Village Fund Guidelines

Tamil Nadu Vazhndu Kaatuvom Project Component A.2- Village Livelihood Program Revised as of 09 – 08 - 08

1. This document consists of three parts: (a) Part A: Introduction and Justification for Revisions in the Sub-component of Village Livelihood Program; (b) Part B: Village Funds: Rules, sub-funds, eligible activities, and milestones for accessing the Village Fund; and (c) Part C: Livelihood Corpus Fund: rules, eligible activities and milestones for accessing it. The revisions in other two funds - Institutional Development Fund and Gram Panchayat Incentive Fund - would be finalized and agreed upon at a later date (by August 31, 2008). However, this is an evolving document and further discussions are needed to finalize the operational rules and procedures. All these revisions would be reflected in the Community Operational Manual by August 31, 2008.

PART A: INTRODUCTION AND JUSTIFICATION FOR REVISIONS

2. One of the key features of the Vazhndu Kaatuvom Project is that over 80 percent of the project funds are transferred directly to the village communities as Direct Investment to the village called the Village Fund. Though the Village Communities are empowered to adopt rules and guidelines for utilizing the village fund, the overall guidelines for the village funds were elaborated in the Project Implementation Plan and Community Operational Manual.

3. The scope, allocation and guidelines of the village funds have been revised to reflect learning /lessons emerging from project implementation so far especially learning from the JSDF pilot and Batch 1 villages. These improvements are mainly aimed at  Clarifying total fund envelop, key rules for accessing funds; and milestones for various installments;  Responding to the immediate needs of the most vulnerable community members who are not able to access funds through bank linkages or other sources;  Simplifying implementation arrangement and process for accessing livelihood assistance as a revolving livelihood fund.  Building a strong institutional foundation for the VPRC by enhanced linkage with Self Help Groups and entrusting responsibility to manage livelihood fund with institutions that represent SHGs.  Broadening the scope of the village fund to include other members of the village community especially youth and women to generate and sustain momentum at the village level; and  Enhance compliance check and accountability by separating facilitation/implementation functions from appraisal and compliance check. This would be achieved through constituting separate appraisal and monitoring teams at the regional level.

4. To carry out these changes there is need for specific allocation of funds for youth development and individual livelihood assistance. Further, the project proposes to develop a Livelihood Corpus Fund – also called Amudha Surabi Fund -at Panchayat level to cater to the livelihood enhancement needs of target people. As the corpus will revolve within the

of 21 community, it will assist a large number of beneficiaries to improve their livelihoods in a sustainable manner. Thus, the key changes in the village funds are:

- VPRC Fund will be divided into 3 categories namely Capacity Building Fund, Special Fund and Youth Development Fund in the ratio 40 : 40:20.

- Livelihood Fund will be divided into 3 categories namely Corpus Fund/Amudha Surabi Fund, Federation Fund and VPRC incentive Fund

5. The Funds for Direct Investment to the Village Communities will henceforth consist of the following Funds and Sub –Funds as shown in Figure 1:

Figure 1: A.2 Sub Component –Village Funds and Sub- Fund Category (i). VPRC Fund

(ii). Livelihood Corpus Fund A. Village Fund (iii). VPRC Incentive Fund

Direct Investment (i). E A Federations Fund to Village B. Institutional Development fund (ii). CP Development Fund

(i). GP Initiation Fund C. GP Fund (ii). GP Incentive Fund

6. Size and Scope of Village Fund: To meet the needs of the youth, an additional sum of Rs.50 crores is needed. It is proposed to transfer Rs.50 crores from livelihood fund to VPRC fund to meet this requirement. The proposed fund allocation, as shown in Tables 1 and 2 will be as follows. However, this allocation is under discussion currently, and would be further reviewed and finalized during the Mid-term review and revised/increased as necessary: Table 1: Fund Allocation Fund Category As per PAD and PIP Proposed as of July 2005 2008 Fund Sub-Fund Rs. in crore % Rs. in crore % Village Fund VPRC Fund 200 35% 250 43% Livelihood Fund/ Corpus 300 52% 188 33% Fund VPRC Incentive Fund 0 0% 12 2% Institutional Federation Fund 14 2% 64 11% Development Paraprofessional 6 1% 6 1% Fund Development Fund GP Fund GP initiation Fund 9 2% 9 2% GP Incentive Fund 48 8% 48 8% Total 577 100% 577 100%

PART B: VILLAGE FUND: SCOPE, SIZE AND GUIDELINES

7. Objective: The Vazhandhu Kaattuvom Program will provide financial resources to the VPRC to implement various development proposals. These funds are collectively called the Village Fund. The objective of the Village Fund is to enable the village communities to identify, prioritise, plan and manage their own funds and access resources for investment. This fund will directly be released to VPRC as a grant by the district society. This fund can be used to:

a) Promote inclusive, self reliant and sustainable pro-poor community based organisations like VPRC, SHGs, Federations, Social Audit Committee (SAC). b) Tap and augment the inherent potential of poor and marginalized people. c) Improve the business skills, competencies of unemployed youths and broaden the opportunities of gainful employment or self-employment for them. d) Support the Tribal, Disabled and Vulnerable people to plan and implement specialised programs to reduce their vulnerability. e) Promoting youth developmental activities in order to tap the inherent potential of youth in a constructive manner. f) Improve the livelihood status of target population including tribal, disabled and vulnerable by providing both financial and non-financial assistance. g) Motivate VPRCs and other village level institutions to practice “Uyir Moochu” in all its activities and create enabling environment for the village community to come out of poverty. 8. Size of Village Fund: The Village Fund will be allocated to each GP based on number of SC, ST families; and will be directly transferred to the VPRCs. The total budget envelop will be calculated up-front and disseminated among the community members and VPRCs.

The Village Fund will consist of two sub-funds: i. VPRC Fund ii. Livelihood Corpus Fund

The formula for calculating eligible budget envelop for each Village Panchayat is as follows :

VPRC Fund Rs. 6.00 Lakhs + (Rs.2000 * No.of SC HHs1 + Rs. 2200 * No.of ST HHs1) Livelihood Corpus Rs. 6.00 Lakhs + (Rs.800 * No.of SC HHs1 + Rs. 880 * Fund No.of ST HHs1)

9. In addition, An additional 10% of the Village Fund will be available as Incentive Fund to all those VPRCs, who have successfully implemented the above funds and also meet eligibility criteria as agreed. The qualifying villages have to meet the eligibility criteria. [We agreed during the mission that 5% of EAG fund would be added on to the overall envelop of VPRCs (which may amount to about 8 to 10% of the VPRC fund). This would 1 According to census 2001. 1 1 1

of 21 be given only to those VPRCs that have satisfied eligibility criteria. The incentive fund guidelines and critieria need to be developed. The GP Incentive Fund guidelines also need to be revised. During the mission it was agreed to introduce annual system of GP incentive]

10. Fund details: The Village Fund will thus consist of as shown in Figure 2 below:

Figure 2: Village Sub-Funds

VPRC Fund

Village Fund Livelihood Corpus Fund

VPRC Incentive Fund

A. VPRC Fund

11. The objective of VPRC Fund is to develop the VPRC as an inclusive, autonomous and accountable village institution responsible for:

(a) Identify the needs of target population and plan for their development especially women, youth, tribal, disabled and vulnerable; (b) Promote and capacitate the institutions (VPRC, sub-committees, Social Audit committee, Self Help Groups, Federations etc.,) of poor, disabled and vulnerable; (c) make the local institutions (VPRC, GP, etc) accountable to the people through Gram Sabha, Village Assembly, and Social Audit Committee; and (d) provide necessary information and exposure to the community members to develop economic activities for livelihood improvement.

of 21 12. Key Rules: A maximum of 50% of the eligible village fund can be earmarked for VPRC Fund Activities.

VPRC fund will be utilized according to Uyir Moochu of the project.

VPRC will be responsible for implementing VPRC Fund. The guidelines and rules for implementing various activities will be approved by Gram Sabha attended by at least VPRC FUND 70% of target people of which minimum 50% shall be women

All Guidelines contained in the community operational manual including financial management, procurement, social accountability shall be complied with . Release of each installment will be based on achievement of milestones as certified by the Social Audit Committee and appraised/verified by the Appraisal and Monitoring Team

Transparent rules for engaging services of book keeper, community Professionals are to be decided and approved in the Gram Sabha.

13. Each VPRC, in consultation with target beneficiaries and approval of Gram Sabha, could come up with its own additional rules, terms and conditions for usage of the fund and allocate funds based on village priorities. VPRC will take decisions on case to case basis according to the broad norms being approved by the Grama Sabha.

14. Components of VPRC Fund – the key components within VPRC fund are shown in Figure 3 below:

 The VPRC fund is divided into 3 categories namely Capacity Building Fund (CBF), Special Assistance Fund (SAF) and Youth Development Fund (YDF).

 This fund is allocated among these categories in the ratio of 40: 40: 20 respectively. However VPRC at its discretion can reallocate as per local needs.

Figure 3: Components of VPRC Fund

Capacity Building Fund ( 40%)

Special Assistance Fund ( 40%) VPRC Fund

Youth Development Fund ( 20%)

of 21  This fund will be released in 3 installments (40: 40 :20) to the VPRC based on achievement of certain milestones.

 An amount of Rs. 40000/- will be released to VPRC as “VPRC Initiation Fund” to take up the start up activities. This fund will be adjusted with VPRC first installment allocation subsequently.

15. (i) VPRC Capacity Building Fund:

 The key objective of this fund is to help the community and their institutions to acquire necessary knowledge, skills, facilities and assistance for planning, implementing and managing village poverty reduction activities.

16. Eligible Activities i. Communication activities  Habitation wise awareness campaigns may be conducted to disseminate project principles, information on different aspects of the project, on an ongoing basis  Habitation wise Disability Awareness & identification campaign may be conducted. ii. Setting up of VPRC office & its administrative Cost:

 One time maintenance/repair cost of office building, and minimum office furniture package etc.,  Stationary, electricity, local conveyance etc., hiring the services of VPRC accountant, Community Professionals like CSTs, CDFs and Supply of Books, registers etc.

iii. Creation of Youth Forums  Awareness campaigns to orient youth on VKP may be conducted.  Youth Forums for male youth and female youth each has to be formed.  Youth sub-committee of VPRC has to be constituted with the approval of Grama Sabha.

iv. Vision building and VPRC Plan  The Vision building and the VPRC planning exercises have to be conducted in a participatory manner and to be displayed for atleast 7 days in the notice board.

v. Capacity Building – Trainings and Exposure visits :  COM internalization training to all members of VPRC, SAC members, office bearers, sub committee members, Social Audit Committee members, Federation office bearers etc.,  Book keeping training to VPRC booker keeper, Treasurer, Secretary and one SAC member.  VPRC, SAC members may undertake an exposure visit to well functioning VPRCs. vi. Development of Community SHG Trainers :  Identify and develop adequate number of community SHG trainers to support the SHGs.

of 21  Periodical grading of Community SHG Trainers. vii. Mobilization and strengthening of SHGs:  Mobilising the left out eligible target people into Self Help Group (including the most vulnerable and disabled).  One time assistance for books and registers  Building the capacities of SHG members, office-bearers, and book-keepers.  Monitoring of SHGs and Grading them  Providing seed money to the eligible SHGs. Eligible SHGs means the SHGs obtained the grade “Good and Above”in the community grading process.  Assisting the SHGs to get continuous financial linkages and other required linkages.  Facilitating SHGs to get audited regularly. VPRC may decide to bear/subsidise the community-auditing fee during the initial period.  Institutional support to solidarity groups/Federations Federations viii. Mobilization and strengthening of SHG Federations :  Building the capacities of federation members, office-bearers, and book-keepers.  One time assistance for books and registers  Operational cost of PLF for initial period of 6 months from the date of release of livelihood corpus fund viii. Skill Development for non – youth members:  Assisting the individuals / Groups (not belonging to the youth category) to develop their livelihood skills.

of 21 (b) VPRC Special Assistance Fund

17. The key objective of this fund is to identify and assist the disabled and the most vulnerable in the village to get socially and economically mainstreamed. . This fund will also provide seed money as a grant to eligible SHGs.

18. Key Rules: The terms and conditions of the financial assistance under this fund which is a grant to the village will be decided by the Grama Sabha.

The Grama Sabha with at least 70% participation of target people will approve the broader framework on terms and conditions for grants, eligibility criteria, selection process, amount of assistance, etc. Within the broader framework VPRC will decide each case on its own merit.

KEY RULES for SAF Grant assistance can be extended to people who seek support for medical, aids & appliances, education and other rehabilitation expenses.

Grant assistance can also be given for livelihood development to the selected very poor disabled/vulnerable persons who do not yet have the capacity to pay back a loan and may not belong to an SHG. The shortlist of deserving individuals for grant assistance should be approved by Grama Sabha in advance.

Seed money will also be provided as a grant to eligible SHGs.

19.Eligible Activities: Support would be provided for the following eligible activities:

 Preparation of plan for disabled and most vulnerable as part of VPRC Plan based on special needs identified  Rehabilitation need assessment camps to be conducted  Grant funds for rehabilitation, treatment, and skill development of severely disabled people.  Providing seed money to the eligible disabled and tribal SHGs.  Planning for the specific livelihood activities of the disabled and most vulnerable either as groups or individuals. This business planning should show how income from the selected business would enable recipients of the one-time grants to cover their costs and earn a small profit that will enable them to mainstream to savings and loan activities within SHGs.  Livelihood assistance can be given to the vulnerable and disabled as per the terms & conditions decided by the Grama Sabha.  Livelihood Assistance may take the form of one-time grants in case of very vulnerable or severely disabled people as per the short list approved by the Grama

of 21 Sabha.will be provided to eligible individuals or to the care givers in case of severe disability including mentally challenged which hinders the disabled from being part of the group.Other vulnerability reduction measures/ schemes, as decided by the Gram Sabha.

(c) Youth Development Fund:

20. The key objective of this fund is to channelize the youth power into developmental activities; and help the unemployed youth to upgrade their traditional skills or to acquire critical skills that can lead to either self-employment or to take up other gainful employments.

[All individuals in the age group of 18 – 35 will be termed as youth]

21. VKP would like to make an intervention in the following aspects to improve the status of youth:

 institutionalizing youth force at village level  channelizing the energy of youth in constructive developmental activities  link youth to gainful employment or self-employment  assisting other youth developmental activities at Panchayat level like development of village information center, sports center, and other social activities, etc.

22. With respect to institutionalization,  VPRC will be assisted by 5 member “Youth Sub-Committee”. Youth forums will nominate these members ensuring that at least 3 members belong to target population.  VPRC will organize the youth community into 2 youth forums (1 male and 1 female).  Each VPRC will have 2 youth representatives from the target population (1 male and 1 female) as its members.  23. Fund Allocation: About 20% of VPRC fund can be earmarked for youth development. Figure 4 shows fund allocation for Youth Development Fund. This fund can be used to provide matching grant to eligible youths. The modalities, terms and conditions of usage of fund have to be made in consultation with target people and with the approval of Grama Sabha.

. Figure 4: Youth Development Fund Components

Youth Development Fund

Skill Development Fund Other Youth Development Activities Fund

of 21 a) Skill Development Fund  Assistance under skill development fund will be provided as a matching grants to the eligible youth and/or as seed funds to Youth SHGs. The quantum of grant assistance may vary from case to case on the basis of merit.  VPRC will make efforts to ensure that minimum 50% of the youth beneficiaries are women.

b) Other Youth Developmental activities  Grant assistance will be given for promoting youth developmental activities and to take up some social activities. Community Contribution is preferable for youth development activities. VPRC can decide on the community contribution while sanctioning the grant assistance.

24. Key Rules: Assistance under this component will be given by way of matching grant

Minimum 80% of the fund earmarked will benefit youth belonging to target population and minimum 80% of youth benefited should betarget youth.

The Grama Sabha with at least 70% participation of target people will KEY RULES for Youth approve the broad framework on terms and conditions for matching Development Fund grant (eligibility, mode of payment, etc.,). Within the broader framework VPRC will decide each case on its own merit.

Skills and trades for trainings/matching grants should be selected such that it will lead to gainful employment opportunities or self employment.

25. Eligible Activities: The following activities would be eligible:  Developing and updating the database related to youth.  Formation and strengthening of youth SHGs ( in addition to Capacity Building Fund)  Identifying the suitable skills and trades for the youth in the GP.  Providing assistance to undergo skill trainings.  Creating youth friendly environment to augment their talents and potentials.  Supporting productive youth activities to satisfy the prolonging village needs like education, health, sports, career guidance etc.

26. Conditions for Releasing VPRC Fund: The District Society will release the VPRC Fund in three installments based on achievement of certain milestones, after due appraisal. An Initiation Fund of Rs.40, 000 will be released before the first installment to

of 21 help VPRC undertake preparatory activities of achieving milestones for the first installment. The conditions for the release of each installment would be as follows.

27. Each installment will be released only after a. Satisfactory appraisal by the Appraisal and Monitoring Team (AMT) b. Certification of Social Audit Committee that milestones and rules have been complied with c. Approval of Grama Sabha

28. The Key Milestones for release of installments areshown as follows; An umbrella GP financing VPRC submitted agreement VPRC/SAC Participatory Bookkeepe report on signed formed and Identification of r appointed utilization of between approved in Poor List and GP initiation VPRC and completed and Gram Sabha trained. funds with District approved by and account Gram Sabha SAC’s Society opened recommenda tion.

VPRC Initiation Fund (Rs. 40000/-)

VPRC vision and plan prepared ( CB plan, Youth Addendum-1 is Development plan and signed. VPRC, sub- Special group plan, committees and Tribal Development SAC trained on Plan (if reqd) basic COM and approved by orientation and on Gram Sabha. Social Accountability.

VPRC 1st instalment (40% of VPRC Fund net of initiation fund)

of 21 At least 15% of At least 40% of target youth the identified At least 60% of either employed At least 60% of tribal, disabled, the amount or self employed new SHGs vulnerable received has been through project accessed funds received utilized and intervention. (*) assistance either progress report from project fund and Utilization and/or through certified by SAC convergence. and approved by Grama Sabha

VPRC 2nd installment (40% of VPRC Fund)

29. The following key points clarify few terms in the milestones : - New groups includes all types of groups (Women, Youth, Tribal and Disabled) formed by VPRC. - The assistance to tribal, Disabled and Vulnerable denotes 40% tribal households, 40% of disabled and vulnerable people. - Target youth means youth belonging to very poor and poor households. - Target SHG means SHG with 80% of target people representation.

30. Majority of Batch 1 VPRCs may not be able to achieve the milestone number 4 for the release of second installment. For Batch 1 VPRCs, instead of milestone number 4 above, the following milestones will be used.

- Formed youth forums - Constituted the youth sub committee and - Inducted 2 youth members into VPRC.

31. Further Batch 1 VPRCs, should prepare the plan including youth development plan immediately on receipt of 2nd installment fund. This plan will be for the total amount received as second installment and for unspent amount of first installment.At least 50% of At least 80% of target youth the identified either employed At least 80% of tribal, disabled, or self At least 80 % vulnerable employed total amount of target utilized and received through project SHGs (*) assistance either intervention progress report have been and Utilization from project linked to the fund and/or certified by banks SAC and through approved by convergence. Grama Sabha

VPRC 3rd installment (20% of VPRC Fund) Page 13 of 21 PART C LIVELIHOOD CORPUS FUND OR AMUDHA SURABI FUND

32. Objective: The objective of the Livelihood Corpus fund is to help create a community-managed source of capital which will be used to improve livelihood status of the people and will compliment capital available from member savings and loans from banks and other external sources.

33. Fund Design: Key elements of fund design would include the following; and Figure 5:

 Fund for each GP will be allocated based on number of SC/ST families in the GP.  This fund will be released as a Grant to VPRC for livelihood enhancement of the people. This will be revolving in nature and will remain as corpus in the village.  Allocated fund will be released to VPRC in 2 installments (60: 40) based on milestones.  This fund will be managed by the restructured Panchayat level SHG federation in Village Panchayat and will be used to provide loan assistance primarily to the target population.  Loans under this fund will only be given for livelihood enhancement. List of negative activities can be drawn out by the VPRC with the approval of Grama Sabha.  Minimum 80% of fund should benefit target poor and 80% of beneficiaries should be from target population. Preference should be given to the very poor, poor, disabled and vulnerable.  VPRC will monitor use of the Livelihood Corpus Fund according to the terms of a Memorandum of Agreement signed between the VPRC and the PLF.

Reconstit District On signing of Agreement uted SHG On signing of Agreement Society VPRC Federatio n

Target People 34. Reconstitution or Formation of Panchayat level SHG Federation:

of 21 a) Existing PLFs will be reconstituted to ensure o Democratic, participative, self managed institution through required orientation and capacity buildings. o Pro-poor institution with adequate representation of target people in decision making positions. o Transparency, as representatives of SHGs from all habitations form the PLF Executive Committee, and all SHG members form the PLF General Body. o Financial viability to meet all expenses and institutional capacity to provide value-added services. b) Governance Structure of Panchayat Level Federation o All types of credit rated SHGs in a Panchayat irrespective of their promoters can become members of PLF.. o The restructured PLF has at least 50% of the target households as its members. o The institutional structure of PLF will comprise Habitation level forums, Executive Committee and a General Body. . SHGs in each habitation will constitute a Habitation Level Forum (HLF) with 1 representative from every credit rated SHG. These representatives should be selected from among the office bearers of the SHG. But as a reserve arrangement one more office bearer from each member SHG will also be trained on PLF functioning. HLF will elect from the SHG representatives 2 office bearers namely Secretary and Treasurer to represent the HLF in the PLF Executive Committee (EC). . Minimum size of EC will be 11 including 1 disabled SHG member. At least 50% of EC members will be from target population . . EC will 9(s)elect 4 women SHG members as office bearers namely President, Secretary, Joint Secretary and Treasurer. GB should ensure that atleast 2 of them are target people & atleast 1 represents very poor category. . The term of PLF members and office bearers will be two years. . The same person cannot be the member of EC or office bearer for more than two terms. . While selecting new set of EC members and office bearers, the GB should ensure that not more than 50% of members are reelected. . GB should ensure that neither the office bearers of VPRC nor the members of Social Audit Committee are (s)elected as office bearers of PLF.

. Secretary& Treasurer of the PLF of which one will be from target category will be nominated as joint signatories to operate the PLF bank account. GB can ensure that both signatories are not changed at the same time. . All members of federated SHGs will constitute the General Body of PLF. . 2 additional members will be nominated by VPRC from among the habiitation representatives to attend the PLF- EC meeting where “Amudha Surabhi” fund related agenda is being discussed.

of 21 c) Financial structure and revenue model o All SHGs that become members of the PLF will contribute one time entrance fee and monthly subscription to the the federation. o Revenues for the federation will consist of interest on its lending and any other fee that the federation may decide to charge for its services.

d) Staff and Systems o Both VPRC and PLF can operate in the same office building. VPRC can bear the management expenditure like rent, electricity initially for a period of 6 months from the date of release of livelihood corpus fund . o The accounts of the PLF will be computerized in due course o PLF will engage a book keeper to maintain its accounts, including the livelihood corpus fund account. o The honorarium of the book keeper will be met as follows o For first 3 months - Training period o 4 - 6 months - VPRC will bear the cost. o After 6 months - PLF to bear.

35. Fund Use and Management:

 To receive the Livelihood Corpus Fund, the PLF General Body (GB) should resolve to adopt “Uyir Moochu” principles of VKP.

 PLF - GB will also approve the broad framework on terms and conditions for loan (mode of payment, terms of repayment, rate of interest etc., for different categories) under Livelihood Corpus Fund according to best practices. These best practices include use of full-cost-covering interest rates and repayment terms based on the cash flows of the economic activities supported. The rate of interest should not exceed 12% p.a. For external loans from other sources, PLF will decide each case on its own merit

 A separate bank account will be opened in the name of “Livelihood Corpus Fund / Amudha Surabi Fund”

 PLF – EC will prioritize, decide, release and recover the loan.

 PLF should provide reports to the VPRC in its role as guardian of project funds so that it can monitor rules and usage of the Livelihood Corpus Fund.

 Minimum 80% of fund should benefit target poor. Preference should be given to the very poor, poor, disabled and vulnerable

 The interest income on the Livelihood Corpus Fund will be used by the PLF to pay its expenses and to increase the size of the Fund. PLF may also share portion of its interest income ( as per the agreement with VPRC) with VPRC and SHGs as an incentive to monitor the repayment.

36. Implementation Process:

of 21  As part of an annual planning process, all SHGs that are members of the restructured PLF will prepare a micro credit plan. This plan will identify member’s credit needs and based on their creditworthiness and debt capacity, prioritize, approve loan limits for each member.

 This credit plan will form the basis for all external loan mobilization – from banks, PLF, and any other sources. The total amount of credit mobilized from all sources will not exceed that agreed to by the SHG in its annual credit plan.

 SHGs will submit loan applications to the PLFs through their HLF representatives. HLF will do the loan appraisal as per norms and will forward the application to the PLF along with its recommendation.

 A decision on the applications by the PLF EC will be made following receipt of recommendation from HLF. The decisions will be intimated to the concerned SHGs and also publicly displayed.

 The loans will be released to the accounts of the concerned SHGs after the completion of a loan agreement that specifies the repayment schedule, penalties in case of default. Loan agreement will also specify the individual and collective responsibility of all members belonging to concerned SHG

 PLFs will issue loans only to the individuals belonging to graded SHGs (good or above).

 Applicants can get continuous assistance with this fund on prompt repayment of previous loans. However each individual is eligible for a maximum amount of o Rs. 10000/- as maximum first time loan o Rs. 25000/- as maximum loan.

of 21  Figure 5 shows the process that would be followed to approve a loan application.

Applicant

If Sanctioned, Fund Released

If not sanctioned, Display the reasons for rejection in the SHG notice board Federatio n

Flow of application Flow of fund Loan Recovery(Principle &Interest)

37. Conditions for accessing Livelihood Corpus Fund: The District Society will release the Livelihood Corpus Fund to VPRC in two installments. The VPRC in turn will transfer the fund to the PLF/SHG federation after signing of a memorandum of understanding. The conditions for the release of each installment are shown below:

Table 7: Milestones for Release of Installments

I Installment 1. At least 80% of the left out eligible target poor households ( 60%) including tribal households, disabled and most vulnerable individuals formed into SHGs. 2. Livelihoods Resource Mapping completed and information shared with all. 3. PLF/SHG federation constituted as per VKP norms and 2 VPRC members are nominated as additional EC members of PLF. 4. All Office Bearers and book-keepers of SHGs and PLF trained on book keeping and loan tracking. 5. Rules and Guidelines of Livelihood Corpus Fund (amudha Surabhi) approved by PLF GB 6. Addendum-2 is signed between VPRC and District Society and

of 21 MoU signed between VPRC and PLF.

II Installment 1. PLF has provided VPRC with quarterly performance and (40%) financial reports and VPRC has submitted those to PFT (reports to be certified by SAC and approved by Gram Sabha ) 2. At least 60 % of new SHGs have received grade Good and above 3. At least 60% of the fund received has been disbursed as loan and Utilisation certified by SAC, approved by Grama Sabha submitted to Appraisal Team. 4. Minimum 80% of fund should benefit target poor. 5. At least 40% of the target poor including disabled, vulnerable started income generating activities/ employed. 6. Portfolio At Risk 3 months (that is, loans that have repayment installments overdue by 3 months or more) should be less than 5% 7. SHG Federation meets operational expenses from its own resources.

38. Registers to be maintained: Following are the set of registers to be maintained by VPRC & PLF.

LH Corpus VPRC Fund Fund 1. Minutes Books 2. Membership & Asset 1. Minutes Books Register 2. Receipts 3. Receipts 3. Voucher 4. Voucher 4. Cash Book 5. Cash Book & 5. General Ledger General Ledger 6. Loan Ledger 6. Loan ledger 7. Stock Register 7. Loan tracking 8. Cheque Register register 9. Beneficiary register 10. PIP register

Will be maintained Will be maintained by PLF Bookkeeper by VPRC Bookkeeper

of 21 39. Reporting Structure: Monthly Progress report including financial information

Notice Board PLF VPRC

VPRC Fund PFTs LH corpus Fund and LH Corpus Fund

40. Audit:

a. Annual Financial Audit  VPRC & Federation will be audited by auditors.  The audit report will be displayed in the notice board and also to be approved by Grama Sabha.

b. Social Audit  Both VPRC fund and Livelihood corpus fund are subject to the audit of Social Audit Committee.

C. VPRC Incentive Fund

41. The objective of this fund is to recognize those VPRCs that have successfully implemented implemented the above two funds following the “Uyir Moochu” principles of VKP, and have improved their governance; have shown downward accountability to the community members, and have taken measures that would lead to sustainability. The recognition is in the form of granting a special reward of about 10% of Village Funds. The guidelines and norms for the VPRC incentive fund will be worked out subsequently.

D. Alternate arrangements :

42. In the Village Panchayats wherein the PLF restructuring as per VKP norms is not possible, a federation of SHGs formed and affiliated by the VPRC will be constituted on the same pattern as the restructured PLF. Amudha Surabi funds will be habdled by this federation of VKP SHGs.

43. In Panchayats which a separate tribal VPRC if there is only one hamlet covering the tribal population, the HLF of the hamlet will act as manager of Livelihood Corpus meant for the tribal VPRC. In case the tribal population is spread over more than one hamlet, a federation of the tribal SHGs will be constituted to handle the livelihood corpus fund.

Annexure : 1. Appraisal Checklist 2. Umbrella Agreement 3. Addendum – 1 4. Addendum – 2 5. MoU between VPRC and PLF