal Rate of 
Return (EIRR) for the 20-years period is 30% with benefit cost ratio of 1.31 (The EIRR for this is 29%, 
indicating that the project can withstand the loss of land to that degree. 
 
                                                           
5 Exchange Rate (ER) Feb 2019 [Bangladesh Bank, https:// www.bangladeshbank. org.bd/econdata/exchangerate.php] 
6 Source: Bangladesh Bank Quartely, https://www.bangladeshbank.org.bd/econdata/exchangerate.php

16 
 
 
Table 13). The project earns a Net Present Value (NPV) of USD 291 million for the 20-year period 
31.
with 6.2% discount rate. 
 
Sensitivity analyses were carried out to assess whether the project is economically viable to face 
32.
possible risks of increasing the cost of production of enterprise, decreasing their benefits, one-year delay 
in realising project benefits, and possible loss of land for cultivation. These risk factors represent most of 
the potential adverse climatic conditions (heavy rains, floods and cyclones etc) and market failures. It has 
been estimated that there are crop production losses due to drought which varies from 6% per annum to 
15% per annum.7 The scenario of 10% and 20% benefit loss address these risk factors.  
 
The results of the sensitivity analyses are presented in The EIRR for this is 29%, indicating that the 
33.
project can withstand the loss of land to that degree. 
 
                                                           
7 https://www.climateemergencyinstitute.com/uploads/M__Drought_in_Bangladesh_and_its_adaptive_measures.pdf

17 
 
 
Table 13. Both cost increase by 10% and 20% and benefit decrease by 10% and 20% yield EIRR 
34.
that are higher than the opportunity cost of capital and therefore indicate that the enterprise models are 
quite stable to face risky scenarios. However, the production models show the highest drop of EIRR in the 
scenario of 20% benefits decrease and one-year delay in getting benefits. As such the PKSF will have to 
closely monitor any changes to the facilitative factors and continue to provide services to maintain the 
productivity levels that are currently being achieved without incurring any delays for the benefits to be 
realised. In order to take possible climatic effect on land degradation, a scenario of 30% of all land 
cultivated with project assistance becoming un-cultivable was also assumed as a scenario. The EIRR for 
this is 29%, indicating that the project can withstand the loss of land to that degree.

18 
 
Table 13: Results of the Economic Analysis 
Sensitivity Analyses 
EIRR 
B/C Ratio 
NPV (USD mn) 
NPV (BDT mn) 
Base Case 
30% 
1.31 
291  
24,477 
All cost increase by 10% 
22% 
1.19 
197  
16,580 
All cost increase by 20% 
14% 
1.09 
103  
8,684 
All benefits decrease by 10% 
21% 
1.18 
168  
14,133 
All benefits decrease by 20% 
11% 
1.05 
45  
3,789 
Cost increase by 10% and benefits decrease by 10% 
13% 
1.07 
74  
6,236 
1 year delay in getting benefits 
16% 
1.26 
172  
14,448 
30% of Land under crop would become un-usable due to 
climatic effect 
29% 
1.29 
267  
22,466 
 
 
Qualitative benefits These include enhanced financial and social service delivery capacities of the 
35.
Partner Organizations of PKSF to their members; improved technical capacities of livestock para 
professionals and para extension service providers; food safety in the project area; better awareness of 
food safety and nutrition intake among beneficiaries; improved animal health (dairy, beef cattle, poultry 
and fisheries); and value chain (VC) development through improved market access, and development 
and expansion of rural  businesses. RMTP will also generate employment opportunities for women and 
men, particularly the youth through their involvement of the value chain activities and related backward 
and forward linkages. 
 
The EFA excel sheets, both for financial and economic values, provide the detail tables listed 
36.
below. 
 
List of tables
Description
Tradable!A1
Analysis of parity prices
Prices!A1
Prices of all inputs and outputs
EFAStructure_Degn!A1 Foundation for the EFA modeling and distribution of beneficiaries: Design Formulation
EFAStructure_Apprs!A1Foundation for the EFA modeling and distribution of beneficiaries: Appraisal Formulation
Beneficiary!A1
Distribution of RMTP beneficiaries on the basis of micro-finance beneficiaries of PKSF, 2017-2018
SubProjects!A1
Aggregated cash flows of all enterprises
FmModels!A1
Farm Models and summary analyses
AmanVC!A1
Crop Budgets - Aman rice, production increase with adopting technologies (WP), no premium price
AmanSVC!A1
Crop Budgets - Aman rice, production increase with adopting technologies (WP) and premium price
BoroVC!A1
Crop Budgets - Boro rice, production increase with adopting technologies (WP), no premium price
BoroSVC!A1
Crop Budgets - Boro rice, production increase with adopting technologies (WP) and premium price
AromaticRiceVC!A1
Crop Budgets - Aromatic rice, production increase with adopting technologies (WP), no premium price
AromaticRiceSVC!A1
Crop Budgets - Aromatic rice, production increase with adopting technologies (WP) and premium price
MungbeanVC!A1
Crop Budgets - Mungbean, production increase with adopting technologies (WP), no premium price
PotatoVC!A1
Crop Budgets - Potato, production increase with adopting technologies (WP), no premium price
PotatoSVC!A1
Crop Budgets - Potato, production increase with adopting technologies (WP) and premium price
BananaVC!A1
Crop Budgets - Banana, production increase with adopting technologies (WP), no premium price
BananaGGAP!A1
Crop Budgets - Banana, production increase with adopting technologies (WP) and premium price
FishPond!A1
Enterprise Budgets - Fish Ponds
ImprovedFishFarm!A1 Enterprise Budgets - Improved Large Fish Ponds
Egg!A1
Enterprise Budgets - Eggs
BroilersVC!A1
Enterprise Budgets - Broiler
BroilersSVC!A1
Enterprise Budgets - Broiler with GGAP and premium price
Beef!A1
Enterprise Budgets - Beef
CowMilk!A1
Enterprise Budgets - Dairy Cow
MilkCollect!A1
Enterprise Budgets - Milk Collection
HandLoom!A1
Enterprise Budgets - Handloom
Basket!A1
Enterprise Budgets - Basket
FingerLingBreed!A1
Enterprise Budgets - Fingerling production
VegWOP!A1
Crop Budgets - Vegetable production increase with adopting technologies (WP), no premium price
VegWPGGAP!A1
Crop Budgets - Vegetable production increase with adopting technologies (WP) and premium price
DripBanana!A1
Crop Budgets - banana with drip irrigation, production increase with adopting technologies (WP), no premium price
EAYRB_Apprais!A1
Project cost
Ark1'!A1
Cropping calendar

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex 5: Social Environment and Climate Assessment (SECAP) Review Note
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

Annex 5:  Social Environment and Climate Assessment (SECAP) Review Note  
I. 
Major landscape characteristics and Issues 
A. 
Socio-cultural context 
1. Poverty and trends in rural areas. Bangladesh is a country with a population of about 153 
million living in an area of 147,500 square kilometers (or 1,252 persons per square kilometer). 
This makes Bangladesh one of the most densely populated countries in the world. Bangladesh has 
progressed to lower middle-income country status with high—but declining—rates of poverty 
among its 153 million people. The proportion of the population living under $1.25 a day fell from 
49% to 32% between 2000 and 2010 effectively lifting 16 million people out of poverty. Sustained 
economic growth was fundamental to this reduction: Bangladesh real GDP growth averaged 6.3% 
over the last decade. In 2017, GDP growth was 7.3%.  
2. About 80% of the population lives in rural areas. The rural population is mainly engaged in 
agriculture and or agricultural related activities - 41% of the population is active in the agricultural 
sector1. Currently, the largest share of public expenditure for agriculture goes to price support, 
income subsidization and input subsidies. Approximately 65% of the rural population is landless or 
functionally landless (owning less than 0.2 hectares of land). Land ownership is considered an 
enabling factor for poverty alleviation in rural Bangladesh; Longitudinal research shows that 
graduation from poverty happened more often when families had disposition over land.  
3. Over the last two decades rural communities have gradually moved from subsistence farming to 
commercial farming. This allows even people with very little means to respond to market 
opportunities. Smallholders are adopting new agricultural and information technologies and 
management practices. Financial services, mainly savings and credit, have dramatically improved 
due to microfinance although micro-insurance service is yet to make any meaningful inroad. In 
addition, a number of trends can be observed in rural agricultural sectors that are relevant to 
RMTP: (i) younger and educated groups are slowly investing in agriculture, (ii) larger private 
companies are appearing in agro-processing, (iii) urban consumers are demanding quality 
products, (iv) agricultural extension services are more and more privatized as are the seed sector 
and irrigation are almost fully privatized. Improved rural roads and cell phone services, facilitates 
the sales of commodities.  
4. Rahman (2011) studied 10,483 households across the RMTP target districts of Satkhira and 
Khulna Districts and found that among the extreme poor, 74% were Muslim, 25% are Hindus, and 
1 per cent are Christian, Buddhist or adhere to another religion. Overall, 9 per cent of the extreme 
poor population are classified as religious-ethnic minorities. In other words, their representation 
among the extreme poor significantly outstrips their percentage of the total population. 
5. Education. Bangladesh has made noteworthy gains in education. According to UNESCO, the 
literacy rate in the country is 72.9% in 2017 (75.7% for male and 70% for female). Literacy rates 
are particularly high among the lower age quantiles of the population with 92.9% (91.5% for male 
and 94.3% for female) of people between 15-24% being literate. A 2010 paper on education in 
rural Bangladesh however, describes that 1) a wide range of primary education options are 
available in rural Bangladesh, ranging from public schools to NGO organized initiatives and that 2) 
the quality of education generally is of lower quality in rural areas than in urban areas. High 
literacy rates strongly correlate with high financial literacy rates and financial well-being. For RMTP 
this could potentially translate in higher payback rates, increased savings and lower portfolio at 
risk.  
6. Indigenous peoples. Around 45 indigenous communities are present in Bangladesh most of 
them living in the Chittagong Hill Tracts, greater Mymensingh, greater Rajshahi, greater Sylhet, 
Patuakhali and Barguna. They are generally disadvantaged in the social and cultural spheres and 
studies suggest that extreme poverty is more prevalent among indigenous communities. IFAD has 
been supporting indigenous communities in Bangladesh since 2007 through the Indigenous 
Peoples Facility.  
                                                 
1 Gautam and Faruqee (2016) Dynamics of Rural Growth in Bangladesh: Sustaining Poverty Reduction. 
https://openknowledge.worldbank.org/bitstream/handle/10986/24544/9781464808760.pdf?sequence=2

7. Nutrition. Despite significant economic growth, current levels of malnutrition in Bangladesh are 
alarming. Child stunting is estimated at 36%, acute child undernutrition stands at 14%, and low 
birth weight affects 22% of babies. Micronutrient deficiencies remain a challenge, with 21% of 
children being vitamin A deficient, 45% of children being deficient and 40% iodine deficient. 66% 
of women nationally do not meet minimum while in rural areas 70% of women and only 28% of 
children meet the required minimum dietary diversity. Food safety remains an issue. Reasons for 
malnutrition in rural areas include the (i) food insecurity and (ii) inadequate dietary practices.  At 
the same time, there has been a rapid increase in overweight and obesity. This is mostly due to 
the increased consumption of trans-fats, ultra-processed foods and sugar sweetened beverages. 
8. Food safety. Food safety is a serious concern in Bangladesh, with inappropriate use of 
pesticides and ripening chemicals being some of the main problems facing the agricultural sector. 
The Bangladesh Institute of Public Health indicated that 50% of food items tested between 2001-
2009 was adulterated (particularly pesticide residue), posing health risks for domestic consumers 
and preventing export. Introduction of food safety standards such as GlobalGAP has been pursued 
over recent years, however this effort needs to be integrated into a wider effort. Beyond regulatory 
interventions, market demands for safe food do not reach the majority of smallholder farmers2.  
Recently, FAO has set up the Food Safety Network3 to improve food safety in Bangladesh, aimed at 
introducing improved guidelines and training of farmers, consumer awareness, inspection and 
enforcement. 
9. Gender. Gender equality is a prominent issue in Bangladeshi public debate and it is a major 
objective of the 7th five-year plan. Gender equality in Bangladesh has been improving over time. 
Education levels increased, maternal mortality is declining by 5.5% per year and Bangladesh is 
one of the best performing countries in the Gender Gap Index (WEF, 2017). However, gender 
inequalities remain apparent, especially in rural Bangladesh. Women are responsible to carry out 
the household activities and are the prime care takers for the elderly and children. Dowry is 
practiced throughout the country, yet there is an increasing public awareness about the negative 
impact of Dowry and under aged marriages.  According to UN women, violence against women is a 
common practice in family level as well as community level (UNDP, 2017). 
10. Women play a vital role in agriculture, nutrition, food security and a wide range of income-
generating activities. Production activities largely undertaken by women include post-harvest 
activities, processing and preservation of crops. Women are also involved in seed preservation, 
cattle fattening and milking production. Relative to men, women are more often involved in 
homestead agricultural activities like vegetable production, poultry and goat rearing. Women are to 
a larger extent involved in production for home consumption rather than for commercial purposes. 
Men are more engaged in field-based agriculture and larger-scale, higher value business activities 
further from the home. Social and cultural norms still imped women from selling goods on markets 
or to participate in economic activities outside of the homestead. Yet, there is a positive trend and 
women seem to –slowly but steadily- gain access to market places. Being the cradle of 
microfinance, microloans are widely accessible to women. Many MFIs specifically target women 
and around 95% of MF loan recipients are female. The majority of women are members of savings 
groups. When receiving a loan from a PKSF partner organization, both men and women receive 
PKSFs standard financial literacy training. During this training, beneficiaries also discuss gender 
equality and equitably financial relations.  
11. 
Women are involved in a wide range of income generating activities. Preferably, women work 
on homestead agricultural activities such as small-scale vegetable production, poultry and 
livestock. In addition, they are involved in minor income generating activities such as sewing and 
handicrafts. The table below gives an overview of the different value chains and their gender 
impact. Finally, an empowerment matrix provides an overview of different empowering measures 
included in the design document.  
 
 
                                                 
2 BoP Innovation Center (2015). The impact of food standards on inclusive growth in agriculture: the case of Bangladesh 
3 See http://www.fao.org/in-action/food-safety-bangladesh/en/

Value chain 
Gender aspects 
Fruit and vegetable 
gardens.  
-Gender-sensitive when cultivation takes place on homestead 
gardens or very near to households. 
-Men usually sale cultivation on nearby markets. Women report to 
receive earnings of their sales from men.  
Beef. 
-Women look after cattle present at the homestead. They fatten 
cattle when needed.  
-Women state that they feel free to seek the assistance of veterinary 
services when needed.  
-Women are trained on beef fattening practices.  
Poultry. 
-Women look after poultry at the homestead.  
-Poultry is collected at farm gate.  
Goat. 
-Women look after goats when present at the homestead.  
-Goats are collected at farm gate. 
Aquaculture. 
- Generally less female involvement as ponds are usually not near to 
the family home. 
-Anecdotal evidence suggest that women are to a larger extent 
involved in aquaculture in the Southern provinces as ponds are closer 
to the homestead.      
Non-agricultural 
activities in 
homestead. 
-Non-agricultural IGA activities in the homestead include sewing and 
knitting.   
 
 
Empowerment topics. 
Interventions 
PKSF 
Partner Organisations 
Women’s control over 
productive assets and  economic 
empowerment. 
 
 
 
Incorporate gender, poverty and 
youth issues in value chain mapping 
and analyses. 
 
Design value chain projects to ensure 
that young women are specifically 
targeted as value chain actors. 
 
Ensure that selected value chains 
respond to a broader strategy for 
livelihood adaptation and 
diversification 
 
All value chain studies will address 
gender based constraints to women’s 
participation at all levels within the 
commodity based chain.  
 
The project will ensure that the 
evolving design of the components 
will reflect the gender priorities 
identified in the studies. 
 
Take up lessons learned from the 
CGAP study on women and 
technology and incorporate them in 
the different mobile platforms. 
 
The selection process of value chains 
will include activities that have a 
higher rate of women’s participation 
and will address gender based 
constraints that women.  
 
Actively target women with the loans 
provided by NBFI’s. 
 
Continue the mentorship programme 
for female employees at PKSF for 
women. 
 
 
All trainings for PKSF and PO staff 
on value chain processes and 
inclusive enterprise management will 
include topics on ensuring an 
enabling and equitable environment 
for women’s participation in such 
processes.  
 
Target gender sensitive value chains 
and promote the role of women in 
male-dominated value chains. 
 
Actively target women in vocational 
training programs. 
 
Any assets created through the project 
(insurances, animals, sheds, business 
contracts with buyers, etc), will be in 
the name of women when they are the 
sole managers of the asset, or else 
jointly owned by women. 
 
Women’s decision making at 
household level. 
 
Develop public-private shared 
understanding of values, and 
complementary expertise, to create 
gender-responsive strategy.  
 
Strengthening women’s agency 
(decision-making power) 
accompanied by work to change 
attitudes at community and higher

 
Actively undertake activities to 
promote improved labour standards 
and working conditions for women in 
the value chain. 
 
Explore opportunities with enterprises 
to develop gender-responsive, pro-
poor strategies. 
 
Ensure that efforts will be made in 
terms of structuring these capacity 
building events to suit the availability 
of the women members in terms of 
timings, venues and child care 
facilities  
 
 
 
levels by incorporating this as topics 
in the multiple trainings offered. 
 
Skill trainings and vocational 
trainings will include both women 
and men of the households taking 
loans. 
 
Promotion of women leaders in MF 
groups and producer associations.  
 
Build/strengthen the social capital 
and negotiation skills of poor people 
in general, and women and young 
people in particular, to enable them to 
participate effectively in value chain 
relationships. 
Reducing workloads, and 
achieve an equitable workload 
balance between women and 
men 
 
 
Promote access to new technologies 
and new markets. 
 
Adopt low cost technology to reduce 
drudgery and improve quality and 
production in all stages of crop 
production and post harvesting 
 
Gender mainstreaming within 
the M&E 
 
Monitoring and evaluation will be 
carried out on the basis of gender and 
household poverty disaggregated 
data.  
 
Baseline and impact surveys will 
include empowerment indicators to 
be measured. This will allow the 
project to track the progress on 
inclusion of women and other 
marginalized households overall.  
 
Pilot initiatives will be assessed 
according to gender impact so that 
lessons learnt can be used in 
subsequent project activities.  
 
Sub-project reports reflect gender 
issues. The final project reports 
systematically identify gender gaps 
and gender-related project successes  
 
Ensure that all information is 
gathered and presented disaggregated 
by sex. 
 
12. Youth. With the median of the entire population being a bit over 26 years old and 20% of the 
population between 15-24 years old, Bangladesh is considered to have a young population. Over 
the next couple of decades this median will slowly raise to 30 years while it is expected that 60% 
of the population is between 15-24 years old4 in 2020. Youth unemployment stands at 10.3%, 
which is slightly lower than the average global unemployment rate of 12%. However, according to 
the ILO, 20.1% of the population is confined to irregular employment. Constrains faced by youth, 
especially in rural areas are (i) lack of technical education, (ii) lack of skills and training, (iii) 
limited access to finance (Hossain, 2010). Often, youngster leave school before obtaining 
secondary education. Despite the fact that youth who leave high school prematurely are literate 
and have basic mathematic skills, it increases chances to long-term social exclusion. There is a 
variety of reasons why the youth decides to drop out of a school including, the need to support the 
family income, uninterested and affordability. Marriage is the most important reason why women 
drop out of secondary school.  
13. 
With 34.5%, the agricultural sector, either directly or indirectly, remains the most important 
employer in Bangladesh providing employment of youth. Services provide 32.9% of employment 
and industry 30.6%. Proportionally, more women than men are employed by the agricultural 
factors. Of the youth, 54% is an employee, 0.5% is an employer, 31.7% is an own-account worker 
and 11% is unpaid family worker. Written contracts are not the norm in Bangladesh with around 
30% of the youth in rural areas having penciled down their engagement5.  
14. 
A large portion of the youth of Bangladesh still moves abroad for employment and sends 
home remittances. In 2015, the country received $15 billion from remittances and migration is 
                                                 
4 See: https://population.un.org/wpp/Graphs/Probabilistic/POP/0-24/  
5 See: https://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/documents/publication/wcms_245517.pdf

higher among the middling poor than the rich and the poorest poor. Migration is a men’s business 
and female migration is reserved for divorcees, widows and abounded women. Studies suggest 
that migration is not the preferred option for youth, they often chose this path when other 
economic opportunities have been exhausted. A challenge for remittance senders is finding long-
term productive investment opportunities. (Rashid and Sidker, 2016). 
The project's direct target groups consist of marginal & small farmers and micro-entrepreneurs 
and within the direct target groups, preference is given to women, the youth and the poorer 
segments. The project will indirectly support all value chain actors such as input suppliers, traders, 
processors, advisory services. Consequently, the project will have a positive impact on the ultra-
poor for whom more jobs get available along the value chains. Building on research from the World 
Food Programme, the Bangladeshi rural poor can be roughly identified in three segment: the ultra-
poor, enterprising farmers and emerging farmers. The ultra-poor are also targeted through pro-
poor loans as well as other IFAD interventions such as PROVATi³, HILIP-CALIP and CCRIP. The 
Enterprising poor, Emerging famers and Micro-entrepreneurs will be targeted by PKSF loan 
programme as well as VC activities. The table below provides a general description of their 
characteristics based on WFP livelihood maps6 and the 2010 household expenditure survey7. 
 
Target group. 
General characteristics. 
Financial characteristics.  
Ultra-poor. 
-27% of rural poor. 
-Beneficiaries of buniad loans under 
RMTP. 
-Illiterate 
or 
poorly 
literate/ 
poor 
numeracy.  
-Average family size: 3.96 
-Poor financial management skills 
-Undeveloped business skills. 
-Involved in unskilled labour. 
-Live in cabins. 
-Own mobile phone. 
-Average expenditure on major food 
crops: 4287. 
-Seasonal 
migration 
seen 
as 
expandable livelihoods strategy.  
-Depend on wage labour including cash 
for work schemes. 
-Little savings.  
-No land – 0.49 acres 
-0-4 chicken. 
-Average number of earners: 1.29. 
-Average income: 5843 
Transitional poor. 
-58% of rural poor. 
-Beneficiaries 
of 
pro-poor 
loans 
agricultural loans, Jagaron loans and 
VC activities under RTMP. 
-Literate/ numerate. 
-Average family size: 4.61 
-Rudimentary financial management 
skills. 
-Involved in unskilled and skilled labor. 
-Majority lives in cabins or family 
housing. 
-Own mobile phone. 
-Average expenditure on major food 
crops: 5616. 
 
-Sharecroppers or owning 0.5-1.49 
acres land. 
-0-4 cows owned/ shared,  
-0-2 goats. 
-1-4 fruit trees. 
-Homestead gardens.  
-Some 
receive 
remittances 
either 
international or domestic. 
-Average number of earners: 1.26 
-Average income: 9696.50 
Enterprising poor. 
- 15% of rural poor. 
-Beneficiaries of agricultural loans and 
Jagaron loans, Aggressor loans and VC 
activities under RTMP 
-Literate/ numerate. 
-Average family size: 5.36 
-Rudimentary financial management & 
business skills.  
-Affiliated 
with 
POs 
through 
MF 
programmes and sometimes ME loans 
-Live in family housing and 25% in 
brick structures. 
-Own mobile phone and sometimes 
solar panel/motorbike. 
-Average expenditure on major food 
crops: 7526. 
 
-Owning more than 1.50 acres of land. 
-4-8 cows owned/ shared, 
-4-8 goats. 
-1-6 fruit trees -multiple varieties. 
-Homestead gardens.  
-Expanding  land ownership. 
-Some 
receive 
remittances 
either 
international or domestic. 
-Average number of earners: 1.29 
-Average income: 16172.50 
 
 
Ultra-poor: The Ultra-poor are landless or have up to 0.49 acre of land and hold few assets. For 
income generation, they depend on wage labour and share copping. Often they migrate out to 
rural areas in other parts of the country in search of income or depart for urban areas. Although 
they are 90% food secure, a food crises can occur when incomes stagnate. The ultra-poor have 
limited literacy and numeracy skills, live in cabins and have little savings. They are targeted 
through PKSFs pro-poor loan programme (Buniad) and as suppliers under RMTPs value chain 
activities. Their average annual income is BDT 5843 and average expenditure on major food crops 
is 4287. 
 
                                                 
6 See: https://reliefweb.int/sites/reliefweb.int/files/resources/livelihoods_of_char_and_river_basin_communities_2016.pdf  
7 See: http://203.112.218.65:8008/WebTestApplication/userfiles/Image/LatestReports/HIES-10.pdf

Transitional poor: Possess between 50-1.49 acres of land including homestead and/or are involved 
in sharecropping as well as wage labour. Generally, they are food secure, though this group 
occasionally could face a food crisis due to e.g. a climate related shock. Enterprising poor are 
literate and numerate, live in cabins and have some livestock and chicken. Enterprising poor were 
able to increase their asset base over the last couple of year, by migration and diversifying their 
income base. They are targeted through PKSF’s income generating activities programme (Jagaron) 
or agricultural (Sufolon) programme as well as suppliers under RTMPs VC activities. Their average 
annual income is BDT 9693 and average expenditure on major food crops is 5616.   
 
Enterprising poor: This group has land holdings between 50-2.49 acres and a small herd of cattle 
& poultry. Depending on their agro-ecological zone, they are involved in rice or crop production. 
Enterprising poor are food secure and, just as the transitional poor, literate and numerate. They 
live in cabins and in some cases in fixed structures. Many of the enterprising poor farmers have 
been able to expand their asset base over the last couple of years by increasing their land 
holdings. This groups is targeted through PKSFs agricultural programme as well as Jagaron, 
Sufolon and Agressor loan products. Their average annual income is BDT 16172 and average 
expenditure on major food crops is 7526. 
 
Using existing procedural guidelines, financial services are provided to micro-enterprises and to 
growing/larger enterprises and agribusinesses. Based on a typology from the DFID funded study: 
Diagnostic of Micro-enterprise lending (ME) lending by MFIs in Bangladesh, the table below (i) 
describes different types of enterprises and (ii) how they relate to PKSF loan products and NBFI 
lending products. 
  
 
 
B. 
Natural resources  
15.  
Bangladesh is predominantly a riverine, deltaic country, with around 80% of its surface 
classifying as floodplains and having an extensive coastal area, jointly forming the Bangladesh 
Plain. Part of the world’s largest delta, the country has been formed over centuries from sediments 
deposited by the Ganges, Brahmaputra and Meghna (GMB) river system, which converge on the 
Bengal Basin. There are only a few non-plain areas in the country, notably the Chittagong Hills in 
the southeast and the highlands in the northwest. Bangladesh's alluvial soils are highly fertile, but 
vulnerable to floods as well. Flooding is highly common phenomenon in Bangladesh, and in many 
ways society has adjusted to these natural dynamics. Nevertheless, floods still present a major risk 
to human lives and economic activity. The 1998 flood inundated about 75% of the country 
including Dhaka, made 30 million people homeless and killed over a thousand people. Other major 
natural hazards in Bangladesh include cyclones and tornadoes, equally presenting a major risk to 
human lives and the economy. 
16.  
Water. During the annual monsoon period, the rivers of Bangladesh flow at some 140,000 
m3/s, while during the dry period this only amounts to 7,000 m3/s. More than 60 % of the net 
arable land, some 91,000 km², is cultivated in the rainy season despite the possibility of severe 
flooding, and nearly 40 % of the land is cultivated during the dry winter months. Water resources

management interventions have therefore aimed at both providing flood protection and drainage 
during the rainy season, and irrigation facilities for the expansion of winter cultivation. Major water 
control projects have been implemented by the government to provide irrigation and flood control. 
In addition, thousands of tube wells and electric pumps are used for local irrigation. 
17. 
Forestry. Bangladesh has three categories of forests based on topographic conditions: (i) 
hill forests, moist tropical evergreen and semi-evergreen forests comprising more than half of the 
country’s total forest resources and carrying high ecological importance; (ii) Plain Sal Forests, 
Tropical Moist Deciduous forests that have been reduced to only scattered and degraded patches; 
and (iii) Littoral Mangrove Forests, of which the Sundarbans area is the most prominent (see 
below). Bangladesh has a network of Social Forestry projects that involves communities with a 
legally binding benefit sharing mechanism. The region also features significant coastal 
afforestation programs.  
21.  
Fish resources. Fisheries resources, both brackish and freshwater, in the coastal areas are 
remarkable. Bangladesh has the highest per capita consumption of fish-based animal protein on 
the planet. The National Fisheries Policy (NFP), Inland Capture Fisheries Strategy (ICFS) and 
National Shrimp Policy (NSP) (GoB, 2014)8 were heavily drawing from the open capture fisheries in 
the region. The Jashore District is famous for breeding freshwater fish and catering to the entire 
country with fish fingerlings. The introduction of aquaculture in coastal areas has had very serious 
ecological effect. Vast areas previously used for crop agriculture have been transformed into 
intentional, perennially waterlogged landscapes to boost shrimp farming. Shrimp is a major export 
commodity however the sector is losing international market. Shrimp exports fell for a fourth 
consecutive year in 2017-18 in the face of persistent weak demand in the international market for 
the locally farmed shrimp. The business community as well as the small farmers are therefore 
trying to diverse the aquatic production system by introducing white fish and, more importantly, 
mud-crab. Mud-crab is one of RMTP’s potential value chains. Meanwhile, studies have shown 
through life cycle analysis that intensification of aquaculture can actually reduce environmental 
impact, for instance by producing different spices of fish in same pond utilizing feed better, thereby 
creating less waste9. The RMTP interventions will aim to promote such practices as well as RAS and 
other technologies to reverse the environmental degradation trend in these areas.   
16.  
Sundarbans and protected areas. A particularly important area for natural resources and 
conservation is the Sundarbans area, a mangrove area of about 10.000 km2 spanning both 
Bangladesh and India.  The whole Sundarbans area is intersected by an intricate network of 
interconnecting waterways, of which the larger channels are often a mile or more in width. The 
Sundarbans – a Ramsar site and UNESCO World Heritage Site – includes three Protected Areas 
(PAs) (wildlife sanctuaries): Sundarbans South, Sundarbans East and Sundarbans West. The 
wildlife sanctuaries are managed by BFD’s Wildlife and Nature Conservation Circle (WNCC) under 
the Protected Area Rules (GoB, 2017). An integrated management plan for the entire SRF provides 
the overall guiding principles for management. The Sundarbans Reserve Forest (SRF), the wildlife 
sanctuaries and the ECA are managed through collaborative management or co-management – a 
shared governance system that involves the community as environmental stewards sharing the 
management responsibilities with the BFD and DoE.  
19.  
Throughout the country, Ecologically Critical Areas (ECA) are identified and controlled under 
the Department of Environment (DoE). The ECAs are managed under the ECAs Rules (GoB, 2016) 
promulgated under Bangladesh Environmental Conservation Act (BECA) (GoB, 2010).10. 
20.  
Wildlife. Bangladesh was once home to a large number of species that have currently 
reduced to a much smaller number primarily concentrated in the Sundarbans and Chittagong Hills. 
Species include the Bengal Tiger, Asian Elephant, Gibbon and Asian Black Bear. Bangladesh is a 
priority country of the Global Tiger Action Plan; therefore, the Sundarbans as the home of Bengal 
Tiger attracts added global attention. The BFD has a Tiger Action Plan (GoB, 2009).11 Bangladesh’s 
                                                 
8 GoB, 2014. Bangladesh National Shrimp Policy, Ministry of Fisheries and Livestock. 
 
9 See https://www.stockholmresilience.org/research/research-news/2018-03-05-get-it-right-on-fish-intensity-get-it-right-for-
aquaculture.html  
10 GoB, 2016. Ecologically Critical Area (ECAs) Rules, Ministry of Environment, Forests and Climate Change 
GoB, 2010. Bangladesh Environmental Conservation Act Revised, Ministry of Environment, Forests and Climate Change. 
11 GoB, 2009. Bangladesh Tiger Action Plan, Ministry of Environment, Forests and Climate Change.

only Marine Protected Area, the Swatch of No Ground (SoNG), is a continuum of the protected 
area network ecologically linked to the Sundarbans. 
23.  
The role of microenterprises and their service providers. While the large majority of 
microenterprises to be supported under RMTP have minimal impact on the environment 
individually, 
their 
cumulative 
and 
aggregated impact 
may 
be 
significant. 
Clusters 
of 
microenterprises in a particular value chain may lead to local accumulation of waste and cause 
pollution. Microenterprises are subject to national legislation on environmental management (e.g. 
the Environmental Conservation Rule 1997), but enforcement is often problematic and therefore 
compliance levels typically very low. Service providers, both financial and technical, can and are 
expected to play a role in ensuring the micro-enterprises they invest in have the right micro-
enterprises, by means of screening and capacity building. 
C. 
Climate 
24.  
Current climate. Bangladesh falls under monsoon influenced tropical climate area with an 
average annual rainfall of 2,700 mm, over 85% of which falls during June and October. Average 
day time temperature varies between 23 to 27˚C, while the average night time temperature 
ranges between 18 and 22˚C. While winters are generally dry and mild, summer months are wet 
and moist, the relative humidity is generally over 85% during monsoon season. During late April 
and mid-November, the sea surface temperature often rises above a threshold of about 27˚C, 
which creates an ideal climatic condition to form tropical low and depressions. Sometimes, such 
tropical weather fronts give rise to the formation of cyclones and super cyclones.  
25.  
Natural hazards. Bangladesh as a whole is highly prone to natural hazards including 
cyclones, storm surges, floods, landslides, earthquakes, tsunamis, sea-level rise and increasing 
saltwater intrusion.  On an average, one major cyclone hits Bangladesh in every three years. It is 
believed that the shallow continental shelf, the high tidal range and the inverted funnel shape of 
the Bay play significant roles to ‘guide’ tropical cyclones towards the low-lying delta. Although 
cyclone-related human deaths have been reduced significantly due to improved warnings and pre-
hazard preparedness programmes, cyclones in the past have killed many coastal Bangladeshis. 
26. Climate change trends and predictions. The climate in Bangladesh is changing. 
Temperatures have increased by about 0.3 – 0.5°C between 1960 and 2010. Although the total 
average rainfall does not show any discernible change, the micro-structure of monsoon has been 
exhibiting a number of important changes. For example, the rainfall is exhibiting a bi-modal 
distribution over monsoon, the first peak coming a lot earlier than expected (shifted from middle of 
July to early June). There are increasing numbers of extreme rainfall episodes during the monsoon 
with prolonged rainless days in between, while the late-October rain (Kaitani) has almost 
disappeared. For some districts in particular, it has been observed that rainfall in the pre-monsoon 
and winter season had a decreasing trend whereas it had an increasing trend during monsoon and 
post-monsoon seasons12. 
II. 
Potential project’s social, environmental, and climate change impacts and risks 
A. Key potential impacts 
27. The project’s expected benefits include 
(a) Increased income of targeted small farmers and micro-entrepreneurs; 
(b) Increased food security of targeted small farmers and micro-entrepreneurs; 
(c) Improved nutrition status of targeted small farmers and micro-entrepreneurs through 
bio-fortified new varieties with increased level of micro nutrition, vitamins, 
amongst others 
and proteins; 
(d)  Increase resource use efficiency and re-use including through adoption of drip 
Recirculation Aquaculture Systems, Water 
irrigation, System of Rice Intensification, 
treatment for reuse in processing 
                                                 
12 Rahman et al. (2009) Trend Analysis of Climate Change and Investigation on Its Probable Impacts on Rice Production at 
Satkhira, Bangladesh.

Solar energy for operating milk coolers, 
(e) Increased use of renewable energy through 
cold storage, processing facilities, driers, irrigation pumps; 
(f)  Reduced emissions or emission intensity through precision placement of slow release 
briquettes, higher livestock productivity  
fertilizer 
(g) Reduced vulnerability to climate change through new crop varieties, heat tolerant 
livestock breeds, improved fish breed 
28. The project’s main potential negative impacts prior to mitigation measures include: 
(a) Increase in waste streams and pollution from small-scale agriculture and micro-
entrepreneurs; 
(b) Increased competition for natural resources, e.g. fresh water resources; 
(c) Loss of natural vegetation and habitat due to expansion of land-based micro-
enterprises. 
29. The draft Environmental and Social Management Framework (ESMF) contains a longer list of 
potential impacts. 
B. 
Climate change and adaptation 
30. Bangladesh is consistently ranked in the top list of countries impacted by the effects of climate 
change.  
31. Climate change impacts in the project area. Key climate change impacts for the project 
area are linked to sea level rise contributing to increasing floods and increasing intrusion of saline 
seawater. Subject to various climate change scenarios, sea level rise is expected to inundate 
120,000 km2 by 2050; 14% more of the country may become extremely prone to floods by 2030. 
Coastal salinity problems will likely worsen as changing rain patterns reduce the amount of dry 
season water supply from upstream river sources.  
32. Increasing salinity and mean temperatures have generally negative effects on agriculture. 
Overall, crop production might be reduced by 30% by the end of the century; rice production could 
fall by 8%, and wheat production by 32% by 2050. Winter crop production would be seriously 
hampered due to a warmer and drier environment during non-monsoon seasons, while moisture 
stress might force farmers to reduce the area under irrigated rice cultivation. 
33. Climate change adaptation. The concrete impacts of climate change already caused a 
considerable amount of autonomous adaptation amongst farmers in the target districts, involving 
changes to livelihood assets and income generating activities13.  It has also prompted many 
climate change related strategies and projects to be implemented in the project area, which offer 
opportunities for leverage and partnership to RMTP. Most relevant strategies and projects include: 
the Bangladesh Climate Change Strategy and Action Plan (2009)14, the National Adaptation 
Programme of Action (2009)15,  
III. 
Environmental and social category 
34. The preliminary Environmental and Social categorization for this project is B. The potential 
negative impacts of this project are those linked to small and medium agribusinesses and other 
micro-enterprises and are small and site-specific. The primary environmental risk relates to 
cumulative / aggregated impact of various small agribusinesses and micro-enterprises in a cluster, 
thereby posing a considerable risk in terms of waste streams and pollution. This risk can however 
be managed using mitigation measures already identified and accessible to project implementers 
and beneficiaries. The project will integrate activities to proactively address these issues, such as 
the introduction of climate-smart technologies and environmentally sustainable practices such as 
balanced fertilizer use and integrated pest management, composting, briquettes from compost and 
chemical fertilizer. Social risks are minimal, with project interventions aimed at better inclusion of 
                                                 
13 University of Leeds (2016) Autonomous adaptation to riverine flooding in Satkhira District, Bangladesh: insights for 
transformation.  
14 See https://www.iucn.org/downloads/bangladesh_climate_change_strategy_and_action_plan_2009.pdf  
15 See https://unfccc.int/resource/docs/napa/ban02.pdf

youth and women in value chains. A draft Environmental and Social Management Framework 
(ESMF) has been developed and will be finalized prior to implementation. 
IV. 
Climate risk category 
35. The Climate risk category for this project is rated as Moderate, based on the selected value 
chains and areas to be supported under the project. Although the project area is highly vulnerable 
to the impact of climate change, the project will be well-positioned to leverage several ongoing 
climate change-related initiatives in the area. Given the high number of studies already carried out 
in Bangladesh, a basic climate risk analysis has been carried out for the value chains to be 
supported as part of the ESMF and much focus has been put on the previous experience of PKSF in 
the World Bank funded Climate Change project. The ESMF incorporates and refers to an inventory 
of proven measures to both adapt to climate change and reduce greenhouse gas emissions that 
can be promoted. This includes the introduction of flood and drought tolerant varieties, 
mechanisation enabling cultivation on ridges, aquaculture in the valleys and land-based vertical 
recycling production systems for mud crab. Emission reduction interventions are especially 
important for the meat (beef, poultry and goat), dairy and rice value chains. 
V. 
Recommended features of project design and implementation 
A. 
Environment and social mitigation measures 
36. Environmental and social risk management measures to be deployed under RMTP comprise the 
following: 
37. Firstly, the project will need to deploy screening and due diligence tools to select those 
(portfolios of) companies that have limited environmental and social risk and are incompliance 
with the law and regulations (including regulations and limitations on protected areas). For 
component 1, this would be done through the screening procedure already established for other 
projects (e.g. the Sustainable Enterprise Project (SEP), World Bank-funded and also implemented 
by PKSF16). In component 2, this should be part of the evaluation criteria of various EOIs to be 
issued, and/or integrated in the due diligence following the EOI phase. Environmental and social 
selection criteria need to be realistic, fit to the context of operation, and inclusive. This may create 
potential trade-offs in the selection process, however certain gaps identified during due diligence in 
terms of environmental and social performance can be addressed through provision of technical 
services once selected. 
38. Secondly, the project component structure enables the project to ensure environmental and 
social sustainability of investments through the provision of non-financial services for producers 
(component 1.2) and enterprise strengthening in component 2.2. Under sub-component 1.2, PKSF 
will organize trainings in crop/livestock/aquaculture management. For cropping, specific attention 
will be devoted to the selection, application and safe handling of pesticides. For livestock, training 
will cover para-veterinarian activities such as routine vaccinations and health care in a safe 
manner. For aquaculture, training will focus on environmentally-sustainable production practices 
and fish health care.  
39. The project will seek to align with existing national and international standards and 
certification systems, such as GlobalGAP, building on existing work by the FAO Food Safety 
Network17. RMTP will engage accredited certifying organizations to develop group protocols for 
livestock, aquaculture and crops. These organizations will train the technical advisors as well as 
focal farmers/micro-entrepreneurs to introduce protocols and will organize the eventual 
certification of PAs. The technical advisors will assist PAs to comply with the standards introduced. 
A similar process will be applied for HACCP, in cases where field-level HACCP compliance is 
required. Halal standards will also be introduced where required by the market. For cattle, 
electronic chipping will be introduced to ensure traceability. 
40. There are a number of projects which RMTP will leverage in terms of knowledge and best 
practices on environmental and social risk management, including: 
                                                 
16 See Project Information Document for SEP: 
http://documents.worldbank.org/curated/en/636751500364935990/pdf/ITM00184-P163250-07-18-2017-1500364933222.pdf  
17 See http://www.fao.org/in-action/food-safety-bangladesh/en/

(a) The World Bank-funded Sustainable Enterprise Project (SEP), also implemented by 
PKSF and integrating several measures for ensuring sustainability such as screening 
tools and ‘green portfolio’ monitoring. 
(b) The World Bank-funded Bangladesh Sustainable Coastal and Marine Fisheries Project, in 
particular for the fisheries and aquaculture aspects of the project. 
B. 
Climate change mitigation measures 
41. Bangladesh has a low per-capita contribution to greenhouse gas emissions (some 0.5 
MT/capita). The country’s INDC18 (2015) aims at a 15% reduction in greenhouse gas emissions 
compared to Business As Usual by 2030, and has limited specificity in terms of reducing emissions 
from agriculture.  
42. The project will however engage in several value chains with significant potential for 
greenhouse gas reduction, including beef, poultry, dairy, goats and rice. The aim for these value 
chains should be to reduce the carbon intensity of each value chain, for instance by increasing the 
milk production of each cow, thereby lowering the emissions per litre of milk (dairy products) 
produced rather than reducing absolute emissions from each value chain per se.  
41. For dairy in particular, a study by FAO has shown that low-emission dairy development can 
provide improved productivity while reducing emission intensity by 17%. Strategies to reach this 
goal include (i) improving the quality and availability of feed resources; (ii) strategic feeding and 
supplementation to address seasonality constraints; (iii) improved herd management; and (iv) 
improving animal breed. 
42. Rice production is another major global source of greenhouse gasses, particularly methane19. 
The use of Alternate Wetting and Drying (AWD) and System of Rice Intensification (SRI) in rice 
production can reduce greenhouse gas emissions by half through avoiding anaerobic 
decomposition of organic matter, while at the same time reducing water use by 30%. This system 
however requires a higher level of water control. Another strategy for greenhouse gas reduction is 
the adoption of Deep Placement of Urea, a technique to apply fertilizer at greater soil depth (7-10 
cm). This also reduces the amount of fertilizer needed by 30%, at the same time increases yield 
by 15-20% and reduces emission by 30%. Introduction of GGAP will reduce overall use of input 
reducing cost and often increase productivity at the same time.  
43. The ESMF includes an inventory of such practices for the different project value chains. These 
include in particular the ‘no regret’ or common-sense interventions that reduce emissions while 
improving profitability of micro-enterprises. 
C. 
Incentives for good practices 
44. As mentioned above, incentives for good practices (environmentally and socially sustainable, 
increasing resilience to climate change and reducing greenhouse gas emissions) in the RMTP 
project need to be based on market mechanisms. Some good practices may be directly financially 
interesting for target agribusinesses and micro-entrepreneurs, where the role of the project will be 
primarily that of awareness raising and training through technical service provision. 
45. In other instances, financial benefits may be more long-term or indirect. For instance in terms 
of food safety, initial incentives are in the form of saving input and optimize their use bringing 
instant benefits. However, premium price for GGAP might take some promotion of differentiation 
between safe and non-safe food with associated price differences. Finally, the project may apply 
screening to select certain business already deploying good practices, or those committing to 
implementing such practices.  
D. 
Participatory processes 
46. Consultations during the design process with target small-scale agribusinesses and 
microenterprise owners clearly showed that if knowledge and technology are available the 
                                                 
18 Intended Nationally Determined Contributions, see 
https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Bangladesh%20First/INDC_2015_of_Bangladesh.pdf  
19 See http://ghgmitigation.irri.org/our-work/bangladesh and https://ccafs.cgiar.org/fr/blog/mitigation-co-benefits-increased-
water-and-nutrient-efficiency-irrigated-rice-bangladesh#.XBzka1xKg2w

readiness to adopt environmentally sound practices is high. The biggest barriers and opportunities 
that these target entrepreneurs face in adopting environmentally sound technologies and fair 
labour practices, are the lack of knowledge and technologies. Field visits confirmed that when 
advisory services were paid by farming enterprises the adoption rate was close to 100%, indicating 
that there is a viable business case for commercial knowledge and technologies services. 
Introduction of pay based advisory service appears to be effective and can be introduces by cost 
sharing the advisors for a few years.   
47. The project itself will deliver services to targeted entrepreneurs and producers’ associations. 
The services to be delivered will be based on consultations, but feedback mechanisms should be 
built into the project that will allow the project management unit to monitor if the services 
delivered respond to the needs of the targeted people, and how the topics and content of training 
can be adjusted to match the evolving context. This kind of adaptive management of service 
delivery needs to be facilitated by a well-functioning monitoring and evaluation system. Finally, the 
project will implement a grievance redress mechanism as part of its Environmental and Social 
Management Framework.  
VI. 
Analysis of alternatives 
50. The choice of value chains to invest in is one of the most important alternatives to consider in 
the process. Each value chain has its own characteristics in terms of environmental and social risks 
and opportunities, ranging from the type and intensity of waste streams associated with a certain 
enterprise, to the accessibility of each value chain for starting entrepreneurs. To the extent 
possible, a “green portfolio” of value chains will be selected having a higher level of control and 
precision, contribute to an environmentally sustainable economy and that are often also more 
attractive to youth.  
51. Another alternative is the choice of target area. Generally, Bangladesh is relatively vulnerable 
to climate change due to the proximity to the ocean, thereby running the risk of salinization and 
flooding. Such risks are however predominant across Bangladesh and such areas cannot be 
avoided. At higher level of detail, geographic targeting of production clusters will be evaluated for 
environmental and social risks in that specific area. 
52. In a no-project scenario, the potential negative impacts may still occur as the micro-enterprise 
sector develops albeit at a slower pace and PKSF and partner organizations would not be in the 
same position to deliver technical services to guide the growth of this sector.  
VII. Institutional analysis 
A. 
Institutional framework 
53. RMTP will be managed and implemented primarily by PKSF. PKSF was established by the 
Government of Bangladesh and is one of the primary vehicles for facilitating sustainable 
development in the country, working together with their partner organizations. Jointly, these 
organizations have also built up a long track record of working with international development 
partners on similar projects, incorporating the environmental, social and climate requirements 
brought along.  
54. PKSF itself has developed substantial internal capacity on various cross-cutting themes linking 
to the SDGs and has developed a range of policies and strategies covering environmental and 
social management, discrimination, sexual harassment and others20. In terms of staffing, PKSF has 
established various units for cross-cutting items including social advocacy, environment and 
climate change. Whereas PKSF will be responsible to monitor overall implementation and setting 
the standards for implementation in terms of environmental and social performance, 
implementation is very much dependent on the capacity of partner organizations. During selection 
on Participating Partner Organisations, and NBFIs in particular, will undergo an analysis of their 
capacity and identify capacity building needs. 
                                                 
20 See http://pksf-bd.org/web/?page_id=3515

55. RMTP will not integrate all cross-cutting issues into the internal capacity of the implementing 
organizations, but rather to leverage the expertise and capacity of partners to deliver the intended 
outcomes. This could for instance include the FAO Food safety network, a collaboration of 
international and national development partners with significant experience on the topic of 
promoting food safety. Also, the project will capitalize on the learnings of other projects 
implemented by PKSF or partners organizations around for example nutrition and empowerment. 
The same will hold true for climate change related topics for each of the selected value chains. 
B. 
Capacity building 
56. The design of RMTP includes various elements of capacity building related to environmental 
and social performance, through technical services components 1.2 and 2.2. The capacity building 
will also address the capacity of POs to implement the project in compliance with the policies of 
PKSF, as well as the potential to use the technological innovations proposed (such as blockchain 
technology, crowdfunding and IT) to enhance environmental and social performance. Specifically, 
RMTP will attract a competent nutrition expert who is able to execute a thorough nutrition analysis 
and target value chains that are able to address this situation.  
VIII. Monitoring and Evaluation 
57. A strong M&E system will be integral part of RMTP and indicators relating to environmental and 
social performance have been developed. The project Management Information System will be 
used as a vehicle to integrate such indicators. This will start with indicators for which data is 
readily available, such as gender and youth-disaggregation in portfolio monitoring. Periodic reviews 
of such data would look at performance of certain value chains against climatic data, to be 
obtained from external sources such as the Meteorological services. 
58. Beyond basic data, the M&E system will also allow the project to collect additional data on 
environmental and social performance. This will for instance include the ‘green portfolio’ indicator 
that is has being developed for the SEP project implemented by PKSF, or further expanding this 
indicator to be tailored to each of the value chains to be targeted under RMTP.  
59. Apart from monitoring the investment portfolio, the M&E system will also provide PCU 
information on the effectiveness and efficiency of technical services being delivered.  
IX. 
Budgetary resources and schedule 
61. Budgetary resources to implement the SECAP related aspects of RMTP are included in the 
project design document and cost tables.  
XI. 
Record of consultations 
62. A list of people consulted is available in the project life file. 
Answers to guiding questions and explanations: Climate Change 
 
 
Yes 
No 
Additional explanations for “yes” response 
Is the project area subject 
to extreme climatic 
events, such as flooding, 
drought, tropical storms 
or heat waves?  
 
 
Bangladesh as a whole is prone to natural hazards 
including cyclones, storm surges, floods, landslides, 
earthquakes, tsunamis, sea-level rise and 
increasing saltwater intrusion. 
Do climate scenarios for 
the project area foresee 
changes in temperature, 
rainfall or extreme 
weather that will 
adversely affect the 
project impact, 
sustainability or cost over 
its lifetime?  
 
 
Bangladesh is expected to see continued 
temperature increases in line with global warming 
effects. Although the total average rainfall does not 
show any discernable change, intra-seasonal 
changes are predicted. For example, increasing 
numbers of extreme rainfall episodes during the 
monsoon with prolonged rainless days in between.

Would the project make 
investments in low-lying 
coastal areas/zones 
exposed to tropical 
storms?  
 
 
 
Would the project make 
investments in glacial 
areas and mountains 
zones?  
 
 
 
Would the project 
promote agricultural 
activity in marginal and/or 
highly degraded areas 
that have increased 
sensitivity to climatic 
events (such as on 
hillsides, deforested 
slopes or floodplains)?  
 
 
A large part of the RMTP target landscape is 
composed of freshwater and coastal floodplains. 
The flooding pattern is however part of the normal 
situation in these areas, and people have developed 
mechanisms to deal with such events. 
Is the project located in 
areas where rural 
development projects 
have experienced 
significant weather-
related losses and 
damages in the past?  
 
 
Yes, particularly in the coastal areas in Bangladesh, 
achievements of development projects – fully or in 
part – always run the risk of being washed away 
because of natural calamities. There have been 
instances that major development interventions 
such as coastal embankments had given in to 
natural hazards.  
Would the project 
develop/install 
infrastructure in areas 
with a track record of 
extreme weather events?  
 
 
RMTP will not embark on building any major 
physical infrastructures. However, the crab 
hatcheries will be located in areas sensitive to 
extreme weather in tandem with other agricultural 
production systems and rural enterprises. 
Is the project target group 
entirely dependent on 
natural resources (such as 
seasonal crops, rainfed 
agricultural plots, 
migratory fish stocks) that 
have been affected by in 
the last decade by climate 
trends or specific climatic 
events?  
 
 
 
Would climate variability 
likely affect agricultural 
productivity 
(crops/livestock/fisheries), 
access to markets and/or 
the associated incidence 
of pests and diseases for 
the project target groups?  
 
 
Yes, the majority of value chains selected will be 
affected by climatic variability. 
Would weather-related 
risks or climatic extremes 
likely adversely impact 
upon key stages of 
identified value chains in 
the project (from 
production to markets)?  
 
 
Yes, as part of the RMTP target area falls in the 
climate and natural disaster-prone regions. 
Is the project investing in 
climate-sensitive 
livelihoods that are 
diversified?  
 
 
RMTP will be promoting a diverse range of 
agricultural and aquaculture value chains that may 
be climate-sensitive. 
Is the project investing in 
infrastructure that is 
exposed to infrequent 
 
 
In part of the target RMTP areas, any project 
investment, including infrastructures, will be

extreme weather events?  
exposed to extreme weather events. 
Does the project have the 
potential to become more 
resilient through the 
adoption of green 
technologies at a 
reasonable cost?  
 
 
The RMTP concept already recognizes the climate 
and extreme weather-related threats and has 
incorporated climate-sensitive approaches in 
selecting technological inputs. 
Does the project 
intervention have 
opportunities to 
strengthen indigenous 
climate risk management 
capabilities?  
 
 
Yes. The RMTP will work on capacity building 
programs, including climate risk management. The 
partner organization – PKSF – has an excellent 
track record of implementing climate change 
mitigation and adaptation projects. 
Does the project have 
opportunities to integrate 
climate resilience aspects 
through policy dialogue to 
improve agricultural 
sector strategies and 
policies?  
 
 
Yes. The RMTP will target policy dialogues on 
various issues.it is expected that climate related 
policy issues will be also included to better 
safeguard the investments. 
Does the project have 
potential to integrate 
climate resilience 
measures without 
extensive additional costs 
(e.g. improved building 
codes, capacity-building, 
or including climate risk 
issues in policy 
processes)?  
 
 
The RMTP concept has been cognizant of the fact 
that climate variability and extreme weather 
situations that may affect the production systems 
may be of common occurrence. Therefore, the 
project will focus on climate-smart technologies. 
Based on the information 
available would the 
project benefit from a 
more thorough climate 
risk and vulnerability 
analysis to identify the 
most vulnerable rural 
population, improve 
targeting and identify 
additional complementary 
investment actions to 
manage climate risks?  
 
 
Though the answer is affirmative, RMTP can build 
on climate risk analyses done by other 
development partners and the GoB, as well as a set 
of tools and procedures already developed in PKSF 
to manage climate risks.

Environmental and Social Management Framework (ESMF)

Contents 
Abbreviations and acronyms .......................................................................................... 18 
1. 
Introduction ............................................................................................................ 19 
1.1 
Background ..............................................................................................................19 
1.2 
Project Description ....................................................................................................19 
1.3 
Purpose of this ESMF .................................................................................................19 
1.4 
About this ESMF ........................................................................................................20 
2. 
Project Components ................................................................................................ 20 
3. 
Institutional and Legal Framework ......................................................................... 20 
4. 
PKSF’s Environmental and Social Management Approachs ...................................... 21 
4.1 
Policies and procedures ..............................................................................................21 
4.2 
Organizational capacity ..............................................................................................22 
4.3 
Ongoing developments and mainstreaming ...................................................................22 
5. 
Environmental and Social Management in RMTP ..................................................... 23 
5.1 
Principles..................................................................................................................23 
5.2 
Potential Impacts and related Mitigation Measures .........................................................23 
5.3 
Climate Change Adaptation and Mitigation ....................................................................25 
5.4 
Processes and procedures ..........................................................................................26 
5.5 
Monitoring, Evaluation and Learning ............................................................................26 
5.6 
Consultation .............................................................................................................27 
5.7 
Grievance Redress Mechanism ....................................................................................27 
5.8 
Costs of implementing the ESMF .................................................................................28 
6. 
Innovation .............................................................................................................. 28 
6.1 
Microenterprise Sustainability Scoring ..........................................................................28 
6.2 
Categorization and Management at Cluster level ...........................................................29 
7. 
Other References and Learning ............................................................................... 29 
Annex 1: PKSF Environmental Assessment and Monitoring Flow Chart .......................... 30 
Annex 2: PKSF Exclusion List (environmental issues) .................................................... 31 
Annex 3: PKSF Exclusion List (social Issues) ................................................................. 32

Abbreviations and acronyms 
 
AWPB        Annual Work Plan and Budget 
EHS 
 
Environment, Health and Safety 
EMP 
 
Environmental Management Plan 
FAO 
 
Food and Agriculture Organisation 
GoB 
 
Government of Bangladesh 
IFAD 
 
International Fund for Agricultural Development 
IT              Information Technology  
IEE 
 
Initial Environmental Examination 
M&E 
 
Monitoring and Evaluation 
MFI 
 
Microfinance Institution 
MIS 
 
Management Information System 
MoEWOE 
Ministry of Expatriates' Welfare and Overseas Employment 
MoF 
 
Ministry of Finance 
MoU 
 
Memorandum of Understanding 
MRA 
 
Microfinance Regulatory Authority 
MSME       Micro, small and medium enterprise 
MTR 
 
Mid-Term Review 
NGO 
 
Non–Governmental Organisation 
PACE          Promoting Agricultural Commercialization and Enterprises 
PCR 
 
Project Completion Report  
PDR           Project Design Report 
PKSF 
 
Palli Karma-Sahayak Foundation 
PMU         Project management Unit 
PO             Partner Organization 
PY 
 
Project Year 
R&D          Research and development  
RIMS 
 
Results and Impact Management System 
SEP 
 
Sustainable Enterprise Project 
SMF 
 
Social Management Framework 
TA 
 
Technical Assistance

1. Introduction 
1.1 
Background 
The Government of Bangladesh (GoB) and the International Fund for Agricultural Development 
(IFAD) are jointly developing a new project aimed at investing in rural microenterprises, the Rural 
Microenterprise Transformation Project (RMTP). As part of the final design stage of this project, a 
set of documents is produced to assist and guide the implementation of this project. 
IFAD has over recent years enhanced its approach to environmental, social and climate risk 
management in the project it invests in. One of the key instruments to manage environmental and 
social risks in projects is the Environmental and Social Management Framework, which is the 
subject of this document. 
1.2 
Project Description  
The Rural Microenterprise Transformation Project (RMTP) will be a six-year project running from 
2020 to 2025, with a total cost of USD 190M of which USD 81M funded by IFAD and targeting the 
entire country of Bangladesh. The GoB Ministry of Finance is the Executing Agency of the Project, 
whereas the Palli Karma-Sahayak Foundation (PKSF, ‘Rural Employment Support Foundation’) will 
be the implementing agency for the project except for subcomponent 2.3 concerning remittances, 
which will be implemented by the Ministry of Expatriates' Welfare and Overseas Employment 
(MoEWOE).  
The project goal is to increase the income and nutrition of farmers across selected value chains.. 
The project's development objective is the sustainable growth of selected rural commodity value 
chains. The central strategy of the project is to work in production clusters of in three broad 
agricultural sectors or in areas with potential for creation of agri-business clusters. PKSF has 
identified several hundred such clusters of small-scale production of horticulture, pond fisheries 
and poultry & livestock. Details on the project components and activities are presented below. 
1.3 
Purpose of this ESMF 
IFAD has over the last years updated its approach to environmental, social and climate risk 
management. Building on IFAD’s Environment and Natural Resource Management (ENRM, 2011) 
Policy that stresses project designs present opportunities to improve systematic integration and 
scaling up of environmental and natural resource management, IFAD’s Social Environmental and 
Climate Assessment Procedures (SECAP, 2017)21 describe how to better mainstream 
environmental, social and climate change considerations into the project cycle, going beyond 
“doing no harm” to maximize development gains. The SECAP are of a similar nature to safeguards 
procedures in other organizations. 
 
In line with IFAD policy, a SECAP review note was prepared for RMTP at concept note stage, which 
identified RMTP as a Category B project in terms of environmental and social risks. The potential 
negative impacts are those linked to micro-enterprises and small to medium agribusinesses and 
are small and site-specific. The primary environmental risk relates to the cumulative/aggregated 
impact of various micro-enterprises and small agribusinesses in a cluster, thereby posing a 
considerable risk in terms of waste streams and pollution. This risk can however be managed using 
mitigation measures already identified and accessible to implementers and target groups. 
 
RMTP is a nationwide project with a high number of subprojects of which the location has not yet 
been decided. The large majority will most likely fall in Category C, whereas only a few activities 
may be classified as Category B and thereby requiring Environmental and Social Management 
Plans. Based on these characteristics, an Environmental and Social Management Framework is the 
best instrument to guide implementation of the project and manage the environmental and social 
risks and opportunities. Climate considerations, both in terms of adaptation as well as mitigation, 
have been integrated into this framework. 
 
 
IFAD recognizes that GoB has its own systems for delivering safeguards and ensuring 
environmental and social sustainability of projects. Furthermore, it recognizes that using those 
systems and actively supporting them enhances development impacts in the longer term and 
reduces transaction costs. This ESMF therefore builds as much as possible on existing policies, 
procedures and in-country capacity, both within GoB line ministries and agencies, as well as within 
PKSF as a government-mandated institution. In addition, IFAD seeks to align its approach with 
other international financial institutions including the World Bank. 
                                                 
21 See https://www.ifad.org/en/secap

1.4 
About this ESMF  
The preparation of this ESMF has been guided by IFAD’s policies and SECAP as well as 
Bangladesh’s legal, policy and regulatory framework for environmental and social management. 
The first draft of this ESMF was prepared in March – April 2019 through collection and review of 
primary and secondary baseline data, consultations with key stakeholders and project area 
communities, site visits to partner organizations and their field activities, and report writing. It 
should be noted that, as a Category B project with relatively smaller risks compared to Category A 
projects, this ESMF is more focused on broad risks and opportunities management strategies and 
capacity building efforts aimed at lifting the environmental and sustainability level of large groups 
of micro-entrepreneurs. None of the sub-projects in this project will require a formal 
Environmental and Social Impact Assessment and only very few projects may require a formal 
Environmental and Social Management Plan to be developed; these procedures are therefore not 
the primary topic of this ESMF.   
 
This ESMF is based on the Project Design Report (PDR) dated April 2019. Although the PDR is still 
being reviewed and finalized and component descriptions may change, the types of interventions 
and overall project target area are likely to remain the same. Should there be any significant 
changes in the PDR, these would need to be reflected in an updated ESMF. The ESMF will be 
disclosed on the PKSF website and various elements of it, primarily the procedures and forms used 
in screening and monitoring of subprojects, will be disclosed in Bangla at the local level through 
PKSF’s partner organizations. 
2. Project Components 
The RMTP comprises the following components: 
Component 1: Value Chain Enhancement. This component will enable rural producers to 
sustainably expand their practices through (i) the promotion of private extension services, (ii) the 
promotion of food safety standards (iii) adoption of efficient production methods and (iv) support 
with market linkages. In addition, activities under this component contribute to an enabling 
environment that promotes the growth of micro, small and medium enterprises. 
Component 2: Financial Services. This component will offer financial services to beneficiaries 
and micro enterprises allowing for the sustainable growth of their practices. PKSF’s Partner 
Organizations target beneficiaries through their conventional loan programme under this 
component. In addition, RMTP finances small enterprises and agribusinesses through non-bank 
financial institutions. 
Component 3: Institutional Strengthening and Project Management. This component 3 will 
strengthen the capability of PKSF and POs to capitalize on emerging trends in financial services, 
commercial platforms and new technologies. Through the provision of technical assistance and 
training, the project will build PKSF and POs capacity by gradually and carefully integrating ICT-
based solutions and other innovations into their operations. 
Full details on the project design can be found in the Project Design Report. It should be noted 
that this ESMF is focused on the activities carried out by PKSF and their Partner Organizations.  
3. Institutional and Legal Framework 
This project in particular, and the microfinance and microenterprise development space in 
Bangladesh in general, are situated in a multi-level institutional framework. The main RMTP 
implementing body, PKSF, is an apex body implementing their programme of work through a 
network of more than 270 Partner Organizations (POs). These POs are registered microfinance 
institutions (MFIs) and/or NGOs (referred to here as NGO-MFIs) who all have their own target 
geographies across Bangladesh, as well as their own specialties in terms of value chain 
development.  
PKSF is a government-mandated organization registered as a not-for-profit company with 
interactions with government at various levels. At governance level, the PKSF Governing Body 
comprises 7 members of which 3, including the Chairman, are nominated by the GoB.  At strategic 
and programmatic level, PKSF interacts and collaborates with various Government line ministries 
and agencies. 
PKSF has its own set of policies and procedures22, of which some are effective across the entire 
PKSF portfolio, and some are only effective for certain projects according to the specificities of that 
project and/or donor requirements. These policies and procedures are cascaded onto the Partner 
                                                 
22 See http://pksf-bd.org/web/?page_id=3515

Organizations who in turn also have their own policies and procedures and, in most cases, also 
work with various funding institutions.  
 
Within PKSF and its partner organizations, two major workstreams can be distinguished. The first 
and primary workstream is its core microfinance and loan portfolio comprising Agrosor 
(Microenterprise), Jagoran (microcredit for moderately poor), Sufalon (seasonal agricultural loan) 
and Buniad (loan for the very poor) programmes. A second workstream is a diverse set of 
projects, special programmes and capacity building activities that mostly target specific groups of 
producers or value chain actors. While the core finance activities have a much larger outreach, 
many of PKSF and Partner Organizations’ clients are reached through the various programmes and 
projects as well. From a management perspective, many projects in the workstream seek to test 
approaches and tools that are, if found successful, to be mainstreamed across the two 
workstreams. 
An important government agency in the institutional framework is the Microfinance Regulatory 
Authority (MRA). The MRA is the central body to certify, monitor and supervise the operations of 
NGO-MFIs, created through the Microfinance Regulatory Authority Act of 2006. MRA has 
established a set of rules and regularly issues circulars, some of which touch on social issues but 
not broader Environment, Social and Governance (ESG) requirements. Non-Banking Financial 
Institutions, targeted in RMTP, are regulated by the Bangladesh Bank. 
These institutions are active members of the Alliance for Financial Inclusion (AFI) and have 
participated in the drafting of the National Financial Inclusion Strategy for Bangladesh. An 
important ongoing development in this regard is the establishment of a Credit Information Bureau 
for the microfinance sector, which is ongoing. These developments are highly relevant to the social 
risk management aspect of RMTP, particularly on client protection. 
Outside the financial system, various Government agencies play a role in the institutional 
framework. Partner Organizations often work together with local government and extension 
departments on technical assistance projects, or for instance on government-controlled services 
such as artificial insemination for livestock.  
Important knowledge partners in the country include the Bangladesh Agricultural Research 
Institute, Bangladesh Agricultural Research Council, Bangladesh Agricultural University, 
Bangladesh Institute of Development Studies, Bangladesh Rice Research Institute, International 
Centre for Climate Change and Development amongst others. Furthermore, there are international 
knowledge partners with presence in Bangladesh including the FAO. 
On sexual exploitation and harassment in particular, it should be noted that the Bangladesh 
Supreme Court has issued a decree with directions to all workplaces to prevent sexual 
harassment. PKSF and its Partner Organizations have taken steps to implement the directions as 
given by the Supreme Court. 
4. PKSF’s Environmental and Social Management Approach 
4.1 
Policies and procedures 
PKSF has a comprehensive set of policies and procedures in place to govern its operations23. The 
most important in the light of this ESMF include: 
 
PKSF Lending policy and procedures. The lending policy outlines the conditions for 
lending to Partner Organizations and sets the requirements for the core programmes / 
financial products. These include, for some products but not all, the requirement of 
“environmentally friendly income generating activity”.  
 
PKSF Statement of non-discriminatory practices. Statement (policy) explaining that 
PKSF does not allow any discrimination against any employee or project participants for 
employment because of race, color, national or ethnic origin, age, religion, disability, sex, 
sexual orientation, gender identity and expression. 
 
PKSF Environmental Management Framework (2012). This EMF outlines the key 
principles basic processes for environmental management. This includes a mandatory 
Environmental Screening and, if significant potential negative impacts are identified, a 
subsequent Initial Environmental Examination (IEE) leading to an Environmental 
Management Plan (EMP). A screening checklist is annexed in the EMF. 
 
PKSF Social Management Framework (2012). This SMF includes a screening 
procedure for potential negative social impact issues. It also includes guidelines for using 
                                                 
23 All documents can be found at http://pksf-bd.org/web/?page_id=3515

public and private land and a tribal peoples plan, as well as guidance for integrating social 
and gender issues into all projects.  
 
Policy and Strategy for Protecting Women Employees from Possible Sexual 
Harassment. This policy is particularly aimed at PKSF employees and details the actions 
to be considered sexual harassment, as well as the awareness raising and preventive 
actions to be taken in the organization. 
Apart from the organization-wide policies and procedures, certain projects have developed policies 
and procedures relevant to this ESMF: 
 
Sustainable Enterprise Project (SEP) Environmental Management Framework and 
Social Management Framework24. These two documents are developed especially to 
govern the implementation of the SEP in compliance with the World Bank’s safeguards 
policies (as applicable prior to the enforcement of the revised version in 2018). In addition 
to the two frameworks, the SEP is developing Protocols for use in the core microfinance 
programmes, written in Bangla and aimed at operational use by Partner Organization staff. 
There are currently Protocols for Livestock Waste Management, Safe Banana Cultivation, 
Safe Mango, Loom and Shoe Factories. 
 
Promoting Agricultural Commercialization and Enterprises (PACE). Under PACE, an 
Environment, Health and Safety (EHS) manual for Microenterprise has been developed. 
This EHS manual has subsequently been discussed at a policy dialogue with relevant 
government, NGO and private sector stakeholders25. The EHS manual is a comprehensive 
document written in English. Following feedback received by various stakeholders, parts of 
the EHS may be captured in separate, user-oriented documents written in Bangla. 
4.2 
Organizational capacity 
PKSF employs professionals across the organization with widely varying backgrounds, including 
finance, agronomy, and environmental science. The organization therefore has significant in-house 
capacity on environmental and social subject matters. Partner Organizations similarly comprise 
staff of various educational and technical backgrounds. The challenge however, as in any financing 
organization, is to equip the client-facing officers (of PKSF and the Partner Organizations) with 
solid top-level knowledge of key environmental and social issues thereby knowing what the key 
environmental and social issues are in their work in general, and for individual value chains in 
particular. With that knowledge, client-facing officers should be able to identify issues concerning 
their client and establish what is a material issue, and what is not. Material issues can then be 
followed up on with the assistance of technical experts, internal or external to the organization, 
where needed. The policies and procedures listed above are a tool for client-facing officers, and 
their line managers, to do so. 
In terms of organization set-up, PKSF has established a dedicated unit for Environment and 
Climate Change. Some projects (particularly those funded by the World Bank) have dedicated 
environmental and/or social safeguards managers, whereas others have only focal points assigned. 
Similarly, some projects require Partner Organizations to assign focal points for environmental and 
social safeguards. This is a practice that should be mainstreamed within PKSF as part of the 
update of the PKSF corporate-level Environment and Social Management Frameworks. 
4.3 
Ongoing developments and mainstreaming 
As mentioned in section 4.2, PKSF is currently engaged in a number of activities relating to 
environmental and social management. The tools being developed under SEP (particularly 
commodity-specific protocols) and the EHS manual being developed under PACE will soon be 
tested in the respective projects. With RMTP coming online in 2020, this presents a good learning 
opportunity and eventual adoption of successful practices. Moreover, the organization as a whole is 
in continuous development and as a part of that regularly updating their policies and procedures. 
In light of this, and considering the benefits of having a single, integrated approach on 
environmental and social management across the organization, PKSF is planning to update their 
corporate level Environmental Management Framework and Social Management Framework (both 
dated 2012) with the lessons learned and new elements.  
RMTP can play an enabling role in this mainstreaming effort, by pro-actively testing and 
implementing new measures, and financing consultancies and workshops where needed. For the 
time being, this current document will serve as the ESMF for RMTP. During the update process of 
the PKSF corporate level EMF / SMF, IFAD can be an active participant and review the final version 
                                                 
24 Available at http://projects.worldbank.org/P163250/?lang=en&tab=documents&subTab=projectDocuments 
25 http://pksf-bd.org/web/?p=7167

with a view of adopting these documents as the active ESMF for RMTP once final and approved by 
other relevant stakeholders.  
5. Environmental and Social Management in RMTP 
5.1 
Principles 
The RMTP Environmental and Social Management Approach is based on the following principles: 
 
To ensure compliance with SECAP and thereby the applicable laws, regulations and policies 
of GoB as well as those of IFAD; 
 
To use, as much as possible, existing policies and procedures from inside the implementing 
organisations (PKSF and Partner Organizations) in an effort to support mainstreaming; 
 
To acknowledge that the nature of ensuring environmental and social sustainability of 
microenterprises is that of continuous improvement; 
 
To address all activities under the project, from capacity building to core microfinance; 
 
To address improvements in policies, procedures, staff capacity in an integrated and 
coherent matter. 
 
The RMTP furthermore supports PKSF’s principles of environmental management: 
 
Projects and programs when funded for implementation will be subject to an 
environmental screening and initial environmental examination (IEE) in order to prevent 
execution of sub- projects with significant long-term negative environmental impacts and 
also to plan and implement mitigation measures for less significant environmental impacts, 
 
PKSF will ensure due diligence to the related government regulations (ordinance, acts, 
rules etc.) related to environment  
 
Partner Organizations will be responsible for obtaining and ensuring clearance required 
from local government agencies as necessary, 
 
PKSF will promote environmental sound design of value chain activities and environmental 
capacity building of Partner Organizations and community. 
 
Climate resilient considerations will be integrated in designing relevant projects. 
 
5.2 
Potential Impacts and related Mitigation Measures 
The project’s expected benefits include 
 
Increased income of targeted small farmers and micro-entrepreneurs; 
 
Increased food security of targeted small farmers and micro-entrepreneurs; 
 
Improved nutrition status of targeted small farmers and micro-entrepreneurs through 
amongst others bio-fortified new varieties with increased level of micro nutrition, vitamins, 
and proteins; 
 
Increase resource use efficiency and re-use including through, System of Rice 
Intensification, Recirculation Aquaculture Systems, Water treatment for reuse in 
processing 
 
Increased use of renewable energy through solar energy for operating milk coolers, cold 
storage, processing facilities, driers, irrigation pumps; 
 
Reduced emissions or emission intensity through precision placement of slow release 
fertilizer briquettes, higher livestock productivity  
 
Reduced vulnerability to climate change through new crop varieties, heat tolerant livestock 
breeds, improved fish breed. 
 
The project’s main potential negative impacts prior to mitigation measures include: 
 
Increase in waste streams and pollution from small-scale agriculture and micro-
entrepreneurs; 
 
Increased competition for natural resources, e.g. fresh water resources; 
 
Loss of natural vegetation and habitat due to expansion of land-based micro-enterprises. 
The following table includes a longer list of potential negative impacts and associated mitigation 
measures, compiled from PKSF internal documents as well as external guidance and best 
practices.  
 
 
Risk 
Mitigation measures  
Agricultural production

Increased 
agricultural waste 
streams leading to 
environmental 
pollution 
Encourage construction of pits for livestock manure  
Encourage and establish new business models for manure composting and 
sales, potentially by establishing and initially subsidizing central 
composting points  
Promote water re-use and recycling  
Improve dairy productivity to reduce greenhouse gas emission intensity  
Promote bio-gas production with slurry management technology 
Promote improved feed management for reducing GHG emissions from 
livestock 
Produce and use organic compost 
Increased 
competition over 
natural resources 
Promote adoption of drip irrigation or other precision irrigation techniques 
such as porous pipes. 
Promote rain water harvesting systems  
Promote solar systems 
Promote System of Rice Intensification 
Monoculture and 
loss of 
biodiversity 
Encourage the use of local/indigenous varieties 
Promote crop rotation  
Protect forests and wetlands that are critical habitats for endangered 
species 
Prohibit introduction of exotic species 
Pest infestation 
Promote Integrated pest management (IPM); 
Promote use of varieties tolerant to pest infestation; 
Promote crop diversification; 
Promote use of pheromone trap; 
General environmental issues 
Deforestation 
Discourage cutting of mature trees.  
Promote use of buffer zones along rivers.  
Include plantation programs in cluster development  
Promote agroforestry  
Land degradation 
and soil erosion 
Limit free ranging of livestock 
Encourage earth/soil collection from existing borrow pits 
Encourage grass planting or (temporary) fencing to regenerate vegetation  
Encourage tree plantation on slopes  
Addition of organic matter like animal manure 
Incorporation of residues of leguminous crops into the soil 
Declining soil 
health 
Encourage crop diversification  
Promote balanced fertilizer application; 
Promote use of bio-fertilizer or organic fertilizers; 
Promote conservation agriculture, mulching with straw, hyacinth, etc.; 
(CCM & CCA) 
Encourage plantation of leguminous varieties for nitrogen fixation; 
Soil salinization 
Increase irrigation efficiency and water productivity; 
Discourage drainage to intrusion of saline water; 
Flushing soil with pre-monsoon rain water; 
Promote extensive shrimp-rice farming system; 
Use of organic fertilizer; 
Promote drip irrigation  
Depletion of 
groundwater level 
Promote water-efficient irrigation techniques  
Promote crops with low water consumption 
Promote rainwater harvesting  
Promote water re-use  
Livestock management 
Animal welfare 
Train business clusters on cleaning of poultry and goat/pig rearing hut and 
shed 
Increase awareness on how to control odour, insects and mosquito 
breeding around the poultry and goat/pig rearing farm 
Disease outbreak 
Promote biosafety measures such as restricted access and washing 
facilities 
Water, Sanitation and Hygiene 
Contamination of 
drinking water 
Maintain safe distance between latrine and water sources 
Maintain safe distance between livestock sheds and kitchen 
Promote hygienic practices 
Promote regular testing of water sources

Take corrective action when water contamination established 
Occupational Health and Safety 
Health risk to 
workers 
Promote safe work through Standard Operating Procedures, training and 
awareness raising 
Encourage and enforce the use of PPE 
Supporting first-aid box and to provide minimal level of training; 
Adequate transport facility to allow a patient into the hospital; 
Enlisting the names and numbers of village doctors in nearby community 
places/shops;   
Encourage regular workplace cleaning 
 
Apart from the mitigation measures to prevent and minimize negative impacts, RMTP includes a 
high number of activities aimed at amplifying positive impacts. These include: 
 
Training and certification of farmers on GlobalGAP. The project will assist 
groups/clusters of enterprise involved in primary production of crops, livestock and 
aquaculture to adopt Global Good Agriculture Practices (GGAP). The project will support 
enterprises involved in produce handling/transport, feed manufacturing, and hatchery to 
obtain GGAP if required. 
 
Training of entrepreneurs on HACCP. Support will be provided to enterprises engaged 
in crop/meat/fish processing to obtain Hazard Analysis Critical Control Point (HACCP) 
certification.  
5.3 
Climate Change Adaptation and Mitigation 
Bangladesh is consistently ranked in the top list of countries impacted by the effects of climate 
change. Key climate change impacts for the project area are linked to sea level rise contributing to 
increasing floods and increasing intrusion of saline seawater in addition to flash flood, riverine 
floods, cyclone, tidal surge, drought etc. All climate-induced phenomena have significant effects on 
agriculture, with increasing salinity and mean temperatures having generally negative effects. 
Overall, crop production might be reduced by 30% by the end of the century; rice production could 
fall by 8%, and wheat production by 32% by 2050. Winter crop production would be seriously 
hampered due to a warmer and drier environment during non-monsoon seasons, while moisture 
stress might force farmers to reduce the area under irrigated rice cultivation. At the same time, 
climate change may offer opportunities in terms of new or expanding areas of suitability for 
particular crops. 
PKSF and RMTP can be a facilitator of action on both adaptation and mitigation. It should be noted 
that the project does not include specific climate change labelled funds that can be passed on to 
recipients in concessional form. The project will therefore focus on double-win or triple-win 
investments (good for the enterprise, good for reducing vulnerability to climate change, good for 
reducing greenhouse gas emissions). Some adaptation and mitigation activities will thereby fall 
outside of the scope of RMTP, such as the building of larger infrastructure of a public nature for 
flood protection or reducing cattle herd sizes by offering financial incentives. RMTP will implement 
the lessons learned from the Climate Change Project implemented by PKSF and funded by 
Bangladesh Climate Change Resilience Fund (BCCRF) in this regard. It will also integrate the 
measures agreed in the Bangladesh communication to the UNFCCC through the Nationally 
Determined Contribution (NDC)26. 
The following table includes an overview of the major value chains to be supported under RMTP, 
their vulnerability to climate change / need for climate change adaptation, the potential to reduce 
greenhouse gas emissions in this chain and associated measures for both adaptation and 
mitigation. This table can be further supplemented with known and tested measures as the project 
is being implemented. References to external sources are included as footnotes. 
Value Chain 
Vulnerability 
to Climate 
Change 
Primary risk 
factors  
Potential to 
reduce GHG 
emissions 
Potential 
adaptation 
measures 
Potential Mitigation 
Measures 
Livestock 
Poultry and 
eggs 
Medium 
Heat stress 
Medium 
Promote water 
harvesting, water 
use efficiency, re-
use, safe disposal 
Improve livestock 
waste management 
Encourage zero-grazing 
Reduce emission 
Red Meat 
Medium 
Heat stress 
Medium 
                                                 
26 See https://www4.unfccc.int/sites/NDCStaging/Pages/Party.aspx?party=BGD

Dairy 
Medium 
Heat stress 
High 
Avoid flood prone 
areas 
Use safe heights 
for construction of 
stalls and other 
infrastructure 
intensity through 
increased productivity 
per animal 
Supplementation of 
diet with urea and 
molasses, feeding a 
balanced feed ration, 
fodder cultivation and 
udder health 
management27 
Crops / horticulture 
High value 
cereal 
Medium to high 
Floods and 
droughts 
Low to Medium 
 
Promote precision 
irrigation (drip, 
sprinkler) 
Promote IPM 
Promote 
Conservation 
Agriculture 
Promote SRI (for 
rice) 
 
Discourage 
deforestation 
Promote IPM 
Promote Conservation 
Agriculture 
Discourage burning 
High value 
fruits and 
vegetables 
High  
Floods and 
droughts, 
salinity 
Low 
Pulses 
Medium 
Floods and 
droughts 
Low 
Aquaculture 
Technology-
based 
aquaculture 
(e.g. mud 
crab, carp 
and tilapia, 
crayfish) 28 
High 
Water 
temperature 
Salinity 
Floods 
Droughts 
Low 
Improved water 
quality 
management 
practices 
Improved waste 
management 
Reduce energy use 
(fuel efficiency, lights) 
Reduced use of energy-
intensive feedstuff 
(e.g. shift to locally 
sourced oilseeds)  
 
5.4 
Processes and procedures 
The following will apply to RMTP with regards to the processes and procedures to be used to 
ensure environmental and social sustainability of project investments: 
 
The project will make use of the existing PKSF procedure for screening project using the 
Environmental and Social Screening Forms, and for those projects that have significant 
environmental risks, the Initial Environmental Examination Form.  
 
The screening process will include analyzing proposed projects against the environmental 
and social exclusion lists annexed to this ESMF (Annex 2 and Annex 3). 
 
RMTP will make use of processes developed by other projects once they are tested and 
found to be successful. This particularly concerns the Protocols being developed under SEP 
and the EHS Manual developed under PACE.  
 
The project will assign environmental and social management focal points in each of its 
Partner Organizations, tasked with ensuring that PKSF policies and procedures are 
adequately implemented and monitored 
 
PKSF will organize regular training sessions on emerging environmental and social 
management issues, to be attended by the Partner Organizations’ environmental and 
social management focal points.  
The general process flow for environmental and social screening, assessment, monitoring and 
management is contained in Annex 1. In addition to the above, the project will pilot innovations 
relating to environmental and social management. These are discussed in section 6. 
5.5 
Monitoring, Evaluation and Learning 
PKSF applies a thorough monitoring and evaluation approach, aimed at both the Partner 
Organizations as well as directly at the clients of those Partner Organizations. The monitoring and 
                                                 
27 Reference FAO Options for low emission development in the Bangladesh dairy sector 
http://www.fao.org/3/a-i6822e.pdf 
28 Reference FAO Impacts of climate change on fisheries and aquaculture  
http://www.fao.org/3/i9705en/i9705en.pdf

evaluation of the measures stipulated in this ESMF will be integrated in those procedures, as 
follows: 
 
PKSF / PMU will monitor the environmental and social risks and mitigation measures 
identified through the different procedures and forms used in the organization 
 
PKSF / PMU will regularly review and synthesize data from these sources to identify most 
important issues as well as emerging themes 
 
PKSF / PMU will integrate environmental and social sustainability issues into its regular 
reporting to IFAD. 
The outcomes of these monitoring and evaluation practices should be integrated into the regular 
learning and training programmes of PKSF, picking up the emerging themes from the monitoring 
data and inviting experts to provide insights on best practices as well as new technologies. Some 
of the Partner Organizations have Training of Trainer methodologies in place to ensure that 
knowledge flows from senior levels to junior levels, which is particularly relevant in the light of 
high staff turnover at many of the partner organizations. This approach will be promoted among 
other Partner Organizations as well. 
Finally, environmental and social management performance can be integrated into the Client 
Satisfaction Survey that PKSF regularly carries out. These can include simple questions to gauge 
the adequacy and effectiveness of policies and procedures put in place. 
5.6 
Consultation 
Consultation is an essential part of the project cycle. Understanding the views from various 
stakeholders is critical for confirming relevance of proposed interventions, for effectiveness and 
efficiency of proposed approaches and for impact and sustainability of the intended positive 
changes.  
The RMTP has been designed in close consultation with a wide group of stakeholders, the details of 
which can be found in the PDR. PKSF has integrated consultation requirements during project 
implementation into its participatory processes, including the environmental screening process. 
These requirements are also integrated into the various forms and checklists that are being used 
by PKSF and its partner organizations. Finally, PKSF carries out monitoring of projects to, amongst 
others, ensure that proper consultation has been carried out. 
5.7 
Grievance Redress Mechanism 
A grievance redress mechanism is a process for receiving, evaluating and addressing project-
related concerns of, and complaints by, project affected communities or persons. IFAD’s Grievance 
Redress Mechanism allows affected complainants to have their concerns resolved in a fair and 
timely manner through an independent process.  
IFAD’s Grievance Redress Mechanism requires: (i) working proactively with the affected parties to 
resolve complaints; (ii) ensuring that the complaints procedure is responsive and operates 
effectively; and (iii) maintaining records of all complaints and their resolutions.  
The principles of a good grievance redress mechanism are: 
 
A mechanism scaled to risk and adverse impact on affected communities 
 
Designed to take into account culturally appropriate ways of handling community concerns 
 
A clear and understandable mechanism that is accessible to all segments of the affected 
communities at no cost 
 
Transparency and accountability to all stakeholders  
 
A mechanism that prevents retribution and does not impede access to other remedies  
The key steps for grievance management are 
 
Publicizing grievance management procedures so that the mechanism is accessible to 
everyone; 
 
Receiving (i.e. collecting, recording and registering) and keeping track of grievances; 
 
Reviewing and investigating grievances to assess the nature of the grievance, its severity 
and legitimacy; 
 
Developing resolution options commensurate with the nature of grievances and preparing 
and communicating a clear response, and closing out cases when agreement with the 
complainants is reached  
 
Monitoring grievances through tracking to ascertain effectiveness, adapting the mechanism 
to correct inefficiencies, using the results of monitoring for feedback and lessons learned. 
PKSF has established its own grievance redress system, which will be used for the implementation 
of RMTP.

Figure 1 Visual of the PKSF Grievance Redress Mechanism. Details can be found in the PKSF Social 
Management Framework 
Furthermore, project stakeholders may use IFAD’s Complaint Procedures that can be found at 
https://www.ifad.org/en/accountability-and-complaints-procedures  
5.8 
Costs of implementing the ESMF 
The costs of implementing this ESMF primarily comprise staff time (both of PKSF as well as Partner 
Organizations), as well as costs of training of farmers. These costs have been readily integrated 
into the PKSF cost tables and will subsequently be integrated into the Annual Work Plan and 
Budgets (AWPB). Additionally, producers and entrepreneurs will have costs in terms of 
implementing some of the interventions needed to reduce risks or impact. Some of these costs will 
be subsidized through the project and are budget in the general project budget lines, others will 
come from the loans that these entrepreneurs take with PKSF its partner organizations. 
6. Innovation 
Under RMTP, a set of innovations in environmental and social management will be pursued as 
listed below. 
6.1 
Microenterprise Sustainability Scoring  
Recognizing that existing procedures are rather compliance-oriented, PKSF will experiment with a 
scoring method for the environmental and social sustainability of microenterprises that is aimed at 
both the entrepreneur self, as well as the responsible loan officer.  
This system will comprise a traffic light system (red, yellow, green). The responsible loan officer 
will need to classify the microenterprise based on a set of general indicators and a set of value 
chain specific indicators. In case the microenterprise is in the red category, essential actions need 
to be undertaken prior to (further) financing. In case the microenterprise is in the yellow category, 
actions need to be taken during financing which if not implemented may result in ineligibility for 
any follow-on loan. 
Microenterprise Sustainability Scoring – template example in italics 
Enterprise Name and type 
Name, Poultry Farm 
Current Status 
Yellow 
Key Issue(s) 
Chicken litter dumped into adjacent stream posing risk to health 
Improvement Milestones 
Find alternative method for waste 
management 
Sep 2019 
 
A Sustainability Scoring Guide will need to be developed for this purpose, clearly explaining the 
key environmental and social sustainability issues in each of the value chains. This will need to 
include specific possible circumstances that qualify as green, yellow or red, as well as the possible 
improvement measures. These should be drawn from the Protocols currently being developed 
under SEP. 
Once the Sustainability Scoring approach is implemented at sufficient scale, it will also generate an 
interesting data set that can be integrated into the project’s monitoring and evaluation system. A

portfolio level indicator can then not only indicate the current composition of the portfolio in terms 
of environmental and social performance, but also more detailed diagnostics such as in which 
value chains environmental and social sustainability is a major concern. 
6.2 
Categorization and Management at Cluster level 
In the current practice of PKSF, Environmental and Social categorization of projects is done at 
either Partner Organization level or individual producer level. Recognizing that this approach 
carries a risk of not adequately managing the cumulative / aggregate impact of production 
clusters, PKSF will explore an alternative categorization and risks management approach centered 
at the cluster level. In this manner, a cluster such as one for livestock can be evaluated in its 
integrity and measures identified that are not easily implementable at the individual producer level 
but can be implemented at cluster level.  
7. Other References and Learning 
Over the past decade or two, significant efforts have been made globally to improve environmental 
and social sustainability of microfinance operations. These serve as a resource to PKSF in for 
instance the updating of their corporate policies and procedures. The most relevant are listed 
here: 
 
The SMART Campaign29. The SMART Campaign is primarily aimed at integrating 
Client Protection Principles into the microfinance across the globe. The Client 
Protection Principles include (i) appropriate product design and delivery, (ii) prevention 
of over-indebtedness, (iii) transparency, (iv) responsible pricing, (v) fair and respectful 
treatment of clients, (vi) privacy of client data, and (vii) mechanisms for complaint 
resolution. 30 
 
The Social Performance Taskforce31. The SPTF is a membership organization 
working on standards and good practices in social performance management for 
inclusive finance. 
 
FMO ESG Toolkit32. The Dutch Development Bank FMO has developed a MFI-oriented 
toolkit for management of environment, social and governance issues. It includes a 
training tool as well as other guides. 
 
 
 
                                                 
29 See http://smartcampaign.org  
30 See http://smartcampaign.org/storage/documents/20110916_SC_Principles_Guidance_Draft_Final.pdf for a 
full list 
31 See https://sptf.info/  
32 See https://www.fmo.nl/esg-toolkit

Annex 1: PKSF Environmental Assessment and Monitoring Flow Chart

Annex 2: PKSF Exclusion List (environmental issues) 
If the screening identifies significant environmental impacts like possibility of drainage congestion 
in the adjacent areas due to the new embankment or uses of excessive agrochemicals or shrimp 
farming encroaching the mangrove area, the subprojects will not be recommended for financing 
under Project.  
The proposed sub project in the environmentally sensitive areas or proposed subproject with 
significant and long-term environmental impacts will not be recommended. Approval will not be 
given to the beneficiary who will deals with unauthorized and excessive pesticides, toxic chemicals, 
polythene, narcotics or any unlawful/environmentally unacceptable interventions. The following 
activities will not be supported under project: 
 
Sl 
# 
Intervention/ 
Attributes/  
Brief Description 
Example 
1 
Protected 
areas/Archaeological 
Historical Sites declared 
by the Government of 
Bangladesh 
Activities within or adjacent to the protected areas or 
archaeological historical sites identified by DoE or other 
Government agencies 
(Attach a list of protected areas & archaeological 
historical sites) 
Any 
activities in 
Sundarban 
is Banned.  
2 
Natural habitat and 
sensitive ecosystem 
Activities that may adversely affect the natural habitat 
with sensitive ecosystems like natural 
pond/beel/baor/haor etc with important aquatic life 
 
3 
Use of pesticides  
Use of excessive pesticides in agricultural land, tree 
plantation, large scale nursery.  
 
4 
Road construction 
Construction, reconstruction and extension of regional, 
national road and highway involving major 
concrete/cement concrete/reinforced cement concrete/ 
concrete block 
 
5 
Extraction of Natural 
Resource 
Activities supporting commercial logging in forested areas 
or involving the use of unsustainably harvested timber or 
fuel-wood or significant conversion or degradation of 
critical natural habitats 
 
6 
Extensive Shrimp 
Firming 
Sub-projects involving threats to mangrove forest and 
coastal environment 
 
7 
Dams/Embankment 
Construction/reconstruction of dam/embankment 
involving major concrete/cement concrete/reinforced 
cement concrete /concrete blocks 
 
8 
 Supply of contaminated 
water 
 
Tube-wells with Arsenic contamination (higher than 
national standard (0.05 mg/l)  
base below the 10 years flood level 
water supply schemes with high probability of bacterial 
contamination 
 
9 
Unsanitary disposal of 
solid waste and waste 
water 
New or significant expansion of disposal facilities with 
negative health impacts to nearby water sources or 
population 
 
 
10 
Major loss of agricultural 
land 
Construction/reconstruction of road/drain, canal/pond 
excavation with major loss of agriculture land and use of 
concrete cement/ reinforced concrete cement 
 
 
 
11 
Land filling 
Sub-projects that will impact major destruction of top soil 
of agricultural land and land filling by industrial, 
household and commercial waste

Annex 3: PKSF Exclusion List (social Issues) 
 
Involuntary Resettlement:  Do the proposed project activities: 
1. 
Require private land which is to be acquired by using the Bangladesh 
Acquisition and Requisition of Immovable Property Ordinance, 1982? 
[ ] Yes 
[ ] No 
2. 
Require private land which is not available on voluntary contribution?  
[ ] Yes 
[ ] No 
3. 
Affect any private homesteads (vita with houses & other assets)? 
[ ] Yes 
[ ] No 
4. 
Require land that is not available on ‘contribution against compensation’ 
or other means not acceptable to the landowners? 
[ ] Yes 
[ ] No 
5. 
Make persons/households using public lands destitute? 
[ ] Yes 
[ ] No 
6. 
Affect mosques, temples, graveyards, cremation grounds, and other 
places/objects that are of religious and cultural significance? 
[ ] Yes 
[ ] No 
7. 
Affect livelihood of vulnerable persons based on the required land? 
[ ] Yes 
[ ] No 
8. 
Significantly restrict access to common property resources and 
livelihood activities of groups and communities? 
[ ] Yes 
[ ] No 
Tribal Peoples:  Do the proposed activity/adaptation measures, including physical / construction 
activities: 
1. 
Threaten cultural/traditional way of life of tribal peoples? 
[ ] Yes 
[ ] No 
2. 
Require tribal lands that are to be acquired by using the Bangladesh 
Acquisition and Requisition of Immovable Property Ordinance, 1982  
[ ] Yes 
[ ] No 
3. 
Severely restrict access to common property resources (forests, water 
bodies, etc) and livelihood activities? 
[ ] Yes 
[ ] No 
4. 
Affect places/objects of cultural and religious significance (places of 
worship, ancestral burial grounds, etc.) 
[ ] Yes 
[ ] No 
“Yes” answer to any of the questions under Involuntary Resettlement and Tribal 
Peoples will make the proposed sub-project ineligible for financing under a project of 
PKSF.

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex 6: First Annual Work Plan and Budget (AWPB)
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

Annex 6:  First Annual Work Plan and Budget (AWPB) 
 
 
 
Bangladesh
Rural Micro-Enterprise Transformation Project
First 18 Months Annual Work Plan and the Budget (AWPB)
Component 1: Value Chain Development
Sub-Component 1.1: Organization
Q 1
Q 2
Q 3
Q 4
Q 5
Q 6
IFAD/CF 
(USD
Other 
(USD)
A 1
1. Start-up Training
Sub Act A 1.1.1
Information & Orientation on financial literacy for MC & PO members
PKSF
TRAINING
Nb Persons
1,428,571
100,000
50,000
14
700,000
0
700,000
Sub Act A 1.1.2
Training on Nutrition, climate, environmental and social issues
PKSF
TRAINING
Nb Persons
3,657,143
384,000
100,000
10
1,000,000
0
1,000,000
Sub Act A 1.1.3
Prepare information sheet and discussion notes for village meetings
PKSF
TRAINING
Number
59,524
200
200
298
59,600
0
59,600
Sub Act A 1.1.4
TOT on financial literacy for PO trainers by POs
PKSF
TRAINING
Nb Batches
11,905
200
150
60
9,000
0
9,000
Sub Act A 1.1.5
Training on business management for ME and PA members
PKSF
TRAINING
Nb Batches
285,714
300
125
952
119,000
119,000
0
Sub Act A 1.1.6
Developing and revising training module by PKSF
PKSF
TA
Number
5,952
1
1
5,952
5,952
5,952
0
Subtotal
1,893,552
124,952
1,768,600
A 1
2. Training on Nutrition
Sub Act A 1.2.1
Information campaign for nutrition education
PKSF
TRAINING
Lump sum
1,786
595
595
0
Sub Act A 1.2.2
Development of training material for nutrition training
PKSF
TA
Lump sum
2,381
1,190
1,190
0
Sub Act A 1.2.3
Allocation of funds to undertake special studies at PO level
PKSF
STUDIES
Lump sum
23,810
17,857
0
17,857
Sub Act A 1.2.4
TOT on Nutrition Sensitive Value Chain
PKSF
TRAINING
Lump sum
357,143
133,929
0
133,929
Subtotal
153,571
1,786
151,786
A 1
3. Training on Climate Issues and Environment
Sub Act A 1.3.1
Training on contract farming and exchange visits for PA members
PKSF
TRAINING
Nb Batches
23,810
50
10
476
4,760
4,760
0
Total for Sub-Component 1.1: Organization
5,857,738
2,051,883
131,498
1,920,386
Design Total 
Budget (USD
Design Total 
Targets
18 Months Plan Period: Jan 2020 - June 2021
Planned 
Total Units 
(18 
months)
Unit 
Price 
(USD)
Total 
Budget 
(USD)
Financiers
Unit
Activity No.
Activities
Implementing 
Agency
IFAD Exp. 
Category

Bangladesh
Rural Micro-Enterprise Transformation Project
First 18 Months Annual Work Plan and the Budget (AWPB)
Component 1: Value Chain Development
Sub-Component 1.2: Technical and Business Service
Q 1
Q 2
Q 3
Q 4
Q 5
Q 6
IFAD/CF 
(USD)
Other 
(USD)
A 2
1. General Basic Training /g
Sub Act A 2.1.1
Generic technological and management training on Horticulture
PKSF
TRAINING
Nb Batches
95,238
4,000
750
24
18,000
0
18,000
Sub Act A 2.1.2
Generic technological and management training on Fisheries
PKSF
TRAINING
Nb Batches
95,238
4,000
750
24
18,000
0
18,000
Sub Act A 2.1.3
Generic technological and management training on Poultry
PKSF
TRAINING
Nb Batches
95,238
4,000
750
24
18,000
0
18,000
Sub Act A 2.1.4
Generic technological and management training on livestock
PKSF
TRAINING
Nb Batches
95,238
4,000
750
24
18,000
0
18,000
Subtotal
72,000
0
72,000
A 2
2. Subject Specific Advanced Training
Sub Act A 2.2.1
Advanced technological and management training on Horticulture
PKSF
TRAINING
Nb Persons
357
2,500
1,250
143
17,857
1,786
16,071
Sub Act A 2.2.2
Advanced technological and management training on Fisheries
PKSF
TRAINING
Nb Persons
357
2,500
1,250
143
17,857
1,786
16,071
Sub Act A 2.2.3
Advanced technological and management training on Poultry
PKSF
TRAINING
Nb Persons
1,143
8,000
1,250
143
71,429
7,143
64,286
Sub Act A 2.2.4
Advanced technological and management training on Livestock
PKSF
TRAINING
Nb Persons
571
4,000
1,250
143
35,714
3,571
32,143
Subtotal
142,857
14,286
128,571
A 2
3. GLOBAL GAP & HACCP Protocol /i
Sub Act A 2.3.1
Contracts with certification authorities for developing training modules
PKSF
TRAINING
Lump sum
600,000
0
0
300,000
300,000
0
Sub Act A 2.3.2
Training of Master Trainer & Protocol Development
PKSF
TRAINING
Sessions
7,351
65
20
113
1,413
1,413
0
Sub Act A 2.3.3
Training of PA or Groups
PKSF
TRAINING
Nb Batches
67,064
9,389
2,683
7
18,778
18,778
0
Sub Act A 2.3.4
Audit / certification
PKSF
TA
Nb Batches
72,653
9,389
671
8
5,364
5,364
0
Sub Act A 2.3.5
Training of farmers on GAP
PKSF
TRAINING
Nb Batches
1,488,095
1,250
75
1,190
89,250
89,250
0
Subtotal
414,804
414804
0
A 2
4. Training of Special Advisory service
Sub Act A 2.4.1
Generic training material
PKSF
TRAINING
Number
1,786
3
3
595
1,785
1,785
0
Sub Act A 2.4.2
Generic training
PKSF
TRAINING
Number
833
35
35
24
840
840
0
Sub Act A 2.4.3
Specialised training material
PKSF
TRAINING
Number
1,488
25
25
60
1,500
1,500
0
Sub Act A 2.4.4
Specialised training
PKSF
TRAINING
Number
833
35
25
24
600
600
0
Sub Act A 2.4.5
Printing material
PKSF
OPERATIONS
Number
2,381
20,000
10,000
1,190
1,190
0
Sub Act A 2.4.6
Cost Sharing of Advisors
PKSF
OPERATIONS
Lump sum
106,119
0
57,476
57,476
0
Subtotal
63,392
63,392
0
A 2
5. Piloting of technologies in horticulture, livestock, fisheries and others
PKSF
TA
Number
1,372,750
228,792
57,198
171,594
Total for Sub-Component 1.2: Technical and Business Service
4,104,735
921,844
549,679
372,165
Design Total 
Budget (USD
Design Total 
Targets
Total 
Budget 
(USD)
Financiers
Unit
18 Months Plan Period: Jan 2020 - June 2021
Planned 
Total Units 
(18 
months)
Unit 
Price 
(USD)
Activity No.
Activities
Implementing 
Agency
IFAD Exp. 
Category

Bangladesh
Rural Micro-Enterprise Transformation Project
First 18 Months Annual Work Plan and the Budget (AWPB)
Component 1: Value Chain Development
Sub-Component 1.3; 1.4 and 1.5
Q 1
Q 2
Q 3
Q 4
Q 5
Q 6
IFAD/CF 
(USD
Other 
(USD)
A 3. Value chain sub-project implementation
Sub Act A 3.1
1. Value chain analysis by PKSF
PKSF
STUDIES
Number
95,238
4
4
23,810
95,240
95,240
2. Value chain investment and implementation
Sub Act A 3.2.1
Value chain packages
PKSF
GRANTS
Number
8,397,619
100
60
83,976
5,038,560
5,038,560
Sub Act A 3.2.2
Investment in innovative new VCs
PKSF
GRANTS
Number
1,200,000
6
Sub Act A 3.2.3
Marketing and Enterprise Visibility Fares
PKSF
GRANTS
Lump sum
1,429
0
Subtotal
9,694,286
5,133,800
5,133,800
0
A 4. Enterprise strengthening
Sub Act A 4.1
Specialized Agribusiness Consultant providing TA to POs & undertaking studiePO
TA
Lump sum
1,000,000
300,000
300,000
0
A 5. Policy dialogue
Sub Act A 5.1
Policy dialogue on identified areas
PKSF
STUDIES
Lump sum
600,000
150,000
150,000
0
Total for Sub-Component 1.2, 1.3 and 1.4: VC Sub-project implementation, Enterprise strengthening, Policy
20,988,571
5,583,800
5,583,800
0
Total 
Budget 
(USD)
Financiers
Design Total 
Budget (USD
Design Total 
Targets
18 Months Plan Period: Jan 2020 - June 2021
Activity No.
Activities
Implementing 
Agency
IFAD Exp. 
Category
Unit 
Price 
(USD)
Planned 
Total Units 
(18 
months)
Unit
Bangladesh
Rural Micro-Enterprise Transformation Project
First 18 Months Annual Work Plan and the Budget (AWPB)
Component 2: Financial Services
Q 1
Q 2
Q 3
Q 4
Q 5
Q 6
IFAD (USD
Other (USD)
B 1. Line of credit for PKSF's ME loan programme
Sub Act B.1.1
1. Line of credit for PKSF's loan program: IFAD Resources
PKSF
Credit
Lump sum
46,373,714
23,186,857
23,186,857
Sub Act B.1.2
2. Line of credit for PKSF's loan program:PKSF Resources
PKSF
Credit
Lump sum
10,756,226
10,756,226
10,756,226
Sub Act B.1.3
3. Line of credit for PKSF's loan program: POs Resources
PO
Credit
Lump sum
73,127,667
73,127,667
73,127,667
Subtotal
130,257,607
107,070,750
23,186,857
83,883,893
B.2  Line of credit to PKSF for ME loan through NBFIs
PKSF
Credit
Lump sum
20,000,000
15,000,000
7,500,000
7,500,000
Total for the Component
122,070,750
30,686,857
91,383,893
Component 3: Remittances Management
C.1 Remittances - Project Implementation
PKSF
Grant
Lump sum
1,000,000
500,000
500,000
18 Months Plan Period: Jan 2020 - June 2021
Total 
Units
Unit Price 
(USD)
Total Budget 
(USD)
Financiers
Design Total 
Budget (USD
Design Total 
Targets
Activity No.
Activities
Implementing 
Agency
IFAD Exp. 
Category
Unit

Bangladesh
Rural Micro-Enterprise Transformation Project
First 18 Months Annual Work Plan and the Budget (AWPB)
Component 4: Institutional Strengthening and Project management
Q 1
Q 2
Q 3
Q 4
Q 5
Q 6
IFAD (USD
Other 
(USD)
D 1 Sub Component 4.1: PKSF's Capacity Building
 
1. PKSF's capacity building through ICT based solutions
 
Sub Act D 1.1
Development of block chain platform, e-commerce & crowd funding platform
PKSF
TRAINING
Lump sum
1,400,000
466,900
466,900
D 1
2. PKSF HR (Staff) Development (training, exchange visits)
PKSF
Sub Act D.1.2.1
Business management and financial analysis
PKSF
TRAINING
Number
11,905
40
10
298
10,000
10,000
Sub Act D.1.2.2
Value chain analysis and VCD subproject design - training
PKSF
TRAINING
Number
2,976
10
10
298
10,000
10,000
Sub Act D.1.2.3
Project design and management
PKSF
TRAINING
Number
5,952
10
0
0
Sub Act D.1.2.4
M and E system design and management
PKSF
TRAINING
Number
2,976
5
5
595
5,000
5,000
Sub Act D.1.2.5
ICT based platforms: Overview and management
PKSF
TRAINING
Number
5,952
20
5
298
5,000
5,000
Sub Act D.1.2.6
Development project management
PKSF
TRAINING
Number
11,905
20
0
0
Sub Act D.1.2.7
Financial services and institutions
PKSF
TRAINING
Number
4,762
20
0
0
Sub Act D.1.2.8
ICT based Realtime MIS
PKSF
TRAINING
Number
2,976
10
5
298
5,000
5,000
Sub Act D.1.2.9
Exchange visits (VCD) /a
PKSF
TRAINING
Lump sum
142,857
40
0
0
Subtotal
 
1,592,262
35,000
35,000
D 2 Sub Component 4.2: POs capacity building
 
Sub Act D 2.1
1. Value chain integration and contract intermediation
PO
TRAINING
Lump sum
11,905
1
1
11,905
11,905
11,905
Sub Act D 2.2
2. Other training - Nutrient Sensitive, M&E etc.
PO
TRAINING
Lump sum
5,952
Sub Act D 2.3
3. New financial product development
PO
TA
Lump sum
357,143
Subtotal
 
375,000
11,905
11,905
D 3 Sub Component 4.3: Project management
 
1. Office Facilities - Procurement
 
Sub Act D 3. 1.1
SUV: 4-Wheel Vehicle for Field Visits
PKSF
VEHICLES
Number
119,048
1
1
10,000
10,000
10,000
Sub Act D 3. 1.2
Laptops
PKSF
Eqip
Number
21,429
18
18
1,190
21,420
21,420
Sub Act D 3. 1.3
Printers
PKSF
Eqip
Number
1,190
2
2
595
1,190
1,190
Sub Act D 3. 1.4
Photocopy machine
PKSF
Eqip
Number
5,952
1
1
5,952
5,952
5,952
Sub Act D 3. 1.5
Office furniture
PKSF
Eqip
Number
10,119
17
17
595
10,115
10,115
Sub Act D 3. 1.6
Cellphones
PKSF
Eqip
Number
10,714
18
18
595
10,710
10,710
Sub Act D 3. 1.7
Training and recording equipment
PKSF
Eqip
Number
29,762
1
1
29,762
29,762
29,762
Subtotal
 
198,214
89,149
89,149
D 3
2. Operating expenses - Salaries & Allowances
 
Sub Act D 3.2.1
Project Co-ordinator
PKSF
SALARIES
Number
337,500
6
1.5
56,250
84,375
84,375
Sub Act D 3.2.2
Deputy project Co-ordinator (Technical)
PKSF
SALARIES
Number
318,571
6
1.5
53,095
79,643
39,821
39,821
Sub Act D 3.2.3
Deputy project Co-ordinator (Financial Service)
PKSF
SALARIES
Number
318,571
6
1.5
53,095
79,643
39,821
39,821
Sub Act D 3.2.4
Sectoral Specialist (Livestock)
PKSF
SALARIES
Number
232,857
6
1.5
38,810
58,215
58,215
Sub Act D 3.2.5
Sectoral Specialist (Horticulture)
PKSF
SALARIES
Number
232,857
6
1.5
38,810
58,215
58,215
Sub Act D 3.2.6
Sectoral Specialist (Fisheries)
PKSF
SALARIES
Number
232,857
6
1.5
38,810
58,215
58,215
Sub Act D 3.2.7
ICT Specialist
PKSF
SALARIES
Number
232,857
6
1.5
38,810
58,215
58,215
Sub Act D 3.2.8
Financial Analyst
PKSF
SALARIES
Number
232,857
6
1.5
38,810
58,215
58,215
Sub Act D 3.2.9
Procurement Specialist
PKSF
SALARIES
Number
195,000
6
1.5
32,500
48,750
48,750
Sub Act D 3.2.10
Communication, Publication & Knowledge Management Specialist
PKSF
SALARIES
Number
180,714
6
1.5
30,119
45,179
45,179
Sub Act D 3.2.11
Monitoring and Evaluation Specialist
PKSF
SALARIES
Number
195,000
6
1.5
32,500
48,750
48,750
Sub Act D 3.2.12
Nutrition Specialist
PKSF
SALARIES
Number
195,000
6
1.5
32,500
48,750
48,750
Sub Act D 3.2.13
Value Chain Project Manager
PKSF
SALARIES
Number
998,571
36
9
27,738
249,642
249,642
Sub Act D 3.2.14
Assistant Manager (Accounts)
PKSF
SALARIES
Number
260,000
12
3
21,667
65,001
65,001
Sub Act D 3.2.15
Computer Operator cum MIS Officer
PKSF
SALARIES
Number
74,286
6
1.5
12,381
18,572
18,572
Sub Act D 3.2.16
Driver
PKSF
SALARIES
Number
55,714
6
1.5
9,286
13,929
13,929
Subtotal
 
4,293,214
1,073,307
993,665
79,643
D 3
3. Operating expenses - Other
 
Sub Act D 3.3.1
Monitoring and Travel
PKSF
Operations
Lump sum
178,571
53,571
53,571
Sub Act D 3.3.2
Overhead - Office Rent, electricity /b
PKSF
Operations
Lump sum
571,429
142,857
142,857
Sub Act D 3.3.3
Start-up workshop
PKSF
Operations
Lump sum
11,905
11,905
11,905
Subtotal
 
761,905
208,333
208,333
D 3
4. M &E, studies and dissemination
 
Sub Act D 3.4.1
Studies (baseline, Mid-term and end-project impact studies)
PKSF
STUDIES
Lump sum
600,000
150,000
150,000
Sub Act D 3.4.2
Sector impact studies
PKSF
STUDIES
Lump sum
119,048
0
Sub Act D 3.4.3
Results sharing (websites, seminars/workshops, video production etc.) /c
PKSF
STUDIES
Lump sum
47,619
0
Subtotal
 
766,667
150,000
150,000
D 3 Sub Component 4.3: Project management
1,520,789
1,441,147
18 Months Plan Period: Jan 2020 - June 2021
Planned 
Total Units 
(18 months)
Unit Price 
(USD)
Planned 
Total 
Budget 
(USD)
Financiers
Design Total 
Budget (USD
Design Total 
Targets
Activity No.
Activities
Implementing 
Agency
IFAD Exp. 
Category
Unit

Bangladesh 
 
 
 
 
 
 
Rural Micro-Enterprise Transformation Project 
 
 
 
 
 
First 18 Months Annual Work Plan and the 
Budget (AWPB) 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate Summary 
 
 
 
 
Components 
& Sub 
Components 
  
Activities 
Design 
Total 
Budget 
(USD) 
18 
Months 
AWPB 
Total 
Budget 
(USD) 
Financiers 
IFAD (USD) 
Other 
(USD) 
  
 
  
  
  
  
  
Component 1: Value Chain Development 
  
  
  
  
A 1 
Total for Sub-Component 1.1: Organization 
5 857 738 
2 051 
883 
131 498 
1 920 386 
  
 
  
  
  
  
  
A 2 
Total for Sub-Component 1.2: Technical and Business Service 
4 104 735 
920 284 
548 119 
372 165 
  
 
  
  
  
  
  
A 3  
Total for Sub-Component 1.3: Value chain sub-project 
implementation 
9 694 286 
935 000 
935 000 
0 
  
 
  
  
  
  
  
A 4 
Total for Sub-Component 1.4: Enterprise strengthening 
1 000 000 
300 000 
300 000 
0 
  
 
  
  
  
  
  
A 5 
Total for Sub-Component 1.5: Policy dialogue 
600 000 
150 000 
150 000 
0 
  
 
  
  
  
  
  
Component 2: Financial Services 
  
  
  
  
B 1 
B 1. Line of credit for PKSF's ME loan programme 
130 257 
607 
107 070 
750 
23 186 857 
83 883 893 
B 2 
 
  
  
  
  
  
  
B.2  Line of credit to PKSF for ME loan through NBFIs 
20 000 000 
15 000 
000 
7 500 000 
7 500 000 
  
 
  
  
  
  
  
Component 3: Remittances Management 
  
  
  
  
C 1 
C.1 Remittances - Project Implementation 
1 000 000 
500 000 
500 000 
0 
  
 
  
  
  
  
  
Component 4: Institutional Strengthening and Project management 
  
  
  
  
D 1 
D 1 Sub Component 4.1: PKSF's Capacity Building 
1 592 262 
35 000 
35 000 
0 
  
 
  
  
  
  
  
D 2 
D 2 Sub Component 4.2: POs capacity building 
375 000 
11 905 
11 905 
0 
  
 
  
  
  
  
  
D 3 
D 3 Sub Component 4.3: Project management 
6 020 000 
1 520 
789 
1 441 147 
79 643 
  
 
  
  
  
  
  
  
  
Grand Total 
180 501 
628 
128 495 
612 
34 739 526 
93 756 086

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex 7: Procurement Plan for first 18 months
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

Annex 7:  Procurement Plan for first 18 months 
 
 
 
 
 
Ref No (To 
AWPB).
Package No.
Review by IFAD 
Prior/Post
Description of Services
Estimated 
Cost (USD)
Method of 
Selection @
Advertising 
for EOI 
(Date)
TOR/ 
Prequalified 
Shortlist 
Finalized 
(Date)
RFP Final 
Draft 
forwarded 
to IFAD 
(Date)**
IFAD’s No 
Objection 
for TOR 
Shortlist/ 
Final REP 
(Date)**
RFP Issued 
(Date)
Proposals 
Received 
by the 
Project 
Authorities 
(Date)
Evaluation 
Finalized 
(Draft 
Contract/Fina
l Contract) 
(Date)
IFAD’s No 
Objection for 
Final 
Contract) 
(Date)**
Contract 
(Service / 
Consultancy) 
Offer
Row Nb>>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
*PP
Q 1
Q 2
Q 3
Q 3
Q 3
Q 4
Q 4
Q 4
R
A
*PP
Q 2
Q 2
Q 2
Q 2
Q 2
Q 2
Q 2
Q 2
R
A
*PP
Q 4
Q 5
Q 5
Q 5
Q 5
Q 6
Q 6
Q 6
R
A
*PP
Q 4
Q 4
Q 5
Q 5
Q 5
Q 5
Q 6
Q 6
R
A
*PP
Q 4
Q 4
Q 5
Q 5
Q 5
Q 5
Q 6
Q 6
R
A
*PP
Q 4
Q 5
Q 5
R
A
*PP
Q 4
Q 5
Q 5
R
A
*PP
Q 4
Q 5
Q 5
R
A
*PP
Q 4
Q 5
Q 5
R
A
*PP
Q 2
Q 2
Q 2
Q 2
Q 2
Q 3
Q 3
Q 3
Q 3
R
A
*PP
Q 3
Q 3
Q 3
Q 4
Q 4
Q 5
Q 5
Q 6
R
A
*PP
Q 2
Q 2
Q 2
Q 2
Q 2
Q 3
Q 3
Q 4
R
A
*PP
Q 3
Q 3
Q 3
Q 4
Q 4
Q 4
Q 4
Q 4
R
A
*PP
Q 2
Q 3
Q 3
Q 4
Q 4
Q 4
Q 4
Q 5
R
A
*PP
Q 3
Q 3
Q 4
Q 4
Q 4
Q 4
Q 4
Q 5
R
A
*PP
Q 2
Q 2
Q 3
R
A
*PP
Q 2
Q 2
Q 2
Q 3
Q 3
Q 3
Q 4
Q 4
Q 4
R
A
*PP
Q 3
Q 3
Q 3
Q 3
Q 3
Q 3
Q 4
Q 4
Q 4
R
A
  995,600.93 
LCB
DIR_CON
LCS
QCBS
QCBS_PM ( 100% )
Bangladesh
Rural Micro-Enterprise Transformation Project
First 18 Months Procurement Plan (PP)
Component 1: Value Chain Development - Procurement of Service Providers and TA
DATE OF SUBMISSION
Thresholds: US$ 300,000 or above for IFAD approval
Sub Act A 1.1.6
2
post
TA: Developing and revising training 
module by PKSF
       5,952.00 
DIR_CON
IFAD APPROVAL DATE:
Sub Act A 1.1.5
1
post
SP: Training on business management 
for ME and PA members
   119,000.00 
LCB
Sub Act A 1.2.2
4
post
SP: Development of training material 
for nutrition training
       1,190.48 
LCS
Sub Act A 1.2.1
3
post
Trainers: Information campaign for 
nutrition education
          595.24 
LCS
Sub Act A 2.2.1
6
post
Trainer: Advanced technological and 
management training on Horticulture        1,785.71 
DIR_CON 
[PKSF Staff]
Sub Act A 1.3.1
5
post
SP: Training on contract farming and 
exchange visits
       4,760.00 
IC
Sub Act A 2.2.3
8
post
Trainer: Advanced technological and 
management training on Poultry
       7,142.86 
DIR_CON 
[PKSF Staff]
Sub Act A 2.2.2
7
post
Trainer: Advanced technological and 
management training on Fisheries
       1,785.71 
DIR_CON 
[PKSF Staff]
Sub Act A 2.3.1
10
prior
TA: Contracts with certification 
authorities for developing training 
modules
   300,000.00 
LCB
Sub Act A 2.2.4
9
post
Trainer: Advanced technological and 
management training on Livestock
       3,571.43 
DIR_CON 
[PKSF Staff]
Sub Act A 2.4.1
12
post
TA: Generic training material
       1,785.00 
LCS
Sub Act A 2.3.2
11
post
TA: Training of Master Trainer & 
Protocol Development
       1,412.50 
LCB
Sub Act A 2.4.3
14
post
SP: Specialised training material
          900.00 
LCS
Sub Act A 2.4.2
13
post
SP: Generic training
          240.00 
LCS
Sub Act A 3.1
16
post
SP: Value chain analysis by PKSF
     95,240.00 
DIR_CON 
[PKSF Staff]
Sub Act A 2.4.4
15
post
SP: Specialised training
          240.00 
LCS
Sub Act A 5.1
18
prior
Policy dialogue on identified areas
   150,000.00 
DIR_CON 
[University]
Sub Act A 4.1
17
prior
TA: Specialized Agribusiness 
Consultant providing TA
   300,000.00 
QCBS
TA: Technical Assistance Consultancy
Local competitive bidding
DIR_CONTRACT_PM ( 100% )
LCL_SHOPPING_PM ( 100% )
Component 1: Value Chain Development - Total
PP: Target dates agreed as per Procurement Plan          R: revision      A: actual dates           
 ¨RFP (Request for Proposal): Same as ‘Bid Document’
** Applicable in case of ‘Prior Review’ by IFAD
SP : Service Provider

Ref No (To 
AWPB).
Package No.
Review by IFAD 
Prior/Post
Description of Services
Estimated 
Cost (USD)
Method of 
Selection @
Advertising 
for EOI 
(Date)
TOR/ 
Prequalified 
Shortlist 
Finalized 
(Date)
RFP Final 
Draft 
forwarded 
to IFAD 
(Date)**
IFAD’s No 
Objection 
for TOR 
Shortlist/ 
Final REP 
(Date)**
RFP Issued 
(Date)
Proposals 
Received 
by the 
Project 
Authorities 
(Date)
Evaluation 
Finalized (Draft 
Contract/Final 
Contract) 
(Date)
IFAD’s No 
Objection for 
Final 
Contract) 
(Date)**
Contract 
(Service / 
Consultancy) 
Offer
Row Nb>>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
*PP
Q 2
Q 2
Q 3
Q 3
Q 3
Q 4
Q 4
Q 4
Q 4
R
A
*PP
Q 3
Q 3
Q 4
Q 4
Q 4
Q 5
Q 5
Q 5
R
A
*PP
Q 3
Q 3
Q 4
Q 4
Q 4
Q 5
Q 5
Q 5
R
A
*PP
Q 3
Q 3
Q 4
Q 4
Q 4
Q 5
Q 5
Q 5
R
A
*PP
Q 3
Q 3
Q 4
Q 4
Q 4
Q 5
Q 5
Q 5
R
A
*PP
Q 3
Q 3
Q 4
Q 4
Q 4
Q 5
Q 5
Q 5
R
A
*PP
Q 4
Q 5
Q 5
R
A
*PP
Q 1
Q 1
Q 1
Q 1
Q 2
Q 2
Q 2
Q 2
Q 2
R
A
  663,805.00 
IFAD APPROVAL DATE:
Bangladesh
Rural Micro-Enterprise Transformation Project
First 18 Months Procurement Plan (PP)
DATE OF SUBMISSION
Thresholds: US$ 300,000 or above for IFAD approval
LCS
Sub Act D 1.1
1
prior
Trainer: Block chain platform, e-
commerce & crowd funding platform    466,900.00 
LCB
Sub Act D.1.2.1
2
post
SP: Business management and 
financial analysis
     10,000.00 
       5,000.00 
LCS
Sub Act D.1.2.2
3
post
SP: Value chain analysis and VCD 
subproject design - training
     10,000.00 
LCS
DIR_CON 
[PKSF Staff]
Sub Act D.1.2.8
6
post
TA: ICT based Realtime MIS
       5,000.00 
LCS
Component 4: Institutional Strengthening and Project management - Procurement of Service Providers and TA
Sub Act D 2.1
6
post
1. Value chain integration and 
contract intermediation
     11,905.00 
Sub Act D.1.2.5
5
post
TA: ICT based platforms: Overview 
and management
       5,000.00 
LCS
Sub Act D.1.2.4
4
post
SP: M and E system design and 
management
DIR_CON 
[PKSF Staff]
Component 2: Institutional Strengthening and Project management - Total
Sub Act D 3.4.1
7
post
TA: Studies (baseline, Mid-term and 
end-project impact studies)
   150,000.00 
Ref No (To 
AWPB).
Package No.
Review by IFAD 
Prior/Post
Description of Goods
Estimated 
Cost (USD)
Method of 
Procurement
Specs. 
Completed
Finalization 
of Bidding 
Document 
(Date)
IFAD No-
Objections 
for Bidding 
Document
Bid 
Invitations
Bid 
Opening
Bid 
Evaluation 
and 
Ranking
IFAD No-
Objections for 
Bid 
Evaluation
IFAD No-
Objections 
for Bid Offer
Contract 
Awarding
Row Nb>>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
*PP
Q 1
Q 1
Q 1
Q 1
Q 1
Q 2
Q 2
Q 2
Q 2
R
A
*PP
Q 1
Q 1
Q 1
Q 1
Q 1
Q 1
R
A
*PP
Q 1
Q 1
Q 1
Q 1
Q 1
Q 1
R
A
*PP
Q 1
Q 1
Q 1
Q 1
Q 1
Q 1
R
A
*PP
Q 1
Q 1
Q 1
Q 1
Q 1
Q 1
R
A
     89,149.00 
First 18 Months Procurement Plan (PP)
Component 4: Institutional Strengthening and Project management - Procurement of Goods
DATE OF SUBMISSION
Thresholds: US$ 300,000 or above for IFAD approval
IFAD APPROVAL DATE:
Sub Act D 3. 1.1
1
prior
SUV: 4-Wheel Vehicle for Field Visits
     10,000.00 
LCB
LCS
Sub Act D 3. 1.2 - 4
2
post
Laptops, printers, photocopy machine      28,562.00 
LCS
Sub Act D 3. 1.5
3
post
Office furniture
     10,115.00 
LCS
Sub Act D 3. 1.6
4
post
Cellphones
     10,710.00 
LCS
Sub Act D 3. 1.7
5
post
Training and recording equipment
     29,762.00 
Component 2: Institutional Strengthening and Project management - Total

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex 8: Project Implementation Manual (PIM)
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

Bangladesh: Rural Micro-enterprise Transformation Project (RMTP) 
RMTP: Project Implementation Manual (PIM) 
Date: May 2019  
 
1 
 
 
 
 
 
Palli Karma Sahayak Foundation (PKSF) 
 
 
 
Rural Micro-enterprise Transformation Project (RMTP) 
 
 
 
Project Implementation Manual (PIM) 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
May 2019

Bangladesh: Rural Micro-enterprise Transformation Project (RMTP) 
RMTP: Project Implementation Manual (PIM) 
Date: May 2019  
 
2 
 
TABLE OF CONTENTS 
 
1. Introduction to PIM and RMTP  
2. Project Objective and Components 
3. Project Area and Target Population  
4. Project Implementation Approach 
5. COMPONENT 1: Value chain development/enhancement  
1.1 Subcomponent 1.1: Organization of Producers  
1.2 Subcomponent 1.2: Technical and Business Services 
1.3 Subcomponent 1.3: Integration of Value Chains  
1.4 Subcomponent 1.4: Strengthening of Enterprises (agribusinesses) 
1.5 Subcomponent 1.5: Policy Dialogue with Government 
6. COMPONENT 2:  Financial services 
2.1 Subcomponent 2.1: Microfinance through Partner Organizations 
2.2 Subcomponent 2.2: Commercial finance through NBFIs 
2.3 Sub-component 2.3. Optimal utilisation of remittances 
7. COMPONENT 3: Institutional Strengthening and Project Management 
3.1 Sub-component 3.1 PKSF capacity building 
3.2 Subcomponent 3.2: PO Institutional Strengthening 
3.3 Subcomponent 3.3: Project Management  
8. Project Outreach and Benefits 
9. RMTP Project Implementation 
10. Planning, M&E, Learning and Knowledge Management    
11.  Financial Management and Procurement 
12.  RMTP Project Costs and Financing   
 
Appendices    
1. Project Fund flow 
2. Project physical targets and financial plans; and details COSTAB 
3. Value chain facilitators 
4. Eample of Preparing Value Chain Analysis and Strategic Investments 
5. IFAD Financial Management Manual  
6. IFAD Procurement Manual

Bangladesh: Rural Micro-enterprise Transformation Project (RMTP) 
RMTP: Project Implementation Manual (PIM) 
Date: May 2019  
 
3 
 
1. INTRODUCTION TO PIM and RMTP 
 
2. 
This project implementation manual (PIM) has been prepared to guide the project management 
unit (PMU) to implement all project activities as per project design documents and annual plan. 
The PIM should be read in conjunction with the project design report (PDR) with associated 
Appendices and technical background papers produced during the design process. Aside from 
the PIM, there will be separate manuals/documents such as Financial Management Manual, and 
Procurement Manual to support the PIM. These documents have been referred to in the PIM as 
appropriate.  
3. 
Project Partners: The project will be implemented by PKSF through its existing partner 
organizations (POs) as well as future partner organizations and NBFIs. Besides, during the 
course of implementation of the project the PMU/PKSF may engage new and different types of 
partner organizations or project participant such as research organizations, academic 
institutions, testing & certification institutions, regulatory agencies and any other government, 
non-government and private agencies to achieve objective of the project.       
4. 
The PIM has been reviewed and approved by the PMU (PKSF team) and by IFAD. The PMU will 
seek IFAD’s approval for future amendments and revisions.   
5. 
Important Dates: The following dates are important for the project: 
 
Financing Agreement: The Financing Agreement (FA) was signed between IFAD and the 
Government of Bangladesh (GoB) on ………… 2019. 
 
Letter to the Borrower: IFAD issued the Letter to Borrower on …. 2019 that mentions 
…….. 2019 as Financing Agreement enforce date.   
 
Project duration: The Project Completion Date is ---- ----- 2025 and the Financing 
Closing Date is ------------------------ 2025.  
 
2. PROJECT OBJECTIVE AND COMPONENTS 
 
6. The project goal of RMTP is to sustainably increase the income, food security and nutrition of 
marginal and small farmers and micro-entrepreneurs across selected value chains.  
7. The development objective is the sustainable growth of selected rural commodity value chain. 
8. Project Components: The project has three complementary components as follows: 
9. Component 1: Value Chain Enhancement. This component will enable 445,000 microenterprises to 
sustainable expand their activities through adoption of efficient production methods, compliance 
with internationally recognised food safety and traceability standards, and strong market linkages. 
It will contribute to creating an enabling environment that promotes the growth of micro and small 
enterprises, and strengthens their linkages with the agribusinesses and other value chain actors. 
It has five sub-components: (i) organisation of producers; (ii) provision of technical and business 
services (including GGAP compliance) to producers through private advisory services; (iii) 
integration of actors across selected value chains; (iv) strengthening of downstream 
agribusinesses (including GGAP and HACCP compliance as required); and (v) policy dialogue with 
Government. 
10. Component 2: Financial Services. This component will provide sustainable financial services to 
micro-enterprises and to growing/larger enterprises and agribusinesses. It has three sub-
components: (i) provision of financial services to micro-enterprises through partner organisations 
(microfinance institutions); (ii) provision of commercial finance to larger micro-enterprises as well 
as small/medium agribusiness companies, through non-banking financial institutions (NBFIs); and 
(iii) optimal utilisation of remittances through training to the family members of overseas workers.

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11. Component 3: Institutional Strengthening and Project Management. This component aims to 
strengthen PKSF and PO capability as development organisations by leveraging trends in 
Information Communication Technology (ICT), financial services, commercial platforms and new 
technologies, and to ensure that the project is managed satisfactorily. It has three sub-
components: (i) PKSF capacity building; (ii) POs capacity building; and (iii) project management 
(see organisation and management section). 
12. Project duration: The project is designed for a period of six years, 2020-2025. 
 
13. 
Design and monitoring framework (DMF): Design and Monitoring Framework (Logframe) of 
RMTP is presented below (Table 1) [See separate XL file for full details]

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Table 1: RMTP: Design and Monitoring Framework (DMF or Logframe) 
 
 
Name
Baseline
Mid-Term
End Target
Source
Frequency
Responsibility
No delay in project 
launching; and no delay in 
disbursement of project 
funds and ME loan
Males - Number
                          -                      80,000                  200,000 
Females - Number
                          -                    100,000                  245,000 
Sustainable and qualified 
POs are available to 
implement VCD programs 
Young - Number
                          -                      20,000                    50,000 
Country remains politically 
stable
Not Young - Number
                          -                    160,000                  395,000 
Young - Percentage (%)
                          -                       11.11                     11.24 
Non-women-headed households - 
Number
                          -                    170,000                  425,000 
Women-headed households - 
Number
                          -                      10,000                    20,000 
Households - Number
                          -                    180,000                  445,000 
Household members - Number of 
people
                          -                    810,000               2,002,500 
1.2.8 % of women reporting 
improved food quality in their 
diet
Base line diet 
combintion
 - 
50%
PMU/PKSF
• Economy maintains or 
increases growth rates
• Terms of trade for rural 
communities shall not 
deteriorate 
• Price inflation for staple 
food remains below 10%
• Rural and peri-urban 
infrastructure available
70% of project supported 
households increase income by ---
%: 
Estimated baseline 
HH annual income: 
Taka -------
                          -   
50% Impact surveys of 
households, qualitative 
(PRA) assessment of 
participating HHs and 
quantitative assessment 
(profitability analysis) of 
micro-enterprises
Results Hierarchy
Indicators
Means of Verification
Assumptions
Outreach
1.b Estimated corresponding total number of household members
POs and PKSF 
monitoring report
Annual 
POs and 
PMU/PKSF
1.a  Corresponding number of households reached
1  Persons receiving services promoted or supported by the project
at baseline, mid- 
term and 
completion
Project Goal:  To sustainably 
increase the income, food 
security and nutrition of 
marginal and small farmers 
and micro-entrepreneurs 
across selected value chains.

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Development Objective:  
 Sustainable growth of selected 
rural commodity value chains 
supported by the project
at baseline, mid- 
term and 
completion
HHs - Number
0                  100,000                  275,000 
% increase in sales of sample 
microenterprises in the value 
chains 
baseline: average 
annual sales (Taka---
million)
15%
30%
% increase in profit (year to year) 
of sample microenterprises in the 
value chains 
baseline: average 
annual profit (Taka--
- million)
10%
20%
Outcome 1
Producers/microenterprises  - 
Number
Baseline: --
                 400,000 
Producer organizations  - Number Baseline: --
500                     1,500 
 Increase in # of producers 
groups adopted GAP 
Bseline: --
                    2,000                     7,000 
Men -  number
0                    80,000                  180,000 
Women - number
0                    65,000                  165,000 
Households - Number
0                200,000                445,000 
1.2.4 HHs reporting increase in production
PMU
• Government maintains 
favorite policies for small 
businesses
• Government continues to 
support micro-finance 
programs and NGO activities  
• Absence of political unrest 
that could adversely affects 
Quantitative assessment 
of productin, sales, and 
profitability of sample 
micro-enterprises from 
sectors
PMU
• POs remain institutionally 
and financially viable and 
offer competitive loan 
products
• POs establishe separate non-
financial services units and 
enhance capacity to manage 
value chain projects
• No major external shocks 
such as major spread of 
disease
• PKSF and POs successful 
identify technologies and
2.1.4  Supported rural producers that are members of a rural producers' 
organization
implementing partners' 
records and project 
records
quarterly
PMU
• Farmers willing to adopt 
new technologies
1.2.2 Producers and microenterprises in the selected value chains adopted improved 
production technolgies* 
implementing partners' 
records and project 
records
quarterly
PMU
Farming microenterprises 
expand sustainable businesses 
through adopting efficient 
production methods, 
internationally recognized safety 
standards and traceability, and 
building strong market 
linkages.efficient production 
methods and strong market 
linkages
2.2.3 Rural producers organizzations  engaged in infromal and formal 
partnerships/agreements or contracts with buyers
implementing partners' 
records and project 
records
quarterly
Output
1.1. Organization: Formation of 
producer organizations
1.1.8  Households provided with targeted support to improve their nutrition

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Males - Number
4,900
                  
11,900
                
Females - Number
2,100
                  
5,100
                  
Young - Number
4,200
                  
11,900
                
Not Young - Number
2,800
                  
5,100
                  
Persons trained (total) - Number
7,000
                  
17,000
                
Males - Number
5600                    14,020 
Females - Number
2400                     6,008 
Young - Number
5600                    14,020 
Not Young - Number
2400                     6,008 
Persons trained (total) - Number
8000                    20,028 
Men - number
                   10,000                    32,000 
Women- number
                    1,000                     3,000 
Men - number
                       500                     5,000 
Women - number
                       100                     1,000 
HHs - Number
                 200,000                  445,000 
Output 1.4  Enterprise 
strengtheing
Number of enterprises - number
                    2,000                    20,000 
Output 1.5 Policy dialogue
Policy related knowledge products completed
# policy issues identified, policy 
products (papers) prepared and 
policy advocay/dialogue initiated
3
5
%Increase in avearge loan size to 
ME borrowers
baseline average 
loan size: Taka ----
25%
40%
POs  remain institutionally 
and financially viable 
• Private business companies 
are interested in sourcing 
products from micro-
enterprises and willing to 
engage in partnership in the 
selected value chains 
Increase in PKSF ME loan 
portfoilio (Taka -- billion)
Baseline portfolio 
Taka --- Billion
PKSF
PKSF
PMU
• PKSF and POs successfully 
establish collaborative 
business arrangements 
between MEs and 
mainstream businesses
1.1.4 Persons trained in production technologies and business management in three sectors 
implementing partners' 
records and project 
records
quarterly
PMU
• PKSF and POs remain 
committed to facilitating non-
financial services along with 
providing financial services 
program to MEs
• POs establishe separate non-
financial services units and 
Persons paid partially or fully for training or advisory services in selected value chains
implementing partners' 
records and project 
records
mid-term and 
completion
PMU
2.1.1 Rural enterprises accessing business services
3.2.2 Number of HHs reporting adoption of climatically sustainable and climate resileint 
technologies, and practices
Output 1.3: Value chain 
integration 
Outcome 2: Sustainable 
financial services for 
microenterprises
implementing partners' 
records and project 
records
quarterly
PMU
Output
1.2. Technical and business 
servces: Value chain advisory 
services provided to producers 
and producer organizations
Persons trained in GLOBAL GAP and HACCP
implementing partners' 
records and project 
records
quarterly
1.1.4 Persons trained in Technical services (e.g. paravet)

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POs  remain institutionally 
and financially viable 
• Private business companies 
are interested in sourcing 
products from micro-
enterprises and willing to 
engage in partnership in the 
selected value chains 
Increase in ME borrowers -men
                   15,000                    25,000 
Increase in ME borrowers - 
women
                   35,000                    75,000 
Increase in PO ME loan 
outstanding to ME borrowers
Baseline PO ME 
loan outstanding: 
Taka ----- B
PKSF
 PKSF 
Increase in PKSF ME loan 
outstanding to POs
Baseline PKSF ME 
loan outstanding: 
Taka ----- B
PKSF
PKSF
Increase in number of ME 
borrowers
Baseline ME 
borrowers (#): ----
500
1400
Increase in PKSF ME loan 
outstanding to NBFIs
Baseline loan 
outstanding (Taka -- 
m)
250
800
increase in NBFI ME loan 
oustanidng to borrowers
Baseline loan 
outstanding (Taka -- 
m)
500
1600
Output 2.3 Optimal utilization 
of remittances
Support to families of expatriate 
workers
# of persons trained on vcational 
and business management training 
baseline: 0
• Presence of non-bank 
financial institutions in 
project area
• Portfolio quality of ME 
loan program of POs remains 
high (PAR <5%)
• Loan recovery rate of 
overall MF program and ME 
loan of POs remains high 
1.1.5 Persons in rural accessing financial services  
implementing partners' 
records and project 
records
Quaterly
PMU
Output 2.1: Financial Services 
through Partner Organizations 
(MFIs)
MEs supported by selected NBFIs 
implementing partners' 
records and project 
records
quarterly
PMU
Output 2.2 Financial services to 
Mes through NBFIs

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Outcome   3
PKSF and POs’ capacity is 
enhanced in areas of ICT and 
the project is satisfactorily 
managed.
# of ICT solutions developed
Baseline: 0
4
4
Output 3.2 PKSF human 
resources development
Persons - number
25
155
Output 3.3 POs Institutional 
strengthening
Services providers - number
15
25
 persons trained in various 
courses
Men - number
40
100
Women- number
20
120
* PKSF will define actual 
technology during 
implementation
implementing partners' 
records and project 
records
mid-term and 
completion
PMU
Output 3.1 PKSF’s institutional 
strengthening through ICT 
based solutions
•Policy environment present 
to implement platform.
•Institutional capacity present 
to implement platform.
1.1.6 Financial service providers supported in delivering outreach strategies, financial 
products and servcies to rural areas
People trained in various capacity building courses

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3. PROJECT AREA AND TARGET POPULATION 
14. Project area. The project has a national mandate and will invest throughout Bangladesh. Specific 
focus areas will be selected based on poverty incidence, economic opportunity, implementability, 
and complementarity with ongoing investments in agricultural value chain development. The 
following procedure will be applied to select districts/sub-districts (upazilas) where project 
activities will take place: 
 
First, PKSF will identify districts/sub-districts that have: (i) already developed production 
clusters of the selected value chains; and, (ii) the potential to develop production clusters 
of the selected value chains. 
 
Second, PKSF will map the incidence of poverty in all districts/sub-districts of the country. 
 
Third, PKSF will make a final selection of the target areas covering districts/sub-districts 
with existing/potential value chain clusters and with greater incidence of poverty. 
15. Two additional considerations will be taken into account: (i) avoiding investments in the same 
value chains and same sub-districts already covered by other PKSF programmes (while seeking 
complementarities with World Bank-financed Sustainable Enterprise Project); and (ii) focusing on 
areas where Partner Organisations (POs) have lending programmes and have the capacity to 
implement value chain financing.  
 
16. A list of districts/sub-districts with high potential for the selected value chains is presented in 
Table 2 below:   
 
Table 2: Potential Project Districts 
 
Commodity or 
agribusiness 
Districts with existing clusters  
Potential districts  cluster 
development 
High value cereals 
Greater Dinajpur 
Thakurgaon, Rangpur 
High value 
vegetables, 
floriculture, 
beans/lentils 
Dhaka, Comilla, Manikganj, 
Shariatpur, Narshingdi, Bogra, 
Jessore, Chuadanga, Meherpur, 
Dinajpur, Rajshahi, Naogaon, 
Chittagong, Joypurhat, Bhola, and 
greater Barisal 
All districts except haor districts, flood 
affected sub-districts, and coastal 
sub-districts with high soil salinity 
High value fruits 
Greater Dinajpur, Greater Rajshahi, 
Chapai Nawabganj, Satkhira, Bogra, 
Tangail, Mymenshing, and Narshingdi 
Thakurgaon, Panchagar, and parts of 
three Chittagong hill districts 
(Banderban, Rangamati, Khagrachari) 
High value spices and 
medicinal plants 
Natore, Chittagong hill districts 
Plain and low hilly part of three 
Chittagong hill districts (Banderban, 
Rangamati, Khagrachari) 
Dairy products 
Tangail, Munshiganj, Manikganj, 
Sirajganj, Pabna, Dhaka, Bogra, 
Greater Faridpur, Bhola, Comilla 
All districts  
Dairy farm 
Sirajganj, Pabna, Rangpur, Bogra, 
Satkhira, Munshiganj, Manikganj, 
Comilla, Dhaka, Gazipur, Shariatpur, 
Tangail, Sylhet 
Greater Dinajpur, Greater Kushtia, 
Greater Rajshahi, Greater Faridpur

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Goat and sheep farm 
Kushtia, Meherpur, Chuadanga, 
Tangail, Rajshahi 
Jessore, Comilla 
Cattle fattening 
Sirajganj, Pabna, Bogra, Comilla, 
Kushtia, Meherpur, Jessore, 
Chuadanga, Cox’s bazaar, Chittagong 
Hill districts, Manikganj, Dhaka 
Greater Dinajpur, Greater Kushtia, 
Greater Rajshahi, Greater Faridpur 
Poultry and feed 
Gazipur, Tangail, Dhaka, Bogra, 
Joypurhat, Mymenshing, Narshingdi, 
Comilla 
Greater Rajshahi and Greater 
Rangpur; parts of all districts 
Aquaculture (crab 
culture, crayfish, etc) 
Cox’s bazaar, Satkhira 
Khulna, Laxmipur, Noakhali 
Pond fisheries 
Mymenshing, Rajshahi, Munshiganj, 
Jessore, Meherpur, Natore, Bogra, 
Dinajpur, Comilla, Chapai, Pabna, 
Ishwardi, Gopalganj, Madaripur, 
Sirajganj, Noakhali 
Greater Rajshahi, Greater Rangpur, 
Greater Faridpur 
Fish hatchery 
Greater Jessore, Mymenshing, 
Comilla, Chittagong 
 
Note: RMTP/PKSF may choose any sub-district/district in the country to respond to demand and 
opportunity, and proposal from POs   
17. Target groups. RMTP will directly target marginal and small farmers and micro-entrepreneurs 
engaged in producing or processing field crops, horticulture, aquaculture and livestock. Within 
these groups, the project will focus on the ultra poor, the transitional poor, and the enterprising 
poor. These are characterized below: 
 
Ultra-poor (approx. 10% of beneficiaries): The ultra-poor are typically landless and depend 
on unskilled wage labour and seasonal migration. They have poor literacy and numeracy 
skills. The ultra-poor are involved in producing commodities such as poultry and small 
ruminants. This group is directly targeted by PKSF's pro-poor lending programme (Buniad). 
 
Transitional poor (approx. 19% of beneficiaries): The transitional poor typically possess less 
than 30 decimals of land (30% of an acre), including homestead land, and/or are involved 
in sharecropping and wage labour. They participate in crop, livestock and poultry value 
chains, and sometimes supply output to micro-enterprises. The transitional poor have been 
able to gradually increase their asset base over the past 5-10 years by diversifying their 
income base, and in some cases by receiving remittances. This group is targeted by PKSF’s 
household income-generating activities lending programme (Jagoron) or seasonal 
agricultural lending programme (Sufolon). 
 
Enterprising poor (approx. 71% of beneficiaries). The enterprising poor typically possess 
between 30 and 90 decimals of land (30% to 90% of an acre). They operate micro-
enterprises in crops/horticulture, aquaculture, livestock and poultry value chains, and 
supply output to markets or larger enterprises. The enterprising poor are expanding land 
ownership, and in some cases receive remittances. This group is targeted through PKSF’s 
Jagoron, Sufolon, and Agrosor (micro-enterprise) loan products. 
18. However, in case of loan products PKSF will its existing criteria, which may be updated from time 
to time. Besides, these criteria may vary from PO to PO and geographical location of respective 
PO’s operational area.

Bangladesh 
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19. Other potential project participants: In addition, the project will indirectly target all other 
value chain actors, such as input suppliers, advisory service providers, traders and processors. 
20. Participants in value chains: In a particular value chain producers belonging to all three 
categories of beneficiaries as well as larger producers may also being doing business and 
consequently may participant in the project activities. But larger and wealth participants may not 
receive any subsidized services that might be offered in a particular situation.   
21. Microfinance groups will be the main entry point for value chain activities, although participation 
will also be open to micro-entrepreneurs outside these groups. As per POs' regular practices, 
borrowers are included in microfinance groups for administrative, transactional and organisational 
purposes. Microfinance groups typically consist of borrowers of all four loan products. POs will 
make efforts to increase participation of Buniad borrowers in these groups. 
22. Targeting strategy. The project's targeting mechanisms are outlined below: 
 
Geographical targeting: outlined in paragraph 14 above. 
 
Procedural targeting: existing procedures will be applied for targeting under PKSF's four 
standard loan products. Standard loan packages will correspond to the financial capacities 
of the ultra-poor, transitional poor and enterprising poor respectively. Similar procedures 
will be established for the participation of non-banking financial institutions in lending to 
larger/ growing enterprises and to agribusinesses. 
 
Direct targeting: POs will identify and directly target microfinance groups that have the 
potential to upgrade production and develop market linkages, and that have a higher 
proportion of ultra-poor borrowers. 
 
Self-targeting: Micro-finance groups engaged in the selected value chains will have the 
option of forming into producers' associations, with project support. 
23. Targeting Youth: Youth may be the targeted in the following manner: a) borrowers of ME loan 
and other loan products from POs; b) trainees of GGAP and HACCP training courses; and c) 
trainees of other specialized training courses for development local service providers.   
24. Targeting Women: Women will be main recipients of microfinance services (ME loans and other 
loans) and also participants of value chains as producers, and sometimes as traders and 
processors.   
 
4. PROJECT IMPLEMENTATION APPROACH 
 
 
25. Project implementation approach: The PMU/PKSF will ensure the following core implementation 
approach while designing a value chain subproject as well as offering financial services:  
 
Work in clusters and new cluster development: One of the core elements of the project is 
to offer services or introduce new technologies in an existing cluster of businesses. The 
PMU must advice POs to identify successful clusters of business to determine constraints 
as well as services needed to further develop the clusters and or expand the businesses in 
another locations (new clusters). This critical step is to reach out to a large number of 
similar business, develop commercially viable support and advisory services, disseminate 
new technologies and information, and collecting produces for buyers.     
 
Combine microfinance and non-financial services in each value chain: While designing a 
value chain subproject involving a specific product or a group of similar products (such as 
vegetables) the PMU will ensure that participants receive loans as and when demanded.    
Since producers groups will have members of various size and capacity loans will be

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offered from four PKSF/POs lending windows. However, it is understood that not all value 
chain participants will need loans or ask for  loans as many of them may join the groups 
for technology, training and accessing market; 
 
Transform subsistence producers into microenterprises: The PMU will introduce 
management practices, technologies, and support services to improve productivity and 
expand businesses to create broad economic multiplier effects that transform the rural 
sector and reduce poverty; 
 
apply a nutrition-sensitive approach to the selection of commodities to be promoted, to 
ensure better nutrition for producers and consumers; 
 
specifically target women through the selection of commodities/value chains in which 
women are heavily involved (poultry, livestock, homestead production); 
 
introduce compliance with food safety and quality standards at producer and processor 
levels, to ensure the supply of safe food for producers and consumers;  
 
leverage commercial finance through non-banking financial institutions for investment in 
larger enterprises and agribusinesses to expand the market for micro-enterprise output; 
and  
 
strengthen the capability of PKSF and POs as development institutions by leveraging 
trends in financial services, commercial platforms and new technologies. 
 
5. COMPONENT 1: VALUE CHAIN DEVELOPMENT/ENHANCEMENT 
 
26. This component will enable 345,000 microenterprises to sustainably expand their activities 
through adoption of efficient production methods, compliance with internationally recognised food 
safety and traceability standards, and strong market linkages. It will contribute to creating an 
enabling environment that promotes the growth of micro and small enterprises, and strengthens 
their linkages with the agribusinesses and other value chain actors. It has five sub-components: 
(i) organisation of producers; (ii) provision of technical and business services (including GGAP 
compliance) to producers through private advisory services; (iii) integration of actors across 
selected value chains; (iv) strengthening of downstream agribusinesses (including GGAP and 
HACCP compliance as required); and (v) policy dialogue with Government. 
27. The microfinance groups supported by POs are the main entry point for investments under 
component 1 (Figure 1). Based on the principles of self-
selection, 
cohesive 
microfinance 
groups 
can 
request 
additional support and become informal producers' groups 
under sub-component 1.1. These groups will receive 
technical and business services to increase productivity and 
ensure compliance with GGAP and HACCP (where required) 
under sub-component 1.2. Value chain integration support 
will connect microenterprises to agribusinesses and markets 
under sub-component 1.3. Agribusinesses will be supported 
to adopt new technologies, comply with HACCP (where 
required) and expand their market linkages under sub-component 1.4. The relevant policy 
environment, and any needed reforms, will be covered by sub-component 1.5. Policy Dialogue.

Bangladesh 
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Targeting Strategy  
28. Geographical target: The below table providing the indicative target districts, the commodities and 
existing clusters are already developed. It also provides the districts having the potential for 
developing new clusters. The project will not support districts where other development partners 
implement similar activities. However, POs is encourage to expand clusters initiated under PACE 
and POs own initiatives and expand VC activities within these clusters including introduction of 
GGAP, HACCP and other relevant standards. 
Table 3: Indicative Districts with existing Commodity Clusters and Potential Districts  
Commodity 
Districts with successful clusters 
already developed 
Districts with potential for 
cluster development 
High value cereals 
Greater Dinajpur 
Thakurgaon, Rangpur 
High value 
vegetables, 
floriculture, 
beans/lentils 
Dhaka, Comilla, Manikganj, 
Shariatpur, Narshingdi, Bogra, 
Jessore, Chuadanga, Meherpur, 
Dinajpur, Rajshahi, Naogaon, 
Chittagong, Joypurhat, Bhola, and 
greater Barisal 
All districts except haor districts, 
flood affected sub-districts, and 
coastal sub-districts with high soil 
salinity 
High value fruits 
Greater Dinajpur, Greater Rajshahi, 
Chapai Nawabganj, Satkhira, Bogra, 
Tangail, Mymenshing, and 
Narshingdi 
Thakurgaon, Panchagar, and parts 
of three Chittagong hill districts 
(Banderban, Rangamati, 
Khagrachari) 
High value spices 
and medicinal plants 
Natore, Chittagong hill districts 
Plain and low hilly part of three 
Chittagong hill districts (Banderban, 
Rangamati, Khagrachari) 
Diary products 
Tangail, Munshiganj, Manikganj, 
Sirajganj, Pabna, Dhaka, Bogra, 
Greater Faridpur, Bhola, Comilla 
All districts  
Dairy farm 
Sirajganj, Pabna, Rangpur, Bogra, 
Satkhira, Munshiganj, Manikganj, 
Comilla, Dhaka, Gazipur, 
Shariatpur, Tangail, Sylhet 
Greater Dinajpur, Greater Kushtia, 
Greater Rajshahi, Greater Faridpur 
Goat and sheep 
farm 
Kushtia, Meherpur, Chuadanga, 
Tangail, Rajshahi 
Jessore, Comilla 
Cattle fattening 
Sirajganj, Pabna, Bogra, Comilla, 
Kushtia, Meherpur, Jessore, 
Chuadanga, Cox’s bazaar, 
Chittagong Hill districts, Manikganj, 
Dhaka 
Greater Dinajpur, Greater Kushtia, 
Greater Rajshahi, Greater Faridpur 
Poultry and feed 
Gazipur, Tangail, Dhaka, Bogra, 
Joypurhat, Mymenshing, Narshingdi, 
Comilla 
Greater Rajshahi and Greater 
Rangpur; parts of all districts 
Aquaculture (crab 
culture, crayfish, 
etc) 
Cox’s bazaar, Satkhira 
Khulna, Laxmipur, Noakhali

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Pond fisheries 
Mymenshing, Rajshahi, Munshiganj, 
Jessore, Meherpur, Natore, Bogra, 
Dinajpur, Comilla, Chapai, Pabna, 
Ishwardi, Gopalganj, Madaripur, 
Sirajganj, Noakhali 
Greater Rajshahi, Greater Rangpur, 
Greater Faridpur 
Fish hatchery 
Greater Jessore, Mymenshing, 
Comilla, Chittagong 
 
Note: RMTP/PKSF may choose any sub-district/district in the country to respond to demand and opportunities, and 
proposal from POs   
 
Target Group  
29. The RMTP will directly target marginal and small farmers and micro-entrepreneurs engaged in 
producing or processing field crops, horticulture, aquaculture and livestock. Within these groups, 
the project will focus on the ultra poor, the transitional poor, and the enterprising poor. These are 
characterised below: 
 
Ultra-poor (approx. 10% of beneficiaries): The ultra-poor are typically landless and depend 
on unskilled wage labour and seasonal migration. They have poor literacy and numeracy 
skills. The ultra-poor are involved in producing commodities such as poultry and small 
ruminants. This group is directly targeted by PKSF's pro-poor lending programme (Buniad). 
 
Transitional poor (approx. 19% of beneficiaries): The transitional poor typically possess less 
than 30 decimals of land (30% of an acre), including homestead land, and/or are involved 
in sharecropping and wage labour. They participate in crop, livestock and poultry value 
chains, and sometimes supply output to micro-enterprises. The transitional poor have been 
able to gradually increase their asset base over the past 5-10 years by diversifying their 
income base, and in some cases by receiving remittances. This group is targeted by PKSF’s 
household income-generating activities lending programme (Jagoron) or seasonal 
agricultural lending programme (Sufolon). 
 
Enterprising poor (approx. 71% of beneficiaries). The enterprising poor typically possess 
between 30 and 90 decimals of land (30% to 90% of an acre). They operate micro-
enterprises in crops/horticulture, aquaculture, livestock and poultry value chains, and 
supply output to markets or larger enterprises. The enterprising poor are expanding land 
ownership, and in some cases receive remittances.  
 
In addition, the project will indirectly target all other value chain actors, such as input 
suppliers, advisory service providers, traders and processors. 
 
Direct targeting: POs will identify and directly target microfinance groups that have the 
potential to upgrade production and develop market linkages, and that have a higher 
proportion of ultra-poor borrowers. 
 
Self-targeting: Micro-finance groups engaged in the selected value chains will have the 
option of forming into producers' associations, with project support. 
 
Subcomponent 1.1: Organization   
30. The PKSF will be overall responsibility for project implementation and field implementation will be 
the direct responsibility of selected PKSF Micro Finance Partner Organizations (PO) also including 
Non-Bank Financial Institutions (NBFI).  
31. PKSF’s Partner Organizations (POs). Field implementation of the RMTP will be the direct 
responsibility of selected PKSF Partner Organizations (POs). When PKSF have selected the POs,

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the POs can hire  value chain facilitators (ToR Annex 1). The PKSF will select the POs based on 
their existing criteria which includes: 
 
 
Level of engagement with micro, small and medium agriculture enterprises and willingness 
to expand the engagement 
 
Loan repayment (portfolio quality): portfolio at risk (PAR), and/or loans at risk (LAR) 
and/or, current recovery rate (CRR) together with Annual loan loss rate (ALR) 
 
Financial sustainability (profitability): return on assets (ROA) or for subsidized institutions, 
return on equity (ROE), financial self-sufficiency (FSS) or adjusted return on assets 
(AROA) or subsidy dependence index (SDI) Compliance with all other MRA guidelines on 
financial soundness, management, accounting etc.  
 
Management information and reporting systems that provides suitable information to the 
PO’s owners and management on the general and financial performance of the POs, 
inclusive of the management of risks. Allowance for loan losses (risk fund) at an amount 
prescribed by Microcredit Regulatory Authority (MRA). 
 
Hold a valid micro finance license. 
 
Compliant with all guidelines and financial covenants imposed by the MRA and PKSF. 
 
Maintain accounting evidence for overall transactions and operations in accordance with 
acceptable accounting procedures and standards acceptable to MRA and PKSF. 
 
Annual audited report inclusive of the auditors comments, and MRA decisions based on 
supervision reports and copies of document on remedy measures as well as the 
information on implemented actions by the Po and MRA. 
 
Efficiency: operating expense ratio (OER) and cost per client. 
 
Sound and updated business plan that ensures the PO institutional capacity development 
and its sustainability. 
 
Satisfactory procedures for external and internal auditing and internal control. 
 
Outreach (breadth) number of active clients or accounts. 
 
Outreach (depth) average outstanding balance per client or account. 
32. Existing Microfinance Groups and Formation of New Groups. Over the years the POs under PKSF 
has assisted to form thousands of informal1 microfinance groups. These groups were originally 
formed, and used for savings and for channelling of credit to individual group members. Under 
PACE, these groups are functioning as focal points for dissemination of new technologies, 
knowledge and to a lesser extend market information. Public advisory services hired by the POs, 
PO’s own hired advisors and private advisors paid for by the farmers disseminated the knowledge 
and new technologies. Advisory service delivered for free directly by POs was not nearly as 
convincing as the pay based advisory service, introduced by some of the POs.    
33. Based on the experience from PACE, the RMTP will also make use of existing and new groups2 
(calls Producer Groups PG) as the focal point for dissemination of new technologies, knowledge, 
and standards/traceability, linking PGs with downstream agro-business (Lead Firms)  for buying of 
commodities and linkage to line of credits. Particularly linkages of PG with LF will receive attention, 
ensuring a more stable market and prices for both conventional and GGAP certified farm produce.  
PKSF will generate a long-list of agribusinesses that may be interested in buying agriculture, 
aquaculture and livestock produce. POs will cluster PG’s   to enable them to meet the quantities 
and quality required by LFs. The size and proximity of clusters will be influenced by availability of 
public and private advisory services. PGs will be supported by POs to enter into contractual 
arrangements with interested agribusinesses. 
                                                 
1 Despite being informal the groups has a structure like a formal groups including elected leaders. 
2 The project will use a broad definition of private sector: farmers, producer groups, informal/formal microenterprises, service 
providers, private businesses of inputs, traders, business associations, informal businesses and formal businesses, processors, 
transporters, domestic market businesses, exporters, private and non-government financial institutions etc.

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34. If requested by farming enterprises, the POs will assist them to form new PAs. The new PGs and 
existing PGs can receive PO support to register formally if required. A formal registration is 
necessary if a PG, wants to enter into business together e.g. milk collecting centre; grain storage 
with box dryer and cleaner; seed processing, drying, packaging and storage; tractor services with 
full implements; cold storages for fish, vegetables and fruits etc.  
 
35. The POs will also support the formation of apex producer associations (PA) if requested. A PA is 
typically composed of many PG and engage in negotiating better condition on a wider scale, 
engage in policy dialogue with local government, public institution authorities, and infrastructure, 
negotiate better prices for inputs, services and credit.  
 
36. The engagement of the existing PGs and formation of new PGs will be the responsibility of the 
Value Chain Facilitators under each PO. Support to PGs will commence upon POs being shortlisted 
for project support (this could take place before project commencement). Around 8,000 farming 
enterprise groups, each with around 45 households will participate in the value chain activities. 
Listed below are the typical activities, timelines and parties responsible.  
 
Table 4: Sequential Activities and Timeline, Responsible Party for Facilitating PGs 
Participation in Value Chain Activities 
Sequential Activities 
Timeline 
Responsible Party 
Awareness of potential VCs for PGs to 
participate in  
Upon PO being 
shortlisted for project 
support 
Value Chain Facilitator with 
assistance of the pay based 
advisor 
Linking PGs with LFs 
As part of preparing 
proposals for project VC 
support 
Value Chain Facilitator with 
assistance of the pay based 
advisor 
Formation of new PGs  
When required  
Value Chain Facilitator 
Support to PGs formal registration  
When business 
partnership require  
Value Chain Facilitator 
Training of new PGs 
As soon as formation is 
completed 
Value Chain Facilitator 
Prepare a long list of potential LFs 
interested to buy produce from PGs 
Prior to commencement 
of the project 
For LFs with national coverage 
PKSF and for LFs with district 
coverage POs 
 
37. The project will not provide direct general support to national value chains, but rather focus on 
building relationship between LFs, (making up the national national value chains) and the PGs. The 
relationship between LF and PGs will be in the form of contractual engagement buying/selling all 
or part of the raw material, produced by the farming enterprises members of the PGs. In most 
instance, the PO will provide credit for production investment of the PG’s farming enterprises, as 
most LFs anticipated to participating in the RMTP have insufficient financial strength to undertake 
this task. If an advantage, tripartite/four-partite financing arrangement will be organised between 
the PO/NBFI, LF and the PGs.

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Rural Microenterprise Transformation Project (RMTP) 
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Figure 1: Value Chain 
 
 
 
38. Training for microfinance and producers’ groups (See COSTAB for details): The following Table 
presents various training items planned for development of microfinance and producer groups. The 
items a) to d) are responsibilities of the POs to enhance knowledge of their microfinance members 
on financial literacy, especially related to savings/credit, awareness on nutrition, climate, 
environment and social issues. The POs will organize low-cost campaigns on these issues, rather 
classroom trainings, throughout the year among microfinance groups and PGs and population in 
general to develop awareness and consequently, encourage behavioural changes (e.g. in 
nutritional aspects of diet, protection of environment etc). Various social media and other 
information dissemination channels, direct contact with communities, microfinance groups, various 
social events etc should be used by POs to implements these activities.            
  
a. Information & Orientation on financial literacy for MC & PO members 
b. Training on Nutrition, climate, environmental and social issues 
c. 
Prepare information sheet and discussion notes for village meetings 
d. TOT on financial literacy for PO trainers by POs 
e. Training on business management for ME and PA members  
f. 
Developing and revising training module by PKSF 
39. The PMU will produce/revise modules for the campaigns mentioned above. However, all such 
modules should be in video form and wide shared through social media. Even the project may 
consider developing an App for dissemination purpose, and upload all such video materials in the 
project website.   
 
40. Subcomponent 1.2: Technical and Business services: The project will support micro-
enterprises to better engage in selected value chains. Key services will include: privatised advisory 
services to optimize production; preparation of business models and plans; support to 
microenterprises for GGAP compliance; support to agribusinesses for HACCP compliance; 
assistance to source financing; and development of contract management arrangements. 
  
41. Private Advisory Services: A pool of highly knowledgeable and skilled local service providers 
such as paravets, trainers, and certified local agricultural technicians will be gradually developed 
to provide privatised technical and business services. PKSF will develop a pre-qualification system 
for developing this pool of private advisors. It will issue periodic calls for interest inviting qualified 
persons to apply. Candidates will be evaluated according to educational background, technical 
knowledge and experience; ability to specifically target women microentrepreneurs and the youth 
will also be assessed.

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Table 5: Evaluation Matrix for Shortlisting Candidates for Pay Based Advisors  
 
 Criteria 
Maximum 
Points 
Educational Background (maximum 15 points each) 
1 
Educational background  
 
2 
Post educational relevant courses  
 
3 
Other relevant skills  
 
4 
Published reports and training material  
 
Working Experience  (maximum 10 points each) 
1 
Is the working experience relevant  
 
2 
Is the duration of experience sufficient for the position 
 
Additional Knowledge/experience  (maximum 5 points each) 
1 
Is the candidate knowledgeable of human nutritional requirements   
 
2 
Experience working with youth and gender 
 
3 
Experience working with private sector in a commercial fashion  
 
4 
Others 
 
Total 
 
 
42. PKSF/POs will organise generic and advanced training for pre-qualified advisors in commodity-
specific crop, livestock, and aquaculture management. For cropping, specific attention will be 
devoted to the selection, application and safe handling of pesticides. For livestock, training will 
cover para-veterinarian activities such as vaccinations and health care. For aquaculture, training 
will focus on environmentally-sustainable production practices and fish health care. All advisory 
services will comply with food safety protocols and standards for crops, fresh vegetables, livestock 
and aquaculture products. 
43. Preparing of Training Material and Training of Pay Based Advisors. PKSF will prepare training 
modules for each selected value chain.  To the extent possible, existing training material 
developed by PKSF and its POs will be update as required and new modules developed if needed. 
The training modules will include generic training of the three broad value chains supported by the 
project. Likewise, commodity specific advanced training modules will be prepared. If needed, PKSF 
will engage qualified third party to assist develop the training material. Upon completion, relevant 
expertise will be engaged to validate all training material to ensure highest quality possible. The 
training material will centre on good agriculture practises, environmental sound, climate smart, 
gender specific, innovative and commercialisation of agriculture and aquaculture. 
 
44. The Environment, Health and Safety (EHS) manual for Microenterprise developed under PACE will 
be modified and adopted by RMPT and its use thought to the pay based advisors and value chain 
facilitators as a reference tool. The use of RMPT’s Environmental and Social Management 
Framework (ESMF) will be part of the training for pay-based advisors and value chain facilitators 
for implementation of VC activities.   
45. PKSF will undertake training of preselected candidates to become advisors, with support from 
relevant private and public institutions, as and when required. Upon passing final examination, 
PKSF will accredit the advisors for jobs within selected VC. It is envisaged that the majority of 
private advisors will be young women and men (i.e. between 18 and 35 years of age). POs will 
draw from the pool of accredited private advisors to meet value chain actors’ requests for 
services, ideally on cluster basis.

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Table 6: Sequential Activities and Timeline, Responsible Party for Preparing Training 
Material for Farming Enterprises and Training Pay Based Advisors 
Sequential Activities 
Timeline 
Responsible Party 
Prepare generic training material 
Commence upon signing the LA and 
completed within two months 
PKSF 
Prepare specialized commodity specific 
training material 
Commence upon signing the LA and 
completed within two months 
PKSF 
Training of pay based advisors in 
generic and specialized  
First batch of 130 pay based 
advisors. Completed within the first 
4 months after signing the LA 
PKSF 
Training of pay based advisors in 
generic and specialized 
Second batch of 325 pay based 
advisors during the last quarter of 
2021 
PKSF 
Training of pay based advisors in 
generic and specialized 
Final batch of 195 pay based 
advisors during the last quarter of 
2022 
PKSF 
 
46. The provision of advisory services will be cost-shared by the project over three years on declining 
basis (80% in the first year of operation; 50% in the second year; 30% in the third year). The PO 
will offer pre-qualified advisors to take up a position within a value chain cluster of sufficient sizes 
able to generate the required income for the advisor.  
47. The average number of PGs per pay-based advisor will be around 15 with 30-45 in each group, 
totaling 600 farming enterprises. On average, a pay-based advisor will be visiting/training PG 
members each 7 times per crop season with an average of 3 seasons per year totaling 21 
visits/trainings per annum. The training/visits for crops will typically include (1) Gap need 
assessment for introducing GGAP (see list in Annex: xx), (2) pre-planting, (3) fertilizer application, 
(4) pest control, (5) harvest, (6) harvest and (5) postharvest/marketing. At each of these 
visits/trainings, relevant elements of introduction of GGAP will be included. If the pay based 
advisor earns Taka 350,000 per year it will translate into Taka 27 (Taka 350,000/ (600 farming 
enterprises*3)/ 7 visits) per farming enterprise per visit/training, which is Taka 575 for 21 
visits/training for three cropping seasons per year.  In addition, the advisor will undertake 
observation visits to identify nutritional deficiencies, pest problems, water management issues etc. 
These visits are not directly charge to the farming enterprises but use for determining the right 
timing and subjects for visiting/trainings.  
 
48. The pay-based advisor will keep a logbook specifying the nature of training/visit to the PG. The 
chairperson/treasure of the PG will sign the log after each visit and pay the amount due to the 
advisor. Relevant pictures from each training/visit session showing no of participants and other 
relevant events during the training event will accompany the protocol.   
 
49. Instead of charging the PGs, the advisor can also promote and sell inputs during the training/visits 
on commission basses for input suppliers and in strict compliance with GGAP regulations/protocol. 
The commission earned has to recorded in the logbook, and the PGs should pay any difference 
between commission and actual cost of the service received. Similar to a fee based only scenario, 
relevant pictures should accompany the logbook when partly or fully paid by commission. When 
more experience is gained from the pay based system, PKSF will fine tune the payment system.  
 
Table 7: Cost for Advisory Service for Crops (Taka)  
Year 
Y1 
Y2 
Y3 
Y4 
Payment by Farming Enterprises 
115 
287 
402 
575 
 
50. Advisory service for livestock and aquaculture will typically involve vaccination/medication, 
deworming/parasite control, insemination, birth assistance. The advisor will typically visit/train 
each farming enterprise 24 times per year averaging Taka 25 per visit/training or Taka

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585/year/farming enterprise. This cost do not include expenses for medications. Similar to crops 
the advisor will keep a logbook accompanied with relevant pictures for each visit/training. 
Handling of commission from sale of medications, feed and other items should be dealt with in the 
same manner as for crops mention above.   
 
Table 8: Cost for Advisory Service for Livestock (Taka)  
Year 
Y1 
Y2 
Y3 
Y4 
Payment by Farming Enterprises 
117 
293 
410 
585 
 
51. Advisory service and training of farming PGs will be in coordination with LF, input suppliers, and 
other relevant stakeholder of the value chain. 
 
52. The models developed for deriving the financial analysis for the RMTP investments’ clearly show 
that the incremental return will easily pay for the advisory service.   
 
 
Table 9: Budgets of all enterprise models representing the VCs used for the EFA of RMTP 
 
 
 
53. Global Good Agriculture Practices. To overcome the increasing concern of food safety, the 
RMTP will assist to introduce Global Good Agriculture Practices (GGAP) for PGs/VC clusters 
involved in primary production of crops, livestock and aquaculture. GGAP Chain of Custody 
Standard (Traceability) will be introduce for all commodities receiving GGAP certification. The 
RMTP will support enterprises involved in produce handling/transport, feed manufacturing, and 
hatchery to obtain GGAP if required.  
 
54. GGAP can be defined as optimization of technologies and resources for sustainable agriculture and 
food safety. There are costs related to introducing GGAP as well as recurrent cost. The initial cost 
is related to farm assurers assessing the gaps to be closed for achieving GGAP certification, 
training of members of PGs to close the gaps and meet the GGAP management requirements and 
the cost of audit and certification. There are also cost related to soil and water analysis and 
Production 
(kg)
Total labour 
use (md)
Net benefits 
(USD)
ROI
Production 
(kg)
Total labour 
use (md)
Net benefits 
(USD)
ROI
Aman Rice
GAP, No P-price
1 ha
3,850
127
150
16%
4,130
42
351
43%
462
Boro Rice
GAP, No P-price
1 ha
4,550
127
177
16%
5,050
39
318
29%
550
Aromatic Rice
From Boro To
1 ha
5,750
142
336
27%
2,925
139
620
51%
828
Potato
GAP, No P-price
1 ha
16,500
190
349
21%
18,000
75
591
38%
1,133
Banana
GAP, No P-price
1 ha
15,060
120
239
12%
22,500
78
772
30%
2,116
Aman Rice
GAP, With P-price
1 ha
4,130
39
337
41%
4,130
42
405
48%
501
Boro Rice
GAP, With P-price
1 ha
5,050
39
177
91%
5,050
39
759
102%
411
Aromatic Rice
GAP, With P-price
1 ha
2,925
139
708
62%
3,360
60
1,030
90%
703
Vegetables (6 veg)
GAP, With P-price
1 ha
8,146
365
993
156%
8,957
383
1,440
189%
1,130
Mung Beans
GAP, With P-price
1 ha
280
17
102
61%
380
20
150
65%
196
Potato
GAP, With P-price
1 ha
16,500
191
408
26%
19,500
56
1,142
82%
1,004
Banana
GAP, With P-price
1 ha
22,500
78
989
41%
22,500
78
1,237
48%
2,116
Fish ponds
Improved practice
30 decimal
210
10
261
64%
300
15
385
67%
537
Large Fish ponds
GAP, With P-price
1 ha (total)
2,500
100
5,388
206%
4,100
250
11,089
209%
4,686
Poultry - Eggs
Better feeds
300 birds
19,200
100
630
29%
30,240
150
1,197
37%
2,874
Poultry - Broiler
Better feeds
150 birds
180
20
61
13%
270
20
182
29%
578
Beef fattening: bull
Faster fattening
1 per Yr
175
20
68
12%
245
20
248
40%
564
Dairy Milk [1]
Better Feeds/Breed 1 Cow
1,440
15
1,423
19%
2,880
60
2,398
20%
1,400
Poultry - Broiler
GAP, With P-price
150 birds
180
20
61
13%
270
25
233
33%
650
Banana+Potato: Drip
GAP, With P-price
7 ha
938
16,649
41%
1,008
35,735
82%
2,030
Micro-Enterprises:
Milk Collection Centre
GAP Standard
500 kg/day
182,500
300
24,883
27%
6,725
Hand Loom ME
Women ME
300 Lungy
300
889
36%
72
Basket weaving
Women ME
200 Basket
200
486
30%
69
Fingerling production
5 ponds in 5 ha
9,600
700
125,013
23%
39,584
Demand for 
the Loan: 22% 
An. Int. (USD)
Model Type
Unit of 
Production
With Project (WP)
GAP: Global Good Agricultural Practices; P-Price: Premium price with Value chain linkages; ROI: Return on Investment; [1] Dairy milk: net benefit is in NPV (10% DR); Milk collection: 
building with GGAP standards; All ME s are new and the WOP benefits is assumed as the opportunity cost of labour involved. Net benefits are in NPV (10% DR) and IRR for 20 years. Drip - 
Drip Irrigation
Enterprises 
representing the VCs
Without Project (WOP)

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construction/modification of storage facility of chemicals and fertilizer. The recurrent cost is annual 
audit and renewal of certification. There are also savings, which can generate benefits in excess of 
the cost e.g. Vietnam report that on average farmers generates USD 1,250 per Ha in net benefit 
from GAP. 
 
55. The PKSF will engage a recognized institution (international/national) to prepare the GGAP 
protocols for selected commodities value chain. PKSF will also examine the feasibility of providing 
capacity-building support for Bangladesh Standards and Testing Institution (BSTI) enabling the 
institution to undertake audits and certifications of GAAP. PKSF will also carefully asses the 
feasibility of providing equipment support for BSTI conduct pesticide residue, heavy metal and 
antibiotic laboratory test. When drafting of protocols for HACCP and GAAP are completed, they will 
be shared with Bangladesh Food Safety Authorities (BFSA) for comments and information. The 
BFSA will also be consulted when preparing soil and water sampling methods and in selection of 
best choice of laboratories to be used for the analysis.  
 
56. Value chains where the PGs are vertical integrated with the LF is the most relevant for GGAP as 
movement of produce from farm to fork is easy to trace. Example of such VC are milk, vegetables 
and fruit for processing, fisheries commodities for export, branded grain for domestic and export 
markets. It is anticipated that around 250,000 HH or around 70% of the targeted beneficiaries will 
be part of a vertical integrated value chain. However, all PGs will undergo GGAP training to ensure 
safe and to increase the profitability of farming by using optimal levels of inputs instead of present 
practice of overusing both pesticide and fertilizer.  
 
57. Qualified pay based advisors will receive training to become GGAP Master Trainers to support 
marginal/small farmers, micro-enterprises and LFs to obtain GGAP.  
  
Table 10: Sequential Activities and Timeline, Responsible Party for Training GGAP 
Master Trainers3 
Sequential Activities 
Timeline 
Responsible Party 
Training of pay based 
advisors to become GGAP 
master trainers 
First batch of 130 pay based advisors. Completed 
within the first 4 months after signing the LA 
PKSF hire Farm 
Assurers from an 
accredited 
GLOBALG.A.P. 
institution 
(international/ 
national 
Training of pay based 
advisors to become GGAP 
master trainers 
Second batch of 325 pay based advisors during the 
last quarter of 2021 
Training of pay based 
advisors to become GGAP 
master trainers 
Final batch of 195 pay based advisors during the 
last quarter of 2022 
 
58. The first step on the way to obtain GGAP certification is assessment of existing one-farm gaps to 
be closed in order to obtain GGAP certification. Example of crop assessment (similarly livestock 
and aquaculture will also be assed) will examine the following:  
 
 
Production conditions must be safe including soil, water for irrigation and washing products 
must be safe, processing area, which can ensure the hygiene and safety and farmers 
understanding of IPM and environment protection. 
 
Good production management for groups including safe management of input materials like 
fertilizer, pesticide and agriculture chemicals (require a common facility which can be locked 
and inputs going in and out is kept in a logbook by appointed store keeper), recording keeping 
of production management, internal audit, management plans and lesson learnt, and farmers 
understanding about IPM, GAP, environment protection 
                                                 
3 GLOBALG.A.P. Farm Assurers

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 
Good production practice including safe production procedures, use of approved pesticide, and 
fertilizer in proper way, use of unknown-origin of pesticide, agriculture chemicals, use of 
organic fertilizers, compost etc., field record keeping. 
 
Good harvesting and post-harvest handling including the understanding and maintain of pre – 
harvesting Interval4, wash products by clean water, keep produce in clean storage/container/ 
packaging and label the produce for traceability 
 
Protect health and environment by using approved chemical in the recommended quantities, 
use proper work wear to protect the workers, safe disposal of waste and chemical containers 
according to regulations 
59. Based on the assessment, a training protocol will be prepared to close all the gaps and the training 
needs of the PGs within a cluster. The master trainer assesses when the PG has reached a level 
warranting GGAP certification and invites the GLOBALG.A.P. Farm Assurer to confirm the 
assessment. If the level of PG’s compliance acceptable, the accredited certification frim is call to 
undertake the audit and issue certification.  
 
60. It will take around 6-12 months for PGs’ and LFs’ to achieve GGAP certification. PKSF will engage 
with a recognized accredited institution (international/national) to undertake the audit and 
certification.   
 
Table 11: Sequential Activities and Timeline, Responsible Party for Training GGAP 
Master Trainers5 
Sequential Activities 
Timeline 
Responsible 
Party  
 
 
 
GGAP training of PGs  
First batch of 1,600 farming enterprise groups 
qualifying for GGAP within the first 12 months after 
signing the LA 
 
Certification  
Within the first 12 month after signing the LA 
 
GGAP training of PGs 
Second batch of 4,000 farming enterprise groups 
qualifying for GGAP within the second year after 
signing the LA 
 
Certification  
Within the first 24 month after signing the LA 
 
GGAP training of PGs 
Final batch of 2,400 farming enterprise groups 
qualifying for GGAP within the third year after 
signing the LA 
 
Certification  
Within the first 36 month after signing the LA 
 
 
61. Hazard Analysis Critical Control Point. Enterprises engaged in crop/meat/fish processing are going 
to receive assistance to obtaining Hazard Analysis Critical Control Point (HACCP) certification. The 
project will engage national HACCP team of experts to guide processors obtaining HACCP 
certification. If national experts are not available, training will be organised to develop this 
expertise. The training will cover the Codex Alimentarius Commission's Good Manufacturing 
Practices and all steps to full HACCP certification. Subsequently, PKSF will enter into a retainer 
contract with the team of experts to support enterprises to undertake the necessary steps to 
obtain HACCP certification. PKSF will engage with an in-country accredited authority to undertake 
audits and certification.  
 
                                                 
4 Pre-harvest interval (PHI) refers to the amount of time that must lapse (in days) after a pesticide application before the crop is 
harvested according to the product specification of the chemical used. 
5 GLOBALG.A.P. Farm Assurers

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62. The HACCP team will be composed of individuals having specific knowledge and expertise in the 
product and process of the LF in question and will broadly undertake the following: 
 
 
First, the HACCP team provides a general description of the food, ingredients and processing 
methods.  
 
Describe the normal expected use of the food. The intended consumers may be the public or a 
particular segment of the population (e.g., infants, immune compromised individuals, the 
elderly, etc.) 
 
Construct flow diagram to describe the production process.  The flow diagram should provide a 
clear, simple outline of all the steps involved in production the process. 
 
On-site confirmation of flow diagram by the HACCP team 
 
Conduct a hazard6 analysis (Principle 1) and identifies appropriate control measures.  
 
Determine critical control points (CCPs) (Principle 2) where control can be applied and prevent 
or reduce food safety hazard.  
 
Establish Critical Limits for Each CCP (Principle 3) to prevent eliminate or reduce to an 
acceptable level the occurrence of a food safety hazard.  
 
Critical limits must be on a scientifically basis. For each CCP, there is at least one criterion for 
food safety that is to be met. The critical limits and criteria for food safety may be derived 
from sources such as regulatory standards and guidelines, literature surveys, experimental 
results and experts. 
 
Establish a monitoring system for each CCP (Principle 4) to produce an accurate record for 
future use in verification. 
 
Establish corrective actions (Principle 5) to prevent potentially hazardous foods from reaching 
consumers.  
 
Establish verification procedures (Principle 6) that determine the validity of the HACCP plan 
and that the system is operating according to the plan. 
 
Establish documentation and record Keeping (Principle 7) including: (i) A summary of the 
hazard analysis, including the rationale for determining hazards and control measures; (ii) the 
HACCP Plan will include: 
 
Listing of the HACCP team and assigned responsibilities 
 
Description of the food, its distribution, intended use and consumer 
 
Verified flow diagram 
 
HACCP Plan Summary Table that includes information for 7*: 
 
Steps in the process that are CCPs 
 
The hazard(s) of concern 
 
Critical limits 
 
Monitoring* 
 
Correction actions* 
 
Verification procedures and schedule* 
 
Record-keeping procedures* 
 
 
Finally, a plan needs to be prepared stating the individuals responsible for developing, 
implementing and maintaining the HACCP system. It is important to insure that all individuals 
involved, receive proper training so they understand their role and can effectively fulfil their 
responsibilities. 
                                                 
6 A hazard is defined as a biological, chemical or physical agent that is reasonably likely to cause illness or injury in the absence of 
its control (i.e. safety concerns, not quality concerns). 
 
7 *A brief summary of position responsible for performing the activity and the procedures and frequency should be provided

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Table 12: Sequential Activities and Timeline, Responsible Party for HACCP 
Sequential Activities 
Timeline 
Responsible Party 
Identify national/regional expert 
panel for most common 
processing agro-businesses and 
provide them with relevant 
training if required 
During the first 1 month 
after signing the FA  
PKSF and local HACCP 
accredited company 
Expert panel develop HACCP 
protocols for most common agro-
businesses 
During the first 3 
months after signing 
the FA 
PKSF lead HACCP officer and 
expert panel  
Provide guidance to agro-
business in develop business 
specific protocols and obtain 
HACCP certification  
As and when required 
Expert panel and PKSF lead 
HACCP officer 
Prepare HACCP plan  
At the final stage before 
certification 
Expert panel and PKSF lead 
HACCP officer 
HACCP certification of agro-
businesses  
As and when required 
One of the four accredited 
HACCP companies 
 
63. GGAP and HCCAP Awareness Campaign. The project will raise public awareness of the benefits 
derived from GGAP and HACCP for domestic consumers (safe food), producers (personnel safety in 
handling chemicals and overall savings in production), processors (safety and traceability of 
produce) and exporters (increases the potential for export), through mass media. The project will 
contract an advertising company to assist prepare and roll out the campaign. The campaign will 
also serve as an attraction for farming enterprises to participate in value chains supported under 
RMTP’s activities. 
 
Table 13: Sequential Activities and Timeline, Responsible Party for GGAP and HACCP 
Awareness Campaign  
Sequential Activities 
Timeline 
Responsible Party 
Prepare a national awareness 
campaign  
Within the first 2 
months after signing 
the LA 
PKSF and advertising firm 
Air the campaign using the mass 
media  
First exposer on the 
mass media starting 6 
month after signing the 
LA and thereafter every 
two month for the 
duration of the project 
PKSF 
Measurer the effect of the 
campaign and make adjustment 
as required 
End of first year  
PKSF 
 
64. Introduction of appropriate new technologies. RMTP will promote appropriate new/modern 
technologies in the selected value chains, such as vertical recycling production systems for mud 
crab, recycling systems for other aquaculture commodities; hybrid solar driers for vegetables and 
fruits; drip and micro irrigation; modern rice mills; briquette machine for urea, urea/compost, 
urea/compost/DAP, and tractor operated implement for deep placement of urea briquettes etc. 
New 
technologies 
will 
also 
include 
appropriate 
research 
and 
development 
findings/recommendation from the public and private sector e.g. new crop varieties using 
biofortification for increased levels of nutrition, resistance against pest and deceases, tolerant to 
salinity, draught and flood. Through selection new improved local breed of poultry, ruminants and 
cattle, and fish. Biostimulants, biopesticides, biomedecines, urea/compost briquettes, Alternate 
Wetting and Drying (AWD) and System of Rice Intensification (SRI). Prior to commencement of

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the project PKSF will map all available climate smart technologies and environmental safe 
technologies as a reference guide to pay based advisors and value chain facilitators.  
 
65. The project will provide financial support for feasibility studies, training, technical assistance for 
the introduction of new technologies and, in appropriate situations, subsidized machinery and 
equipment. Level of subsidies depends on the in country experience. If never tried before in 
country PKSF can grant 100% subsidy for the first introduction and if tried in the country but not 
at the respective district level PKSF can provide 50% subsidy. 
 
Table 14: Sequential Activities and Timeline, Responsible Party for Introduction of 
Technologies 
Sequential Activities 
Timeline 
Responsible Party 
Prepare a list of appropriated new 
technologies for the VC supported 
by the RMTP  
Within the first 1 
months of project 
implementation  
PKSF 
Compile a list of suppliers from 
where to buy i.e. domestically or 
from regional B2B platforms 
Within the first 1 
months of project 
implementation 
PKSF 
Provide TA for feasibility studies, 
training, technical 
Ongoing as and when 
required  
 
PKSF hired consultants  
Cost sharing procurement of 
machinery and equipment 
Ongoing as and when 
required  
 
PKSF and beneficiary  
Evaluation of the new technology 
and recommendations for broad 
adoption 
Ongoing as and when 
required  
 
PKSF 
 
66. Subcomponent 1.3 Value chain integration: The project will invest in value chains 
commodities that have comparative advantage, market demand, growth potential and cultivated 
by small farmers and micro-entrepreneurs. The commodities selected should be cultivated in 
geographical clusters to ensure economies of scale and the possibility of private sector linkages. 
More than 50% of the selected commodities should also have the potential to improve food and 
nutrition security for both producers and consumers. Commodities not contributing directly to 
improved nutrition should generated sufficient income, which can contribute to increased purchase 
of nutritional food. The value chains the project supports fall into three broad categories:  
 
 
Crops and horticulture: (i) high value cereal crops (for example, aromatic and fine rice); (ii) 
high value fruits and vegetables (including dark green leafy vegetables); and (iii) pulses 
(such as lentils, mung bean, chickpeas etc.), beans, and seeds; related trading and 
processing;  
 
Aquaculture: technology-based aquaculture for example, mud crab; carp; tilapia, crayfish 
and other local species, particularly small fish; related trading and processed fish products; 
 
Livestock: (i) dairy production; (ii) red meat including cattle; goats; sheep; and buffalo. 
 
Poultry: Including meat and eggs from chicken; duck; gees; turkey; and quail related 
trading and processed products. 
67. The project will support PKSF to undertake countrywide value chain analyses  for select 
commodities, by either upgrading existing analyses or undertaking new ones  (Annex I provide 
example of VCA). Based on these value chain analyses, PKSF will issue calls of interest for POs to 
implement value chain support for their clients. The project will avail 100 VC support packages, of 
USD 100,000 each. Each of these packages will assist in the formation of PGs; development of 
value chains; demonstrations for PGs; PG to PG visits; LF training and training visits; support to

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build apex Producers Associations if required. On average each of these packages will support 
linking 3,185 farming enterprises to seven downstream agro-business’s VCs. Total anticipate 
benefiting PGs are around 8,000 with 345, 000 members linked to 700 LFs’ VCs. In addition, there 
is around 80,000 farming enterprises choosing other routes of marketing.  
   
68. The project will support each participating PO to engage four value chain facilitators responsible 
for supporting the implementation of the VC support packages with the assistance of the Pay 
based advisors. The value chain facilitators will receive training by the PKSF similarly to the pay 
based advisors. Those passing the final examination, can be hired by POs on a 3 months trial 
period, and if performing extended yearly over a 3 year period.  
 
69. The PKSF will issue calls of interest for POs to express interest to implement value chain packages 
for its clients. The call of interest will include the countrywide VC analysis prepared by PKSF as a 
point of reference. Based on these analyses the POs will prepare proposals for specific commodity 
VCs. Steps to be undertaken by POs to obtain value chain support packages to strengthen market 
arrangements between PG and LF are shown in Annex 3) 
 
70. Approval of the PO proposal. PKSF will use below matrix to evaluate proposals from POs. If the 
proposal score meets the threshold, it will be approve for financing. Financing of proposals is 
according to the principle of first come first served, until the budget is exhausted. The POs not 
being financed during first submission, but qualifying can resubmit during the subsequent call for 
proposals. PO’s having the proposal rejected because of low score can improve their proposals and 
resubmit during subsequent call for proposals. 
 
Table 15: Evaluation Matrix for Scoring PO Proposals 
Criteria  
Score  
Identify the commodity value chains in need of upgrading, which will benefit 
the PG (10 max and 1 smallest) 
 
Nutritional sensitivity  VC (15 max and 1 smallest)  
 
Undertake value chain analysis. The VC analysis can be based on, existing 
studies.  The VC analysis will also include benefit cost analysis of proposed 
upgrading along the value chain (10 max and 1 smallest) 
 
Identify LF interested to procure produce from how many PG (and # HH), (10 
max and 1 smallest) 
 
During the identification process, the PO will also identify the required 
upgrading of the LF interested to participate in the RMTP (10 max and 1 
smallest) 
 
Identify the size of the commodity cluster in terms of PG and # of farming 
enterprises and total area under production (10 max and 1 smallest)  
 
Identify constraints and opportunity for upgrading the primary production and 
product differentiation (10 max and 1 smallest) 
 
Environmental sustainability of the productive area and climate risk assessment 
(10 max and 1 smallest) 
 
Road infrastructure connecting productive areas with the main road network 
(10 max and 1 smallest) 
 
Service providers and relevant support institutions (10 max and 1 smallest) 
 
The PO together with the LF and representatives from PGs will prepare 
appropriated training packages for stakeholder in the VC. (10 max and 1 
smallest) 
 
The proposal will also include a detailed budget  (5 max and 1 smallest) 
 
Number of pay based advisors required (5 max and 1 smallest) 
 
Number of PGs in need of GGAP certificates (15 max and 1 smallest) 
 
Number of LF in need of GGAP certificates (produce handling, transport, 
hatcheries, feed mills) (15 max and 1 smallest) 
 
Number of LF in need of HACCP certificates (15 max and 1 smallest)

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71. Visible and significant impact. The POs, while expand existing value chains should strive for 
approaches that would create significant impact in an area not limited to members of PG  or 
Producer associations. For example, any initiative to develop commercial animal health services 
should try to cover all goats/sheep and cattle farming enterprises in the area and not only HH that 
are members of a PG.   
72. Evaluation of value chain support. After each season the PO, have to undertake evaluation of the 
VC support including simple (no need for IRR and NPV) benefit cost analysis of all investments 
supported by the project e.g. advisory service, GGAP, HACCP, new technology, machinery etc. 
Evaluation of the governance structure and effectiveness will also be undertaken. Both the PO and 
PKSF will post the results in their MIS and on their webpages. 
 
73. The POs will publish the results and lessons learned from each VC, and select the best performing 
VCs for visit and training exchange programmes within the PO and across POs.  
 
74. Value Chain Governance. For each supported value chain, the project will assist establish a value 
chain committee composed of one representatives from each participating group, the LF, input 
suppliers, transporters, researchers, public advisory services, pay based advisor and end market 
representatives if required. The committee will elect a chairperson who in collaboration with the 
value chain facilitator will organize meetings. The VC committee will meet at pre-planting and 
post-harvest. The first meeting will deal with required training during the production season, 
including GGAP and HACCP, quantities, quality, variety (crop/fish/livestock), staggering 
production, testing innovations and price mechanism, including permissible side selling. The 
second meeting will coordinate harvest operations and related logistic like drying, moisture 
content, refrigeration, transport etc. Other meeting might take place when and if required. The VC 
committee will also be responsible for championing the introduction of GGAP and HACCP.  
 
75. If a large number (more than 10%) of farming enterprises within a cluster, are not 
interested/willing to be member of a PG, but want to participate in the value chain activities they 
can select one person for every 45 HH to represent them at the VC committee.   
Table 16: Sequential Activities and Timeline, Responsible Party for Facilitating Value Chain 
Governance 
Sequential Activities 
Timeline 
Responsible Party 
Linking downstream Agro-business 
with farming enterprises  
As part of preparing PO 
proposals for receiving 
PKSF VC support 
Value chain facilitators  
Invite other stakeholder to participate 
in the VC committee  and elect the 
chairperson  
As part of preparing PO 
proposals for receiving 
PKSF VC support 
Value chain facilitators and 
leaders of farming enterprises 
and management of LF 
(downstream agro-business) 
Select the VC committee chairperson 
As soon as the VCC is 
formed 
Value facilitator  
Conduct regular by-seasonal meetings 
Pre- and post-season 
meetings  
VC committee chairperson and 
PO value chain facilitator  
 
76. Subcomponent 1.4 Enterprise strengthening: The project will provide specialised consultancy 
support to the LF for:  
 
1. Food safety standards and traceability (GGAP and HACCP) 
2. Introduction of new products like dried fruit; fruit juice; parboiled speciality rice etc. 
3. Introduction of new equipment and machinery like small scale seed processing;  
4. Market entry studies for both domestic and export markets 
5. Trial shipments for domestic and export markets 
6. Product branding including geographical indication, and GGAP labeling/certification

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7. Operational business planning for small LFs having potential for rapid growth.  
 
77. The project will not generally provide direct subsidies for the business operations of farming 
enterprises, micro-enterprises and/or agro-businesses. However, PKSF will develop a scale for the 
provision of subsidies to individual training recipients and downstream agro-businesses to catalyse 
the introduction of specific services, products or contract farming arrangements based on their 
financial and managerial strength. This support will only be for those engaging in contractual 
arrangements with producers' groups and providing sustainable services  
 
78. Subcomponent 1.5 Policy dialogue. The IFAD Country Office will support PKSF in its policy 
dialogue with relevant Government institutions on important topics relevant to the project. 
Possible topics for policy dialogue include:  
1. Reviewing regulations governing PO loan portfolio structure 
2. Increasing micro-enterprise loan ceilings to enable introduction of new technologies 
3. Revisiting regulations governing the livestock sub-sector 
4. Ague for allowing the establishment of commercial hatcheries for mud crab-lets 
5. Establishing an ISO 17025 accredited laboratory for analysis of residue of pesticide, heavy 
metal, antibiotics etc. 
6. Address any emerging issues in financial services and selected agricultural production 
sectors.  
 
79. PKSF is encourage to engage public and private institution (research institution, universities) to 
prepare position papers in support of policy dialogue with the GoB.  
 
 
 
6. COMPONENT 2:  FINANCIAL SERVICES 
 
80. Component 2: This component will provide sustainable financial services to micro-
enterprises and to growing/larger enterprises and agribusinesses. It has three sub-
components: (i) provision of financial services to micro-enterprises through partner 
organisations (microfinance institutions); (ii) provision of commercial finance to larger 
micro-enterprises as well as small/medium agribusiness companies, through non-banking 
financial institutions (NBFIs); and (iii) optimal utilisation of remittances through training to 
the family members of overseas workers. 
81. Sub-component 2.1: Financial services through Partner Organizations (POs): PKSF offers 
four loan products through POs: (i) Buniad (ultra-poor loans); (ii) Jagoron (household 
income-generating loans); (iii) Sufolon (seasonal agricultural loans); and (iv) Agrosor 
(microenterprise loans). Demand for micro-enterprise loans across the country is very 
high, and growing faster than the other three loan products. The project fund will be 
utilized for expansion of Microenterprise loan product of PKSF, and consequently, that of 
POs. 
82. ME loan size: It is estimated that an additional 100,000 microenterprises will be financed, 
with an average loan size of BDT 120,000. However, the actual loan size will be 
determined by the POs as per demand from the client and prevailing ceiling of loan as 
determined by PKSF. It is understood that PKSF will update its policy regarding loan size 
from time to time, which will be accepted as the policy for the project. 
83. Microenterprise borrowers within the value chain subprojects will receive loans in line with 
the existing practices of the respective POs. Leasing (hire-purchase) will be encouraged for 
investments in power tillers, tractors, mechanical/motorized rice planters, solar-powered 
drip/micro irrigation systems, automatic poultry slaughter houses, and other relevant 
activities.

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84. Definition of MEs and ME loan: The project fund will use the same definition of PKSF and 
POs while defining ME borrowers. PKSF from time to time will revise/update the definition 
to reflect changes in the microfinance markets and or regulatory changes.  
85. Interest rate: PKSF will change its prevailing rate of interest to POs as per its policies, which 
is understood to be revised from time to time. The interest to the client by the POs will also be 
as per prevailing rate of interest. 
86. Management process: The selection of POs, savings and loan policies, implementation 
process and policies, monitoring and evaluation, institutional development and any other 
issues related to ME loan program will be managed by Loan Operations Division of PKSF as 
per prevailing rules and norms.  
87. PKSF ME Loan Fund: The fund from IFAD for Component 2 will be added to the pool of funds 
for the ME loan program of PKSF. The pool will have other resources: PKSF’s own fund, from 
other international organizations such as the World Bank, the Asian Development Bank, GoB 
etc. It is expected that PKSF will enhance ME loan fund from other sources as well. 
88. Measurement of IFAD loan: No distinction will be made between sources of fund of ME loan 
program. IFAD will monitor increase in loan outstanding of PKSF ME loan to POs and 
compare that to total increase in ME loan fund and determine its amount proportionally. Such 
proportional increase in loan outstanding at the PO- level will be used to determine next 
withdrawal from IFAD.    
89. Record keeping: The PMU/RMTP will keep record and produce report of overall ME program, 
and keep track and produce report on incremental number of beneficiaries, disbursement, 
loan outstanding, withdrawal from IFAD, contribution of PKSF and POs etc.  
90. Reporting: PMU will produce report for Component 2 as part of overall report for RMTP. 
 
91. Subcomponent 2.2: Commercial finance through NBFIs: The objective of this sub-
component is to develop a new channel of financing for larger microenterprises and 
small/medium agribusiness companies (the 'missing middle') which are currently neither 
clients of microfinance institutions nor commercial banks. This financing will be 
administered by licensed non-banking financial institutions (NBFIs), with interest rates to 
final borrowers typically ranging between 9% and 18%. NBFIs currently lend to small 
enterprises (in one case offering special loan products for women entrepreneurs), but their 
agribusiness portfolios are limited due to financial constraints. 
92. The project will provide resources through PKSF to selected licensed NBFIs for this 
purpose. This would substantially expand the market for the output produced by small 
farmers and micro-enterprises, which are the primary target groups of the project, and 
improve their integration within the selected value chains. Larger agribusinesses will be 
encouraged to also enter into contract farming arrangements with producers' groups and 
micro-enterprises, obtaining NBFI financing where required, with project support in the 
form of technical assistance, technology transfer, and organisation of producers. 
93. NBFIs will be a new type of PO for PKSF. RMTP is the first project through which PKSF will 
engage with POs that are not registered under the Microfinance Act, but rather are 
licensed by Bangladesh Bank under the Financial Institutions Act (1993). PKSF regulations 
have recently been adjusted to allow working with NBFIs. 
94. PKSF will develop an assessment process for selection of NBFIs as its new kind of Partner 
Organizations. The selection of NBFIs under the project will be competitive, based on an 
approved assessment process. PKSF will issue a request for EOI from NBFIs interested to

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participate in the project. On this basis, a number of NBFIs will be invited to submit 
proposals. In addition to standard financial criteria, NBFI selection criteria would include 
their interest to venture into this sector leveraging their experience in other sectors, their 
willingness to lend to downstream value chain actors, their proposed lending terms and 
conditions, and the amount of cost-sharing from their own resources.  
95. PKSF will enter into an agreement with each selected NBFI which outlines the terms and 
conditions of project financing, and the parameters governing how the funds will be 
utilised. This process may be repeated periodically during implementation. 
96. NBFIs will assess the profitability, cash flow, reputation and credit history of businesses 
applying for loans. Normally businesses that are financed by NBFIs will be supported by 
the project (under component 1) to enter into relationships with microenterprises and 
producers' groups if the value chain activities of POs fall within the working areas of POs. 
PKSF will advise NBFIs to lend in value chain development operational areas. But PKSF 
shall not direct NBFIs to lend to any particular person or group of people. NBFIs will apply 
their prevailing criteria and selection process to select clients.  
97. The possibility of financing larger enterprises and agribusinesses also through a state-
owned bank, such as Karmasangsthan Bank, may be explored. 
98. Participating NBFIs will finance agribusiness investments in capital equipment (on debt or 
hire-purchase basis) for relevant value chain activities. Repayments will be revolved into 
new loans for the duration of the project implementation period and beyond. Agribusiness 
selection criteria would include their commitment to enter into commercial relationships 
with targeted micro-enterprises. 
99. Reporting: PKSF will submit a report indicating amount of disbursement, loan outstanding, 
number of clients of this subcomponent as a part of overall RMTP report.   
100. Sub-component 2.3. Utilisation of remittances8. Millions of Bangladeshis live and work 
outside the country and send home an estimated USD 20 billion annually in the form of 
remittances. These remittances are used for consumption, house improvements and in 
some cases the purchase of land. Remittance receivers often do not invest these funds in 
sustainable economic activities due to lack of skills, and fall back into poverty when the 
expatriate worker returns home. 
101. A small in-loan grant will be provided to the Ministry of Expatriates' Welfare and Overseas 
Employment (MoEWOE), which is mandated to handle non-resident Bangladeshi (NRB) 
affairs, for the promotion of diaspora investment and optimal utilisation of remittances 
under the project. The objective would be to develop the skills of households receiving 
remittances so that they can invest a portion of the remittances received into micro-
enterprises, and sustainably improve their economic status. The MoEWOE would identify 
remittance-receiving households in the project areas, and link them to project component 
1.2 for the provision of business and technical training to expatriate family members 
(mainly women and the youth). They would also be linked to sub-component 2.1 for the 
provision of microfinance where required. 
102. Most remittance-receiving families are headed by women, and have underemployed 
youth. This sub-component will provide an important contribution to women's economic 
empowerment any youth employment in the project areas. Piloted methodologies will 
subsequently be scaled up across rural areas of Bangladesh. 
                                                 
8 This subcomponent will be implemented by the Ministry of Expatriates' Welfare and Overseas 
Employment (MoEWOE). PKSF does not have any responsibility regarding implementation and 
monitoring of this subcomponent.

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7. COMPONENT 3: INSTITUTIONAL STRENGTHENING AND PROJECT 
MANAGEMENT 
 
103. This component aims to strengthen PKSF and PO capability as development organisations 
by leveraging trends in ICT, financial services, commercial platforms and new 
technologies, and to ensure that the project is managed satisfactorily. It has three sub-
components: (i) PKSF capacity building; (ii) POs capacity building; and (iii) project 
management (see organisation and management section). 
104. Sub-component 3.1 PKSF capacity building. This subcomponent has two major activities: 
i) PKSF’s capacity building through ICT based solutions; and ii) PKSF’s human resources 
development through specialized training.  
105. 3.1.1 ICT based solution for PKSF: Over time, PKSF has introduced numerous software 
modules 
covering 
financial 
management, 
human 
resources 
management, 
PO 
management, and mobile financial service systems for POs. Through the provision of 
technical assistance and training, the project will assist PKSF to gradually and carefully 
integrate additional ICT-based solutions into its operations. The ICT solutions proposed 
below will be subject to feasibility studies and pilot phases, and the availability of local 
service providers will be assessed, before they are introduced. A brief description for each 
ICT application is given below: 
106. Distributed digital ledger technology (transparency engine). A recent technical 
assessment commissioned by IFAD investigated the opportunities, risks and alignment of 
partners, and found the introduction of distributed digital ledger technology within PKSF to 
be feasible. The project will support PKSF to create an information management and 
sharing platform built on distributed ledger blockchain technology to ensure improved 
management of records and greater transparency in fund management. This will allow 
borrowers, producers, associations, organisations, public entities, POs and PKSF to track 
sources of funding and to better monitor the detailed credit history of clients. Over time, 
this will translate into lower interest rates for proven credit-worthy borrowers and will 
facilitate their integration into the national banking system. Other financial institutions 
may eventually be invited to use the platform as an input for loan appraisal decision 
making. ICT applications for blockchain use will also be developed. PKSF will contract a 
qualified fintech service provider to develop the platform, related applications, a user 
guide and training materials, and to train potential users. Other options, such as using 
blockchain application for commodity traceability, will be assessed during implementation. 
107. E-commerce platform. The project will upgrade PKSF's e-commerce platform for rural 
products and integrated business services, which was established under PACE. It will 
leverage technology to connect rural producers (women, small farmers and micro-
entrepreneurs) with new sets of customers, creating a parallel marketplace. POs will be 
assisted to connect borrowers to the platform and orient them on transactional methods – 
business to business (B2B) and business to consumer (B2C). The option of technical 
cooperation with Alibaba/Ant Financial in upgrading this platform will be assessed. 
108. Crowd-funding (fraternity funding) platform. Crowd-funding, which enables entrepreneurs 
to raise funding from multiple individuals/investors, including migrant remitters, is now the 
second-largest financier of enterprises globally (after venture capital). Subject to a 
positive assessment by a feasibility study, the project will support PKSF to create a crowd-
funding platform and associated marketing campaign. Two approaches will be promoted – 
initially the lending-based, peer to peer (P2P) model; and eventually the equity-based

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model (such as the 'Bangladesh Angels' model, a pioneering angel investment network. 
The platform owner (PKSF) will provide financial due diligence and legal/contractual 
services as it links investors to micro-enterprises and agribusinesses. Interested 
entrepreneurs will be trained to prepare and disclose the financial information required. 
Technical assistance on regulatory aspects will be provided to relevant authorities. 
109. Microenterprise ICT. PKSF will develop an ICT platform and a mobile phone application for 
the sharing of advisory services related to selected value chains (as well as household 
health and nutrition information). Users will be able to download illustrated training 
modules. The platform will include an expert panel to respond to queries of producers' 
groups. 
110. In leveraging ICT solutions, the project will collaborate with and build upon the knowledge 
generated by the IFAD grant-funded ongoing research by the Consultative Group to Assist 
the Poor (CGAP). The aim of this grant is to overcome the persistent digital divide between 
women and men in the mobile money market in Bangladesh. CGAP supports the 
introduction of new smart phone apps to POs, as the penetration of smart phones in rural 
areas is increasing. Together with financial literacy training, the grant expects to improve 
the role of women in financial decision making. 
111. 3.1.2 PKSF’s Human resources development: The following Table provides the training 
courses (see COSTAB for number of persons and estimated cost for training): 
Short training courses  
Main topic for training 
Provider 
Business management 
and financial analysis 
Suggested Topics: Focus of the training will be on 
management of one typical business, preferably 
agribusiness. Main issues of discussion: a) 
Bangladesh private sector environment and 
agribusiness; b) four functions of a business – 
marketing, production, HR and finance; c) financial 
analysis – profitability analysis, cash flow analysis, 
balance sheet; d) risk and sustainability of 
agribusiness; e) financing of agribusiness and MEs; 
f) IRR and NPV; g) small business loan program of 
MFIs, NBFIs, commercial banks.    
Participants: Officers of Loan Division, selected 
RMTP officials, other PKSF officers, selected PO 
officer   
Bangladeshi individual 
experts, and Bangladeshi 
institutions including 
Universities, Business 
schools.  
Value chain analysis and 
VCD subproject design - 
training 
 
 
 
Topics: a) define sector and concept of value chain 
development; b) basic sector analysis techniques; 
c) SWOT analysis; d) Determining constraining and 
corresponding solutions; e) selection of critical 
solutions; f) Determine project activities and cost; 
g) develop work plan budget; h) implementation; i) 
M & E, j) Sample VCD projects – success and 
failure; h) recent debates on VCD approach of 
business promotion and impact on poverty.   
Participants: RMTP officials, PKSF’s core officials, 
selected PO officers etc 
Bangladeshi individual 
experts, and Bangladeshi 
institutions including 
Universities, Business 
schools 
Project design and 
management 
Topic: Situation analysis; SWOT analysis; setting 
goal and objective; selection of solutions for 
intervention; project activities; determine cost; 
annual plan development; implementation plan 
development; M&E 
Bangladeshi individual 
experts, and Bangladeshi 
institutions including 
Universities, Business 
schools

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Participants: PKSF officers  
M and E system design 
and management 
Concept of M&E; project Logframe development; 
indicators and evaluation methodologies; 
monitoring and reporting; low cost evaluation 
methods; common statistical techniques and 
application; Evaluation report writing; MIS    
Participants: PKSF officers in Loan and other Units; 
MIS 
Bangladeshi individual 
experts, and Bangladeshi 
institutions including 
Universities, Business 
schools 
ICT based platforms: 
Overview and 
management 
Selected ICT based solutions: Block chain; crowd 
funding; e-commerce; online and mobile financial 
services; online MIS; oneline project management 
system. 
  
Bangladeshi individual 
experts, and Bangladeshi 
institutions including 
Universities, Business 
schools 
Development project 
management 
Review of selected development projects in areas of 
financial services, VCD, agribusiness development, 
environment,  climate change, livelihoods 
development; discuss common project activities; 
critical issues related to success and failure; M&E of 
various types of projects; implementation 
challenges and mitigation.  
Bangladeshi individual 
experts, and Bangladeshi 
institutions including 
Universities, Business 
schools 
Financial services and 
institutions 
Review of financial services for poor, ME and SMEs; 
basic management and operations of commercial 
bank, NBFIs and selected MFIs; online and mobile 
financial services. 
Bangladeshi individual 
experts, and Bangladeshi 
institutions including 
Universities, Business 
schools 
ICT based Real time MIS 
Design of MIS with good indicators; implementation 
of online MIS; analysis of MIS reports for 
management decision. 
Participants: PKSF MIS team; loan officers; PMU 
MIS officer 
Bangladeshi individual 
experts, and Bangladeshi 
institutions including 
Universities, Business 
schools 
Exchange visits (VCD) /a 
Focus of visits: agribusiness; agro processing; 
agro-processing technologies; agri-implements; 
GGAP and HACCP    
The countries to be visited 
will be confirmed during 
implementation. 
  
112. Subcomponent 3.2: PO Institutional Strengthening. The project will provide capacity 
building for POs in: (i) IT systems; (ii) value chain management, integration, technology 
and 
contract 
intermediation; 
(iii) 
nutrition-sensitive 
value 
chain 
design 
and 
implementation; and, (iv) new product development where required. 
113. The above support can be provided in the form of training and exchange visit, advisory 
services. The PMU must take great care in selection of relevant and appropriate candidate 
for training. 
 
Subcomponent 3.3: Project management and coordination 
114. PKSF will: (i) continue to review and evaluate value chain subproject proposals through its 
Value Chain Evaluation Committee; (ii) organise and fund the capacity building of its own 
staff as well as that of POs and value chain actors; (iii) identify potential value chains to 
invest in and outsource commodity/sub-sector/market studies; (iv) provide clear guidance 
to POs on preparation and management of value chain subprojects; (v) contribute to the 
preparation of value chain proposals by POs by providing guidance and sharing relevant

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sector and marketing studies; (vi) share experiences with other value chain development 
operations and rationalize common activities; (vii) engage in policy advocacy for necessary 
changes in rules, laws, and standards; and, (viii) identify suitable technical assistance 
providers or individual experts to provide capacity building to PKSF staff, POs, and value 
chain actors and associations. 
115. POs will: (i) undertake or outsource an initial mapping of key actors in each selected value 
chain (producers, service providers, input suppliers, traders) as well as marketing 
channels and relevant associations; (ii) prepare proposals for value chain subprojects; (iii) 
provide and manage microenterprise credit and other financial products for producers and 
entrepreneurs; (iv) guide the upgrading of the selected value chains; (v) ensure the 
availability and linkages of qualified providers of services to value chain actors; (vi) advise 
producers on input supply and market access; (vii) ensure that all services to producers 
are supplied by the private sector (where feasible) on commercial basis; and, (vii) monitor, 
evaluate and report on progress, and analyze issues and lessons. 
116. For the purposes of the project, PKSF will establish a Project Management Unit, integrated 
within its structure, for overall project management purposes. The PMU will be headed by 
a Project Coordinator appointed from PKSF's pool of senior officials or recruited through a 
competitive process. PMU staff will consist of 2-3 officers seconded from PKSF's core team 
and nineteen recruited from the market. The PMU will work with PKSF's Loan Operations 
Division to implement the financial services programme through POs as per established 
processes and norms. This Division will assist with the selection of qualified NBFIs for 
financing larger enterprises and agribusinesses. It will work with POs and selected service 
providers for the implementation of the value chain component. PKSF’s support divisions 
such as Audit, Administration, Agriculture, Human Resources, Accounts and Finance, 
Livestock, Research, Training, M&E, MIS and IT will provide relevant services to the 
project. 
117. The following Table presents the designation, number of staff in each rank and type of 
contract:  
 
 
Number of 
officers 
PKSF Officers 
Contractual  
Project Coordinator 
1 
PKSF officer or 
contractual 
 
Deputy project Coordinator 
(Technical) 
1 
PKSF officer 
 
Deputy project Coordinator 
(Financial Service) 
1 
PKSF officer 
 
Sector Specialist (Livestock) 
1 
 
Contractual, Fulltime 
Sector Specialist (Horticulture) 
1 
 
Contractual, Fulltime  
Sector Specialist (Fisheries) 
1 
 
Contractual, Fulltime 
ICT Specialist 
1 
 
Contractual, Fulltime  
Financial Analyst 
1 
 
Contractual, Fulltime 
Procurement Specialist 
1 
 
Contractual, Fulltime  
Communication, Publication & 
Knowledge Management 
Specialist 
1 
 
Contractual, Fulltime 
Monitoring and Evaluation 
1 
 
Contractual, Fulltime

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Specialist 
Nutrition Specialist 
1 
 
Contractual, Fulltime 
Value Chain Project Manager 
6 
 
Contractual, Fulltime  
Assistant Manager (Accounts) 
2 
 
Contractual, Fulltime 
Computer Operator cum MIS 
Officer 
1 
 
Contractual, Fulltime  
Driver  
1 
 
Contractual, Fulltime 
 
 
118. Recruitment of PMU staff members: PKSF will follow its established recruitment process 
that involves initial short listing of potential candidates, written test, followed by viva-voce for 
recruiting all project staff members.

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119. Qualification and TOR for each position: The following Table provides qualification and brief job description of each PMU official: 
Position  
No. 
(#) 
Work 
station 
Education and Training 
Experience and other 
factors 
Major Job description 
Project 
Coordinator 
1 
Dhaka  
and 25% of 
total spent in 
the field to 
supervise 
project 
activities 
 Advance 
degree; 
at 
least 
four 
year 
undergraduate degree 
with 
good 
academic 
standing. 
 Training on financial 
services management 
and institutional 
development; training 
on enterprise 
management 
 Fluent 
in 
oral 
and 
written 
English 
and 
Bengali.  
Senior PKSF officer or 
recruited from the market.  
Solid experience of private 
sector, value chain 
development, planning, and 
management and 
supervision of field activities 
(in case recruitment from 
the market the candidate 
must have at least 20 years 
of work experience, 
education in areas of 
business, finance, 
marketing, technology, 
economics)   
 Provide 
overall 
leadership 
and 
guidance for implementation of RMTP 
project. 
 Accountable to produce results through 
implementation of the project   
 Develop work plan and budget and 
receive approval from PKSF, GOB and 
IFAD 
 Supervise PMU staff members and 
activities of POs.  
 Organize recruitment and training of 
project staff members 
 Prepare RMTP reports 
 Coordinate with IFAD, GoB and other 
stakeholders  
 Coordinate 
with 
LOD 
and 
other 
divisions of PKSF 
 Act as overall chief of administration, 
accounts and finance of the project    
Deputy 
Project 
Coordinator 
(Technical) 
1 
Dhaka  
and 50% of 
total spent in 
the field to 
supervise 
project 
activities 
 Advance 
degree; 
at 
least 
four 
year 
undergraduate degree 
with 
good 
academic 
standing. 
 Training on business 
management, project 
management, Value 
chain development, 
institutional 
development; training 
on enterprise 
management 
Fluent in oral and written 
English and Bengali 
Senior PKSF officer   
Solid experience of private 
sector, value chain 
development, planning, and 
management and 
supervision of field activities, 
Experience of managing 
similar project 
 
 Supervise all VCD activities of the 
project

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Deputy 
Project 
Coordinator 
(Financial 
services) 
1 
Dhaka  
and 50% of 
total spent in 
the field to 
supervise 
project 
activities 
 Advance 
degree; 
at 
least 
four 
year 
undergraduate degree 
with 
good 
academic 
standing. 
 Training on financial 
services management 
and institutional 
development; training 
on enterprise 
management 
Fluent in oral and written 
English and Bengali 
PKSF officer (Asst General 
Manager) with experience 
of 
managing 
financial 
services program of PKSF 
 Manage ME component of the project; 
 Financial planning and budgeting of the 
project 
 Produce all reports 
 Coordinate 
with 
Finance 
and 
acct 
person 
 Supervise M&E, KM, communication 
activities the project  
 Plan 
and 
execute 
all 
institutional 
development (component 3) of the 
project 
Sector Value 
chain 
specialist 
(Livestock) 
1 
Dhaka and at 
least 50% of 
time spent in 
project 
supervision 
in the field 
working with 
POs and 
other 
stakeholders 
 Advance 
degree 
(master’s 
degree) 
in 
one of the following 
subject animal science, 
agribusiness, business 
administration, 
finance, 
marketing, 
agribusiness,  
agricultural economics, 
and 
engineering/technology 
(exception 
can 
be 
made 
in 
academic 
subject 
if 
a 
highly 
experienced person is 
found 
to 
lead 
the 
activities 
in 
this 
category). 
 Training 
in 
business 
management, 
value 
chain development and 
management 
 Fluent in Bangla and 
English 
 
 Minimum 
of 
15 
years 
work 
experience 
in 
reputed 
organizations, 
preferably 
in 
developmental 
organizations, 
of 
which 
minimum of 3 years in 
senior 
management 
position. 
 Minimum 
of 
10 
years 
experience in agribusiness 
business 
management, 
technology transfer and 
value chain development 
project(s). 
 Progressively 
advanced 
career 
path 
and 
demonstrated capacity in 
project management 
 Willingness and ability to 
undertake regular travel 
all over the country  
 Age limit: Maximum 45 
years 
 Develop 
value 
chain 
strategy 
for 
livestock sector. 
 Manage VCD subprojects; oversee GAP 
and HCCP training 
 Work with MEs, POs and private sector 
firms to establish market linkage and 
develop contract farming arrangement  
 Explore 
export 
potential 
of 
each 
subsectors 
 Identify 
new 
opportunities 
for 
interventions, transfer of technology, 
solve problems in value chains 
 Advise the PC and other managers and 
supervisors 
on 
value 
chain 
development 
 Conduct market research 
 Help the PC to develop annual plan and 
implement plans 
 Visit 
subprojects 
to 
identify 
opportunities and constraints, monitor 
progress and observe impacts   
 Prepare reports, case studies etc  
  Do any other work assigned by the PD 
Sector Value 
1 
Dhaka and at 
 Advance 
degree 
 Minimum 
of 
15 
years 
 Develop 
value 
chain 
strategy 
for

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chain 
specialist 
(Fisheries) 
least 50% of 
time spent in 
project 
supervision 
in the field 
working with 
POs and 
other 
stakeholders 
(master’s 
degree) 
in 
one of the following 
subject 
fisheries, 
aquaculture, 
agribusiness, business 
administration, 
finance, 
marketing, 
agribusiness,  
agricultural economics, 
and 
engineering/technology 
(exception 
can 
be 
made 
in 
academic 
subject 
if 
a 
highly 
experienced person is 
found 
to 
lead 
the 
activities 
in 
this 
category). 
 Training 
in 
business 
management, 
value 
chain development and 
management 
 Fluent in Bangla and 
English 
 
work 
experience 
in 
reputed 
organizations, 
preferably 
in 
developmental 
organizations, 
of 
which 
minimum of 3 years in 
senior 
management 
position. 
 Minimum 
of 
10 
years 
experience in agribusiness 
business 
management, 
technology transfer and 
value chain development 
project(s). 
 Progressively 
advanced 
career 
path 
and 
demonstrated capacity in 
project management 
 Willingness and ability to 
undertake regular travel 
all over the country  
 Age limit: Maximum 45 
years 
fisheries sector. 
 Manage VCD subprojects; oversee GAP 
and HCCP training 
 Work with MEs, POs and private sector 
firms to establish market linkage and 
develop contract farming arrangement  
 Explore 
export 
potential 
of 
each 
subsectors 
 Identify 
new 
opportunities 
for 
interventions, transfer of technology, 
solve problems in value chains 
 Advise the PC and other managers and 
supervisors 
on 
value 
chain 
development 
 Conduct market research 
 Help the PC to develop annual plan and 
implement plans 
 Visit 
subprojects 
to 
identify 
opportunities and constraints, monitor 
progress and observe impacts   
 Prepare reports, case studies etc  
  Do any other work assigned by the PD 
Sector Value 
chain 
specialist 
(Horticulture
)  
1 
Dhaka and at 
least 50% of 
time spent in 
project 
supervision 
in the field 
working with 
POs and 
other 
stakeholders 
 Advance 
degree 
(master’s 
degree) 
in 
one of the following 
subject 
agricultural 
science, 
agribusiness, 
business 
administration, 
finance, 
marketing, 
agribusiness,  
agricultural economics, 
and 
engineering/technology 
(exception 
can 
be 
made 
in 
academic 
subject 
if 
a 
highly 
 Minimum 
of 
15 
years 
work 
experience 
in 
reputed 
organizations, 
preferably 
in 
developmental 
organizations, 
of 
which 
minimum of 3 years in 
senior 
management 
position. 
 Minimum 
of 
10 
years 
experience in agribusiness 
business 
management, 
technology transfer and 
value chain development 
project(s). 
 Develop 
value 
chain 
strategy 
for 
horticulture sector. 
 Manage VCD subprojects; oversee GAP 
and HCCP training 
 Work with MEs, POs and private sector 
firms to establish market linkage and 
develop contract farming arrangement  
 Explore 
export 
potential 
of 
each 
subsectors 
 Identify 
new 
opportunities 
for 
interventions, transfer of technology, 
solve problems in value chains 
 Advise the PC and other managers and 
supervisors 
on 
value 
chain

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experienced person is 
found 
to 
lead 
the 
activities 
in 
this 
category). 
 Training 
in 
business 
management, 
value 
chain development and 
management 
 Fluent in Bangla and 
English 
 
 Progressively 
advanced 
career 
path 
and 
demonstrated capacity in 
project management 
 Willingness and ability to 
undertake regular travel 
all over the country  
 Age limit: Maximum 45 
years 
development 
 Conduct market research 
 Help the PC to develop annual plan and 
implement plans 
 Visit 
subprojects 
to 
identify 
opportunities and constraints, monitor 
progress and observe impacts   
 Prepare reports, case studies etc  
  Do any other work assigned by the PD 
ICT 
Specialist 
1 
Dhaka 
and 
25% in the 
field 
to 
observe 
applications 
 Undergraduate degree 
in computer science, 
computer applications 
 Training in web based 
development  
 At least 15 years work 
experience 
as 
software 
developer, 
system 
implementer, 
or 
application developer  
 Coordinate 
all 
ICT 
applications 
of 
Component 3 
 Develop requirements, guide suppliers, 
supervise installation, monitor system 
performance 
 Coordinate 
online 
MIS 
system 
development and application 
 Advise PC on ICT related issues     
Financial 
analyst 
1 
Dhaka 
and 
25% in the 
field 
to 
observe 
applications 
 Undergraduate degree 
in Finance, accounting, 
Business 
administration, 
cost 
accounting     
 At least 15 years work 
experience 
in 
relevant 
areas  
 Conduct financial analysis subproject 
proposals;  
 Analyse project budget, plan annual 
activities and budget;  
 Conduct 
profitability 
of 
various 
technological 
options, 
business 
processing proposal that RMTP may 
receive from different organizations. 
 Assist POs with financial analysis 
 Conduct relevant training.  
 Analyse ME loan program   
 Track project spending  
 Conduct 
financial 
analysis 
of 
microenterprises  
 Work with M&E specialist to prepare 
financial analysis of MEs and other 
businesses 
 Prepare case analysis of individual

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subprojects, MEs   
 
 
 
 
 
  
Procuremen
t specialist  
1 
Dhaka; visit 
POs 
and 
other places 
if and when 
necessary 
4-year 
Undergraduate 
degree reputed public or 
selected 
private 
universities 
in 
management, 
public 
administration, 
accountancy, 
business, 
economics etc 
Training/degree 
on 
procurement 
and 
thorough 
knowledge 
in 
procurement 
rules 
is 
required. 
Minimum of 10 year work 
experience in in which at 
least 
five 
years 
in 
procurement   
 Process all procurements under the 
project 
 Ensure IFAD and PKSF procurement 
rules are complied by the project and 
POs. 
 Help POs develop IFAD compliant 
procurement rules. 
 Act as office manager for the project  
 Coordinate with respective authorities 
and 
organizations 
in 
case 
any 
machineries are imported for value 
chain development. 
 Manage 
all 
logistics, 
small 
procurements etc 
M&E 
specialist  
1 
Dhaka 
and 
50% 
field 
visit 
At least four year 
undergraduate degree 
with good academic 
standing in one of the 
following subjects: 
business administration, 
finance, marketing, 
agribusiness, economics, 
agricultural economics, 
management. 
Training or degree on 
project design, planning, 
monitoring and evaluation 
methodologies of 
development projects 
Minimum 
of 
10 
year 
experience 
in 
project 
management, planning and 
at least 5 years experience 
in leading monitoring and 
evaluation of development 
projects preferably in value 
chain development projects.    
 
Experience in designing and 
conducting 
field 
surveys, 
data 
analysis 
and 
report 
writing;  
Fluent in English – oral and 
written.    
 Prepare TORs for various surveys and 
studies; 
 Conduct baseline and other impact 
assessment studies; 
 Conduct studies planned for the project 
to be managed by the PMU; write TOR, 
coordinate with procurement specialist 
to procure all services; 
 Prepare project reports;  
 Assist 
POs 
to 
prepare 
subproject 
indicators and subproject log-frame, 
and prepare project reports. 
 Prepare impact studies of individual 
subprojects in collaboration with VC 
managers. 
 Conduct 
training 
on 
subproject 
planning, monitoring and evaluation of 
individual subprojects by POs. 
 Prepare 
sector 
specific 
report 
on 
experience of PACE

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 Prepare KM products 
 Organize 
seminar, 
workshops 
and 
other activities to disseminate project 
results    
Communication
, Publication & 
Knowledge 
Management 
Specialist 
1 
Dhaka 
and 
50% in the 
field 
4-year 
undergraduate 
degree 
in 
business 
administration, 
communication, 
journalism, 
media 
management, 
finance, 
marketing, 
agribusiness, 
economics, 
agricultural 
economics, management 
etc. 
Training 
on 
communication, 
professional 
writing, 
publication, 
website 
content preparation  etc 
Minimum 
of 
10 
year 
experience 
in 
communication, 
content 
production, training material 
preparation, media work etc.   
Experience 
in 
preparation 
project 
report, 
case 
preparation, 
field 
investigation methodologies, 
data 
analysis 
and 
report 
writing;  
Fluent in English – oral and 
written 
 Develop contents for project website 
 Maintain 
project 
website, 
facebook 
page 
 Organize seminars, workshops, and 
produce KM products 
 Coordinate with media/press 
 Disseminate 
project 
KM 
products 
among stakeholders 
 Coordinate with M&E and other officials 
to produce contents  
 Produce all video materials of the 
project. 
   
Nutrition 
specialist  
1 
Dhaka 
and 
50% 
field 
works 
4 
year 
degree 
from 
reputed public or private 
university 
on 
nutrition, 
public health   
10 
year 
relevant 
work 
experience  
 Develop nutrition strategy for the 
project 
 Design and roll out campaign on 
nutrition 
and 
other 
related 
issues 
under component 1.1 in collaboration 
with POs and other stakeholders  
 Assess impact of such campaign in 
collaboration 
with 
M&E 
and 
Communication specialist  
 Produce reports   
Asstt. 
Manager 
( 
Accounts)  
2 
Dhaka; visit 
POs 
and 
other places 
if and when 
necessary 
4-year 
Undergraduate 
degree in accountancy or 
finance, 
or 
cost 
accounting (part) etc. 
Training in computer 
accounting software  
Minimum of 8 year work 
experience as accountant in 
reputed organization  
 Maintain all books of accounts in 
project office; maintain records of all 
bank accounts 
 Process all payments and disbursement  
 Prepare monthly, quarterly and annual 
financial reports 
 Assist PC to prepare budget; maintain 
bank accounts of the project

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 Assist financial analyst  
 Coordinate with PKSF accounts depart 
regarding accounts and budget  
VC 
project 
Manager  
6 
Dhaka and at 
least 
60% 
time at the 
field level  
 Advance 
degree; 
at 
least 
four 
year 
undergraduate degree 
with 
good 
academic 
standing from reputed 
public 
and 
private 
universities preferably 
in one of the following 
subjects: 
business 
administration, 
finance, 
marketing, 
agribusiness, 
economics, agricultural 
economics, 
and 
engineering/technology 
 
Training on VCD 
management and 
institutional 
development; training 
on enterprise 
management 
 
Fluent in oral and 
written English and 
Bengali. 
 
 At least 5 years work 
experience 
 Experience of VCD project 
management;  
   
 Design value chain project 
 Assist POs to design VCD subprojects 
 Supervise 
and 
monitor 
selected 
subprojects. 
 Prepare reports, case studies  
 Conduct market research 
 Identify business opportunities 
 Liaison with private sector, public 
institutions, 
training 
providers, 
TA 
providers etc 
 Prepare reports   
Computer 
operator 
cum 
MIS 
officer 
1 
Dhaka 
Undergraduate 
degree 
and training on computer 
application 
(Microsoft 
office) and MIS  
3 
year 
relevant 
work 
experience  
 Drafting of reports, communication 
documents  
 Prepare MIS report

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8. PROJECT OUTREACH AND BENEFITS 
 
120. Outreach: The following Table presents overall outreach targets for the project by categories 
of people – men, women, young, and women-headed households. The project through its ME 
and VCD subprojects will reach the target population. The targets will be monitored through 
regular project monitoring tools – project reports by POs and other implementers, annual 
survey etc. (see logframe for various methods for monition and evaluation). 
Indicators 
Name 
Baseline 
Mid-Term 
End Target 
1  Persons receiving services promoted or supported by the project 
Males - Number 
                          -    
                   80,000  
                 200,000  
Females - Number 
                          -    
                 100,000  
                 245,000  
Young - Number 
                          -    
                   20,000  
                   50,000  
Not Young - Number 
                          -    
                 160,000  
                 395,000  
Young - Percentage (%) 
                          -    
                    11.11  
                    11.24  
1.a  Corresponding number of households reached 
Non-women-headed households - Number 
                          -    
                 170,000  
                 425,000  
Women-headed households - Number 
                          -    
                   10,000  
                   20,000  
Households - Number 
                          -    
                 180,000  
                 445,000  
1.b Estimated corresponding total number of household members 
Household members - Number of people 
                          -    
                 810,000  
              2,002,500  
 
121. Project Benefits: The project will directly benefit an estimated 445,000 households, 
including small farmers, micro-entrepreneurs and other value chain participants (input 
suppliers, traders, service providers). Of these, 100,000 households will receive several 
rounds of microfinance as well as value chain services, while 345,000 households will 
receive value chain services. Considering an average household size of 4.5, the project will 
benefit 2 million people within a period of six years. 
122. The project will generate multiple social, nutritional, financial, economic and institutional 
benefits. A preliminary financial analysis indicates that all selected value chains are 
financially viable. Aromatic rice, representing high value cereals, has Return on 
Investment (ROI) of 51%; banana representing fruits 30%; potato representing 
vegetables 38%; technology-based aquaculture 67%; dairy 20%; red meat 40%; poultry 
meat 29%; and poultry eggs 37%. 
123. RMTP will generate significant positive effects on rural household incomes, food security 
and nutrition. Other benefits include improved advisory services; better food safety; 
improved animal health (dairy, beef cattle, poultry and fisheries); improved market 
access, and growth of rural businesses. RMTP will also generate employment opportunities 
for women and men, particularly the youth through their involvement of the value chain 
activities and related backward and forward linkages.

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124. Estimation of Benefits: The PMU, as per logframe targets and methods and led by M&E 
Specialist will conduct impact studies to estimate project impacts accrued to different target 
population. Such studies will be part of annual M&E plan of the project.    
 
9. RMTP PROJECT IMPLEMENTATION 
 
Implementation plans 
125. Pre-project readiness: As outlined in the aide memoire of the final design mission, PKSF will 
undertake the following preparatory activities for successful launching of the project:   
 
Complete reassignment of officials from within PKSF and recruitment process of all 

new project officials to ensure they join right after launching of the project;  
 
Train a core group PKSF officials on GGAP and HACCP (including site visits) by 

employing a Bangladesh-based training, development, and certification agency as this 
service is now available in the country, using resources from IFAD-funded PACE 
project;     
 
Conduct a survey to map products, locations and supply chains of all important 

agribusiness and processors along with support service providers in three broad 
sectors - horticulture, fisheries and Poultry & livestock - using resources from the PACE 
project; and 
 
Develop policies for lending to NBFIs and assessment process for selection of NBFIs.  

126. Identify successful POs and Value Chains under PACE:  PKSF will identify the successful value 
chains and competent POs for launching first round of funding to expand value chains as per 
design of the RMTP project.       
127. Start-up readiness- ME program: PKSF has established systems, policies, procedures and skilled 
managers and staff. The project will not require revision of existing policies or procedures or 
management system for ME loan part of the project. PKSF will develop annual disbursement 
plan for ME part of the project as a part of total ME disbursement plan. 
128. Start-up activities: VC Development (Component 1) under RMTP: Similarly, the methodology for 
value chain activities has been developed under PACE and will be strengthened and applied 
under RMTP. PKSF will undertake following activities for starting the project:  
 
Develop guidelines including format(s) for POs for submission of VCD proposals; 
 
Organize a start-up workshop involving all potential POs to explain the project, particularly 
Component 1; 
 
Invite POs to submit proposals in the very early stages of implementation;  
 
Start the VCD activities by expanding successful products and clusters under PACE 
 
Conduct broad-based value chain analysis of three sectors – horticulture, livestock, and 
fisheries; 
 
Complete the feasibility studies on crowdfunding and block chain;  
 
Complete procurement procedures for the carrying out of the baseline survey, and launch 
the survey as soon as project funds are available.

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129. 
Supervision: IFAD will conduct regular supervision and implementation support 
missions as per standard procedures. These missions will review project performance, 
progress towards achievement of objectives, and compliance with fiduciary requirements. 
10.  PLANNING, M&E, LEARNING AND KNOWLEDGE MANAGEMENT 
      
130. AWPB: The PMU/PKSF will prepare the annual work plan and budget for RMTP, and obtain 
approval from FID and IFAD. The plan will include activity plan along with targets and 
expenditure plan and should reflect overall project targets and activities. IFAD supervision 
missions and mid-term review mission will offer opportunities for review of progress and 
assessment of effectiveness of the project. 
131. Monitoring and evaluation: The PMU will develop an effective M&E system to measure 
indicators included in the log frame. It will be part of a larger MIS system which will serve 
as an information and knowledge sharing platform. The M&E system will be utilised as a 
management tool and will include assessment of progress and compliance, identification of 
constraints and proposed remedial actions.  
132. Online application based project management: PSKF will develop project management 
application for management of Component 1 of RMTP. It will be given to all POs 
implementing Component 1. PKSF will able to observe real-time all physical progress of all 
participating POs and the application will generate comprehensive reports. It will eliminate 
the need for sending paper-based reports from POs and   
133. Desegregated data: All data will be disaggregated by gender, age, and geographical 
location. Participatory M&E including qualitative surveys will be undertaken on a regular 
basis. A baseline survey will be undertaken at start up, and outcome surveys will be 
carried annually. The key production and financial indicators of small farmers and 
microenterprises will be monitored annually to assess the emerging results of the project. 
134. Knowledge Management and Learning: The PMU will prepare a comprehensive KM 
action plan in the early stages of implementation. The project's KM activities must support 
the effective flow of relevant information among project staff, beneficiaries and other 
stakeholders. Output, outcome and impact data generated by the M&E system will inform 
case studies, briefs and reports. These will be used for policy dialogue, peer-learning, and 
potential scaling-up.  
135. KM products will be communicated through multiple sources including blogs, written 
publications, video and social media (e.g. facebook). However, most of the publications 
should be in electronic and video form. The written documents should be at a minimum.  
136. Website: The project will have a website to share reports, impact studies, case studies, 
training materials, videos and application technologies. It will discourage printing of 
reports and other documents. POs will be encouraged to follow the same, and 
communications with beneficiaries will be via mobile phones. 
Baseline and other surveys 
137. Baseline survey: The PMU will prepare TOR for baseline survey and cleared it by IFAD. All 
goal and objective level indicators must be in survey questionnaire. Sample must be 
statistically valid.   
138. Midterm and final impact survey: The PMU will prepare TOR for baseline survey and cleared 
it by IFAD. All goal and objective level indicators must be in survey questionnaire. Sample 
must be statistically valid.

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139. PCR preparation: The PMU will prepare PCR as per IFAD guidelines 
 
11. FINANCIAL MANAGEMENT AND PROCUREMENT 
Disbursement Profile 
140. RMTP´s withdrawal of funds and its use of loan proceeds are governed by the IFAD’s Loan 
Disbursement Handbook (LDH) and Financing Agreement between IFAD and the 
Bangladesh Government. Applicable procedures of disbursement, financial reporting and 
maintenance of appropriate project records will be described in details in a Letter to the 
Borrower subsequently after signing the Financing Agreement between IFAD and the 
Bangladesh Government.  
141. 
After the Financing Agreement for RMTP enters into force, PKSF will sign a subsidiary 
Loan and Grant agreement in which the Government of Bangladesh will on-lend a portion 
from the proceeds of the Loan as a subsidiary loan to PKSF. The remaining portion of the 
loan will be provided in the form of a Grant to PKSF and for the Components of: Value 
Chain Enhancement and Institutional Strengthening/Project Management. 
142. 
An online guided overview of IFAD financial management practices and procedures is 
available for project staff9. Project staff is encouraged to avail this training to ensure an 
efficient disbursement and an appropriate fiduciary control. 
143. 
Three standard disbursement procedures are available for RMTP withdrawal of 
financing:  
a. Advance withdrawal 
b. Direct payment 
c. Reimbursement 
144. 
Advance withdrawal 
a. This modality is used to advance and/or replenish funds to a bank account as designated 
by the borrower. The Fund places a limit on the amount to be advanced and/or 
replenished. Relevant details on the modality – which is project specific – are to be agreed 
between the borrower and the Fund, and be detailed in the LTB.  
b. The ceiling amount will be a reasonable limit, sufficient enough to cover average projected 
eligible expenditures of RMTP for a period of six months. The ceiling amount may be set 
depending on the level of expenditures as to be incurred based on (i) the approved AWPB; 
and (ii) the project’s specific reporting of actual and projected expenditures foreseen 
within that AWPB period. The Fund will ascertain and certify clearance of the figure to be 
advanced, which may vary during the implementation of the project, depending on the 
projected expenditure requirements. 
c. 
Should it be found necessary to revisit the ceiling figure considered a reasonable limit at 
any time during project implementation, this shall be subject to prior agreement between 
the borrower and the Fund, with communication by IFAD to the borrower through 
modification of the LTB.  
d. The advance withdrawal is foreseen to be the principal method to be used for the 
disbursement of RMTP. The main conditions precedent to withdrawal the initial advance 
from the Loan to the Designated Account (DA) of the Project are: (i) evidence that the DA 
has been opened; (ii) authenticated specimen signatures of each authorised person that 
will operate the DA; and (iii) sufficient evidence of the authority of the persons who will 
sign the withdrawal applications on behalf of the PKSF. The Project Coordinator (PC) will 
ensure a proper cash flow from the Loan Account to the DA to ensure the implementation 
                                                 
9 https://www.ifad.org/web/knowledge/publication/asset/39631355

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of the project is not hindered. RMTP will use the IFAD Client Portal (ICP) for the 
submission of withdrawal applications. 
e. Subject to the recommendation of the first IFAD supervision mission, the project is 
expected to enter into the Straight Through Processing (STP) to justify advances and seek 
replenishments. This facility was incorporated in the last stage of PACE.  
f. 
Supporting documentation and records of the expenditures claimed under the STP facility 
should be maintained and be readily available for review by IFAD's supervision missions or 
any other review team assigned by IFAD and external auditors. The PMU will be 
responsible to ensure the SOEs are elaborated in accordance with IFAD requirements. 
145. 
Direct payments 
a. This modality is used for eligible project expenditures to be paid directly by IFAD as per 
the request of the PMU, generally for large contracts, to suppliers, contractors, consultants 
or third parties, as authorized by the borrower. 
b. This procedure is generally suitable for payment of large civil works, consultant fees (when 
these are of substantial), importation of goods for which a letter of credit is not practical, 
and when exchange rate control regulations are present in the country. The minimum 
value threshold for direct payments is specified in the LTB. 
c. 
Under this procedure, RMTP requests the fund to pay the supplier directly on its behalf 
from the loan account in IFAD. RMTP must indicate in the WA the date on which payment 
becomes due to the supplier. The WA will need to be accompanied by a signed copy of the 
contract and relevant supporting documents evidencing the eligibility of the expenditure. 
146. 
Reimbursement 
a. This is applicable when eligible project expenditures, reimbursable under the financing, 
have been pre-financed by the project or incurred (that is, the suppliers of goods, works, 
consulting or other services has already been paid by the project from its own funds). This 
reimbursement procedure is generally suitable for payment of: (i) local currency costs; (ii) 
petty cash or small purchases; (iii) small civil works payments; and (iv) the borrower’s 
provision of financial resources to the project when, for example, requests for advance 
replenishment to the designated account have not been submitted promptly, thus enabling 
the project to continue uninterrupted implementation.  
b. Usually, IFAD will reimburse the project in the currency of payment as affected by the 
borrower. Nevertheless, the borrower may request reimbursement to be made in the 
currency of the Financing Agreement. However, the amount to be paid will be determined 
by the Fund, using the rate of exchange determined by IFAD Treasury. This methodology is 
used as a safeguarding principle. 
c. 
Requests for reimbursement are to be submitted to the Fund within ninety calendar days 
from the date of payment by the project. Should special circumstances prevail for the 
loan, these will be described in the agreed-on, project-specific LTB. 
147. 
Flow of Funds.  
a. RMTP shall maintain and operate two Designated Accounts (DAs) denominated in US 
dollars in the Bangladesh Bank open under the SAFE modality, to receive the loan and 
grant proceeds. The DAs are administered following imprest arrangements, in which an 
initial amount of the loan and grant is advanced and then replenished periodically based 
on justified expenditures. The maximum advances provided by IFAD to the DAs are 
established as an Authorized Allocation (AA) in the LTB. 
b. An additional DA in US dollars shall be maintained by the Ministry of Expatriates' Welfare 
and Overseas Employment (MoEWOE) following the same arrangements to receive funds 
for the Sub-component 2.3. Optimal utilisation of remittances.

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c. 
RMTP shall maintain two Project Accounts (PA) in Bangladesh Taka (BDT) in a commercial 
bank for day-to-day project management operations and activities. One Project Account 
for the loan proceeds and the other one for the grant proceeds. An additional Project 
Account following the same arrangements shall be maintained by MoEWOE. 
d. Transfers to POs, NBFIs and VC development projects will be transferred from the Project 
Accounts in local currency following similar imprest arrangements for quarterly 
replenishment. 
e. Specific details for enabling further transfer of advance resources are described in the 
LDH. Towards project completion, the Fund initiates procedures and takes steps to ensure 
recovery of advances provided. (see Appendix 1 of PIM for visual representation). 
148. PKSF contribution: a) PKSF counterpart to RMTP is for the Subcomponent 2.1 Financial 
Services through Partner Organizations (POs) and taxes and duties. 
149. PKSF contribution will be incorporated in the Annual Work Plan and Budget (AWPB) cycle 
for all PO’s and NBFIs and will be consolidated and reported by the PMU level.  
150. Non-Banking Financing Institutions and Partner Organizations contribution: The 
PMU will establish appropriate procedures with POs and NBFIs to ensure that the matching 
contribution of its part is done in a timely manner.  
151. Private sector contribution: The private sector contribution will be contingent upon the 
production and market linkages that are facilitated by the POs. No cash contribution to the 
project is foreseen by the private sector. Their contributions represent an estimate in the 
form of training to beneficiaries, advisory services, etc. The PMU will ensure that the 
private sector contribution is accounted and tracked properly to ensure its reporting by the 
PMU level. 
152. 
Beneficiaries contribution: Beneficiary contributions for RMTP are in kind. The PMU 
will ensure that this counterpart is tracked and quantified at fair market value. The PMU 
will ensure that the beneficiaries’ contribution is accounted and tracked properly to ensure 
its reporting by the PMU level. 
153. Accrual basis accounting: Some POs and NBFIs apply the accrual basis of accounting, 
while others utilise the cash basis. During implementation, it is expected that all POs 
gradually move to an accrual-based system for the preparation of financial reports. POs 
are audited annually by independent audit firms appointed by PKSF. These audits cover 
only microfinance operations. For RMTP, it is agreed that the same independent auditors 
will also audit value chain activities. 
154. The internal control arrangements for RMTP will consider: (i) appointment of qualified 
personnel with clear responsibilities and adequate segregation of duties; (b) establishment 
of an adequate financial records management system which has a complete audit trail; (c) 
set up of physical safeguards; (d) independent checks, with procedures subject to random 
independent reviews. 
155. There is an adequately staffed Internal Audit Unit (IAU) in PKSF. The IAU prepares an 
annual plan for internal audit reviews within PKSF and POs. These audits mainly focus on 
compliance review and checking of payment vouchers prior to issuing payments to 
suppliers/vendors. There may be room for the inclusion of risk review in the internal audit 
process; this will be assessed during implementation. 
156. RMTP accounts will be audited annually by the private firm that audits PKSF in accordance 
with International Standards on Auditing (ISA) and in compliance with IFAD's Handbook 
for Financial Reporting and Auditing. The audited project financial statements together

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Draft RMTP Implementation Manual   
 
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with the auditor’s opinion will be submitted to IFAD in English within 6 months of the end 
of the fiscal year. 
157. External audit: PKSF will recruit as per its own process. The TOR of external auditor and 
audit report must meet IFAD’s requirements. 
158. Procurement. PKSF has effective governance and internal control mechanisms for 
procurement and contract management. It has experience in handling procurement under 
IFAD financing. Procurement managed by POs is moderately satisfactory, with continuous 
follow up by PKSF. 
159. Procurement under the project will be undertaken in accordance with IFAD's Procurement 
Guidelines and Procurement Handbook. Specific procurement arrangements, procedures 
and thresholds will be elaborated in the PIM, aligned with PKSF procurement policies as 
applicable. Controls will be ensured, and risk mitigation measures will be strengthened. 
Procurement under RMTP will be undertaken by the Administration Department of PKSF, 
which currently manages all procurement for the organisation. All project-related 
procurement by POs will also be undertaken in accordance with IFAD guidelines. PKSF will 
assist POs to develop/upgrade their procurement policies and processes as required. 
 
12.  RMTP PROJECT COSTS AND FINANCING 
 
160. The total project cost is USD 200 million over a six-year implementation period. The project 
cost summary by component/financier is outlined below (in USD '000). 
 
Table 17: RMTP cost summary by component/financier 
 
 
161. Details Project Cost: See associated COSTAB (XL files) for details costs, unit costs, annual 
and total targets. 
162. IFAD Loan terms and conditions: The Financing is granted on 67% Highly Concessional 
Terms and 33% Blend terms.  
163. The Financing granted on highly concessional terms shall be free of interest but shall bear 
a fixed service charge as determined by the Fund at the date of approval of the Financing 
by the Fund’s Executive Board, payable semi-annually in the Loan Service Payment 
Currency. The Financing shall have a maturity period of forty (40) years, including a grace 
period of ten (10) years starting from the date of approval of the Financing by the Fund’s 
Executive Board.  
IFAD
IFAD Grant
PKSF
Co-Financiers
Private Sector
POs
NBFI
Beneficiaries
PKSF-Tax
Total
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
A. Value Chain Development
 
Organization
240
3.1
-
-
392
5.1
1,139
14.8
-
-
5,808
75.6
-
-
-
-
105
1.4
7,685
3.8
Technical and Business service
2,071
19.6
-
-
-
-
2,307
21.8
4,646
43.9
-
-
-
-
877
8.3
691
6.5
10,592
5.3
Value Chain Integration
9,326
61.6
-
-
-
-
5,821
38.4
-
-
-
-
-
-
-
-
-0
-0.0
15,147
7.6
Enterprise strengthening
500
60.0
-
-
-
-
334
40.0
-
-
-
-
-
-
-
-
-
-
834
0.4
Policy Dialogue
600
60.0
-
-
-
-
400
40.0
-
-
-
-
-
-
-
-
-
-
1,000
0.5
Subtotal
12,738
36.1
-
-
392
1.1
10,000
28.4
4,646
13.2
5,808
16.5
-
-
877
2.5
796
2.3
35,257
17.6
B. Financial Services
 
Micro-Finance through PO
49,874
36.9
-
-
10,756
7.9
-
-
-
-
74,706
55.2
-
-
-
-
-
-
135,336
67.7
Commercial Finance
10,000
50.0
-
-
-
-
-
-
-
-
-
-
10,000
50.0
-
-
-
-
20,000
10.0
Subtotal
59,874
38.5
-
-
10,756
6.9
-
-
-
-
74,706
48.1
10,000
6.4
-
-
-
-
155,336
77.7
C. Capacity Building of Remittance Earners
-
-
1,000
100.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000
0.5
 
PKSF's Capacity Building
1,961
100.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0
-
1,961
1.0
POs Capacity Building
335
85.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
55
14.1
390
0.2
Project Management
5,092
84.1
-
-
890
14.7
-
-
-
-
-
-
-
-
-
-
74
1.2
6,055
3.0
Subtotal
7,388
87.9
-
-
890
10.6
-
-
-
-
-
-
-
-
-
-
129
1.5
8,407
4.2
Total PROJECT COSTS
80,000
40.0
1,000
0.5
12,039
6.0
10,000
5.0
4,646
2.3
80,514
40.3
10,000
5.0
877
0.4
925
0.5
200,000
100.0
D. Institutional Strengthening and 
Project management

Bangladesh 
Rural Microenterprise Transformation Project (RMTP) 
Project Design Report (PDR) – Final Design Mission 
Draft RMTP Implementation Manual   
 
51 
 
164. The principal of the Financing granted on highly concessional terms will be repaid at four 
and half per cent (4.5%) of the total principal per annum for years eleven (11) to thirty 
(30), and one per cent (1%) of the total principal per annum for years thirty-first (31) to 
forty (40).  
165. The Loan granted on blend terms shall be subject to interest on the principal amount 
outstanding and a service charge as determined by the Fund at the date of approval of the 
Loan by the Fund’s Executive Board. The interest rate and service charge determined will 
be fixed for the life cycle of the loan and payable semi-annually in the Loan Service 
Payment Currency, and shall have a maturity period of twenty (20) years, including a 
grace period of five (5) years starting from the date of approval of the Loan by the Fund’s 
Executive Board.10 
 
 
 
                                                 
10 PKSF requested that the full amount of IFAD loan be disbursed at Highly Concessional Terms as the loan is for poverty 
reduction

Bangladesh 
Rural Microenterprise Transformation Project (RMTP) 
Project Design Report (PDR) – Final Design Mission 
Draft RMTP Implementation Manual   
 
52 
 
Appendix 1: Project Fund flow 
 
[See separate PDF file]

Bangladesh 
Rural Microenterprise Transformation Project (RMTP) 
Project Design Report (PDR) – Final Design Mission 
Draft RMTP Implementation Manual   
 
53 
 
 
 
Appendix 2: Project physical targets and financial plans; and details COSTAB 
 
 
SEE COSTAB in separate XL files

Bangladesh 
Rural Microenterprise Transformation Project (RMTP) 
Project Design Report (PDR) – Final Design Mission 
Draft RMTP Implementation Manual   
 
54 
 
Appendix 3: Value Chain Facilitators 
The Value Chain Facilitator will provide implementation support to the POs including:  
(i) 
Assist prepare VC proposals 
(ii) 
Undertake value chain analysis 
(iii) 
Assist identify VC activities 
(iv) 
Assist linking farming enterprises with input dealers for financing/co-financing 
demonstration activities and bulk purchase 
(v) 
Support access to markets, market information and contractual linkages with 
downstream agro-business (contract farming, out grower schemes) 
(vi) 
Assist to establish access to storage and primary processing options 
(vii) 
Assist to establish access to mechanization (in areas of insufficient labor supply) 
(viii) 
Provide training to downstream agro-businesses in business planning and analysis of 
financial returns 
(ix) 
Introduce new high value crops and new cropping systems  
(x) 
Assist linking farming enterprises to downstream agro-businesses via contract 
arrangements 
(xi) 
Assist organize value chain committee meetings  
(xii) 
Assist organize and facilitate farming enterprise to farming enterprise visits across the 
project area 
 
Qualifications of the Value Chain Facilitator 
 
Hold a university degree or equivalent relevant to agriculture (agronomy, livestock, 
aquaculture, poultry, economics, advisory service, agribusiness)  
 
Proven records of working with agriculture value chains; 
 
Added advantage if the VCF has experience from working with a pluralistic/private/cost 
recovery advisory system; 
 
Fluency in written and spoken Bengal and English. 
 
Pay Based Advisor  
The pay based advisor will provide advisory service for nutritional sensitive commodities of:  
(xiii) 
High value cereal, fruit and vegetable crops  
(xiv) 
Pond and tank aquaculture   
(xv) 
livestock cattle (milk and beef), buffalo (milk and beef), goat and sheep  
(xvi) 
Poultry including egg and meat of chickens, turkeys, geese and ducks, guineas fowl and 
quails  
 
The area of advisory service will include: 
 
(i) 
Farm economics and financials analysis  
(ii) 
Modern production methods using sustainable approaches i.e. GGAP, IPM, precision 
placement of plant nutrition, use of organic plant nutrition, improve animal and fish 
breed adjusted to the climate, mechanisation etc. 
(iii) 
Postharvest technologies reducing losses and drudgery  
(iv) 
Linkage to financial services, input supplier for bulk procurement and to market for bulk 
sale

Bangladesh 
Rural Microenterprise Transformation Project (RMTP) 
Project Design Report (PDR) – Final Design Mission 
Draft RMTP Implementation Manual   
 
55 
 
Qualifications of the Value Chain Facilitator 
 
Hold a university degree relevant to agriculture (agronomy, livestock, aquaculture, 
poultry, economics, advisory service, agribusiness)  
 
Proven records of working with agriculture value chains; 
 
Added advantage if the VCF has experience from working with a pluralistic/private/cost 
recovery advisory system; 
 
Fluency in written and spoken Bengal and English. 
 
Appendix 4 : Eample of Preparing Value Chain Analysis and Strategic Investments 
 
Step One: Data Collection 
The value chain analysis team will first conducts background research on the chosen 
commodity/crop/livestock/poultry/aquaculture by reviewing websites and other secondary sources of 
information. During this phase, the team looks for information such as: 
 
Importance of commodity to Project Area’s economy (percentage of GDP, employment in the 
sector, etc.)  
 
Global end markets for commodity/crop (demand, trends, potential expansion)  
 
Project Area's position within the Bangladesh and global commodity/crop market  
 
Average size (ha) of commodity/crop per farming enterprise in Project Area 
 
Climatic conditions in Project Area for commodity production  
 
Trade data of import and export on the commodity/crop in Project Area and Bangladesh at 
large. 
 
Undertake a value chain analysis of potential commodities in need of upgrading, which will 
benefit the farming enterprises and the LFs 
 
Identify downstream agro-business interested to procure produce from farming enterprises 
particularly for GGAP certified commodities. During the identification process, the PO will also 
identify the required upgrading of the downstream agro-business interested to participate in 
the RMTP.  
 
Identify the size of the commodity cluster in terms of farming enterprises and total area under 
production 
 
Identify constraints and opportunity for upgrading the primary production and product 
differentiation 
 
Environmental sustainability of the productive area and climate risk assessment 
 
Road infrastructure connecting productive areas with the main road network 
 
Service providers and relevant support institutions 
 
The VC analysis can be based on, existing studies.  The VC analysis will also include benefit 
cost analysis of proposed upgrading along the value chain. 
 
The PO together with the LF and representatives from PGs will prepare a training package for 
PG members and the LF. 
 
 
The proposal will also include a detailed budget  
 
 
Number of pay based advisors required 
 
 
Number of GGAP certificates for PGs  
 
 
Number of GGAP certificates for LF  
 
 
Number of HACCP certificates for LF

Bangladesh 
Rural Microenterprise Transformation Project (RMTP) 
Project Design Report (PDR) – Final Design Mission 
Draft RMTP Implementation Manual   
 
56 
 
After a thorough review of relevant secondary sources, the VC team conducts primary research in 
Project Area through a combination of one or more of the following methods: interviews, focus groups, 
surveys and observation. Through this process, which takes approximately 1 week in the field, the 
team gather more information on the value chain actors i.e. farming enterprises, downstream agro-
businesses, input suppliers, machine hire, advisory services etc., relationships between the actors of 
the chain and factors affecting the competitiveness of the chain. 
Step Two: Value Chain Description 
Using the information gathered during interviews as well as secondary research, the value chain 
analysis team develops description of the commodity/crop sector in Project Area. Value chain 
description enables the analysis team to visualize the flow of the product from conception to end 
consumer through various actors, as well as the supporting markets and enabling environment 
affecting the value chain. The first step is to list all the functions and actors in the value chain. 
Who are the actors in the commodity/crop value chain? 
 
Input suppliers for agriculture and non-agriculture businesses 
 
Producers belonging to the FARM target group   
 
Small-scale traders for both agriculture and non-agriculture produce 
 
Small-scale processors –local sale 
 
Medium/large-scale processors-exporter sale 
 
Retailers  
 
Functions may be performed by more than one actor, and each actor may perform more than one 
function. What are the functions in the commodity/crop value chain? 
 
Input supply  
 
Production  
 
Trading  
 
Processing  
 
Exporting  
 
Importing  
 
Once they are identified, the functions and actors are placed in a matrix to show who does what. List 
the functions along the side and the actors across the top and mark the boxes to indicate which actors 
perform which functions. Once this table is complete, a map can be drawn showing how the product 
moves from one actor to another and when it passes through the different functions. Based on the 
map it is possible to establish the cost and margin make-up for each level the produce passes through 
used as the base line for present distribution of cost and benefits among actors.  
 
Step Three: Analysis of Opportunities and Constraints 
The next step is to prepare a matrix like shown below, list the structural and dynamic factors in the 
value chain, and then briefly describe the current situation, opportunities, constraints and 
recommendations for addressing the constraints including tangible How, Who and Financing.  
 
Framework 
Situational 
analysis 
Opportunities 
for Upgrading 
Constraints to 
Upgrading 
Recommendation 
for Upgrading 
Constraints 
(How, who and 
financing) 
Structural Elements of the Value Chain 
End market 
 
 
 
 
Business

Bangladesh 
Rural Microenterprise Transformation Project (RMTP) 
Project Design Report (PDR) – Final Design Mission 
Draft RMTP Implementation Manual   
 
57 
 
enabling 
environment 
(both 
soft 
and 
hardware) 
Vertical linkages 
 
 
 
 
Horizontal 
linkage 
 
 
 
 
Supporting 
markets 
 
 
 
 
Dynamic of the Value Chain 
Value 
chain 
Governance  
 
 
 
 
Inter-firm 
Relationship  
 
 
 
 
 
Step Four: Prepare Brief Sample Value Chain Action Plans for Each Recommended Upgrading showing 
the expected Results of the Upgrading 
This step included technical description of the upgrading’s viable for standalone investments within the 
VC, together with financial analysis, economic analysis listing all the incremental estimated forecasts 
e.g. increased farming enterprises income, number of farming enterprises benefiting; job creation; 
increased export; import substitution;  etc. Standalone investments can be on-farm investments e.g. 
dripfertigation, new varieties, introduction of HVC, off-farm investment e.g. repair shops, tractor and 
machine rental enterprises, processing facilities of HVC for generating markets. 
 
This step should also include the preparation of a matrix showing the current cost and benefit make-
up and profit distribution along the value chain before and after upgrading and an evaluation of 
change in governance after upgrading. 
 
 
 
Step five: VC Committee workshop 
The VC Committee workshop brings together key actors from various levels in the value chain to vet 
the findings of the analysis and discuss if the chosen strategy for increasing value chain 
competitiveness is valid and beneficial for the stakeholders.

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex 9: Integrated Risk Framework (IRF)
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

Risk categories
Risk
Probability
Risk
Impact
Mitigations/comments
1. Political and governance
Low
Medium
-Slow start-up due to delays in government processes. 
C: PKSF is excluded from certain governmental processes
(e.g. DPP) allowing for a quick start-up. 
-Lack of government commitment to policy change on
crowdfunding and block chain. 
M: Align project activities with and "Strategic priorities of
Bangladesh in IT" action plan - build partnerships with
designated institutions. 
M: Learn from best practices generated by other
institutions. 
-Political volatility may adversely impact on the
performance of public institutions. 
C: Project works through MFIs, NGO, NBFIs and the
private sector.
2. Macroeconomic
Medium
Medium
-Price variations incentivizing breaches in partnership
between producer organizations and private sector
partners. 
M: Build flexibility in the partnerships so producers can
also serve alternative markets if needed and avoid side
selling. 
-Market dynamics negatively affects selected value
chains. 
M: Careful selection of value chains in close cooperation
with private sector entities; selection of diversified value
chains. 
-M: Improved technologies and production techniques are
provided to increase productivity. 
C: Allow for flexibility in project design to drop certain
value chains or include additional value chains if needed.
3. Sector strategies and policies
High
Medium
-Outdated policies governing agriculture sector and
financial services. 
M: Policy dialogue sub-component will provide evidence
basis for policy reform, and capacity building.
4. Technical aspects of project or
program
Medium
Medium
Low capacity of Partner Organizations to manage and
implement technological and agricultural innovations as
proposed by the projects due to lacking experience 
M: Promote effective cooperation modalities between POs
and private sector (e.g. PPPs) assuring that private sector
"know how" strengthens the project. 
M: Promotion of private extension services and technology
extension services are offered
5. Institutional capacity for
implementation and sustainability
Low
Low
-Lack of capacity (in specific with regards to IT
components and Nutrition) in-house to implement project
activities. 
M: Utilize capacity already build under PACE and use
period when both projects are overlapping for cross-
learning and capacity building. 
M: Develop an incentive scheme to attract qualified
personnel. 
M: Develop a roadmap for IT interventions by international
consultants prior to project design.
1/2

6. Financial management
Medium
Medium
The inherent risks for RMTP is considered to be medium
due to the diversified set of activities and decentralized
activities involving multiple Partner Organisations (PO’s)
and Non-Banking Financial Institutions (NBFIs). The latter
is a new approach for the Palli Karma-Sahayak
Foundation (PKSF) business model. This assessment
took into account the overall environment surrounding
financial management, the existing pursuit for improving
financial management practices and progress thereof and
experience gained by PKSF within IFAD’s portfolio.
7. Procurement
Medium
High
-Mis-procurement leading to reputational risk. 
M: Training on procurement provided during project
implementation 
M: IFAD reviews all procurement actions and installation
of NOTUS.
8. Stakeholders
Low
Medium
-Insufficient interest from stakeholders to participate in the
project. 
C: Demand for financing by small farmers and MEs far
exceeds supply;
9. Environment and social
Medium
High
Adverse climate shocks affecting agricultural production
and producer's yields. 
-M: Advocate for climate-smart production methods. 
Gender inequality and lack of female participation in the
project and unintended exclusion from project activities. 
-M: Target value chains that are gender-sensitive. 
-M: Promote participatory approaches and gender
sensitization activities. 
-M: Development of comprehensive targeting guidelines.
Overall
Medium
Medium
Based on the overall assessment, the risk assessment is
medium.
Risk categories
Risk
Probability
Risk
Impact
Mitigations/comments
2/2

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex 10: Exit Strategy
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

Annex 10: Exit Strategy and Sustainability 
 
 
Exit strategy. PKSF and its Partner Organisations (PO), farming enterprises and 
downstream agro-businesses, will implement the project. The farming enterprises, 
downstream agro-businesses, and other private sector will be engaged from the earliest 
possible opportunity. The PKSF and POs are permanent structures that will be able to absorb 
support activities after the end of the project. 
 
Interventions supported by the project will be owned by farming enterprises, downstream 
agro-businesses, pay based advisors and other private sector value chain actors. The PKSF 
and POs will also take ownership through expansion of their financial markets.  
 
The commercial relationship between all parties involved in RMTP will increase the change 
for long-term ownership and sustainability. The availability of pay base advisory service 
beyond the project will ensure continues transfer of technologies and knowledge and 
maintaining the GGAP.  
 
The project design is built on lessons learnt from recent IFAD-financed projects. Particularly 
PACE have provided important insights for project sustainability and the exit strategy. The 
above approach and the sustainability factors mentioned below will ensure a smooth, 
responsible and sustainable exit of project-funded activities. 
 
Institutional sustainability. IFAD's strategy in working with PKSF has been to expand 
core PKSF programmes, and to introduce innovations which PKSF then takes to scale using 
core resources as well as other partners' financing. This strategy has proven to be very 
successful. The first project (MFTSP) supported PKSF to graduate from lending only to 
lending with associated services; this is now practised across all PKSF operations. The 
second project (MFMSP) helped PKSF to enter into agricultural lending; agriculture loans 
now constitute 12% of its portfolio. The third project (FEDEC) assisted PKSF to introduce 
micro-enterprise lending and business clusters; micro-enterprises now account for 31% of 
its portfolio. The fourth project (PACE, ongoing) is helping PKSF to upgrade agriculture 
lending towards a commercial approach, proving that small farms and rural microenterprises 
are economically viable. The emerging lesson is that PKSF is capable of growing 
institutionally on an incremental basis. 
 
Social sustainability (Empowerment). Using value chain as a basis for linking 
micro/small farming enterprises with downstream agro-businesses will make the parties 
become accustomed to working together and sharing knowledge and information. This will 
build trust over time and become a sustainable basis for them to expand their relationship, 
related to the production and marketing of their products.  
 
Participation of the private sector. RMTP will involve private-sector entrepreneurs such 
micro/small farming enterprises, downstream agribusinesses like wholesalers, processors 
and exporters. Financial institutions like PKSF and its Partner Organisations (MFIs) operating 
at both local and national level. The delivery of pay based agricultural advisory services, are 
some of the key tools that will promote the development of mutually beneficial business 
relationships between RMTP target groups and private stakeholders, and thus enhance the 
long term sustainability of the project’s investments. 
 
Economic and financial sustainability. The overall EFA shows that RMTP is financially 
profitable for farming enterprises with financial ROI for farming enterprise ranging from 20% 
to above 100% depending on the production system. The sensitivity analysis shows that the 
economic profitability would remain satisfactory even if the project cost increase by 10% 
and benefits decrease by 10%. 
 
Environmental sustainability. Introduction of GGAP will contribute to environmental 
sustainability of agriculture and aquaculture production. Combined with the promotion of a 
wide range of bio-control agents for pest control, new crop varieties resistance to abiotic 
stresses caused by climate change as well as new crop varieties (aromatic rice) bio-fortified 
with increased level of micro nutrition, vitamins, and proteins. Promotion of increased use of 
organic fertilizer, precision placement of fertilizer, slow releasing fertilizer briquettes.  
Environmental sustainability will be further enhanced by the adoption of drip irrigation, 
System of Rice Intensification increase productivity without raising emission, improved 
livestock breeds heat tolerant with high FCR resulting in a better meat-milk emission ratio, 
improved fish breed through selection increasing FCR and thereby income. Introduction of

solar energy for operating milk coolers at milk collecting centres, cold storage, processing 
facilities, driers, irrigation pumps.     
 
Enabling policy environment. The project will benefit from a highly enabling policy and 
institutional environment, for private sector operation.  IFAD together with PKSF will engage 
government in policy dialogue for improving the gaps in laws and policies to facilitate 
agriculture sustainable growth.

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex: Apr Comments To Qag Review
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

APR responses to QAG desk review. 
Empowerment: DRM recommended that 
empowerment needed to be better reflected 
in the PDR. A bullet point has been added to 
para 33 ‘women are actively targeted as 
recipients of microfinance and financial 
literacy training’ – however the PDT may wish 
to amplify this into areas other than just 
micro-finance. 
An additional matrix on the gender 
empowering aspects of the project has been 
included in the SECAP. The SECAP also 
includes a list of gender sensitive value chains. 
Sectoral policies: The DRM noted that the 
outdated nature of the country’s sectorial 
policies presented a significant risk to the 
project. The PDT may wish to expand of this 
aspect either within the national context or 
lesson learnt section to give more context to 
its policy dialogue support. 
Under component 1.5 “the revision of 
outdated sectoral policies” has been 
specifically included as a topic for policy 
engagement.  
TORs in PIM. The DRM suggested that to be 
more nutritional and gender sensitive these 
aspects should be included in the TOR of 
project staff. However, staff ToR could not be 
found in the PIM. 
Please refer to para 119 on pp. 37 of the PIM. 
Together with the NSVC specialist from the 
design team it was decided that a nutrition 
specialist will be hired to support the PMU 
with incorporating gender.  
Para 165 states that all M&E data will be 
disaggregated by gender, age and geographic 
location. This is mostly reflected in the 
logframe, although Output 1.3 ‘value chain 
integration’ still refers to ‘total persons’. 
Noted, this has been adjusted. 
Logframe. The logframe is now aligned with 
the PDR (goal and Development Objective). A 
few clarifications are however still required: 
1) Given the project’s focus and targeting 
on female beneficiaries it is not clear 
why only 75,000 (16.8%) out of 445,000 
persons receiving project services or 
support are female - is this correct? 
(Output 1.1 indicates 225,500 supported 
rural producers who are members of POs 
are female).  
2) The number of individual beneficiaries is 
the same as the total households i.e. 
445,000 - assumedly there is only one 
beneficiary per household (it is the same 
with Output1.1)?  
3) Young = 10 ??   
4) Project GoaI: o Should the end target be 
70% rather than 50%? 
 
1) This has been corrected both numbers 
and now the outreach is 225,500 men 
and 225,500 women. 
2) Correct, there will be 1 beneficiary per 
household. 
3) Please refer to the logframe in ORMS 
and bring this technical issue up with 
IT. In ORMS it is indicated that the 
percentage of young people is 10%. 
When the logframe is extracted from 
ORMS in a draft report, the “%” is not 
included in the logframe.   
4) This has been corrected to 70%.

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex: Bangladesh Rmtp Response To Qag Comments
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

Bangladesh: Rural Microenterprise Transformation Project 
Response to QAG Comments 
 
 
Comments 
Responses 
Overall Assessment 
1 
Microfinance sector. The PDR lacks 
information on the microfinance sector, 
its structure, overall outreach and 
volume of lending, challenges and 
opportunities.  Given that 80% (i.e. USD 
155 million) of project resources will be 
financial services through Partner 
Organizations (POs)/NBFIs, it is 
important that an overview of the 
financial sector is provided. The rationale 
for providing a credit line should also be 
strengthened. 
Microfinance sector review has already been 
completed (see attached presentation). The 
key elements are being incorporated into the 
final version of the PDR. The rationale is 
outlined in the project rationale and in the 
description of Component 2. 
Credit lines provided to PKSF in the past by 
IFAD and other IFIs evidently triggered the 
development of sustainable financial services 
and met the longer-term needs of some 200 
POs/MFIs without any negative impact on 
the wider financial sector in Bangladesh. This 
is because the market has demonstrated a 
clear lack of liquidity up to the date of the 
design of RMTP. Actually, previous lines of 
credit encouraged other IFIs to co-finance 
the on-ending operations by PKSF to their 
financially sound and independent POs, some 
have even managed to borrow from 
commercial banks. POs have the capacity to 
efficiently and transparently absorb and 
manage the credit line. Loans to POs and 
from POs to its clients, micro-entrepreneurs 
and producer associations (PAs), are priced 
at commercial rates. POs also developed and 
expanded the range of lending products to 
serve new market segments. 
 
Files 
2 
Policy Dialogue. According to the PDR 
"Supported by the IFAD Country Office, 
PKSF will undertake policy dialogue with 
concerned Government institutions on 
key topics relevant for the project". IFAD 
should directly be engaged in policy 
dialogue, which can occur with the 
support of other partners, but it should 
not be delegated to the implementing 
agency PKSF which is a government 
owned institution. 
This repeated comment displays a 
fundamental misunderstanding of policy 
dialogue processes at country level. 
The IFAD Country Office of course has 
intensive and strategic policy dialogue with 
Government on a range of topics of 
relevance to the country programme. This is 
governed by the COSOP and structured 
through direct evidence-based interaction 
with relevant Ministries, the Local 
Consultative Group (LCG) – Plenary, the LCG 
– Water Sector, and the LCG – Agriculture 
Sector. IFAD policy dialogue is broad and 
transcends individual projects which are 
financed by loans to Government.In addition, 
IFAD is involved in policy dialogue as part of 
the UN country team. There is no scope nor 
legal basis for IFAD to directly implement 
policy dialogue through a project which is 
implemented by Government and financed 
through a loan to Government. IFAD does 
not, and should not, have a direct 
implementation role at project level. 
PKSF is not owned by the Government. It 
has been established by Government but has 
an independent board and management. For 
RMTP, policy reforms will be promoted by 
PKSF with support from partners such as

such as agri-research agencies, the 
Bangladesh Food Safety Authority, the 
Bangladesh Standard and Testing Institute, 
private sector stakeholders, the Credit and 
Development Forum, POs, and other relevant 
organizations (on case to case basis). IFAD 
can and will facilitate these processes. 
3 
Target group definition. The PDR 
specifies that beneficiaries will be ultra-
poor (approx. 10%), transitional poor 
(19%), and enterprising poor (71%) 
categorised based on land ownership 
bands. It should be clarified how these 
categories compare with national poverty 
lines that are based on consumption 
expenditure. 
The description of poverty is indicated in the 
PDR main text and detailed in the SECAP 
review note which is an integral part of the 
project design documentation. More 
information on the relation with national 
poverty statistics can be provided in the PDR 
main report if deemed necessary, although 
the page limit will be exceeded. 
4 
Component 1 - value chain financing. The 
PDR should (a) clarify extent to which the 
project support will focus on the farm 
sector and/or non-farm sectors, including 
opportunities and challenges of each; and 
(b) present the main features of the 
micro-enterprises it will be working with, 
including the characteristics of their 
membership 
The PDR very clearly indicates that the 
project will invest exclusively in farm sectors 
– refer to para 53. 
The features of the targeted micronterprises 
are presented in the SECAP review note. 
5 
Component 2 - financial services. 
Estimates on number and loan sizes to 
micro-enterprises should be provided, 
and also on how the disbursements will 
be undertaken.   
The numbers and average loan sizes are 
indicated in para 66 of the main report. 
The disbursement procedures are indicated 
in para 67 and are being detailed in the PIM. 
6 
Project financing.  The total project cost 
is US$ 200.0 million, of which IFAD is 
expected to provide US$80.0million, 
Denmark US$10.0 million, POs US$ 80.5 
million and NBFIs US$10.0million.  This 
expected co-financing is significant and if 
it does not materialize may require a 
redesign of the project. In particular, 
component 2 relies heavily on POs/NBFI 
financing (approx. US$85.0million) while 
Denmark would provide US$10.0 million 
value chain financing.  The team is 
invited to provide an update on the 
financing and mitigation should this fall 
through. 
There is no risk in the domestic cofinancing. 
In all previous IFAD-financed projects 
implemented by PKSF, POs have fully 
achieved (and often exceeded) their 
cofinancing commitments. It should be noted 
that POs have multiple sources of funding – 
savings, retained earnings, and commercial 
borrowing. 
The Embassy of Denmark has confirmed that 
it will cofinance the project. This will increase 
the number of beneficiaries receiving 
services under component 1 from 400.000 
(without co-financing) to 445.000 (with co-
financing).Should this contribution not 
materialise, the targets will be adjusted 
accordingly prior to design report 
finalisation.  
7 
The Project Implementation Manual is 
incomplete and only provides a list of 
potential districts and implementation 
guidelines for component 1.  
Implementation guidelines for component 
2 and 3, as well as detailed project 
management arrangements, financial 
management and procurement, and 
terms of reference for project staff and 
service providers should be developed. 
The design report submitted for the DRM 
contained the basic structure and outline of 
the PIM. The full PIM is being prepared and 
will be incorporated into the final design 
report. 
 
8 
The  log-frame should be revisited to 
align the goal statement with that in the 
The logframe is being revised.

PDR, have more specific indicators, and 
revise targets to be more ambitious given 
the overall size of the project and 
experience from previous IFAD financed 
projects in the country.   
 
Compliance with issues raised at the OSC/Concept Note stage 
9 
On targeting, the PDR specifies (para 26) 
that about 10% of beneficiaries will be 
ultra-poor, 19% transitional poor, and 
71% enterprising poor. It is however not 
clear how the PDR has defined poverty – 
it mentions typical land ownership bands, 
with enterprising poor having up to 0.9 
acres.   It is not known how these 
categories compare with national poverty 
lines that are based on consumption 
expenditure,  but it would be thought 
that many (if not most) of the 
enterprising poor will be above the 
poverty line.  Almost three-quarters of 
rural households are now above the 
poverty line (para 6), and it will be 
difficult to find a large number of people 
below the poverty line with the capacity 
and willingness to take risks to invest in 
larger enterprises. 
The SECAP review note provides a 
description of the target group. Should it be 
deemed necessary, further details can be 
added to this description. 
 
Context and Rationale for IFAD's Engagement 
10 
Project rationale. The rationale for the 
project appears good – while support to 
increase agricultural production increases 
incomes and reduces poverty and food 
insecurity, without value chain 
integration this will not generate the 
growth of scale needed to transform the 
rural economy and to sustainably 
eliminate poverty.  This is not an 
unreasonable assertion, but the PDR 
offers no evidence to support this 
statement.  Earlier IFAD projects 
(especially FEDEC and PACE) have aimed 
to do just this (as have projects 
supported by other donors), and are said 
to have generated good results – it would 
be good to know about these. 
The lessons learned from previous IFAD-
financed projects implemented by PKSF are 
contained in para 23 of the main report. 
Comprehensive documentation on previous 
projects is publicly disclosed by IFAD and 
easily accessible. 
 
11 
This rationale fits well with component 1 
(value chain development), but not so 
well with component 2 – financial 
services.  While it is accepted that micro-
enterprises need capital, the extent of 
capital shortage has not been mentioned. 
The key principals for IFAD engagement 
(para 24), are good – (i) build on 
successful microfinance programmes; (ii) 
micro-entrepreneur integration within 
value chains; (iii) nutrition-sensitive 
approach in selection of commodities; 
(iv) target women through the selection 
of commodities/value chains; (v) 
compliance with food safety and quality 
standards; (vi) leverage commercial 
The core strategy in the project is to 
combine finance and non-financial services, 
based on the lessons learned from previous 
projects which are documented in the PDR. 
This will maximize RMTP impact, unlike 
many other value chain projects in the 
country where finance is absent. PKSF and 
POs are in unique position to do this. Please 
also refer to the response on comment # 1 
above.

finance through non-banking financial 
institutions; (vii) strengthen the 
capability of PKSF and POs as 
development institutions.  But in this list, 
only leveraging finance from NBFIs 
applies to component 2, and no mention 
is made of the major activity in 
component 2 – finance for MFIs (PKSF 
POs). 
12 
Microfinance sector.  The PDR includes, 
as Appendix 1, a paper on the financial 
services available through POs and 
NBFIs.  It would have been useful if this 
Appendix, or the section in the main 
report on the national context, could 
have provided an overview of the 
microfinance sector, including its 
structure , the overall outreach and 
volume of lending.  It would be useful to 
know the size of the current ME portfolio 
of PKSF POs how this is currently funded, 
average loan sizes and numbers of 
borrowers. This would show if planned 
increase in portfolio size of about US$140 
million and 100,000 borrowers is either 
so small as to be insignificant, or so large 
as to be unrealistic.  There is also no 
background information on NBFIs and 
their current role in the financial sector. 
Detailed information on this is contained in 
the attached presentation, which will be 
incorporated into the PDR. 
 
13 
The appendix also includes some useful 
lessons learned, but primarily describes 
an approach to value chain finance.   It 
also says that informal credit contributes 
to value chain financing – although the 
volume and extent of this are not known.   
The impact study for CDSP IV and 
interviews with farmers in the south-west 
of Bangladesh suggests that such 
informal value chain financing is very 
significant in some locations and for 
some crops.  This financing is provided 
both by buyers of farm products and 
suppliers of farm inputs.  More research 
on this would be worthwhile. 
This will continue in case of RMTP clients. It 
is not clear what further research is 
required, nor where the budgetary resources 
for such further research will be obtained. 
Project Description 
14 
Component 1 is value chain 
development, and aims to reach 445,000 
microenterprises (ME) – although in 
some places in the PDR the number is 
400,000.   The component includes 
training (including nutrition), links to 
agribusiness buyers, technical and 
business services (including private 
advisory services), and support for food 
standards.  Around 110 value chain sub-
projects will be implemented by POs, at 
an average cost of $84,000 (in the cost 
tables – in the report text it is 
$100,000).   VC sub-projects have been 
included in earlier projects with PKSF 
(especially FEDEC and PACE) and the 
The average unit cost per sub-project 
including contingencies is USD 100,000. 
There is absolutely no discrepancy between 
the main report and the detailed cost tables. 
Kindly appreciate the difference between 
base cost and cost including contingencies. 
As mentioned earlier, full documentation on 
FEDEC, PACE and other projects is already 
publicly disclosed by IFAD. 
The difference in target group outreach 
numbers is due to the likelihood of DANIDA 
co-financing (see response to comment #6 
above)..

PDR could be enriched by briefly 
providing the experiences of these sub-
projects in terms of their number, scale, 
outreach, sectors and results. 
 
15 
Farm sector vs non-farm sector.  It is not 
clear from the PDR the extent to which 
value chains will be in the broad farm 
sector (including livestock and 
aquaculture) and in the non-farm sector.   
The report does not explain the 
advantages and disadvantages of 
focusing on  either the farm or the non-
farm sector, however the main report 
and the EFA imply that the project will 
overwhelming focus on the farm sector.   
This appears to be similar to the 
approach of PACE.   This is despite the 
fact that the non-farm sector is growing 
more quickly and more and more rural 
employment comes from the non-farm 
sector.   In CDSP IV, the impact survey 
reported that the proportion of household 
income coming from the non-farm sector 
was 60% (but that included wage labour 
on farms), and an increasing proportion 
of loans were being invested in non-farm 
IGAs as the loan programme matured.    
It may be that PKSF has had better 
results from developing microenterprises 
in the farm sector – especially in terms of 
job creation.    It should be remembered 
that 87% of rural households are 
involved, to some extent and in some 
way, in the farm sector.   
As clearly indicated in the PDR, RMTP will 
focus on farm sectors, not non-farm sectors. 
PKSF has other projects which focus on the 
non-farm sector, such as the World Bank-
financed SEP. 
16 
Micro-enterprises.  Linked to the previous 
point, if RMTP is focusing on the farm 
sector, it is not clear what constitutes a 
microenterprise (for the purposes of 
RMTP).    Are not all farms also 
microenterprises?  Or are MEs defined as 
those enterprises that are taking loans of 
a size that is over PKSF’s threshold for 
ME lending?  When FEDEC was being 
implemented, ME loans were defined as 
being between Tk30,000 and 
Tk1,000,000.    It is recommended a 
brief description of the micro-enterprises 
be provided in the PDR.   
Micro-enterprises are described in the PDR 
main text, the SECAP review note, and the 
attached presentation. 
PKSF's present microenterprise average loan 
size is BDT 120,000. PKSF is considering to 
raise this ceiling to BDT 3 million.  
The average loan size of the NBFI window 
ranges from BDT 3 million to BDT 6 million. 
17 
The team should consider providing more 
attention to the development of farm 
sector support enterprises.  While it is 
clear that these are included (milk 
collection centres are in the EFA), there 
is nothing much on the scope and scale 
of these businesses – which include input 
suppliers for the different farm sub-
sectors, farm marketing enterprises 
(including primary processing), 
machinery agents, workshops and hire 
services, irrigation providers, tree and 
plant nurseries, animals and fish 
Further information is being placed in the 
PDR on this aspect (summarised below). 
The project will support investments in 
expansion of rolling stock for hire service 
including tractors, power tillers, combine 
harvesters and rice planters. Implements for 
tractors/power tillers could include potato 
harvesters, planter-fertilizer drills for potato, 
maize, sorghum, medicinal plants, 
vegetables, etc. This includes: trailers; silage 
choppers; fertilizer injectors for deep 
placement of briquettes for rice cultivation 
made from urea, urea/DAP, urea/compost,

breeding services and so on.  The PDR 
does not say what may be done to 
develop their outreach and efficiency.  
There may be value chains to be 
developed within these support 
enterprises – for example the value chain 
for irrigation pumps.   In total the PDR 
talks of only 200 agricultural support 
enterprises being supported – this seems 
a very low number.   
and urea/DAP/compost; plows, harrows, 
rotary tillers, levellers, drip irrigation, etc. 
The project will also provide investment 
support to repair shops for tractors and 
implements. 
Investments in agricultural support 
enterprises will include small 
slaughterhouses for poultry/cattle/goat, 
poultry hatcheries, feed mills, produce 
transporters, small processing facilities for 
vegetables and milk, compost making, 
fertilizer briquettes making, bakeries, fruit 
drying, and pulp/concentrate/juice 
production. 
18 
Value chains.  Oilseeds have not been 
mentioned as a potential sub-sector for 
VC development, despite the sunflower 
VC being mentioned in Appendix 1.  
There is also potential to develop value 
chains for soyabean – including links to 
processing mills.   
Oilseeds will be included under the 
commodity selection heading of 
crops/horticulture, in para 53. The word 
legumes may be included in the text. 
19 
Nutrition and targeting. The PDR includes 
Appendix II: Nutrition-sensitive value 
chain approach.  This makes an 
evaluation of a number of farm products 
in terms their nutrition sensitivity – and 
also how appropriate they are for 
women.  Some of the evaluation of farm 
products in terms of their nutrition-
sensitivity does not take account of local 
production practices and the 
attractiveness for poor households.  It 
dismissed beef and milk production and 
goat rearing as suitable enterprises – all 
of which are attractive for land-poor rural 
households who are nutritionally 
vulnerable.  In particular goats have 
been very successful in past PKSF 
projects, especially for the poorest 
households. 
The PDR clearly and explicitly selects the 
following livestock value chains: (i) dairy 
production; (ii) red meat (e.g. cattle, goats, 
sheep, and buffalo); (iii) poultry (including 
water birds and turkey) and eggs; (iv) 
related trading and processing. Ref para 53 
of the PDR main report. 
Appendix II has been revised to better 
reflect the nutritional attractiveness of the 
products specified above. 
It is expected that 30%-50% of the selected 
value chains are nutrition-sensitive. 
20 
Nutrition-sensitive value chains are more 
relevant for a project targeting the 
extreme poor (who are likely to consume 
the products produced) than one scaling 
up commercial production units (which is 
the thrust of RTMP).  Commercial 
producers will be primarily concerned 
with making money – that they can use 
to buy foodstuffs that they do not 
produce.   Although RMPT aims to reach 
extreme poor households, there does not 
seem to be any special targeted 
assistance for these households.  Rather 
the project will link up with PKSF’s 
existing ultra-poor programme.  There 
could have been an opportunity for RMPT 
to fund a special package of support for 
ultra-poor households, along the lines of 
the earlier PKSF PRIME project – but 
quite possibly PKSF is able to access 
other resources for this, and the need for 
PKSF has just launched a large DFID-
financed project (PPEP) that provides 
significant resources for ultrapoor 
households. Furthermore, PKSF-funded 
Ujjibito and ENRICH programmes are 
specifically targeted to the ultra-poor. RMTP 
will campaign to increase awareness about 
nutrition and foster behavioural change, 
especially in diets, further to a nutritional 
analysis in the early stages of 
implementation. 
Refer to PDR para 94 and Appendix 2.

such support has declined in line with the 
numbers of ultra-poor households. This 
aspect should be clarified. 
21 
Financing. The proposed US$10 million 
grant from Denmark would fund much of 
Component 1, of which total cost is US$ 
35.3 million .  If this grant funding were 
not to be available, the scope and scale 
of value chain development would need 
to be significantly reduced.   
The DANIDA co-funding has been confirmed 
by Denmark. Should this funding not 
materialise, the project cost structure will be 
refined prior to EB submission. 
22 
Micro-enterprise lending. The PDR (para 
66) says project resources will be used to 
expand PKSF’s micro-enterprise lending 
programme by 100,000 borrowers with 
an average loan size of Tk120,000 (which 
will rotate a number of times so the 
average borrower will get a multiple of 
this amount) – but this does not match 
up with calculations in the EFA (Annex 4) 
showing that all 445,000 households 
involved in RMTP will get loans using 
project resources.  100,000 loans with an 
average size of Tk120,000 comes to a 
total of US$143 million -  compared to 
US$135 million allocated in the project 
cost tables (of which 37% is IFAD 
funding, 8% PKSF and 55% from POs).  
Moreover PACE, which seems to be 
rather similar in terms of concept, is 
reported to have financed 609,566 
micro-enterprises.   Why is the number 
going to be so much lower in RMPT?     
Other borrowers will receive loans from three 
other windows of PKSF. 
The average loan size of microenterprise 
borrowers is increasing fast in all POs. Larger 
loans implies a lower number of clients. As 
such, increased resources will not increase 
client base, but rather deepen investment 
and expand impact. The average loan size of 
BDT 120,000 is a starting value; it could rise 
in subsequent years. 
As shown in the Financial analysis in the EFA 
(Annex 4) it is expected that all 445,000 HH 
will take loans to commence the agriculture, 
livestock and non-agriculture activities that 
are supported by the project. In the EFA, the 
analysis focused on only on round of loans 
per HH to commence the production activity 
and also the EFA analysis demonstrated the 
repayment schedule. These 445,000 HH take 
loans in different years and therefore it is 
expected that the POs will use re-flows of 
loans for more than one round during the 
project period to meet the total demand of 
US $ 285 million loans (this is shown in EFA 
Excel sheets – Financial analysis workbook) 
although the total loan amount included in 
the project cost tables is USD 135 million. It 
is possible to deliver USD 285 million since 
the duration of one loan is maximum 1 year 
and the modal time is 6 months.  
The estimated demand of USD 285 million 
would be expected to be realised during 
project year 2 to the end of the project 
(project year 6) taking only one loan per HH. 
However, assessment of POs Annual Reports 
shows that one HH (or one entrepreneur) 
takes multiple loans using both project 
resources and re-flows. Thus, it is difficult to 
ex-ante estimate the number of loans that 
would be sourced by the beneficiaries during 
the full development period of the project. 
The estimation for the PACE project is ex-
post and based on monitoring information. 
23 
There does not seem to have been any 
attempt to calculate how many loans of 
what size will be provided from the 
resources available, and what growth 
there will be in the loan portfolio from 
PKSF to POs, and from POs to households 
in terms of the total amount outstanding 
– as well as the numbers of enterprises 
PSKF’s and POs’ portfolio growth are being 
estimated. These figures will be inserted in 
the logframe. Revolving of loans by POs has 
been calculated.  
The size of an individual loan depends on the 
type of enterprise that is supported by the 
project. The observed practice in project

getting funding from POs.  This needs to 
take account of loan repayments being 
re-lent and growth in PO member savings 
used for on-lending.        
areas is to have a combination of 
enterprises. HH demand for loans for 
project-supported enterprises therefore 
depends on the combinations of these 
production activities. The EFA assessed 7 
different typical and representative 
production models to demonstrate the 
typical size of a loan (Annex 4) that would 
be potentially demanded. In order to 
estimate the total demand for loans, these 
were multiplied by the total lands, other 
enterprise size and size of livestock that are 
supported by the project. As such the typical 
loan sizes that would be demanded have 
been estimated. However, the actual size of 
the loan that HHs would demand would only 
be known once they present their production 
models to the POs during the project. 
24 
ME loan disbursements.  Linked to the 
above, it is not clear how IFAD funds for 
on-lending to POs will be disbursed.   It is 
easy for POs to say they have disbursed 
ME loans to the value of x, and apply to 
have this amount funded by PKSF – and 
in turn by IFAD.  But this takes no 
account of the stream of loan 
repayments and overall growth in the 
portfolio.   In the FEDEC project, funds 
were disbursed to PKSF on the basis of 
growth in PKSF’s ME lending to POs.  For 
each withdrawal application, PKSF 
provided a list of POs and the amount in 
ME lending to the PO which is 
outstanding (i.e. amount lent net of 
repayments).   IFAD then provided PKSF 
with funds equal to 50% of the growth in 
the total amount outstanding – the other 
50% PKSF’s contribution to project cost.    
The practices applied under FEDEC and POs 
will be followed. This is indicated in the PDR. 
PKSF will estimate the increase in its loan 
outstanding portfolio to POs, as well as POs’ 
loans outstanding portfolio with micro-
enterprises. IFAD disbursements will be 
based on the increase in the loan 
outstanding portfolio from PKSF to POs. This 
is standard operating procedure applied by 
all IFIs financing PKSF (including WB and 
ADB). 
25 
The rules for disbursement of IFAD and 
co-financier funds need to be clearly set 
out, as do the definitions of what 
constitutes contributions by PKSF, POs, 
NBFI, the private sector and beneficiaries 
to the costs of different project activities.   
Already done. Beneficiaries and the private 
sector will contribute in kind. This will be 
tracked by the project. 
26 
PO lending. For RMTP, the contribution of 
PKSF to PO lending funds is relatively 
small (8%), with more funds coming 
from POs (55%).   If this is to be 
incremental lending (expanding the ME 
loan portfolio), where are POs going to 
get this money from?   The possibility for 
further increases in bank borrowing by 
POs may be limited.    What mechanism 
will the project have the monitor the 
increase in PO funding of ME lending? 
The main sources of PO funds are savings 
and retained earnings. Some POs even 
borrow from commercial banks. The 
monitoring of PO lending activities is a core 
activity of PKSF as a wholesale lending 
organization to its POs. 
 
27 
Component 3 is institutional 
strengthening and project management.   
Much of sub-component 3.1 (PKSF 
capacity building) concerns innovations – 
distributed digital ledger technology 
(block chain), e-commerce platform, 
Yes. And this will lead to enhanced 
operations by a strengthened apex / 
wholesale lending organization.

crowd funding platform, and micro-
enterprise ICT platform.   
28 
Project management. What is missing 
from the component description (it is also 
not in the part of Section K on project 
management and coordination) is any 
description of the staffing of the PMU. 
There is also no organogram.   The first 
three IFAD projects with PKSF (MFTSP, 
MFMSFP and FEDEC) all had very small 
PMUs with less than a handful of staff.   
PKSF then implemented PRIME with grant 
funding from DFID with a much larger 
staff.  This enabled PMU staff to 
frequently visit participating POs, which 
in turn built a sense of real partnership in 
project implementation and enabled 
problems to be more easily solved.  The 
PKSF proposed staffing for RMTP should 
be described in the PDR/PIM. 
The PMU will have 22 staff including one 
driver. This is estimated based on previous 
IFAD experiences with PKSF, particularly 
PACE. 
The detailed list of positions and 
organigramme is described in the PIM. 
 
Risks and Safeguards 
29 
Risks. One risk that is not in the 
framework is the institutional risk to 
PKSF and POs.  In particular will POs 
continue to be viable as microfinance 
lenders and able to stand up to 
competition from the big three MFIs?   
Another risk that is not mentioned is the 
ability / willingness of POs to make a 
major contribution towards project costs.  
In total POs are to contributes US$80.5 
million – slightly more than the IFAD 
loan. This includes 55% of the cost of 
microfinance lending.   
The three very large MFIs are not expanding 
laterally any more. The main expansion is 
vertical – that is, financing micro-enterprises 
and increasing loan size. All PKSF POs, 
especially those offering micro-enterprise 
loans, are viable, and many of them are very 
profitable. They have been profitable for 
more than 15 years. There is no reason to 
be otherwise, as loan sizes are increasing 
fast and micro-enterprise portfolios exceed 
50% of total lending.  
30 
Safeguards. The QAG notes that the 
project may finance solar powered 
irrigation pumps. This could have adverse 
environmental impacts that have not 
been recognised in the environmental 
screening process.  Solar pumps have 
zero (or near zero) operating costs. This 
means there is no incentive not to 
extract water regardless of the need for 
irrigation.  Where irrigation water 
resources are limited (due to shallow 
aquifer constrains or limited surface 
water supplies in drainage channels), 
over use of water by solar pump 
operators will mean there is less water 
available for other farmers – or for 
domestic purposes.  Support for solar 
powered pumps needs to be carefully 
considered according to local water 
resource availability. 
This risk and the associated mitigation 
measures are documented in the ESMF 
which is an integral part of the project 
documentation. 
The ESMF recognizes the risk of increased 
competition over natural resources which 
includes abstraction of groundwater beyond 
sustainable levels and proposes the 
introduction of drip irrigation and other 
precision irrigation techniques. The actual 
risk of increased water use as a result of the 
promotion of solar-powered irrigation should 
however be qualified and contextualized. In 
many cases this will involve a change from 
diesel powered pumps to solar powered 
pumps. Due to the much higher upfront 
investment costs of solar systems and a 
steep increase in that cost when increasing 
the number of solar panels, farmers will 
often choose a pump with lower capacity 
than a diesel pump which often have a too 
high capacity for the purpose. The 
combination of solar pumps with precision 
irrigation techniques therefore in reality 
leads to a higher system efficiency compared 
to diesel pump systems. Notwithstanding the

above, there will indeed be risks in certain 
areas of the country even if they are not 
directly related to the actual source of 
energy for pumping. These will be identified 
through the cluster-level risk analysis 
(section 6.2 of the ESMF) and a mitigation 
measure will be found at that cluster level. 
These mitigation measures would comprise 
both awareness raising on conscious use of 
freshwater, as well as checks on compliance 
with national and local regulations on 
groundwater pumping such as through water 
use permits. 
Implementation Readiness and Evaluability 
31 
Logframe. This needs considerable 
revision.  It currently covers six pages 
(partly due to poor formatting) and it 
should be possible to reduce this to two 
pages. The logframe has 34 indicators, 
considerably more than the permitted 
maximum of 20 
The logframe has already been revised and 
will be inserted into the final version of the 
PDR. 
32 
The goal statement in the text of the 
report “To sustainably increase the 
income, food security and nutrition of 
marginal and small farmers and micro-
entrepreneurs across selected value 
chains” is quite different to that in the 
logframe “To provide strategic enabling 
conditions for the sustained growth of 
rural commodity value chains with 
comparative advantage, nutritional 
potential, market demand, growth 
potential, and backward linkages to small 
farmers and microentrepreneurs”.  The 
goal statement in the report text is to be 
preferred, and relates much better to the 
logframe indicators such as an increase 
in income. 
The logframe has already been revised and 
will be inserted into the final version of the 
PDR. 
33 
Some of the logframe targets at goal and 
objective levels are either too vague 
(percent of women reporting improved 
food quality), difficult to measure 
(increased profit), and some targets have 
been set so low that they will be 
achieved regardless of what the project 
does.   There also needs to be 
consistency in and between the targets 
presented in the PDR and logframe.   
The logframe has already been revised and 
will be inserted into the final version of the 
PDR. 
The comment on indicators contradicts 
IFAD's published core indicators. The 
indicators “percentage of women reporting 
improved food quality” and “increased profit” 
are IFAD core indicators 1.2.8 and 2.2.2. 
Please discuss this at corporate level. 
34 
Project implementation manual: The PIM 
only has a list of potential districts and 
implementation guidelines for component 
1.  Implementation guidelines are needed 
for component 2 along with detailed 
project management arrangements, 
financial management and procurement 
guidelines, and terms of reference for 
project staff and service providers.  
There is only one paragraph on M&E in 
the main report, and there are no 
detailed guidelines in the PIM.    For M&E 
it should be possible for RMTP to follow 
The comprehensive PIM has been prepared 
and will be inserted into the final version of 
the PDR.

what PACE has done – provided that 
PACE has had a fully operational M&E 
system that has generated all the data 
and reports that are needed.  However 
there is no information on this in the 
PDR.   The same applies to some other 
aspects of the PIM – PACE could be used 
as a model 
35 
Overall readiness: despite the very 
incomplete PIM, PKSF will be ready to 
implement RMTP.  PKSF’s track record 
shows that it can get projects going 
within a short period and achieve (or 
exceed) the required outputs within the 
project period.   There is however a need 
to sort out disbursement rules for lending 
funds.   
The comprehensive PIM has been prepared 
and will be inserted into the final version of 
the PDR. 
 
36 
Evaluability: The financial analysis 
calculates net returns from project 
interventions using a number of 
enterprise models (almost all of these are 
farm enterprises producing different 
products.  From these seven farm models 
have been created, each with a different 
combination of enterprises.   For each 
model total with and without project net 
farm income has been calculated.  
However the overall impact on family 
income and poverty reduction has not 
been assessed as this would need to take 
account of non-farm / non enterprise 
sources of income.  The change in 
volume of farm production and total 
labour requirements have also been 
calculated.   However labour has not 
been disaggregated in family and hired 
labour.      
The EFA is in compliance with IFAD 
requirements. The impact of project 
investments on household incomes has been 
carefully calculated. EFA does not include 
hypothetical exogenous changes which are 
not attributable to the specific project 
investment. 
In the Production Model analysis, the 
existing income generating activities that are 
not supported by the project are not 
included in the analysis. The approach of 
partial budgeting was used where only the 
component of HH economy that would be 
impacted has been the focus of the analysis. 
It is shown in the production model analysis 
the “with-project” income and the comment 
is made about the poverty line, i.e whether 
the “with-project” income would be sufficient 
to come out of poverty. In all production 
model, the income would be sufficient. 
Whilst it is, in theory, correct to disaggregate 
labour into HH and hired, and cost HH labour 
with an imputed value, during the farm visits 
it was revealed that there is a high level of 
interconnectivity between HH labour and the 
hired labour at the HH level. In many 
occasions when HH labour is used on the 
own farm, the option of wage labour is 
foregone. Same labour pool has both types 
and is highly transient and the farm sector 
has year-round work. It is also seasonal and 
hardly any “HH designated” farm activities 
have been observed. As such it is very 
difficult to separate and value HH labour 
from wage labour – same HH will have 
labour which will be ‘HH labour” in January 
and “hired labour” in February.  Hence the 
analysis did not disaggregate. 
37 
Economic analysis uses economic values 
for inputs and outputs and calculates net 
benefits accruing to households less the 
project investment costs.   However 
these investment costs do not include 
funds used for credit.  This is not 
The economic cost does not include credit 
since it is a transaction cost. The balance 
total project economic cost is USD 38 
million. The total incremental production cost 
of all production activities during the project 
period of 6 years is USD 232 million (85% of

unreasonable as credit funds will not be 
used up during the project period.  The 
credit fund will remain intact, and may 
even grow as surplus funds are re-
invested.   However around 80% of 
project cost is the line of credit, and the 
improved availability of credit is a major 
factor behind the generation of benefits.   
The base case EIRR is 30%.  Given that 
only 20% of the project investment has 
been set against the economic value of 
increased household income, it is 
surprising that the EIRR is not higher.   
One interesting figure to come out of the 
sensitivity analysis – if 30% of land were 
to become unusable due to climate 
change, the EIRR would only fall to 29%.   
the total economic cost of the project period 
comes from activities). So, the project 
benefits have to outweigh this cost. 
Moreover, many individual production 
models which contribute largely to the net 
present value (i.e. large fish ponds, milk 
collecting canters and fingerling production, 
all livestock etc) have IRRs which are in the 
range of the base case EIRR. This is the 
main reason of having 30%. 
Regarding the sensitivity analysis, the main 
reason is the land loss scenario has been 
applied only to crops. It is assumed that 
other enterprises would not be affected by 
the loss of cultivable lands. On the other 
hand, the contribution of them to the net 
benefit flow is relatively larger than that 
from crops.

Bangladesh Rural Microenterprise Transformation Project 
Response to Peer Review Comments 
 
Comments 
Responses 
Context and Rational for IFAD's Engagement 
1 
The project will focus on a few value 
chains that have been identified on the 
basis of strong comparative advantages, 
market demand and growth potential. 
These include selected field crops, 
horticulture, aquaculture and livestock 
commodities and products. A brief 
description of these value chains, 
particularly highlighting their status, 
growth trends, opportunities and 
bottlenecks in each case, may help to 
strengthen the rationale for their 
prioritisation in the context of the 
country's agricultural sector 
development. 
This information is being included in the 
updated/comprehensive PIM, which forms an 
integral part of the final PDR. 
A brief summary was also included in the 
concept note shared with the Government 
and with OSC. 
 
2 
IFAD  has a strong background of 
engagement in Bangladesh in building 
resilience and reducing vulnerability to 
climate-related risks, especially under the 
Haor Infrastructure and Livelihood 
Improvement Project (HILIP) and Climate 
Adaptation and Livelihood Protection 
Project (CALIP). Some activities under 
the project are very relevant to RMTP, 
including vocational training to develop 
skills for selected micro-enterprises, as 
well as enhanced production, 
diversification and marketing of crop, 
livestock products and aquaculture, and 
innovations that can be scaled up with 
the financial resources of RMTP. There is 
no mention of linkages with IFAD 
projects that are not in the domain of 
micro-finance, which could be additional 
point of IFAD's comparative advantage 
and to fortify the rationale for IFAD's 
engagement in this project. 
Linkages with other IFAD-financed projects 
in Bangladesh is indicated in para 93 of the 
PDR main report. 
3 
Under Lessons Learnt, conspicuously 
missing are any of the emerging lessons 
from IFAD's work on resilience building 
across the agricultural sector landscape. 
It would be useful to give a brief 
description of IFAD's experience with 
different approaches to reduce 
vulnerability that are linked to the value 
chains targeted by the project. 
It is not clear how this would be relevant to 
a project which will not invest directly in land 
development/protection activities. Resilience 
elements are included in the SECAP review 
note and ESMF. 
4 
The potential role of the line ministries 
responsible for the targeted value chains 
is not coming out clearly. Lessons from 
HILIP-CALIP show the need to involve the 
state ministries responsible for 
development of specific value chains, 
especially on issues around policy, 
licensing/ certification and provision of 
some services. In particular the Ministry 
Agreed. Wording will be added on 
cooperation with relevant Ministries.

of Fisheries and Livestock will have a key 
influence on the proposed activities on 
aquaculture and livestock, and therefore, 
the role of the public sector in the project 
needs to be clarified. 
Project Description 
5 
Under targeting, clarify the provisions for 
inclusion of those with disabilities, 
possibly identifying potential enterprises 
that may specifically accommodate less 
physical requirements.  (It is mentioned 
that disabled persons are covered by 
governmental safety net programs, 
however the project could consider 
tailored training to further reduce their 
vulnerability). 
This is covered by separate Government 
programmes. 
6 
Under Sub-component 2.3, which will be 
implemented by the Ministry of 
Expatriates' Welfare and Overseas 
Employment (MoEWOE), considering that 
recipients of remittances are spread out 
and scattered across the country, and 
that these are private transactions, there 
needs to be a clear strategy on how they 
will be identified and reached. Does this 
intervention target only recipients of 
remittances that fall within IFAD target 
groups (e.g. rural poor) or is it open to 
all categories? Furthermore, a detailed 
analysis on how remittances are currently 
spent could be useful for a better 
understanding of the competing interests 
and conditions preventing such 
remittances from being invested in 
sustainable economic activities, rather 
than to simply assume it is due to lack of 
skills among recipients. 
This is documented in the PIM which is being 
updated. 
7 
The selection of the Project Area avoids 
areas of potential duplication with other 
PKSF programmes, seeks 
complementarities with World Bank-
financed Sustainable Enterprise Project 
and focuses on areas where identified 
Partner Organisations have the capacity 
to implement value chain financing. 
There is need to clarify if consideration 
will also be given to the areas with 
potential to generate linkages with other 
IFAD projects. For instance there could 
be added value to give particular 
attention to the areas where IFAD has 
invested in capacity development (e.g. 
youth vocational training under HILIP-
CALIP), which therefore have potential 
demand for financial services and where 
IFAD has already developed networks. 
The selection of the project will comply with 
para 26 and 27 of the PDR main report. This 
may include areas where other IFAD-
financed projects are operating. 
Risks and Safeguards 
8 
Under technical risks, highlight the risk of 
investing in some value chains where 
IFAD lacks sufficient experience in the 
Not clear about this comment. The project is 
not being implemented by IFAD. It will be

country e.g. aquaculture of crabs. The 
mitigation may include SSTC to promote 
learning from other countries and IFAD 
projects, which have the experience and 
expertise in such value chains. 
implemented by PKSF through POs. PKSF 
and POs have experience in aquaculture 
lending. 
9 
Highlight the institutional risks of working 
with new partners e.g. the Ministry of 
Expatriates' Welfare and Overseas 
Employment (MoEWOE), noting there is 
no mention of IFAD's previous experience 
of working with this Ministry. 
Agreed, this risk will be added. 
Implementation Readiness and Evaluability 
10 
Draft PIM, 18-month Procurement Plan 
and 1st AWPB are fairly advanced, 
suggesting the project's implementation 
readiness. These will need to be updated 
and revision should include the necessary 
edits (e.g. the Table of Content paging 
are not fully aligned with the document 
content). 
Table of contents will be reviewed.

Bangladesh Rural Microenterprise Transformation Project 
Response to SECAP Compliance Review Comments 
 
 
Comments 
Responses 
1 
Gender violence and Sexual 
Exploitation/Abuse: The rate of violence 
against women is considered alarming. 
PKSF has a policy and strategy for 
“Protecting Women Employees from 
Possible Sexual Harassment” aimed at 
PKSF employees, however, the PDR is 
not clear on: (i) the extent to which 
sexual exploitation and abuse is 
addressed in this policy (ESMF, 4.1); and 
(ii) specific project support to 
prevent/remedy/report SEA cases (PDR 
#15, SECAP review note #9). Note that 
IFAD is presently identifying SEA focal 
points in the region. 
 
Agreed, wording will be included. 
2 
Labour: Microenterprises/companies will 
be obliged to comply with national and 
state regulations governing labour. The 
design appears to place emphasis on 
occupational health and safety using the 
Standard Operating Procedures, training 
and awareness raising, however, what is 
unclear is whether the Procedures cover 
other labour management issues related 
to fair treatment, worker organisations, 
etc. (ESMF #5.2). 
The project will be obliged to comply with all 
relevant regulations regarding labour.

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex: Technical Working Papers
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

Appendix I: Financial services through POs and NBFIs.1 
 
1.  Introduction and Background 
 
 
1. 
Palli Karma-Sahayak Foundation (PKSF), an apex development organization was established 
by the Government of Bangladesh (GoB) in May 1990 for sustainable poverty reduction 
through employment generation. PKSF aims to create self-employment opportunities in rural 
off-farm sector by extending loan facilities to the rural moderate poor. Over the last 
decades, this loan programme has been diversified to cater the changing needs of the rural 
Bangladeshi population. PKSF’s “inclusive financing programme” currently serves the ultra-
poor, moderate poor, small and marginal farmers,  and micro-entrepreneurs. In addition to 
financial service delivery, the foundation provides a wide range of development services 
including appropriate credit, basic education, primary health care, technology transfer and 
business development services through 274 so-called Partner Organizations (POs). All PKSF 
POs, especially those offering micro-enterprise loans, are viable, and many of them are 
profitable. They are profitable given the fact that loan sizes are increasing fast and micro-
enterprise portfolios exceed 50% of total lending  
2. 
As at September 2018, PKSF had $9,522,639 and an outstanding loan amount of 
$527,485,950 to its partner organizations. Leveraging PKSF funds, with retained earnings, 
equity and occasionally commercial finance, the PO are able to lend a total of 
$2,651,040,000 to their borrowers. There is a wide variety among the partner organizations 
served by PKSF. Some of the partner organizations are grass roots and have specific focus 
on for example employment generation for the marginalized women, whilst others are larger 
and bear a more commercial signature. Partner organizations typically operate through a 
decentralized model. Meaning that they have bigger offices at district level and smaller 
offices and branches at upazila level. This allows the loan officers at these branches to 
closely monitor the loans of borrowers and assure high repayment rates. In fact, the 
portfolio at risk (PAR) of PKSF POs in negligible and the recovery rate of PKSF loans 
currently stands at 99.53% with defaults mostly caused by a “force majeure”.  
3. 
Due to the surge in economic growth and increased need for financial services, POs have 
been able to gradually expand their operations. Although PKSF works with a variety of 
partner organizations, they use standardized their loan products. Regular adjustments in the 
terms and conditions of PKSF loans were required in order to meet the financial needs of 
borrowers. Over the course of years PKSF therefore gradually increased the loan ceiling of 
their products. Also, the Sufolon product is the direct result of PKSFs aim to offer financial 
services that are aligned with seasons.  
4. 
Another apparent trend in the (micro) financial sector of Bangladesh is the loan ceiling of the 
different loan products. Also, the demand for ME loans increased sharply over the last 
decade with PKSFs ME loan portfolio doubling between 2011 and 2016. Bangladesh has 
three very large MFIs (Grameen, BRAC and ASA) who are not expanding laterally any more. 
Their main expansion is vertical – that is, financing micro-enterprises and increasing loan 
size.  
5. 
IFAD and PKSF recognises constraints of rural entrepreneurs and designed RMTP to leverage 
the usually intangible assets that smallholders do have, namely their – as often is the case - 
long term relationships with their suppliers and buyers, to access small credits for small 
investments from the Partner Organizations2 (POs). These smaller loans enabled the rural 
producers to pay for the inputs required to expand their production and sales. These loans 
are being repaid within six to twelve months. However, these investments are being 
typically for production does not add to their assets creation and entrepreneurship 
development. The project envisaged to introduce a new dimension by including non-bank 
                                                 
1 Prepared by Prasun Das and Michael Hamp 
2 The partner organizations of PKSF are in general the MFIs and NGOs across the country

financial institutions (NBFIs) as potential partners in supplying long term loans and support 
capital formation. 
 
6. 
The proposed project to be implemented by PKSF is expected to support the achievements 
of PACE project and escalate its financial service programme of supporting the POs to 
transform rural microenterprises into sustainable, productive and employment generating 
enterprises. The proposed approach of RMTP is to expand access to financial services for the 
rural producers and microenterprises through the POs and support the non-bank financial 
institutions (NBFIs) to develop and delivery of credit products to support the downstream 
business entities. These resources will be utilised exclusively for development of value 
chains of selected sub-sectors in agriculture (horticultural commodities, livestock and 
fisheries). The specific objectives of this financing arrangement through the POs and NBFIs 
are to develop/streamline access to improved assets, technology, inputs and services. 
 
7. 
Keeping the above in view, this project proposed to include both the POs and the NBFIs3 to 
provide financial services to facilitate both production and fixed/long-term assets creation 
activities. The project will identify the strong and weak nodes in the value chains (out the 
commodities selected in the clusters) and assess the needs of financial and non-financial 
support. The project also envisaged to partner with the information and communication 
technology (ICT) service providers to support easy outreach to millions of rural enterprises 
and linking them with the finance and markets.  
 
8. 
The above arrangements of financial services and support are frequently called “value chain 
financing (VCF)”4. Value chain finance is a method that has been used successfully 
worldwide, but only to a limited extent in Bangladesh (although it is probable that more of 
this kind of lending is taking place in the country, but individual initiatives may not be fully 
documented as such). The rationale for these types of financing arrangements is that, when 
they are properly constructed, they are profitable for and beneficial to providers of financial 
services (e.g. MFIs/Banks/NBFIs) and their clients (e.g. Input suppliers, primary producers, 
aggregators, logistic service providers, processors, domestic/foreign buyers etc.) The aim of 
this working paper is to develop and formalise value chain finance (without any structural 
change in the financing system) and apply the same through this project with selected 
commodities in RMTP project areas as one way to scale up cost effective and sustainable 
lending to rural enterprises. 
 
9. 
The Theory of Change for this project is that involvement of diverse financial institutions (in 
this project MFIs and NBFIs) in Bangladesh are equipped with the skills and capability to 
engage in profitable applications of VCF, then rural based microenterprises will have greater 
access to the kinds of financial services and markets (including market information) they 
need to make the investments required to enhance their competitiveness and increase their 
incomes. 
 
2. Context of Introducing Value Chain Finance Approach 
 
10. 
Rural and agricultural lending system with special reference to microfinance has undergone 
significant changes in Bangladesh since last three decades and it was observed that the rural 
clients are being catered by the MFIs through lending and non-lending services and fostered 
a healthy environment, with the number of borrowers consecutively growing. This 
phenomenon also supported higher level of financial inclusion in the country. However, the 
average lending size by the MFIs failed to cater the agri-business enterprises even at the 
                                                 
3 NBFIs in Bangladesh have substantial experiences of financing fixed/long term assets in the rural areas. However, lending experience to agricultural sub-
sectors is limited. 
4The VCF mechanism are used primarily to reduce the lending risks by leveraging relationships as assets, and/or reduction in transaction costs of lending by 
using value chain actors as loan assessors, distributors or collectors for financial services.

rural levels. For many smallholder farmers and microenterprises, access to finance from 
formal institutions were difficult because of the scarcity or unavailability of assets that can 
be pledged as collateral, their low financial education, the limited range of risk mitigation 
options such as insurance schemes, and the lack of a robust asset base to help ease shocks.   
 
11. 
With the growth in middleclass and youth population in Bangladesh, demand for high quality 
foods likewise increases. The consumers in Bangladesh become more interested in how their 
food is produced. Additionally, consumers demand confidence in the safety and security of 
their food; they want to know that it was produced under safe, humane and 
environmentally-sustainable conditions. This requirement has led to a demand for 
traceability of food items, ones that have been produced with minimal or no harsh 
ingredients etc. which overall are driving towards higher standards for food production and 
handling. These developments are putting pressure on food producers and other actors in 
the agricultural value chains (AVC)5 to find ways to meet these expectations which need 
more investments in building capacity of the downstream actors in the chains. 
 
12. 
Value chain financing often requires a different mindset by financial institutions and hence 
most loans are “one off” and ad-hoc. Even though the individual producers’ loan analysis, 
the administration of the loan transaction, and monitoring is passed on to the value chain 
actors, it does require a measure of trust between financial institutions and the actors in the 
value chain. To mitigate some of the risks, the financial institution requires a greater 
understanding of sector dynamics like production potential, market demand and externalities 
like weather and international commodity prices. This is knowledge that most of the MFIs do 
not possess and commercial banks do not like to enter into these nitty-gritties. 
 
13. 
At the same time, some value chain actors (which are typically MSMEs or larger agri-
businesses) that act as intermediaries also need to develop certain skills. They need to 
understand how credit works, how to make good loans and how to monitor these loans 
so that they get their money back. These businesses may be capable providers of other 
non-financial services6, and may lack good credit management capabilities. They also 
need to understand how they can effectively work with financial institutions to expand and 
improve the quality of their loan portfolios. 
 
14. 
Networked ICT has profoundly improved the value chains of industrial goods and services in 
Bangladesh; and it can likewise elevate the face of agricultural industry in the country. The 
AVC suffers from a lack of information on traceability and other valuable data/ indicators 
which ICT applications are proficient to capture, store and share and potentially important 
instrument to overcome some of the severe agricultural market inefficiencies and price 
racialization issues7. The market for bringing ICT to the AVC is wide open, and this project 
can leverage the investments by the private sectors that are moving to fill the need.  
 
3. Existing Financing Models to Microenterprises in Agriculture   
 
15. 
Conventionally, agricultural development programmes in Bangladesh have tended to be 
public-sector focused, with an emphasis on agricultural extension and research, food 
security, infrastructure, rural livelihoods and financial inclusion. Reviews of experience have 
shown that such approaches have frequently been unable to ensure the sustainability of 
                                                 
5 In the simplest sense, food moves "from farm to table"; and while most people can envision a farmer growing produce and a consumer who ultimately eats 
it, in fact, the AVC is quite a bit more complex, involving scores of individual players and dozens of processes and transactions. 
6 which includes Technical assistance and market information 
7 ICT can provide access to experts and information on best practices at the farm level, map the consumers demand (pull marketing) 
and traceability of products.  It can bring transparency in pricing to promote competitive advantage to the skilled producers; ICT is 
potentially the most important tool to reach to multiple buyers and sellers which could help in achieving price discovery mechanism for 
the actors in the value chains.

benefits to the poor once programme-funded activities cease. The Promoting Agricultural 
Commercialization and Enterprises (PACE) project supported by IFAD being implemented by 
PKSF supports a progressive move for Bangladesh towards a “market systems” or a “making 
markets work for the poor” approach. This approach has emerged as one of the preferred 
methods for smallholder farmer development for many multilateral/bilateral donor agencies 
over the last decade, and has been successfully applied in other rural situations in other 
countries 
(for 
example 
the 
Project 
for 
Agricultural 
Development 
and 
Economic 
Empowerment (PADEE) in Cambodia and Cordillera Highland Agricultural Resource 
Management project (CHARMP) in the Philippines). 
 
16. 
Currently, there are several loan programmes of PKSF that are targeting rural poor, 
agricultural activities and small enterprises; the most important of these programme are 
Agrosor (microenterprise), Jagoran (microcredit for moderately poor), Sufalon (seasonal 
agricultural loan) and Buniad (loan for the very poor) which are being delivered through the 
POs. The Government of Bangladesh (GOB) encourages the financial institutions to lend 
more to agriculture and microenterprises through the government schemes. The current 
policy of the government is for these schemes to operate independently of one another. 
Bangladesh Bank (Central Bank of the country) issue policy guidelines from time to time to 
ensure reasonable flow of credit and develop a sustainable agricultural credit system8. 
However, these directives are not directly applicable to the MFIs who are predominantly 
financing in the rural and agricultural sector. It is to be noted that the MFIs in Bangladesh 
are regulated by Microfinance Regulatory Authority (MRA). 
 
17. 
Similar to what can be observed in other countries, formal financial institutions in 
Bangladesh tend to provide services that do not reach or cannot be accessed by smallholder 
farmers and rural microenterprises. Many smallholders access credit through agribusinesses 
in the value chain, where input finance is prevalent and secured not through collateral, but 
through relationships for example sunflower value chain project in southern delta districts in 
Bangladesh9. These types of lending arrangements within the value chains need to be 
recognized while mapping the flow of finance in this sector. Given the very nature of 
informal financing relationships and in the absence of demand-side market data on the use 
of financial services in Bangladesh, it is hard to assess the volume and type of informal 
credit that is making its way to smallholder farmers in the country.  
 
18. 
There have been a number of initiatives undertaken in Bangladesh to support agricultural 
finance, some of which are still on-going (for example PACE project). Some of these 
initiatives have not been successful implemented at scale. In other cases, some of the 
initiatives are still in their early stages of implementation. Nevertheless, these initiatives do 
offer some useful lessons that can inform the design of future agricultural finance 
interventions. There is an urgent need that the future projects includes implementing a 
strategic business planning (SBP) exercise to help the POs analyse their present strategic 
position and develop an action plan to meet their desired goals and key objectives. PKSF is 
working with some POs to develop products and help introduce innovations in delivering 
financial services, especially for hard-to-reach rural-based clients. 
 
19. 
Non-Bank Financial Institutions (NBFIs) are playing a crucial role in Bangladesh by providing 
additional financial services that cannot be always provided by the banks. The NBFIs, with 
more multifaceted products and services have taken their place in the competitive financial 
market to satisfy the changing demands of customers. NBFIs are investing in different 
sectors of the economy, but their investments are mostly concentrated in industrial sector. 
                                                 
8 For example, Bangladesh Bank issued credit policy guide lines for the year 2018-19 which emphasized that the lenders need to disburse at least 10 percent of 
their agricultural credit to the fisheries sector (https://www.bb.org.bd/mediaroom/press_release/press/jul252018_press.pdf)  
9 Value chain development for adoption of new agricultural knowledge: BRAC’s initiatives in Khulna with Sunflower

According to the release of Bangladesh Bank10, the NBFIs' investment in agriculture sector 
at the end of June 2015 was 1.7 percent of their total investments. 
 
4. Challenges to overcome and lessons learned 
 
20. 
Providing profitable financial services, and in particular lending to microenterprises (farmers 
and agri-businesses) is very demanding in any context. Financial services providers must be 
able to deal with a combination of risks – e.g. weather shocks, fluctuating input and output 
prices, contract- enforcement difficulties, potential government interventions that can 
negatively affect the behaviour of market participants, etc. While there are approaches that 
can be applied more generally, financial service providers will also need to consider more 
specific approaches that are appropriate to the clusters they are targeting (i.e. given the 
differences in the characteristics of market locations, the commodities produced and traded, 
the kinds of actors involved, etc.). 
 
21. 
The proposed RMTP recognises that there are demand and supply side constraints that can 
be eased, if not overcome, to effectively enable rural microenterprises’ access to short and 
long term financing. They are as follows: 
 
Main demand side barriers 
Main supply side barriers 
1. Required loan sizes: Rural microenterprises 
will require loans that are typically small crop 
production, medium size for livestock 
production units and plantation/fruit crops and 
relative big tickets for acquisition of farm 
machineries. 
1. Typically short term loan products: 
Financing by the MFIs while obtained in a 
timely fashion, does not always meet the type 
of capital required (i.e. long term or medium 
term funds). 
2. Capacity and Knowledge Standards of 
existing rural microenterprises are not up to 
the mark to understand the value chains. They 
are not likely to be knowledgeable about the 
financial products and services and/or have 
little experience with dealing with financial 
service providers. 
2. Mismatch of cash flows: All forms of 
lending models followed by the POs  are not 
always appropriate for financing seasonal 
production, where the interest rate and 
repayment terms do not adequately reflect 
the seasonal nature of the investments and 
returns. 
3. Risks related to main assets: Smallholders 
may be unwilling to risk their only productive 
asset to secure financing for production even if 
long term profitability may be favourable, given 
risk spikes in the short term gains.…? 
3. Limited additional services: Financing by the 
MFIs rare typically unable to provide additional 
financial services beyond short term credit and 
savings. 
4. Participation in groups: Producers associations 
(Pas) are existing, however, due  past bad 
experience, smallholders may not participate in 
groups/ and/or cooperatives to own common 
assets, which could serve as viable conduits for 
financing. 
4. Restricted use of credit: Internal value chain 
finance - provided by suppliers, buyers and 
aggregators within the value chain - is often 
directed to one crop only, and does not finance 
the farm as a whole. Also the credit delivered 
is typically in kind only, and cannot be used to 
cover contracted labour costs at the farm 
level. 
 
22. 
The table below outlines some of the important lessons that can be drawn from the early 
experience in agricultural finance in Bangladesh– lessons which are also echoed in the 
experiences of other countries: 
 
Challenges to overcome 
Lessons learned 
                                                 
10 https://www.bb.org.bd/pub/annual/anreport/ar1415/chap7.pdf

High transaction costs 
(dealing with small-
scale transactions, 
involving those in hard-
to-reach locations) 
 
Dealing with organised groups of farmers and other ways of 
aggregating demand (for financial services) can help 
to reduce the costs of delivering financial services. This 
may 
come 
in 
the 
form 
of value 
chain 
financing 
(especially for high-value crops and more integrated supply 
chains), specifically when it is part of a broader package of 
financial and non-financial services.  
 
There are opportunities to introduce innovation in terms of 
using alternative channels or ways of delivering 
services – such as NBFIs (offering lower interest rate and 
provide finance to downstream value chain actors), digital 
finance and market platform (to reach out to multiple 
borrower and market place). 
Limited understanding of 
the agricultural sector 
 
Financial 
service 
providers 
need 
to 
invest 
in 
understanding 
agriculture 
and 
its 
value 
chains, 
including specific agriculture sub-sectors, and adapt their 
products to meet specific demand patterns. This 
also 
involves undertaking a good analysis of the key drivers of 
profitability for both the bank and the actors involved in the 
lending chain and risk mitigation approaches. 
 
The agriculture sector is quite heterogeneous and many 
financial institutions require sectoral expertise to assess 
opportunities and develop appropriate financial products. It 
would be useful to begin engagement with “easier cases” 
(i.e. with some of the “low hanging fruit”)11, to allow 
financial service providers to steadily go through the 
learning 
phase 
without 
prejudice 
to 
developing 
a 
healthy/high quality loan portfolio. 
Difficulties in assessing 
credit risk 
 
In 
Bangladesh, 
there 
doesn’t 
seem 
to 
be 
much 
sophistication 
or 
innovation in terms 
of credit risk 
assessment 
techniques 
(e.g. 
use 
of 
cash 
flow-based 
assessments, agronomic models or more tailored credit 
scorecards). 
 
However, some of the NBFIs are using these models for 
financing  long term assets in other sectors through strong 
linkages with supplier, producers, traders and buyers in the 
value chains – This experiences can be leveraged in case of 
agricultural sector which can be helpful to make a more 
informed assessments of risk. 
Identifying and adopting 
other approaches to 
mitigate and manage risks 
 
There are emerging models in other countries where 
security is provided other than through the requirement 
for borrowers to pledge traditional collateral. 
Financial 
service providers are increasingly able to underwrite 
anticipated cash flows from the farmer and the buyer, and 
use other forms of collateral (such as movable assets). 
Inventory 
financing 
(using 
warehouse 
receipts) 
and 
collateral management agreements are also being used by 
more financial institutions worldwide. These models, are, 
                                                 
11 This can be done by helping POs and other financial service providers to identify already bankable opportunities (that 
remain untapped), working with the best farmers or microenterprises, and then seeking a multiplier effect.

however, 
not 
widely 
used 
(if 
at 
all) 
by 
financial 
institutions in Bangladesh. 
 
Risk sharing is a typical approach adopted – e.g. by 
indirectly 
lending 
through 
groups 
(e.g. 
producers 
associations), or having savings-account-linked input loans 
– especially in the absence of accessible insurance products 
(to cover production or weather risk) as in case of 
Bangladesh. 
 
5. Addressing the constraints through Value Chain Finance Approach 
 
23. 
Value chain finance involves a range of methods through which different actors in the value 
chain finance their activities. Sources of finance can be external actors, such as financial 
service providers, social investors, community savings groups, etc. or internal actors such as 
input suppliers, producers, aggregators/producer groups, logistics service providers 
(warehouse/cold storages, transporters) processors, traders, exporters, etc. Value chain 
actors typically have a number of financial needs depending on their activities in the value 
chains. Value chain finance mechanisms are primarily used to reduce risk (i.e. by leveraging 
relationships or assets) and/or to reduce transaction costs (where value chain actors may 
act as analytical, distribution or collection points for financial products). 
 
24. 
There are a number of advantages to this type of lending system, most of which address the 
constraints which smallholders face when accessing credit in Bangladesh: 
 
Finance is usually built into buy-and-sell mechanisms. This allows producers at the village 
level to feel more comfortable with the transaction and it is more cost-effective means of 
delivery when compared with a financial institution providing financial services directly to 
farmers. 
 
Financing can use existing assets (often non-tangible), which do not require formal 
collateral on the part of producers. When collateral is required, it can be given by larger 
agribusinesses which have sufficient titled assets in place. 
 
It is in the interest of buyers and suppliers to finance producers to either increase or 
encourage sales (e.g. of inputs) to them or to enhance the quality of the supply of 
commodities they receive from them (i.e. in the case of buyers). 
 
Repayment of credit is better assured as producers can receive payment for their product, 
net of any loan repayments. 
 
Repayment rate tends to be higher. This is often helped by the fact that internal value 
chain finance does not take place unless smallholders receive the technical assistance 
needed to improve their production. 
 
25. 
Financial service providers (in this project MFIs and NBFIs) will be able to lend to all sizes of 
rural enterprises dealing with three focussed subsector of agriculture and indeed, the agri-
businesses are more likely to qualify, especially considering their ability to provide the 
required estimated business for these loans. Financial service providers are not currently 
taking full advantage of linking to the value chain to mitigate risks or to reduce costs to 
deliver finance to smallholders or agribusinesses which can be easily achieved through this 
approach. It is expected that the participating POs and NBFIs will take advantage of some 
risk-mitigating instruments available in value chain financing, such as cash flow based 
lending, third party guarantees etc.  
 
6. Implementation Strategies  
 
26. 
While implementing the proposed RMTP project, the emphasis will be given to develop 
agricultural value chains of three sub-sector agriculture already identified during the IFAD 
scoping and design mission. As per the component 2 of the project, the emphasis will be on 
increased access to finance for the rural microenterprises through financial products and 
services delivery by the POs (MFIs) and the NBFIs. The project will also seek to build

synergies between both types of financial service providers (MFIs and NBFIs), and how they 
might come together to leverage finance to the microenterprises. The other lens of RMTP is 
to provide a robust platform for the angle inverters and crowd funding leveraging the strong 
background of PKSF and its due diligence process.   
 
27. 
As stated above, this project will be composed of two streams of interventions: the larger 
stream will deal directly with POs those will be selected by PKSF,; while the other stream will 
encompass support extended to the selected NBFIs who will be interested to  venture into 
this sector leveraging their experiences in other sectors and follow the wholesale financing 
mechanism of PKSF. 
 
28. 
The first stream of intervention will be on core capacity building for POs will be in the area of 
administration and credit management delivery, in particular, assisting them to: 
 
 
Develop cost effective products and processes to use market intermediaries as wholesalers 
of small loans to producers (horticultural crops, livestock and fishery sub-sector), and 
 
Lend to producers directly, but using value chain finance approach to reduce costs and 
mitigate risks (using cash flow based financing after mapping the flow of products and flow 
of finance along the value chains). 
 
The selection of the appropriate sub- sectors  in agriculture (out of the broadly identified 
clusters) will be made by these Pos and will be based on their own strategies for building a 
portfolio of loans in three sub-sectors of agriculture.  
 
29. 
The second stream of interventions will be delivered in collaboration with the NBFIs who 
need to take a pragmatic view into the targeted sub-sectors of agriculture (due to their 
low/no exposure) and build their capacities for future business opportunities. A facilitation 
window need to be created for the NBFI partners who are interested to develop their 
products and services (to cater the financial needs of the rural enterprises which are higher 
than the capacity of Pos), to achieve efficient value chains. This may entail, for example, 
helping NBFIs to identify value chain financing opportunities, help to structure loans for SME 
intermediaries, and then providing guidance on how to deliver these loans successfully. It 
could be that some of these loans will involve the identified Pos; in other cases, however, 
this might involve other financial institutions (non-Pos). For example, an SME intermediary 
in a sector may already have some established track record with a NBFI, which has not been 
selected in the above mentioned first stream.  
 
30. 
Within the capacity building activities, it is critical that there is some hands-on product 
design advisory service that makes it easier for the MFIs and NBFIs to design and implement 
these products. The table below is illustrative of the kinds of capacity building measures 
envisaged. 
 
Theme 
Illustrative Capacity Building 
Linking/Facilitations 
• 
Support 
 
RMTP 
in 
 
linking 
project 
partners 
(e.g. 
identified 
microenterprises) with financial Service providers (MFIs and NBFIs) 
• 
Design  and  develop  value  chain  finance  arrangements  to 
minimize risk/costs

Upgrading 
• 
Technical assistance to microenterprises in administration and credit
management, in conjunction with existing project e.g. PACE 
• 
Technical assistance to POs in product development, cash flow based 
finance, 
building 
linkages 
value 
chain 
business 
opportunities, 
developing tools, etc. 
Knowledge 
• 
Helping to develop greater understanding of 
competitiveness in 
agricultural sectors (among POs) and where there are financing 
opportunities 
• 
Developing and dissemination of training / tools to manage risk 
• 
Pilot testing new products 
• 
Facilitating  field  visits  /  interactions  between  providers  and 
targeted users of financial services 
• 
Developing financial education for producers  and for microenterprises 
Innovation 
• 
Support for innovation, first in lending and then potentially for savings 
through technical assistance and training 
• 
Establishing 
an 
Innovation 
Fund 
for 
strategic 
cost-sharing 
for 
innovative products, delivery systems, etc. 
Monitoring 
and 
Evaluation 
• 
M& E framework to be developed as per the financing agreement with 
IFAD 
• 
RMTP Indicators need to be measurable and in line with the IFAD’s 
country strategic opportunities programme (COSOP)

Appendix II: Nutrition-sensitive value chain approach.  
 
1. A value chain approach is emerging as a useful way to analyze and navigate the complexity of 
the food system to improve food security and nutrition. Such an approach can help to identify 
entry points for policy interventions, investment decisions and capacity development. The 
traditional focus of value chain development is on increasing the economic development. The 
traditional focus of value chain development is on increasing the economic value of the 
commodity to the producer (or the value chain actors). Nutrition-sensitive value chains 
(NSVCs) leverage opportunities to enhance nutrition value as well, increasing supply and 
demand for safe and diverse food and adding nutrition value, or minimizing nutrition loses 
through for examples promotion of biofortitified crops or improved transport and storage. In 
this way, NSCVs contribute to a households consumption of a healthy, diverse diet ans 
consequently to the improvement of the nutritional status of all its members. This chapter 
presents discussion of the two steps of the NSVC process undertaken in a study commissioned 
to the center for tropical agriculture (CIAT). In consists of two steps. Step 1 is the assessment 
of the nutrition situation and Step 2 is the commodity selection. 
 
Step 1: assessment of the nutrition situation. 
 
2. Bangladesh has recorded tremendous improvement in food and nutrition security over the past 
decades. In terms of child nutrition status, until the mid-1990s, Bangladesh’s stunting rates 
have been significantly higher than those of Sub-Saharan Africa. However, over the past 
decades, Bangladesh nutrition has been improving. The rate of stunting (low height-for-age) 
among children under five (0 to 59 months), which reflects the state of chronic undernutrition, 
has decreased from 51 percent in 2004 to 36 percent in 2014, but still falls below the World 
Health Organization’s (WHO) cut off for very high prevalence. Prevalence of stunting is higher 
among rural children than urban children (38 percent compared with 31 percent). In spite of 
the overall better health and nutrition scenario in urban areas, half of the under-five children 
in slums are stunted, which is around one-third for non-slums and other urban areas (NPAN2, 
2017). Across the seven regions of Bangladesh, stunting is most prevalent in Sylhet (50 
percent) followed by Barisal (40%) and Chittagong (38%) and lowest in Khulna (28 percent). 
The nutritional status of Bangladeshi women shows a better trend than that of children. The 
maternal undernutrition, as measured by “low” body mass index (BMI) of <18.5 has declined 
sharply from 52 percent to 17 percent between 1996-97 and 2014 (Figure 3). At the same 
time there has been a rapid increase in prevalence of overweight and obesity (BMI >=25) 
among ever-married women from 3 percent in 1996/97 to 24 percent in 2014.  
 
3. Underweight (low weight-for-age) among children under 5 years has also decreased in 
Bangladesh over the past decade, from 43 percent in 2004 to 33 percent in 2014. Acute 
malnutrition- or wasting (low weight-for-height) has remained worryingly stubborn and almost 
static over a long period, ranging from 14 to 15 per cent between 2004 and 2014). Children 
living in urban areas are less likely to be wasted (12 percent) than children living in rural areas 
(15 percent). By regions, wasting among children ranges from 12 percent in Dhaka to 18 
percent in Rangpur and Barisal. Micronutrient deficiency among children (under 5s and school 
going) is still a challenge in Bangladesh. About 20.5% of school going children are vitamin A 
deficient, 44.6% are zinc deficient and 40% are iodine deficient. Prevalence of iron deficiency 
is at 10.7% and 9.5% for pre-school and school age children respectively (ICDDR, 2011-12). 
Thirty three percent of preschool children are anemic. Prevalence of vitamin D deficiency is 
39.6% for pre-school and 45.5% for school-aged children (NIPORT, 2013; ICDDR, 2011-12). 
Women of reproductive age (15-49 years) in Bangladesh have high micronutrient deficiencies. 
About 42 percent of non-pregnant non-lactating (NPNL) women suffer from iodine deficiency. 
Prevalence of iron deficiency is at 7.1 percent and zinc deficiency is at 57.3 percent for NPNL 
women (ICDDR, 2011-12). Fifty percent of pregnant women are anemic and 71.5 percent of 
NPNL women are vitamin D deficient (NIPORT, 2013; ICDDR, 2011-12). 
 
4. In Bangladesh, non-communicable diseases (NCDs) are rapidly increasing among adults. About 
31.9 percent of Bangladeshi women and 19.4 percent men have elevated blood pressure or 
are currently taking medicine to lower their blood pressure, another 28 percent of women and 
men are pre-hypertensive. Approximately 11 percent of women and men are diabetic with 
additional 25 percent of women and men are pre-diabetic (NPAN2, 2017). Generally, even 
though food access and availability has increased, there is very little improvement in the 
quality and diversity of diet. The Bangladeshi diets are still largely dominated by cereals, which 
contributes around 70% of the per capita total caloric intake remaining much higher than the

WHO/ FAO recommendation (2003) of 60%. The diets are deficient in important micronutrients 
such as vitamin A, iron, zinc and iodine.  
 
5. The ongoing climate change is expected to have detrimental consequences for food security 
and nutrition in Bangladesh. Climate change is likely to reduce crop production in Bangladesh 
by 30 percent by end of the century (WFP, 2016). In addition, rising carbon dioxide emission is 
going to make Bangladesh’s staple food crops less nutritious, hence exacerbating the nutrition 
problem further. Increased salinity in the coastal zones might also alter the micronutrient 
content of foods, including rice, which may become deficient in zinc and other micronutrients. 
In addition, intake of saline water may lead to increased preeclampsia in pregnant women due 
to hypertension, which in turn would aggravate the problem of low birthweight and 
malnutrition of babies in the coastal zones. 
 
6. During 2015, food insecurity became almost rare in Bangladesh. Furthermore, over the last 
four years the proportion of households with one or more members going to bed hungry 
declined from 28 to 4% (JPGSPH, 2016). The proportion of households reported to eat only 
rice and running out of food stock decreased substantially (11 and 13% in 2015) than the 
previous years (45 and 51% in 2011). However, to minimize the in-house food insecurity, 
sacrifices are mostly made by women, even the adolescent girls of the households to cope up 
with the situation. In addition, consumption of sub-optimal food increased (26%) from the 
previous year (23%) which is found to be highest in Sylhet division (37%) followed by 
Rangpur (36%) (JPGSPH, 2016). A major concern in Bangladesh is the lack of sufficient 
dietary diversity in the average person’s (and especially the poor person’s) daily consumption, 
which is often traced back to agricultural diversification—that is, the availability of a diverse 
range of affordable food. 
 
7. On average, the energy gap between requirements and actual intake for a typical adult 
Bangladeshi is 82 kilocalories (2,400 kilocalories vs. 2,318 kilocalories), which may differ 
between socio-economic levels, urban/rural location, and food security status. Dietary intakes 
vary substantially depending on socio-economic status and residence (i.e. whether rural or 
urban). Diets are still largely dominated by cereals, which contributes around 70% of the per 
capita total caloric intake remaining much higher than the WHO/ FAO recommendation (2003) 
of 60%. Since 1992, there has been an increase in average per capita daily calorie intake from 
2266 kcal in 1991-92 to 2318 kcal in 2010 as well as increase in average per capita protein 
intake of about 4.54 gm (66.26 in HIES 2010 versus 62.52 gm in HES 1991-92). Consumption 
of fish is near desirable dietary pattern (60gm/day), pulse intake has markedly declined to 
14g/d while the intake of fruits and vegetables has improved reaching to about 210 gm/day, 
which is half of WHO/FAO (2003) recommended quantity (400 gm/day). The usual diets in 
Bangladesh are typically lacking in important micronutrients, as shown by high prevalence of 
micronutrient deficiencies for iodine, zinc, vitamin A and iron, which can be attributed to 
monotonous diets dominated by plant sources, particularly cereals. For instance, thirty-five per 
cent of the population had mean dietary diversity scores of less than 6 out of 12 food groups 
(BBS, 2010). 
 
8. Households have slowly been changing their diets and are consuming a broader range of 
foods, with greater consumption of vegetables, fruits, and animal source foods. However, the 
consumption rate of these foods remains below the recommended amounts. While there is 
enough evidence to establish desirable dietary patterns that are beneficial for preventing 
malnutrition in all its forms, dietary guidelines have not been accompanied by desirable 
changes in the dietary patterns. Data from the Bangladesh Bureau of Statistics, Household 
Income and Expenditure Survey, 2016) show a clear recent trend from 2010-2016 for 
decreased consumption of rice, wheat, potato, mil/milk products and fruits (-11.74%, -
23.73%, -7.78%, -19.01%, -19.96%), and increase in consumption of specific animal sourced 
foods such as eggs +88.61%), fish (+26.42% and chicken (+54.46%).  Trans fat intake is 
increasing and ultra-processed foods and sugar sweetened beverages in diets are on the rise 
(CIP2, 2016). 
 
9. People’s economic capacity to access food has risen through a rapid decline in the poverty 
headcount -from 48.9% in 2000 to 23.2% in 2016 -, 90% of which is accounted for by 
agriculture and an increasing purchasing power even among the poorest. The proportion of 
households with no food stocks and no ability to purchase food on the market dropped from 
51% in FSNSP 2011 to 13% in FSNS-NNS 2015 (JPGSPH, 2016). With regards to food

utilization and nutrition, the third dimension of food security, it also claims ‘the fastest 
prolonged reductions in child undernutrition in recorded history’ (WFP 2016). 
 
10. Currently, Bangladesh can boast a surplus in rice and potato production. But for other crops 
including fruit, maize, oilseeds, pulses, sugarcane, vegetables etc. there is still a big gap 
between demand and production, and this accounts for much of the hidden hunger in the 
country (Li, X. and Siddique, K.H.M. 2018). BIHS data shows that the share of rice in total 
cropped area from 2012 to 2015 decreased slightly whereas non-rice food crops increased. 
The Government of Bangladesh is seeking to increase the availability of diverse food supply 
through improved agricultural production and trade, and by according priority to food security 
and nutrition as important national goals. The only crops which have not increased in 
production in the eight years between 2007 and 2015 are pulses, banana, and jackfruit. The 
annual growth of food production from animal sources (e.g. meat, milk and egg) has been 
comparatively larger, with an increase of 13% for eggs, 22% for milk, and 56% for meat from 
2007/2008 levels. 
 
11. In Bangladesh, estimates for post-harvest losses of crops range between 20% and 40% in 
fruits and vegetables. This is particularly problematic when it concerns nutrient dense produce 
that are rich in protein and micronutrients -vegetables, fruits, fish, meat and dairy- which are 
potentially critical for food security and nutrition. Food loss include losses in nutritional value, 
economic value and food safety. In addition, climate change and natural resource depletion 
place stress on food production and increase the volatility of supply. Also, animal source food 
supply contributes to climate change through increased carbon dioxide emissions (CIP2, 
2016). 
 
12. The idea that food insecurity arises when food is available but people are unable to afford it is 
still quite a recent development in the history of food security. Akhter et al. (2017) calculated 
the cost of desirable food intakes for Bangladeshis, adjusted for population-level requirements. 
The diet costs Taka 59 (USD 0.70) per capita per day and covers in a cost efficient way the 
energy, protein and micronutrient requirements. The most cost-efficient energy sources are 
cereals (rice, wheat), followed by oil and spices. The most cost-efficient protein sources are 
rice, lentils followed by small fish. The by far most cost-efficient source of vitamin A is leafy 
vegetables, whereas rice and lentils are the most cost-efficient sources of zinc, and spices and 
lentils the most cost-efficient sources for iron. Other cost-efficient animal sourced food items 
are small fish and eggs providing a good source of protein. 
 
 Step2: Commodity Selection and Prioritization 
 
13. Further to a discussion with the implementing agency, livestock, aquaculture and crops were 
identified as commodities to be included in the project. These commodities are the starting 
point for selection and prioritization as done in this paper. Specific commodities presented here 
were selected for having potential in addressing the nutrition gaps but that have at the same 
time, a market potential, income generation potential, potential for women empowerment, and 
environment and climate impact. They were selected based on the NSVC commodity selection 
criteria recommended by de la Peña & Garret, (2018). In due course, this list will be fine-
tuned. Information on the commodities is collected from the literature as well as face-to-face 
interviews with nutrition and agriculture experts in Bangladesh. The step concludes with a full 
overview of the rating and a SWOT analysis on the different commodities. The rating also 
presents tuber as a potential commodity. However, as tubers were not included in the initial 
list at concept note stage and thus have not been discussed with the implementing partner, 
they are currently left out of the selection.  
 
14. Crops including cereals: Three pulses were selected: Lentils, chickpeas and mung beans. 
Lentils and chickpea scored higher 31 points and 29 points respectively, out of the highest 
possible score of 33 points. Lentils and chickpea scored highly due to their nutrition value and 
also given that they can provide diverse nutrients to consumers in a cost efficient way. In 
addition, the two are widely accepted by the Bangladesh people, although their consumption 
(especially for lentils) has gone down due to low production within the country resulting from 
crop substitution with rice. Further, lentils and chickpeas are legumes and therefore important 
in nitrogen fixation. Given that the focus of lentil and chickpea production in the country has 
decreased overtime, less attention has also been put on developing new varieties. As a result, 
most of the present varieties are low yielding and susceptible to diseases, drought, and weed 
infestation. Chickpea producers also have poor management practices. All these combined,

have a negative affect production and productivity. On the positive side, both of these 
commodities have high consumer demand locally (rural and urban) and export. In fact, the 
demand is said to exceed available supply, therefore indicating an opportunity for producers. 
Lentils are however facing a threat from influx of cheap/subsidized imports, especially from 
Canada. Chickpea on the other hand face threats from pest and diseases and also imports 
from neighboring countries. 
 
15. Mung beans are also highly nutritious, have a short growing cycle, and tolerance to abiotic 
stresses, hence becoming favorable for production in Bangladesh in the light of climate 
change. As a legume, it helps in in nitrogen fixation. There is an opportunity to increase 
production of this commodity in several agro-ecological zones of the country because it is 
widely adaptable. In addition, the commodity has several varieties for production during all 
cropping seasons (kharif-I, kharif-II and rabi).  
 
16. Under this food group, pumpkin and dark green leafy vegetables (both exotic and indigenous) 
were considered to have high potential in improving nutrition of the Bangladesh people. Grean 
leafy vegetables attained a score of 33 and pumpkin 29 against the possible 33 points. Dark 
green leafy vegetables are highly nutritious and affordable in terms of production and 
purchase. They can be produced all year round, especially for the producers who have access 
to irrigation water, hence providing important nutrients throughout the year. They do not 
require a lot of water to produce. These vegetables have a high demand by rural, peri-urban 
and urban consumers.  They are mainly produced by women. Therefore, upgrading this value 
chain would create an opportunity for women empowerment. The downside of this vegetables 
is that it is highly perishable, and due to lack of cold storage facilities by producers and value 
chain actors in Bangladesh, and also minimal value addition, there is high post-harvest loss, 
especially during peak seasons. In addition, value chain actors do not have appropriate 
knowledge on appropriate handling of the commodity to avoid nutrient loss. This includes 
cooking practices for consumers, as well as transportation and packaging for producers and 
other value chain actors. The commodity faces threats due to climate change which is 
increasing salinity and having an effect on micronutrient content in the soil. In addition, 
inappropriate use of pesticides at production level may have a negative effect on consumer 
health. 
 
17. Pumpkin is an annual crop, tolerant of hot, humid weather and display a resistance to disease 
and insects. It can be grown the year round, intercropped and rotated with other plants and is 
salinity tolerant. Most parts of the pumpkin are edible, including the fleshy shell, the seeds, 
the leaves, vines, and even the flowers. Important source of protein, minerals (calcium, 
potassium and phosphorus), vitamins (especially vitamin A), and antioxidants. Pumpkin leaves 
are good source of Vitamin A, calcium, Vitamin C, iron and protein. Development of stress-
tolerant varieties and hybrids, areas under pumpkin cultivation are increasing. BARI has 
developed an effective, eco-friendly and low-cost integrated pest management (IPM) package. 
Private seed companies have introduced a number of hybrid pumpkins that are becoming 
incredibly successful crops in char land and saline-prone coastal regions carotenoids. As a 
downside the existence of fruit flies can be mentioned, which can cause serious damage to 
pumpkin crops. In addition, there are fertility and moisture constraints in stress-prone 
ecosystems (char land, coastal areas, hilly areas).  Pumpkin is currently considered by FAO as 
an underutilized crop for Bangladesh. If more research and development is undertaken, it 
could become a major crop in Bangladesh. 
 
18. Four fruits were identified as important in Bangladesh, in terms of their contribution to 
nutrition of the population as well as other four criteria in de la Peña & Garret, (2018). These 
are mangoes, bananas, pineapples and bael. Mangoes, bael and bananas scored 29 out of 33 
points, while pineapples attained a score of 28. Mangoes are widely consumed in the country 
and are a good source of vitamin A, one of the main micronutrient deficiency identified in the 
country. They are consumed as fresh fruits and juice, and they have a high demand both 
locally and export. Some mango farmers wholly rely on sale of mangoes for their livelihood. 
The commodity however, is highly perishable and faces high market dynamics in supply and 
demand during the peak and off-peak seasons. Production of mangoes in the country is not 
very competitive compared to the neighboring countries, such as India. Furthermore, mango 
yields in Bangladesh are much lower than most other mango growing countries. 
 
19. Bananas are also nutritious fruits, widely consumed and a good source of income for 
producers. Many actors are involved in the banana value chain, from production, distribution,

to final consumer, therefore creating employment opportunity for local population. Consumers 
however, are not aware of the nutrition benefits of bananas are most of them just consume it 
because it is widely available, and affordable. The commodity faces threats of imports from 
neighboring countries. 
 
20. Bael is currently considered by FAO as an underutilized crop for Bangladesh. It grows under a 
wide range of soil conditions (pH range 5-10), is tolerant of water logging and has an 
unusually wide temperature tolerance (from -7 °C to 48 °C). Bael is cultivated with minimum 
or no care, mainly in homestead boundaries. It is a rich source of carbohydrate, carotene, 
vitamin B complex, calcium and iron. Demand for bael is high all over the country and the crop 
can demand high prices. If more research and development is undertaken, bael could become 
a major crop in Bangladesh. BARI has already developed one new variety of bael. A hardy 
plant and can be grown in stress-prone areas, especially drought areas with poor soil.  
 
21. Even though pineapple did not score as high as the other two fruits, they are also widely 
produced and consumed in the country. One of their strengths is that they can be produced 
almost the whole year, providing incomes for farmers year round, as well as nutrients for 
consumers. In addition, several varieties are available in Bangladesh, and different varieties 
are produced for different uses. The Bangladesh pineapples are said to be more juicy and 
tastier than those from the neighboring countries, hence becoming favorable not just for local 
consumption but also for export. The commodity is highly perishable. Lack of appropriate 
storage, transportation and marketing facilities leads to high post-harvest loss. They also face 
threats form disease and pest attacks at production level.  
 
22. Four cereals were identified as important in Bangladesh, in terms of their contribution to 
nutrition of the population as well as other four criteria in de la Peña & Garret, (2018). These 
are bio-fortified rice, aromatic rice, wheat and foxtail millet. Whereas foxtail millet (29) and 
bio-fortified rice (28) attained the highest scores, wheat (24) and aromatic rice (22) were 
ranked considerably lower.  The main results are as follows: 
 
23. First, bio-fortified rice is a cost-efficient way to increase zinc content in the diet of Bangladesh 
citizens, as rice is the main staple food in the country, as it accounts for more than 70% of the 
calorie intake among rural consumers. Bio-fortified rice cultivars have been a result of efforts 
from national and international research centers, the current varieties in the market have 
acceptable yields and profits for farmers, and it is an important priority in current government 
policies. However, challenges are evident, the lack of a formal seed system affects adoption of 
biofortified rice at a large scale, and there is lack of consumer awareness about bio-fortified 
rice. Furthermore, current high zinc varieties are susceptible to increases in salinity that harm 
crop suitability and reduces micronutrient content. 
 
24. Second, aromatic rice is another target crop that was considered for the analysis. It is a 
product that has an attractive market potential in the country, it has a higher price (more than 
double of coarse rice), and new widely adopted varieties have yields close to conventional high 
yielding varieties, making aromatic rice very appealing for farmers, and competitive in the 
export markets. New climate resistant (salinity) and/or high zinc12 (via biofortification) 
varieties have been released, and these are having twofold higher yields, these new cultivars 
are increasing gaining popularity in the country. Furthermore, the new aromatic rice varieties 
are resistance to climate change effects, and pest pressure. 
 
25. Third, wheat was also considered as a target crop. It has the advantage of having a huge (and 
increasing) demand of wheat flour (Atta) in the country, and it is a sub-product that can be 
easily fortified to close nutritional gaps among urban and rural consumers. Most importantly, 
according to Akhter et al, 2017), wheat (not fortified) currently represents the most cost-
efficient way to cover the caloric, protein, iron and zinc requirements in Bangladesh. Although 
the demand is high, the cultivation of the crop has not increased accordingly, this is due to the 
fact that there is no culture or tradition of wheat production in the country. Wheat competes 
with other cereals (including rice) for cultivation areas, and that production is not highly 
profitable, as it seems to be more cost efficient to import wheat flour from other countries. 
                                                 
12 High grain Zn trait has been found to be tightly linked with aromatic rice, Advances in breeding for high grain Zinc in Rice  by: 
B. P. Mallikarjuna Swamy,
1 Mohammad Akhlasur Rahman,1,2 Mary Ann Inabangan-Asilo,1Amery Amparado,1 Christine 
Manito,1 Prabhjit Chadha-Mohanty,1 Russell Reinke,1 and Inez H. Slamet-Loedin1 
Turkish Journal of Agriculture - Food Science and Technology, 3(3): 107-111, 2015

Currently, there are new improved High Yield Varieties (HYV) available in the market, but 
those are not widely cultivated in the country yet. 
 
26. Fourth, foxtail millet, an underutilized cereal species, has been identified as a potential product 
for nutrition-sensitive interventions. Foxtail millet has the advantage of being a rich source of 
carbohydrates, vitamins, and minerals. It is a crop that can be grown year-round in marginal, 
low fertile and saline lands. It gathers high market price, as de-husked foxtail millet can be 
sold for twice and thrice the price of fine and coarse rice respectively. Furthermore, it has an 
appealing market demand, and requires marginal care, yet the area dedicated to foxtail millet 
is negligible, and yields can vary widely depending on the variety and growing season. 
 
27. Overall, there are two cereals that scored highly in our analysis; bio-fortified rice13 and foxtail 
millet seem to be suitable crops for potential nutrition-sensitive interventions, there seems to 
have growing market opportunities, and having very little adverse environmental effects. 
 
28. Livestock and aquaculture: Six animal sourced food products were identified as important in 
Bangladesh, in terms of their contribution to nutrition of the population as well as other four 
criteria in de la Peña & Garret, (2018). These are fish (aquaculture, poultry (chicken, duck), 
eggs, cattle fattening (beef meat production), small dairy (milk production) and the production 
of goats and sheep. Whereas aquaculture (31), poultry (30) and egg production (29) attained 
the highest scores, milk (23) and goats and sheep (23) were ranked considerably lower. Cattle 
fattening (beef meat production) attained by far the lowest score (18). The main results are as 
follows: 
 
29. First, aquaculture might be one of the most suitable options for investments for smallholders. 
It is a product (or group of products), that is widely consumed and accepted by the 
Bangladeshi population, regardless of income level (poor, middle, rich), location (urban and 
rural), and vulnerability (children, pregnant women, elderly). Furthermore, it is a product that 
has experienced tremendous growth in the local market, making it more affordable for the 
poor. Aquaculture products are also a great and cost-efficient source of animal sourced 
protein, and other essential nutrients that can help close the nutritional deficiency gaps, and 
from the agricultural development perspective, it is a potential income generation activity that 
can provide smallholders with profits tenfold compared to rice. 
 
30. The main challenges with aquaculture production are that it requires initial fixed investments 
(excavating ponds, installing aerators), that might be beyond the reach of poor smallholders. 
Furthermore, once the ponds are excavated, the land can no longer be used for agriculture, 
and mismanaging cultural practices can have adverse effects on the environment. In addition, 
lack of quality seed and feed are important challenges, plus the risk of diseases. 
 
31. Second, poultry (chicken and duck) are other important target crop for investment. It can be 
easily integrated in smallholder’s farming systems. It is an affordable animal source food, a 
cost-efficient way to provide required nutrients to fill the nutrition gaps, especially protein and 
vitamin A. It is a product that traditionally is reared by women, which gives them more control 
over the farm household income, and it has a high market potential. The challenges related to 
poultry production are related mainly to the fact that depending on the production system that 
it is used, poultry may have severe environmental impact depending on manure management, 
feed production and transportation. Furthermore, poultry production is susceptible to a wide 
variety of diseases, which in turn will have negative impacts on smallholders’ incomes. 
 
32. Third, another product that is related to poultry is the production of eggs. Once again, this is a 
product that can create opportunities for women’s empowerment as hens are typically reared 
by women. It is a nutrititous product (especially vitamin A and protein) that can be home 
consumed by farm households, or sold to other rural and urban markets. As eggs are an 
important and affordable component of the Bangladeshi diet, it has huge market potential for 
both domestic and export markets. Egg production also carries the same type of risk that 
poultry has, and it can also have adverse environmental effect depending on the chosen 
production system, and the management of manure and feed. 
 
33. Fourth, cattle fattening (beef production) was another considered product as a potential value 
chain intervention. Beef is a great animal source food product, it can help tremendously to 
                                                 
13 Hybrid zinc rice variety, BU Aromatic Zinc Rice, developed by BSMRAU

meet the nutrition deficiencies of the population, yet it seems that currently Bangladesh might 
have incredible challenges for beef production to become a suitable and sensible option for 
smallholder farmers. The most evident challenge would be the lack of grazing lands for 
production, even the production of fodder and other types of feed might put unnecessary 
pressure on the scarce food crop areas. Furthermore, there is lack of availability of drugs, 
vaccines, and artificial insemination facilities, poor husbandry practices, lack of laboratory 
facilities, etc. all of these makes beef production in the country highly risky, especially for 
smallholders. In addition, cattle production requires a high demand of water, and has many 
other adverse effects on the environment. Finally, due to its high price beef meat is not an 
affordable source of protein and micronutrients to the majority of the population in 
Bangladesh. Therefore, beef might not be a suitable option in a country whose population 
evidences a low purchasing power and that is prone to climatic disasters, and could be easily 
affected by climate change. 
 
34. Fifth, another product that was considered, and that it is related to double purpose cattle 
production is small dairy production. The production of milk is another great source of 
nutrients (such as calcium and vitamins) and protein that are needed to close the nutrient 
deficiencies among the most vulnerable population. However, Bangladesh does not seem to 
have the suitable conditions for commercial milk production, as there is lack of high yielding 
breeds, knowledge gaps among dairy farmers, inadequate milk value chain and veterinary 
services, and shortage of quality feed and fodder. In addition, currently commercial feed is not 
affordable for the majority of smallholders, and there is lack of access to credit, insurance, and 
adequate market information. However, a limited amount of dairy cows integrated 
meaningfully in smallholder farming systems and fed from locally available food and fodder 
sources may represent an important source of daily income, protein and micronutrients.   
 
35. Sixth, goats and sheep production has also been considered as a potential value chain for 
intervention, as long as it is well integrated into a smallholder farming system. Goats and 
sheep have the advantage that are well adapted to hot humid climate, and saline prone areas. 
Therefore, goat production has the potential to be developed all over Bangladesh. The main 
challenge with goat and sheep production is that the main breed reared in the country does 
not produce high yields, and therefore, it is not an appealing income generating activity for 
smallholders. Furthermore, as ruminants, commercial production of goats and sheep is 
exposed to the same challenges that are faced by cattle production in Bangladesh. 
 
36. Overall, there are three animal source value chains that have very acceptable scores when 
analyzing nutrition-sensitive interventions in Bangladesh: The production of fish (via 
aquaculture), poultry (chickens), and eggs, seems to be products that have enormous benefits 
for smallholder producers, urban and rural consumers Although these value chains might have 
important environmental impacts that need to be considered, as long as they are well 
integrated into smallholder farming systems and livelihood realities, they are appealing income 
generating activities, that can reduce nutrition deficiencies, with great market potential, and 
especially for eggs and chickens, can become means to increase empowerment among women 
in rural Bangladesh.

Table 1-A: Scoring Summary for Commodity Selection 
 
  
List of commodities 
Plant Based Food 
Cereals 
Roots 
& 
Tubers 
Pulses 
Vegetables 
Criteria 
Sub-criteria 
Score criteria 
High 
Zinc 
Rice 
Aromatic 
Rice 
Wheat 
Foxtail 
Millet 
Orange 
fleshed 
Sweet 
Potato 
Taro 
Lentils 
Chick 
Pea 
Mung 
Beans 
Dark 
Green 
Leafy 
Vegetables 
Pumpkins 
Nutrition 
improvement 
potential 
(each to be scored 1 to 
3) 
(sum across the 
sub-criteria) 
 
 
 
 
 
 
 
 
 
 
 
Food consumption 
Low: 
3–4 
Med: 
5–7 
High: 8–9 
3 
3 
2 
3 
3 
3 
3 
3 
3 
3 
3 
Food preferences 
3 
1 
3 
2 
2 
2 
3 
3 
2 
3 
2 
Food composition 
2 
1 
2 
3 
2 
3 
3 
3 
3 
3 
3 
  
Subtotal Score 
8 
5 
7 
8 
7 
8 
9 
9 
8 
9 
8 
Market 
potential 
Market demand  
Low: 
3–4 
Med: 
5–7 
High: 8–9 
3 
2 
3 
2 
2 
2 
3 
3 
2 
3 
2 
Private-sector 
interest 
and upgrading potential 
3 
3 
3 
2 
2 
2 
3 
2 
2 
3 
2 
Agroecological conditions 
3 
2 
1 
3 
3 
3 
3 
2 
3 
3 
3 
  
Subtotal Score 
9 
7 
7 
7 
7 
7 
9 
7 
7 
9 
7 
Income 
generation 
potential 
Level of engagement of 
smallholder producers 
Low: 
3–4 
Med: 
5–7 
High: 8–9 
2 
2 
3 
2 
2 
2 
2 
3 
2 
3 
2 
Profit margins for farmers 
3 
2 
1 
3 
2 
2 
3 
3 
3 
3 
3 
Employment generation 
2 
2 
2 
3 
2 
3 
3 
3 
3 
3 
3 
  
Subtotal Score 
7 
6 
6 
8 
6 
7 
8 
9 
8 
9 
8 
Gender 
Women’s empowerment 
Low: 
1 
Med: 
2 
High: 3 
2 
2 
2 
3 
3 
3 
2 
3 
3 
3 
3 
  
Subtotal Score 
2 
2 
2 
3 
3 
3 
2 
3 
3 
3 
3 
Environment 
and climate 
NRM and climate-smart 
agriculture 
Low: 
1 
Med: 
2 
High: 3 
2 
2 
2 
3 
3 
3 
3 
3 
3 
3 
3 
  
Subtotal Score 
2 
2 
2 
3 
3 
3 
3 
3 
3 
3 
3 
TOTAL SCORE 
28 
22 
24 
29 
26 
28 
31 
31 
29 
33 
29

Table 1-B: Scoring Summary for Commodity Selection 
 
  
List of commodities 
Plant Based Food 
Animal Sourced Food 
Fruits 
Fish 
Poultr
y 
Small 
ruminan
ts  
Beef 
fattenin
g  
Double 
purpos
e 
livestoc
k  
Animal 
produc
ts 
Criteria 
Sub-criteria 
Score 
criteria 
Mang
o 
Banan
a 
Pineapp
le 
Ba
el 
Aquacultu
re 
Chicke
n 
Goats, 
sheep 
Beef 
Meat 
Milk 
Eggs 
Nutrition 
improveme
nt potential 
(each to be scored 1 
to 3) 
(sum 
across 
the 
sub-criteria) 
 
 
 
 
 
 
 
 
 
 
Food consumption 
Low: 
3–4 
Med: 
5–7 
High: 8–9 
2 
2 
2 
3 
3 
3 
3 
3 
3 
3 
Food preferences 
3 
3 
2 
2 
3 
3 
2 
1 
2 
3 
Food composition 
3 
3 
3 
3 
3 
3 
2 
2 
2 
2 
  
Subtotal 
Score 
8 
8 
7 
8 
9 
9 
7 
6 
7 
8 
Market 
potential 
Market demand  
Low: 
3–4 
Med: 
5–7 
High: 8–9 
3 
3 
3 
2 
3 
3 
3 
2 
3 
3 
Private-sector interest 
and 
upgrading 
potential 
3 
2 
3 
2 
3 
2 
2 
2 
2 
2 
Agroecological 
conditions 
3 
3 
3 
3 
3 
3 
3 
1 
2 
3 
  
Subtotal 
Score 
9 
8 
9 
7 
9 
8 
8 
5 
7 
8 
Income 
generation 
potential 
Level of engagement 
of 
smallholder 
producers 
Low: 
3–4 
Med: 
5–7 
High: 8–9 
3 
3 
2 
2 
3 
3 
2 
1 
2 
3 
Profit 
margins 
for 
farmers 
2 
2 
3 
3 
3 
2 
2 
3 
2 
2 
Employment 
generation 
3 
3 
3 
3 
3 
3 
1 
1 
2 
3 
  
Subtotal 
Score 
8 
8 
8 
8 
9 
8 
5 
5 
6 
8 
Gender 
Women’s 
empowerment 
Low: 
1 
Med: 
2 
High: 3 
2 
3 
2 
3 
2 
3 
1 
1 
2 
3

Subtotal 
Score 
2 
3 
2 
3 
2 
3 
1 
1 
2 
3 
Environme
nt 
and 
climate 
NRM 
and 
climate-
smart 
agriculture 
Low: 
1 
Med: 
2 
High: 3 
2 
2 
2 
3 
2 
2 
2 
1 
1 
2 
  
Subtotal 
Score 
2 
2 
2 
3 
2 
2 
2 
1 
1 
2 
TOTAL SCORE 
29 
29 
28 
29 
31 
30 
23 
18 
23 
29

Table 2: Strengths, Weaknesses, Opportunities, Threats Analysis 
 
  
  
SWOT Analysis 
Strengths 
Weaknesses 
Opportunities 
Threats 
High 
Zinc 
Rice 
Cost efficient way to increase zinc 
content 
in 
rice. 
Rice 
is 
widely 
consumed. Higher yields and profit 
margins for farmers. 
-Lack 
of 
formal 
seed 
system affects. adoption at 
large 
scale. 
-Lack 
of 
consumer awareness. 
-HarvestPlus has released several high 
zinc varieties, -Biofortification included 
in government priorities. 
Climate 
change 
increases salinity, crop 
suitability and reduces 
micronutrient content. 
Aromatic 
Rice 
- This is a product that has huge 
market 
potential 
- There are new varieties that are more 
climate 
shock 
resistant 
and/or 
biofortified 
Current 
widely 
adopted 
varieties have very low 
yields, and therefore even 
with higher prices, profits 
are not too attractive. 
Local universities have released new 
high zinc varieties that are supposed to 
have twice as much yields as the 
traditional varieties, yet these varieties 
are not widely cultivated. 
Climate 
change 
increases salinity, crop 
suitability and reduces 
micronutrient content. 
Wheat 
- There is a huge increasing demand of 
wheat 
flour 
in 
the 
country. 
- The main product derived from wheat 
(Atta, flour) can be easily fortified to 
help 
consumers 
close 
their 
zinc 
nutritional gap. 
Cultivation of wheat might 
not 
be 
competitive 
in 
Bangladesh; it might be 
more 
cost 
effective 
to 
import wheat from other 
countries. 
There are better HYVs available in the 
market. 
Climate 
change 
increases salinity, crop 
suitability and reduces 
micronutrient content 
Foxtail Millet 
Rich source of carbohydrates, vitamins, 
minerals. Can be grown year-round in 
marginal, low fertile and saline lands, 
high market price and potential market 
demand, requires marginal care.  
Share 
in 
area 
and 
production 
is 
negligible. 
Low investment in research 
and development so far. 
Yield of foxtail millet varies 
according to the variety 
and growing season. 
-Bari 
has 
developed 
3 
improved 
varieties with high yield potential and 
tolerance 
to 
biotic 
and 
abiotic 
constraints. Priority crop considered by 
FAO for Bangladesh.  
-Dehusked foxtail millet is sold for BDT 
90 per kg as against BDT 46 and BDT 
35 per kg of fine and coarse rice. 
  
Orange 
fleshed 
Sweet Potato 
- Rich source of vitamin A and other 
micronutrients. 
- Easily adaptable to marginal areas. 
- Adaptable to saline prone soils. 
- 
Perceived 
as 
poor's 
people food, not widely 
acceptable among typical 
consumers. 
- Low yields paired with 
moderate 
price 
do 
not 
translate 
into 
a 
very 
appealing 
income 
generating product. 
- Probably one of the most climate 
resilient, nutrient rich crop that can be 
promoted 
for 
nutrition-sensitive 
programs. 
- Lack of availability of 
quality 
seeds 
- High market risk, as 
the 
product 
is 
not 
widely 
consumed, 
a 
small 
increase 
in 
national 
production 
might 
collapse 
the 
market. 
Taro 
Rich 
source 
of 
major 
and 
minor 
nutrient 
elements. 
Tuberous 
roots, 
stolon, leaves and petioles can be 
eaten. During kharif-I season, there is 
Share 
in 
area 
and 
production is still limited. 
Low investment in research 
and development so far. 
Crop can be made available during the 
kharif season when Bangladesh faces a 
shortage of nutritious vegetables. Taro 
is increasingly popular and in demand

SWOT Analysis 
Strengths 
Weaknesses 
Opportunities 
Threats 
wide scope of horizontal expansion of 
the crop. 
across the country.  
Lentils 
Cost efficient source of protein and 
micronutrients; 
widely 
accepted by 
consumers -rural and urban; legume 
hence assist in nitrogen fixation. 
Low yields, susceptibility to 
diseases, 
drought 
and 
weed infestation hamper 
lentil production.  
Current local demand exceeds supply- 
market opportunity for producers.  
Cheap 
Imports 
of 
subsidized lentils from 
Canada. 
Chick Pea 
One of the best plant-protein sources- 
in terms of protein quality; high farm 
gate prices; legume hence assist in 
nitrogen fixation. 
-Low 
productivity 
of 
chickpea 
in 
Bangladesh 
due to use low yielding 
varieties as well as poor 
management practices; 
-Consumers unaware of its 
nutrition benefit. 
High market demand, domestic and 
export 
Pest and diseases; and 
import influx 
Mung Beans 
-Mung beans are a rich source of 
nutrients including B vitamins, copper, 
foliate, manganese, magnesium and 
zinc.  
-Short 
growing 
time, 
wider 
adaptability, tolerance to biotic and 
abiotic 
(salinity, 
drought) 
stresses. 
Growing production areas.  
  
-Introduction of BARI Mung-6, which is 
high yielding (1.5 ton per ha), has a 
short growing duration (55-58 days). 
  
Dark 
Green 
Leafy 
Vegetables 
-By far, most cost-efficient source of 
Vitamin A, and other micronutrients.  
-Year-round 
production 
possible. 
Women's crops. 
-High Perishability, lack of 
cold storage facilities.  
-VC 
actors 
not 
knowledgeable 
on 
best 
handling 
practices 
(including 
cooking) 
that 
retains nutrients. 
High 
demand 
in 
urban 
areas 
for 
nutritious and safe vegetables 
Climate 
change 
increases salinity, crop 
suitability and reduces 
micronutrient content 
Pumpkins 
-It is an annual crop, tolerant of hot, 
humid weather and display a resistance 
to disease and insects. It can be 
intercropped and rotated with other 
plants. Most parts of the pumpkin are 
edible, including the fleshy shell, the 
seeds, the leaves, vines, and even the 
flowers. Important source of protein, 
minerals 
(calcium, 
potassium 
and 
phosphorus), 
vitamins 
(especially 
-Fruit 
flies, 
which 
can 
cause serious damage to 
pumpkin crops. -Fertility 
and moisture constraints in 
stress-prone 
ecosystems 
(char land, coastal areas, 
hilly areas)  
-Can be grown the year round and is 
salinity tolerant.  -Development of 
stress-tolerant varieties and hybrids, 
areas under pumpkin cultivation are 
increasing. BARI has developed an 
effective, eco-friendly and low-cost 
integrated pest management (IPM) 
package. private seed companies have 
introduced 
a 
number 
of 
hybrid 
pumpkins that are becoming incredibly

SWOT Analysis 
Strengths 
Weaknesses 
Opportunities 
Threats 
vitamin A), and antioxidants.  
-Pumpkin leaves are good source of 
Vitamin A, calcium, Vitamin C, iron and 
protein. 
successful crops in char land and 
saline-prone 
coastal 
regions 
carotenoids 
Mango 
-High preference among consumers.  
-Highly accepted by consumers as 
fresh fruit or processed (juice) a good 
source of Vitamin A; and a good source 
of income for mango producing farmers 
 Highly 
perishable 
commodity 
and 
high 
market dynamics in supply 
and demand; consumers 
not aware of its nutrition 
benefit. 
High market demand for mangoes both 
in rural and urban areas; high value 
addition options 
for domestic 
and 
export markets. 
Mango 
yields 
in 
Bangladesh are lower 
than 
in 
most 
other 
mango 
growing 
countries- 
production 
not very competitive 
compared 
to 
neighboring countries. 
Banana 
-Nutritious commodity; good source of 
income for producers. 
-Highly accepted by consumers as 
fresh fruit or processed (juice). 
-Consumers not aware of 
its nutritional benefits-they 
consume just because it is 
widely available. 
-Value 
chain 
not 
well 
organized. 
-Production is quite capital 
intensive  
-High 
employment 
opportunity 
in 
Banana value chain 
-High banana imports 
from 
neighboring 
countries 
Pineapple 
-Nutritious 
and 
produced 
almost 
throughout the year. 
Highly perishable; lack of 
appropriate 
storage, 
transportation 
and 
marketing facilities lead to 
high post-harvest losses. 
-Wide range of varieties for different 
uses; Bangladesh pineapples juicier 
and tastier than others especially form 
Asia- 
so 
a 
high 
export 
market 
potential. 
Threats of diseases and 
pests 
at 
production 
level. 
Bael 
-Grows under a wide range of soil 
conditions (pH range 5-10), is tolerant 
of water logging and has an unusually 
wide temperature tolerance (from -7 
°C to 48 °C).  
-Bael is cultivated with minimum or no 
care, mainly in homestead boundaries 
A 
rich 
source 
of 
carbohydrate, 
carotene, vitamin B complex, calcium 
and iron 
-Share 
in 
area 
and 
production is still limited.  
-Low 
investment 
in 
research and development 
so far 
-Demand for bael is high all over the 
country and the crop can demand high 
prices. 
If 
more 
research 
and 
development is undertaken, bael could 
become a major crop in Bangladesh.  
-BARI has already developed one new 
variety of bael. A hardy plant and can 
be 
grown 
in 
stress-prone 
areas, 
especially drought areas with poor soil. 
  
Aquaculture 
- Huge local market and potential for 
growth 
in 
exports. 
- Huge potential to overcome nutrition 
- It can have high entry 
costs 
for 
smallholders. 
- It can have negative 
- Once initial investments are met, it is 
a great opportunity for famers as an 
IGA. 
- Diseases and lack of 
good 
quality 
of 
fingerlings and PL is a

SWOT Analysis 
Strengths 
Weaknesses 
Opportunities 
Threats 
deficiencies. 
- Most affordable animal source food. 
effects 
on 
the 
environment. 
- Once ponds are made, 
the land cannot be used for 
agriculture anymore. 
huge 
risk 
for 
smallholder farmers. 
Chicken 
Affordable animal source foods; cost 
efficient in providing required nutrients 
to fill nutrition gap, especially protein, 
vitamin A; women's commodity;  
Poultry 
production 
may 
have severe environmental 
impact 
depending 
on 
manure management, feed 
production 
and 
transportation, and poultry 
production systems used. 
High market potential domestic and 
export; profitable and potential for 
women empowerment. 
Susceptible 
to 
diseases; 
frequent 
export 
bans 
due 
to 
diseases 
-which 
has 
negative 
impacts 
on 
producer incomes 
Goats, sheep 
-Goats are well adapted to hot humid 
climate and often produces twins and 
triplets and have the potential of being 
developed 
all 
over 
Bangladesh- 
-Sheep are well adapted to the saline 
environment. 
The 
breeds 
although 
adaptable 
to 
different 
climates 
and 
soil 
conditions, do not produce 
high yields, therefore are 
not 
exciting 
income 
generating activities. 
  
  
Beef Meat 
- Great source of animal source food, 
including protein, and vitamins. 
-Poor availability of drugs, 
vaccines 
and 
artificial 
insemination facilities, poor 
husbandry 
practices 
and 
lack of laboratory facilities 
adverse 
effects 
on 
environment, high demand 
of water, adverse effect on 
food crop area (due to the 
need of fodder crop area). 
  
Adverse 
effects 
on 
environment, 
high 
demand 
of 
water, 
adverse effect on food 
crop area (due to the 
need of fodder crop 
area). 
Milk 
Great source of animal source food, 
including 
protein, 
calcium, 
and 
vitamins. 
-Lack 
of 
high 
yielding 
breeds, knowledge gaps of 
farmers, inadequate milk 
value 
chain, 
lack 
of 
adequate 
veterinary 
services and shortage of 
quality feeds and fodder 
commercial 
feed 
being 
unaffordable.  
  
-Risk 
of 
disease 
outbreaks paired with 
limited 
access 
to 
veterinary services.

SWOT Analysis 
Strengths 
Weaknesses 
Opportunities 
Threats 
-Lack of access to credit 
and insurance; improper 
processing 
and 
storing 
facilities; 
-Lack 
of 
adequate 
market 
information, 
especially 
when 
input 
and 
output 
market 
prices 
are 
very 
volatile. 
Eggs 
-Can create opportunity for women 
empowerment. 
-An affordable animal source protein 
and vitamin A. 
-Poultry 
production 
may 
have severe environmental 
impact 
depending 
on 
manure management, feed 
production 
and 
transportation, and poultry 
production systems used. 
-High market potential domestic and 
export. 
-Profitable and potential for women 
empowerment 
-Poultry 
are 
Susceptible 
to 
diseases. 
-Frequent export ban 
due to diseases -which 
has negative impacts 
on producer incomes.

Appendix III: GGAP and HACCP.  
 
 
The first effort to develop a global standard for food safety and food quality was initiated by 
1.
the  FAO and  WHO, and led to the establishment of the so-called Codex Alimentarius in 
1961. This is a collection of inter-nationally recognized standards, codes of practice and 
guidelines for food production and food safety. The Codex Alimentarius is recognized by the 
WTO as reference point for the resolution of disputes in food safety and consumer 
protection. The standards are globally accepted by 186 states. Next to the heavy influence 
of  the Codex Alimentarius on international trade in food, most states use the Codex as a 
basis for their national food safety policies. Also, the Codex has been worked out into a 
number of sector-specific guidelines and has formed the basis for other standards such as 
the well-known HACCP standard. 
 
Bangladesh is member to the Codex Alimentarius. In 1985 the Bangladesh Standards and 
2.
Testing Institution (BSTI) was established. This is the only national institution operating 
under the Ministry of Industries to formulate national standards and to conduct quality 
controls for industrial, food and chemical products coherent to regional and international 
standards. Next to these public standards, a slow but gradual development of so-called 
private standards started at the end of the previous century. In 1997, British retailers got 
aware of consumers’ growing concerns regarding food product safety and quality, what led 
to the development of an independent certification system for Good Agricultural Practice 
(G.A.P.). Initially this was done for the European market but in the next decade it evolved, 
due to globalization and value chain integration, into the world’s leading farm assurance 
program, translating consumer requirements into a global system for safe food standards, 
called GlobalGAP. Nowadays, GlobalGAP is one of the key standards for the  international 
market for food. Bangladeshi exporters of high-value food products like fruits and vegetables 
and seafood therefore will be confronted more and more with GlobalGAP standards, 
especially when they export to Western markets. More specific standards have been 
developed throughout the years, which are often specifications, or further add-ons on the 
Codex Alimentarius and GlobalGAP14. 
 
Food safety issues in Bangladesh. 
 
 
In Bangladesh unsafe food is an urgent matter; food safety problems are frequently 
3.
reported and have a serious impact on public health, trade in food and agricultural products 
and consumer confidence. Major reasons for unsafe food is unhygienic practice in food 
handling and the use of toxic food adulterators. According to a report from the Directorate 
General of Health Services (DGHS), on an average 3,850 people died from diarrhea each 
year from the period of 2003 to 2009 attributed mainly to unsafe food. The list of toxic food 
adulterators is endless and occurs in the fruit, fish, milk and vegetable sector for quicker 
ripening, colouring and longer lasting storage time. A report from the Ministry of Health and 
Family Welfare (MOHFW) of government of Bangladesh reveals that nearly half of the food 
samples have been found adulterated, as tested by Institute of Public Health (PH) from 2001 
to 2009. In addition, Bangladesh’s middle class has a growing middle class who are more 
and more concerned about food safety standards. Offering GGAP compliant produce allows 
smallholders to tap into a huge market potential.    
 
The government of Bangladesh ensures safe food through approximately 15 laws, and these 
4.
laws are implemented by a large number of public institutions. This scattering of legislation 
and institutions led to a suboptimal situation, where laws were frequently broken and 
enforcement capacity was too limited to put this to a halt. In addition, Bangladesh 
consumers have a lack of awareness about the consumer rights they have, and lack specific 
knowledge on what exactly constitutes safe food. To improve this situation, the government 
of Bangladesh developed the Safe Food Act in 2013, which was eventually approved by 
                                                 
14 This report is based on a case study developed by the Bottom of the Pyramided initiative. 
(http://www.bopinc.org/sites/www.bopinc.org/files/updates/the_impact_of_food_standards_on_inclusive_gr
owth_in_agriculture_-_the_case_of_bangladesh.pdf).

parliament early 2015. The law aims to reduce food adulteration in all stages of the supply 
chain and to put an end to multi-ministry controlled mechanisms for food safety issues. 
 
Food safety and smallholder farming. 
 
 
Smallholder farmers in developing countries are increasingly integrated into global markets, 
5.
and the development of food standards worldwide has an increasingly influence on these 
smallholder farmers, even if they only produce for the national markets.  The impact of 
these developments for small farmers has been frequently debated. Even though several 
thought leaders agree that potentially these trends can have a positive effect on smallholder 
farmers, others argue that food standards are reinforcing global inequality and poverty. A 
key concern is that the process of vertical coordination will exclude smallholder farmers. 
Three reasons are mentioned for this. First, transaction costs favor larger farms in supply 
chains, since it is easier for companies to contract with a few large farms than with many 
small ones. Second, when some amount of investment is needed in order to contract with 
companies or to supply high value produce, small farms are often more constrained in their 
financial means for making necessary investments. Third, small farms typically require more 
assistance from the company per unit of output. 
 
However, there is considerable debate and uncertainty on the validity of these arguments, 
6.
and more generally on the welfare implications of high value chains. While quality and safety 
standards can make production more costly for smallholder farmers, at the same time they 
can reduce transaction costs in trade, both domestic and internationally. For example, a 
positive catalytic effect for smallholders can occur when the introduction of higher quality 
requirements has coincided with the growth of contracting and technology transfer. 
Contracts for quality production with local suppliers in developing countries not only specify 
conditions for delivery and production processes but can also include the provision of inputs, 
credit, technology, management advice, etc. Costs of compliance as critical point. In trying 
to summarize the different findings in the literature, the 2014 IFPRI discussion paper titled 
“Food Safety and Developing Markets” investigates the assumption that the most important 
negative effect of food standards is related to the costs involved with complying with these 
standards, and that the investment needed to cover these costs could potentially crowd out 
smallholder farmers. 
 
It is clear that the general assumption mentioned above is the main reason why food 
7.
standards could form a barrier to more inclusive growth. At the same time, the IFPRI 
literature review  showed evidence for potential positive catalytic effects of food standards 
on inclusive growth. In general, IFPRI found that the potential positive effects that 
smallholder farmers can have from increases in food standards are related to reduction in 
income risk and increased production efficiency, rather than from a possible price premium 
related to the compliance with the food standards. With regard to the increases in 
production efficiency, complying with food standards to a large extent means improving your 
production practices to get these in line with general Good Agricultural Practices. These 
changes in production practices can not only improve production quality, but also production 
quantity and the efficiency in terms of kg of product produced per unit of inputs. Farmers 
might produce more products and therewith also have the potential to earn more income. 
Bringing production practices in line with Good Agricultural Practices does not automatically 
mean that a smallholder farmer has to make more costs. The basic aspects of good 
agricultural practices often mainly have to do with a better understanding of how to grow 
your crop.  
 
RMTP project activities. 
 
 
To address the increasing concern of food safety, the project will assist to introduce Global 
8.
Good Agriculture Practices (GGAP) for marginal/small farmers and micro-enterprises 
involved in primary production of the selected crops, poultry and livestock, and aquaculture 
commodities. The GGAP Chain of Custody Standard (Traceability) will be introduced for all

commodities supported by the project. The project will support enterprises involved in 
produce handling, feed manufacturing, and hatchery to obtain GGAP if required. 
 
The project will engage a recognized institution (international/national) to prepare the GGAP 
9.
protocols for commodities in the selected value chains. The local service providers will 
receive training to become GGAP Master Trainers to support marginal/small farmers, micro-
enterprises and downstream enterprises within the selected value chains. An in-country 
accredited audit and certification firm will be engaged to certify producers' groups, micro-
enterprise groups and downstream enterprises. 
 
Support will be provided to enterprises engaged in crop/meat/fish processing to obtain 
10.
Hazard Analysis Critical Control Point (HACCP) certification. The project will engage national 
HACCP experts to guide processors on obtaining HACCP certification; if national experts are 
not available, training will be organised to develop this expertise. The training will cover the 
Codex Alimentarius Commission's Good Manufacturing Practices and preliminary steps to full 
HACCP. Subsequently, PKSF will enter into a retainer contract with an in-country company to 
support enterprises to undertake the necessary steps to obtain HACCP certification. PKSF 
will engage with an in-country certification authority to undertake certification. 
 
The project will raise public awareness of the benefits derived from GGAP and HACCP for 
11.
domestic consumers, producers, processors and exporters, through mass media. If required, 
the project will contract an advertising company to roll out the campaign

Appendix IV: Typical Value Chains to be Considered 
 
1. 
Aromatic and fine rice. Bangladesh has a trade deficit in rice; imports in 2015 amounted to 
USD 450 million. The bulk of rice produced is short, medium and long, while the production of 
aromatic and fine rice is relatively low. New varieties of aromatic rice have yields that are 
close to or at par with conventional rice if an appropriate input package is used, with 
emphasis on organic fertilizer and organic pest control. The output price for conventional rice 
is about BDT 40/kg compare with BDT 95/kg for aromatic rice. The export price of aromatic 
rice is 154% higher than that of imports or conventional rice. Aromatic rice has higher 
nutritional values compared to conventional rice (protein and lipid fat is two times higher; 
dietary fibre is seven times higher). To optimise the returns from producing aromatic rice, 
there is scope to address identified constraints related to plant spacing, mechanisation, 
fertilizer and pesticide use, irrigation, and harvest and post-harvest handling. Food safety and 
traceability also needs to be addressed for both domestic and export markets. 
2. 
Onion. Bangladesh has a trade deficit in onion, amounting to USD 255 million in 2015. This 
can be addressed through the introduction of improved varieties, improved production 
technologies with mechanisation, better post-harvest handling (drying, storage, packaging), 
introduction of labelling, and compliance with food safety standards and traceability. 
3. 
Mango. Bangladesh is the world’s seventh largest producer of mangoes. It is estimated that 
mango production is currently worth USD 4 billion annually, and is growing by 4% per annum. 
Most mango is sold on the domestic market, either fresh or for juice. Export of fresh mango 
offers a huge potential; however, export attempts particularly to the EU faced serious issues 
with food safety due to inappropriate use of pesticides and ripening chemicals. Production can 
be substantially improved by introducing integrated pest management; applying balanced 
fertiliser, approved pesticides and ripening agents; improving pruning and orchard sanitation; 
using fruit sleeves; better post-harvest handling, cold chain and fruit drying; complying with 
food safety standards and traceability; and modern packaging and labelling. 
4. 
Mud crab. Mud crab production engages some 300,000 people along the commodity chain. 
However, production has recently declined due to the lack of crablets collected from the wild, 
as the resource is over-exploited. Presently there is only one hatchery for mud crablets, 
serving about 5% of demand. Land for increasing production is also becoming scarce. This 
situation can be addressed by establishing additional hatcheries, introducing vertical recycling 
production systems that take up limited space, and introducing compound feed. Marketing 
and output prices can be enhanced by introducing food safety standards and traceability. 
5. 
Goat. Domestic demand for goat meat has risen by 5.5% per annum between 2005 and 
2015, and the growth trend is increasing. It is estimated that the goat mortality rate is 40% 
per annum, while the weight growth rate is 30% below potential. The rising demand for goat 
meat can be met by improving present production systems to reduce or eliminate mortality 
and improve fodder quality, feeding, health care and breeding. Marketing and output prices 
can be improved by introducing food safety standards, traceability and branding. 
6. 
Dairy. In 2015, the import of milk products amounted to USD 290 million. There is scope for 
import substitution while at the same time increasing the supply of young animals for the beef 
industry. Domestic production of milk is currently 2.8 million MT; combined with imports this 
amounts to consumption of 18 litres/capita/year, compared to 90 litres/capita/year in India. 
Demand for milk product is increasing by 5% annually; a large part is met by reconstituting 
imported powder milk. The present very low productivity must be addressed to make milk 
production competitive. The breed needs to be improved using AI sourced from milking 
animals developed for the tropics, as well as the Swiss brown breed. The Frisian-Holstein 
breed currently used is not suitable for the climate nor the level of management applied by 
small farmers. The quality of fodder, feeding, water and watering also needs to be improved. 
Investment in vaccinations and health care, housing of animals, milking machines, and milk 
collection cooling centres is required. Marketing and output prices can be improved by 
introducing food safety standards and traceability. 
7. 
Beef. Domestic beef consumption grew by 4% per annum between 2000 and 2015. Beef 
production in Bangladesh is a function of milk production as bull calves are used for fattening, 
and low milk yields imply low meat production. The introduction of improved milking cows will 
increase the supply of animals with higher meat productivity. Productivity of the local breed 
can also be improved by improving health care, water quality, fodder quality, feeding and

housing. Marketing and output prices can be improved through the introduction of food safety 
standards and traceability. 
8. 
Poultry. Domestic demand for poultry products has increased by 15% per annum for meat 
and 11% per annum for eggs between 2000 and 2015. The backyard poultry sector accounts 
for 88% of total poultry production and is an important food/protein source. The recent 
development of improved backyard breeds such as the Indian Kroiler offers potential for 
increasing the productivity of backyard poultry. Improving productivity will require parent 
stock of existing hybrids or cross-breeding between commercial and local breeds. Marketing 
and output prices can be improved by introducing food safety standards and traceability.

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex: RMTP FINANCIAL & ACCOUNTING MANUAL
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

PALLI KARMA-SAHAYAK FOUNDATION (PKSF) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FINANCIAL & ACCOUNTING MANUAL

P/2 
 
PALLI KARMA-SAHAYAK FOUNDATOIN (PKSF) 
 
FINANCIAL & ACCOUNTING MANUAL 
 
TABLE OF CONTENTS 
 
CHAPTER – 1 – INTRODUCTION 
 
 
 
 
 
 
    Page 
 
                   
                   9-13  
1.1  
- About PKSF 
 
 
 
 
 
 
 
1.2  
- Preamble 
 
 
 
 
 
 
 
1.3  
- Accounting Objectives  
 
 
 
 
 
1.4  
- Accounting and Auditing Requirements  
 
 
 
1.5  
- Accounting Offices 
1.6  
- Accounting Year 
1.7  
- Books of Account  
 
CHAPTER – 2 - ACCOUNTING SYSTEM 
14-33 
2.1  
- Background 
2.2  
- Basis of Accounting 
2.3  
- Accounting responsibility 
2.4  
- Accounting Policies of PKSF 
2.5 
- Accounting Assumptions of PKSF 
2.6  
- Characteristics of financial transactions & statements 
2.7  
- Procedure for Recording Transactions 
2.7.1 
- Money receipts and recording thereof 
2.7.2  
- Payment made in cash/by cheque and recording thereof 
2.8  
- Preparation of daily cash and bank balance statement: 
2.9  
- Passing Adjusting Journal and Closing entries 
2.10  
- Preparation of Trial Balance 
2.11  
- Reporting of Accounting Offices 
2.12  
- Activity Chart of financial transactions and their documentation 
2.13  
- Financial Accounting Flow Chart 
 
CHAPTER – 3 – ACCOUNTING FORMS, VOUCHERS & RECORDING BOOKS 
 
34-39 
3.1  
- Introduction 
3.2  
- Cash Journal – Debit / Payment Voucher  
3.3  
- Cash Journal – Credit / Receipts Voucher  
3.4  
- Journal Voucher - Adjustments / Non Cash Transactions 
3.5  
- Cash Journal Register 
3.6  
- Control General Ledger 
3.7 
- Project Ledger 
3.8  
- Money Receipts 
3.9  
- Subsidiary Ledger 
3.10  
- Store Ledger 
3.11  
- Bank Reconciliation Statement  
3.12  
- Formats to be Used  
3.13  
- Erasing & overwriting prohibited 
3.14  
- Conclusion

P/3 
 
CHAPTER – 4 – WRITING PROCEDURES OF FORMS, VOUCHERS & RECORDING BOOKS 
 
40-43 
 
4.1  
- Instructions to write up Cash Journal 
4.2  
- Instructions to write up Journal Voucher 
4.3  
- Instructions to write up Cash Journal Register 
4.4  
- Instructions to write up Control General Ledger 
4.5  
- Instruction to write up Bank Reconciliation Statement 
 
 
CHAPTER – 5 - MAINTENANCE OF REGISTERS 
 
44-46 
5.1  
- Types of Registers  
5.2  
- Fixed Assets Register 
5.3  
- Salary and Payroll Register 
5.4  
- Cheque Issue Register 
5.5  
- Cheque/DD/PO Receipt Register 
5.6  
- VAT & Income Tax Register 
5.7  
- Advance Slip / IOU Register 
 
5.8  
- Budget Register 
 
 
 
 
 
CHAPTER – 6 – ACCOUNTS & FINANCE ACTIVITIES & JOB DESCRIPTION 
 
 
47-55 
 
6.1  
- Accounts & Finance Activities 
6.2  
- Treasury, Bills & Salary Activities 
6.3  
- General Accounting, Ledger and Final Accounts Activities 
6.4  
- Loan to POs Accounting & Store Accounting Activities 
6.5 
- Budgeting, Tax and Internal & External Reporting Activities 
6.6 
- Job Description of Finance & Accounts Section 
 
 
CHAPTER – 7 - CASH MANAGEMENT PROCEDURES 
 
57-59 
 
7.1  
- Duration of Cash Transaction 
7.2  
- Closing of Account 
7.3  
- Daily Cash Holding Limit 
7.4  
- Handling of Cash 
7.5  
- Cash Scroll 
7.6  
- Cash Security  
7.7  
- Receipt in Cash Section 
7.8  
- Petty Cash 
7.9 
- Cash Deposited in to Bank

P/4 
 
CHAPTER – 8 - BANK ACCOUNTS OPERATION MANAGEMENT 
 
 
    60-65 
8.1  
- General 
8.2  
- Procedure of Opening Bank Account 
8.3  
- Project Bank Accounts 
8.4  
- Operation of Bank Accounts 
8.5  
- Signatories Details 
8.6.  
- Cheque Counterfoil 
8.7  
- Cancellation of cheques 
8.8  
- Canceled Cheques 
8.9  
- Cheque Issue Register 
8.10  
- Cheque, Demand Draft & Pay-order Receipt Register 
8.11  
- Payment from Bank 
8.12 
- Withdrawal of Cash from Bank 
8.13  
- Bank statement and Bank Certificate 
8.14  
- Bank Reconciliation Statement 
8.15  
- Ordering of New Cheque book 
8.16  
- Safety to Cheque Books 
8.17  
- Receipts of Cheque / Drafts 
8.18  
- Dishonour of Cheques 
8.19  
- Payment for Lost Cheques 
 
CHAPTER - 9 - INTERNAL CONTROL  
 
 
 
 
 
    66-76 
9.1  
- Introduction and Concept 
9.2  
- Internal Control Categories 
9.3  
- Classification of Control Procedures 
9.4  
- Internal Check System 
9.5  
- Payment Management 
9.6  
- Payment to Partner Organizations (POs) 
9.7  
- Payment for Services 
9.8  
- Payment of Salaries 
9.9  
- Management of Receipts 
9.10  
- Staff Advance and its' Liquidation 
9.11  
- Physical Inventory Counting & Checking 
9.12  
- Internal Audit - Pre-Audit 
9.13  
- Preservation of Accounting Records 
 
CHAPTER – 10 - FIXED ASSETS & DEPRECIATION ACCOUNTING  
 
 
    77-86 
10.1  
- Concept 
10.2 
- Introduction 
10.3  
- Safe Custody of Fixed assets 
10.4  
- Procurement of Fixed Assets  
10.5  
- Fixed Assets Registration 
10.6  
- Classification of Fixed Assets 
10.7  
- Identification of Fixed Assets 
10.8  
- Depreciation & their Accounting 
10.9  
- Sale of Fixed Assets 
10.10  - Accounting of Fixed Assets 
10.11  - Fixed Assets Register  
10.12  - Instruction to Write up Fixed Assets Register 
10.13  - Physical Counting of Fixed Assets & Reporting 
10.14  - Damage, Loss & Destruction, & Insurance 
10.15  - Use of Fixed Assets on Payment or on Lending 
10.16 
- Scrapping, Condemnation & Write-off of Fixed Assets:

P/5 
 
CHAPTER – 11 - COMPENSATION PACKAGE & ACCOUNTING 
87-90 
11.1  
- Introduction 
11.2  
- Salary Payment 
11.3 
- Some Noteworthy Points with Regard to Payment 
11.4  
- Attendance Register & Statement  
11.5  
- Leave Statement 
11.6  
- Procedures of Salary Payment 
11.7  
- Timing of Salary Payment 
11.8  
- Deduction from Salary 
11.9  
- Overtime Management 
11.10  - Telephone 
11.11  - Accounting of Salary 
 
CHAPTER – 12 – ADVANCES, DEPOSITS & PREPAYMENTS & ITS' ACCOUNTING 
 
91-102 
12.1  
- Introduction 
12.2  
- Types of Advances to be Allowed 
12.3  
- Staff Advances Against Traveling 
12.4  
- Staff Advances Against Purchase 
12.5 
- Staff Advances - Program Expenses 
12.6  
- Third Party Advance Against House Rent 
12.7 
- Third Party Advance Against Material Suppliers 
12.8  
- Third Party Advance Against Service Providers 
12.9  
- Authorization of Advances 
12.10 
- Internal Control in Advance Management & Accounting 
 
CHAPTER – 13 - ACCOUNTING & RECORDING OF LOAN TO POS  
103-107 
13.1  
- Lending Policy - Introduction 
13.2  
- Accounting of Loan to POs 
13.3 
- Accounting of Recovery of loan to POs 
13.4 
- Accounting of Recovery of Service Charge on Loan to POs 
13.5 
- Accounting of Accrual of Service Charge on Loan to POs 
13.6 
- Accounting of Overdue Service Charge on Loan to POs 
13.7 
- Accounting of Loan Loss Provision 
13.8 
- Records & Documentation of Loan to POs 
13.9 
- Internal Control in Loan Disbursement Process 
 
CHAPTER – 14 - GOVERNMENT GRANTS & ITS' ACCOUNTING 
108-112 
14.1 
- Definitions 
14.2 
- Application of IAS - Government Grants Accounting 
14.3 
- Accounting of Government Grants 
 
CHAPTER – 15 – ACCOUNTING OF LABILITIES & BORROWING COSTS 
113-116 
15.1 
- Definitions 
15.2 
- Recognition of Liabilities 
15.3 
- Accounting of Liabilities 
15.4 
- Application of IAS - Borrowing Costs 
15.5 
- Accounting of Borrowing Costs

P/6 
 
CHAPTER – 16 – APPLICATION OF INTERNATIONAL ACCOUNTING STANDARDS (IAS) 
 
117-119 
16.1  
- Introduction 
16.2  
- Application of International Accounting Standards 
16.3  
- Adoption of Accounting Policies as per IAS 
16.4  
- Disclosure of Accounting Policies as per IAS 
 
 
CHAPTER – 17 - PREPARATION OF FINANCIAL STATEMENTS 
120-124 
17.1  
- Introduction 
17.2  
- Finalization of Monthly Financial Statements 
17.3  
- Income Statements 
17.4  
- The Balance Sheet 
17.5  
- Cash Flow Statements 
17.6  
- Notes to Accounts 
17.7  
- Subsidiary Ledger Accounts Statement 
17.8 
- Accounts Schedules & Statements: 
17.9 
- Interpretation of Accounts – Ratios Analysis 
17.10 
- Other Reporting through Accounts Maintenance 
17.11 
- Budgeting & Its Monitoring 
17.12  - Computerization of Accounts 
 
 
CHAPTER – 18 - PURCHASE PROCEDURE & MANAGEMENT 
125-133 
18.1  
- Introduction 
18.2  
- Purchase Methods 
18.3  
- Purchase Procedure 
18.4 
-Tender Quotation Through Paper Advertisement 
18.5  
- Procurement Plan 
18.6  
- From Whom Should Purchase be Made 
18.7  
- Tender Fees & Performance bond 
18.8  
- Procedures Relating to Consultation Services 
 
CHAPTER – 19 - BUDGET & BUDGETARY CONTROL 
134-138 
19.1  
- Introduction - Budget 
19.2  
- Budgetary Control 
19.3  
- Budget Centres 
19.4  
- Accounting Records 
19.5  
- Budget Period 
19.6  
- Organization for Budgetary Control 
19.7  
- Budget Manual 
19.8  
- Formulation of Budget 
19.9  
- Process of Approval of Budget Allocation 
19.10  - Budget Variance, Analysis & Reporting 
19.11  - Budget Monitoring & Control 
19.12 
- Long Term Budget of PKSF 
19.13  - Functions of Budget Committee

P/7 
 
CHAPTER – 20 - COMPLIANCE OF GOVERNMENTS, TAX & VAT RULES & OTHER LAWS 
 
139-140 
 
20.1  
- Over View 
20.2  
- Compliance Reporting 
 
 
CHAPTER – 21 – RAO FUND MANAGEMENT & ACCOUNTING 
 
141-147 
21.1 
- Introduction 
21.2 
- Regional Audit Offices (RAO) Controlling Officer 
21.3  
- RAO Bank Account 
21.4  
- RAO Petty Cash Fund 
21.5  
- RAO Cash Payment Procedures & Its' Approval 
21.6  
- RAO Cheque Payment Procedures & Its' Approval 
21.7  
- Maintenance of Records by RAO 
21.8  
- RAO Reporting to PKSF Head Office 
 
 
CHAPTER – 22 – FUND - LIQUIDITY MANAGEMENT 
 
148-156 
22.1 
- Introduction and Overview 
22.2  
- Objectives 
22.3  
- Policy of Investment 
22.4  
- Depositable Fund 
22.5  
- Strategy for determining surplus fund 
22.6  
- Internal & External Laws to be followed 
22.7  
- Scope of Area of fund utilization 
22.8  
- Principles of Fund Utilization 
22.9  
- Selection of Banks/Financial Institutions 
22.10  - Maintenance of FDR 
22.11  - Management of the fund 
 
 
CHAPTER – 23 – AUDIT ARRANGEMENTS 
 
157-163 
23.1  
- Introduction 
23.2  
- Purpose & Objective Auditing 
23.3  
- Types of PKSF Auditing 
23.4  
- PKSF Pre-Auditing 
23.5  
- PKSF Internal Auditing 
23.6  
- PKSF External Auditing 
23.7  
- PKSF External Auditing of POs 
23.8  
- POs Internal Auditing by PKSF

P/8 
 
CHAPTER – 24 – DELEGATION OF AUTHORITY  
 
164-170 
24.1 - Introduction 
24.2 - Objective 
24.3 - Procedures for Obtaining Payment Approval 
24.4 - Procedures for Approved Payments 
24.5 - Cheque Signatories 
24.6 - Expenditures 
24.7 - Loan Disbursement 
24.8 - Purchase Committee (1) 
24.9 - Purchase Committee (2) 
24.10 - Imprest Petty Cash System 
24.11 - Delegation of Authority 
 
 
CHAPTER – 25 - FINANCIAL DOCUMENTS PRESERVATION & MANUAL MAINTENANCE  
 
171-173 
 
25.1  
- Preservation of Financial Documents 
25.2  
- Periodic Review of Management Control System 
25.3  
- Amendment of the Manual  
 
 
CHAPTER – 26 – CHART OF ACCOUNTS 
 
174-200 
26.1  
- Introduction 
26.2  
- Characteristics of Chart of Accounts 
26.3 
- Coding Structure of Chart of Accounts 
26.4 
- Application of Code Numbers 
26.5  
- Necessary Steps to Prepare Chart of Accounts 
26.6  
- Coding System of Accounts 
26.7  
- Changes and Amendments of Accounting Codes 
 
CHAPTER – 27 - ACCOUNTS FORMS, REGISTER & BOOKS 
 
201-223 
 
27.1  
- Accounts Form (From No. 101 – 120) 
27.2  
- Accounts Registers & Books (Registers No. 201 –209)

P/9 
 
CONTENTS OF CHAPTER - 1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
---------------------------------------------------------------  
1.1 - About PKSF 
1.2 - Preamble 
1.3 – Financial Accounting Objectives 
1.4 – Accounting and Auditing Requirements 
1.5 – Accounting Offices 
1.6 - Accounting Year 
1.7 – Books of Accounts 
 
 
 
 
 
---------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1 - INTRODUCTION

P/10 
 
CHAPTER - 1 
 
INTRODUCTION 
 
1.1 – About PKSF: 
 
A) - Legal Form: 
 
Palli Karma-Sahayak Foundation (PKSF) is an association not for profit registered under 
the Companies Act 1994 (the then enforced Companies Act 1913). The PKSF was 
incorporated in Bangladesh on May 1990. 
 
B) - Nature of Activities: 
 
Palli Karma-Sahayak Foundation (PKSF) was established under the Government 
initiatives for undertaking activities throughout the country for alleviation of poverty of the 
landless and the assetless people. PKSF is presently carrying out its operations through 
various partner organizations (POs). Financial assistance is given to them for the purpose 
of on-lending the same to the landless and assetless people for generating their income 
and employment opportunities. PKSF as an apex organization to provide loans to the 
NGOs, which in turn would provide collateral free credit to their poor members. 
 
Two major programs of PKSF are - (I) - Credit Program and (II) - Institutional 
Development Program. PKSF provides loans to two categories of POs - Organizations 
Operating in Small Areas (OOSA) and Big Partner Organizations Operating in Large 
Areas (BIPOOL). PKSF charges concessional service charges on POs depending on the 
size of loan taken. PKSF also provides advisory services and training to NGOs for 
enhancing their institutional capacity. Apart form core program, PKSF operates some 
other programs such as (I) - ADB funded Participatory Livestock Development Project 
(PLDP), (II) - Integrated Food Assisted Development Project (IFADEP-1) funded "DAW" 
under VGD Programme, (III) - Jamuna Multipurpose Bridge Authority Project (JMBA) 
funded Training, Employment & Income Generation Programme, (IV) - South West Flood 
Damage Rehabilitation Loan Program (SRLP), (V) - Sundarban Bio-Diversity 
Conservative Project and etc. 
 
Since the PKSF is registered as an association not for profit under the Companies Act, It 
transfers its' surplus of income over expenditure to the capital fund account every year.  
 
1.2 – Preamble: 
 
This manual is the essence of a sound financial management and effective accounting 
administration of the organization. The intent of this manual is to provide written 
guidelines to all concerned with a view to facilitate proper financial control on overall 
operational activities of the organization. It is endeavored that this manual will be great 
assistance in fulfilling the requirements of the financial discipline and bringing uniformity 
and cohesion amongst the different areas of the financial management.  
 
A smooth, sound and sophisticated accounting system is a pre-condition for an effective 
and meaningful financial management. The basic requirement for ensuring a good and 
beneficial financial management is to establish a system with a well defines procedure so 
that the accounting records are maintained accurately and the financial statements are 
prepared on time. It is obvious that a foolproof accounting system is needed first for 
attaining the benefits of the financial management.

P/11 
 
 
It is important indeed that PKSF may expect to prepare and receive financial statements 
of the funds so utilized and disbursed to its' partner organizations and also itself. 
Therefore, to enable the accounts’ personnel to prepare useful and accurate financial 
reports it has developed a standardized financial recording system that will help to ensure 
the correctly, timely and regular basis financial reporting. The purpose of introducing the 
accounting manual is: 
 
 To implement an appropriate accounting system as per the Generally Accepted 
Accounting Principles (GAAP) in all sphere of the financial transactions & 
activities of the organization; 
 
 To ensure the application of International Accounting Standards (IAS); 
 
 To ensure the over all coverage of the requirements of the Companies Act 1994; 
 
 To ensure the full coverage of taxation aspects of the organization as per the 
rules & regulations of the Income Tax Ordinance 1984 and VAT Act 1991; 
 
 And in turn to help the management not only in establishing an effective control 
over the financial transactions & activities; and 
 
 Also to avail a positive support in administering the overall activities of PKSF. 
 
 
1.3 – Financial Accounting Objectives: 
 
 
The objectives of maintaining accounts of PKSF are to provide: 
 
a) To maintain an utmost sound financial regularity & discipline in all level of financial 
management of PKSF activities; 
 
b) Transparency and accountability should be achieved through better implementation of 
effective financial management control system and accordingly better preparation & 
presentation of the organization's financial statements following the international 
standards. 
 
c) Full disclosure of the operating cost / expenses of the organization. 
 
d) Accounting records that can serve as the basis of ascertaining the implementation of 
plan and budget, preparing future plan of operation and budgets, and for evaluating 
plan and budget demands and proposals. 
 
e) Financial information needed for monitoring expenditure and for exercising effective 
management control of operations of the organization. 
 
f) 
Reliable information for report purposes, which will serve the requirement of GOB, 
PKSF Internal Management, Donors, Internal Audit, External Audit, Investigation, 
Assessment, Review and other relevant agencies. 
 
g) Periodical statement and report to PKSF management and other related offices as 
required by the management. 
 
h) To strengthen internal control techniques & polices, internal check, better mechanism 
to improve financial accountability, ensure the accuracy of the financial reports and 
maintain a methodical recording of financial transactions.

P/12 
 
 
1.4 – Accounting and Auditing Requirements: 
 
 
 
Sound financial management is a vital to PKSF success. Amongst others, sound financial 
management will help PKSF to perform efficiently by reducing in-progress delays or 
bottlenecks, speeding disbursements and facilitate monitoring.  
 
The accounting and auditing requirements that are obliged to comply with are outlined 
below:  
 
 
A - Accounting Requirements: 
 
 
PKSF accounts must be maintained in accordance with accounting practices that 
are generally recognized by the international accounting community. Such 
practice, one adopted should be consistently followed. The accounting records 
should be maintained in a manner that is transparent and auditable and financial 
statements produced must reflect a clear link to the books of accounts. 
 
 
B - Auditing Requirements: 
 
 
The broad aim of PKSF audit is to safeguard the interest of the GOB / Donor 
Agencies / other related bodies and PKSF itself and promote transparency and 
accountability, along with sound economic and financial management practices 
across the PKSF. Towards that broad aim, the objectives of auditing are to give 
an independent assessment of: 
 
 Whether the financial statements shows a true and fair view of the financial 
position of the PKSF and its income and expenditures for the year in question and 
have been properly prepared in accordance with appropriate rules and 
regulations and following the international accounting standards; 
 
 The adequacy of the PKSF's arrangements to secure economy, efficiency and 
effectiveness in the use of the resources; 
 
 The adequacy of the PKSF's financial management systems; 
 
 The adequacy of the PKSF's arrangements for preventing and detecting fraud, 
corruption and the internal control framework generally; 
 
 The adequacy of the PKSF's arrangements for ensuring the legality of 
transactions that might have a financial consequence; 
 
 The adequacy of the PKSF's arrangements for collecting, collating and recording 
accounting data and publishing financial statements and reports pursuant to 
appropriate rules and regulations and as per internationally accepted standards.

P/13 
 
1.5 - Accounting Offices:  
 
o 
In Head Office - 
 
 
Chief of Finance & Accounts will be in charge of the Finance & 
Accounts Department of Head Office who remains directly 
responsible to the General Manager Administration of all financial 
and accounting functions & activities of Head Office and 
Regional Audit offices.  
 
o 
In Regional Audit Offices - 
 
 
Manager (Audit) will be in charge of the Finance & Accounts 
functions who remains directly responsible to the Chief of 
Finance & Accounts for financial and accounting functions & 
activities of Regional Audit offices and for other internal audit 
functions / activities of POs directly responsible to Deputy 
General Manager (Audit) posted in head office. 
 
1.6 – Accounting Year: 
 
 
PKSF shall use July to June as their planning year, accounting year as well as fiscal year. 
Uniformity in the planning period, accounting year and fiscal year is deemed necessary for 
proper planning and monitoring purposes. 
 
 
1.7 – Books of Accounts: 
 
 
PKSF shall maintained all books of accounts based on the following requirements, 
guidelines, instructions, rules and regulations as per the: 
 
(a) Financial and Accounting Manual of PKSF; 
 
(b) Rules of the PKSF Accounting Code;  
 
(c) Requirements of the International Accounting Standards (IAS); 
 
(d) Contents of the Companies Act 1994; 
 
(e) Requirements of the Income Tax Ordinance 1984; 
 
(f) Guidelines of the Value Added Tax Act 1991; 
 
(g) PKSF's different policies approved by the Governing Board of PKSF; 
 
(h) Requirements of the Donor Agencies; 
 
(i) And such other books of accounts as required, circulated and instructed by the 
Management of PKSF from time to time.

P/14 
 
CONTENTS OF CHAPTER – 2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
------------------------------------------------------------------------------------- 
2.1 - Background 
2.2 - Basis of Accounting 
2.3 - Accounting Responsibility 
2.4 - Accounting Policies of PKSF 
2.5 - Accounting Assumptions of PKSF 
2.6 - Characteristics of Financial Transactions & Statements 
2.7 - Procedure for Recording Transactions 
2.7.1- Money receipts & recording thereof 
2.7.2 - Payment made in cash / cheque & recording thereof 
2.8 - Preparation of daily cash and bank balance statement 
2.9 - Passing Adjusting Journal and Closing entries 
2.10 - Preparation of Trial Balance 
2.11 - Reporting of Accounting Offices 
2.12 - Activity Chart of transactions & their documentation 
2.13 - Financial Accounting Flow Chart 
 
 
 
 
------------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 2 - ACCOUNTING SYSTEM

P/15 
 
CHAPTER - 2 
 
ACCOUNTING SYSTEM 
 
2.1 - Background: 
 
 
Palli Karma-Sahayak Foundation (PKSF) is an organization with the objectives to act as 
the apex body to provide loans to the NGOs (Partner Organizations) which in turn provide 
collateral free credit to their poor members. Its funding depends on from government, 
IDA, donors agencies and assistance and also on its own income. The money has to be 
expended in line with the budget that has to be properly and adequately documented and 
authenticated. PKSF will ensure that all financial transactions created / made in 
connection to the activities / operation of the organization have to be systematically, 
properly, accurately and timely recorded in the books of accounts of PKSF. 
 
That is why systematic recording of financial transactions and timely reporting to 
interested groups as mentioned above is essential through preparation and presentation 
of financial statements in accordance with generally accepted accounting principles. Main 
objective of adopting the manual is to provide a systematic & acceptable basis of 
maintaining accounts and sound financial management procedures. 
 
 
2.2 - Basis of Accounting: 
 
Accounts of PKSF should be maintained on acceptable basis, that is, all income actually 
received are to be considered as income and all expenditure / payments, actually made 
are to be taken as expenditure, with a few book adjustments for stock & stores, 
advances, 
prepayments, 
outstanding 
expenses, 
depreciation, 
accrued 
income, 
receivables, etc.  
 
As such accrual basis of accounting is being pursued. The organization shall apply, 
adopt, follow and implement the guidelines / instructions of the International Accounting 
Standards (IASs) for all purposes of accounting. 
 
2.3 - Accounting responsibility: 
 
Finance & Accounts Section is entrusted with the responsibility to ensure the proper 
maintenance of the books of accounts of the organization. Timely and accurate 
presentation of the financial reports is the prime job of the accounts personnel in PKSF 
head office.  
 
The Finance & Accounts Department will ensure the authenticity & recording for all 
payments and also responsible for recording of all receipts on time. They will supervise 
the effective implementation of the internal control devices & assist the management in 
attaining financial management. The head of the Finance & Accounts Department is 
responsible to preserve all books of accounts & supporting accounting records in a 
systematic manner. Management will make job/duty allocations to the staff members of 
finance/accounts section & ensure smooth function of the section.

P/16 
 
As a measure of management safe-guard, the required coverage and appropriate 
precautions must be exercised for handling of cash, handling of store materials, carrying 
cash from and to bank and preservation of cheque books and over all financial discipline 
of the PKSF.  
 
Any staff member of PKSF who signs or countersigns in any primary documents, books of 
original entries, books of final entries and reporting etc. is personally, officially and 
professionally responsible for their completeness, correctness & for the facts as stated 
there in so far as it is his / her duty to know or to extent to which he / she may be 
responsible or expected to be aware of them. 
 
2.4 - Accounting Policies of PKSF: 
 
 
Accounting system, selection and application of accounting policies and presentation of 
financial statement of PKSF shall be in conformity with the internal accounting standards. 
Accounting policies of PKSF encompass the principles, bases, conventions, rules and 
procedures adapted by PKSF management in preparing and presenting financial 
statements by using best management judgment in the circumstances of the organization 
are best suited to present properly its financial position and the results of its operations. 
PKSF shall uses its judgment in selecting and applying its accounting policies keeping in 
view the following: 
 
 
The requirements and guidelines in International Accounting Standards dealing 
with similar and related issues; 
 
 
The definitions, recognitions and measurement criteria for assets, liabilities, 
incomes and expenses set out in the International Accounting Standards 
Committee (IASC) framework; and 
 
 
Pronouncements of other standards setting bodies and accepted policies, but 
only to the extent, that these are consistent with the above.  
 
Four considerations shall govern the selection and application of the appropriate 
accounting policies and the preparation of the financial statements of PKSF. These are: 
 
I. Prudence -  
 
Uncertainties inevitably surrounded many transactions. This shall be 
recognized by prudence in preparing financial statements.   
 
II. Substance - 
 
Financial transactions and other events shall be accounted for and 
presented in accordance with their substance and financial reality and 
merely with their legal form. 
 
III. Materiality - 
 
Financial statement shall be disclosed all items which are material 
enough to effect evaluation or decisions. 
 
IV. Neutral - 
 
Financial transactions shall be neutral and shall be free from bias.

P/17 
 
Accounting policies of PKSF are listed below: 
 
1) Accounting Convention - Basis of Preparation: 
 
 
Financial statements shall be prepared under historical cost convention and in 
accordance with the International Accounting Standards as adapted in 
Bangladesh and where relevant with presentational requirements of the 
Companies Act, 1994; 
 
 
All activities included in the accounts shall be continuing in nature that is the 
financial statements prepared on going concern basis; 
 
 
Financial transactions shall be accounted for and presented in accordance with 
their substance and financial reality and not merely with their legal form; 
 
 
Comparative figures shall be stated in the financial statements; 
 
 
The disclosures in the financial statements, in all material respects, are in 
accordance with International Accounting Standards. 
 
2) Currencies: 
 
 
All PKSF's assets, liabilities, capital fund, income and expenditure are 
denominated in terms of the Taka, the local currencies; 
 
 
Hence, PKSF is not subject to foreign currency risk. 
 
3) Fixed Assets: 
 
 
Fixed assets shall be stated at cost less accumulated depreciation; 
 
 
Fixed assets valuation bases used for determining the amounts at which 
depreciable assets shall be stated in the financial statements; 
 
 
Maintenance and repairs are charged to the statement of income when 
expenditure incurred and improvements are capitalized. Land in not depreciated;  
 
 
The gross amount of depreciable assets and the related accumulated 
depreciation shall be disclosed in the financial statements; 
 
 
An item shall be recognized as an asset when it is probable that future economic 
benefits associated with the asset shall flow to the organization. The cost of the 
asset to the organization can be measured reliably. 
 
 
An item of property, plant and equipment that qualify for recognition as an asset is 
initially been measured at its cost.  
 
 
The component of cost is purchase price plus all other costs of bringing the asset 
to working condition.  
 
 
The policies in recognition, valuation & revaluation of property, plant and 
equipment should not be contradictory to the IAS 16.

P/18 
 
 
The assets are accounted for in the following classes: 
 
(a) Land: Land is recorded at the price paid for the land to the GOB. The other 
expenses for acquiring the land are added to the cost. The other expenses 
are: Stamp fee, Registration fee, Government tax, Legal fee, Other expenses 
 
(b) Building: Valued at cost plus all other relevant expenses up to the point of 
bringing it to the usable condition. It is recorded at the amount of cash or 
cash equivalents. The building is shown in the balance sheet at cost less 
accumulated depreciation. The following cost are considered: (i) - The cost of 
floating tender for selecting - Designer, Contractor, Personnel, Material, 
Other; (ii) - Material costs; (iii) - Labor cost; (iv) - Consultants’ fee; (v) - 
Design fee; (vi) - Supervision; (vii) - Guard; (viii) - Utility cost; (ix) - Other. 
 
(c) Machinery: Machinery is acquired at cost that can be measured reliably. All 
other expenses to bring the machinery to the working condition are 
considered.  
(d) Motor Vehicles: Shown in the balance sheet at cost less accumulated 
depreciation. The other related expenses are added to the cost for making it 
fit for running in the road. Among the other costs that can be recognized over 
its purchase price are the following: (i) - Registration cost; (ii) - First time 
checking and inspecting expenses. 
(e) Furniture and fixture: Are recorded at the amount of cash or cash equivalents 
paid or the fair value of the consecration given to acquire them at the time of 
their acquisition. These are shown at cost less accumulated depreciation in 
the balance sheet.  
(f) Office equipment: Are recorded at the amount of cash or cash equivalents 
paid or the fair value of the consecration given to acquire them at the time of 
their acquisition. These are shown at cost less accumulated depreciation in 
the balance sheet. 
(g) Others: On the basis of the chart of accounts.

P/19 
 
4) Depreciation on Fixed Assets: 
 
 
Depreciation shall be charged on fixed assets on reducing balance method; 
 
 
Depreciation on fixed assets additions shall be charged from the date of the 
acquisition under reducing balance method; 
 
 
Depreciation for the period shall be charged to income statement for the period; 
 
 
Depreciation method selected shall be applied consistently from period to period; 
 
 
The selection of allocation and estimation of the useful life of a depreciable 
assets shall be the matter of Judgment of PKSF management considering the 
expected physical wear and tear 
 
 
Accumulated depreciation shall be disclosed in the financial statement; 
 
 
A reconciliation of additions, disposals, amount of depreciation and other 
movements shall be given in the financial statements; 
 
 
The rate of depreciation on each class of asset shall be follows: 
 
Category of assets 
 
 
Rate of Depreciation 
 
 
Building  
 
 
 
 
10% 
 
Tin Shed 
 
 
 
 
20% 
 
Semi Building 
 
 
 
 
15% 
 
Transports & Vehicles  
 
 
20% 
Office Equipments 
 
 
 
20% 
Furniture 
 
 
 
 
10% 
Library Books 
 
 
 
 
10% 
Carpet & Drapery 
 
 
 
20% 
Crockeries & Cutleries  
 
 
30% 
Deep Tube-well  
 
 
 
15% 
 
Electric Generator 
 
 
 
 
 
Fire Fighting Equipments 
 
 
 
 
Power Substation 
 
 
 
 
 
 
 
 
5) Revenue Recognition: 
 
 
Service charges shall be calculated in accordance with the loan agreement 
between PKSF and its partner organizations (POs); 
 
 
Service charges shall be charged as per PKSF policy depending on the loan 
volume to the loans to POs under core program and other projects of PKFS; 
 
 
Service charges on project loan to POs  (borrowers of PKSF) shall be accounted 
for on accrual basis;

P/20 
 
 
 
Service charge shall not be accrued on POs whose loans are more than 29 days 
in arrears with respect to the payment of service charges or principal or both; 
 
 
Service charge on regular loan - loans where no amounts are overdue, as at the 
end of the reporting period, shall be recognized as income; 
 
 
Service charges shall be disclosed separately in the financial statements in order 
to give a better understanding of the composition;  
 
 
Interest income from short-term investment / deposits shall be accounted for on 
accrual basis; 
 
 
Grants for expenses to the extent of the amount for the year shall be recognized 
as an income during the year; 
 
 
All other incomes shall be accounted for on accrual basis; 
 
 
Any other / miscellaneous income shall be accounted for on realized basis / 
actual basis that shall be disclosed in the financial statements; 
 
 
All items of income recognized in a period by PKSF shall be included in the 
determination of the net surplus or deficit for that period; 
 
 
The nature and amount of each extraordinary item shall be separately accounted 
for and disclosed in the financial statements; 
 
 
Revenue is recognized by PKSF when it is probable that future economic benefits 
shall flow to the organization and these benefits can be measured reliably. 
 
 
6) Recognition of Grants & Accounting for Government Assistance: 
 
 
 
Grants for expenses shall be recognized as deferred income to the extend of the 
amount of subsequent years and for equity as capital fund; 
 
 
Amount equal to current years' depreciation under grant for assets shall be 
recognized as income. Rest / carrying amount of the relevant assets shall be 
accounted for as grant for assets; 
 
 
Government grant shall not be recognized until there shall be reasonable 
assurance that the PKSF shall comply with the conditions attaching to it, and that 
the grant shall be received; 
 
 
The nature and extent of government grants recognized shall be disclosed 
adequately in financial statements;

P/21 
 
7) Borrowing Cost: 
 
 
Borrowing costs shall be interest and other costs incurred by PKSF in connection 
with the borrowing of funds; 
 
 
Borrowing costs shall be recognized as an expenses in the period in which they 
are incurred; 
 
 
Borrowing costs shall be accounted for on accrual basis; 
 
 
The nature and extent of borrowing costs recognized shall be disclosed 
adequately in the financial statements; 
 
8) Employees Retirement Benefit Plans: 
 
 
Employees' retirement benefit plans shall be adequately disclosed in the financial 
statement of PKSF in respect to plans and to the following: Description of plans, 
Number of participants received benefits, Employers' contribution, Employees 
contribution, Investment incomes and administrative expenses. 
 
 
Provision for the employers' contribution to the Contributory Provident Fund shall 
be made as per rules of the Contributory Provident Fund Scheme; 
 
 
Required amount against provision for gratuity shall be invested in the bank with a 
view to timely payment of gratuity to the staff members of PKSF;   
 
 
Premium for Group Insurance Coverage for its employees shall be accounted for 
annually; 
 
 
Cost of providing retirement benefit shall be recognized as an expense in the 
period during which the services are rendered; 
 
9) Taxation: 
 
 
At present, provision for income tax is not required to make in the financial 
statements as PKSF has been exempted from income tax; 
 
10) Capital Fund: 
 
 
The origin of the capital fund is the receipts of the grants made by the 
Government of Bangladesh; 
 
 
The accretion of capital fund shall be the transfer of each yeas' surplus of income 
over expenditures of PKSF; 
 
 
Capital fund is restricted to be exclusively used for the purpose of PKSF only and 
the surplus of income over expenditures cannot be distributed as dividend to its 
members.

P/22 
 
 
11) Loan to Partner Organizations:  
 
 
 
The loan given to the partner organizations (POs) of PKSF for micro-finance to 
the poor for poverty alleviation shall be shown at loan amount (Gross value).  
 
 
The total loan shall be classified according to the policy of PKSF.  
 
 
Provision shall be made in the accounts for Bad and Doubtful Debts.  
 
 
Detailed movement of the provision shall be disclosed in the financial statement. 
 
 
12) Loan to Partner Organizations for Capacity Building:  
 
 
 
Loan to the Partner Organizations shall be given subject to the budget provision.  
 
 
Loan shall be operated according to the policy of the PKSF. 
 
 
13) Loan Classification and Provisioning Policy:  
 
 
 
Considerations for loan classification: At first - In determining the level of the 
provisions required on the loan amount to the borrowers (POs), PKSF 
management has considered a number of factors that are as follows: 
 
 The debt service - Payment record; 
 
 Sub-sector assessment - Acceptability, profitability & competition; 
 
 Comparative evaluation of borrower - Sector average, position & status; 
 
 The borrower's financials - Dependability, liquidity, income generation, 
cash flows & leverage; 
 
 The borrower's governance / management - Capability, experience, 
quality, integrity, professionalism, controls, commitment; and 
 
 The borrower' s viability - Risks, operational status, financial strength, 
cost recovery. 
 
Second consideration for loan classification: In determining the level of the 
provisions required on the loan amount to the borrowers (POs), PKSF 
management shall consider another factor that the number of days in arrear of 
the loans to POs. 
 
The results of the application of the different factors in assessing the borrower's 
loan quality shall be the classification of loans to POs into five internationally 
accepted categories;

P/23 
 
 
Loans to Partner Organizations (POs - the borrowers of PKSF) shall be classified 
in the following five internationally-accepted categories: 
 
Days in Arrears  
 
 
Loan Classification / Quality 
 
Current (No arrears) 
 
 
Standard 
 
1 to 30 days arrears 
 
 
Watch-list 
 
31 to 180 days arrears  
 
Sub-standard 
 
181 to 350 days arrears  
 
Doubtful 
 
Over 350 days arrears  
 
Loss 
 
 
After determining the classification of loans to POs, provisions are then set up 
based on the following guidelines: 
 
Days in Arrears  
Loan Classification / Quality 
Required Provisions 
 
Current (No arrears) 
Standard 
 
 
 
2% 
 
1 to 30 days arrears 
Watch-list 
 
 
 
5% 
 
31 to 180 days arrears Sub-standard 
 
 
 
20% 
 
181 to 350 days arrears Doubtful 
 
 
 
75% 
 
Over 350 days arrears Loss 
 
 
 
 
100% 
 
 
Provisions for doubtful and bad debts are made, having regard to both the 
general and specific risk.  
 
 General Provisions - 
o 
The general elements of the provisions relates to 
those loan losses that, although not yet specifically 
identified, are known from experience to be present 
at any year-end in the loan portfolio. 
 
o 
The potential losses not specifically identified 
(general provisions for "standard" loans) in the 
portfolio are recognized as an expense in the 
statement of income and expenditure and separately 
shown in Balance Sheet as Debt Management 
Reserve on loan. 
 Specific Provisions - 
o 
The specific elements of the provisions relates to 
those loan losses that, have been specifically 
identified as problematic, doubtful or bad. 
 
o 
The potential losses which have been specifically 
identified (specific provisions for "watch-list", "sub-
standard", "doubtful" and "loss" loans) in the portfolio 
are recognized as an expense in income statement 
and separately shown in Balance Sheet as Debt 
Management Reserve on loan.

P/24 
 
   Methodology for Loan Classification and Provisioning 
 
Matrix Methodology 
 
a) The matrix methodology takes in to account different factors in assessing the quality of a 
loan, notably, the borrower’s payment record and financials. In addition, the matrix 
methodology considers the borrower’s sub-sector, its relative standing in the sub-sector, 
governance and management, and viability. The application of these various elements in 
assessing the loan quality involves the use of five loan classification categories: 
“standard” or “pass” “watch-list” or “special mention”, “substandard”, “doubtful”, and “loss”. 
The discussion below provides a broad conceptual description of the situations attendant 
to these classifications. 
 
b) The credits, which are considered “standard”, do not exhibit credit weaknesses that might 
jeopardize collection of the debt in the manner agreed to upon the loan’s inception. Such 
credits are properly structured so that repayment is effected in a timely and realistic 
manner and are otherwise sound in every respect. In essence, they are good credits to 
good borrowers. 
 
c) Loans under the “watch-list” category show no signs of potential default. However, the 
borrower is vulnerable to structural economic/financial changes or there are certain minor, 
unsatisfactory aspects to the loans. These loans require closer monitoring than “standard” 
loans. 
 
d) A “ substandard” loan is one, which has a well – defined credit weakness, or weaknesses, 
which jeopardize(s) the servicing of the debt. The sound net worth or payment ability of 
the borrower inadequately protects it. Substandard credits are characterized by the 
distinct possibility that the lender will sustain some loss if the credit weakness is not 
corrected. Loss potential, while existing in the aggregate amount of substandard assets, 
does not have to exist in individual assets classified substandard. The loan of a borrower 
that relies heavily on grant income or subsidies, which are uncertain over after a period of 
time, to cover its operating costs and debt servicing obligations could at best be 
considered substandard. 
 
e) A substandard borrower is also one, which lacks adequate cash flow to service or repay 
its currently maturing debts. This credit weakness may be determined from an actual lack 
of performance or it may be concluded on a prospective basis through an analysis of the 
enterprise’s financial statements. In some instances, borrowers may appear to perform on 
their debts but in fact do not. It is through the capitalization or refinancing or interest, 
which is due and unpaid that the loan appears current. Substandard assets might include 
loans to borrowers which are fundamentally viable but which require a moderate degree 
of restructuring in their operations to improve efficiency and profitability, a more conducive 
operating environment, and a stretching out or change in the mix of their liabilities. The 
objectives of restructuring would be to improve the borrowers’ operations so that they are 
more efficient, more competitive, and sufficiently profitable to adequately service their 
debts and provide a reasonable return on capital. In effect, the credit weaknesses in such 
borrowers are, to a very large degree, controllable and correctable over the short-term 
with a minimum of external intervention. 
 
f) 
A “doubtful” loan has all the weaknesses inherent in one classified substandard with the 
added characteristic that the weaknesses make collection or liquidation in full, on the 
basis of currently existing facts, conditions and values, highly questionable and 
improbable. One example of a doubtful asset is a loan which exhibits the characteristics 
of a substandard asset but which is also seriously past due and inadequately protected by 
the realizable value of any collateral pledged.

P/25 
 
g) The definition of a doubtful loan should be extended to those borrowers, which are 
fundamentally viable, but require significant restructuring of their operations and debt 
relief or forgiveness to remove the massive overhand of obligations they owe. 
 
h) Loans are classified as “loss” or uncollectible and of such little value that there 
continuance as sound assets is not warranted. This does not mean that the loan has 
absolutely no recovery or salvage value, but rather it is not practical or desire-able to 
defer writing off this basically worthless asset even though partial recovery may be 
affected in the future. Assets considered, as loss would include loans to those borrowers, 
which are not viable in the short–term under any reasonable circumstances. 
 
i) 
The matrix methodology, shown in Appendix-B-I, provides a systematic basis for 
classifying loans based on a host of factors. The column on “sub-sector”, while applicable 
to lenders, which service different sub-sectors, is ignored in applying the matrix to PKSF’s 
loan classification. It is assumed PKSF is a wholesale lender providing credits to relatively 
homogeneous retail lending institutions. In using the matrix, the auditor would determine 
in which “boxes” the loan would fall. The “box” depicting the worst situation would be the 
basis for the loan classification.  
 
j) 
Once the loan classification is determined, the required provisions could be computed by 
multiplying the percentage provisions required under the classification by the outstanding 
loan amount. 
 
k) The “Big Five” international accounting firms, in collaboration with multilateral financial 
institutions, have utilized a matrix methodology in determining the loan classification and 
provisioning required of financial institutions operating in different parts of the world.

P/26 
 
Annex-B-1 
Methodology for PKSF Loan Classification and Provisioning 
Classif./Tre
atment 
Payment Record 
Sub-sector 
Borrower 
Financials 
Governance/Managem
ent 
Viability 
 
“Standard”: 
2% 
 
Punctual, no lates  
High account 
turnover 
Acceptable 
adequate 
demand 
Adequate 
profitability 
Minimal 
competition 
Above sector 
average 
Strong 
competitive 
position 
Good 
products and 
market 
Profitable 
Liquid 
Sufficient cash 
flow(CF) 
Low leverage (LV) 
Capable/qualified 
No doubt of integrity 
Clear strategic vision 
Very professional 
Good control/MIS  
Good external credit 
No significant 
risks 
 
“Watch List” 
: 
5% 
Delays <90 days  
Occasional 
overdrafts 
High ave. payables 
Medium turnover 
Minor contract 
breach on payables 
Some questions 
Income 
decreasing 
Competition 
increasing  
Price competition 
up 
Operating costs 
up 
Within 
sector’s 
average 
Some 
competitive 
weaknesses 
Profitable 
Acceptable liquidity 
Moderate leverage 
CF<operating 
costs+replacement 
of assets 
Capable/qualified  
No doubt of integrity 
Some strategic 
problems 
Improving control/MIS 
Committed governing 
body & managers 
Will survive 
problems 
Has strength to 
cope 
New capital 
available if 
needed 
No major labor 
issue 
 
 
“Substanda
rd”: 20% 
 
 
 
Past due >90<180 
days 
Recurrent overdrafts 
Low account turnover 
Contract breach on 
payables>90 days 
Weak loan 
documentation 
Volatile 
Weak co. under 
pressure 
Income down  
Liberalization 
risk 
Administered 
prices (interest 
rates) 
Under sector’s 
average 
Defined 
competitive 
problems 
Income low to zero 
Low liquidity 
High leverage 
Weak cash flow 
(CF) 
CF<P+I  
Viability dependent 
on grant income  
Increased 
Weak, low capacity 
Shallow experience 
Questionable integrity 
No strategic vision 
Weak controls/MIS 
Governance 
Reliant on 
financing 
Questionable 
owner support 
New marketing 
needed 
Latent future risks 
Minor labor 
excesses 
 
 
 
 
 
Working capital mask 
problems 
       conflicts  
Weak external audit 
Basic 
problem is 
financial 
Products 
and market 
can recover 
 
 
 
“Doubtful” 
     75% 
 
Past due >180 days 
Permanent 
overdrafts 
Contract breach on 
payables> 180 days 
Renewals capitalize 
interest 
Poor legal 
documentation 
 
Poor earning = 
or <zero  
Acute price 
competition 
High risk of 
liberalization 
Operation 
restructuring 
needed  
Political prices 
(interest rates) 
Well below 
sector average 
Serious 
competition 
problem 
Urgent need to 
modernize 
Losing markets  
Product 
problems 
Over-extended 
Operational losses 
Illiquid 
Selling assets to survive 
CF<interest service 
Excessive leverage 
Inadequate payment source 
Increased WC hides 
operating losses 
Poor  
Incompetent-hiding 
Uncooperative, 
hostile  
Doubts on integrity  
Lack of control/MIS 
No source of new 
capital 
Poor external audit 
Operational 
problems  
Major labor 
excess 
Require debt 
relief 
Deep 
product 
restructuring 
No full cost 
recovery 
 
 
 
“Loss”: 
100% 
 
Past due>365 days 
New loans despite 
operational losses 
Patently inadequate 
evidence of loan 
Non-interest 
bearing loans 
Dying  
Structural 
weaknesses 
Anachronistic 
 
Lower quartile 
Uncompetitive 
Weak products 
Marginal role 
 
High losses 
Selling assets at losses 
Acute CF & leverage 
problems 
CF<gen. & adm. Costs 
No identifiable repayment 
sources(except liquidation) 
Very poor  
Cannot be trusted 
Incompetent and 
desperate 
Chance of fraud 
Non-existent 
governance 
Extremely 
questionable 
Should be 
liquidated 
Should be 
fragmented

P/27 
 
14) Accounting of Expenses:  
 
 
All expenses shall be accounted for as on accrual basis. Under the accrual basis 
of accounting, transactions and events shall be recognized when they occur (and 
not as cash or its equivalent is paid) and shall be recorded in the accounting 
records and reported in the financial statements of the periods to which they 
relate. Expenses shall be recognized in the income statement on the basis of a 
direct association between the costs incurred and the earning of specific items of 
income (matching). 
 
15) Materiality and Aggregation:  
 
 
Each material item that is enough to effect evaluation or decision shall be 
presented separately in PKSF financial statement. Immaterial amounts are 
aggregated with the amounts of similar nature or function and need not be 
presented separately.  
 
 
Financial statements result from processing large quantities of transactions, 
which are structured by being aggregated into groups according to their nature or 
function. The final stage in the process of aggregation and classification is the 
presentation of condensed and classified data, which form line items either on the 
face of the financial statements or in the notes. If a line item is not individually 
material, it shall be aggregated with other items either on the face of the balance 
sheet or in notes. An item that is not sufficiently material to warrant separate 
presentation on the face of financial statements may nevertheless be sufficiently 
material that it should be presented separately in the notes.      
 
 
Materiality depends on the size and nature of the item judged in the particular 
circumstances of its omission. In deciding whether an item or an aggregate of 
items is material, the nature and the size of the item shall be evaluated together. 
Depending on the circumstances, either the nature or the size of the item could 
be the determining factor. For example, individual assets with the same nature 
and function shall be aggregated even if the individual amounts are large. Large 
items which in nature or function shall be presented separately.    
 
16) Offsetting:  
 
 
PKSF's assets and liabilities shall not be offset except when offsetting is required 
or permitted by any International Accounting Standard.  
 
 
Items of income and expenditure shall be setoff when an International Accounting 
Standard requires or permitted. 
 
 
It is important that both assets and liabilities, and income and expenses, when 
material are reported separately. Offsetting in either income statement or balance 
sheet, except when offsetting reflects the substance of the transaction or event, 
detracts from the ability of users to understand the transactions undertaken and 
to assess the future cash flows of the organization. The reporting of assets net of 
valuation allowances for example doubtful debts allowances on receivables is not 
offsetting. Transaction which do not generate revenue but which are incidental to 
the main revenue generating activities. The results of such transactions or event, 
by netting any income with related expenses arising on the same transaction.  
 
 
For example: Gains and losses on the disposal of non-current assets, including 
investments and operating assets, are reported by deducting from the proceeds 
on disposal the carrying amount of the assets and related selling expenses;

P/28 
 
2.5 - Accounting Assumptions of PKSF: 
 
 
Following are the accounting assumptions of PKSF to be followed: 
 
a) Going Concern: 
When preparing the financial statements, PKSF shall make an 
assessment of an enterprise's ability to continue as a going 
concern. 
 
b) Consistency: 
The presentation and classification of financial items in the 
financial statements shall be retained from one period to next 
period unless; 
 
i) - A significant change in the organization. 
ii) - A change in presentation is required by an IAS. 
 
c) Accrual: 
PKSF shall prepare its financial statements, except for cash 
flows information, under the accrual basis of accounting. 
 
 
2.6 - Characteristics of Financial Transactions & Statements: 
 
 
 
The financial transactions and the financial statements of PKSF shall have the following 
characteristics: 
 
1) Understandability; 
2) Relevance; 
3) Reliability; 
4) Faithful presentation; 
5) Substance over form; 
6) Neutrality; 
7) Prudence; 
8) Completeness; 
9) Comparability. 
 
2.7 - Procedure for Recording Transactions: 
 
2.7.1- Money receipts and recording thereof: 
 
The organization receives its fund from the Government (own resources and lent from 
IDA credit) as loan in the form of cheque / draft and through Special Accounts subject to 
the terms of the Development Credit Agreement between the Government and IDA & 
Subsidiary Loan Agreement. The other sources of the funds are service charges, bank 
interest earned, income from training, sale of waste & scraps materials, other 
miscellaneous incomes etc. Repayment of Loans to POs with service charges is to be 
received by the organization regularly. 
 
Money Receipts (as per computerized form) are to be prepared and issued to the 
concerned parties / customers on receipt of any fund and income by the organization. 
Money receipts must be numbered.

P/29 
 
Money Receipt shall be prepared in tree (3) copies, original receipt goes to the payer, the 
second copy will be attached with the credit voucher and third copy will be in the file or 
reserve copy. Money receipt shall be checked and then placed it for recording it the Cash 
Scroll Book through computer and at the day end cash scroll is checked with physical 
cash and duly signed by cashier cash officer, and then kept it in vault by joint custodian. 
All receipts (cash, cheques, demand draft, pay order etc.) shall be deposited at the 
earliest opportunity, in the bank by filling in the pay-in-slips, after due verification and 
approval and then recorded it in the Cash Journal Register in the computer through 
preparing cash journal - credit voucher. 
 
2.7.2 - Payment made in cash / by cheque and recording thereof: 
 
All payments made by cash or cheque shall be processed through the payment vouchers 
(Cash Journal - Debit Voucher) and posted in the credit side of the Cash Journal Register 
that will be debited to the appropriate head of accounts. All payment vouchers must be 
supported by the documentary evidences such as requisition / indent, quotation, 
comparative statement, purchase committee resolution, purchase order, challan, bills, 
cash memo, job completion certificate etc. and duly approved by the authorized 
personnel. Upon receipt a bill, the Finance and Accounts Section will verify the relevant 
documents to justify the payment and prepare a voucher to process the payment subject 
to the clearance of the pre-audit cell.  
 
Payment in cash should be restricted to the limit and cases as are narrated and 
earmarked in the delegation of authority. 
 
Generally all payments will be made by cheque and that should be crossed before 
handing over the same to the payee. Neither a blank nor a bearer cheque should ever be 
signed by the organization. The cheque must bear the name of the payee, date of issue, 
amount in both figures and words. While signing the cheque, an initial should be given on 
the counter-part of the cheque where the cheque particulars will be recorded in a 
condensed manner.  
 
Cheque books should always be kept under lock & key under safe custody of the 
authorized custodians. Canceled cheque should be retained with chequebooks & corners 
thereof torn off as a measure of safeguarding against any misuse, in future. When 
disbursing amounts, Person responsible for payment (as per job/duty allocation) should 
obtain the signature of the payee or his/her authorized representative, acknowledgment of 
receipt of cheque or cash as the case may be. When approving a payment, all supporting 
vouchers or documents must be canceled (by affixing a rubber stamp worded "PAID 
AND CANCELED") to minimize the risk of a double payment subsequently being made 
by mistake or manipulation.   
 
 
2.8 - Preparation of daily cash and bank balance statement: 
 
Daily cash & bank balance statement usually contains the following data & information: 
 
A - Bank account balance of different banks; 
B - Cash in hand; 
C - Advance slip (IOU-Temporary Loan) balance (If any);  
 
Cashier and Cash Officer (F/A) will check & sign this statement at the end of the day as 
per format.

P/30 
 
2.9 - Passing Adjusting Journal and Closing entries: 
 
 
Adjustment entries for stores, advances, prepayments, outstanding expenses, 
accrued income, receivables and depreciation shall be made as and when required 
through journal vouchers.  
 
 
All rectification, transfers and adjustments and non-cash transactions are to be 
processed through journal voucher. 
 
 
The adjusting journals will be prepared by the Assistant Manager Finance (AMF), duly 
checked Finance Manger (FM), certified by the Chief of Finance & Accounts and 
approved by the competent authority. The posted / entered the same in to the 
computer software. 
 
 
The journal vouchers will be filled in a chronological order.  
 
2.10 - Preparation of Trial Balance: 
 
 The ledger accounts shall be balanced on transaction basis to prepare trial balance. 
Consolidated Accounts, Project Accounts and Fund Accounts to be drawn to ensure 
the arithmetical accuracy of the entries made in the Cash Journal Register and 
Ledgers Accounts. 
 
 Trial balance will be the base document to prepare the Income & Expenditure 
Account, Balance Sheet, Cash Flow Statements and all other financial statements as 
required by management.  
 
2.11 - Reporting of Accounting Office: 
 
Accounting office shall close the accounts at the last transaction day of the month. This 
closing includes: 
 
A - Closing of Books and Accounts: 
 
 Closing of Cash Journal Register - Cash and Bank balance; 
 
 Balancing of General Control Ledger; 
 
 Balancing of all Project, Fund, Subsidiary & Sub-subsidiary Ledgers. 
 
 Balancing of all Loan Ledgers 
 
 Balancing and updating of all kinds of registers. 
 
 Cash and bank balance confirmation; 
 
 Bank reconciliation statements preparation; 
 
B - Preparation Financial Statements: 
 
 Preparation of Trail Balance; 
 
 Preparation of monthly Income & Expenditure Account; 
 
 Preparation of monthly Balance Sheet;

P/31 
 
 Preparation of all necessary schedules and break up of figure; 
 
 Preparation of Cash flow statement as per International Accounting Standard-7. 
 
 Notes to Accounts with full disclosure requirements of adequate & correct 
presentation of Financial Statements as per International Accounting Standards; 
 
 Yearly basis loan classification statements and loan loss provision statements 
following the Matrix method for the loans to POs;  
 
 Interpretation of Financial Statements; 
 
 Budget Monitoring & Budget Variance Analysis; 
 
 Preparation of Project Financial Statements as per Guidelines of Donor; 
 
 Donor-wise statement of utilization against a fund would be prepared on the basis 
of the financing agreement. Reports would assist management with comparison 
of actual cost with budgeted cost promptly and accurately. 
 
Accounting office shall prepare the complete set of accounts – financial statements by the 
20th of the next month at the latest and submitted to the Managing Director. 
 
 
2.12 - Activity Chart of transactions & their documentation: 
 
Activity Chart of the total financial accounting system of the organization has been 
outlined as below: 
 
ACTIVITY CHART 
 
 
 
Activity  
 
 
 
Form to be used 
Frequency 
 
1-Transactions – cash or non-cash 
 
 
 
 
 
As and when it takes place 
 
2-Adequcy of documents of transactions 
 
 
 
 
For each transaction 
 
3-Approval of transactions 
 
 
 
 
 
 
For each transaction 
 
4-Payment vouchers – Cash Journal 
 
 
 
 
 
For each transaction 
 
5-Payee’s acknowledgement  
 
 
 
 
 
For each transaction 
 
6-Receipt vouchers  - Cash Journal 
 
 
 
 
 
For each transaction 
 
7-Posting to cash journal register 
 
 
 
 
 
Daily basis 
 
8-Balancing of cash journal voucher 
 
 
 
 
 
Daily basis 
 
9-Posting & balancing to bank accounts ledger 
 
 
 
 
Daily basis 
 
10-Preparation of daily cash & bank balance statements 
 
 
 
Daily basis 
 
11-Preparation of bank reconciliation statements  
 
 
 
Monthly basis

P/32 
 
12-Journal vouchers 
 
 
 
 
 
 
Daily, as &  when takes place 
 
13-Adequacy of documents of journal voucher 
 
 
 
 
For each transaction  
 
14-Posting to control general ledger 
 
 
 
 
 
Daily basis 
 
15-Posting to project ledgers  
 
 
 
 
 
Daily, as & when takes place 
 
16-Posting to fund ledger 
 
 
 
 
 
 
Daily basis 
 
17-Posting to budget register  
 
 
 
 
 
Daily basis 
 
18-Balancing of all ledgers 
 
 
 
 
 
 
Daily basis 
 
19-Posting to fixed assets register 
 
 
 
 
 
As & when it takes place 
 
20-Posting to stock register  
 
 
 
 
 
As & when it takes place 
 
21-Balancing of stock register 
 
 
 
 
 
Daily basis 
 
22-Posting & balancing of advance register 
 
 
 
 
As & when it takes place 
 
23-Posting and balancing of loans register 
 
 
 
 
As & when it takes place 
 
24-Posting & balancing of all payable registers 
 
 
 
 
As & when it takes place 
 
25-Posting & balancing of all subsidiary ledgers  
 
 
 
As & when it takes place 
 
26-Posting & balancing of all sub subsidiary ledgers & registers 
 
 
As & when it takes place 
 
27-Preparation of trial balance 
 
 
 
 
 
Monthly basis 
 
28-Preparation of income statements of all projects 
 
 
 
Monthly basis 
 
29-Preparation of consolidated income statements of PKSF  
 
 
Yearly basis 
 
30-Preparation of balance sheets of all projects  
 
 
 
Monthly basis 
 
31-Preparation of consolidated balance sheets of PKSF 
 
 
 
Yearly basis 
 
32-Preparation of cash flow statements of all projects and PKSF 
 
 
Monthly basis 
 
33-Preparation of notes to accounts of all projects and PKSF 
 
 
Monthly basis 
 
34-Preparation of accounts statements/schedules of all projects and PKSF 
 
Monthly basis 
 
35-Preparation of cash custody certificates of all projects and PKSF  
 
Monthly basis 
 
36-Obtain bank balance confirmation certificates - all projects and PKSF 
 
Monthly basis 
 
37-Obtain Loan balance confirmation certificates from POS - all projects 
 
Monthly basis

P/33 
 
 
2.13 - Financial Accounting Flow Chart: 
 
 
PKSF financial accounting system flow chart has been given as below: 
 
 
Flow Chart of Financial Accounting 
 
 
Financial Transactions 
 
 
Cash / Bank transactions 
 
 
 
 
Non-cash transactions 
 
 
 
Receipt transactions 
Payment transactions 
Depreciation & 
Provision for        Provisions for         
 
 
 
 
 
 
Adjustment of 
capital expense 
revenue expenses 
 
 
 
 
 
 
Assets 
 
 
Cash Journal 
 
 
 
 
 
Journal Voucher 
 
 
Cash Journal Register 
 
 
 
 Control General Ledger 
 
Project Ledger 
 
Fund Ledger 
 
 
 
 
Subsidiary Ledger  
 
Subsidiary Ledger  
Subsidiary Ledger 
 
 
 
Trial Balance 
 
 
Trial Balance 
 
 
Trial Balance 
 
 
 
Income Statement Balance Sheet 
Income Statement Balance Sheet  
Income Statement Balance Sheet 
 
 
Cash Flow Statement 
 
Cash Flow Statement 
 
Cash Flow Statement 
 
 
Notes to Accounts  
 
Notes to Accounts  
 
Notes to Accounts

P/34 
 
CONTENTS OF CHAPTER – 3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
------------------------------------------------------------------------------------- 
3.1 - Introduction 
3.2 – Cash Journal – Debit / Payment Voucher  
3.3 – Cash Journal – Credit / Receipts Voucher  
3.4 – Journal Voucher–Adjustments/Non Cash Transactions 
3.5 – Cash Journal Register 
3.6 – Main / Control General Ledger 
3.7 – Project Ledger 
3.8 – Money Receipts 
3.9 – Subsidiary Ledger 
3.10 – Store Ledger 
3.11 – Bank Reconciliation Statement  
3.12 – Formats to be used  
3.13 – Erasing & overwriting prohibited 
3.14 – Conclusion 
 
 
 
 
--------------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 3 – ACCOUNTING FORMS, VOUCHERS & RECORDING BOOKS

P/35 
 
CHAPTER – 3 
 
ACCOUNTING FORMS, VOUCHERS AND RECORDING BOOKS 
 
 
3.1 - Introduction: 
 
In general, the following accounting forms and recording books could possibly be kept 
and maintained by PKSF. These accounting forms and recording books would be used 
for documentation of various records, analysis and interpretation of daily financial 
transactions of PKSF in terms of cash and accrual basis. Utilities and characteristics of 
different forms and recording books are described here in details for smooth functioning 
of processing the every day financial transactions of PKSF head office and its Regional 
Audit offices in systematically. 
 
3.2 – Cash Journal – Debit / Payment Voucher: 
 
Voucher is the primary source of information to the accounting process. Vouchers are 
prepared on the basis of invoice or memorandum that serves as evidence of a 
transaction. As soon as cash and bank payment transaction is completed, it has to be 
recorded in Cash Journal – Debit / Payment Voucher. To record the cash and bank 
transactions, it is the primary and main evidence of processing transactions of PKSF 
head office and its Regional Audit offices.  
 
Debit – Cash Journal: 
 
In case of cash / bank expenses or payments or discharging of liabilities, it has to be 
recorded through Debit – Cash Journal. Debit / Payment vouchers shall be submitted for 
approval together with all supporting documents. Only duly approved vouchers can be 
posted to the books of accounts. 
 
 
The specimen format of Cash Journal is given in Form No. - 101 
 
 
3.3 – Cash Journal – Credit / Receipts Voucher: 
 
 
As soon as cash and bank receipt or income transaction is completed, it has to be 
recorded in Cash Journal – Credit / Receipt Voucher. To record the cash and bank receipt 
transactions, it is the primary and main evidence of processing transactions of PKSF 
head office and its Regional Audit offices.  
 
Credit – Cash Journal: 
 
In case of cash / bank receipts or incomes, it has to be recorded through Credit – Cash 
Journal. Credit / Receipts vouchers shall be submitted for approval together with all 
supporting documents. Only duly approved vouchers can be posted to the books of 
accounts. 
 
 
The specimen format of Cash Journal is given in Form No. - 102

P/36 
 
3.4 – Journal Voucher – For Adjustments / Non Cash Transactions: 
 
Journal vouchers need to be prepared in order to reconcile different combinations of inter 
related accounts. Besides, transactions of some non-cash items will also be made 
through the preparation of Journal Voucher.   
 
Preparation of journal voucher is generally necessary to record the posting of all financial 
transactions that are generally categorized as below: 
 
 Depreciation of all fixed assets; 
 
 Provision created for the capital expenditures; 
 
 Provision created for the revenue expenditures; 
 
 All sorts of adjustment in inventory accounting; 
 
 All sorts of adjustment of advances; 
 
 All sorts of income receivables; 
 
 Provision created for the loan losses;   
 
 To accounts for all sorts of accrued liabilities; 
 
 Accounting of deduction of security deposit, Income Tax, & VAT 
 
 All sorts of rectification entries for appropriate corrections; 
 
 Other transactions not covered by any other vouchers. 
 
Journal vouchers shall be submitted for verification to the Manager Finance (FM) and 
then for approval to the Deputy General Manager (DGM), together with all supporting 
documents. Only duly approved journal vouchers can be posted to the books of accounts. 
 
 
The specimen format of Journal Voucher is given in Form No. - 103 
 
3.5 – Cash Journal Register: 
 
PKSF account section shall maintain double-column Cash Journal Register. All cash and 
bank transactions will be recorded in the respective columns of cash and banks of cash 
journal register on daily basis in computer.  
 
Cash debit journal will be recorded on the expenditure / payments side and cash credit 
journal will be recorded on the receipt side of the cash journal register chronologically. 
Cash journal register must be balanced after daily operations are being completed. After 
balancing the cash journal, the balance amount will be physically verified and there after 
both accounts officer and cashier will put their signatures acknowledging the above 
balance as found correct. Thus, it is the primary and main book of the PKSF that will give 
an accurate picture of the cash item transactions in a particular time. 
 
 
This will be a computerized form – R-201.

P/37 
 
3.6 – Control General Ledger: 
 
 
The control general ledger is the control book to summaries all financial transactions 
(cash items and non-cash items transactions) of PKSF in accounts head and accounts 
code wise for easy preparation of financial statements. Recording of all the daily 
expenses and income transactions will be made in the control general ledger through 
computer. All transactions in cash journal register and through journal vouchers will have 
to be recorded in control general ledger under different accounting heads and codes.  
 
This will be a computerized form. 
 
3.7 – Project Ledger: 
 
 
PKSF executes various projects simultaneously. Project accounts are separate sets of 
books. So, it is essential to keep separate records for all transactions as per their 
connection to different projects since the sources of funds are not same. To ensure the 
project wise recording, the all project wise financial transactions VIZ, cash and non-cash 
items will have to be accumulated in accounts head and accounts code by opening of 
project ledger sheet in necessary.  
 
This will be a computerized form. 
 
3.8 – Money Receipts: 
 
Money Receipt is a computerized form, shall be used for the following transactions: 
 
 
Receipt of funds; 
 
Receipts of service charges and loans repayments amount from POs; 
 
Sale proceeds of wastage and scrap materials; 
 
Sale proceeds of assets & dead stock; 
 
Fees and subscriptions; 
 
Received from other sources; 
 
All other receipts. 
 
3.9 – Subsidiary Ledger: 
 
Subsidiary ledger is the secondary control book to summaries all financial transactions 
(cash items and non-cash items transactions) of PKSF in accounts head & code wise for 
detail presentation of the control general ledger. Detail recording of the daily expenses 
and income transactions will be made in this ledger. All transactions in cash journal 
register and through journal vouchers will have to be recorded in this ledger under 
different accounting sub-heads and sub-codes.  
 
This will be a computerized form – R-202. 
 
3.10 – Store Ledger: 
 
 
Store ledger shall be maintained for all materials purchased - whether for works or for 
store or for sale. A separate folio or set of folios shall be opened for each stock group. All 
stock items placed in store or issued out of store should be recorded in the store ledger 
individually. All stock items in store shall be inventoried at June 30 each year positively. 
All types of store ledgers shall be up-to-date at all times and balanced at the end of each 
month.

P/38 
 
 
3.11 – Bank Reconciliation Statement:  
 
 
The bank statement providing all details of bank transactions should be obtained from the 
bank by the 5th of the following month and scrutinize the transactions recorded in bank 
statement and reconcile with the Cash Journal Register.  
 
 
Bank reconciliation statement should be prepared by the tenth day of the following month. 
If the account section with the balance as per bank statement for reconciliation purpose, 
all cheques deposited but not credited by bank should be added, and cheques issued but 
not cashed be deducted. 
 
Appropriate reconciliation would also be required for bank charges, which are generally 
accounted for only on receipt of bank statements. 
 
 
The official designated for verification should review the completed bank reconciliation 
statement very carefully. 
 
The specimen format of Bank Reconciliation Statement is given in Form No. - 107 
 
 
3.12 – Formats to be Used: 
 
 
 
The organization will also use the following formats in the prescribed forms designing in 
connection to recording, posting, documenting, as evidences, finalizing all financial 
transactions and preparing & presenting financial statements of PKSF: 
 
 
Advance slip / IOU form; 
 
Requisition of fund / indent form; 
 
Store materials requisition form; 
 
Purchase requisition form; 
 
Schedule of comparative statement form; 
 
Purchase order form; 
 
Goods receipt & inspection note form; 
 
Conveyance bill form; 
 
Travel expenses and allowance bill form; 
 
Log book sheet; 
 
Travel request from; 
 
Overtime request form; 
 
Annual accounts statements form; 
 
Accounts schedules form; 
 
Staff advances statements form; 
 
Accounts payable statements form; 
 
Accrued liabilities statements form; 
 
Physical inventory statements form; 
 
Trail balance statements from; 
 
Income & expenditure accounts form; 
 
Balance sheet statements form; 
 
Cash flow statement form; 
 
Cash certificates form; 
 
Bank confirmation certificates form; 
 
Cash Scroll Book form

P/39 
 
 
3.13 – Erasing & overwriting prohibited:  
 
 
Erasure and overwriting of entries once made in the cash journal register, ledgers and 
other registers are strictly prohibited. If a mistake is discovered, it should be corrected by 
drawing the pen through the incorrect entry and inserting the correct one in between the 
lines. Every such correction should be attested by the officer / cashier / AMF with his 
dated initials. 
 
 
3.14 – Conclusion:  
 
 
 
The above mention forms and registers are important documents. So, proper care must 
be taken of these registers. Special attention should also be paid so that the entries to the 
forms and register are made as carefully as possible and deletion.  
 
Over writing or tearing of page with wrong entries should be avoided. If an entry in the 
form / register is found to be erroneous, then initials should be given after inserting correct 
data deleting the previous one.  
 
Eraser, vanishing liquid / fluid should never be used to rectify a wrong entry. Data 
transferred from certain column or space of original source will have to be recorded in the 
respective column or page of the register.

P/40 
 
CONTENTS OF CHAPTER – 4  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
------------------------------------------------------------------------------------ 
4.1 – Instructions to write up Cash Journal 
4.2 – Instructions to write up Journal Voucher 
4.3 – Instructions to write up Cash Journal Register 
4.4 – Instructions to write up Control General Ledger 
4.5 –Instruction to write up Bank Reconciliation Statement  
 
 
 
 
------------------------------------------------------------------------------------ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4–WRITING PROCEDURE OF FORMS, VOUCHERS & RECORDING BOOKS

P/41 
 
 
CHAPTER – 4 
 
 
WRITING PROCEDURE OF FORMS, VOUCHERS & RECORDING BOOKS 
 
 
4.1 – Instructions to write up Cash Journal:(Debit & Credit Vouchers) 
 
 
 At first, mention project / fund name for which the concerned cash journal will be 
prepared; 
 
 And then, voucher number will be set-forth chronologically relating to the date of 
incurring the financial transactions. 
 
 Put the date of preparation of cash journal. 
 
 Name the bank account from which payment is to be made and receipt will 
accumulate. 
 
  Mode of payment will have to be mentioned. i.e. cash or cheque in payment voucher. 
 
 Mode of receipt will be mentioned cash or cheque wise in case of receipt voucher. 
 
 It is compulsory to write down the cheque number for better get control over bank 
payments and receipts; 
 
 Exchange rate of the date of happening the transactions to be mentioned for foreign 
currency conversion purpose; 
 
 Accounts head and code from the chart of accounts has to be clearly specified in the 
voucher format both debit and credit sides. Other wise, summarization of ledger is not 
accurately possible in computer software. 
 
 Being implementation of internal check system, it is compulsory to write up the Taka 
amount in words in cash journal format correctly. 
 
 Narration of the occurring of the financial transaction shall be written in legible way 
that shall be easily understood by all concern. 
 
 Before posting, the cash journal shall be checked compulsorily. Posting of cash 
journal in the cash journal register through computer software will be clearly 
earmarked with the words “YES or NO” along with the signature and also mention the 
date of posting. Control general ledger, project ledger, loan ledger, subsidiary and 
sub-subsidiary ledger positing automatically generated in the computer software.   
 
 Finally, cash journal will be printed out in hardcopy, signed by the prepared by, 
checked by and approved by.

P/42 
 
4.2 – Instructions to write up Journal Voucher: 
 
 First point is that to note the project / fund name for which journal has been prepared; 
 
 Then, put the journal voucher number in the format; 
 
 Date of preparation of journal voucher is compulsory to write down; 
 
 Accounts head and accounts codes from chart of accounts to be accurately 
mentioned in the journal voucher form with debit and credit amount. Then, totaled 
both the sides. 
 
 Being implementation of internal check system it is compulsory to write up the Taka 
amount in words correctly in the journal voucher format. 
 
 In narration column, the causes of making the journal voucher will be highlighted in 
details with putting references. 
 
 Finally, journal voucher will be signed by who prepared it and checked it and then 
placed to DGM (Finance / Accounts) for final approval. 
 
 Posting of non-cash transactions in ledgers should be clearly earmarked by putting 
the “YES or NO” with date of posting in journal voucher format. 
 
4.3 – Instructions to write up Cash Journal Register: 
 
 Cash Journal Register is a computer software generated format.  
 
 Computer generated cash journal register has two sides for recording of cash 
journals – 
 
o 
Credit journals will be recorded in “Receipts” side (denotes "+"); and 
o 
Debit journals will be recorded in “Payment” side (denotes "-"). 
 
Format is same for recording in both sides (credit and debit). 
 
 Cash Journal both debit and credit shall be posted in the Cash Journal Register that 
is a computer software generated format.  
 
 Finally, cash journal register will be printed out in hardcopy & check the followings: 
 
 
At first, dates of the cash journal register. This will be the date of debit and 
credit journals date and sequence of writing up the date is always be 
maintained accurately. 
 
 
Then, voucher number from cash journal of debit and credit shall be written 
so correctly to attain the goal of internal check and control. 
 
 
Particular column whether recorded as the details of nature of expense. 
Whether accounts head and codes column recorded similar to the accounts 
head and codes that are written in cash journal.

P/43 
 
 
Then, check the Taka amount separately for cash payment and receipt in 
cash column & for bank payment and receipt in bank column.  
 
 
Then check the total figure in receipt and payment side of cash and bank 
columns respectively.  
 
 
Check balancing amount after deducting total payments from total receipt. 
 
 Finally, accounts personnel will sign cash journal register after detail checking and 
verification of vouchers posting & balancing with the close of every day's recording. 
 
4.4 – Instructions to write up Control General Ledger: 
 
 Control General ledger is also a computer software generated format. 
 
 The Debit and Credit of Control General Ledger will be automatically posted through 
computer software simultaneously at the time of inputting the posting of debit and 
credit of Cash Journals and Journal Vouchers in the computer. 
 
 Finally, cash journal register & journal voucher register will be printed out in hardcopy 
and checked the followings: 
 
 
Firstly, to check accounts head and code very carefully & accurately.  
 
Check the correct date from cash journal and journal vouchers.  
 
Check the debit and credit column Taka amount whether recorded as per 
accounts head and code debit & credit basis from cash and journal voucher.  
 
Then, check the balance amount whether found out by balancing debit & 
credit figure in line by line. 
 
 Finally, marking of debit and credit balances accurately and signed the cash journal 
register and journal voucher register who checked these. 
 
4.5 – Instruction to write up Bank Reconciliation Statement: 
 
 First the balance as per Cash Journal Register for reconciliation purpose in 
reconciliation statement. 
 
 Then, added all cheques issued but not presented in bank for payment. 
 
 Then, deducted all cheques deposited in bank but not collected by bank. 
 
 Then, added all cheques collected by bank but not entered/recorded in to Cash 
Journal Register. 
 
 Then, added bank interest credited in bank statement but not entered/recorded in to 
Cash Journal Register. 
 
 Then, deducted all cheques cashed by bank but not entered into Cash Journal 
Register. 
 
 
Then, deducted all bank charges & commission debited in bank statement but not 
entered in to Cash Journal Register. 
 
 Then, deducted clearing return by bank. 
 
 
The official designated for verification should review the completed bank 
reconciliation statement very carefully.

P/44 
 
CONTENTS OF CHAPTER – 5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
--------------------------------------------------------------- 
5.1 - Types of Registers  
5.2 - Fixed Assets Register 
5.3 - Salary and Payroll Register 
5.4 - Cheque Issue Register 
5.5 - Cheque/DD/PO Receipt Register 
5.6 - VAT & Income Tax Register 
5.7 - Advance Slip / IOU Register 
 
 
 
 
 
 
5.8 - Budget Register 
 
 
 
 
 
 
--------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 5 - MAINTENANCE OF REGISTERS

P/45 
 
CHAPTER – 5 
 
MAINTENANCE OF REGISTERS 
 
5.1 - Types of Registers: 
 
Accounting offices of PKSF shall maintain the following register to record the financial 
transactions and its related information: 
 
 Fixed Assets Register 
 Salary and Payroll Register 
 Cheque Issue Register 
 Cheque/DD/PO Receipt Register 
 VAT & Income Tax Register 
 Advance Slip / IOU Register 
 Budget Register 
 Tour Register 
 
5.2 - Fixed Assets Register: 
 
All fixed assets acquired / sales / disposal shall be recorded in as per the format given for 
the Fixed Assets Register (as per format - Register No. - 203). A separate folio or set of 
folios shall be opened for each asset group. All fixed assets on hand shall be recorded in 
the fixed assets register individually. The register shall be kept up to date at all times and 
balanced at the end of each month.  
 
The fixed assets shall be physically verified at the end of each half year and results 
should be reconciled with the fixed assets register and short / excess, if any, shall be 
adjusted in the books of accounts and Fixed Assets Register with the approval of the 
competent authority of PKSF. Sold, disposed of and damaged asset must be recorded in 
the appropriate column of the Register. Depreciation on fixed assets will be recorded in 
the fixed assets register in appropriate column. 
 
5.3 - Salary & Payroll Register: 
 
PKSF Head Office and its Regional Audit office shall maintain a sheet/register 
(computerized) for payment of monthly salaries to the staff members (as per format - 
Register No. - 204). All employees should be encouraged to receive their salary through 
their individual bank account or through cheques. This will reduce the risk of handling 
cash.  
 
5.4 - Cheque Issue Registers: 
 
To establish an effective internal control mechanism, cheque issue register shall be 
effectively maintained. Register to be maintained for recording cheques for persons / 
organizations to whom cheques are issued, date, amount, indicating payment date, 
cheque nos., purposes of payment, bank branch upon which cheques are drawn. 
Separate cheque issue register shall be opened for individual bank account. Cheque 
signatories shall sign the register. Register shall always be signed by a senior level officer 
of accounts’ section & shall be checked by another personnel. (As per format - Register 
No. - 205)

P/46 
 
 
5.5 - Cheque/DD/PO Receipt Registers: 
 
 
To establish an effective internal control mechanism a cheque & demand draft receipt 
register shall be effectively maintained. This register to be maintained for recording 
cheques for persons / organizations to whom cheques & demand drafts are received, 
date and amount, indicating receipt date, cheque nos., purposes of receipt, bank branch 
upon which cheques and demand drafts are received.  
 
This register shall always be signed by a senior level officer of accounts’ section and shall 
be checked by another personnel. (As per format - Register No. - 206) 
 
 
5.6 - VAT & Income Tax Register: 
 
 
VAT & Income Tax register  (As per format - Register No. - 207) shall always be 
maintained 
by 
PKSF 
to 
control 
over 
the 
VAT 
collections/deductions 
from 
suppliers/consultants and income tax deductions from the suppliers & consultants and 
deducted amount are duly been deposited to the Government fund through treasury 
challan as per rules and regulations as made in this context by the Income Tax Ordinance 
1984.  
 
 
5.7 - Advance Slip / IOU Register: 
 
 
 
IOU / Advance Slip register (as per format - Register No. - 208) shall be maintained by the 
PKSF Head Office and its Regional Audit office to record the Taka amount given as IOU / 
as by Advance Slip and to record the Taka amount adjusted / refunded by the staff 
members of the organization only for emergency purposes or making expenses of very 
small amount.  
 
 
5.8 - Budget Register: 
 
 
 
A budget register (computerized R-209) shall be maintained always in an updated manner 
by the accounts personnel to control the expenditure in any particular head. Before 
confirming the payment, budget should be checked and verified and this is why the 
budget register should be maintained regularly and correctly.

P/47 
 
 
CONTENTS OF CHAPTER – 6 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
------------------------------------------------------------------------------------- 
6.1 - Finance & Accounts Activities 
6.2 - Treasury, Bills and Salary Activities 
6.3 - General Accounting, Ledger & Final Account Activities 
6.4 - Loan to POs Accounting Activities 
6.5 - Budgeting, Tax, Internal & External Reporting Activity 
6.6 - Job Description of Finance & Accounts Section 
 
 
 
-------------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 6 – FINANCE & ACCOUNTS ACTIVITIES & JOB DESCRIPTION

P/48 
 
CHAPTER – 6 
 
FINANCE & ACCOUNTS ACTIVITIES & JOB DESCRIPTION  
 
6.1 – Finance & Accounts Activities: 
 
PKSF finance and accounts activities can be subdivided into four main specialized ways 
for the sack of better handling of its entire operations / functions VIZ: 
 
 Treasury, bills and salary activities; 
 General accounting, ledger & final accounts activities; 
 Loan to POs accounting activities; 
 Budgeting, tax and internal & external reporting activities. 
 
The details of the above activities are highlighted as follows: 
 
6.2 – Treasury, Bills and Salary Activities: 
 
 Handling of cash floats – All receipts and payments by cash and bank accounts; 
 
 Payment of various expense bills in cash or on cheque after proper examination and 
pre-auditing of these bills being done; 
 
 To exercise control over all banking transactions; 
 
 Withdrawal of necessary amount of cash from banks to carry out daily cash 
transactions; 
 
 Preparation of cash requisition statement on need basis; 
 
 Proper, accurate and up dated writing of double column cash book (Cash Scroll 
Book) and daily balancing; 
 
 Reconciliation of cash balance with physical balance of cash; 
 
 Preparation of IOU slip and file the duplicate for control and internal cheek; 
 
 Preparation & checking of advance forms and their reporting; 
 
 Debit & credit vouchers preparation through cash journal – only the approved ones; 
 
 Preparation of cash & bank payments and receipts summary as per accounts heads 
and code on monthly basis; 
 
 Preparation of journal vouchers for adjustments, rectification and for other 
transactions as and when needed; 
 
 All types of correspondences with the banks; 
 
 Collections of bank statements – accounts wise; 
 
 Collections of bank confirmation statements from all banks on monthly basis;

P/49 
 
 Maintaining of bank accounts register / ledgers; 
 
 Preparation of bank reconciliation statement for all bank accounts on monthly basis; 
 
 Preparation of daily cash and bank balance statements; 
 
 Arrangement of transfer of funds from DOSA; 
 
 TA / DA bills checking with rules; 
 
 Budget provisions verifications and recordings; 
 
 Process of salary and bonus payments to staff members; 
 
 Preparation of bank advice for salary payments with details list of individuals net 
salary payable; 
 
 Documentation of recording the all sorts of deductions of salary; 
 
 Processing all sorts of internal bills, their documentation, authentication, approval, 
payments and recording accordingly; 
 
 Processing all sorts of external bills (bills of contractors, suppliers and other third 
parties), their documentation, relevancy, authentication, approval, payments and 
recording accordingly; 
 
 
6.3 – General Accounting, Ledger & Final Accounts Activities: 
 
 
Preparation, checking and verification of Journal vouchers for all non cash 
transactions; 
 
 
Posting of approved journal vouchers (non-cash) in computer accounting software 
daily and when ready for recording; 
 
 
Posting of all cash and bank transactions through cash journal in Cash Journal 
Register daily and when ready for recording; 
 
 
Posting and balancing in all types of registers and sub - subsidiary registers on timely, 
properly and accurately; 
 
 
Maintenance of separate fixed assets register for each projects and funds. 
 
 
Posting and balancing in fixed assets register. 
 
 
Depreciation calculations all fixed and other assets which are depreciable assets;  
 
 
Preparation of fixed assets schedules with showing their depreciation and written 
down value; 
 
 
Preparation of Project-wise Trial Balance; 
 
 
Preparation of consolidated Trial Balance as a whole;

P/50 
 
 
Preparation of Project-wise Income Statements. 
 
 
Preparation of consolidated Income Statements; 
 
 
Preparation of Project-wise Balance Sheet; 
 
 
Preparation of consolidated Balance Sheet; 
 
 
Preparation all related project-wise and consolidated accounts schedules and 
statements; 
 
 
Preparation of project-wise and consolidated Notes to the Accounts / Financial 
Statements; 
 
 
Preparation of statements for adoption of accounting policies as adopted by 
management in preparing financial statements of PKSF; 
 
 
Finally, to confirm that the preparation of financial statements / accounts of PKSF and 
its projects are prepared as per the requirements and disclosure requirements of the 
International Accounting Standards (IASs) as adopted in Bangladesh; 
 
6.4 – Loans to POs Accounting Activities: 
 
 
Preparation of all service charges against loans to POs related statements to be 
needed by the preparation of income statements in presenting the financial 
statements; 
 
 
Maintenance of separate Loans to POs register for all POs; 
 
 
Updating of posting in Loans to POs registers and their balancing in timely manner; 
 
 
Preparation of service charges cash journal and their documentation & recording 
properly; 
 
 
Preparation of service charges journal vouchers and their documents & recording 
properly; 
 
 
Preparation of aging schedules of loans to POs and necessary flow up regarding 
realization and adjustments; 
 
 
Maintenance of all related documents, papers, agreement, deeds with the POs; 
 
 
Maintenance of disbursement records, their recording in the loan register and update 
the documentation. 
 
 
Maintenance of recovery / collection records, their recording in the loan register and 
update the documentation; 
 
 
Preparation of loan classification statements to the loans to POs as per internationally 
accepted policy guidelines; 
 
 
Preparation of provision for loan loss statements as per classified loan statement to 
the Loans to POs as per internationally accepted guidelines;

P/51 
 
6.5 – Budgeting, Tax and Internal & External Reporting Activity: 
 
 Budget and budgeting functions – preparation of budgets for new and all existing 
offices of PKSF; 
 
 Collection of information & data in connection to formulation of budget for all offices; 
 
 Processing, editing and reviewing the collecting information and data in connection to 
formulation of budget for all offices of PKSF; 
 
 Setting of standards in relation to the formulation of budget for all offices of PKSF; 
 
 Formulation of budget for all offices of PKSF; 
 
 Maintenance of budget registers in all offices of PKSF as per requirements; 
 
 Preparation of budget monitoring statements; 
 
 Preparation of variance statements; 
 
 Analysis of variances; 
 
 Assessment of actual results with the budgeted ones and if any deviation found, then 
to pinpoint the actual causes 
 
 To take necessary steps to eradicate or minimize this deviation in future through 
more realistic budget preparation and / or better performance; 
 
 To give necessary guidelines & advice in order to rectify those anomalies/mistakes 
that have been pinpointed by the internal auditors in their periodic audit reports; 
 
 All correspondences to the Tax authority; 
 
 All correspondences to the VAT authority; 
 
 Filling of tax returns of the staff members of the organization whose are taxable; 
 
 Processing of tax assessments; 
 
 Maintenance of tax deductions register for the staff members, suppliers and for 
others who are related; 
 
 Deposit of money to Bangladesh Bank through Challan of the deducted amount as 
advance tax from staff members and outsides parties; 
 
 Internal reporting to the management for decision making relating to the information 
of accounts and finance as and when needed; 
 
 External reporting of financial accounting to funding agencies on the basis of their 
requirements or in accordance with the conditions previously agreed with them; 
 
 In addition to the above functions, this branch provide all other accounts and finance 
related information for Management Information System (MIS) reporting purpose; 
 
 All types of correspondences to the Government; 
 
 All types of correspondences to the loan given agencies relating to the relevant 
matters of accounts and finance;

P/52 
 
 
6.6 - Job Description of Finance & Accounting Section: 
 
 
Designation & 
Name 
Works / Duties 
Leave 
Substitute 
1. 
DGM 
-
(Finance & 
Accounts) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
a) Overall charge of Finance and Accounts Section of PKSF; 
b) Preparation of Annual Budget of PKSF; 
c) Expenditure Control; 
d) Management of IDA fund, withdrawal its and repayment to Government 
and IDA; Keeping DOSA and Reconciling with Bangladesh Bank 
Statement, Keeping IDA accounts and reconciling with IDA statement, 
repayment schedule preparation;   
e) Verification of income and expenditure of PKSF and passing of credit, 
debit and journal vouchers; 
f) Internal Audit and giving cooperation in conducting External Audit. 
g) Fund management: Preparation of quarterly projection, contacting banks 
and negotiating rate for investment; 
h) Handling files and keeping register for short term investments of the 
temporary idle funds; 
i) Ensure proper preparation of cheques, DD, Pay-order etc. as per order 
of the competent authority & place them to signatories for their 
signature; 
j) Other duties as assigned by PKSF; 
k) National 
Budget 
related 
work, 
estimating 
fund 
requirement, 
corresponding with the ministry & follow up for budget inclusion, getting 
budget copy; 
l) Finance related work with the Ministry, Informing budget variation, 
getting authorization for fund release from Bangladesh Bank after 
producing signature cards etc. 
He will report directly to General Manager (Administration) 
Manager 
(F/A) 
2. 
Manager (F 
& A) 
 
a) 
Overall supervision Finance and Accounts section of PKSF; 
b) 
He will coordinate the works of the staff members describe in serial 3 to 
12;  
c) 
He will ensure: 
(I) - the proper maintenance of general cash book, ledgers and all other 
accounts related books; 
(II) - the correctness of Debit & Journal Vouchers & present them to the 
DGM (F/A) for approval; 
(III) - proper preparation of cheques as per order of the competent authority; 
(IV) - the maintenance of Provident Fund Account; 
(V) - the matter relating to income tax; 
(VI) - the matter relating to Register of Joint Stock Companies & Firms; 
(VII) - the works relating to final settlement of the staff members;   
d) 
Assist DGM (F/A) in preparation of annual budget of PKSF and 
expenditure control; 
e) 
Preparation of final Accounts & Statements and presenting monthly 
accounts to DGM (F/A) by 20th of next month; 
f) 
Keeping document and books ready for internal & external audit; 
g) 
Keeping separate accounts for USAID; 
h) 
Clear outstanding entries in Bank reconciliation. Foreign Tour bill 
counter signing; 
i) 
Joint Custodian of valuables & confidential document, agreements etc.; 
j) 
Joint keeper of loan agreements; 
k) Other works as assigned by the DGM (F&A) or by the 
Management of PKSF; 
He will report to DGM (F&A). 
DGM (F 
& A)

P/53 
 
 
 
3. Manager (F 
& A)-2 
       
 
a) 
Supervision of accounting for BIPOOL POs and other projects; 
b) 
Proper maintenance of accounts relating to POs under BIPOOL & 
keeping separate relevant documents from those of POs under OOSA;  
c) 
Works relating to incoming DD / Cheques / Pay order etc. 
(I) - Ensure timely deposit of incoming DD, Cheques, Pay order etc. to 
concerned bank account of PKSF; 
(II) - Verification of DD receipt register & repayment card; 
(III) - Verification of all credit vouchers; 
(IV) - Settlement of returned DD, cheques, Pay order etc.; 
d) 
Keeping separate accounts of ADB funded "PLDP", JMBA funded 
TEIGP", IFADEP-1 funded "DAW" under VGD Programme and of their 
project including replenishment of fund from ADB; 
e) 
Ensure proper transactions at reception relating to sales of various 
publications form etc; 
f) 
Final verification of T/A bills of the staff members & placed them to 
concerned authority for approval; 
g) 
Ensure proper preparation of salary & bonus statements, salary & bonus 
transfer advice; 
h) 
Assist Manager (F/A)-1 in preparation of final accounts statements and 
other important works; 
i) 
Joint custodian of valuables and confidential document, agreement etc; 
j) 
Joint Keeper of loan agreements; 
k) 
Works directly assigned by the DGM (F/A) or by the management of 
PKSF; 
l) 
Works related to fixed assets inventory; 
He will report to the DGM (F&A). 
 
Assistant 
Manager 
(F&A) 
 
4. 
Assistant 
Manager 
(F&A) 
 
 
a) 
Verification of debit & journal vouchers present them to Manager (F/A); 
b) 
Preparation of day to day adjusting vouchers; 
c) 
Preparation of vouchers for banks interest on STD & Savings Account 
and for bank charges, commission etc; 
d) 
Ensure proper & regular posting of the vouchers; 
e) 
Verification of posting of all types of vouchers & take corrective measure 
if required; 
f) 
Preparation of salary statements, festival bonus statements, salary & 
bonus transfer advice; 
g) 
Review the bank reconciliation statements and take necessary 
corrective measures; 
h) 
Reconcile the accounts information with those of MIS and take 
necessary action; 
i) 
Maintenance of Provident Fund Accounts; 
j) 
Works relating to final settlement of the staff members; 
k) 
Matters relating to Joint Stock Companies & Firms; 
l) 
Matters relating to income tax; 
m) Other Works as assigned by Manager (F&A) & any other works directly 
assigned by the DGM (F&A) or by the Management of PKSF; 
He will report to the Manager (F&A). 
 
Officer 
(F&A)

P/54 
 
5. 
Officer 
(F/A) -1 
       
a) 
Loan disbursement as per prescribed system, verification of loan 
agreements & maintenance of loan disbursement register; 
b) 
Other payments through cheques; 
c) 
Assist in preparing of salary statements, festival bonus statements, 
salary & bonus transfer advice; 
d) 
Maintenance of Provident Fund Accounts; 
e) 
Preparation of cheques as per order of the provident fund 
competent authority & maintenance of related books; 
f) 
To prepare adjusting vouchers for T/A bills; 
g) 
Computer works for correspondence purpose; 
h) 
Other works as assigned by the Manager (F&A) or by Assistant 
Manager (F&A) & any other works directly assigned by the DGM 
(F&A) or by the Management of PKSF; 
i) 
Keeping loan agreements. 
He will report to the Manager (F&A)-1 
 
Assistant 
Grade - 1  
(F&A) 
6. 
Officer 
(F&A) - 2 
 
 
a) 
Preparation of Cheques as per order of the competent Authority; 
b) 
Making payment of taxes including tax deducted at sources, PF 
Contribution etc. 
c) 
Preparation of debit vouchers for payment through cheques; 
d) 
Assist Manager (F&A) for handling various files; 
e) 
Supervision of cash transactions; 
f) 
Preparation of adjustment vouchers against bills of the parties; 
g) 
Verification of T/A bill of the officers from the level of Managers and 
places & placed them to Manager (F& A)-1for final verification; 
h) 
Verification of foreign tour bills and place them to Manager (F&A)-1 
for final verification; 
i) 
Assist Managers (F&A) in preparing of final accounts & statements; 
j) 
Other Works as assigned by the Manager (F&A) or by Assistant 
Manager (F&A) & any other works directly assigned by the DGM 
(F&A) or by the Management of PKSF; 
He will report to the Manager (F&A)-1. 
 
Assistant 
Grade - 1 
(F&A) - 1 
7. 
Assistant 
Grade 
- 
1 
(F&A) 
       
a) 
Works relating to incoming DD / Cheques / Pay order under core 
program: 
 (I) - Receipt of incoming DD, Cheques, Pay order etc. from reception & entry 
made to the DD receipt register & in the repayment card; 
(II) - Identify each and every receipt with allotment number, installment 
number, project, area and identifying as to different types of ID loan to 
principal and service charge. Recording the receipts in register, credit 
vouchers and in cards and depositing the collections in related bank 
accounts; 
(III) - Timely deposit the incoming DD, Cheques, PO etc. to concerned bank 
account of the PKSF; 
(IV) - Issue of cash memo for realization of loan installment & other receipts; 
(V) - Works related to return of DD, Cheques and PO etc; 
b) 
Preparation of credit vouchers for the sale proceeds of publications, 
Forms etc. at the reception; 
c) 
Other works as assigned by the Manager (F&A) or by the Assistant 
Manager (F&A) & any other works directly assigned by the DGM 
(F&A) or by the Management of PKSF. 
He will report to Manager (F&A)-2. 
 
 
Officer  
(F&A)

P/55 
 
 
8. 
Assistant 
Grade 
- 
1 
(F&A) 
       
a) 
Works relating to incoming DD / Cheques / Pay order under various 
projects: 
(I) - Receipt of incoming DD, Cheques, Pay order etc. from reception & entry 
made to the DD receipt register & in the repayment card; 
(III) - Timely deposit the incoming DD, Cheques, PO etc. to concerned bank 
account of the PKSF; 
(IV) - Issue of cash memo for realization of loan installment; 
(V) - Works related to return of DD, Cheques and PO etc; 
b) 
Preparation of credit vouchers for incoming DD, Cheques, PO etc. 
for core program & other projects; 
c) 
Verification of T/A bill of the employees up to the level of Deputy 
Managers and place & placed them to Manager (F& A)-2for final 
verification; 
d) 
Tour bill register maintenance; 
e) 
Other works as assigned by the Manager (F&A) or by the Assistant 
Manager (F&A) & any other works directly assigned by the DGM 
(F&A) or by the Management of PKSF. 
He will report to the Manager (F&A)-2. 
 
Officer 
(F&A) 
 
9. 
Cashier, 
Assistant 
Grade 
- 
2 
(F&A) 
 
 
a) 
Works as cashier; 
b) 
Preparation of cash debit and cash credit vouchers 
c) 
Preparation of cash memo for incoming DD, Cheques, Pay order etc. & 
other receipt through cash; 
d) 
Other work as assigned by the Manager (F&A), or by the Assistant 
Manager (F&A) Officer (F&A)-2 & any other works directly assigned by 
the DGM (F&A) or by the Management of PKSF. 
 
He will report to the Assistant Manager (F&A)& Officer (F&A)-2. 
 
Assistant 
Grade-1 
(F&A) 
10. Assistant 
Grade-2 
 
a) 
Works as computer operator of the Finance & Accounts Section; 
b) 
Keeping record of all accounts related books / register & files of the 
Finance & Accounts Section 
c) 
Other work as assigned by the Manager (F&A), or by the Assistant 
Manager (F&A) & any other works directly assigned by the DGM (F&A) 
or by the Management of PKSF; 
He will report to the Manager (F&A)-1 and Assistant Manager (F&A). 
 
(Assistant 
Grade-1 
(F&A) 
11. 
Office 
Worker 
Grade-2 
 
a) 
Deposit the DD, P.O, cheques etc. into Bank A/C of PKSF & Payment of 
bills to different offices as per order of the Finance & Accounts Section; 
b) 
Carryout any other order of the Finance & Accounts  
Section or by the Management of PKSF. 
 
12. 
Office 
Worker Grade 
- 2 
 
a) 
Keeping safely the vouchers folders; 
b) 
Going to different banks and ministry with letters etc; 
c) 
Carryout any other order of the Finance & Accounts 
Section or by the Management of PKSF.

P/56 
 
 
CONTENTS OF CHAPTER – 7 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
----------------------------------------------------- 
7.1 - Duration of Cash Transaction 
7.2 - Closing of Accounts 
7.3 - Daily Cash Holding Limit 
7.4 – Handling of Cash 
7.5 - Cash Scroll 
7.6 - Cash Security  
7.7 - Receipt in Cash Section 
7.8 – Perry Cash 
7.9 - Cash Deposited into Bank 
 
 
 
 
 
 
 
---------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 7 - CASH MANAGEMENT PROCEDURES

P/57 
 
CHAPTER - 7 
 
CASH MANAGEMENT PROCEDURES 
 
7.1 - Duration of Cash Transaction: 
 
In order to complete writing of Cash Scroll Books and their posting in the Cash Journal 
Register through computer, daily cash transactions shall be closed at least two (2) hours 
before the close of the office. 
 
7.2 - Closing of Accounts: 
 
Each day, all cash receipts & payments shall be entered into the Cash Journal Register 
and it should be closed daily. Cash Officer (F&A) shall check and verify the cash balance 
and Cash Journal Register at the end of each day and duly signed. Manager (F&A) and 
DGM (F&A) shall verify the cash balance and verify the Cash Journal Register at the end 
of each month and signed duly. 
 
7.3 - Daily Cash Holding Limit: 
 
The management may prescribe money limits for cash in hand in the head office and 
Regional Audit Offices. When such limits are prescribed, cash in hand must not be 
exceeded that limit. 
 
Only cashier, cash officer (F&A) jointly shall be responsible to hold liquid cash. Cash shall 
be drawn from bank to meet the daily cash expenses. Requirement of cash shall be 
intimated through Money Requisition [as per format]. Such requisition shall be received by 
accounts at least five (5) hours before the closing of banking hour. Required cash may be 
drawn from the bank on requisition.  
 
However, after disbursement & receipt the cashier, cash officer (F&A) jointly may hold 
liquid cash to the extent of Taka 50,000 (Fifty Thousand) in head office level and Taka 
40,000 (Forty thousand) in Regional audit office level by Manager and any officer of that 
office as decided by the Managing Director. 
 
Other than above, in no cases, the office liquid money will be in the hand of any staff 
member of the organization unless other wise permitted by the management. The 
adoption of the principle of transacting cash business through bank is to keep to the 
minimum the actual cash handling in the cash section. 
 
7.4 – Handling of Cash: 
 
Office money should be kept in secured strong iron safe. The cash safe should be double 
locked. One set of key shall be kept with the Cash Officer (F&A) and the other set will 
remain with the Manager (F&A). Persons handing the cash should be covered by fidelity 
insurance in addition to cash security to be provided by them. 
 
Cash Officer and Manager (F&A) who is responsible for the safe and security of money 
must satisfy themselves that the iron safe is free from defects. If a defect is detected or if 
there is even a doubt that the keys or their duplicates are missing, immediately 
arrangement should be made for their replacement under intimation to head of finance & 
accounts.

P/58 
 
7.5 - Cash Scroll: 
 
Cash shall remain in the custody of finance and accounts department. At the end of each 
day after making all transactions cashier, Cash Officer shall count the cash physically and 
record on a cash count sheet and shall confirm the balance with the Cash Journal 
Register balance. For cash scroll specific designed format will be used. 
 
7.6 - Cash Security:  
 
While carrying office cash (liquid money) from the bank (for withdrawn purposes) and to 
the bank (for deposition purposes), vehicles shall have to be used and security guard 
shall have to be provided at its best level by the management.  
 
PKSF management should arrange for insurance to cover the risk of carrying and 
deposition of liquid cash. 
 
7.7 - Receipt in Cash Section: 
 
No money should be received from any person without issuing proper receipt which inter-
alia will state the name of person from whom it has been received, amount both in figure 
and words, purposes for which it has been received etc.  
 
The money receipt should be in the prescribed form. These forms shall be printed in 
number, bound book forms, kept in safe custody and properly accounted for.  
 
Normally cashier shall receive the cash by giving money receipt duly signed by Cash 
Officer (F&A). The receipt will be prepared in triplicate, the original will be issued to the 
depositor, the duplicate copy will be kept with voucher & triplicate copy will be retained for 
record and audit verification.  
 
Signature of the depositor must be obtained on counterfoil of the money receipt. Over 
writing & erasing is strictly prohibited and not allowed.  
 
 
7.8 - Petty Cash: 
 
 
Petty cash is maintained on imprest petty system with a limit of Taka 100,000 (One lac) 
only. Taka one lac balance shall be maintained in cash up to Taka 50,000 (fifty thousand) 
only, plus up to Taka 50,000 (fifty thousand) only, in IOU slips and advances. Each IOU 
slip should be adjusted with in eight (8) working days and any advances with in 20 
working days. 
 
The cashier, AMF & MF jointly shall maintain an imprest fund for an amount of Taka 
100,000 (One Lac) for PKSF Head Office in Dhaka to defray the petty expenses. The limit 
of amount for each transaction is Taka 5,000 (five thousand) from this fund and voucher 
is required to prepare for this purpose. 
 
The Manager and one designated officer shall maintain an imprest fund for an amount of 
Taka 40,000 (Forty thousand) for Regional Office to defray the petty expenses. The limit 
of amount for each transaction is up to Taka 3,000 (Three thousand) from this fund and 
voucher is required to prepare for this purpose.

P/59 
 
The cashier will disburse the amount on the basis of the approval as outlined in the 
financial power of PKSF on the concerned bill or payment claim paper after due 
verification and authentication and pre-audit. This will off-load the main Cash Journal 
Register with the transaction volume for the day-to-day expenses of petty amounts. 
 
In head office, the cashier will request the replenishment of the fund by preparing a 
statement of the incurred expenditure by showing the date of payment, accounts head 
and the amount paid on approval of the Chief of Finance & Accounts and MFA. 
Replenishment request should be processed when 80% of the allocated fund will be 
exhausted. 
 
A short period financing for emergent but small amount office expenses, viz. staff 
advance for traveling, conveyance, entertainment, postage, telephone bill, gas bill, 
electricity bill, etc. can be allowed from this petty cash to the employees concerned, but 
the expenditure voucher must be submitted by the following working day and the IOU (as 
per format) should be approved duly. 
 
 
7.9 - Cash Deposited in to Bank: 
 
 
The cashier, cash officer and Manager (F&A) will make sure of the deposition of the cash 
and cheque collected daily in to bank and recorded the transaction immediately in the 
Cash Journal Register. 
 
The Cash Officer will prepare the pay-in slip. The Manager (F&A) and DGM (F&A) will 
make best arrangement to send the money in the bank.

P/60 
 
CONTENTS OF CHAPTER – 8 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
--------------------------------------------------------------- 
8.1 – General 
8.2 - Procedure of Opening Bank Account 
8.3 - Chapter Office Bank Accounts 
8.4 - Operation of Bank Accounts 
8.5 – Signatories Details 
8.6. - Cheque Counterfoil 
8.7 - Cancellation of cheques 
8.8 - Canceled Cheques 
8.9 - Cheque Issue & Receive Register 
8.10- Cheque, D. Draft & PO Receipt Register 
8.11 - Payment from Bank 
8.12-Withdrawal of Cash from Bank 
8.13 - Bank statement and Bank Certificate 
8.14 - Bank Reconciliation Statement 
8.15 - Ordering of New Cheque book 
8.16 - Safety to Cheque Books 
8.17 – Receipts of Cheque / Drafts 
8.18 – Dishonour of Cheques 
8.19 – Payment for Lost Cheques 
 
 
 
 
 
 
------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 8 - BANK ACCOUNTS OPERATION MANAGEMENT

P/61 
 
CHAPTER - 8  
 
BANK ACCOUNTS OPERATION MANAGEMENT 
 
 
8.1 – General: 
 
 
All funds (received) shall be paid into the PKSF's accounts with the bankers of the PKSF 
and shall not be withdrawn except by cheque signed by the Managing Director, or by such 
officer of the PKSF as may be duly empowered in this behalf by the Managing Director or 
the Governing Body. All receipts of money through cheque / draft / pay order / transfer 
advice, bank account shall be debited and relevant source / liability / income account is 
credited. Cheque / Draft / Pay order shall be deposited into bank through deposit slip of 
the bank. General principle of PKSF is that to encourage all concern to make / receive 
payments through banks. 
 
 
8.2 - Procedure of Opening Bank Account: 
 
 
As per Articles of Association of the PKSF -  
 
 "All properties of the PKSF, movable and immovable shall vest in the PKSF and 
shall be administered by the Managing Director, on behalf of the PKSF within the 
parameters set by the PKSF in its General Meeting or otherwise as directed by 
the Governing Body".   
 
 Unless other wise authorized by the Governing Body, the Chairman or the 
Managing Director of the PKSF, no new account in the name of the PKSF shall 
be opened. 
 
Thus, the bank accounts PKSF shall be operated in accordance with the provision of the 
above Articles of Association of the organization. The organization, as envisaged in the 
Articles of Association, shall open bank accounts (projects / otherwise) in any bank for 
each project separately by taking resolution in the Governing Body.  
 
Bank account may be opened for each fund / project / which shall be interest bearing 
unless otherwise specified in the letter of agreement or Memorandum Of Understanding 
(MOU) of donor or fund agencies. 
 
 
8.3 - Regional Audit Offices (Outside Dhaka) Bank Accounts: 
 
PKSF, as envisaged in the Articles of Association, shall open Regional Audit Office bank 
accounts in any schedule bank in the Regional Office areas separately by taking 
resolution in the Governing Body of PKSF.  
 
Fund transfer will be made only after receiving the fund requisition request and monthly 
expenditure statement by head office and its approval by the person as per the delegated 
authority of PKSF head office.  
 
Bank account may be opened which shall be interest bearing unless otherwise specified 
by head office.

P/62 
 
8.4 - Operation of Bank Accounts: 
 
 
For operating the bank accounts of the PKSF Head Office and Regional Audit Offices, 
authority from the Governing Body of PKSF that Managing Director in favour of Governing 
Body, or such other officers by designation of the PKSF as may be duly empowered in 
this behalf by the Managing Director, to sign cheques. Such intimation to the banks is to 
be issued from the head office centrally by enclosing the resolution of operating the bank 
accounts taken in this context by PKSF management. 
 
All the PKSF's banks accounts shall be operated as per the guidelines of the "Delegation 
of Financial Authority" - approved by the PKSF Governing Body.  
 
All the payments through bank must be authorized by joint signatories i.e. 
 
 
1 - Principal signatory and 
 
 
2 - A co-signatory 
 
For all kinds of transactions except where "Delegation of Financial Authority" applies 
PKSF's Managing Director shall be the principal signatory and co-signatory can be any of 
the officials as mentioned below: 
 
 
1 - General Manager (Admin.), or 
 
 
2 - Deputy Managing Director (O), or 
 
 
3 - Deputy Managing Director (B) 
 
Managing Director has the authority to make any changes, amendments in the bank 
signatory powers of the concerned PKSF's officials. 
 
 
8.5 – Signatories Details: 
 
 
Details of cheque signatories for operating the bank accounts will be kept confidentially in 
Finance and Accounts Department under safe custody. It includes name, designation, 
specimen signature and initials, validity date. When signatories are included / deleted, list 
should be placed to substitute previous one. 
 
8.6. - Cheque Counterfoil: 
 
While issuing cheques, it is remembered that counterfoil of cheque shall also be filled in & 
put the date of issue, name of payees, initials of the cheque signatories, amount in Taka 
and words in brief. 
 
8.7 - Cancellation of cheques: 
 
If any cheque issued but not presented for collection by the payee within six month from 
the date of issue, the cheque shall be automatically canceled. Accordingly, the finance 
and accounts department shall give reversal entry in the Bank Book and keep a note in 
the bank reconciliation statement. Any loss or theft of the cheque / chequebook must be 
informed to the concerned bank management at earliest possible time.

P/63 
 
8.8 - Canceled Cheques: 
 
The word "CANCELED" shall be written in the counterfoil as well as on the face of the 
cheque when a cheque is required to be canceled. 
 
8.9 - Cheque Issue Register: 
 
Cheque Issue Register shall be maintained for each bank account separately in a book in 
the prescribed manner. 
 
8.10 - Demand Draft, Cheque & Pay-order Receipt Register: 
 
Demand Draft (DD), Cheque & Pay-Order Receipt Register shall be maintained for each 
bank account separately in a book in the prescribed manner. 
 
8.11 - Payment from Bank: 
 
Any payment exceeding Taka 5,000 (five thousand) shall be made through an account 
payee cheque and payment less than Taka 5,000 (five thousand) may be made by cash 
from the cash in hand in head office level. 
 
8.12 - Withdrawal of Cash from Bank: 
 
For withdrawal of money (Liquid Cash) from the bank account for working cash or for any 
operational expenses, a requisition for fund must be prepared for approval in accordance 
with the delegated authority and withdrawal of cash from bank shall be in accordance with 
the guidelines of "Delegation of Financial Authority".  When cash to be withdrawn, cash 
cheques should denote "Account Payee Cancelled". 
 
Accounts personnel shall always keep in mind that the maximum closing cash balance in 
hand should not exceed Taka 50,000 after the day transaction in PKSF Head Office and 
Taka 40,000 in Regional Audit Offices. 
 
 
8.13 - Bank Statement and Bank Certificate: 
 
Collection of monthly bank statements along with Bank Certificates confirming bank 
balances on monthly basis and relevant advice from bank shall be the responsibility of 
Finance and Accounts Department. 
 
 
8.14 - Bank Reconciliation Statement: 
 
After receiving the monthly bank statement, the bank balance shown in that statement as 
of last day of the month must be reconciled with the balance shown in the cash book on 
the same day by preparing a bank reconciliation statement.  
 
Bank reconciliation statements shall be prepared by Cash Officer duly checked by 
Assistant Manager (F/A) and Internal Audit Department and shall be submitted for 
approval of the Manager (F/A) and DGM (F&A).  
 
The bank charge or interest detected to be not incorporate earlier in the cashbook should 
be entered in the cashbook by preparing a voucher to this effect.

P/64 
 
Any deposit / interest, payment or cheques not record in the bank accounts or bank 
statement shall be reconciled by adding or deducting from the closing balance as shown 
by the bank statement.  
 
A reversal entry should be processed for canceling the cheque issue entry if the cheque is 
found not presented within its validity period. Any difference should be thoroughly checked 
and investigated with the bank. 
 
 
8.15 - Ordering of New Cheque book: 
 
 
Respective Cash Officer with the approval of Manager (F/A) and DGM (F&A) shall initiate 
for ordering new chequebook when the cheque leaf reaches the order shed attached with 
the chequebook.  
 
While receiving new chequebook from bank respective Cash Officer (F&A) shall count the 
cheque leaf and satisfy himself that the numbers of cheque leaves are found in order. 
 
 
8.16 - Safety to Cheque Books: 
 
 
Finance and Accounts Department shall be the custodian of chequebook and shall 
ensure that chequebooks are preserved safety. To be kept under lock (safe volt) and key 
by the Cash Officer and Manager (F&A) designated for this. 
 
Fraud, defalcation and misappropriation of public moneys are largely attributed to 
inadequate measures taken by the authorized officers for the safety and security of the 
bank chequebooks and bank pass books etc.  
 
The officers authorized to sign and / or entrusted with the custody of the cheques / pass 
books will be he held personally liable for losses due to laxity or their parts for the safe-
keeping and security of these books. 
 
 
8.17 – Receipts of Cheque / Demand Drafts Pay-Order: 
 
 
Cheques / demand drafts / pay-orders received in payment of dues cannot, however be 
admitted till they are cleaned from the bank. Final money receipt in printed forms shall not 
be granted till the cheques are en-cashed and proceeds credited to account.  
 
A certificate of receipt quoting the number and the date of cheque tendered or a receipt 
with the following remarks may be given: 
 
 “Issued subject to collection of proceeds’’ 
 
Cheques / drafts / cash received in the cash section must be deposited in to the bank 
without any delay, preferably on the same day, that are received. 
 
Delay in deposit involves question of safety and security and sometimes may result in 
non-realization of the amount of the cheque.

P/65 
 
8.18 – Dishonour of Cheques: 
 
In the event cheques being dishonoured by the bank on presentation the fact mentioning 
the causes of dishonour, should be reported at once to the drawer of the cheque with 
demand for immediate payment and mean while the entry in the books of accounts 
should be reversed.  
 
 
8.19 – Payment for Lost Cheques: 
 
 
If a cheque is reported lost, contract should at once be made with the bank on which the 
cheque was drawn. The bank should be informed / instructed to stop payment on that 
cheque.  
 
Fresh cheque may be issued only after obtaining non-payment certificate from the bank.

P/66 
 
CONTENTS OF CHAPTER – 9 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
----------------------------------------------------------------------- 
9.1 – Introduction and Concept 
9.2 - Internal Control Categories 
9.3 - Classification of Control Procedures 
9.4 - Internal Check System 
9.5 - Payment Management 
9.6 - Payment to Partner Organizations (PO) 
9.7 - Payment for Services 
9.8 - Payment of Salaries 
9.9 - Management of Receipts 
9.10 – Staff Advance and its' Liquidation 
9.11 - Physical Inventory Counting & Checking 
9.12 - Internal Audit - Pre-Audit 
9.13 - Preservation of Accounting Records 
 
 
 
 
 
----------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 9 - INTERNAL CONTROL

P/67 
 
CHAPTER - 9 
                                                                                                                                                                                                                                    
INTERNAL CONTROL 
 
9.1 – Introduction and Concept: 
 
The internal control system is inevitable for an organization to control its financial matters 
as well as to maintain the continuity and accuracy in the arena of its financial affairs. With 
a view to maintain an effective and efficient work flow in all sphere of transaction 
procedures, it is essential to segregate a specific job in different segments and make a 
meaningful division of labour to accomplish that task. Some important elements of the 
internal control device are narrated below: 
 
 
The organization plan with particular reference to the allocation of staff function; 
 
Authorization, recording and custody procedures including internal check; 
 
Managerial supervision and reviews including audit.  
 
An internal control system is defined as the whole network of systems established to 
provide reasonable assurance that PKSF objectives will be achieved, with particular 
reference to: 
 
 
The effectiveness of operations; 
 
The economical and efficient use of resources; 
 
Compliance with applicable policies, procedures, laws and regulations; 
 
The safeguarding of assets and interests from losses of all kinds; 
 
The integrity and reliability of information, accounts and date; 
 
These embraces the concepts of effectiveness, value for money, compliance, irregularity, 
inconsistency and financial controls. 
The manual sets out to achieve is to promote an 
understanding of what constitutes good practice in respect of nurturing a robust control 
environment. It highlights the role of management in ensuring adequate systems of 
internal control are in place at strategic and operational levels.  
 
9.2 – Internal Control Categories: 
 
There are broadly eight categories of internal controls. The acronym "SOAP MAPS" can 
be used to categorized the controls as follows: 
 
1 - Segregation of duties - Roles and responsibilities should be clearly defined. 
 
2 - Organizational structures - Appropriate organization structures should be exists. 
 
3 - Authorization & Approval - Appropriate authorization & approval procedures should be 
well introduced. 
 
4 - Physical Safeguard - Appropriate physical safeguard should be established. 
 
5 - Management review & Monitoring - Financial and other performance should be 
monitored regularly. 
 
6 - Accounting & Arithmetical - Appropriate accounting and arithmetical procedures 
should be operated. 
 
7 - Personnel arrangements - Appropriate personnel arrangement should be exist. 
 
8 - Supervision - Appropriate supervision procedures should be exist.

P/68 
 
9.3 - Classification of Control Procedures: 
 
1 - Management Controls: These are detective in nature and encompass the high-level 
supervision and review. For example - Management review of exception reports, 
performance against budgets etc. 
 
2 - Organizational Controls: These are both detective and preventive in nature and 
include well-defined responsibilities and the segregation of functions such transactions 
initiating, processing and recording. 
 
3 - Authorization Controls: These are preventive in nature. Good authorization controls 
will be specific about who can approve what, the extent of checking required before 
approval and how the check should be evidenced. 
 
4 - Operational Controls: These are either detective or preventive in nature. It includes 
sequence checking to provide assurance on the completeness of numbered documents, 
comparison of one set of documents to another (e.g. purchase order to invoice). 
 
5 - Access Controls: These are detective in nature and includes control over access to 
assets and accounting records through simple physical measures such as locks and 
safes and procedural controls such as controls over petty cash issue. 
 
9.4 - Internal Check System: 
 
The absolute and independent control of one person in the financial transaction may 
create the opportunity of fund misappropriation. As such, to safeguard the interest of the 
organization, adequate control over financial transaction, internal check system is a must. 
The function of accounts department should be designed in such a way that the job done 
by one person is automatically checked by another and thus minimizing the possibility of 
fraud or irregularities. The job distribution of the personnel of finance & accounts 
department of PKSF head office shall be arranged in such a way that a person handling 
cash and posting Cash Scroll Book shall not be given the responsibility of preparing 
vouchers, writing of cheques and posting Cash Journal Register & General Ledger 
through computer.  
 
It is therefore, recommended that: 
 
 Cashier & Cash Officer shall be engaged for receipts and payments of cash, 
maintenance of physical cash and writing of Cash Scroll Book.  
 
 Writing of various vouchers, like transfer vouchers, cash payment voucher, cheque 
payment voucher, money receipts, writing of cheque should be done by other person 
in finance and accounts section. 
 
 The person who has no connection of maintaining cash and voucher preparation shall 
do posting in computer and other registers. 
 
 The Manager (F&A) shall be responsible for the preparation of monthly trail balance, 
income statements and balance sheet, cash flow statements, notes to accounts. 
 
 The DMG (F&A) shall be responsible for the preparation of reports to the Managing 
Director, Government & fund giving agencies as the case may be.

P/69 
 
9.5 - Payment Management: 
 
Before making payment in connection to all bills / vouchers for expenses of the 
organization shall be duly checked by finance & accounts section and shall be pre-audited 
as per rules and regulations of PKSF in this context and shall be finally approved by the 
competent authority as per the delegation of financial authority of the PKSF.  
 
No payment shall be made without the prior approval of the above authority as narrated. 
The bills and the invoice for payment shall be canceled by affixing the stamp "Paid" and 
shall be dated. The payment voucher should always have the supporting documents in 
original as its attachments. All sums of money expended by the organization shall be 
recorded in books of accounts and there should be systematic procedures of payment 
that can ensure: 
 
a) Payment is made within the budget amount; 
b) Payment is made for organization; 
c) Payment is made properly to the right person; 
d) Vouchers are prepared correctly to record transaction in Cash Journal Register; 
e) Expenditures have genuine supporting documents; 
f) 
Documents are duly valid, authenticated & appropriate for the purposes; 
g) Payment shall be authorized and approved by competent authority. 
 
Before making payment either in cash or cheque, person responsible to make the 
payment is to be ensured that payment vouchers have been prepared, checked and 
approved. Accounts shall prepare payment vouchers and shall be supported by 
documents like: 
 
 Cash Memo / Bill 
 Challan 
 Indent 
 Purchase order 
 Money receipts 
 Comparative statement 
 Purchase committee resolution 
 Job completion certificate 
 Telephone bill, electric bill, rent bill etc. 
 And any other document that are required.  
 Approval of tour program along with tour plan; 
 Air / Bus / Train / Launch tickets; 
 Entitlement of class, Per-diem & DA according to grade as specified in the 
service rules. 
 
Accounting offices shall keep the payment vouchers in chronological order. Each financial 
year shall maintain a serial number beginning from 01. Accounting office shall file the 
vouching along with all supporting documents. All vouchers and supporting documents 
shall be preserved for a minimum period of twelve (12) years.  
 
 
A - Cash Payment System: 
 
 
Maximum up to Taka 5,000 can be paid from petty cash. All payments above 
Taka 5,000 are preferably be made through cheques;

P/70 
 
 
All payments shall be prior approved. Before the payment is made, the related 
person raises notes for the expenditure explaining the necessity of the payment 
to the departmental head in a proper file. If the payment seems necessary, then 
the file is forwarded to the competent authority who approve the payment; 
 
 
After the expenditure is incurred, the supporting are raised in the file;  
 
 
The file is sent to the Internal Audit Department for pre-auditing purpose; 
 
 
The file is sent to the proper authority for payment approval; 
 
 
Payment is made on producing the proper authorization and supported voucher 
to the cashier who makes the payment keeping recipient’s signature on the 
voucher; 
 
 
The payment is entered in the cash scroll.  
 
Cash handling - 
 
 
Cash is maintained on imprest system. The imprest amount depends on the 
decision of the management. At present the imprest amount is Taka 100,000 
(Taka one lac), 50% of the imprest i.e., Taka 50,000 can be used against IOU for 
emergency purchase / payments against prior payments approval; 
 
 
Cash is kept in the Joint custody of two Managers (F&A). In case of leave of one 
Manager, Assistant Manager or any other officer approved by the authority will 
take the charge of the custody; 
 
 
The vault is kept in Joint Custody. 
 
 Cash Recording - 
 
 
Vouchers are punched in computer software by Assistant Grade-2 at the day’s 
end; 
 
Cash & Cheque Summary (CCS) for the day is produced next morning that is 
checked by Assistant Manager (F&A) as regard to correctness of punching;  
 
CCS along with vouchers are checked & signed by the Internal Audit;  
 
Payments are posted to the ledger by computer. 
 
Custody & Safeguarding of cash - 
 
 
Cash scroll is balanced by cashier;  
 
Physical cash is counted by Assistant Grade-2 & Officer (F&A) at day end;  
 
Cash scroll is signed by both Assistant Grade-2 and Officer (F&A);  
 
Kept at safe-custodian by two designated officers of Finance & Accounts. 
 
 
B - Cheque Payment Procedure: 
 
 
Requisition from the respective department for expenditure is raised and sent for 
approval of proper and competent authority;

P/71 
 
 
Expenditure is approved in file by the proper authority recommended by 
appropriate purchase committee;  
 
 
Advertisement in national dailies for quotation is published; tenders are received; 
comparative statement is prepared and placed before the purchase committee; 
supplier selection is made by one of the two committees; printed order for supply 
is sent; Delivery Note is received; Material Receiving & Inspection Report (MRIR) 
is raised and invoice is received;  
 
 
Invoice is raised in the file along with all the papers and documents to Internal 
Audit for verification for pre-audit purpose; 
 
 
File moves to the proper person capable of authorizing the payment;  
 
 
Then file goes to Finance and Accounts Section for payment;  
 
 
Invoice is checked again by Manager (F&A) and Officer (F&A), voucher is 
prepared, cheque is prepared, recorded in the bank register;  
 
 
Cheque is checked by Manager (F&A) and DGM (F&A) - counter signed in bank 
register and cheque counterfoil;  
 
 
Cheque along with all the documents in the file goes to one of the co-signatory 
and then to the principal signatory for signature who signs the cheque and 
countersigns the register;  
 
 
Cheque is given to the proper person on getting receipt and after recording in the 
cheque issue register. 
 
Cheque handling: 
 
 
Joint custodian; 
 
Joint Signatory as per delegation of authority; 
 
Pages are counted at the day end; 
 
Kept in safe. 
 
9.6 - Payment to Partner Organizations (PO): 
 
 
Inspection of Partner Organization (PO) by Dealing Officers (DO) before 
disbursement of loan is done; 
 
 
DO reports in prescribed form and puts up in file if all the criteria are fulfilled. File 
goes to Supervising Officer (SO) and then to Deputy Managing Director (DMD) 
(operation) who finally sends the file to Managing Director.  
 
 
Managing Director being satisfied about the PO’s performance places the 
proposal to the Governing Board where approves the loan.  
 
 
A Loan Installment Payment Requisition (LIPR) is raised by the DO in the file that 
goes to SO and finally to MD via DMD. They all except MD sign the LIPR and 
send it including copy of relevant attested note sheet to Finance and Accounts 
Section for Cheque payment;

P/72 
 
 
Officer (F&A) verifies the form in respect of all the information in the LIPR. He 
checks; 
 
o 
If the name of the PO has been written properly; 
o 
Previous payments have been mentioned properly; 
o 
Sanction of the Board; 
o 
Resolution of the board; 
o 
Conditions in the resolution if any; 
o 
Copy of the note sheet to see the approval of MD; 
o 
And or any condition for the payment – fills up a portion of the form for 
cheque signature approval-records the payment in specific sheet against 
the resolution for loan sanction-cheque is written-recorded in bank 
register-prepares the payment voucher and 
 
 
Then forwards to Manager (F/A) and thereafter to DGM (F/A) for verification. MF 
& DGM (F/A) verifies the documents and the cheque is prepared, they sign the 
LIPR, registers and records and send those to the signatories for signature.  
 
 
The joint signatories sign the cheque, register and LIPR. The cheque is recorded 
in Cheque Disbursement Register at the time of disbursement on receipt of 
properly executed Loan Agreement (LA). 
 
 
LIPR is kept in FA in custody and recorded in a separate register. 
 
 
9.7 - Payment for Services: 
 
 
Payment for services shall require the followings: 
 
 Requisition / Indent; 
 Resolution of the Governing Body if needed; 
 Approval of Managing Director; 
 Agreement / Deed of contract; 
 Assignment letter which should include TOR; 
 Assignment completion certificate 
 
 
9.8 - Payment of Salaries: 
 
 
Payment of salaries of PKSF staff members shall be made through bank transfer advice 
or cheque. Each employee shall open a bank account in his own name with the same 
bank where PKSF maintains its account and accounts number shall be intimated to the 
Finance & Accounts Section.  
 
Accounting office shall issue transfer advise letter to the bank for total amount of monthly 
salary payable to credit the individual account of each staff member with the amount 
written against each individual.  
 
The accounting offices shall maintain a salary register, which shall be prepared, every 
month.

P/73 
 
Salary register shall be prepared considering the following points: 
 
a) Name and designation; 
b) Number of working days - as per attendance register; 
c) Increment, Promotion, Suspension, Transfer order / instruction; 
d) Leave without pay; 
e) Other deductions like Advance, Tax, etc.; 
 
All the staff members working at different offices of PKSF will be paid their salaries after 
the 25th day of the month.  
 
 
9.9 - Management of Receipts: 
 
  
Source of receipts of the organization may be as follows: 
 
 
Receipts of grants from GOB; 
 
Receipts of loan from GOB; 
 
Receipts of repayment of loan from POs; 
 
Receipt service charge from POs; 
 
Sale of wastage; 
 
Bank interest earned; 
 
Miscellaneous income and etc. 
 
(a) Grants are received by the organization from government and different donor 
agencies against different projects / programs by cheque, after signing a letter of 
agreement between the parties mentioned above and recipients authorized official. In 
the event the authorized official is not available to collect each installment cheque, the 
officer or staff member designated to collect in cheque must have a letter signed by 
the authorized official, authorizing him / her to collect the cheque. Funds may be 
provided in one or more installments. Grants received must be entered in receipt side 
of the Cash Journal Register, loan register, grant register and deposited the same 
into interest bearing bank account. 
 
(b) Interest earned on the amount of fund kept in the bank shall be treated as income 
and entered in the receipt side of the cash journal register. 
 
(c) Income, which cannot be classified on any above group, shall be treated as 
miscellaneous income & entered in the receipt side of the Cash Journal Register. 
 
Each receipt shall be acknowledged either through acknowledgment letter or a Money 
Receipt. Cashier shall prepare receipt voucher for daily receipt of money & a copy of 
acknowledgment letter / money receipt shall be attached to receipt voucher and indicating 
its head of account according to Chart of Accounts. 
 
 
A - Cash Receipts System: 
 
 
Every employee of PKSF shall be personally responsible for the money that 
passes through his hand and for the prompt record of receipts in the manner 
prescribed below. All money, not banked, shall be kept in a strong safe;

P/74 
 
 
All receipts, other than cash drawn from bank for payments, must be deposited to 
bank intact preferably on the same day or positively on the next morning;  
 
 
Cash shall be received by the cashier or by any other person deputed by the 
management in his / her absence;  
 
 
Money Receipt (MR) must be issued immediately on receipt of cash. The cashier 
will enter the receipt in Financial Management System (FMS) in the computer 
from where Money Receipt will be generated in the printer;   
 
 
MR is to be checked and signed by an officer (F&A) and be issued to the payer;  
 
 
The receipt is recorded in cash scroll;  
 
 
Credit voucher will be generated in the FMS that will be checked by the Manager 
(F/A) and countersigned by DGM (F&A);  
 
 
Credit Voucher is posted in the FMS in the computer at the day end;  
 
 
Cash scroll will be checked with physical cash and signed by Cashier, Officer 
(F&A) at the day end;  
 
 
Cash will be kept in vault by the joint custodian as designated. 
 
 
B - Cheque Receipts System: 
 
 
Mail will be opened at the reception by a responsible officer who will enter the 
checks/drafts/pay order etc. received in FMS and the Cheques/drafts/POs/DDs 
will be handed over to Finance and Accounts Section;  
 
 
Concern person will enter the instruments (Cheques/draft/PO/DD) in a register. 
He / they will check the advice sent with the instruments by tallying with PO cards 
as to the loan number, installment number, principal, service charge and by 
tallying with the advice and the instruments. He will check the entries made by the 
reception desk in the FMS and will correct the mistake if any. The system will 
accept the transaction on accepting by concern staff member;  
 
 
He will sort the instruments according to the PO nature, Loan nature, Project-wise 
and will prepare pay-in-slips and will arrange to deposit those instruments in 
respective bank accounts;  
 
 
The credit voucher will be generated by the FMS automatically;  
 
 
He will enter the receipts in the project-wise individual PO cards by allotment 
number, installment number of the allotment;  
 
 
He will then prepare pay-in-slips which is checked by Assistant Garde-1 and will 
send the instruments to banks on the same day. Assistant Grade-1 will check the 
pay-in-slips again after depositing whether those were properly received by the 
banks.

P/75 
 
Dishonored / returned cheques:  
 
 
Dishonored / returned instruments will be received by Assistant Grade-1; 
  
 
He will check the reasons for dishonor and will put up the case in a file that will go 
to the DGM (F&A) via Manager (F&A);  
 
 
The dishonored instruments will then be sent to the respective PO with a 
forwarding letter stating the reasons of dishonor and asking them to send the 
instrument back after correction or to send a fresh instrument with in seven days;  
 
 
Copy of the letter will be given to the Supervising Officer (SO) for information and 
necessary action;  
 
 
Assistant Grade-1 will check the position daily and will follow up the cases. 
 
9.10 – Staff Advance and its' Liquidation: 
 
Advance against any operational cost shall be initiated on Money Requisition and the 
delegated authority will approve such advance.  
 
Approved advance requisition form shall be sent to the accounts which will be checked 
the particulars therein and then payment voucher shall be prepared by the accounts & 
shall disburse the amount of advance after obtaining the signature of the recipient.  
 
Any advances to staff members may be made on specific requirement with the written 
approval of the competent authority as delegation of authority. 
 
Any payment to staff as advance should be adjusted and replenished at regular interval 
on submission of bills / vouchers to the account section and must be adjusted within 
twenty (20) days of completion of the requirement. 
 
 
9.11 - Physical Inventory Counting and Checking: 
 
The status or existence of any organization is mainly determined by the volume of funds / 
property that are owned by the organization. Considering the same it is one of the prime 
responsibilities of an organization to protect / safeguard resources / property. PKSF has 
been implementing various programs / projects throughout the country by its own offices 
and resource are thereby granted / allocated to the said offices. There are lists of 
resources so far been sent to different corner of the country. 
 
PKSF shall follow the noted steps in verifying / checking the validity of all the resources at 
its disposal. 
 
 A committee comprising at least two (2) members shall be formed. The said 
committee shall do a feasibility study / checking of all the resources once in each 
year. 
 
 Committee shall examine all of the resources in light of the lists prepared by 
Administration Department. 
 
 The committee shall submit the feasibility report as per stipulated date and time.

P/76 
 
 Required adjustment of any inconsistency shall be made having approval from the 
management as per delegated authority. 
 
 
9.12 - Internal Audit - Pre-Audit: 
 
 
To safe guard the financial & accounting system from frequent mistakes, frauds and 
misappropriations, the internal audit is needed as follows - 
 
 Pre - auditing system should be introduced at any level in head office. 
 
 Keep constant watch on records of financial transaction and to safeguard the 
organization from fraud. 
 
 Keep updated accounts of the projects / programs / head office / Rangpur office. 
 
 To establish strong financial discipline in the organization 
 
 To enable and aware the accounts personnel to perform their duties with earnest 
sincerity and efficiently. 
 
The internal audit department should be headed by a senior management position and 
have several audit officers working under him as per need of the organization. The 
internal audit department will work independently and should be reported to the Managing 
Director.  
 
All financial and accounting activities of the particular accounting year of PKSF should be 
audited with in the fifth month of the following accounting year. Moreover, the internal 
department will constantly review the all activities of all projects / programs.  
 
 
9.13 - Preservation of Accounting Records: 
 
 
 All of the documents / records related to financial transaction shall be preserved for a 
period of twelve years. 
 
 In case of project documents / records related to financial transaction shall be 
preserved at least for three phases including the current phase of the project. But by 
no way any of the documents of the previous phases can be burnt out.

P/77 
 
CONTENTS OF CHAPTER – 10 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
--------------------------------------------------------------------------------- 
10.1 - Concept 
10.2 – Introduction 
10.3 – Safe Custody of Fixed assets 
10.4 – Procurement of Fixed Assets  
10.5 – Fixed Assets Registration 
10.6 – Classification of Fixed Assets 
10.7 - Identification of Fixed Assets 
10.8 – Depreciation & their Accounting 
10.9 – Sale of Fixed Assets 
10.10 – Accounting of Fixed Assets 
10.11 – Fixed Assets Register  
10.12 – Instruction to Write up Fixed Assets Register 
10.13-Physical Counting of Fixed Assets & Reporting 
10.14 – Damage, Loss & Destruction, & Insurance 
10.15 – Use of Fixed Assets on Payment or Lending 
10.16–Scrapping, Condemnation & Write-off of Assets 
 
 
 
 
---------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 10 - FIXED ASSETS & DEPRECIATION ACCOUNTING

P/78 
 
CHAPTER – 10 
 
FIXED ASSETS AND DEPRECIATION ACCOUNTING 
 
10.1 – Concept: 
 
Fixed assets have the fundamental characteristics that they are held with the object of 
earning revenue and not for the purpose of sale in the ordinary course of business. 
Depreciable assets are assets that are expect to be used during more than one 
accounting period have limited useful life and are held by the organization for use in the 
production or supply of goods and services or for rental to others or for administrative 
purposes. Note that land generally has an indefinite life and is therefore not depreciable 
asset as defined above. Buildings are however different. Buildings do have a definite life 
and are therefore depreciable assets. Thus, for accounting purposes the value of land 
and buildings should be segregated. The land should be maintained in the accounts with 
out depreciation. Building on other hand should be depreciated. 
 
10.2 – Introduction: 
 
The assets purchased / procured by PKSF could be termed as fixed assets, the expected 
life or duration of which are relatively longer period. The importance of proper accounting, 
maintenance and evaluation of current conditions and or expected remaining life of fixed 
assets cannot be over emphasized.  
 
Unit price of any asset is at least Taka 1000 (One Thousand) only will be regarded as 
fixed asset of PKSF. For all that any item is below worth Taka 1000 (One Thousand) only 
but durable for many years will not be capitalized. This definition will hold good to all 
purchase items and items received as donation.  
 
For this reason, proper register and accounting books are to be maintained in head office 
and also in Regional Audit Offices to fully account for fixed assets in their possession. 
Where fixed assets are procured, it will be necessary to keep an accurate account of 
such assets for physical control and inventory. 
 
10.3 – Safe Custody of Fixed Assets: 
 
Every offices of PKSF shall designate a staff member for maintaining the records of fixed 
assets and their movements and safe custody. Assets issued to various offices of PKSF 
shall remain in the safe custody of themselves and therefore they will be responsible for 
management of assets. 
 
10.4 – Procurement of Fixed Assets: 
 
Fixed assets can only be procured by PKSF head office centrally for its own use and for 
its Regional Audit Office. Regional Audit Office may procure assets with the approval of 
head office. In any case, purchase or procurement should always follow in rules & 
regulations of "Purchase Policy" made and constituted in this regard. To procure and 
purchase of fixed asset it should at least follows the under mentioned guidelines: 
 
 
Prior approval is compulsorily needed of the respective authority; 
 
 
Should follow the all rules and instructions of the purchase procedures as laid down in 
this context;

P/79 
 
 
Budgetary provision must be made and confirm for a fixed assets item before its 
procurement can takes place; 
 
 
Purchase of an assets will need the approval of Managing Director; 
 
 
Requisition from the user and need of use should be clearly identified and properly 
evaluated before placing the requisition of the concern asset purchased; 
 
 
Approval should be obtained for requisition of an assets in accordance with the 
authorization of the organization;  
 
 
Purchase requisition shall be raised by the department / person requiring the assets 
in a purchase requisition form;  
 
 
Approval of Managing Director is a must in case of decision of purchase committee;  
 
 
Manager Administration shall approve the purchase of assets up to Taka 1,000 
thousand);  
 
 
DGM (F/A) shall approve the purchase of assets from Taka 1,001 to Taka 2,000; 
 
 
General Manager (Administration) shall approve the purchase of assets from Taka 
2,001 to Taka 5,000;  
 
 
Managing Director shall approve the purchase of assets more than Taka 5,000 up to 
Taka 20,000; 
 
 
Purchase Committee-1 will recommend purchase of assets valued above Taka 
20,000 and final approval is given by Managing Director; 
 
 
Purchase Committee-2 will recommend purchase of assets valued from Taka 20,001 
(twenty thousand and one) to Taka 500,000 (five lacs) and final approval is given by 
Managing Director; 
 
 
For sole agent lone quotation is sufficient;  
 
 
For numerous suppliers, purchase shall be through quotation by advertisement in at 
least two National Dailies;  
 
 
Spot quotation or quotation is required for purchase through Purchase Committee-2;  
 
 
At least three quotations are required;  
 
 
Purchase over Taka 500,000 requires tender or quotation;  
 
 
Pro-forma invoice is required in case of sole distributor;  
 
 
Spot quotation / price collection by two officers / employees from at least three seller 
is required for purchase assets below Taka 20,000 for spot purchase;  
 
 
Purchase under TA program of the World Bank requires the purchase procedures of 
the World Bank to be followed;

P/80 
 
 
Comparative price statement shall be prepared for quotations received;  
 
 
Goods Received & Inspection Note should be prepared;  
 
 
Fixed Assets Register to be up dated. 
 
 
In case of fixed assets being supplied by the head office to the Regional Audit offices, 
corresponding challan advice must be sent as soon as goods are being sent. If there 
is delay of getting those challans advice or the challan advice gets lost in the process, 
then the offices should have to collect that particulars advice from head office by 
taking its own initiatives. 
 
10.5 – Fixed Assets Registration: 
 
Legal registration of all the purchased fixed assets shall be in the name of PKSF. 
Managing Director or authorized officer of PKSF on behalf of PKSF will sign in the deed / 
document related to registration. 
 
10.6 – Classification of Fixed Assets: 
 
Assets valued at Taka 1,000 or more and lasting for more than two (2) years shall be 
classified and entered in the assets register according to standard accounting practices. A 
proper record shall be maintained for all fixed assets whether procured or received from 
head office. The records of assets shall be maintained using the accounting codes and 
heads as illustrated in common chart of accounts.  
 
10.7 – Identification of Fixed Assets: 
 
Identification number of fixed assets is a compulsory item in the management of fixed 
assets and its control mechanism. An identification number for each category of fixed 
assets items should be assigned for easy identification of the assets. These identification 
numbers should be written on each item and the numbers should be indicated on the 
fixed assets register also for each fixed assets. 
 
In doing so the following continuity shall have to be maintained: 
 
 Name of PKSF; 
 One or two letters introducing the group viz., FR for furniture; 
 Two letters identifying the item viz., CH for chair; 
 Two letters identifying location of the assets for example, HO for Head office; 
 Three figures indicating serial number of same item such as 001,002,003 etc; 
 Last figures indicating the year of purchase used in the purchased item, for 
example, for Head Office: PKSF/FR/CH/HO/001/02. 
 
 
10.8 – Depreciation & their Accounting: 
 
Every asset has a certain life span that varies depending on the particular characteristics 
of that asset. Dividing the purchase value of an asset by its expected economic life or 
duration period (in years) results in that asset’s yearly depreciation. Depreciation for the 
accounting period is charged to income either directly or indirectly. The depreciation 
method selected should be applied consistently from the period to period unless altered 
circumstances justify a change.

P/81 
 
Depreciation to be charged on fixed assets on reducing balance method. Special 
instructions are: 
 
 The rate of depreciation will be instructed / circulated from head office; 
 Depreciation of a fixed asset will have to be charged from the date of purchase; 
 
 
10.9 – Sale of Fixed Assets: 
 
If an item of fixed asset gets unusable, broken, obsolete, or no longer necessary, then 
this item could be eligible for sold out subject to the approval from the Managing Director.  
 
To sale or disposal it should at least follows the under mentioned guidelines: 
 
 
Administration Department (Logistics section) in head office will prepare a statement 
containing all unusable fixed assets & submit it to the Managing Director through 
DGM & GM. He will then place it to purchase committee to assess the need of 
disposal; 
 
 
Purchase Committee will then assess the need of sale of assets, repurchase of same 
assets, feasibility of fund etc, and final recommendation will then be place to 
Managing Director in the matter of sale; 
 
 
Fixed assets could be sold by inviting press tender (If the approximate price of 
disposable asset is above Taka 100,000) or taking comparative quotation rates (If the 
approximate price of disposable asset is below Taka 100,000). This sale however, 
could be made also through mutual negotiation by taking at least three (3) quotations 
to avoid undue complications. In all cases the asset will be have to be sold to the 
highest bidder; 
 
 
Fixed assets are usually sold through the PKSF head office; Regional Audit office 
may only on special circumstances with the permission of Managing Director; 
 
 
Only approved and authenticated sales / disposal of fixed assets compulsorily shall 
be recorded and documented by doing accounting in books of accounts and concern 
fixed assets register accordingly. 
 
 
10.10 – Accounting of Fixed Assets: 
 
This has been considered in four ways – such as; 
 
 At the time of purchase / procurement; 
 At the time of sale / disposal;  
 At the time of write off; 
 At the time charging depreciation. 
 
A) - At the time of purchase / procurement: 
 
1) If a fixed asset (photocopier) is purchased or procured by the head office 
through making payment on cash / bank, then the journal entry in the books 
of accounts will be made through cash journal:

P/82 
 
Debt 
- Fixed Assets  
 
 
            - (General ledger Accounts Code) 
- Office Equipment 
 
            - (Subsidiary ledger Accounts Code) 
 
Credit 
- Cash At Bank 
 
 
            - (General ledger Accounts Code) 
           
 
- HO Bank Account -  
 
            - (Subsidiary ledger Accounts Code) 
 
This will be recorded in fixed assets register. 
 
2) If a fixed asset (photocopier) is purchased or procured by the head office on 
credit, then the journal entry in the books of accounts will be made through 
journal voucher: 
 
Debt 
- Fixed Assets  
 
       
            - (General ledger Accounts Code) 
- Office Equipment 
  
            - (Subsidiary ledger Accounts Code) 
 
Credit 
- Accounts Payable 
 
            - (General ledger Accounts Code) 
           
 
- Accounts Payable - Suppliers 
            - (Subsidiary ledger Accounts Code) 
 
 
This will be recorded in fixed assets register and accounts payable – Suppliers 
subsidiary ledger and also in the registers.  
 
3) If a fixed asset (photocopier) is purchased or procured by the head office on 
credit and make payment to the supplier later on, then the journal entry in the 
books of accounts will be made through cash journal: 
 
Debit 
- Accounts Payable 
 
            - (General ledger Accounts Code) 
           
 
- Accounts Payable - Suppliers 
            - (Subsidiary ledger Accounts Code) 
 
Credit 
- Cash At Bank 
 
 
            - (General ledger Accounts Code) 
           
 
- HO Bank Account 
 
            - (Subsidiary ledger Accounts Code) 
 
This will be recorded in accounts payable - supplier subsidiary ledger & also in registers.  
 
B) - At the time of sale / disposal: 
 
 
Journal entries to record the sale  / disposal of fixed assets are as follows; 
 
a - Sale of fixed assets: 
      
Debit - Fixed assets Sold Account 
 
 
Credit - Fixed Assets Account (Cost price) 
 
b - Sale price received: 
      
Debit - Cash / Bank Account 
 
 
Credit - Fixed Assets Sold Account (Sale price) 
 
c - For Accumulated Depreciation: 
      
Debit - Accumulated Depreciation of Fixed assets Account 
 
 
Credit - Fixed Assets Sold Account

P/83 
 
C) - At the time of write-off: 
 
 
Journal entries to record the write-off of fixed assets are as follows; 
 
a - Write of fixed assets: 
      
Debit - Fixed assets Obsolete Account 
 
 
Credit - Fixed Assets Account (Cost price) 
 
b - For Accumulated Depreciation: 
      
Debit - Accumulated Depreciation of Fixed assets Account 
 
 
Credit - Fixed Assets Obsolete Account 
 
D) - At the time of charging depreciation. 
 
 
Through wear & tear, working lives of the fixed assets get shortened and gradual 
loss of their workability takes place depending, of course, on the rate of usage. 
To account for this loss / damage, depreciation as per schedule fixed by 
management will have to be charged on fixed assets.  
 
Necessary entries through journal voucher for this depreciation charge will be: 
(Photocopier) 
 
Debit 
-Depreciation Expenses 
 
            - (General ledger Accounts Code) 
-Depreciation of Fixed Asset -  
            - (Subsidiary ledger Accounts Code) 
 
  Office Equipment 
 
Credit 
-Accumulated Dep. Fixed Assets  
            - (General ledger Accounts Code) 
           
 
- Accumu. Dep. Fixed Assets                       - (Subsidiary ledger Accounts Code) 
 
 
  Office Equipment 
 
It is worth mentioning here that the fixed assets will always have to be shown in the books 
of accounts at the original cost. At the time of preparing final accounts, the total 
accumulated depreciation is to be deducted from the cost price of the fixed assets in 
question and the result is to be shown as the net book value. 
 
 
10.11 – Fixed Assets Register: 
 
Obviously, fixed assets play an extremely important role in every organization. As a result 
there is an overgrowing need to maintain and up date various data and information with 
regard to these assets VIZ, the maintenance system, total numbers, total value, present 
conditions and location of all the fixed assets.  
 
Considering this requirement, it is felt very necessary to keep a separate register for fixed 
assets (As per Format- Register No. - 202). 
 
As soon as the procurement of fixed assets take place, various data related to that assets 
have to be recorded in the fixed assets register. The vouchers prepared (both cash 
journals and journal vouchers) in this connection will indicate where and how the 
particulars are to be recorded in the fixed assets register.

P/84 
 
10.12 – Instruction to Write up Fixed Assets Register: 
 
A - First stage - Particulars and references of assets: 
 
 
In column 1 put the date of acquisition of fixed assets purchased; 
 
In column 2 insert the references of cash journals or journal vouchers for the concern 
procurement / sale / adjustment; 
 
In column 3 put the quantity of assets; 
 
In column 4 put the unit price of the asset; 
 
In column 5 insert the cost price of the concern asset; 
 
B - Second stage – Value of assets: 
 
 
In column 6 insert opening balance value at cost price of the asset of particular year; 
 
In column 7 insert the Taka amount for additional purchase during the period; 
 
In column 8 put the Taka amount cost price of sale / disposal / adjustment of asset for 
the period; 
 
In column 9 find out the Taka amount of total balance by adding the column 6&7 and 
then deducting the column 8 from the results of adding; 
 
C – Third stage – Depreciation of assets: 
 
 
In column 10 insert opening accumulated depreciation of assets of particular period; 
 
In column 11 insert the Taka amount of depreciation charges during the period; 
Depreciation = [(Column 9 less column 10) multiply by rate of depreciation] 
 
In column 12 insert the Taka amount of any adjustment of depreciation; 
 
In column 13 find out the Taka amount of total balance of depreciation by adding the 
column 10 & 11 and then deducting the column 12 from the results of adding; 
 
D – Fourth stage – Written Down Value of assets: 
 
 
In column 14 find out the Taka amount of written down value of assets by deducting 
the column 13 from the column of 12. 
 
10.13 – Physical Counting of Fixed Assets & Reporting: 
 
Every offices of PKSF shall make a provision of inspection and physical verification of 
assets, by the person not related with the record of assets, at least once in a year to find 
out the condition of moveable and immovable assets. All assets shall be inventoried at 
June closing each year compulsorily. Approved inventory sheet shall be used for this 
purpose. The stock on hand per fixed assets register shall be verified against the physical 
counts and physical quality shall be recorded in the fixed assets register. 
 
10.14 – Damage, Loss & Destruction, and Insurance of Fixed Assets: 
 
Each office of PKSF shall insure that proper system is installed to prevent assets from 
being damaged, lost or destroyed. Every office also shall, when feasible, insure fixed 
assets against theft, pilferage or possible loss due to accident, fire or natural calamities. 
 
10.15 – Use of Fixed Assets on Payment: 
 
On approval of management of PKSF any staff member of PKSF can use asset 
(particularly vehicles) of PKSF on payment through submitting a written application.

P/85 
 
10.16 – Scrapping, Condemnation & Write-off of Fixed Assets: 
 
A - Purpose: 
 
Write-off the assets from the books of accounts of PKSF if it is found that: 
 
 
Life of the assets are over; 
 
Assets are discarded and disordered; 
 
Assets are damaged, broken and not repairable; 
 
Use and utility of assets are ended (non-useable); 
 
Assets are declared obsolete and scraped; 
 
Assets are lost; 
 
Assets are theft and etc. 
 
B - Formation of Committees: 
 
i) - 
Inspection Committee - Consists of three (3) members - One from 
Administration Department and others two outside of Administration 
Department to be formed in Administration Department only to perform 
primary inspection in connection to the determination of saleable and 
obsolete assets of PKSF and make their list; 
 
ii) - 
Condemnation Committee - Two Condemnation Committees shall be 
formed like purchase committee.  
 
a - Condemnation Committee-1: To perform the activity in to connection 
to the declaration of saleable and obsolete assets of PKSF amounting 
above Taka 500,000; 
 
b - Condemnation Committee-2: To perform the activity in to connection 
to the declaration of saleable and obsolete assets of PKSF amounting 
from Taka 20,000 to Taka 500,000; 
 
To perform the activity in to connection to the declaration of saleable and 
obsolete assets of PKSF amounting up to Taka 20,000 shall be 
accomplished with the approval of MD as per policy; 
 
C - Procedures relating to write-off: 
 
 
Physical inspection and verification of assets by the Inspection Committee of 
Administration Dept. once in a year shall be conducted to determine the physical 
existence and position of unusable assets as outlined in above and prepare a 
comprehensive scrapping report. If circumstance permitted / arisen, the 
scrapping report is to be prepared at any time of the year based on the findings 
that assets are discarded, disordered, lost, theft, unusable, damaged, broken, 
life over, non-repairable, utility ended, obsolete; 
 
 
Inspection Committee after inspection shall prepare a detailed list of condemned 
goods / assets with their present position and placed it to the Condemnation 
Committee; 
 
 
On verification, examination and detailed review of the list prepared by 
Inspection Committee, the Condemnation Committee shall finalize the list of 
saleable assets and list of obsolete assets and submitted the same with 
recommendation to the MD in regard to the declaration of saleable and obsolete 
assets. Next step shall be taken as per the decision of the MD;

P/86 
 
 
Administration Dept. shall then take the initiative to place the file for final 
approval of proposal of write-off as per the decision; 
 
 
MD shall approve any amount total depreciated value of the total obsolete assets 
of PKSF. 
 
D - Scrapping and Condemnation Procedures: 
 
 
Prepare a list of obsolete assets by Adm. Dept. and submitted the same to 
Condemnation Committee; 
 
On due verification Condemnation Committee shall then prepare a list of 
obsolete or disposable assets and accordingly recommended; 
 
On verification and review, if it is found that the assets are lost, theft, not found  / 
available, Administration Dept. may take appropriate action on the basis of 
investigation and FIR may be lodged if found that assets are lost / theft; 
 
On verification, if it found that the assets are been damaged / lost by the staff 
members of PKSF due t the ground of negligence of duty, Adm, Dept. may 
recommended the authority for recovery of loss sustained / incurred through   
fixing up the responsibility and liability in the context; 
 
In determining the disposable cost of the assets the Condemnation Committee 
shall consider the market price of the assets; 
 
E - Disposal Procedures: 
 
 
All assets shall be disposed as per set rules of PKSF; 
 
Value of condemned assets as determined by the Condemnation Committee 
shall be considered as the lowest price in case of sale / disposal. Sale shall be 
made to the highest bidder. 
 
15% of the total sale value shall be taken as security money and shall be 
collected during the time of submission of tender / quotation. Remaining 85% 
shall be received before receiving the sold assets by the purchaser. If the 
purchaser, not intended to receive the disposable assets with in the time frame 
as mentioned in the sale agreement/deed, 15% security money shall be lapsed. 
 
F - Adjustment of Disposed & Write-off Assets: 
 
 
Disposal of assets shall be done immediately after declaration of assets 
disposed and condemned; 
 
If disposal value is more / less than the write-off value of the concerned assets, 
these shall be considered as income / loss of PKSF; 
 
Admin. Dept. shall submit separate proposal to the MD in connection to the 
write-off of obsolete assets immediately after disposal of disposable assets; 
 
Determine the loss /income of the obsolete assets; 
 
Lost assets shall be eliminated from the fixed assets register; 
 
Following is the format in connection to the submission of declaration of the 
obsolete and disposable assets of PKSF; 
 
 
Sl 
No. 
Description 
of Assets 
Quantity 
Purchase 
Date 
Purchase 
Value 
Written Down 
Value 
Remarks

P/87 
 
CONTENTS OF CHAPTER – 11 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
------------------------------------------------------------------------------------ 
11.1 - Introduction 
11.2 – Salary Payment 
11.3 - Some Noteworthy Points with Regard to Payment 
11.4 – Attendance Register & Statement 
11.5 – Leave Statement 
11.6 – Procedures of Salary Payment 
11.7 – Timing of Salary Payment 
11.8 – Deduction from Salary 
11.9 - Overtime Management 
11.10 - Telephone 
11.11 - Accounting of Salary 
 
 
 
 
-------------------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 11-COMPENSATION PACKAGE & ACCOUNTING

P/88 
 
CHAPTER - 11 
 
COMPENSATION PACKAGE & ACCOUNITNG 
 
11.1 - Introduction: 
 
Policy instructions, payment and documentation in connection to the compensation 
packages of staff members of PKSF shall be conducted, controlled and constituted as per 
the existing "Service Rules" of the PKSF that are in force and act.  
 
Expenditure on account of salary and allowances forms a major portion of the recurring or 
revenue expenditure of any large organization. This very fact, calls for the need of proper 
recording system as well as controlling mechanism to account for this expenditure. 
Various staff related activities VIZ, recruitment, salary, increment, transfer, promotion, 
termination, penalty imposition, salary deductions etc. are usually carried out by personnel 
department / administration department. 
 
11.2 – Salary Payment: 
 
In general, staffs are recruited by PKSF at certain salary level / scales. All particulars of 
staff members are notified to the head office finance & accounts department. Other staff 
related information such as staff salary increment, salary withholding, loan recovery 
through installments etc. are also provided by the personnel department. Payment of 
salary and the preservation of all the data related to staff salaries are done by the finance 
and accounts. 
 
In case of Regional Auditing office, salary related matters, however, would be controlled 
by head office. Other wise incidents like presenting information about some bogus staff 
and then drawing his or her salary might take place or at least, possibilities of similar 
incident to happen cannot be totally written off.  
 
 
11.3 – Some Noteworthy Points with Regard to Payment: 
 
 
The following matters need to be dealt with prior salary payment: 
 
 
Up to date information regarding appointment or transfer of any staff member; 
 
 
Proper maintenance of salary register; 
 
 
Correct recording of all necessary data with regard to salaries and allowances to staff 
members; 
 
 
Collection and preservation of particulars in respect of deduction made or to be made 
from salaries on different accounts; 
 
 
Attendance register being properly maintained; 
 
 
Information of those employees who have resigned or have been terminated or 
whose transfer orders have been issued are to be recorded in the salary register and 
that salary to be withheld accordingly;

P/89 
 
 
Calculation of net salary after making all necessary additions or deductions correctly 
and appropriately.  
 
11.4 – Attendance Register & Statement: 
 
 The attendance register serves as the supporting document in the preparation of 
salary bills. Administration department shall provide the monthly attendance 
statement to the Finance and Accounts Section.  
 
 This register will also help towards annual budget preparation of PKSF. Apart form 
this it creates effective pressure on the staff members to arrive at the office within 
stipulated time limit. 
 
 From organization’s point of view, the prime objective of this register, however, is to 
help the staff to attend office in time. So, attendance registers have to be maintained 
at all level offices of PKSF. 
 
11.5 – Leave Statement: 
 
It is essential to record particulars of leave in order to prepare salary bills by accounts 
department easily and correctly. If any staff member of PKSF wants to go on leave, he / 
she should apply in a prescribed form and get that leave application approved before 
actually leaving the workstation.  
 
The officer dealing with the leave register will record all particulars about leave of a staff, 
so that, up to date information of the person’s current leave position is readily available by 
Finance & Accounts Section. 
 
11.6 – Procedures of Salary Payment: 
 
All staff members have been advised to open a bank account and given the bank account 
number to accounts department at the time of joining in the PKSF.  
 
Bank advice has been prepared by the accounts department to transfer the individual 
salary of to the individual staff salary account in bank at the end of the month whose 
salary became due after approval of DGM (F&A), General Manger and Managing Director 
as per delegation of authority. 
 
11.7 – Timing of Salary Payment: 
 
All the staff members working at head office will be paid their salaries after 25th day of a 
month. Preparation of the salary bills should preferably be started from the fourth week of 
the month so as to make sure that payment is made in time. If the salary bills are not 
prepared in advance, last minute rush in trying to complete the bills might result in 
occurrence of all sorts of mistakes in the payment of salaries. 
 
 
11.8 – Deduction from Salary: 
 
Some staff members may well be taken advances either to carry out official duties. Out of 
these advance payments, some are adjusted against bills submitted and the rest will have 
to be adjusted against salaries of the respective staff. Contribution to provident fund, 
advances and other deductible items shall be deducted from salaries and allowances.

P/90 
 
11.9 - Overtime Management: 
 
Payment of overtime should be discouraged in all respects. But in special circumstances 
the management may give over time to employees who have worked beyond office hours. 
In such case a prior approval for overtime must be taken from the appropriate authority. 
The overtime of a staff will be guided by following overtime policy of PKSF. Overtime for 
which payment [As per format Form No.-112] is to be made must be authorized in 
advance. On the form indicate the reasons for the overtime work and the estimated 
number of hours overtime as well as the period of days will be needed before it is 
completed. The form is dated and signed by the chief of the department / section and sent 
for approval to chief of personnel. 
 
 
11.10 - Telephone: 
 
 
Office telephone is only for official use. Personal call is entitled for meeting emergency 
whose duration should be as short as possible. Personal trunk call / overseas call shall be 
entitled only on payment and with prior approval. Budget allocation for head office and 
Regional audit office shall be monitored regularly. 
 
 
11.11 - Accounting of Salary: 
 
 
For payment / transfer of net salary from the bank account of PKSF to the bank of 
individual staff member after preparing bank advice and duly approved as per delegation 
of authority: 
 
 
A) – Preparation of cash journal for making payment of salary: 
 
Debit 
- 
Salary & Allowances – Net Salary              
Credit  - 
Cash at Bank 
 
             
 
B) – Preparation of cash journal for making payment of PF deduction to PF Account: 
 
Debit  
- 
Contribution to Provident Fund Account 
 
             
Credit  - 
Cash at Bank         
 
C) – 
Preparation of journal voucher for deduction of salary for telephone / fax / e-mail / 
car use / petrol bill beyond ceiling / telephone bill beyond ceiling / staff house 
building loan / staff house building loan interest: 
 
Debit  
- 
Salary & Allowances - Deducted amount 
             
Credit     - 
Telephone / fax / e-mail / car use / petrol bill beyond ceiling / 
telephone bill beyond ceiling / staff house building loan / staff 
house building loan interest         
 
D) – Preparation of cash journal for making payment of staff Income Tax: 
 
Debit  
- 
Income Tax - Staff 
 
             
Credit  - 
Cash at Bank

P/91 
 
CONTENTS OF CHAPTER – 12 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
------------------------------------------------------------------------- 
12.1 - Introduction 
12.2 – Types of Advances to be Allowed 
12.3 – Staff Advances Against Traveling 
12.4 – Staff Advances Against Purchase 
12.5 – Staff Advances Against Program Expenses 
12.6 – Third Party Advance Against House Rent 
12.7 - Third Party Advance Against Material Supplier 
12.8 - Third Party Advance Against Service Provider 
12.9 - Authorization of Advances 
12.10 - Internal Control In Advances Management 
 
 
 
 
 
--------------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 12 – ADVANCES, DEPOSITS, PREPAYMENTS & IT’S ACCOUNTING

P/92 
 
CHAPTER – 12 
 
ADVANCES, DEPOSITS, PREPAYMENTS & IT’S ACCOUNTING 
 
12.1 – Introduction: 
 
To fulfill different projects / programs and normal activities of PKSF it becomes essential 
to procure goods and services from different persons or organizations at different points 
in time and in doing so, advance payment need to be made from time to time. Depending 
on the particular situation, these advance payments at times are made directly to some 
outside person or organizations as well as PKSF's own staff members in some cases. 
 
12.2 – Types of Advances to be Allowed: 
 
Mainly categorized in two: 
 
 Advance to staff members – these are commonly known as temporary advances 
and long term loans: 
 
 
Advance against travelling expenses; 
 
Advance against purchase of goods; 
 
Advance against program expenses; 
 
Advance against house building loan. 
 
 Advance to third parties 
 
 
Advance against house rent; 
 
Advance to materials suppliers / contractors; 
 
Advance to service providers; 
 
 
12.3 – Staff Advances - Against Traveling: 
 
PKSF staffs members are frequently travel to different areas of the country and also 
outside the country for official purposes. The staff members are entitled to take advances 
to bear the transportation and traveling expenses. Allowances for traveling inside and 
outside the country will be entitled by staff member as per the rules and regulations of the 
"Service Rules" of PKSF that are in force and act on. 
 
General conditions are as follows: 
 
Following conditions govern the sanction of temporary cash advances against traveling: 
 
 Advance should preferably given to permanent staff members; 
 No second advance will be paid unless the previous advance is adjusted fully; 
 To be paid only against approved tour; 
 Must be adjusted with in twenty (20) days from the date of payment; 
 If a staff member to whom an advance has been made fails to submit bills / 
accounts supported by vouchers for adjustment with in stipulated time, total 
amount of advance will be deducted from his / her salary account till the accounts 
of advance are finalized with out any intimation to concerned person.

P/93 
 
The accounting of the advances, their adjustment against submission of bills, payment of 
extra amount and deduction of salary for non submission of bills against advance    will be 
made in due care and timely manner. 
 
Accounting of advances and its' adjustment against submission of bills, payments of extra 
amounts & receipt of unspent amount will be as follows: 
 
A - 
Journal entries through preparation of Cash Journal relating to the traveling 
advance payment of PO audit to Mr. X is as below: 
 
Debt 
- Advance against Evaluation & Monitoring - 
(General ledger Code) 
          
- Advance to Mr. X  (Name of person) 
- 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
 
- 
(General ledger Code) 
             - HO Bank Account 
 
 
- 
(Subsidiary ledger Code) 
 
(Only for advance amount given to Mr. X) 
 
B - 
If the advance is adjusted on submission of approved bills, then the following 
Journal Voucher will be prepared: 
 
Debit 
- Evaluation & Monitoring Expenses - 
(General ledger Code) 
            - Audit Expenses - PO  
 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Advance against Evaluation & Monitoring - 
(General ledger Code) 
             - Advance to Mr. X  
 
  
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of advance given to Mr. X) 
 
C - 
If the actual bills approved more than advance taken amount then, for payment of 
excess amount to Mr. X, the following Cash Journal will be prepared: 
 
Debit 
- Evaluation & Monitoring Expenses  
- 
(General ledger Code) 
            - Audit Expenses - PO  
 
 
- 
(Subsidiary ledger Code) 
 
Credit  - Cash At Bank 
 
 
 
- 
(General ledger Code) 
           
 
- HO Bank Account 
 
 
-  
(Subsidiary ledger Code) 
 
(Only for excess payment of Taka amount to Mr. X against audit expenses of PO) 
 
D - 
If the actual bills approved less than advance taken amount then, for receipt of 
balance amount from Mr. X, the following Cash Journal will be prepared: 
 
Debit  
- Cash In Hand 
 
 
 
- 
(General ledger Code) 
           
 
- HO Bank Account 
 
 
-  
(Subsidiary ledger Code) 
 
Credit 
- Advance against Evaluation & Monitoring - 
(General ledger Code) 
             - Advance to Mr. X  
 
  
- 
(Subsidiary ledger Code) 
 
(Only for receipt of balance Taka amount from Mr. X against audit expenses of 
PO)

P/94 
 
12.4 – Staff Advances - Against Purchase: 
 
 
To carry out the routine duties and activities related to different projects / programs of 
PKSF head office and Regional Audit office, all sorts of goods and materials need to be 
procured. Out of these materials, some are purchases through the staff members while 
others directly through out side parties / suppliers. 
 
General conditions are as follows: Following conditions govern the sanction of cash 
advances against purchases of goods: 
 
 That the stores are immediately and urgently required; 
 That time at disposal does not permit purchase by open or selected tender; 
 That delay in procurement would involve loss; 
 That no second advance is given till the previous advance is fully accounted for 
and the balance, if any refunded to cash; 
 That purchases be completed and account rendered with in three (3) days of 
drawl of the advance and the balance, if any be refunded in cash immediately 
after purchase; 
 In making the purchase basic principles of purchase policy shall be always kept in 
consideration and view; 
 If a staff member to whom an advance has been made, fails to submit bills / 
accounts supported by vouchers for adjustment with in the stipulated time, the 
total amount of advance will be deducted from his salary account till the accounts 
of advances are finalized with out given any intimation to concerned staff 
member. 
 
Accounting of advances, their adjustment against submission of bills, payment of extra 
amount and deduction for non-submission of bills against advance will be made in due 
care and timely manner. 
 
Accounting of advances and its' adjustment against submission of bills & payments of 
extra amounts will be as follows: 
 
A - 
Journal entries through preparation of Cash Journal relating to the advance 
payment for purchase of printing & stationery to Mr. Y is as below: 
 
Debt 
- Advance against Administrative Expenses - 
(General ledger Code) 
          
- Advance to Mr. Y  (Name of person) 
- 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
 
- 
(General ledger Code) 
             - HO Cash In Hand 
 
 
- 
(Subsidiary ledger Code) 
 
(Only for advance amount given to Mr. Y). 
 
B - 
If the advance is adjusted on submission of approved bills, then the following 
Journal Voucher will be prepared: 
 
Debit 
- Administrative Expenses  
 
- 
(General ledger Code) 
            - Printing & Stationery Expenses 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Advance against Administrative Expenses - 
(General ledger Code) 
             - Advance to Mr. Y  
 
  
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of advance given to Mr. Y)

P/95 
 
C - 
If the actual bills approved more than advance taken amount then, for payment of 
excess amount to Mr. Y, the following Cash Journal will be prepared: 
 
Debit 
- Administrative Expenses  
 
- 
(General ledger Code) 
            - Printing & Stationery Expenses 
 
- 
(Subsidiary ledger Code) 
 
Credit  - Cash At Bank 
 
 
 
- 
(General ledger Code) 
           
 
- HO Bank Account 
 
 
-  
(Subsidiary ledger Code) 
 
(Only for excess payment of Taka amount to Mr. Y against purchase of printing & 
stationery expenses). 
 
D - 
If the actual bills approved less than advance taken amount then, for receipt of 
balance amount from Mr. Y, the following Cash Journal will be prepared: 
 
Debit  
- Cash In Hand 
 
 
 
- 
(General ledger Code) 
           
 
- HO Cash In Hand 
 
 
-  
(Subsidiary ledger Code) 
 
Credit 
- Advance against Administrative 
 
- 
(General ledger Code) 
             - Advance to Mr. Y  
 
  
- 
(Subsidiary ledger Code) 
 
(Only for receipt of balance Taka amount from Mr. Y against purchase of printing 
& stationery expenses). 
 
 
12.5 – Staff Advances - Against Program Expenses: 
 
To carry out the program activities related to different projects and programs of PKSF, 
some expenses are need to be paid out to the staff members of PKSF in the form of liquid 
cash on the same date as the expenses as incurred for smooth completion of the 
activities find no other alternative as the situation arises. 
 
General conditions are as follows: Following conditions govern the sanction of temporary 
cash advances against program expenses: 
 
 Section / departmental heads' approval is needed before advance; 
 That time at disposal does not permit purchase by open or selected tender; 
 That delay in procurement would involve loss; 
 That the payments from advance amount involves larges quantity but in a small 
form on each quantity; 
 That no second advance is given till the previous advance is fully accounted for 
and the balance, if any refunded to cash; 
 That advances should be compulsorily adjusted / settled with in twenty (20) days 
of drawl of advance and the balances, if any should be refunded accordingly. In 
no circumstances the office liquid cash will be lying in the hands of the staff 
members of PKSF. Thus, after making the payment of the related program 
expenses by the person whom advance has been taken, the remaining balance 
of liquid cash amount should compulsorily refunded / deposited to the cash 
section of finance and accounts.  
 In making the payment basic principles of payment policy shall be always kept in 
consideration and view; 
 If a staff member to whom an advance has been made, fails to submit bills / 
accounts supported by vouchers for adjustment with in stipulated time, the total 
amount of advance will be deducted from his salary account till the accounts of 
advance are finalized with out given any intimation to concerned staff member.

P/96 
 
Accounting of advances, their adjustment against submission of bills, payment of extra 
amount and deduction for non-submission of bills against advance will be made in due 
care and timely manner. 
 
Accounting of advances and its' adjustment against submission of bills & payments of 
extra amounts will be as follows: 
 
 
A - 
Journal entries through preparation of Cash Journal relating to the advance 
payment to Mr. Z for seminar & workshop expenses for Institutional Development 
& Capacity Building is as below: 
 
Debt 
- Advance against Inst. Dev. & Cap. Building - 
(General ledger Code) 
          
- Advance to Mr. Z  (Name of person) 
- 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
 
- 
(General ledger Code) 
             - HO Cash In Hand 
 
 
- 
(Subsidiary ledger Code) 
 
(Only for advance amount given to Mr. Z). 
 
B - 
If the advance is adjusted on submission of approved bills, then the following 
Journal Voucher will be prepared: 
 
Debit 
- Institutional Dev. & Capacity Building 
- 
(General ledger Code) 
            - Seminar & Workshop 
 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Advance against Inst. Dev. & Cap. Building - 
(General ledger Code) 
             - Advance to Mr. Z  
 
  
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of advance given to Mr. Z) 
 
C - 
If the actual bills approved more than advance taken amount then, for payment of 
excess amount to Mr. Z, the following Cash Journal will be prepared: 
 
Debit 
- Institutional Dev. & Capacity Building 
- 
(General ledger Code) 
            - Seminar & Workshop 
 
 
- 
(Subsidiary ledger Code) 
 
Credit  - Cash At Bank 
 
 
 
- 
(General ledger Code) 
           
 
- HO Bank Account 
 
 
-  
(Subsidiary ledger Code) 
 
(Only for excess payment of Taka amount to Mr. Z against expenses of seminar 
& workshop for Institutional Development & Capacity Building) 
 
D - 
If the actual bills approved less than advance taken amount then, for receipt of 
balance amount from Mr. Z, the following Cash Journal will be prepared: 
 
Debit  
- Cash In Hand 
 
 
 
- 
(General ledger Code) 
           
 
- HO Cash In Hand 
 
 
-  
(Subsidiary ledger Code) 
 
Credit 
- Advance against Inst. Dev. & Cap. Building - 
(General ledger Code) 
             - Advance to Mr. Z  
 
  
- 
(Subsidiary ledger Code) 
 
(Only for receipt of balance Taka amount from Mr. Z against expenses of seminar 
& workshop for Institutional Development & Capacity Building)

P/97 
 
12.6 – Third Party Advance Against House Rent: 
 
 
This is called as prepaid rent. In case of rental of houses for official purposes by PKSF 
Head Office and Regional Audit Offices, the following procedures are applicable: 
 
 Rental of a house is initiated upon contractual agreement between PKSF and the 
owner of the house; 
 
 Any authorized officer on behalf of PKSF can carry out the initial formalities prior to 
rental of house and then signed the agreement on behalf of PKSF; 
 
 After agreement is done, the house owner may be given advance against office rent 
as per terms and conditions of that agreement; 
 
 Adjustment of advances shall be clearly stated in the agreement and account 
department should have a copy of that agreement and accordingly adjusted the 
advance amount. 
 
Accounting of advances & their adjustment against submission of bills will be made 
regularly. This advance will have to be adjusted as per terms & conditions.  
 
Accounting of advances and its' adjustment against submission of monthly rent bills will 
be as follows: 
 
A - 
Journal entries through preparation of Cash Journal relating to the advance 
payment for office rent expenses is as below: 
 
Debt  
- Advance against Occupancy Expenses 
- 
(General ledger Code) 
- Advance House Rent 
 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
             - 
(General ledger Code) 
           
 
- HO Bank Account 
 
 
- 
(Subsidiary ledger Code) 
 
 
B - 
This advance will have to be adjusted as per terms and conditions. If the advance is 
adjusted on submission of monthly rent bills, then the following Journal Voucher will be 
prepared: 
 
Debit 
- Occupancy Expenses 
 
 
- 
(General ledger Code) 
- House Rent Expenses  
 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Advance against Occupancy Expenses 
- 
(General ledger Code) 
- Advance House Rent 
 
 
- 
(Subsidiary ledger Code) 
 
 
 
12.7 – Third Party Advance Against Material Suppliers / Contractors: 
 
 
Advances to suppliers against material supplies / contractors are generally discouraged 
and every endeavour shall be made to maintain a system under which no payments are 
made except for works actually done. Following are the cases where advances can be 
given:

P/98 
 
 If the contractual agreement permits, advances shall be made as per clause of the 
agreement;  
 
 Section / departmental heads' approval is needed before advance; 
 
 In all other cases, only with the sanction of the Managing Director, which may, in 
exceptional circumstances, authorize such advances as may be deemed necessary, 
taking the proper precautions against loss and for preventing the system from 
becoming general or continuing longer than is absolutely essential. 
 
 Accounting of advances & their adjustment against submission of bills will be made 
on regular basis. This advance will have to be adjusted as per terms & conditions of 
the agreement; 
 
 For payment of the submitted bill of the supplier / contractor: Noted that; 
 
o 
If the bill amount of the supplier exceeds the taxable limit for deduction of tax 
at source at the time of payment as per the Income Tax Ordinance 1984, 
then it should be compulsory to deduct tax at the rates applicable to this 
payment of the bill. 
 
o 
If the bill amount of supplier is subject to VAT deducted at source at the time 
of payment as per the VAT Act 1991, then it should be compulsory to deduct 
VAT at the rates applicable to this payment of the bill. 
 
o 
Finally, the deducted (TAX & VAT) amount from the supplier’s bill should be 
deposited to the Government through treasury challan with in the date (with in 
7 days from the date of such deduction) as specified in the Income Tax 
Rules.  
 
 
Accounting of advances and its' adjustment against submission of bills & payments of 
extra amounts will be as follows: 
 
 
A - 
Journal entries through preparation of Cash Journal relating to the advance 
payment to supplier (Rangs Industries Ltd.) against purchase of spare parts for 
car of PKSF is as below: 
 
Debt 
- Advance against Administrative Expenses - 
(General ledger Code) 
- Advance to Rangs Industries Ltd.  
- 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
             - 
(General ledger Code) 
- HO Bank Account 
 
             - 
(Subsidiary ledger Code) 
 
 
 
B - 
This advance will have to be adjusted as per the terms and conditions. At the time 
adjustment of advance on submission of bill, If the bill amount of the supplier exceeds the 
taxable limit for deduction of tax at source as per Income Tax Ordinance 1984, then it 
should be compulsory to deduct tax at the rates applicable to this payment of the bill and 
then, payments to supplier.

P/99 
 
(I) - First of all, prepare a Journal Voucher for deduction of tax amount from the gross 
amount of suppliers bill:  
 
Debit 
- Administrative Expenses  
 
- 
(General ledger Code) 
- Car Maintenance 
 
 
- 
(Subsidiary ledger Code) 
 
Credit  - Liabilities For Other Finance 
 
- 
(General ledger Code) 
           
- Income Tax Deducted At Source-Suppliers - 
(Subsidiary ledger Code) 
 
(Only the tax deducted amount at source) 
 
 
(II) - Secondly, prepare a Journal Voucher for adjustment of advance amount: 
 
Debit 
- Administrative Expenses  
 
- 
(General ledger Code) 
- Car Maintenance 
 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Advance against Administrative Expenses - 
(General ledger Code) 
- Advance to Rangs Industries Ltd.  
- 
(Subsidiary ledger Code) 
 
 
(III) - Then, prepare Cash Journal for payment of rest amount (final bill is more than the 
advance amount) after deduction of tax amount: 
 
Debit 
- Administrative Expenses  
 
- 
(General ledger Code) 
- Car Maintenance 
 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
             - 
(General ledger Code) 
- HO Bank Account 
 
             - 
(Subsidiary ledger Code) 
 
(Only the excess amount after adjustment of advance amount and tax deducted at source 
amount).  
 
 
(IV) - Finally, prepare the Cash Journal for deposition of tax deduction amount from 
supplier's bill to the Government Treasury through treasury challan: 
 
Debit  
- Liabilities For Other Finance 
 
- 
(General ledger Code) 
           
- Income Tax Deducted At Source-Suppliers - 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
             - 
(General ledger Code) 
- HO Bank Account 
 
             - 
(Subsidiary ledger Code) 
 
(Only the tax deducted amount at source) 
 
 
 
12.8 – Third Party Advance Against Service Providers: 
 
 
Advances to consultant for providing services are, however, permitted in the following 
cases: 
 
 As per contractual agreement with the consultants / consulting firm & organization.  
 
 Cases, in which, in the interest of works, it is absolutely necessary to make advance;

P/100 
 
 In all other cases, only with the sanction of the Managing Director, which may, in 
exceptional circumstances, authorize such advances as may be deemed necessary, 
taking the proper precautions against loss and for preventing the system from 
becoming general or continuing longer than is absolutely essential. 
 
Accounting of advances & their adjustment against submission of bills will be made on 
regular basis. Advance will be adjusted as per terms & conditions with the service 
provider. 
 
For payment of other part of submitted bills of consultant. Noted that: 
 
 If the bill amount of consultant exceeds the taxable limit for deduction of tax at source 
at the time of payment as per the Income Tax Ordinance 1984, then it should be 
compulsory to deduct tax at the rates applicable to this payment of the bill. 
 
 If the bill amount of the consultant is subject to VAT deducted at source at the time of 
payment as per the VAT Act 1991, then it should be compulsory to deduct VAT at the 
rates applicable to this payment of the bill. 
 
 Finally, the deducted (TAX & VAT) amount from the consultant’s bill should be 
deposited to the Government through treasury challan with in the date (with in 7 days 
from the date of such deduction) as specified in the Income Tax Rules. 
 
 
Accounting of advances and its' adjustment against submission of bills & payments of 
extra amounts will be as follows: 
 
A - 
Journal entries through preparation of Cash Journal relating to the advance 
payment to consultants (IBCS Primex) against consultancy in PKSF is as below: 
 
Debit 
- Institutional Dev. & Capacity Building 
- 
(General ledger Code) 
- Advance to IBCS Primex  
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
             - 
(General ledger Code) 
- HO Bank Account 
 
             - 
(Subsidiary ledger Code) 
 
 
B - 
This advance will have to be adjusted as per the terms and conditions. At the time 
adjustment of advance on submission of bill, If the bill amount of the service provider 
exceeds the taxable limit for deduction of tax at source as per Income Tax Ordinance 
1984, then it should be compulsory to deduct tax at the rates applicable to this payment 
of the bill and then, payments to service provider. 
 
 
(I) - First of all, prepare a Journal Voucher for deduction of tax amount from the gross 
amount of service provider's bill:  
 
Debit 
- Institutional Dev. & Capacity Building 
- 
(General ledger Code) 
            - Consultants Service at PKSK Head Office - 
(Subsidiary ledger Code) 
 
Credit  - Liabilities For Other Finance 
 
- 
(General ledger Code) 
           
- Income Tax Deducted At Source-Ser. Pro. - 
(Subsidiary ledger Code) 
 
(Only the tax deducted amount at source)

P/101 
 
(II) - Secondly, prepare a Journal Voucher for adjustment of advance amount: 
 
Debit 
- Institutional Dev. & Capacity Building 
- 
(General ledger Code) 
            - Consultants Service at PKSK Head Office - 
(Subsidiary ledger Code) 
 
Credit 
- Advance against Inst. Dev. & Cap. Building - 
(General ledger Code) 
             - Advance to IBCS Primex   
 
- 
(Subsidiary ledger Code) 
 
(Only the advance amount adjustment)  
 
 
(III) - Then, prepare Cash Journal for payment of rest amount (final bill is more than the 
advance amount) after deduction of tax amount: 
 
Debit 
- Institutional Develop. & Capacity Building - 
(General ledger Code) 
            - Consultants Service at PKSK Head Office - 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
             - 
(General ledger Code) 
- HO Bank Account 
 
             - 
(Subsidiary ledger Code) 
 
(Only the excess amount after adjustment of advance amount and tax deducted at source 
amount).  
 
 
(IV) - Finally, prepare the Cash Journal for deposition of tax deduction amount from 
service provider's bill to the Government Treasury through treasury challan: 
 
Debit  
- Liabilities For Other Finance 
 
- 
(General ledger Code) 
           
- Income Tax Deducted At Source-Ser. Pro. - 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
             - 
(General ledger Code) 
- HO Bank Account 
 
             - 
(Subsidiary ledger Code) 
 
(Only the tax deducted amount at source) 
 
 
 
12.9 - Authorization of Advances: 
 
 
The authorization of advances shall be made in the following ways; 
 
 
Prior approval from the Managing Director is compulsory for outside advances in 
cases of "advance against third party for material supplies", "advance against 
service providers", "advance against rent" and "advance against traveling - 
outside the country". 
 
 
Prior approval from the Managing Director is compulsory for staff advances in 
case of "advance against house building loan".  
 
 
Prior approval from the concern authority is compulsory for staff advances in case 
of "advance against traveling - in the country".

P/102 
 
12.10 - Internal Control in Advance Management & Accounting: 
 
 
PKSF management should establish a proper internal control system in such a manner 
that: 
 
 
One transaction of advance in never been completed without passing through the 
hands of at least three officials (preparation, authentication and financial 
clearance); 
 
 
Before authorization of adjustment of advances proper documentation, evidences 
and finally authenticity should be proved appropriately and accurately with due 
care; 
 
 
The authorities and responsibilities of various officials have to be arranged in 
such a way that the person who authenticating the advances, who authorizing the 
advances, who documented & recorded the advances, the person who receives 
the advances is always be different. 
 
Internal control in connection to operational steps of advances:  
 
o 
Advances will be initiated on advance requisition form. 
 
o 
The advance will be approved as per delegated authority. 
 
o 
The advances requisition form will then be handed over to the Finance 
and Accounts section to check the particulars therein. 
 
o 
Accounts Section will prepare payment voucher and checked the same. 
 
o 
Cash Section will then make payment after obtaining receiver's signature. 
 
o 
Accounts section will make the cash entry in the cash Scroll. 
 
 
Staff advances will be adjusted with in twenty (20) days from the payment of 
advances. 
 
 
Maximum limit of advance shall be received by the staff members of PKSF is not 
exceeding the limited as outlined by the "Service Rules" of the PKSF in case of 
staff advance for traveling cost. 
 
 
Other advances will be adjusted as per PKSF's Service Rules and related 
Contract Agreement basis. 
 
 
Expenses incurred will subsequently be approved as per policy and guidelines. 
 
 
On approval of the bills, accounts section will make the payment voucher / journal 
voucher / received voucher as the case may be.  
 
 
Finance & Accounts Section will make entry in the computer and updated the all 
ledgers.

P/103 
 
 
CONTENTS OF CHAPTER – 13 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
------------------------------------------------------------------------------------------------ 
13.1 - Lending Policy - Introduction 
13.2 - Accounting of Loan to POs 
13.3 - Accounting of Recovery of loan to POs 
13.4 - Accounting of Recovery of Service Charge on Loan to POs 
13.5 - Accounting of Accrual of Service Charge on Loan to POs 
13.6 - Accounting of Overdue Service Charge on Loan to POs 
13.7 - Accounting of Loan Loss Provision 
13.8 - Records & Documentation of Loan to POs 
13.9 - Internal Control in Loan Disbursement Process 
 
 
 
----------------------------------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 13 - ACCOUNTING & RECORDING OF LOAN TO POs

P/104 
 
CHAPTER - 13 
 
ACCOUNTING & RECORDING OF LOAN TO POs 
 
 
13.1 - Lending Policy - Introduction: 
 
The broad objective of "lending Policy" of PKSF is to sponsor, promote and provide 
various forms of assistance including financial, institutional, advisory and training to Non-
Government, Semi-Government and Government Organizations, voluntary agencies and 
societies, local government bodies, institutions and groups of individuals (named as 
Partner Organizations or POs) undertaking activities with a view to generating income and 
/ or employment opportunities and alleviating poverty in conformity with the objects of, an 
in a manner approved by the PKSF. This provides key aspects of PKSF's lending policies 
and procedures, as approved by its Governing Body from time to time. 
 
 
13.2 - Accounting of Loan to POs: 
 
Presentation of loans to POs to the PKSF financial statement shall be shown as its gross 
amount. The presentation of "Loans to Partner Organization" (POs) shall be as follows: 
 
A - 
Non Current (Due beyond a year) 
 
 
B - 
Current (Due with in a year)  
 
PKSF has given loan to POs as per installment basis through Draft or Cheques to the 
concerned POs as the case may be.  
 
Accounting of loan given to POs (Name of PO is ABC) [Rural Micro-credit to PO's under 
OOSA] will be journalized through making Cash Journal in the following way: 
 
Debit 
- Rural Micro-credit to PO's under OOSA 
- 
(General ledger Code) 
- ABC (Name of PO)  
 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
             - 
(General ledger Code) 
- HO Bank Account 
 
             - 
(Subsidiary ledger Code) 
 
(Only for Taka amount of loan given to ABC - PO) 
 
 
13.3 - Accounting of Recovery of loan to POs: 
 
PKSF recovers its loan to POs as per installment basis through receiving Demand Draft 
or Cheques or Pay-Order from the concerned POs as the case may be.  
 
Accounting of loan recovery from POs (name of PO is ABC) against loan to POs [Rural 
Micro-credit to PO's under OOSA] will be journalized through making Cash Journal in the 
following way: 
 
Debit 
- Cash At Bank 
 
 
             - 
(General ledger Code) 
- HO Bank Account 
 
             - 
(Subsidiary ledger Code) 
 
Credit 
- Rural Micro-credit to PO's under OOSA 
- 
(General ledger Code) 
- ABC (Name of PO)  
 
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of loan realized from ABC - PO)

P/105 
 
13.4 - Accounting of Recovery of Service Charge on Loan to POs: 
 
 
PKSF recovers its' service charge from POs calculated as per rate agreed upon in the 
loan agreement on loan to POs on installment basis through receiving Demand Draft or 
Cheques or Pay-Order from the concerned POs as the case may be.  
 
Accounting of service charge recovery from POs (name of PO is ABC) against loan to 
POs [Rural Micro-credit to PO's under OOSA] will be journalized through making Cash 
Journal in the following way: 
 
Debit 
- Cash At Bank 
 
 
             - 
(General ledger Code) 
- HO Bank Account 
 
             - 
(Subsidiary ledger Code) 
 
Credit 
- Service Charge Under RMC - OOSA 
- 
(General ledger Code) 
- ABC (Name of PO)  
 
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of service charge realized from ABC - PO) 
 
 
13.5 - Accounting of Accrual of Service Charge on Loan to POs: 
 
 
PKSF accrue its' service charges on loan to POs as per policy instruction calculated 
based on rates agreed upon in the loan agreement with the POs as the case may be.  
 
Accounting of service charges accrual but not due from POs (name of PO is XYZ) against 
loan to POs [Rural Micro-credit to PO's under OOSA] will be journalized through making 
Journal Voucher in the following way: 
 
Debit 
- Accrued Service Charge RMC - OOSA       - 
(General ledger Code) 
- XYZ (Name of PO) 
 
             - 
(Subsidiary ledger Code) 
 
Credit 
- Service Charge Under RMC - OOSA 
- 
(General ledger Code) 
- XYZ (Name of PO)  
 
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of accrued service charge but not due from XYZ - PO) 
 
 
13.6 - Accounting of Overdue Service Charge on Loan to POs: 
 
 
Overdue service charges on loan to POs accounted for separately.  
 
Accounting of over due service charge from POs (name of PO is NM) against loan to POs 
[Rural Micro-credit to PO's under OOSA] will be journalized through making Journal 
Voucher in the following way: 
 
Debit 
- Overdue Service Charge RMC - OOSA       - 
(General ledger Code) 
- NM (Name of PO) 
 
             - 
(Subsidiary ledger Code) 
 
Credit 
- Service Charge Under RMC - OOSA 
- 
(General ledger Code) 
- NM (Name of PO)  
 
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of overdue service charge from NM - PO)

P/106 
 
13.7 - Accounting of Loan Loss Provision: 
 
The amount of accumulated provision made for the doubtful loans calculated as loan 
classification and provisioning policy of PKSF shall be shown as liability item of the 
balance sheet and debt management charges for the year shall be shown as an expense 
in the income statement.  
 
Accounting of loan loss provision on loan to POs - OOSA will be journalized through 
making Journal Voucher in the following way: 
 
Debit 
- Debt Management Charges for Core Program- 
(General ledger Code) 
- D M Charges - Core Program 
             - 
(Subsidiary ledger Code) 
 
Credit 
- Debt Management Reserve on Loan to  
  POs - OOSA 
 
 
 
- 
(General ledger Code) 
- Loan Component  
 
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of debt management reserve) 
 
13.8 - Records & Documentation of Loan to POs: 
 
 Loan ledgers shall be maintained in finance and accounts section, Disbursement 
and repayment of loan shall be immediately documented evidently, recorded 
authentically and posted correctly in the ledgers as and when they take places 
and updated the ledgers regularly; 
 
 Monthly reconciliation by the finance and accounts shall be conducted with 
figures of the MIS of the total loan outstanding, disbursements and recovery and 
prepare the reconciliation statement for the unmatched balances of accounting 
ledgers; 
 
 Overdue statement of loan outstanding (as per format) shall be prepared on 
monthly basis regularly and also by MIS Section; 
 
 Loan classification statements (as per format) shall be prepared yearly basis 
following the guidelines as stated in the policy - Matrix Methodology; 
 
 Loan loss provision statement or calculation sheet (as per format) to be prepared 
based on loan classifications statements following the instruction & guidelines 
made in this regard; 
 
 Separate statement to be prepared for the "Renegotiated Loans" and Nor-
performing Loans" as per statement (as per format) designed in this context. 
 
 
13.9 - Internal Control in Loan Disbursement Process: 
 
 
On getting the approval for payment on the file, a cheque requisition giving details of the 
board sanction, mode of payment etc, shall be prepared by the Desk Officer (Operations) 
approved DMD (Operations) asking the Finance and Accounts Department to prepare the 
cheque. File shall be moved to Supervising Officer and Deputy Managing Director (DMD-
Operations) for their signatures. The cheque requisition along with other related 
necessary papers to process the loan disbursement to POs shall then, given to the 
Finance and Accounts Department for preparing cheque in favour of the POs.

P/107 
 
 
Cheque requisition goes to Officer (F&A), to see if any condition is given in the requisition 
if followed. He then brings out the resolution file and check that requisition agrees with 
what is mentioned in the resolution. Then, he attaches a copy of the file note approving 
the payment with the voucher made for payment. He puts the cheque number and 
amount paid on the face of the resolution marking the payment. 
 
Then, Officer (F&A) prepares the cheque recording the payment in Cheque Payment 
Register and on Customer Loan Card. The cheque, cheque register, resolution of minutes 
file and the voucher then sent to the Manager (F&A) who check that the cheque is 
prepared properly and all formalities regarding payment is maintained. Then, he signs on 
the counter foil of the cheque, cheque payment register, on the cheque requisition and on 
the resolution of minutes and also voucher prepared for this. 
 
After verification and signing by Manager (F&A), the whole set then sent to the DGM 
(F&A) who again checks in the same way and sends those to the cheque signatories as 
per delegation of authority. On signing the cheque by the authorized personnel and file 
return to Finance and Accounts Department for delivery of cheque to the concern PO 
through concern Desk Officer of Operation Department. 
 
Finance and Accounts Department then handed over the cheque to the concerned officer 
for delivering to the PO recording the same in the cheque disbursement register and the 
PO card. The deeds are entered in Deed Register where DO and AM signs. Deed of 
agreements along with other papers is kept in safe custody under the joint custodians.

P/108 
 
CONTENTS OF CHAPTER – 14 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
------------------------------------------------------------------------------------- 
14.1 - Definitions 
14.2 - Application of IAS - Government Grants Accounting 
14.3 - Accounting of Government Grants 
 
 
 
 
------------------------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 14 - GOVERNMENT GRANTS & IT'S ACCOUNTING

P/109 
 
 CHAPTER – 14 
 
GOVERNMENT GRANTS & IT'S ACCOUNTING 
 
14.1 – Definitions: 
 
(I) - Government Grants - 
 
Government grants are assistance by government or other agencies in the form of 
transfers of resources to PKSF in compliance with certain conditions relating to operating 
activities of PKSF. 
 
(II) - Grants Related to Assts -  
 
Grants related to assets are grants whose primary condition is that PKSF qualifying for 
them shall purchase or acquire long-term assets. Subsidiary conditions may also be 
attached restricting the type or location of the assets or the periods during which they are 
to be acquired or held. 
 
(III) - Grants Related to Income - 
 
Grants related to income are government grants other than those related to assets. 
 
14.2 - Application of IAS - Government Grants Accounting: 
 
International Accounting Standard IAS - 20 - "Accounting for Government Grants and 
Disclosure of Government Assistance" shall be applied in accounting for, and in the 
disclosure of, government grants received by PKSF and in the disclosure of other forms 
of government assistance. 
 
Recognition of Government Grants & Accounting for Government Assistance by PKSF 
shall be as follows: 
 
(a) - Recognition of Government Grants: 
 
 
Government grants shall not be recognized until there shall be reasonable 
assurance that: 
 
(I) - The PKSF shall comply with the conditions attaching to it; and 
 
(II) - The grant shall be received. 
 
 
 
Government grants shall be recognized as income over the periods necessary to match 
them with related costs which, PKSF are intended to compensate, on a systematic basis.  
 
(b) - Accounting of Government Grants: 
 
(I) - Grant for current year's revenue expenses shall be recognized as grant 
income under other income account; 
 
(II) - Government grants for expenses shall be recognized as deferred income to 
the extend of the amount of subsequent years and for equity as capital fund; 
 
(III) - Amount equal to current years' depreciation under grant for assets shall be 
recognized as income. Rest / carrying amount of the relevant assets shall be 
accounted for as grant for assets;

P/110 
 
(c) - Disclosure of Government Grants in financial statements of PKSF: 
 
(I) - The accounting policy adopted for government grants, including the methods 
of presentation adopted; 
 
(II) - The nature and extent of government grants recognized shall be disclosed 
adequately; 
 
 
14.3 - Accounting of Government Grants: 
 
 
Following accounting procedures / systems shall be followed by PKSF to the Government 
Grants:  
 
 
(A) - Accounting against revenue expenditures: 
 
(I) - When revenue expenditures incurred and paid by PKSF: 
 
Debit 
- Relevant Revenue Expenditure        
- 
(General ledger Code) 
- Relevant Expenditure 
 
             - 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
 
- 
(General ledger Code) 
- HO Bank Account  
 
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of revenue expenditures paid) 
 
(II) - When expenditures reimbursed by Government that paid by PKSF: 
 
Debit 
- Cash At Bank 
 
 
 
- 
(General ledger Code) 
- HO Bank Account  
 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Other Income 
 
 
 
- 
(General ledger Code) 
- Grant Under Project   
 
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of revenue expenditures reimbursed by Government) 
 
(III) - For accrual of expenditures (not received with in particular year): 
 
Debit 
- Grants Receivables  
 
 
- 
(General ledger Code) 
- Receivable Under Project 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Other Income 
 
 
 
- 
(General ledger Code) 
- Grant Under Project   
 
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of revenue expenditures not yet received with in particular year) 
 
 
(IV) - When grants received in advance: 
 
Debit 
- Cash At Bank 
 
 
 
- 
(General ledger Code) 
- HO Bank Account  
 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Deferred Income 
 
 
- 
(General ledger Code) 
- Deferred Income Under Project  
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of revenue expenditures received in advance)

P/111 
 
(V) - Revenue expenditure paid in advance for subsequent year but the eligible 
reimbursement did not received in the year in which advance is paid: 
 
Debit 
- Grant Receivable Account  
 
- 
(General ledger Code) 
- Receivable Under Project 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Other Income 
 
 
 
- 
(General ledger Code) 
- Grant Under Project  
 
 
- 
(Subsidiary ledger Code) 
 
 
 
(B) - Accounting against capital expenditures: 
 
(I) - When capital expenditures incurred and paid by PKSF: 
 
Debit 
- Relevant Fixed Assets Account        
- 
(General ledger Code) 
- Relevant Fixed Assets 
 
             - 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
 
- 
(General ledger Code) 
- HO Bank Account  
 
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of capital expenditures paid) 
 
(II) - When capital expenditures reimbursed by Government that paid by PKSF: 
 
Debit 
- Cash At Bank 
 
 
 
- 
(General ledger Code) 
- HO Bank Account  
 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Grant for Assts  
 
 
- 
(General ledger Code) 
- Grant for Asset Under Project   
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of capital expenditures reimbursed by Government) 
 
(III) - For accrual of capital expenditures (not received with in particular year): 
 
Debit 
- Grants Receivables  
 
 
- 
(General ledger Code) 
- Grant Receivable Under Project 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Grant for Assets  
 
- 
(General ledger Code) 
- Grant for Assets Under Project 
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of capital expenditures not yet received with in particular year) 
 
(IV) - When grants received in advance: 
 
Debit 
- Cash At Bank 
 
 
 
- 
(General ledger Code) 
- HO Bank Account  
 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Deferred Income 
 
 
- 
(General ledger Code) 
- Deferred Income Under Project  
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of capital expenditures received in advance) 
 
(V) - For depreciation of the assets: 
 
Debit 
- Depreciation of Fixed Assets 
 
- 
(General ledger Code) 
- Depreciation of Fixed Asset Under Project - 
(Subsidiary ledger Code) 
 
Credit 
- Provision for Depreciation on Fixed Asset - 
(General ledger Code) 
- Provision for Dep. on F. Asset Under Project- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of depreciation of fixed assets for the particular period)

P/112 
 
(VI) - For adjustment of proportionate depreciation against grants for assets: 
 
Debit 
- Grant for Assets  
 
- 
(General ledger Code) 
- Grant for Assets Under Project 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Other Income 
 
 
 
- 
(General ledger Code) 
- Grant Under Project   
 
 
- 
(Subsidiary ledger Code) 
 
(Only for equivalent Taka amount of yearly proportionate depreciation of fixed asset)

P/113 
 
 
CONTENTS OF CHAPTER – 15 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
--------------------------------------------------------------- 
15.1 - Definitions 
15.2 - Recognition of Liabilities 
15.3 - Accounting of Liabilities 
15.4 - Application of IAS - Borrowing Costs 
15.5 - Accounting of Borrowing Costs 
 
 
 
 
-------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 15 - ACCOUNTING OF LIABILITIES & BORROWING COSTS

P/114 
 
 CHAPTER – 15 
 
ACCOUNTING OF LIABILITIES & BORROWING COSTS 
 
15.1 – Definitions: 
 
(I) - Liabilities - 
 
One of the elements directly related to the measurement of financial position of PKSF is 
liability. Liability is a obligation of the organization arising as a result of past events and 
from which future economic benefits are expected to flow to the organization. 
 
An essential characteristic of a liability is that the organization has an obligation. An 
obligation is a duty or responsibility to act or perform in a certain way. Obligations may be 
legally enforceable as a consequence of a binding contract or statutory requirement. A 
distinction needs to be drawn between a present obligation and a future commitment. A 
decision by the management of the organization to acquire assets in future does not, of 
itself, give rise to a present obligation. An obligation normally arises only when the asset is 
delivered or the organization enters into an irrecoverable agreement to acquire the 
assets. Example of liabilities resulting from past transactions or past events is the receipt 
of loan results in an obligation to repay the loan with interest.  
 
(II) - Borrowing Costs - 
 
Borrowing costs are interest and other costs incurred by PKSF in connection with the 
borrowing of funds. 
 
15.2 – Recognition of Liabilities: 
 
A liability is recognized in the balance sheet when it is probable that an outflow of 
resources embodying economic benefits will result from the settlement of an obligation 
and the amount at which the settlement will take place can be measured reliably. 
Recognition of liabilities entails recognition of related assets or expenses. 
 
15.3 - Accounting of Liabilities: 
 
 
Generally, PKSF classified its' liabilities into two major categories as follows: 
 
 
(I) - Current Liabilities 
 
(II) - Long Term Liabilities 
 
 
Following accounting procedures / systems shall be followed by PKSF to accounting its' 
obligation / liabilities:  
 
 
(A) - Current Liabilities: 
 
(I) - For accrual of expenses (Accrual of liabilities for expenses): 
 
Debit 
- Relevant Revenue Expenditure        
- 
(General ledger Code) 
- Relevant Expenditure 
 
             - 
(Subsidiary ledger Code) 
 
Credit 
- Other Liabilities  
 
 
- 
(General ledger Code) 
- Provision for Expenses   
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of accrued expenditures not yet paid)

P/115 
 
(II) - For payment of liabilities: 
 
Debit 
- Other Liabilities  
 
 
- 
(General ledger Code) 
- Provision for Expenses   
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
        
- 
(General ledger Code) 
- HO Bank Account 
 
             - 
(Subsidiary ledger Code) 
 
(Only for Taka amount paid against liabilities) 
  
 
(B) - Long Term Liabilities: 
 
(I) - For receipt of long-term loan under different projects: 
 
Debit 
- Cash At Bank 
 
 
        
- 
(General ledger Code) 
- HO Bank Account 
 
             - 
(Subsidiary ledger Code) 
 
Credit 
- Long Term Loan Account  
- 
(General ledger Code) 
- Loan Under Project 
 
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of long term loan received under project) 
 
(II) - For payment of long term loan: 
 
Debit 
- Long Term Loan Account  
- 
(General ledger Code) 
- Loan Under Project 
 
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
        
- 
(General ledger Code) 
- HO Bank Account 
 
             - 
(Subsidiary ledger Code) 
 
(Only for Taka amount paid against long term loan) 
 
 
(C) - Gratuity Fund: 
 
(III) - For accrual of gratuity expenses: 
 
Debit 
- Salaries, Allowances & Other Facilities       - 
(General ledger Code) 
- Gratuity 
 
 
             - 
(Subsidiary ledger Code) 
 
Credit 
- Provision for Gratuity  
 
 
- 
(General ledger Code) 
- Name of the Employee   
 
- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of accrued expenditures not yet paid for gratuity) 
 
(II) - For payment of gratuity: 
 
Debit 
- Provision for Gratuity 
 
 
- 
(General ledger Code) 
- Name of the Employee   
 
- 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
        
- 
(General ledger Code) 
- HO Bank Account 
 
             - 
(Subsidiary ledger Code) 
 
(Only for Taka amount paid against gratuity)

P/116 
 
15.4 - Application of IAS - Borrowing Costs Accounting: 
 
International Accounting Standard IAS - 23 - "Accounting for Borrowing Costs" shall be 
applied in accounting for borrowing costs of PKSF. Recognition of borrowing costs & 
Accounting for borrowing costs by PKSF shall be as follows: 
 
(a) - Recognition of borrowing costs: 
 
o 
Borrowing costs shall be recognized as an expenses in the period in 
which they are incurred;  
 
(b) - Accounting of borrowing costs: 
 
o 
Borrowing costs shall be interest and other costs incurred by PKSF in 
connection with the borrowing of funds; 
 
o 
Borrowing costs shall be accounted for on accrual basis; 
 
(c) - Disclosure of borrowing costs in financial statements of PKSF: 
 
o 
The nature and extent of borrowing costs recognized shall be disclosed 
adequately in the financial statements; 
 
o 
The accounting policy adopted for borrowing costs; 
 
15.5 - Accounting of Borrowing Costs: 
 
 
Following accounting procedures / systems shall be followed by PKSF to accounting its' 
borrowing costs:  
 
 
(A) - Accounting for interest on loan: 
 
(I) - For accrual of interest expenses on loan: 
 
Debit 
- Interest On Loan 
 
        
- 
(General ledger Code) 
- Interest On Loan Under Projects              - 
(Subsidiary ledger Code) 
 
Credit 
- Interest Payable On Loan - Current 
- 
(General ledger Code) 
- Interest Payable On Loan U. Pro. - Current - 
(Subsidiary ledger Code) 
 
Credit 
- Interest Payable On Loan - Non-Current 
- 
(General ledger Code) 
- Interest Payable On Loan U. P Non-Current- 
(Subsidiary ledger Code) 
 
(Only for Taka amount of accrual of interest expenditure on loan) 
 
(II) - For payment of interest on loan: 
 
Debit 
- Interest Payable On Loan - Current 
- 
(General ledger Code) 
- Interest Payable On Loan U. Pro. - Current - 
(Subsidiary ledger Code) 
 
Credit 
- Cash At Bank 
 
 
        
- 
(General ledger Code) 
- HO Bank Account 
 
             - 
(Subsidiary ledger Code) 
 
(Only for Taka amount paid against interest on loan)

P/117 
 
CONTENTS OF CHAPTER – 16 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
---------------------------------------------------------------------------------- 
16.1 – Introduction 
16.2 – Application International Accounting Standards 
16.3 – Adoption of Accounting Policies as per IAS 
16.4 – Disclosure of Accounting Policies as per IAS 
 
 
 
 
--------------------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16-APPLICATION OF INTERNATIONAL ACCOUNTING STANDARDS

P/118 
 
CHAPTER – 16 
 
 
APPLICATION OF INTERNATIONAL ACCOUNTING STANDARDS 
 
 
16.1 – Introduction: 
 
 
Here, it will be better to give an overview of the meaning and objective of the International 
Accounting Standards (IAS). 
 
The International Accounting Standard (IAS) are issued by the International Accounting 
Standards Committee (IASC) to bring world - wide “harmonization in the Generally 
Accepted Accounting Principles (GAAP), so that financial statements, as the bases for 
investment, credit and similar decision", standards (subject to local adaptation), which are 
meant for mandatory application wherever adopted. 
 
International Accounting Standards are designed to achieve improvement in the degree of 
uniformity in accounting principles and disclosures and thereby effective harmonization in 
financial reporting of the concerned entities. Each IAS covers accounting standards 
(recognition and measurement related) and reporting standards (disclosure related). 
 
Though accounting standards are generally similar, the reporting or disclosure standards 
may vary significantly from entity to entity and country to country, because of differences 
in corporate objectives and economic, socio-political environments. Hence, realization of 
disclosures is essential for achieving national and international harmonization in 
accounting practices and presentation. 
 
 
16.2 – Application of International Accounting Standards: 
 
 
 
While preparing the financial statements of PKSF, it always to follow the internationally 
generally accepted accounting principles and accounting standards issued by the 
International Accounting Standards Committee (IASC) considering the local adoption. 
 
The preparation of financial statements and adoption & application of accounting policies 
of PKSF should be identical and as per the requirements of International Accounting 
Standards (IASs) as adopted in Bangladesh. The financial statements such as balance 
sheet, income statements, cash flow statements, disclosure of accounting policies are 
being prepared based on various important assumptions, concepts, principles and 
conventions as per International Standard. 
 
The management of the PKSF is responsible for the preparation and presentation of its 
financial statement as per International Accounting Standards (IAS-1). 
 
Financial statements shall present fairly the financial position, financial performance and 
cash flows of PKSF. The appropriate application of International Accounting Standards, 
with additional disclosure when necessary, results, in virtually all circumstances, in 
financial statements that achieve a fair presentation.

P/119 
 
The following International Accounting Standards (IAS) shall be applicable in preparation 
and presentation of PKSF financial statements: 
 
Sl. No. Number of IAS Name of IAS  
 
 
1 
IAS-1 
 
Presentation of Financial Statements 
 
 
2 
IAS-2 
 
Inventories 
 
 
3 
IAS-7 
 
Cash Flow Statements 
 
4 
IAS-8 
 
Net Profit or Loss for the Period, Fundamental Errors &  
Changes in Accounting Policies 
 
 
5 
IAS-10  
Events After the Balance Sheet Date 
 
 
6 
IAS-16  
Property, Plant & Equipment 
 
 
7 
IAS-18  
Revenue Recognition 
 
 
8 
IAS-19  
Employee Benefits 
  
 
9 
IAS-20  
Accounting Government Grants & Disclosure of Govt. Assist. 
 
 
10 
IAS-23  
Borrowing Costs 
 
 
11 
IAS-30  
Disclosure in the Financial Statements of Banks & 
Similar Financial Institutions   
 
16.3 – Adoption of Accounting Policy As per IAS:  
 
Accounting policies are the specific principles, bases, conventions, rules and practices 
adopted by PKSF in preparing and presenting financial statement. 
 
Management of PKSF shall select and apply its' accounting policies in such a way, so that 
the financial statements comply with all the requirements of each applicable International 
Accounting Standard.  
 
16.4 – Disclosure of Accounting Policies As per IAS:  
 
As per the requirement of the International Accounting Standards (IAS-1), the preparation 
of disclosure requirement statements of accounting policies adopted to prepare financial 
statements in the organization as an integral part of the financial statements is 
compulsory. 
 
This is why PKSF has to prepare disclosure requirements statements of accounting 
policies for its consolidated statements in head office centrally. 
 
Each accounting policies of the PKSF should be disclosed that is necessary for a proper 
understanding of the financial statements. A specific accounting policy should be 
disclosed, where disclosure would assist users in understanding the way in which 
financial transactions and events are reflected in the reported performance and financial 
position.

P/120 
 
CONTENTS OF CHAPTER – 17 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
--------------------------------------------------------------------------------- 
17.1 - Introduction 
17.2 - Finalization of Monthly Financial Statements 
17.3 - Income Statements 
17.4 - The Balance Sheet 
17.5 - Cash Flow Statements 
17.6 - Notes to Accounts 
17.7 - Subsidiary Ledger Accounts Statement 
17.8 - Accounts Schedules & Statements 
17.9 - Interpretation of Accounts – Ratios Analysis 
17.10 - Other Reporting through Accounts Maintenance 
17.11 - Budgeting 
17.12 - Computerization of Accounts 
 
 
 
 
---------------------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17 - PREPARATION OF FINANCIAL STATEMENTS

P/121 
 
CHAPTER - 17 
 
PREPARATION OF FINANCIAL STATEMENTS 
 
17.1 – Introduction: 
 
The financial statements of the PKSF shall be finalized (prepared and presented) through 
inserting the all disclosures requirements of the accounts as per International Accounting 
Standards (IAS) for each calendar month. Usually each month accounts shall be 
completed by third week of the next month. At the end of each month, the chief of finance 
and accounts shall prepare and submit monthly financial report to the Managing Director 
of PKSF. 
 
At the end of the fiscal year, the chief of finance and accounts shall prepare the Annual 
Report including financial statements of the organization with full disclosures 
requirements of the accounts as per International Accounting Standards (IAS) duly 
audited and submit the same to the General Body through Managing Director. Financial 
statements also show the results of management's stewardship of the resources 
entrusted to it. 
 
17.2 – Finalization of Monthly Financial Statements: 
 
 
At the end of each month balancing of all records of accounts, control general ledgers, 
subsidiary ledgers and registers shall be carried out attentively and completed & updated 
accurately in all offices of PKSF. Then go for finalization of monthly basis accounts / 
financial statements of PKSF. The stages to complete the preparation of final accounts of 
PKSF are as follows: 
 
 Preparation of trial balance; 
 Preparation of income statements - Projects, funds and PKSF as a whole; 
 Preparation of balance sheets - Projects, funds and PKSF as a whole; 
 Preparation of cash flow statements - Projects, funds and PKSF as a whole; 
 Preparation of notes to accounts - Projects, funds and PKSF as a whole; 
 Preparation of all schedules & statements - Projects, funds and PKSF as a whole; 
 Preparation of significant accounting policies adopted to prepare accounts; 
 Preparation of all explanatory notes to accounts - Projects, funds and PKSF as a 
whole; 
 Preparation of ratio analysis statements; 
 Preparation of budget variance analysis statements; 
 
17.3 - Income Statements: 
 
 
As a process of preparation of periodical financial statements, PKSF shall have to 
prepare income statements to show the excess / shortage of expenditure over income for 
a particular period monthly / quarterly / yearly basis. It is required to be essential to 
prepare the income statement on monthly basis for all the offices including head office 
and a consolidated income statement of PKSF. To prepare the income statement: 
 
 
All revenue incomes balances of ledger accounts to be accumulated as per individual 
accounts head and codes in income side and all revenue expenditures balances of 
ledger accounts to be accumulated as per individual accounts head and codes in 
expenditure side;

P/122 
 
 
Then totaled the both sides (income and expenditure); 
 
 
The difference amount (excess or shortage) to be find out by balancing the total 
balance of both sides; 
 
 
Payments against advance or prepayments and the capital expenses should not be 
included in this account. This type of expenses should be treated as items to be 
shown in the balance sheet; 
 
 
The surplus or deficit as shown by this account shall be transferred to the balance 
sheet as capital fund; 
 
 
The depreciation charges relating to fixed assets and the provision for loan losses will 
be shown in the income statements. 
 
 
All revenue nature income and expenditure relating to the reporting period will be 
reflected in this account irrespective of the status whether income received or not and 
the expenditure paid or not. 
 
17.4 - The Balance Sheet: 
 
The balance sheet portrays the state of assets and liabilities of the organization as on a 
particular day. So, to depict the over all financial position of the organization, it is 
compulsory to draw up a balance sheet (As per Format) for PKSF at closing day of the 
financial year. To facilitate the easy accounting for PKSF, monthly basis preparation of 
balance sheet is acute to be needed. Besides, it is also needed to prepare balance sheet 
for all offices. 
 
a) The balance sheet shall have to be prepared on the basis of the ledger balances; 
 
b) For this purpose, all assets & property will be classified in one side and all liabilities & 
equities will be classified in other sides of balance sheet; 
 
c) Then after, totaled both the sides and examine whether the sum of equity and liability 
side agrees with the sum of property and assets side of balances sheet.  
 
d) So, the equation for balance sheet stands as below: 
 
Balance sheet = Equity & liabilities – Property & Assets. 
 
e) Excess of income over expenditure [surplus] or excess of expenditure over income 
[deficit] is to be adjusted against equity – as retained earning in balance sheet. 
 
f) 
The ultimate effects of the adjustments relating to advances, prepayments and 
outstanding expenses and depreciation shall be shown in the balance sheet. 
 
g) Details of fixed assets should be shown either in a schedule to be annexed with the 
balance sheet. 
 
17.5 – Cash Flow Statements: 
 
 
As per the requirement of the International Accounting Standards (IASs-1 & 7), the 
preparation of cash flow statements of the organization is compulsory. This why PKSF 
has to prepare Cash Flow statements for its all offices and consolidated statements in 
head office also. The cash flow statement has to be prepared as per format.

P/123 
 
17.6 – Notes to Accounts: 
 
 
As per the requirement of the International Accounting Standards (IASs-1), the 
preparation of notes to accounts as an integral part of the financial statements of the 
organization is compulsory. This is why PKSF has to prepare notes to accounts 
statements for its all offices & consolidated statements in head office. 
 
17.7 - Subsidiary Ledger Accounts Statement: 
 
 
To support the balance sheet, income statement and cash flow statements of PKSF is 
compulsory to prepare the statements of all subsidiary ledger accounts balances of a 
particular period – monthly, quarterly & yearly as required for explanation. This will be 
prepared as per the specified format by all offices. 
 
17.8 - Accounts Schedules & Statements: 
 
To support the balance sheet, income statement and cash flow statements of PKSF is 
compulsory to prepare the schedules & statements of balance sheet, income statement 
and cash flow statement items of a particular period – monthly, quarterly & yearly as 
required for explanation. This will be prepared as per the specified format by all offices.  
 
All sorts of statements and schedules to be prepared as and when needed to clarify 
financial statements - such as fixed assets schedules, depreciation schedules, stock 
statements, prepaid expenses statements, inter office transactions statements, cash 
custody certificate, bank balance confirmation certificates, detail break up of sales & 
purchases, cash budget, budget variance analysis and etc. 
 
17.9 - Interpretation of Accounts – Ratio Analysis: 
 
 
Ratio analysis statement as whole of PKSF is compulsory to prepare at a particular period 
– monthly, quarterly & yearly as required for interpretation of the financial statements is 
necessary to measure the rate of performances in different sector of the organization. 
The achievement in different sectors of PKSF will be evaluated through finding out the 
calculation of certain ratio as delineated by the management.  
 
17.10 - Other Reporting through Accounts Maintenance: 
 
 
 
I - Accounts Maintenance: 
 
PKSF accounts are developed in a computer-software - whole thing is a 
computerized one. The modern concepts and system of accounts keeping are 
followed in PKSF. 
 
 
II - Preparing other reports: 
 
 Loan & fund position; 
 Loan disbursement to POs; 
 Loan recovery of POs; 
 Service charge recovery from POs; 
 Net Loan disbursement summary of POs; 
 DOSA - Accounts statements - IDA reporting; 
 Other reports as per management requirement;

P/124 
 
 Daily Transaction Report; 
 General Ledger at different options; 
 Cash and Bank Summary; 
 Journal Voucher Summary; 
 Demand Draft register; 
 Other information as and when required. 
 
III - Providing management information - As and when required. 
 
17.11 – Budgeting: 
 
 
 
I - Annual Budget Preparation: 
 
 Annual Budget shall be prepared for the next year at the end of the current year 
and shall be placed at the board for approval; 
 
 The budget shall be placed and approved in the Annual General Meeting. 
 
II - Long Term Budget (LTB): 
 
Shall be prepared as & when required by the management to foresee the future; 
 
LTB shall also be prepared to see the trend at different scenario. 
 
 
17.12 - Computerization of Accounts: 
 
 
The accounting system of PKSF has been computerized. A well designed accounting 
software has been introduced in the organization to record the day to day financial 
transactions in such a way that a best presentation of the PKSF financial statements has 
been prepared which following the all requirements, guidelines and disclosures of 
International Accounting Standards (IASs). 
 
 
To facilitate the whole accounting system and to prepare all financial statements of PKSF 
based on the generally accepted accounting principles required as per the International 
Accounting Standards processed through the newly introduced accounting software, a 
best commonly applicable chart of accounts adhere to record all financial transactions of 
the organization at all level linking with the budget line items of PKSF has been developed 
in this context.  
 
 
Newly developed accounting software of PKSF considers location wise (means PKSF 
head office in Dhaka and all other Regional Audit offices through out the country) financial 
transactions recording and their preparation of related financial statements. Moreover, it 
also considered to record all financial transactions of project program wise, program 
activity wise and finally expense nature wise all financial transactions of all level of PKSF. 
 
 
This would assist PKSF to record information conveniently and produce various financial 
statements and reports accurately and timely in regular basis.

P/125 
 
 
CONTENTS OF CHAPTER – 18 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
------------------------------------------------------------------------------- 
18.1 - Introduction 
18.2 - Purchase Methods 
18.3 - Purchase Procedure 
18.4 - Tender Quotation Through Paper Advertisement 
18.5 - Procurement Plan 
18.6 - From Whom Should Purchase be Made 
18.7 - Tender Fees & Performance Bond 
18.8 - Procedures Relating to Consultation Services 
 
 
 
 
------------------------------------------------------------------------------ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18 - PURCHASE PROCEDURE & MANAGEMENT

P/126 
 
CHAPTER - 18 
 
PURCHASE PROCEDURE & MANAGEMENT 
 
18.1 - Introduction: 
 
All types of purchases and procurements of head office and regional audit offices of 
PKSF should be made as per the procedures and guidelines narrated here in below. All 
procurement must be on fair competitive basis and a competitive price is made for goods 
and services. In order to implement the purchase procedures effectively, it is necessary to 
set up an efficient purchase unit under the administrative department. The staff members 
(may be changed from time to time) responsible for purchase should: 
 
 Have considerable experience in buying;  
 Have organizing ability; 
 Have ability to negotiate; 
 Be reliable, dependable and honest; 
 Have broad base technical ability; 
 
 
18.2 - Purchase Methods: 
 
Generally following two methods will exist: 
 
I. Strictly by Requirement: 
Purchases will be made only when need and the 
purchase unit should have up-to date knowledge 
of all reliable sources. 
II. Group Purchase: 
Purchase will be made in groups that are placing 
one order for a number of small orders. 
 
 
18.3 - Purchase Procedure: 
 
Following procedures and guidelines have to be followed to ensure fair and competitive 
price, offers should be made to genuine dealers or suppliers through tender or quotation: 
 
I. Purchase Requisition: 
 
 
This includes fixed assets, routine purchase, casual purchase etc. Administrative 
department shall send request to different department / section to send their 
requisition for purchase of bulk item. Administration Dept. shall also arrange to 
obtain budget from finance and accounts department to ensure primarily that the 
purchases are within the budget allocation. 
 
 
Purchase requisition indicating budgetary sanction or block allocation is to be 
initiated by user department, vetted by the concerned head. Requisition is to be 
made in duplicate. The person requisitioning retains one copy and the other copy 
is forwarded to the Administration Dept. 
 
 
Other than that Annual / Half Yearly / Quarterly bulk purchase all requisitions for 
regular weekly purchase shall have to be submitted by different Department / 
Section to Administration Department.

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 
After careful scrutiny of the requisitions submitted by different department / 
section, Administration Dept. shall take the initiative to process the file and 
necessary prior approval from the line authority as per authorization procedures. 
 
 
After careful scrutiny of the requisitions submitted by different department / 
section, Administration Dept. shall prepare indent & send the same to purchase 
committee for review / recommendation if purchase cost value is Taka 20,000 
(Twenty thousand) and above. 
 
 
If purchase formalities are under the jurisdiction of purchase committee - the 
necessity of purchases shall duly approved by the Managing Director. 
 
 
Purchase proposal together with quotation / offer shall be placed to Purchase 
Committee. 
 
II. Purchase Committee: 
 
 
There shall be two purchase committees (PC) to be constituted by the Managing 
Director to conduct purchase related activities. 
 
 
The committee may be consisted of minimum 4-5 members or as decided by the 
Management. At least three (3) members should always be available at the time 
of approving any purchase.  
 
 
All the purchases value exceeding Taka 20,000 are to be handled and maintained 
by purchase committee. 
 
 
The purchase committee shall reserve the right to accept or reject any or all 
quotation / tenders with proper justification. 
 
 
Purchase committee shall verify the quotation and the comparative statement and 
then recommend to Managing Director for approval.  
 
 
Purchase Committee-2: To perform the activity in connection to the purchase 
goods from Taka 20,001 up to Taka 5,00,000; 
 
 
Purchase Committee-1: To perform the activity in connection to the purchase of 
goods amounting to above Taka 5,00,000. 
 
 
When a particular item is purely of proprietary in nature, irrespective of the value 
of the purchase, single tender inquiry is to be used directly to the manufacturer or 
their authorized agents. On scrutiny, the purchase committee shall place the 
recommendation of purchase to Managing Director. 
 
 
If the suppliers' organization / source is more than one, purchase shall be made 
on competitive price basis through making necessary inquiry or through inviting 
Tender / Quotation / Offer at least two national newspapers / dailies.  
 
 
In case of quotation / tender purchase, at least three (3) quotation / tender will 
have to be collected / submitted from the different shop's / suppliers. Then, on 
scrutiny, the purchase committee shall place the recommendation of purchase to 
Managing Director.

P/128 
 
 
III. Way of Purchase - Selection / Identification of Suppliers: 
 
 
A - General Purchase: 
 
 
Administration Dept. can purchase when purchase requisition involves below 
Taka 20,000 (Twenty Thousand) with the approval of Managing Director. 
 
 
In this case, at least three (3) quotations will have to be collected / submitted from 
the different shop's / suppliers. 
 
 
Administration Dept. shall nominate / select two personnel of PKSF for collection 
of quotations.  
 
 
Then, on scrutiny, Administration Dept. shall place the recommendation of 
purchase to Managing Director. 
 
 
Administration Dept. shall purchase the daily supplies / canteen materials from 
the market by a survey to ascertain the prevailing competitive pricing.  
 
 
 
B - Spot Quotation Purchase: 
 
 
 
If the purchase volume exceeding 20,000 (Twenty Thousand) but not more than 
Taka 500,000 (Five Lacs), purchase will be made through collecting spot 
quotations or sealed quotations. 
 
 
Written quotation at least from three suppliers, if not possible, at least from three 
sources with name, address and telephone number, to justify the market and 
those quotations need to be preserved with the relevant accounting record. 
 
 
Purchase formalities should be approved by the purchase committee-2. 
 
 
C - Purchase From Selected Suppliers: 
 
 
 
If purchase volume exceeds Taka 20,000 (Twenty Thousand) but not more than 
Taka 500,000 (Five Lacs), purchase will be made through circulating sealed 
tender notice to the reputed suppliers. 
 
 
Enlistment of suppliers will be as per the norms and rules of the purchase 
procedures duly approved by Managing Director. 
 
 
At least from three sources, to justify the market and those quotations need to be 
preserved with the relevant accounting record. 
 
 
Purchase formalities should be approved by the purchase committee-2.

P/129 
D - Purchase Through Press Tender: 
 
 
If purchase volume involves more than Taka 500,000 (Five Lacs) and the goods 
are of non-proprietary in nature, purchase shall be made through sealed tender / 
quotation inviting by at least two dailies national newspaper having reasonably 
wide circulation and circulation in the notice board. 
 
 
At least from three sources, to justify the market and those quotations need to be 
preserved with the relevant accounting record. 
 
 
Purchase formalities should be approved by the purchase committee-1. 
 
E - Purchase From Single Suppliers: 
 
 
When a particular item is purely of proprietary in nature, irrespective of the value 
of the purchase, single tender inquiry is to be used directly to the manufacturer or 
their authorized agents. 
 
 
Purchase formalities should be approved by the purchase committee-1. 
 
IV. Purchase Under TA Program: 
 
 
All purchases in respect of TA Program of Donor Agencies, shall be performed / 
constituted as per the circulated / instructed rules and regulations of the Donor 
Agencies made in this context to the PKSF. 
 
V. Purchase Approval: 
 
Following officers of PKSF, have been given the power of authority to approve / authorize 
the goods purchases: 
 
 
Manager (Administration) shall approve purchase/expense amounting up to Taka 
1,000 (One Thousand). For non-recurring goods whether price verification is 
made or not, he shall taken the approval of higher authority in case of approval of 
Purchase Requisition. 
 
 
Deputy General Manager (F/A) shall approve purchase/expense from Taka 1,001 
to 2,000. 
 
 
General Manager (Administration) shall approve purchase/expense more than 
Taka 2,000 (Two Thousand) and not exceeding Taka 5,000 (Five Thousand). 
 
 
Managing Director shall approve purchase any amount exceeding Taka 5,000 
(Five Thousand). 
 
 
If purchase cost amounting to Taka 20,000 (Twenty Thousand), purchase 
committee recommendation shall be needed. 
 
 
In case of purchase amounting to Taka 20,000 (Twenty Thousand) and not 
exceeding Taka 500,000 (Five Lacs), purchase committee - 2 shall make the 
recommendation regarding purchase to the Managing Director. 
 
 
In case of purchase amounting more than Taka 500,000 (Five Lacs), purchase 
committee-1 shall make the recommendation regarding purchase to the 
Managing Director.

P/130 
 
VI. Comparative Statement Preparation: 
 
 
Manager (Administration) shall prepare the comparative statement of the prices 
quoted by supplier/dealer & shall send it to the Managing Director for approval. 
 
 
Purchase committee shall prepare a comparative statement of the prices quoted 
by supplier / dealer and shall declared the lowest bidder as selected supplier. If 
the lowest bidder has not been declared as selected supplier, detail explanation 
of the reason shall be narrated / cited in the comparative statement. 
 
 
Details of the purchase recommendation mentioning the budget provision shall be 
written in a presentation form or minutes and the same shall be duly signed by 
the president / chairman and members of the purchase committee and then, 
presented the minutes / presentation to the Managing Director for approval   
 
VII. Purchase Work Order: 
 
 
On getting the approval of purchase, purchase price and the supplier by the 
Managing Director, an authorized officer (Manager Administration) shall prepare 
the Purchase Order for procurement of goods or a contract for services.  
 
 
Administration Dept. shall issue the work order to supplier mentioning all term & 
conditions and details goods specifications and copies of such work order shall 
be sent to stores & accounts department and one retain with the administration.  
 
 
While rewarding a purchase order against the available bids, the consideration 
should equally be emphasized on price and quality. The price can be negotiated, 
but the quality cannot be compromised at any circumstance. The negotiation is, 
however, discouraged and it may be applied only when the situation will make it 
unavoidable and must be handled jointly by the purchase committee.  
 
 
While rewarding a purchase order, conditions regarding the income tax, value 
added tax, sales tax and other related matters should always be in properly 
inserted and clearly stated about the status of payment. 
 
 
Purchase committee should consider only the responsive bids, which meets 
booth the desired quality and competitive price level.  
 
 
Repeat purchase order or purchase through negotiation is not allowed. Exception 
to this must be justified with reasonable grounds and may be considered only 
once a while to face emergency with the approval of Managing Director. 
 
Purchase order should include the following points 
 
 All materials shall be supplied as per order. 
 
All materials shall have to be supplied within the time as stipulated in the 
order, if not order shall be treated as canceled. 
 
Damaged or inferior quality or not as per specification of the order shall not 
be received. 
 
Short in quantity of material shall not be received. 
 
Tax, VAT & other Taxes will be clearly stated. 
 
Payment will be made through Account payee cheque. 
 
Printed bills along with the Challan shall have to be submitted to the office. 
 
Money Receipt to be submitted when the bill is paid.

P/131 
 
VIII. Quality Control & Purchase Receipt: 
 
 
Quality of the purchase goods should always be maintained at all level. While 
receiving and storing the materials it should be done in presence of storekeeper, 
and one account's personnel.  
 
 
After receiving the necessary supply of items it should be certified by a competent 
person regarding the quality of the condition of the goods supplied.  
 
 
Stores shall receive the goods, if delivered within the stipulated time and 
according to specification. 
 
 
Damaged, broken, inferior quality and goods not as per the specification of the 
order should not be received at any circumstances.  
 
 
A quality control report mentioning the quality & quantity of goods, other 
conditions of supplies and finally remarks by the competent authority should be 
always be contained / inserted in the Goods Received and Inspection Report 
(GRIR). 
 
 
Copy of the Goods Received and Inspection Report shall be sent to accounts 
department, one copy to administration department and one copy to be kept by 
the store 
 
 
Storekeeper makes the record in the stock register and duly mentioned in the bill 
form of recording the goods in the stock register. 
 
IX. Purchase Payment: 
 
 
All papers and documents with regard to purchase like requisitions, indent, 
quotation / tender, comparative statement, approval of purchase committee and 
Managing Director, challan / bill, money receipt, purchase order, goods received 
and inspection report shall be made available with the payment vouchers. 
 
 
Suppliers' bills in connection to process for making payment shall submit their all 
kinds of purchase bill to the Administration Department. 
 
 
After receiving the suppliers' bill, Administration Dept. shall check and verify the 
bill following the instructions: 
 
o 
At first verify through comparing the similarity of the goods ordered and 
bill amount with the purchase order; 
 
o 
Whether goods (quantity, size, & other specifications) are received as 
mentioned in bill shall be checked and verified through comparing the bill 
and goods received & inspection report prepared in this connection; 
 
o 
Whether the value of goods and related discount (if allowed) mentioned 
in the bill shall be checked and verified through comparing the bill and 
purchase order and quotation; 
 
o 
To check the calculations of bill whether correct or not; 
 
o 
To check the Government Tax, VAT, etc. are duly paid and deducted.

P/132 
 
 
After verification of bill, certify the bill in signing for making payment with 
mentioning the amount by narrating all references by the bill examiner of the 
administration dept. 
 
 
Then Manager (Administration) shall place the file by initiating note sheet to the 
line authority in connection to the approval of payment of purchase; 
 
 
On getting the approval of payment of purchase, then sent the file to Finance and 
accounts Department. 
 
 
Before making the payment to the suppliers against their bill Manager (F/A) shall 
also check the bill, material-receiving report, purchase order. All kinds of 
purchase must be within the approved budget. 
 
 
Then, accounts department shall arrange for issue of cheque. Payment to the 
supplier against their bill exceeding Taka 5,000 shall be made by Account Payee 
cheque only. 
 
 
For any discrepancies or error, Accounts Section will bring these to the notice of 
the Sanctioning Authority. 
 
 
Approval of purchase and their payment shall always be followed by the 
delegation of authority. 
 
X. Settlement of Dispute: 
 
 
Settlement of dispute for any inconvenience or for any unwanted event regarding 
the purchase shall be settled down through the decision of the Managing Director 
and shall be treated as final decision. 
 
18.4 – Tender Quotation Through Newspaper Advertisement: 
 
The flowing principles shall be followed: 
 
 This shall be done through in newspaper advertisement; 
 
 On the date of paper advertisement or before tender, papers with necessary 
schedules shall be sent to cash section of finance and account dept. on due 
acknowledgement. The cash section will then enter the particulars in a register; 
 
 Each tender sold will bear the signature and seal of Manager Finance; 
 
 On closing date remaining tender documents will be counted by cash section and put 
them under custody with necessary remarks by the Manager Finance; 
 
 On opening of tender only tenders bearing seal and signature of authorized officer of 
administration dept. will be taken into consideration; 
 
 On opening of tender members of committee will sign all tender documents & papers; 
 
 A separate tender register will be maintained where in all particulars be recorded and 
a comparative statement prepared. The comparative statement and the register will 
be signed by all the members of the committee with specific recommendation;

P/133 
 
 In case, the lowest tender is not accepted, the reasons for non-acceptance shall be 
recorded in writing. 
 
 On approval of the recommendation of the committee by the appropriate authority 
necessary supply order / work order shall be issued. 
 
18.5 - Procurement Plan: 
 
PKSF as far as possible should prepare a commodity procurement plan soon after the 
annual budget is approved. This is particularly important in case of commodities normally 
not available in the project area and those requiring heavy financial investment.  
 
In case of daily consumable items, it is necessary to estimate the quarterly requirement in 
order to avail the benefits of bulk purchase and, procure them on quarterly basis. 
 
18.6 - From Whom Should Purchase be Made: 
 
Procurement of goods and services shall be made from reliable suppliers to ensure the 
supply of goods and services in time and at a competitive price.  
 
A supplier firm should satisfy the following conditions: 
 
 That is a bonafied business concern; 
 That it is registered with income Tax authority or VAT authority; 
 That it holds valid trade license; 
 That it was never blacklisted before by the organization; 
 That it's past records and performance with the organization are satisfactory; 
 
18.7 - Tender Fees & Performance Bond: 
 
 
PKSF shall charge appropriate fees for tender forms & schedules.  
 
 
In certain cases PKSF with the approval of Managing Director may ask the 
supplier to deposit some percentage of the contract amount as performance bond 
and any other deposits as required by regulations in Bangladesh. 
 
 
18.8 - Procedures relating to Consultation Services: 
 
 
If the PKSF is required to avail the specialist consultation services such as 
development of systems, engineering, training, monitoring, and evaluations, 
proposals should be invited through “tender” or “request for proposal on quality & 
cost basis” in accordance with terms of reference (TOR) from persons, 
companies or firms experienced in the related subject and appointed through 
negotiation; 
 
 
Work order will be issued accordingly.

P/134 
 
CONTENTS OF CHAPTER – 19 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
------------------------------------------------------------------------ 
19.1 - Introduction - Budget 
19.2 - Budgetary Control 
19.3 - Budget Centres 
19.4 – Accounting Records 
19.5 - Budget Period 
19.6 – Organization for Budgetary Control 
19.7 - Budget Manual 
19.8 – Formulation of Budget 
19.9 – Budget Variance, Analysis & Reporting 
19.10 – Budget Monitoring & Control 
19.11- Approval Process of Budget Allocation 
19.12 - Long Term Budget of PKSF 
19.13 - Functions of Budget Committee 
 
 
 
 
 
----------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19 – BUDGET & BUDGETARY CONTROL

P/135 
 
CHAPTER – 19 
 
BUDGET & BUDGETARY CONTROL 
 
 
19.1 – Introduction - Budget: 
 
Generally, budget means a statement of forecasted incomes or funds and expenditures of 
an organization at a particular specified time. A budget is not or should not be the same 
as a forecast. A forecast is a statement of what is expected to happen. Where as a 
budget is a statement of what it is reasonable to believe can be made to happen.  
 
Thus, PKSF's budget is “a financial and/or quantitative statement prepared & approved 
prior to a defined period of time of the policy to be pursued during that period for the 
purpose of attaining a given objective. It includes incomes, expenditures and the funds. 
 
19.2 - Budgetary Control: 
 
Budgetary control is the establishment of PKSF's budgets relating to the responsibilities of 
executives to the requirements of a policy and the continuous comparison of actual with 
budgeted results either to secure by individual action, the objective of that policy or to 
provide a basis for revision. 
 
It is apparent that a system of budgetary control provides the mechanism for controlling 
costs and revenues. Budgetary control is people oriented. It highlights the variance 
occurring in the various areas of an organization for which the departmental heads are 
responsible. Thus, PKSF management has to establish budgetary control techniques for 
its' head office and all regional auditing offices. 
 
19.3 - Budget Centres: 
 
 
A budget is a location, person, item or a group of items for which costs are ascertained 
and used for the purpose of cost control. In PKSF wherever possible budget centres 
should be identified with the responsibilities of particular executives. A group of computer 
machines under a supervisor may be a budget centres and all costs like payrolls, running 
expenses, maintenance, etc. may be his direct responsibility. A well-defined budget 
centre is an essential pre-requisite for any system of budgetary control. 
 
 
19.4 – Accounting Records: 
 
 
Periodically, the accounting records of PKSF must be able to highlights the variances 
from budgets. It is, therefore, important the PKSF's accounting heads must be 
comprehensive. At the same time, both financial accounts and the budget expenditure 
must be identical otherwise variances could not be ascertained. 
 
 
19.5 - Budget Period: 
 
 
A budget period is the length of time for which a budget is prepared and operated. There 
is no set rule as to what should be the budget period. Usually, master budgets are 
prepared for one year because it coincides with the financial accounting year of PKSF.

P/136 
 
19.6 – Organization for Budgetary Control: 
 
 
 
A senior executive of accounts, commonly designated as budget controller or budget 
officer, usually heads the budgetary control department. Another variant is the 
establishment of a budget committee.  
 
The functions of the budget committee will interalia, be as follows: 
 
 
Receive, scrutinize, revise and approve budgets prepared by the various 
departments; 
 
Receive budget reports periodically comparing actual figures against those budgeted. 
 
Analyze variances with a view to locating responsibilities and finding those ways to 
prevent their re-occurrence. 
 
Periodically, reappraise the budgeted figures for revision, if any.  
 
19.7 - Budget Manual: 
 
 
The budget manual is a schedule or document that lays down the budgeting organization 
and operational procedures.  
 
The main contents of a PKSF's budget manual are: 
 
 
Introduction – Short narrative explaining principles of the budgetary control system. 
 
Responsibilities and duties: The nature and extent of responsibilities and duties of all 
operational executives. 
 
Procedures: The manner in which each functional budget is to be drawn up, the time 
schedule for submission. 
 
Specimen forms and reports: Budget report forms must be standardized. 
 
Accounting classification: Accounting heads and codes must be clearly stated.  
 
Budget period: Length of period must also be clearly stated. 
 
Reporting schedules - detail schedules must be drawn stating the time for 
submission. 
 
19.8 – Formulation of Budget: 
 
Preparation of budgets for the head office and all regional auditing offices begins 
immediately after receiving specific instructions from the budget controller or budget 
committee. A program is drawn up stating the persons or departments responsible for 
preparation and formulation of specific budgets, person to whom they must be handed 
over & the timetable for their preparation. Usually such a program is contained in budget 
manual.  
 
Then, prepare the budgets by the departmental heads of the PKSF Head Office. Regional 
Auditing Offices of PKSF shall also be requested to submit their budget to the budget 
committee.  
 
Then, discussion meeting of the budget committee will be held to finalize the budget for all 
offices of PKSF.  
 
Then, finally agreed the budget approved by the Governing Body and distributed the 
approved budget copy to the all concern offices for use.

P/137 
 
While formulating the budget, the following three factors shall be considered by all offices 
of PKSF: 
 
 To analyze the past trend of the specific budget heads; 
 To determine the present conditions and anticipated future conditions of the 
relevant budget heads; 
 To quantify through applying the specific rates in some cases of budget heads. 
 
While formulating the budget, a workshop on draft budgets may be held at PKSF head 
office to review the overall budget for the year in order to exchange views and deliberate 
on problems and solutions. This feels that cross-fertilization of ideas between staff 
members of PKSF will achieve the objectives at hand. 
 
19.9 – Process of Approval of Budget Allocation: 
 
(a) All allocation of both capital and revenue expenditures of projects / programs / 
regional auditing offices will be approved by the head office; 
 
(b) All projects / departments / all regional auditing offices shall submit the budget 
allocation to the head office in the month of March of every year; 
 
(c) Detail work sheets & calculation sheets must be accompanied with prepared 
budget allocation; 
 
(d) If the offices are anticipating any new heads of expenditure, then separate budget 
proposal shall be submitted by the concern offices; 
 
19.10 – Budget Variance, Analysis & Reporting: 
 
Budget variance can be found out by the differences between budgeted figure and actual 
figure. In budgetary control cycle it is in third stage.  
 
First stage is agreed the budget and the second stage is incurred the expenditure.  
 
Difference between two stages is known as budget variance. Two aspects will be come 
out from the analysis of budget variance – these are termed as favourable and 
unfavourable. A standard form has to be used by PKSF's Finance and Accounts 
Department to find out the budget variance. Comparison of budgets and actual shall be 
done in form of variance report.  
 
The report should also clarify the reasons for major variances, which shall be marked as 
either "controllable" or " Uncontrollable". Controllable variance would indicate that 
variance could be brought under control by efficient management. Uncontrollable variance 
occurs due to exceptional circumstance hence this is not an indicator of management 
performance. There may be cases where variances occurred due to poor budgeting. 
Theses factor should be noted for next year budget preparation. 
 
The variance report shall be reviewed by the Chief of Finance and Accounts and 
submitted to the Managing Director. Variance report shall be a more arithmetic exercise. 
The concentration shall be on identifying problems encountered enabling worse able 
solutions. Variance indicating departmental chiefs performance shall be taken as input in 
the staff appraisal system.

P/138 
 
19.11 – Budget Monitoring & Control: 
 
 
Generally budget shall be monitored in quarterly basis. Specific format must be used for 
the purpose of monitoring of budget of any offices / departments / projects of PKSF.  
Budget monitoring statement must be prepared and send it to Finance and Accounts 
Department of head office on regular basis.  
 
Required information to be inserted very carefully in monitoring statement. The main 
purpose of budget monitoring is to control the expenditure and to develop the necessary 
& appropriate techniques & mechanisms how to control the expenditure. 
 
19.12 – Long Term Budget of PKSF: 
 
It is to be prepared by the Finance & Accounts Department: 
 
 As and when required by the management to foresee the future; 
 Also prepared to see the trend at different scenario. 
 
19.13 – Functions of Budget Committee: 
 
 Preparation of budgets for PKSF as a whole; 
 
 Collection of information and data in connection to formulation of budget; 
 
 Processing, editing and reviewing the collected information and data in connection to 
formulation of budgets; 
 
 Setting of standards in relation to the formulation of budgets; 
 
 Formulation of budgets and budget workshop; 
 
 Maintenance of budget registers as per requirements; 
 
 Preparation of budget monitoring statements; 
 
 Preparation of variance statements; 
 
 Analysis of variances and report preparation; 
 
 Assessment of actual results with the budgeted ones and if any deviation is found, 
then to pinpoint the actual causes; 
 
 To take the necessary steps to eradicate or minimize the deviations in future through 
a more realistic budget preparations and /or better performance;

P/139 
 
 
CONTENTS OF CHAPTER – 20 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
------------------------------------------ 
20.1 – Over view 
20.2 – Compliance Reporting 
 
 
 
 
 
 
------------------------------------------ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20 - COMPLIANCE OF GOVERNMENT, TAX, VAT& OTHER LAWS

P/140 
 
 
CHAPTER – 20 
 
 
COMPLIANCE OF GOVERNMENT, TAX, VAT & OTHER LAWS 
 
 
 
20.1 – Over View: 
 
 
PKSF head office and it's Regional Auditing office concerned shall have to follow / abide 
by the concerned rules, regulations and financial & accounting implementations of the 
Government, Tax authority, Value Added Tax (VAT) authority and all other laws that are 
prevailing in the country and compliance thereon. 
 
 
20.2 – Compliance Reporting: 
 
 
 
PKSF shall select, adopt, apply and implement all relevant financial management 
techniques, accounting system, procedures, methods and maintain all books of accounts 
based on the following requirements, guidelines, instructions, rules and regulations: 
 
(a) - 
As per the rules and regulations, instructions, policies, guidelines, 
circulars, manuals and office order of the PKSF management issued and 
circulated on any matters time to time; 
 
(b) - 
As per the requirements of the Income Tax Ordinance 1984; 
 
(c) - 
As per the guidelines of the Value Added Tax Act 1991; 
 
(d) - 
As per the requirements of the International Accounting Standards (IAS); 
 
(e) - 
As per the requirements of the International Standards of Auditing (ISA); 
 
(f) - 
And, such other books of accounts as required, circulated and instructed 
by the management of PKSF from time to time.

P/141 
 
 
CONTENTS OF CHAPTER – 21 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
----------------------------------------------------------------------------------- 
21.1 - Introduction 
21.2 - Regional Audit Offices (RAO) Controlling Officer 
21.3 - RAO Bank Account 
21.4 - RAO Petty Cash Fund 
21.5 - RAO Cash Payment Procedures & Its' Approval 
21.6 - RAO Cheque Payment Procedures & Its' Approval 
21.7 - Maintenance of Records by RAO 
21.8 - RAO Reporting to PKSF Head Office 
 
 
 
 
----------------------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 21 - RAO FUND MANAGEMENT & ACCOUNTING

P/142 
 
CHAPTER – 21  
 
RAO FUND MANAGEMENT & ACCOUNTING 
 
21.1 – Introduction: 
 
Regional Auditing Office (RAO): 
 
Regional audit office means the office of PKSF established / set-up with an objective to 
conduct the audit (internal audit) of the financial activities of the PKSF fund of the Partner 
Organizations (POs) of PKSF through out the country.  
 
This office of PKSF has no executive power, and shall be fully controlled, managed and 
directed under the rules and regulations of PKSF head office in Dhaka. 
 
21.2 – RAO Controlling Officer: 
 
An officer of PKSF, nominated and designated by PKSF head office management, as a 
controlling officer / supervising officer / officer in charge, shall be held responsible for the 
overall management of the RAO and conduct the overall activities of the RAO in 
connection to the set purposes / objectives following the instructions and directions of the 
PKSF head office management issued time to time through the Administration 
Department of PKSF.  
 
The officer of PKSF, designated, as a controlling officer of RAO shall be held liable and 
responsible for all activities performed in the RAO to the PKSF head office management 
for each and every respect. 
 
 
21.3 – RAO Bank Account: 
 
 
To perform and mitigate all the banking activities, functions and financial transactions of 
the RAO as far as possible, shall open a bank account (specifically STD Bank Account) 
preferably with a nationalized commercial bank in the name of PKSF (organization but not 
in the name of RAO), where the RAO is located / situated.  
 
Bank account shall be operated by any two of the four Senior Officers of PKSF Head 
Office.  
 
Chequebooks shall be kept in head office of PKSF at Dhaka in Finance and Accounts 
Department.  
 
Fund shall be placed / transferred from the bank account of PKSF head office in Dhaka 
through cross cheque / DD / bank transfer to the STD bank account opened in RAO 
office.  
 
The balance of the STD bank account as fund balance shall in no case be exceeding 
amounting to Taka 200,000 (Two lac). 
 
Any amount from any sources including the principal loan and service charge of POs shall 
not be received / deposited in any circumstances in the RAO STD bank account.

P/143 
 
21.4 – RAO Petty Cash Fund: 
 
 
Taka 40,000 (Forty thousand) shall be the maximum limit of petty cash fund of the RAO. 
This amount of money shall be given as advance to the controlling officer of RAO as petty 
cash advance of the RAO.  
 
A bank account (named as current account) shall be opened in the name of controlling 
officer of RAO in the same bank where the PKSF STD bank account is opened 
exclusively to operate only for the petty cash expenses of the RAO as per set rules and 
guidelines of the PKSF.  
 
No other personal / others receipts and payments shall be allowed or strictly prohibited on 
/ from this bank account. 
 
TA/DA expenses, local conveyance, postage expenses, office maintenance expenses, 
overtime expenses, entertainment expenses etc. and other daily expenses of the RAO, 
shall be paid out as cash from this petty cash fund kept by controlling officer of the RAO 
on primary approval of the controlling officer. Controlling officer of the RAO shall treat this 
primary approval of payment of expenses as temporary approval. 
 
The controlling officer RAO shall request the replenishment of the petty cash fund by 
preparing a statement of the incurred and paid expenditure by showing the date of 
payment, name of payee, accounts head and the amount paid on approval of the 
controlling officer of RAO with vouchers and all supporting documentary evidences. 
Replenishment request shall be processed and sent to head office when 80% of the 
allocated fund (petty cash fund) will be exhausted.  
 
On getting the final approval of the head office (as per normal procedures followed in 
connection to the authentication, authorization and final approval of expenses as outlined 
for PKSF head office), PKSF head office shall reimburse the amount to the controlling 
officer directly to his bank account.  
 
If any expenses not approved by PKSF head office, controlling officer of the RAO shall be 
held liable and responsible for the bill amount not approved and replenishment will be 
made by PKSF head office after deducting the not approved bill amount in this respect.   
 
 
21.5 – RAO Cash Payment Procedures & Its' Approval: 
 
 
As a norm, the approval procedures of expenses in PKSF head office is generally shall be 
followed as the accepted rules and regulations in case of all regional auditing offices.  
 
Following are the guidelines for payment procedures and its' approval from petty cash 
fund kept by controlling officer of the RAO: 
 
I - TA/DA Advance: 
 
 
TA/DA advance to the staff members shall be paid out from petty cash fund 
following the guidelines of the PKSF Service Rules on approval of the controlling 
officer of the RAO. Before making the payment, tour program shall be duly 
approved.

P/144 
 
II - TA/DA Bill adjustment / payment: 
 
 
 
TA/DA advance adjustment (all steps from submission to bill payment) to the staff 
members shall be made following the guidelines of the PKSF Service Rules. On 
submission of TA/DA bill, controlling officer of RAO shall verify, check, 
authenticate the bill and temporary approval of the same make the payment after 
adjustment. To claim TA/DA bill against traveling, if any staff member of the RAO 
travel more than 10 K.M. from the territory of the RAO where it is located, it shall 
be taken into consideration as traveling for this purpose. 
 
III - Cash payment of the other expenses: 
 
 
Only following expenses can be paid out as cash from petty cash fund kept under 
the controlling officer of the RAO - Local conveyance, printing & printing 
expenses, office repair & maintenance, electricity / water / gas bill, overtime bill 
and entertainment bill & etc. 
 
Cash payment for other expenses (within budget) can be made not more that 
Taka 1,000 (One thousand) for each case, from petty cash fund as temporary 
approval of the head of RAO and final approval will be given at head office level 
during the time of replenishment of petty cash fund. 
 
Cash payment for other expenses (within budget) can be made for more than 
Taka 1,000 (One thousand) but not exceeding Taka 2,000 (Two thousand) for 
each case, from petty cash fund by the head of RAO after taking necessary 
approval of the head office before making the expenditure mentioning the valid 
reason and final approval will be given at head office level during the time of 
replenishment of petty cash fund. 
 
A - Local conveyance - Always try to avoid local travel. On necessity local 
conveyance shall be paid from petty cash fund subject to approval of controlling 
officer of RAO. 
 
B - Printing & stationery - If necessary, can be purchase and paid from petty cash 
fund subject to approval of controlling officer. 
 
C - Office repair & maintenance - If necessary, (out of rent agreement) can be 
paid from petty cash fund subject to approval of controlling officer. 
 
D - Electricity/water/gas bill - If necessary, (out of rent agreement) can be paid 
from petty cash fund subject to approval of controlling officer. 
 
E - Entertainment expenses - Present staff members of the RAO are entitled to 
have tea in morning and afternoon time. Expenses of daily tea can be paid out 
from petty cash fund. Entertainment of PKSF guest and staff member of PKSF if 
necessary, shall be allowed on monthly basis up to Taka 400 and paid from petty 
cash fund subject to approval of controlling officer. 
 
G - Overtime bill - Shall be paid from petty cash fund on approval of the 
controlling officer following guidelines as per PKSF Service Rules.

P/145 
 
21.6 – RAO Cheque Payment Procedures & Its' Approval: 
 
 
Following expenses shall be paid out as cheque from RAO bank account - Salary & 
allowances, Festival bonus, Office rent, Telephone & fax bill, Lunch coupon bill of staff 
members, Fixed assets, other expenses as determined by PKSF head office & etc. 
 
If other expenses amount incurred more than Taka 2,000 (Two thousand) for each case, 
payment shall compulsorily be made through cheque from the RAO bank account. In no 
case, the payment shall be made from petty cash fund.  
 
In this case, each transaction shall be sent to head office for approval before making 
payment.  
 
PKSF head office shall make the payment by issuing account payee cheque to the bill 
receiver through the RAO bank account after auditing and head office approval of the 
same. 
 
In other cases, payment and approval shall be in following way: 
 
 Salary, allowances & festival bonus: 
 
After preparation of the salary, allowances and bonus statement (as per format) of the 
staff members of the RAO, PKSF head office process the approval and payment of 
the same as per practice for the staff members of the head office staff members.  
 
Then, bank transfer advice in connection to the payment of individual salary of the 
staff members of the RAO shall then be issued drawn up on the bank account. 
 
 Office rent: 
 
Office rent of the RAO shall be paid through issuing cross cheque in favour of the 
landlord on request of the RAO with office rent bill and approval from head office. 
Cross cheque in connection to the payment of rent shall then be issued drawn up on 
the bank account of the RAO.  
 
Cheque sent to RAO in the name of the landlord from PKSF finance and accounts 
department. Controlling officer of the RAO handed over the cheque to the landlord 
after receiving the money receipt / acknowledgment receipt.  
 
Photocopy of the money receipt shall be kept by RAO and the original shall be sent to 
PKSF head office. 
 
 Lunch coupon bill of the staff members: 
 
A statement as per prescribed format mentioning the date and time of the staff 
members of the RAO duly singed by the controlling officer shall be sent to PKSF head 
office requesting for payment and approval.  
 
Noted that payment of such coupon bill shall only be made to the staff member of the 
RAO for the full day attendance of the concern staff member.

P/146 
 
On approval of PKSF head office, cross cheques/transfer advice in connection to the 
payment of individual lunch coupon bill of the staff members of the RAO shall then be 
issued drawn up on the bank account of the RAO and then sent to RAO in the name 
of the controlling officer from PKSF finance and accounts department by attaching a 
statement.  
 
On receipt of the cheques, the statement shall be duly signed by controlling officer of 
the RAO and sent back the same to PKSF head office. All cheques shall be recorded 
in the cheque register and then, make payment to the staff members of the RAO 
maintaining all formalities. 
 
 Fixed asset purchase: 
 
Generally, purchase of fixed assets by the RAO is restricted. If necessary, on 
demand, furniture, fixtures office equipment electric fan and etc. shall be purchased 
on submitting the requisition and prior approval of the PKSF head office. Purchase 
shall be made strictly following the PKSF purchase procedures that are in force.  
 
On procurement of the fixed assets by collecting at least three spot quotation 
accompanying by two officers as nominated by the controlling officer of the RAO and 
duly approved by the controlling officer sent the bill to head office for final approval 
and its' payment.  
 
On approval of head office, cross cheques in connection to the payment of fixed 
assets of the RAO shall then be issued drawn up on the bank account of the RAO in 
favour of the supplier and sent the same to RAO in the name of the controlling officer 
from PKSF finance and accounts department. On receiving the cheque, the 
controlling officer of the RAO handed over the cheque to the supplier and collect 
money receipt. Photocopy of the money receipt shall be kept by the RAO and the 
original copy shall be sent to head office.  
 
Fixed asset register shall be updated immediately after purchase. 
 
 
21.7 – Maintenance of Records by RAO: 
 
 
The controlling officer of the RAO shall be held liable and responsible for maintaining the 
following records, ledgers and register as per designed format for documentation all 
financial activities as a management control: 
 
 Stock register for printing and stationery; 
 Fixed assets register for fixed assets; 
 Cheque register; 
 Attendance register; 
 TA/DA advance register; 
 Other registers if necessary or as directed by PKSF head office; 
 Petty cashbook & ledger books.

P/147 
   
21.8 – RAO Reporting to PKSF Head Office: 
 
 
1 - Replenishment of RAO Fund: 
 
The controlling officer RAO shall request the replenishment of the petty cash fund by 
preparing a statement of the incurred and paid expenditure by showing the date of 
payment, name of payee, accounts head and the amount paid on approval of the 
controlling officer of RAO with vouchers and all supporting documentary evidences.  
 
Replenishment request shall be processed and sent to head office when 80% of the 
allocated fund (petty cash fund) will be exhausted.  
 
Following are the statements to be sent to PKSF head office: 
 
 Petty Cash Payment Statement - Duly signed by controlling officer of RAO; 
 
 Cheque Disbursement Statements - Duly signed by controlling officer of RAO; 
 
 Bank Statement - RAO bank account statement - collected from bank. 
 
2 - Monthly Statement: 
 
Following are the statements to be sent to PKSF head office with in 7 days of the next 
month: 
 
 
 Lunch Coupon Statement - Duly signed by controlling officer of RAO; 
 
 Attendance Report / statement - Duly signed by controlling officer of RAO;

P/148 
 
 
CONTENTS OF CHAPTER – 22 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
--------------------------------------------------------------- 
22.1- Introduction and Overview 
22.2 - Objectives 
22.3 – Policy of Investment 
22.4 - Depositable Fund 
22.5 - Strategy for determining surplus fund 
22.6- Internal & External Laws to be followed 
22.7 - Scope of Area of fund utilization 
22.8 - Principles of Fund Utilization 
22.9-Selection of Banks/Financial Institution 
22.10 - Maintenance of FDR 
22.11 - Management of the fund 
 
 
 
 
 
 
--------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 22 - FUND - LIQUIDITY MANAGEMENT

P/149 
 
CHAPTER - 22 
 
FUND LIQUIDITY MANAGEMENT 
 
22.1 - Introduction and Overview:  
 
Palli Karma-Sahayak Foundation (PKSF) is an apex funding agency to sponsor, promote 
and provide various forms of assistance including financial, institutional, advisory and 
training to non-government, semi government and government organizations, voluntary 
agencies and societies, local government bodies and institutions undertaking activities 
with a view to generate income and / or employment opportunities and alleviating poverty 
in conformity with the objectives of, and in a manner approved by the Foundation.  
 
Proper management of PKSF fund is an essential for attaining objectives of PKSF as well 
as attaining self-sufficiency. It is therefore essential to have appropriate policies of PKSF 
for proper utilization of its fund.  
 
Capable General Body and Government Body, efficient management and staff of the 
Foundation is the basis of Foundation’s good reputation. Fund management of PKSF is 
closely supervised which helped PKSF in developing a base for itself. Need for a “Liquidity 
Management Policy” was being felt to ensure efficient fund management and to ensure 
transparency in operating the fund consistent to the major objectives of PKSF. 
 
22.2 - Objectives:  
 
 
To ensure the liquidity of the Foundation in all times, so that PKSF has sufficient 
liquidity in conducting the normal course of its business.  
 
 
The objective of this policy is to ensure proper management of the liquid fund that 
arises during day-to-day transactions of PKSF by keeping the fund in interest bearing 
accounts like FDR or otherwise for creating a strong base which would help in tiding 
up of difficult funds for a certain period before an investment is made.  
 
 
22.3 – Policy of Investment:  
 
 
The aim of liquidity management is to maximize the earning of PKSF by timely and 
properly depositing the surplus fund of the organization to interest bearing accounts 
and other forms of deposits of various terms.  
 
 
To ensure that PKSF invests surplus funds in designated securities only e.g., bonds, 
treasury bills, savings certificates, FDRs etc. which typically safe from being doubtful 
of recovery. 
 
 
Ensure that the deposit is made to the best yielding securities and deposits, after 
giving due considering to risk and the rate involved. 
 
 
Ensure participating in call money market, as and when situation and opportunity 
permits with in the scheduled banks and other non-banking financial institutions. 
 
 
 If investment policy permits, ensure safe investments are made in the secondary and 
primary market.

P/150 
 
22.4 - Depositable Fund: 
 
 
 
The Governing Body of PKSF may decide to fix a certain percentage of its liabilities 
as fund to be kept compulsorily with an A-class bank if it so thinks necessary.  
 
 
Foundation may decide to deposit a portion of its surplus cash for amortizing its loan. 
In normal circumstance when sufficient fund is available to meet up the liabilities, 
normal procedure of making general deposit can be followed to avail the opportunity 
of market inflation, demand etc.  
 
 
The mid-term projection of the Foundation as well as the short-term projection can be 
helpful in detecting the fund required on the loan amortization date and available fund 
position on that date. These projections should be drawn and observed very carefully 
and routinely.      
 
 
Sometimes PKSF may need to give security deposit to the gas, electricity, and 
telephone authorities for taking connections. If acceptable to these utility service 
providers, security deposits may be given in the form of fixed deposit receipts or in 
the form of savings certificates to the authorities.  
 
 
The excess fund during a given period may be kept in the form of fixed deposit.  
 
 
Funds for special purpose, like gratuity fund, provident fund etc., can be kept in fixed 
deposits.  
 
 
22.5 - Strategy for Determining Surplus Fund: 
 
 
 
Month-wise disbursement plan for partner organizations (PO) has to be prepared at 
the beginning of each year. The plan has to be checked each month to find out the 
variation. The monthly variations of the actual to be the plan to be adjusted in the 
flexible manner.   
 
 
Month-wise repayment schedule of the POs has to be prepared at the beginning of 
the year. Any variation to the plan has to be adjusted at the beginning of the next 
month. In preparing the repayment schedule care to be taken to consider the deferred 
payments.  
 
 
Month-wise expenditure schedule to be prepared along with the revenue expenditure, 
the capital expenditure also has to be reckoned. Any special type of exceptional 
payments like flood loan, HRD implementation or any other contingent liability, which 
may occur to be forecasted.  
 
 
Month-wise receivable has to be prepared. FDR maturating on months along with 
other receivable has to be considered. 
 
 
Government grant or loan, IDA grant or loan or grant and loan of any other funder will 
influence the figure in any month. FDR maturity for the months can be obtained from 
the FDR database to be reflected in the schedule.

P/151 
 
 
 
Month wise cash flow statement is to be prepared. 2-3 months’ cash requirement 
shall have to be kept in liquid form. Those amounts can be deposited in STD 
accounts.  
 
The excess amounts may be kept in various forms of deposits and investment pattern 
as follows: 
 
 7 days call notice deposit 
 Treasury bills of various terms 
 3 months FDR 
 6 months FDR 
 12 months FDR 
 Over 12 months FDR  
 Call money market  
 Government Bonds 
 Other type of instruments under the regulations of Bangladesh Bank. 
 
 
The Cash flow statement, for at least 3 months, will show if any deposit in the first 
month will affect the liquidity in the subsequent two months. Cash flow over the next 
three months will determine the proportion of deposits in these types of instruments.  
 
 
If investment policy permits, investments can also be made in shares in primary 
market, which can be liquidated within six months from the date of investment.   
 
 
Provided investment policy permits, with due care and investment advice, investment 
can also be made in secondary market. Which can be liquidated at any time. 
Transaction cost and other risks associated with the market should be judged before 
any investment in secondary market is made.  
 
 
22.6 - Internal & External Laws to be Followed: 
 
 
A - Internal Laws: 
 
Internal Laws of the Foundation has to be followed in case of keeping funds in fixed 
deposit. This is to affirm that the investment to be made as per the policy of the 
Foundation and that it follows the other rules. It must ensure that deposit shall not lodged 
to any risk institution just for the sake of high interest / return.  
 
The following points may be highlighted in this regard:  
 
 
To see that the deposit does not contradict to the Memorandum and Articles of 
Association the Foundation.  
 
 
To see that Governing Body / General Body permits such deposit. 
 
 
To follow the normal ethics and norms.

P/152 
 
B - External Laws to be followed: 
 
In keeping the surplus fund in fixed deposit, care has to be taken to see that the laws / 
rules of the government and / or of the other bodies have been followed. The following 
laws / rules may be cited: 
 
 
To follow the Acts / Laws or circular of the Government.  
 
To follow the Banking Companies Act.  
 
To follow the Income Tax Act of Bangladesh. 
 
To follow the Companies Act.  
 
To follow Bangladesh Bank Circular(s) and guidelines. 
 
22.7 - Scope of Area of Fund Utilization: 
 
A - Long Term Fund Utilization: 
 
A.1 - Criteria:  
 
 
The fund that Foundation wants to keep for over 4 years are termed as 
Long Term Fund.  
 
A.2 - Purposes: The major purposes for depositing in Long Term are: 
 
 
To provide fund for the purpose of amortization of Long Term Loans.  
 
To provide funds for the purpose of replacement of Fixed Assets. 
 
To utilize extra fund revealed from Long Term Plan. 
 
For proper utilization of Gratuity Fund and other funds. 
 
A.3 - Area of utilization of fund in long term:  
 
 
The deposit in long term should be preferably in Fixed Deposits of Banks 
& of Specialized Financial Institutions including Government Bonds.  
 
B - Mid Term Fund Utilization: 
 
B.1 - Criteria: 
 
 
Deposits that are over 1 year but up to 4 years are termed as Mid Term 
Deposits. Excess fund that can be realized from the Mid Term Plan can 
be utilized in fixed deposits with in that term. 
 
B.2 - Purposes: 
 
 
Mid Term Deposits may be used for the purpose of amortization of Long 
Term Loans that has to be repaid during the period of 1 to 4 years. 
However, when there is sufficient fund available to the Foundation, 
specific deposit for sinking fund may be avoided to avail the opportunity 
of market rise and for taking advantage of compounding. 
 
 
Mid term deposits may be made for the purpose of creating earmarked 
funds for the purpose of replacement of Fixed Assets that are known 
certain terms.

P/153 
 
 
Mid term deposits may be made for Revolving Loan Fund (RLF) that will 
start after a definite period of time. As for example RLF for institutional 
development which will start after the closing of a period. 
 
 
Any excess fund that is foreseen from the mid-term plan can be 
deposited under mid term deposit scheme. 
 
B.3 - Area of Investment: 
 
 
The utilization of fund in Mid Term should be preferably in Fixed Deposits 
with Banks and with Specialized Financial Institutes (SFI), Government 
Bonds and other securities. 
 
C - Short term Fund Utilization: 
 
C.1 - Criteria 
 
 
The funds that are kept with a bank or with a financial institution for a 
period of 1 month to 1 year may be termed as Short Term Fund. 
 
C.2 - Purposes: The short-term deposit of fund is for the following uses: 
 
 
Short Term Fund is for the purpose of amortization of Long Term Loans 
that has to be repaid within a period of 1 month to 1 year. 
 
 
Short Term Fund may be for the purpose of replacement of Fixed Assets 
during the period of one year. 
 
 
Any excess fund that is foreseen from the Monthly Cash Flow Statement 
may be kept in short-term deposits. 
 
C.3 - Areas of Short Term Fund Utilization: 
 
 
Fixed Deposits of Banks & Financial Institutions for three to six months.  
 
Short Term Deposits with Commercial Banks. 
 
Savings Accounts of Commercial Banks. 
 
Call money market 
 
 
22.8 - Principles of Fund Utilization: 
 
A - Fund Utilization Ratios:  
 
This is refers the ratio to which the fund will be invested in different category in different 
terms. 
 
B - Nature of Fund Utilization: 
 
In deciding the ratio of fund utilization in different categories, care should be taken to 
select the category so that choosing the type of fund utilization can maximize interest. 
The fund requirement may vary from period to period depending on the cash flow 
forecast.  If proportion or ratio is to be suggested, care should be taken so that the ratio 
is continuously revised so that cash need is reflected into the investment/deposit pattern.

P/154 
 
Keeping the above in mind, in general terms, the following percentages may be taken in 
selecting the fund utilization sectors: 
 
 
5% of surplus fund may be kept in Fixed Deposits with maturity of over 3 years 
or various Government Bonds. 
 
 
10% of total surplus fund may be kept in Fixed Deposits for a period up to 3 
years. 
 
 
85% surplus fund may be invested in Banks and Specialized Financial 
Institutions as below: 
 
C - Period of deposit:  
 
 
20% may be held in Term Deposit of one year’s maturity.  
 
20% may be held in 6 months maturity Term Deposit. 
 
10% may be held for Treasury Bills. 
 
20% may be held in 3 months maturity Term Deposit. 
 
30% may be held for investment in call Money Market. 
 
 
 
If capital market instruments (primary and secondary shares, commercial papers, 
debentures) are allowed, then 15% of fund may be invested for period maturing between 
three to six months.  
 
 
D - Total Exposure: 
 
Given the number of commercial banks in the country, total exposures in any 
particular bank / organization should not exceed 10% of the total surplus fund. 
But in case where the banks having a very good profile and in case of 
nationalized banks, this limit may be relaxed to 15%.  
 
The fund to be kept in various securities and deposits will be ascertained on the 
basis of past years’ fund utilization trend, merit of the bank and Bangladesh Bank 
circulars.  
 
22.9 - Selection of Banks / Financial Institutions: 
 
In selecting the Banks / SFIs for fund placement, vision should be extended beyond the 
normal selection guidelines. The following points may be taken care of: 
 
 
The bank should be a reputed one. 
 
 
The management of the bank should be good. 
 
 
The bank holds regular Board meeting and Annual General Meeting. 
 
 
Sector of investment of the bank may be considered in choosing for fund 
placement. One bank may invest heavily in agricultural sector while the other 
may invest mainly in industrial sector while another bank in commercial sector. 
The risk of investment will be different in different sector.  
 
 
The accounts of the Bank are drawn up regularly.

P/155 
 
 
The bank should be computerized one, at least in deposit, cash and clearing 
section.   
 
 
The accounts of the Bank are drawn up as per IAS.  
 
 
The accounts of the bank are audited by a reputed Audit Firm. 
 
 
The Bank earns a profit.  
 
 
Directors’ loan from the Bank is within the limit or is as specified by the 
Bangladesh Bank.  
 
 
The classified loan of the bank is over 12% of its total advances. 
 
 
The bank provides for classified loan fully. 
 
 
Earning per share, if available, is over Taka 30.  
 
 
The rate of return to capital employed is good.  
 
 
Different ratios in balance sheet can be calculated to detect the strength of the 
bank.  
 
 
That there is no internal conflict between the directors.  
 
 
That there is no court injunction on the management of the Bank. 
 
 
The CAMEL rating of Bangladesh Bank is to be considered in selecting a Bank 
for placing the fund. The selected Bank should be within 3rd composite rating of 
Bangladesh Bank.   
 
 
News of the media may be considered in knowing the inner information of the 
bank. In fact the news appears in the newspaper disclosing the discrepancies of 
a bank bears more weight than the published accounts.  
 
 
22.10 - Maintenance of Deposit Register: 
 
 
 The FDR will be recorded in FDR register. The register folios will be properly 
numbered. The name of the bank and the branch where the fund is placed will be 
written first. Then, FDR number, Date of purchase, amount, rate of interest and 
period will have to be recorded. In one folio, only one FDR will be recorded. For 
renewal, the same folio will be used recording the change of any condition.  
 
 The custodians will physically keep the FDR in the safe custody jointly. They will, from 
time to time, count the FDRs jointly with the Officer in charge of FDR, at least once in 
every month.   
 
 A computer-generated sheet of FDR will be produced which can be tallied physically 
with the FDRs.

P/156 
 
 A copy of the FDR will have to be kept immediately in the locker of the bank for safe 
documentation.   
 
 
 Letter to be issued at the time of renewal of the FDR asking the Bank to send 
quotation for the rate they want to offer if they are interested in keeping the FDR. This 
process may be made over phone for convenience.  
 
 At the time of encashment, a letter may be sent to the bank for encashment of the 
FDR at least 7 days before the date. Otherwise the FDR can directly be produced to 
them for encashment.  
 
 For renewal a letter is to be prepared asking the bank to renew the FDR at their 
offered rate of interest. The renewal will be for the principal only and for the interest, 
the bank will be asked to issue an “account payee” pay order in favour of Palli Karma-
Sahayak Foundation. The bank account of PKSF where the pay order is to deposit 
will have to be mentioned in the letter. The amount of the pay order will have to be 
checked and be deposited to the main bank account of the Foundation.   
 
 The banker will endorse on the back of the FDR as to the renewal, rate and period 
and will sign and seal the endorsement. 
 
 If investment is made in other form of securities other than the FRDs, same type of 
recording, custodian and handling formalities will be followed. 
 
 
22.11 - Management of the Fund: 
 
 
The Managing Director is authorized to manage fund in the light of past experience and 
above guidelines.

P/157 
 
 
CONTENTS OF CHAPTER – 23 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
----------------------------------------------------- 
23.1 - Introduction 
23.2 - Purpose & Objective Auditing 
23.3 - Types of PKSF Auditing 
23.4 - PKSF Pre-Auditing 
23.5 - PKSF Internal Auditing 
23.6 - PKSF External Auditing 
23.7 - PKSF External Auditing of POs 
23.8 - POs Internal Auditing by PKSF 
 
 
 
 
 
 
 
---------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 23 - AUDIT ARRANGEMENTS

P/158 
 
 
CHAPTER - 23 
 
AUDIT ARRANGEMENTS 
 
23.1 - Introduction: 
 
 
With the intention to focus and to attain the main objectives of PKSF and as a part of 
better financial management control and compliance with the Companies Act, 1994, 
conduction of different types of auditing with the in house professional staffs and external 
professionals of the financial, accounting, operational and management activities of the 
PKSF is felt necessary. Thus, auditing is always considered as a tool or mechanism of 
financial management control. The objective of the audit is to enable the auditors (both 
internal and external) to express a professional opinion as to the accuracy, correctness, 
authenticity, transparency, accountability, true and fairness of the financial position of the 
organization of a particular period. 
 
An auditing is an examination, verification, inspection, review, analysis, interpretation, 
investigation, checking the financial transactions of the organization as per the 
international auditing standards based on organizations' policy, procedures, instructions, 
circulars, office orders, manual, guidelines, agreement, contract, deed, service rules, bills 
/ invoices / cash memos / challans / delivery order / work orders / requisitions / receiving 
report / money receipts, vouchers, all sorts of supporting documentary evidences, 
government rules and regulations (Income tax, VAT, Companies Act, and others laws), 
internal control mechanism, accounting policy as per the generally accepted accounting 
principles, accounting records and documentation as per the requirements of the 
International Accounting standards with the view to pronounce an independent opinion.   
 
 
23.2 - Purpose and Objectives of Auditing: 
 
 
 
Purpose and objectives of PKSF auditing is enumerated as below: 
 
 
To see whether day to day financial transactions of PKSF are accounted for 
systematically maintained as per approved designed format in timely manner; 
 
 
To see whether financial transactions are done following through the organization 
policy and procedures made in this regard; 
 
 
To see whether all financial transactions are duly been authenticated and 
authorized as per set rules of the organization; 
 
 
To see whether all financial transactions are properly evident with necessary 
approved authenticated actual documents; 
 
 
To see whether organization has following the government rules & regulations in 
all respect to process the day to day financial transactions in clean way; 
 
 
To see whether all financial transactions have been processed, authorized and 
approved with adequate and valid supporting documents and evidences;

P/159 
 
 
To see whether expenses are duly authenticated, authorized and approved with 
the line authority before making / incurring the expenses. 
 
 
To see whether the expenses incurred are for the purposes of the organization; 
 
 
To see whether the expenses are in line with the approved budget and proper 
budget clearance has been duly taken before making the expenses;  
 
 
To assess the adequacy of the financial management system of the organization; 
 
 
To see whether goods and services are procured and purchased in accordance 
with the established policy and procedures; 
 
 
To see the system of internal control - such as adequacy and effectiveness of the 
accounting, financial and operational controls, and need for any revision.  
 
 
To assess the level of compliance with established policies, plans and 
procedures; 
 
 
To see whether the financial transactions and the preparation of financial 
statements have been prepared in accordance with consistently applicable 
International Accounting Standards (IAS);     
 
 
23.3 - Types of PKSF Auditing: 
 
 
 
Following are the different types of auditing is to be organized and conducted in the PKSF 
at different times or simultaneously: 
 
 
I) - Pre-auditing: Pre-auditing of all daily financial transactions incurred in PKSF head 
office to be conducted by the trained personnel of in-house Internal Audit Department of 
PKSF. 
 
II) - Internal Auditing: Half-yearly basis auditing of all financial, accounting and operational 
activities of PKSF to be conducted by the trained personnel of in house Internal Audit 
Department of PKSF. 
 
III) - External auditing of PKSF: As an statutory requirements by the memorandum & 
articles of association of PKSF external auditing of all financial, accounting and 
operational activities of PKSF to be conducted by the reputed professional Chartered 
Accountant firms of the country in each financial / accounting year as per International 
Auditing Standards and International Accounting Standards.   
 
IV) - Auditing (Internal) of POs: Auditing as a nature of internal auditing of all program, 
financial, accounting, operational activities of PKSF POs to be conducted by the trained 
personnel of in-house Internal Audit Department of PKSF. 
 
V) - External auditing of POs: As a decision of the Governing Body in Annual General 
Meeting of PKSF external auditing of PKSF fund's or overall financial, accounting and 
operational activities of POs to be conducted by the reputed professional Chartered 
Accountant firms of the country in each financial / accounting year as per International 
Auditing Standards and International Accounting Standards.

P/160 
 
VI) - Management auditing of PKSF: As per the decision of the General Body of PKSF 
management auditing of all financial, accounting and operational activities of PKSF to be 
conducted by the combination of the staff members of PKSF as selected by the board 
and professional personnel (in rank of FCA) of any reputed professional Chartered 
Accountant firm of the country of a particular financial / accounting period.   
 
VII) - Performance auditing of PKSF: As per the decision of the General Body of PKSF 
performance auditing of all financial, accounting and operational activities of PKSF with 
object to measure economy, efficiency and effectiveness / value for money to be 
conducted by the professional personnel of reputed professional Chartered Accountant 
firms of the country of a particular financial / accounting period. 
 
 
23.4 - PKSF Pre- Auditing: 
 
 
 
Pre-auditing of the financial transactions is necessary in PKSF. Most of the financial 
transactions of PKSF shall be pre-audited by the Internal Audit Department.  
 
 
At first, the expenses and the amount of expenses shall be duly approved and authorized 
by the line authority before making and incurring such expenses and amount of 
expenses. 
 
 
Then, authenticate the expenses with the bills/invoices/receipts/memos and related 
supporting documentary evidences and then sent the files to the Administration 
Department. 
 
 
Administration Department then overview the documents weather all formalities have 
been processed in connection to the payments and doing other related departmental 
formalities and sent the files to the Internal Audit Department. 
 
 
On verification and examination of the expenses through applying substantive test and 
compliance test by the trained personnel of Pre-audit cell of the Internal Audit Department 
and then sent back the files to the Administration Department through affixed the seal of 
"Checked and found correct" which are eligible for payment. If pre-audit cell is not 
satisfied then initiating note with mentioning the reason about the grounds of sent back 
the files to the Administration Department. 
 
 
On getting the positive clearance of the pre-audit, administration department then process 
the file for necessary approval and authorization from the line authority of approving the 
expenses and then sent the file to Finance and Accounts Department for process the 
payments of expenses.   
 
 
 
23.5 - PKSF Internal Auditing: 
 
To safe guard the financial & accounting system from frequent mistakes, irregularities, 
inconsistencies, frauds and misappropriations, the internal audit is needed as follows - 
 
 Keep constant watch on records of financial transaction and to safeguard the 
organization from fraud. 
 
 Keep updated accounts of the projects / programs / head office / regional audit 
offices.

P/161 
 
 To establish strong financial discipline in the organization in all level. 
 
 To enable and aware the accounts personnel to perform their duties with earnest 
sincerity and efficiently. 
 
 The Internal Audit Unit will be placed directly under the Managing Director. 
 
The Internal Audit Unit will provide practical support and effective advice in ascertaining 
accuracy of the transactions and in planning & monitoring through budgetary control. This 
may involve playing the following key roles:- 
 
 The audit unit will ensure that all receipts are accounted for. 
 To ensure that no irregular payments have been made. 
 To ensure that all receipts and payments have been properly recorded. 
 To verify the cash in hand and at Bank. 
 To check that goods and services procured were properly ordered and received 
in proper system. 
 Assets that acquired are properly recorded and are in existence. 
 To prepare bank reconciliation statements on monthly basis. 
 To check the Financial accounting systems and how accurately financial and loan 
data is collected and processed. 
 
23.6 - PKSF External Auditing: 
 
The annual accounts of the PKSF shall be audited by GOB registered reputed auditing 
firms for each fiscal year in accordance with the provisions of Memorandum and Articles 
of Association of the organization and as per the agreement with the loan giving agencies 
and donors. 
 
The management of the organization will develop Terms of Reference (TOR) at the time 
of appointment of auditors on which basis the statutory auditor will audit the accounts and 
prepare their reports.  
 
The auditing system of accounts is needed in order to establish accountability and 
transparency of the transactions, policy development, fund utilization and its accuracy 
confirmation through proper testing and verification of transaction by third party with an 
independent view. So, the following steps shall be involved in audit: 
 
a) Within five months of the completion of the financial year / accounting year, 
audits shall be completed. 
b) Approved audit firm is to be recruited by the PKSF management in AGM. 
c) To place with them a Terms of Reference (TOR) regarding audit work. 
d) Financial statement and management report is to be included in TOR. 
e) Audit report is to be based on the applicable rules of GOB and ICAB. 
 
The main purpose and objective of external auditing is to enable the external auditor to 
express and pronounce a professional independent opinion on the financial position of 
PKSF as a whole as at June 30 of each financial year. External auditors have to be 
conducted in accordance with International Standards on Auditing (ISA).

P/162 
 
External auditors have to prepare plan and perform the audit to obtain reasonable 
assurance about whether the financial statements are free from material misstatement. 
An external audit includes examining, on a test basis, evidence supporting the amounts 
and disclosures in the financial statements. An external audit also includes assessing the 
accounting principles used and significant estimates made by the management, as well 
as evaluating the overall financial presentation.   
 
Opinion has to be express in following ways: 
 
 
"The financial statements present fairly, in all material respect, the financial 
position of PKSF as at June 30 of a particular year, the results of its operations and 
changes in its cash flows for the year then ended in accordance with International 
Accounting Standards." 
 
 
23.7 - PKSF External Auditing of POs: 
 
Main functions of external auditor will be to examine the utilization of fund received from 
PKSF, whether proper books of accounts are kept by POs, whether accounting system 
maintained by them are clear and transparent and also to certify that the principal amount of 
loan or any part thereof have been utilized for the purpose for which it is given by PKSF. The 
audit shall be performed in accordance with International Standards of Auditing (or relevant 
national standards). 
 
 
The auditor will submit project wise separate report(s) in the form of letter or otherwise to 
the Managing Director of the Foundation to cover the audit / review of POs' portfolio 
quality in respect of both POs' overall credit program and that financed by PKSF and 
PKSF's general accounting practices, adequacy of MIS and internal audit control systems, 
adequacy of loan classification and provisioning policies, adequacy of loan recovery rates 
and overdue reported in quarterly reports and accuracy of statements of expenditure used 
for withdrawing funds from the relevant project(s). 
 
Reporting Requirements: 
 
A report in two parts / volumes, as indicated below, shall be prepared by the auditor covering 
the period of audit   
 
 
A  - 
Management Report 
 
 
B  - 
Audit Report Regarding PKSF's Fund / Total Micro-Credit Fund and 
Financial Statements. 
 
 
 
 
A.  
Management Report 
 
Management report shall include observations and audit data on the following of the Partner 
Organizations: 
1.  
Accounting System. 
2.  
Accuracy in maintaining of Books of accounts as suggested by PKSF. 
3.  
Utilization of fund received from PKSF (whether loans are properly distributed to the 
ultimate beneficiaries. 
4.  
A summary analysis of unspent balance, committed loan as well as an analysis of 
faults and irregularities found in the audit.

P/163 
 
5.  
System, procedure and documentation of loan disbursement to and recovery from 
beneficiaries. 
6.  
A summary analysis of outstanding position. 
7.  
System of internal control in operation particularly in respect of loan operation 
management. 
8. 
An analysis of loan performance up to the last day of the period under audit showing: 
Repayable to PKSF up to 30-06- 
 
Principal 
: Taka. ...... 
 
Service Charge : Taka. ...... 
 
Overdue Loan Repayable to PKSF on 30-06- 
 
Principal 
: Taka. ...... 
 
Service Charge : Taka. ...... 
 
Subsequent repayment of overdue loan on 30-06- 
 
Principal 
: Taka. ...... 
 
Service Charge : Taka. ...... 
9. 
Suggestion for improvement on administrations of funds. 
 
B. 
Audit Report Regarding PKSF's Fund and Financial Statements. 
 
The Audit Report regarding PKSF's Fund & Statements of Accounts shall provide a 
comprehensive picture of Partner Organizations. The auditor shall state in this part of his 
report that: 
 
(i) Whether proper books of accounts have been maintained by the POs for fund 
received from PKSF; 
 
(ii) Whether Receipts & Payments Accounts have include all the transactions of the 
period under audit & whether such Receipts & Payment Accounts have been drawn up 
accurately & in agreement with the books of accounts maintained by POs; 
 
(iii) Findings on of Auditor. 
 
 The Report shall also include the following: 
 
(i) Certified Financial Statements; 
 
(ii) A schedule of fixed assets as per format.  
 
23.8 - POs Internal Audit By PKSF: 
 
 
Terms of Reference for Internal Audit Cell of PKSF regarding Audit of POs 
 
The audit cell will audit the credit program of a PO once in every year.  For a new PO, audit 
will be conducted after one year of its enlistment as a PO of PKSF. The audit report is to be 
submitted to the Managing Director of PKSF within two weeks of completion of audit at PO 
level with recommendations on probable remedial measures. Report in 3 sections as 
indicated below, shall be prepared covering the period of audit. 
 
 
A. 
Management Report 
 
 
B. 
Audit Report and Accounts 
 
 
C. 
Field Inspection Report.

P/164 
 
CONTENTS OF CHAPTER – 24 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
------------------------------------------------------------------------- 
24.1 - Introduction 
24.2 - Objective 
24.3 - Procedures for Obtaining Payment Approval 
24.4 - Procedures for Approved Payments 
24.5 - Cheque Signatories 
24.6 - Expenditures 
24.7 - Loan Disbursement 
24.8 - Purchase Committee (1) 
24.9 - Purchase Committee (2) 
24.10 - Imprest Petty Cash System 
24.11 - Delegation of Authority 
 
 
 
 
 
----------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 24 - DELEGATION OF AUTHORITY

P/165 
 
CHAPTER - 24 
 
DELEGATION OF AUTHORITY 
24.1 - Introduction: 
 
In order to mobilize and de-centralize the PKSF management in the best way, the PKSF 
Governing Body (GB) has approved the delegation of approval power, financial power and 
cheque signatories. To process the authorization and approval procedures in connection 
to the financial expenses, related bill vouchers and cheque signatures of the PKSF 
following the delegation of authority has been acted henceforth.    
 
24.2 - Objective: 
 
a. PKSF’s operations has expanded over time. As a result administrative as well as financial 
obligations also risen to a great extent. Considering the practicality of day to day operation 
smoothly, some of the administrative and cheque signing authority has been 
decentralized as per “ Delegation of Financial Authority”. This process will enhance 
management capability by ensuring internal control for accountability and transparency. 
 
b. If situation arises, MD may take necessary action in relevant matters after taking approval 
of the Board through circulation. 
 
c. Any alternations and revisions of “Delegation of Financial Authority” may be made by the 
Governing Body after review. 
 
24.3 - Procedures for Obtaining Payment Approval: 
 
- 
No payment can be made unless, a provision for the type of expenditure is included in the 
approved budget. Before taking approval involving financial payments budget clearance 
must be obtained except day to day expenditure. 
 
- 
When a current payment exceeds budget provision, payment must be approved by MD. 
 
- 
If expenditures exceed total approved budget, in absolute terms, Boards approval is 
required for a revision of the budget. 
 
- 
Funds allocation for capital expenditures cannot be re-allocated for meeting operating 
expenditures or vice-versa. 
 
- 
For payment action, all bills must be initiated by department concerned and certified by 
the section head/supervisor and approved by MD except where delegation of 
administrative power is applicable. 
 
24.4 - Procedures for Approved Payments: 
 
- 
All payments above Tk. 5,000 (five thousand) only are preferably to be paid through 
“Account Payee” cheques. 
 
- 
When cash to be withdrawn, cash cheques should denote “Account Payee Cancelled”. 
 
- 
Cheques issued for loan disbursement to POs should denote “Yourself for DD favouring 
..............................(Name of the PO)” or "Account Payee only"

P/166 
 
24.5 - Cheque Signatories: 
 
a. All the bank payments must be authorized by joint signatories i.e. 
 
1. Principal signatory and 
 
2. A cosignatory 
 
For all kinds of transactions except where “Delegation of Financial Authority” applies 
PKSF’s MD shall be the principal signatory and cosignatory can be any of the officials as 
mentioned below: 
 
1. GM (Admin), or 
2. 2. DMD (O), or 
3. 3. DMD (B)  
 
MD has the authority to make any changes, amendments in the bank signatory powers of 
the concerned PKSF's officials. Cheque signatories are mentioned in following serial b, c, 
d & e as follows: 
 
b. Where approved bill/payment amount exceed Taka 500,000 (Five lakh). 
 
i. 
MD + GM (Admin) 
ii. 
In absence of GM (Admin), MD + DMD (O) 
iii. 
In absence of GM (Admin) and DMD (O), MD + DMD (B) 
 
c. Where approved bill/payment amount does not exceed Taka 500,000 (Five lakh) and MD 
is in the office: 
 
i. 
GM (Admin) + DMD (O) 
ii. 
In absence of DMD (O), GM (Admin) + DMD (B) 
iii. 
In absence of GM (Admin), DMD (O) + DMD (B) 
iv. 
In absence of GM (Admin) and DMD (O), MD + DMD (B) 
 
d. Where approved bill/payment amount does not exceed Taka 500,000 (Five lakh) and MD 
is absent from the office: 
 
i. 
GM (Admin) + DMD (O) 
ii. 
In absence of DMD (O), GM (Admin) + DMD (B) 
iii. 
In absence of GM (Admin), DMD (O) + DMD (B) 
 
e. For salary & festival bonus payment: 
 
i. 
MD + GM (Admin) 
ii. 
In absence of GM (Admin), MD + DMD (O) 
iii. 
In absence of GM (Admin) & DMD (O), MD + DMD (B) 
iv. 
In absence of MD, GM (Admin) + DMD (O) 
v. 
In absence of MD & DMD (O), GM (Admin) + DMD (B) 
vi. 
In absence of MD & DMD (B), GM (Admin) + DMD (O) 
 
f. 
If for any reason, MD, GM (Admin) and DMD (O) are absent with Board’s approval by 
circulation, MD may instruct the bank beforehand, so, DMD (B) shall be principal 
signatory and DGM (F/A) shall be cosignatory, if needed.

P/167 
 
g. If for any reason, MD, DMD (O) and DMD (B) are absent with Board’s approval by 
circulation, MD may instruct the bank beforehand, so, GM (Admin) shall be principal 
signatory and DGM (F/A) shall be cosignatory, if needed. 
 
24.6 - Expenditures: 
 
Any kind of expenditures either revenue or capital in nature, above Taka 5,000 (five 
thousand) only, shall be approved by MD. 
 
As the volume of transactions has increased “ Delegation of Financial Authority” has 
delegated authorities in the following manner: 
 
a. When MD is absent from office, approval of salary payment is delegated. When MD 
is absent, DMD (O) shall approve the salary payment, and if, MD, DMD (O) are 
absent, DMD (B) shall approve the salary payment, If MD, DMD (O) and DMD (B) are 
absent, GM (Admin) shall approve the salary payment. Post facto approval is needed 
from MD when s/he is in the office. 
 
b. Approval for payment of Festival bonus is same as 24.6(a) above. 
 
c. GM (Admin) can approve expenditures Taka 2,001 to Taka 5,000 only. 
 
d. DGM (F/A) can approve expenditures Taka 1,001 to Taka 2,000 only. 
 
e. M (Admin) can approve urgent payments up to Taka 1000 (one thousand). 
 
f. 
M (Admin) can discharge payments through IOU slips for prior approved 
expenditures. The balance of IOU slips at the closing of the day should not exceed 
Taka 50,000 (fifty thousand). 
 
g. Cashier can discharge cash for approved payments only e.g. approved tour plan and 
requisitions for advances and TA/DA etc. 
 
h. Respective Division Heads shall approve tour plans and requisitions for advances up 
to Manager levels. 
 
i. 
MD shall approve local tour plans and requisitions for advances from AGM to DMD 
levels. 
 
j. 
MD’s tour plan with in Bangladesh are informed to the Chairman. 
 
k. All foreign tours up to DMD level are approved by MD. 
 
l. 
MD’s foreign tour are informed to the Chairman/Board. 
 
24.7 - Loan Disbursement: 
 
Any loan disbursement is recommended by the Loan Committee and MD approves loan 
disbursements up to Taka 26,00,000 (Twenty-six lacs) cumulative only. Loan sanction 
above Taka 26,00,000 (twenty-six lacs) cumulative only are approved by the Board and 
disbursement is to be approved by MD. 
 
Cheque signing authority of approved loan for disbursement up to Taka 5,00,000 (five 
lacs) only, has been delegated under “Delegation of Financial Authority”.

P/168 
 
24.8 - Purchase Committee (1): 
 
Purchase Committee-1 recommends purchases above Taka 5,00,000 (five lacs) only and 
final approval is given by MD. 
 
 
24.9 - Purchase Committee (2): 
 
Purchase Committee-2 recommends purchases from Taka 20,000 (twenty thousand) to 
Taka 5,00,000 (five lacs) only and final approval is given by MD. 
 
 
24.10 - Imprest Petty Cash System: 
 
Petty cash in maintained in imprest system with a limit of Taka 1,00,000 (one lac) only. 
Taka one lac balance shall be maintained in cash up to Taka 50,000 (fifty thousand) only, 
plus up to Taka 50,000 (fifty thousand) only, in IOU slips. 
 
Each IOU slip should be adjusted within eight working days and any advances within 20 
working days. 
 
Cash withdrawals requisitions are approved by MD. When MD is absent, DMD (O) shall 
approve the cash withdrawal requisition, and if, MD, DMD (O) are absent, DMD (B) shall 
approve the cash withdrawal requisitions. If MD, DMD (O) and DMD (B) are absent, GM 
(Admin) shall approve the cash withdrawal. In all the relevant cases, post facto approval 
is needed from MD when s/he is in the office.

P/169 
 
24.11 – Delegation of Authority: 
 
DELEGATION OF FINANCIAL AUTHORITY 
(Approved by PKSF Governing Body) 
 
Nature 
Administrative 
Approval 
 
Remarks 
 
Expenditures 
 
Up to Taka 1,000 
M (Admin) 
 
Emergency expenses payable from petty 
cash 
 
From Taka 1,001 to 
Taka 2,000 
 
DGM (F/A) 
 
Payable from petty cash or by cheque 
From Taka 2,001 to 
Taka 5,000 
 
GM (Admin) 
 
Payable from petty cash or by cheque 
Above Taka 5,000 
MD 
 
i) Payable to employee: through cash or 
cheque. 
 
ii) Payable to outsider: through Account 
payee cheque. 
 
 
TA/DA Local trip 
 
Up to Manager / 
equivalent levels 
Division Heads 
 
Cashier can discharge cash for approved 
payments only. 
 
From AGM - DMD 
levels 
 
MD 
 
Cashier can discharge cash for approved 
payments only. 
MD 
Chairman to be 
informed 
 
 
Cashier can discharge cash for approved 
payments only.  
 
Foreign Tour Plan, TA/DA and Advances 
 
For all levels up to DMD 
 
MD 
 
 
 
 
For MD 
Chairman/Board to 
be informed

P/170 
 
Nature 
Administrative 
Approval 
 
Remarks 
 
Salary & Festival Bonus 
i. 
In MD’s presence 
 
MD 
 
------------------ 
 
ii 
When MD is absent  
DMD (O) 
 
Post facto approval should be taken from 
MD. 
 
iii 
If MD and DMD (O) are 
absent 
DMD (B) 
 
Post facto approval should be taken from 
MD. 
 
iv 
If MD, DMD (O), DMD 
(B) are absent  
GM (Admin) 
 
Post facto approval should be taken from 
MD. 
 
 
Loan disbursement 
 
 
 
 
 
 
 
 
i. 
Up to Taka 26,00,000 
cumulative 
 
MD on Loan 
Committee’s 
recommendations 
 
 
------------------ 
 
ii 
Above Taka 
26,00,000 cumulative 
MD with GB’s 
Approval 
 
 
------------------- 
 
Investments 
 
 
 
 
 
 
 
i. 
As per liquidity 
Management Manual 
 
MD, if necessary 
shall inform GB 
 
 
------------------ 
 
 
Explanations: 
 
(1) For all kinds of transactions, except where “Delegation of Authority” applies, MD shall be 
the principal signatory and cosignatory can be GM (Admin), or DMD (O), or DMD (B). 
 
(2) Absent means absent from office at least for a day due to leave or tour. 
 
(3) Abbreviations: MD = Managing Director, GB = Governing Body, GM (Admin)= General 
Manager (Administration), DMD (O) = Deputy Managing Director (OOSA), DMD (B) = 
Deputy Managing Director (BIPOOL), DGM (F/A) = Deputy General Manager (Finance & 
Accounts), M (Admin) = Manager (Administration).

P/171 
 
CONTENTS OF CHAPTER – 25 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
---------------------------------------------------------------------------------- 
25.1 - Preservation of Financial Documents 
25.2 - Periodic Review of Management Control System 
25.3 - Amendment of the Manual  
 
 
 
 
--------------------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 25-FINANCIAL DOCUMENTS PRESERVATION & MANUAL MAINTENANCE

P/172 
 
CHAPTER - 25 
 
 
FINANCIAL DOCUMENTS PRESERVATION & MANUAL MAINTENANCE 
 
 
25.1 - Preservation of Financial Documents: 
 
 
Financial documents include all books of accounts together with its supporting documents 
viz., the money receipts, bills, invoices, cash journals, journal vouchers, ledgers, 
subsidiary ledgers, registers and other accounting records, documents & statements. 
 
In addition, loan agreement between the government, funding agencies and the 
organization, Lease Agreement, all financial agreement, contract & deed, Loan 
Agreement & Repayment Schedules with POs, Rent Agreement, Bank statements, 
cheque books, bank deposit slips, all documentary evidences to financial transactions, 
internal and external audit report and GOB letter of approval shall be counted as financial 
documents. 
 
Accounts department will keep all the above documents and files in a safe custody under 
lock and key.  
 
All financial documents shall be preserved at least twelve years time and may be 
destroyed thereafter with the decision from the Governing Body under recommendation 
from a committee specially formed for this purpose. 
 
 
25.2 - Periodic Review of Management Control System: 
 
 
The financial and accounting system is intended as a guide for financial control of PKSF. 
The procedures as recommended in this manual are based on the records and 
information made available at the time of preparation of the system.  
 
However, the changing nature of circumstances demands periodic review of the existing 
system. Any proposed change or modification arising from such periodic reviews should 
not, however, be incorporated without consultation with Governing Body and also 
obtaining a prior approval of Governing Body.  
 
The Governing Body may amend the guidelines for the following purposes: 
 
 If need arises to accommodate relevant rules of the GOB / Grantor concerning 
financial management system; 
 
 If the Governing Body is convinced about its need with the recommendation of the 
staff members of the organization for any amendment; 
 
 The Governing Body will review the financial guidelines after a reasonable time of its 
approval and take necessary steps for amendments if need arises.

P/173 
 
 
25.3 - Amendment of the Manual: 
 
 
This manual is approved by the Governing Body and as such considered a mandatory 
guideline for the overall financial and accounting management control of the organization, 
PKSF. Any amendment of this manual requires approval of the Governing Body, except 
for the chart of accounts part.  
 
The Chief of Finance and Accounts is empowered to modify and re-arrange the chart of 
accounts in order to cater to the needs of the organization. 
  
It is recommended to preserve this manual in a loose-leaf binder. In that case, the 
subsequent amendments will be easy to handle and cheap to execute. Otherwise the 
entire manual will require to be reprinted for any future amendment. 
 
Rigidity in financial management will enforce an effective accounting administration and a 
strong financial discipline in the organization. The management, therefore, should be 
cautions before considering any change in this manual. The amendment will, however, be 
essential with any material change in the organizational structure or with the new 
development in its financial activities.

P/174 
 
 CONTENTS OF CHAPTER – 26 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
-------------------------------------------------------------------------------- 
26.1 - Introduction 
26.2 - Characteristics of Chart of Accounts 
26.3 - Coding Structure of Chart of Accounts 
26.4 - Application of Code Numbers 
26.5 - Necessary Steps to Prepare Chart of Accounts 
26.6 - Coding System of Accounts 
26.7 - Changes and Amendments of Accounting Codes 
 
 
 
 
------------------------------------------------------------------------ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 26 – CHART OF ACCOUNTS

P/175 
 
 
 CHAPTER – 26 
 
 
CHART OF ACCOUNTS 
 
 
26.1 – Introduction: 
 
 
Palli Karma-Sahayak Foundation (PKSF) is quite a large organization by any standard. 
Various projects / programs undertaken by PKSF are being operated simultaneously. 
These projects / programs differ in nature and in length of duration. Fund, loan and 
financial support being received are earmarked for particular projects / programs by 
different government, funding agencies and organizations.  
 
Financial statements have to be prepared in complete form following the guidelines of the 
generally accepted accounting principles with full disclosure requirements of the 
International Accounting Standards by the PKSF Head Office and also Regional Audit 
Offices. 
 
PKSF has it’s different accounting offices in different part / places of the country. Thus, it 
is obvious for the organization to maintain uniformity in accounting heads of it’s own and 
in all over it’s all offices.  
 
Uniform accounting heads / uniform chart of accounts will given the ideal instructions to 
get compete set of financial statements from all the offices of PKSF in regular interval and 
hence, a well designed chart of accounts is necessarily essential for PKSF head office 
and also for its' all offices. 
 
 
26.2 – Characteristics of Chart of Accounts: 
 
 
The characteristics of the chart of accounts of PKSF are outlined here in below: 
 
 All codes for different accounting heads in chart of accounts will consist of Thirteen (13) 
digits. 
 
 Specific project can be identified by the first two (2) digits represents as "Project Code". 
 
 Partner Organization (PO) status can be identified by the second two (2) digits represents 
as "PO Code". 
 
 Specific office can be identified by the third two (2) digits represents as "Location". 
 
 Fourth four (4) digits can identify the control general ledger as “Control Code". 
 
 The last three (3) digits can identify the nature of expense, income, asset & liability. It will 
indicate the particular accounting head that is actually meant for use.

P/176 
 
26.3 – Coding Structure of Chart of Accounts: 
 
 
A nine character numeric coding structure is used for recording transactions.  
 
The basic arrangements of character grouping for the accounts are as under:  
 
 
Coding arrangement for Assets, Liabilities, Income & Expenses Account 
 
Numeric 
 
 
 
 
 
 
 
00 
00 
00 
0000 
000 
Project Code 
 
 
-------------------------| 
  | 
  | 
   | 
    | 
 
 
 
 
 
 
 
  | 
  | 
   | 
    | 
PO status 
 
 
--------------------------------------| 
  | 
   | 
    | 
 
 
 
 
 
 
 
   
  | 
   | 
    | 
Location Code 
 
 
--------------------------------------------------| 
   | 
    | 
 
 
 
 
 
 
 
 
 
   | 
    | 
Control Code 
 
 
--------------------------------------------------------------| 
    | 
 
 
 
 
 
 
 
 
 
  
    | 
Subsidiary Code  
 
---------------------------------------------------------------------------| 
 
 
Total numeric is thirteen (13). 
 
Here; 
 
 Project represents the Crore Program, PLDP, IFADEP, JMBA and etc. 
 
 PO status represents the BIPOOL, OOSA – Partner Organization of PKSF. 
 
 Location represents the PKSF Head Office, Regional Audit Offices. 
 
 Control code represents the control general ledger code. 
 
 Subsidiary code represents the subsidiary ledger code. 
 
The control general ledger codes (control code) are blocked-structured in groups 
as shown below: 
 
Type of Accounts 
Control General Ledger Codes Subsidiary Ledger Code 
 
All Assets 
- 
0001 to 0399 
 
 
001 to 999 
 
All Liabilities 
- 
0401 to 0899 
 
 
001 to 999 
 
All Income 
- 
0901 to 0999 
 
 
001 to 999 
 
All Expenses 
- 
1001 to 9999 
 
 
001 to 999

P/177 
 
26.4 – Application of Code Numbers: 
 
 Code number application for Assets Account 
 
 
 
Account Head - Code number for an account with Janata Bank, Stamasjid Road, STD - 
36 at Head Office Core Program will be as - 01.01.01.0667.025 as explained below: 
 
 
Numeric 
 
 
 
 
 
 
01 
01 
01 
0667 
025 
Project Code - Core Program 
-------------------------| 
  | 
  | 
   | 
    | 
 
 
 
 
 
 
 
  | 
  | 
   | 
    | 
PO status - Common 
 
--------------------------------------| 
  | 
   | 
    | 
 
 
 
 
 
 
 
   
  | 
   | 
    | 
Location Code - Head Office  
--------------------------------------------------| 
   | 
    | 
 
 
 
 
 
 
 
 
 
   | 
    | 
Control Code - Cash At Banks 
--------------------------------------------------------------| 
    | 
 
 
 
 
 
 
 
 
 
  
    | 
Subsidiary Code - Janata Bank STD-36 ---------------------------------------------------------------------| 
 
 
 Code number application for Liability Account 
 
 
Account Head - Code number for an account of IDA Loan Under SPAMFP of Head Office 
Core Program will be as 01.01.01.0124.002 as explained below: 
 
Numeric 
 
 
 
 
 
 
01 
01 
01 
0124 
002 
Project Code - Core Program 
-------------------------| 
  | 
  | 
   | 
    | 
 
 
 
 
 
 
 
  | 
  | 
   | 
    | 
PO status - Common 
 
--------------------------------------| 
  | 
   | 
    | 
 
 
 
 
 
 
 
   
  | 
   | 
    | 
Location Code - Head Office  
--------------------------------------------------| 
   | 
    | 
 
 
 
 
 
 
 
 
 
   | 
    | 
Control Code - Loan Under SPAMFP ------------------------------------------------------------| 
    | 
 
 
 
 
 
 
 
 
 
  
    | 
Subsidiary Code - IDA Loan Under SPAMFP ---------------------------------------------------------------| 
 
 Code number application for Income Account 
 
Account Head - Code number for an account of Service Charge Under RMC-OOSA - 
Akota, at Head Office Core Program will be as 01.01.01.0901.067 as explained below: 
 
Numeric 
 
 
 
 
 
 
01 
01 
01 
0901 
067 
Project Code - Core Program 
-------------------------| 
  | 
  | 
   | 
    | 
 
 
 
 
 
 
 
  | 
  | 
   | 
    | 
PO status - OOSA 
 
--------------------------------------| 
  | 
   | 
    | 
 
 
 
 
 
 
 
   
  | 
   | 
    | 
Location Code - Head Office  
--------------------------------------------------| 
   | 
    | 
 
 
 
 
 
 
 
 
 
   | 
    | 
Control Code - Service Charge Under RMC-OOSA ------------------------------------------| 
    | 
 
 
 
 
 
 
 
 
 
  
    | 
Subsidiary Code - Service Charge Under RMC-OOSA Akota ------------------------------------------|

P/178 
 
 Code number application for Expense Account 
 
Account Head - Code number for an account of Printing & Stationery incurred for the 
Core Program OOSA at Head Office will be as 01.01.01.1759.001 
 
 
Numeric 
 
 
 
 
 
 
01 
02 
01 
1759 
001 
Project Code - Core Program 
-------------------------| 
  | 
  | 
   | 
    | 
 
 
 
 
 
 
 
  | 
  | 
   | 
    | 
PO status - OOSA 
 
--------------------------------------| 
  | 
   | 
    | 
 
 
 
 
 
 
 
   
  | 
   | 
    | 
Location Code - Head Office  
--------------------------------------------------| 
   | 
    | 
 
 
 
 
 
 
 
 
 
   | 
    | 
Control Code - Printing & Stationery-OOSA ----------------------------------------------------| 
    | 
 
 
 
 
 
 
 
 
 
  
    | 
Subsidiary Code - Printing & Stationery-OOSA ------------------------------------------------------------| 
 
 
 
26.5 – Necessary Steps To Prepare Chart of Accounts: 
 
 
a) Before preparing chart of accounts for PKSF, PKSF project codes will be selected at 
first.  
 
This project code could be arranged serially for different offices in following way; 
 
 
 Name of Projects   
 
 
 
 
 Accounting code 
 
 
 Core Program –  
 
 
 
 
 
01 
 
 PLDP –  
 
 
 
 
 
 
02 
 
 IFADEP -  
 
 
 
 
 
 
03 
 
 JMBA -   
 
 
 
 
 
 
04 
 
b) Second step to prepare the chart of account is then select the PO (Partner 
Organization) status code for PKSF. PO status code could be arranged in following 
way; 
 
 
 Name of Projects   
 
 
 
 
 Accounting code 
 
 
 Common –  
 
 
 
 
 
 
01 
 
 OOSA – 
 
 
 
 
 
 
02 
 
 BIPOOL -  
 
 
 
 
 
 
03

P/179 
 
c) Third step to prepare the chart of account is then select the office code for PKSF 
offices. Office code could be arranged in following way; 
 
 Name of Offices  
 
 
 
 
 
 Accounting code 
 
 
 PKSF Head Office –  
 
 
 
 
 
01 
 
 Rangpur Audit Office –  
 
 
 
 
02 
 
d) Fourth step to prepare the chart of account is then selects the control general ledger 
code for broad head of PKSF assets, liabilities, incomes and expenses. Control 
general ledger account code could be arranged as broad head for assets, liabilities, 
incomes and expenses of PKSF office in the following way; 
 
Type of Accounts 
 
Control General Ledger Codes 
 
All Assets 
 
= 
 
0001 to 0399 
 
 
All Liabilities 
 
= 
 
0401 to 0899 
 
 
All Income 
 
= 
 
0901 to 0999 
 
 
All Expenses 
 
= 
 
1001 to 9999 
 
 
e) Fifth and final step to select separate accounting codes for subsidiary ledger account 
codes of control general ledger codes of PKSF assets, liabilities, income and 
expenses. Subsidiary ledger account codes could be arranged in the following way; 
 
Type of Accounts 
 
Subsidiary Ledger Codes 
 
All Assets 
 
= 
 
001 to 999 
 
 
All Liabilities 
 
= 
 
001 to 999 
 
 
All Income 
 
= 
 
001 to 999 
 
 
All Expenses 
 
= 
 
001 to 999 
 
 
 
 
26.6 – Coding System of Accounts: 
 
 
PKSF coding system of accounts has been classified here in below mainly considering 
the control general ledger accounts codes and subsidiary ledger accounts codes. 
 
PKSF coding system of accounts has been enumerated as follows:

P/200 
 
 
 
 
26.7 – Changes and Amendments of Accounting Codes: 
 
 
The accounting codes have been arranged in such a way so that if required these can be 
changed or expanded with the demand of changing situation arises for the purpose. E. g; 
Fixed accounting code numbers have been assigned for all types of assets and liabilities.  
 
Out of these serial numbers of accounting codes, some have not been allocated to 
specific accounting head as yet. These unallocated accounting code numbers could be 
used in future to accounts for any change or additions as demanded.  
 
Similarly, there are some accounting code numbers under recurring expenditures and 
incomes that are not yet attached to any specific item, can be used under circumstances 
needed.  
 
Usually, if some new Regional Audit Offices are started by PKSF, then the accounting 
code numbers which have been reserved for future use will come into operation after 
taking into account the characteristics of income and expenditure items of the new 
Regional Audit Offices.

P/201 
 
CONTENTS OF CHAPTER – 27 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
------------------------------------------------------------------------------------ 
27.1 - Accounting Forms (Form No. 101 - 120) 
27.2 - Accounting Registers & Books (Register No. 201-209)  
 
 
 
 
---------------------------------------------------------------------------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 27 – ACCOUNTING FORMS, REGISTERS & BOOKS

P/202 
 
 
 CHAPTER – 27 
 
 
ACCOUNTING FORMS, REGISTERS & BOOKS 
 
 
27.1 - Accounting Forms (Form No. 101 – 120): 
 
 
1 - Cash Journal 
 
 
 
 
 
 
Form-101&102 
2 - Journal Voucher  
 
 
 
 
 
 
Form-103 
3 – Petty Cash Advance Slip 
 
 
 
 
 
Form-104 
4 – Daily Cash Balance Statement  
 
 
 
 
Form-105 
5 – Daily Bank Balance Statement  
 
 
 
 
Form-106 
6 – Bank Account Reconciliation Statement  
 
 
 
Form-107 
7 - Conveyance Bill  
 
 
 
 
 
 
Form-108 
8 – Travel Form & Requisition for Cash against Travel Advance  
Form-109 
9 – Travel Expenses & Allowance Bill  
 
 
 
 
Form-110 
10 – Detail Statement of Traveling Bill  
 
 
 
 
Form-111 
11 – Description of Travel  
 
 
 
 
 
Form-112 
12 – Overtime Payment Form   
 
 
 
 
Form-113 
13 – Store / Purchase Requisition  
 
 
 
 
Form-114 
14 – Material Receiving & Inspection Report  
 
 
 
Form-115 
15 – Tour Bill Register   
 
 
 
 
 
Form-116 
16 – Movable / Immovable Fixed Assets Statement  
 
 
Form-117 
17 – Statement of Budget Controlling & Monitoring  
 
 
Form-118 
18 – Physical Inventory Statement - Assets  
 
 
 
Form-119 
19 – Statement of Short Term Deposit & Interest Receivables  
 
Form-120

P/223 
 
 
27.2 - Accounting Registers & Books (Register No. 201 - 209):  
 
 
 
1 - Cash Journal Register 
 
 
 
 
 
 
R-201 
2 – Subsidiary Ledger 
 
 
 
 
 
 
 
R-202 
3 – Fixed Assets Register 
 
  
 
 
 
 
R-203 
4 – Salary Register 
 
 
 
 
 
 
 
R-204 
5 – Cheque Issue Register  
 
 
 
 
 
 
R-205 
6 – Cheque/DD/PO Receipt Register 
 
 
 
 
 
R-206 
7 – VAT & Income Tax Register  
 
 
 
 
 
R-207 
8 – Petty Cash Advance Slip Register 
  
 
 
 
 
R-208 
9 – Budget Register  
 
 
 
 
 
 
 
R-209

Bangladesh
Rural Microenterprise Transformation Project
Project Design Report
Annex: RMTP Funds flow
Document Date:
30/07/2019
Project No.
2000002356
Asia and the Pacific Division 
Programme Management Department

DA account Loan 
SAFE USD
IFAD Loan
PA account Loan of 
PMU/PKSF BDT
Bank Accounts of 
Partner 
Organizations
DA MoEWOE 
SAFE USD
CO-FINANCING GRANT
Administration 
performed by IFAD
PA account Loan of 
IU/MoEWOE BDT
DA account Grant 
SAFE USD
PA account Grant of 
PMU/PKSF BDT
Bank Accounts of 
Partner 
Organizations
Bank Accounts Non-
Banking Financial 
Institutions (NBFIs)
IFAD Grant
Component 1: Value Chain Enhancement
Sub-component 1.1 Organization
Sub-component 1.2 Technical and business services
Subcomponent 1.3 Value chain integration
Subcomponent 1.4 Enterprise strengthening
Subcomponent 1.5 Policy dialogue
Component 3: Institutional Strengthening and Project 
Management 
Distributed digital ledger technology
E-commerce platform. 
Crowd-funding (fraternity funding) platform
Micro-enterprise ICT
Component 2: Financial Services
Sub-component 2.3 Optimal utilisation of 
remittances
Component 1: Value Chain Enhancement
Sub-component 1.1 Organization
Sub-component 1.2 Technical and business services
Subcomponent 1.3 Value chain integration
Subcomponent 1.4 Enterprise strengthening
Component 2: Financial Services
Subcomponent 2.2 Commercial finance through 
NBFIs
Component 2: Financial Services
Subcomponent 2.1 Microfinance through POs
Component 1: Value Chain Enhancement
Subcomponent 1.5 Policy dialogue
Technical Assistance