draft treasury & investment manual of asasah

TREASURY AND INVESTMENT MANUAL

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STANDARD OPERATING PROCEDURES

TREASURY AND INVESTMENT

A NOTE ON PRONOUNS

On occasions in this manual, ‘he’ is used for “he or she”, ‘him’ for ‘him or her’ and so forth. Whilst we try to avoid this practice it is sometimes necessary for reasons of style. No prejudice or stereotyping according to gender is assumed or intended.

Issue Date: March 15, 2011 Revision:



DOCUMENT HISTORY

Date VersionName & Designation

Issues/Comments Description of Change / Event/Activity*

* A review, approval, amendment, revision or approvals of amendments are examples of events. All events / activities shall be recorded in chronological order.




FILING INSTRUCTIONS

Updates shall be circulated from the office of ____________________________, along with the version control, whenever revision takes place. The policy holder shall:

Replace the old pages with the updated pages Discard the replaced pages Replace the previous version control history document (filed before the Table of Contents)

with the latest release

NOTE

First release “Rel.01.00, Issue: __________” has been prepared and submitted by:




LIST OF ABBREVIATIONS

Admin AdministrationAFS Available for Sale ALCO Asset and Liability CommitteeBOD Board of DirectorsCEO Chief Executive OfficerCIA Chief Internal AuditorCO Central OfficeCUSIP Committee on Uniform Securities Identification Procedures Dept. DepartmentHOD Head of DepartmentHOO Head of OperationsHT&I Head of Treasury and InvestmentHTM Held to Maturity IA Internal AuditICAP The Institute of Chartered Accountants of PakistanIP Implementation PlanJD Job DescriptionMFB Microfinance BankMFI Microfinance InstitutionsMF MicrofinanceNPO Non Profit OrganizationSECP The Securities and Exchange Commission of Pakistan SOPs Standard Operating ProceduresT&I Treasury and InvestmentTE Treasury Executive




TABLE OF CONTENTS

The Organization..............................................................................9

How to Use the Manual..................................................................11

Objective and Structure of T&I Dept...........................................15

Definitions.......................................................................................17

Role of Treasury.............................................................................22

Asset and Liability Committee......................................................26

Investment Policy Framework......................................................29

Reporting.........................................................................................34

Job Description...............................................................................37



TREASURY AND INVESTMENT - THE ORGANIZATION

ASASAHASASAH

THE ORGANIZATION

Issue Date: March15, 2011 Revision:

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TREASURY AND INVESTMENT - THE ORGANIZATION

The Organization

Asasah was formed in 2003 as a Non Profit Organization (NPO) with the objective of being a Microfinance Institution (MFI), by a group of individuals with the vision of replicating the Grameen Bank approach as its operating model. It started distributing credit in January 2003, with the objective of improving the quality of life of financially poor and socially deprived people inter-alia providing technical assistance, training and learning opportunities to women and children. It is currently registered as a company limited by Guarantee and not having share capital under section 42 of the Companies Ordinance, 1984. Asasah now acts as a catalyst for low income generating group through availing economic opportunities and liaison with financial institutions and donors.

After completing eight years; it has managed to establish twenty three branches targeting approximately 30,000 active borrowers, which has enabled it to be ranked among the top ten MSPs in the MF sector. The entire operations of Asasah are governed by the CEO in consultation with the BOD consisting of six members with diverse skills and expertise. Its CO is located in Lahore while the branch network is spread over different districts of Punjab namely Lahore, Faisalabad, Gujranwala, Kasur, Multan, Okara, Pakpattan, Vehari, Sahiwal and Khanewal.

Asasah’s present competition comes from three sub sectors namely, licensed/regulated institutions, MFI/NGO sector and informal sector. However, the key players under the licensed and MFI sectors are the direct competitors of Asasah with other being either outside the Punjab or targeting different clientele by offering other than MF products.

Although, Asasah is currently classified as an MFI, yet it has a plan of transforming itself into an MFB in the future times to come. Therefore some of the policies described in this manual cater to its transformation requirements to enable it to more smoothly in the right direction.


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TREASURY AND INVESTMENT - HOW TO USE THE MANUAL

ASASAHASASAH

HOW TO USE THE MANUAL


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How to Use the Manual

INTRODUCTION

This is a customized treasury and investment manual of Asasah prepared by Anjum Asim Shahid Rehman Chartered Accountants after defining the information requirements of the organization and is for the specific use of the organization and staff.

The manual will help to smooth the operations of Asasah by providing the management timely information for control and decision making. It will help to facilitate corrective action before things go wrong. It is intentionally written in straight and easy language that makes it user friendly and one can learn from it on his own.

OBJECTIVES

This manual seeks to achieve the following broad objectives:

Formalize policies and business rules;

Ensure maintenance of proper books and records;

Guide processing of all transactions in an efficient manner, on a uniform basis and within certain time frame; and

Ensure adherence to policies, procedures and systems applicable under the relevant statute or law.

RESPONSIBILITY FOR IMPLEMENTATION

Overall responsibility vest into BOD to establish and maintain a system of internal control, prepare and present financial statements in conformity with the approved accounting standards and the Companies Ordinance 1984. However, day to day implementation is to be carried out by the management, which in turn reports to the BOD regarding financial position and performance.

In case of any position becoming vacant, CEO or management shall make sure that an alternate arrangement is made to enable continuity of recording and reporting functions.

CLARIFICATION, UPDATING AND ADMINISTRATION

Requests for clarification or explanation of any policy shall be addressed to the HT&I of Asasah in CO.

It shall be the responsibility of HT&I to ensure that the Manual is constantly updated to meet the changing needs of the organization and governing laws. The master copy of the Manual shall be maintained by him in CO.

Requests for an amendment to the Manual can come from any source typically; they may originate from T&I Dept. or the IA Dept.


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Manual shall be presented to the BOD for its approval at the beginning. However, no subsequent amendment can be made to the Manual without the prior approval of the BOD. Once an amendment request is approved, the "new" procedure must be communicated to all the users of the Manual, together with the effective date of implementation. Holders must be instructed to extract and destroy the superseded pages of their Manual.

In the T&I Dept., superseded Manual sections must be removed from the master copy to a "superseded sections" file and the date of supersession annotated in the relevant section.

CUSTODY AND ACCESS

This manual shall remain in permanent custody of the following:

HT&I; and

CIA

Copies of the Manual must not be provided to any external party without the prior written approval of the CEO. However, access to this manual shall not be restricted from such external parties who are entitled to it in accordance with the provisions of any law for the time being in force or by virtue of performance of their duties.

The Manual is the property of Asasah and must be returned to Asasah when the concerned employee leaves the organization or is assigned to a position, which does not require the use of this manual. Unauthorized use or copying of the manual is strictly prohibited.

USING THE MANUAL

This section describes the basis to use accounting system manual effectively.

Header


TREASURY AND INVESTMENT – HOW TO USE THE MANUAL

1. Name of the Organization

2. Description of Report (Manual)

3. Name of the section

4. Nature of the Document


4

21

3

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Footer

Issue Date: March15, 2011 Revision: 11

1. Describe the date on which manual is issued and will be effective for implementation.

2. Describe the date on which the manual is revised.

3. Describe the page # of manual.


1 2 3

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TREASURY AND INVESTMENT - OBJECTIVES AND STRUCTURE OF T&I DEPT.

ASASAHASASAH

OBJECTIVES AND STRUCTURE OF T&I DEPT.


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TREASURY AND INVESTMENT - OBJECTIVES AND STRUCTURE OF T&I DEPT.

Objective and Structure of T&I Dept.

OBJECTIVES OF TREASURY AND INVESTMENT

This manual outlines detailed procedures and principles to be followed by T&I personnel during the execution of their duties. Treasury and Investment shall performs a dual function of management and investment of funds up to the satisfaction of its stakeholders by meeting international best practices prevailing across the world. In this regard, T&I Dept. shall work to achieve the following objectives:

To identify the areas where surplus funds can be invested to get optimum usage of it;

To identify the reports along with the periodical submission timelines, which are to be generated by T&I to assist management in decision making and to assist the donors in monitoring the grants provided;

To identify the responsibilities of T&I personnel in respect of respective reporting responsibilities;

To ensure that T&I personnel discharge their responsibilities in accordance with the guidelines provided in this manual; and

To ensure that delegation of duties and authorities has been properly done to facilitate personnel in performing their due roles effectively.

ORGANIZATIONAL STRUCTURE

The functional organogram of T&I Dept. in CO is presented below reflecting the reporting lines of all the related positions:


Treasury Executives (2)

Head of Treasury and Investment

Chief Executive

Officer (CEO)

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TREASURY AND INVESTMENT - DEFINITIONS

ASASAHASASAH

DEFINITIONS

1.


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Definitions

Approved Securities

Approved Securities shall mean registered Pakistan rupee obligation of Federal Government including but not restricted to Pakistan Investment Bonds (PIBs), and Market Treasury Bills (MTBs);

Available for sale

The securities which are intended to be held for indefinite period of time but may be sold in response to the need for liquidity or changes in rate.

Benchmark

A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio’s investments.

Bid

The price offered by a buyer of securities.

Contingent Liabilities

Contingent Liabilities means and includes inland letters of credit, letters of guarantee, bid bonds / performance bonds, and advance payment guarantees;

Collateral

Securities, evidence of deposit, or other property that a borrower pledges to secure repayment of a loan. It also refers to securities pledged by a bank to secure deposits of public monies.

Deposit

Deposit means the deposit of money, repayable on demand or otherwise, accepted by an MFB/MFI from the public for the purpose of providing Microfinance services;

Delivery vs. Payment

Delivery versus payment is delivery of securities to a third party with an exchange of money for the securities. The transaction is not complete until both parties provide their commitments.


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Diversification

Diversification of investment means dividing investment funds among a variety of securities offering independent returns.

Equity

Equity means and includes Paid-up Capital, Share Premium, Reserves and unappropriated profits of the MFB/MFI;

Exposure

Exposure means Microfinance facilities provided by the MFB/MFI including both fund based and non-fund based;

Held to maturity

Investments made by Asasah with the intention and ability to hold them up to maturity.

Held for trading

The securities acquired by Asasah with the intention to trade by taking advantage of short-term fluctuations in price or dealer’s margin.

KIBOR

KIBOR is the Karachi Interbank Offer Rate.

Liquidity

A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes.

Market Value

The price at which a security is trading and could presumably be purchased or sold.

Master Repurchase Agreement

A written contract covering all future transactions between the parties to repurchase agreements that establishes each party’s rights in the transactions. A master agreement shall often specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller-borrower.


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Maturity

The date upon which the principal or stated value of an investment becomes due and payable.

Nostro Account

Nostro accounts are operated in the currency of the foreign country which allows easy cash management as the currency doesn't need to be converted.

Portfolio

Portfolio refers to the collection of securities held by an investor.

Repurchase agreement (REPO)

A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security “buyer” in effect lends the “seller” money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use REPOs extensively to finance their positions.

Restricted investments/committed Grants

The funds in which Asasah acts only as manager-agent not authorized to mix his own funds with those of investors/donors without prior permission of the investors/donors.

Records

Records includes ledgers, daybooks, cash books, supporting documents and all other manual or magnetic/electronic records used in the business of the MFB/MFI;

State Bank

State Bank means State Bank of Pakistan established under The State Bank of Pakistan Act, 1956.

Safekeeping

A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank’s vaults for protection.

Spread


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This may be:

1. The difference between the bid and the ask price of a security or asset; or

2. An options position established by purchasing one option and selling another option of the same class but of a different series.

Treasury Bills

Treasury Bills are short-term government issued debt instruments whose return is determined by prevailing market rates of return.

Yield

The rate of annual income return on an investment, expressed as a percentage.


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TREASURY AND INVESTMENT – ROLE OF TREASURY

ASASAHASASAH

ROLE OF TREASURY


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Role of Treasury

INTRODUCTION

T&I Dept. has a significant role in the establishment of effective risk management framework to assess the risk ahead of time, so that appropriate remedial measures could be prompted to avoid any significant losses. In this regard it shall assume the responsibility in the following sections:

Financial Position Management;

Liquidity Risk Management; and

Market Risk Management.

ROLE OF TREASURY IN FINANCIAL POSITION MANAGEMENT

01 HT&I shall manage maturity mismatch between assets and liabilities and at the same time to remain sufficiently liquid, meet all financial commitments and obligations.

02 T&I personnel shall take pro-active measures for the mitigation of risks related to liquidity and market, including liabilities and assets rates, equity and foreign exchange.

03 Treasury Dept. shall analyze the transfer of funds to branches and arrangements for funds when required.

04 T&I Dept. shall provide a balanced and well diversified liability base to fund the various assets in the Statement of Financial Position of Asasah.

05 HT&I shall also make an analysis of major cash flows arising out of assets-liability transactions.

06 TE shall ensure that foreign exchange transactions and mismatched borrowings and lending operations are kept within manageable/mandatory limits.

07 T&I Dept. shall provide policy inputs to strategic planning of Asasah on yield expected from investments.

08 T&I Dept. shall also ensure compliance of the regulations issued by regulatory authorities (i.e. SBP, SECP etc).

ROLE OF TREASURY IN LIQUIDITY RISK MANAGEMENT

09 Asasah’s Treasury shall play an important role in establishing adequate systems and resources for effectively managing liquidity.


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10 HT&I shall be responsible to ALCO for centralized management and monitoring of Asasah’s liquidity.

11 TE shall establish strategies to improve Asasah’s responsiveness to factors that might impact on the future liquidity of Asasah.

12 HT&I shall obtain ALCO’s approval for strategies having implemented the following measures:

Adequate Investment in portfolio of liquid and tradable assets including Government Treasury Bills and Bonds;

Provide early warnings for sustaining overall Credit, Treasury and Investment portfolio in order to maintain a prudent liquidity ratio; and

Develop a liquidity contingency plan enabling Asasah to respond speedily to unexpected events.

13 TE shall use various analytical tools/ methods pertaining to Liquidity like Analysis by Instrument Type, Average Rate, Average Maturity, Maturity Ladder, and Comparison with previous performance etc.

14 Following Risk Reports shall be prepared by TE subject to the review of HT&I and the same shall be presented to the ALCO:

Gap Analysis;

Liquidity Risk and historic comparison of the Liquidity; and

Forward projection of performance for the liquidity under various scenarios.

15 TE may add any other or discontinue any of the existing methods/ tools or report based on the changing market situation and requirements of Asasah with the prior approval of HT&I.

ROLE OF TREASURY IN MARKET RISK MANAGEMENT

16 The HT&I shall be responsible to ALCO for centralized management and monitoring of risks associated with profit rate, mark-up rates, and rates of return.

17 HT&I shall present its recommendations to ALCO reflecting Asasah’s appetite for profit rate, mark-up rates, and rates of return, designed to lock in future profitability in the event of adverse rate movements.

18 TE shall recommend strategies to HT&I for pricing and structuring investment assets and liabilities.

19 Based on recommendations of HT&I, ALCO shall set in place a framework of risk management measures.


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20 Risk measurement framework shall be designed to minimize the risk of unfavorable changes in market conditions, which adversely affect the prices or return on trading and investment, with strict limits on:

Exposure;

Holding period;

Maturities; and

Maximum level of stop loss.

21 Treasury shall be empowered to manage and trade the portfolio for optimizing the return on funds invested with in the above approved limits.

22 ALCO shall monitor the procedures and strategy adopted by the treasury, and adherence to the specified limits.

23 Exposure to the risk associated with changes on foreign exchange rates shall be controlled through:

Stop loss limits;

Combination of foreign exchange position limits;

Trading limits; and

Dealer limits.

24 Exposure reports related to foreign exchange rates shall be provided by TE to HT&I on fortnightly and to ALCO on monthly basis.


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TREASURY AND INVESTMENT – ASSET AND LIABILITY COMMITTEE

ASASAHASASAH

ASSET AND LIABILITY COMMITTEE


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Asset and Liability Committee

Asasah shall have a committee comprising of the senior management to make important decisions related to the Statement of Financial Position. The committee, typically called the Asset Liability Committee (ALCO), shall meet at least once in every month to analyze, review and formulate strategy to manage the financial position of Asasah.

OBJECTIVES OF ALCO

01 ALCO shall aim at improving the asset and liability management of Asasah.

02 ALCO shall develop strategies for risk and liquidity management (long/short) and activities on foreign exchange markets.

03 ALCO shall provide broad guidelines/parameters for the following areas:

Selection of Short Term/ Long Term Securities;

Credit Risk;

Foreign Exchange Risk;

Liquidity Risk (Market Analysis);

Product Pricing;

New product proposals; and

Compliance with Asasah’s policies and regulatory requirements.

COMPOSITION AND MEETING OF ALCO

04 Following shall be the members of ALCO with their roles as defined in the table below:

Designation Role in ALCO Meeting

CEO Chairman

HT&I Secretary

HF&A Member

HOO Member

05 In every ALCO meeting, the key points of the discussion shall be minuted with the highlighted action points.

06 ALCO shall analyze the actual performance in relation to the budget and targets.


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07 ALCO shall meet on monthly basis with following agenda:

Macroeconomic Analysis of the Economy (Budget Deficit/ Balance of Trade, Inflation, Political, Economical, Social and Technical);

Overview of the Microfinance Market;

Need for appropriate Deposit Mobilization;

Provision of plan to bring all limits, in line of breach, under control;

Forecast of Capital Market;

Forecast of Foreign Currency Market;

Review of branches’ assets and liability position along with 3 months forecast;

Determination of target segments for asset growth;

Pricing of assets and liabilities;

Maturity Analysis (Aging Analysis);

Contingency planning; and

Approval of capital market limits.

08 In every scheduled meeting, action points taken in the past ALCO meeting shall be reviewed to ensure implementation.

09 The CEO and HT&I shall raise issues related to the Statement of Financial Position.

10 HT&I and HOO shall suggest the needs and policies regarding disbursements, fund raisings, deposits and investments and whether growth of deposits and advances should be on short term or longer term basis.

11 ALCO shall review the organizational cash flows in its meeting to ensure continuous monitoring and management.

12 ALCO shall appraise the liquidity position of Asasah based on the following considerations:

Present and anticipated asset quality;

Present and future earnings capacity;

Mismatch between asset and liability;

Consideration of the limits that are in breach or are in line of breach;

Historical funding requirements;

Current liquidity position;

Anticipated future funding needs;

Loans/capital ratio;

Donor dependency ratio; and


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Consideration of all regulatory issues that are under threat of non compliance.


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TREASURY AND INVESTMENT – INVESTMENT POLICY FRAMEWORK

ASASAHASASAH

INVESTMENT POLICY FRAMEWORK


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Investment Policy Framework

POLICIES

01. Investment related transactions shall be undertaken subject to the approval of BOD.

02. Investment options/avenues shall be explored keeping in view best return available subject to approval of BOD.

03. The investment portfolio shall be structured after anticipating the cash flow requirements keeping in view the sufficiency of liquidity to pay obligations as they are due.

04. Asasah shall operate its investment portfolio in a transparent manner.

05. Investments in unlisted securities shall be prohibited.

06. Security transactions shall be made on a “Delivery vs. Payment” basis to ensure that Asasah shall have the security or money, as appropriate, in hand at the conclusion of the transaction.

07. Asasah shall classify its investment portfolio into following heads:

Held to maturity;

Held for trading; and

Available for sale.

08. All securities purchased and all investment made, with the funds of Asasah, shall be properly designated as an asset of Asasah.

09. Brokers shall be approved for one-year duration by ALCO and shall be reviewed for renewal every year.

10. Asasah shall limit credit risk (the risk of loss due to the failure of the security issuer or backer) by diversifying the investment portfolio so that potential losses on individual securities shall be minimized and by limiting investments to specified credit ratings.

11. The core investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed.

12. Portfolio for investment shall be structured in such a manner so that securities mature to meet anticipated demand.

13. Investment shall be recognized at its fair value minus transaction costs that are directly attributable.


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14. HT&I and TE shall refrain from personal business activity that could conflict with the proper execution and management of the investment program.

PROCEDURES

SELECTION OF BROKERAGE HOUSE AND FINANCIAL INSTITUTIONS

01. Investment related transactions include:

Investment in Stock markets;

Investment in Mutual Funds;

Investment in Real Estate;

Investment in Government Bonds and Debt Securities; and

Investment in Financial Institutions.

02. TE shall maintain a list of security broker/dealers that are authorized and qualify the criteria under the SECP.

03. TE shall also list financial institutions consisting of banks and other depository institutions authorized to provide depository and investment services.

04. TE shall also recommend the corporate brokerage houses of good repute for trading purposes.

05. Above recommendations of TE shall be properly analyzed by HT&I as per Asasah’s criteria and treasury scheme shall be submitted to ALCO for approval if the Brokerage House and Financial Institution fulfils the criteria.

06. ALCO shall evaluate different solutions and compare them against each other by using the Alternatives Analysis to select the best alternative to meet investment objectives.

07. Alternative Analysis should not be limited to financial considerations, both qualitative factors (such as security issues) and quantitative factors (such as financial costs and timeframes) should also be analyzed.

08. Treasury scheme shall be approved with the consideration of probable safety of capital as well as the probable income to be derived from the investment.

09. Following are the limit for Capital Market Operations:

Investment in Stock Market

Total Limit PKR 3,000,000

Sector Limit 25% of total sanctioned limit of PKR 3,000,000

Individual Scrip limit 20% of total sanctioned limit of PKR 3,000,000

Stop loss limit PKR 1,000,000 (to be calculated for in above


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PKR 3,000,000 Limit)

10. Following schedule shall suggest the pattern of transactions, where choice is to be made among different periods for investments:

GAP Limits

Upto 3 Months PKR 3,000,000/-

3-6 Months PKR 2,000,000/-

6 Months to 1 Year PKR 1,000,000/-

Above 1 Year On case to case basis

11. The traders shall be given limits, with the approval of ALCO, regarding the following:

Amount to be traded in a day;

Amount to be traded of a company; and

Minimum and maximum prices

12. Where any material change in relation to financial or legal status, volumes or pricing of investee takes place, the above criteria above shall be reviewed again by HT&I. However, ALCO may cancel the name of any broker at its discretion.

PROVISION OF SUFFICIENT LIQUIDITY

13. In order to meet the liquidity perimeters, Asasah shall invest in Profit and Loss (PLS) accounts with some selected institutions.

14. To provide sufficient liquidity, at least 25% of the fund investments shall have an effective duration of one year or less.

15. Since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets.

MARKING TO MARKET

16. The market value of the portfolio shall be calculated at least on quarterly basis and a statement of the market value of the portfolio shall be issued at least on quarterly basis.

17. The measurement of surplus/deficit shall be done on portfolio basis for each of the categories separately.

18. The surplus/deficit arising as a result of revaluation of ‘Held for Trading’ securities shall be taken into Statement of Comprehensive Income.


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19. The surplus/deficit on revaluation of ‘Available for Sale’ and ‘Held to maturity’ securities shall be taken to “Surplus/Deficit on Revaluation of Securities” Account.

20. Any permanent diminution in the value of ‘Available for sale’ or ‘Held to Maturity’ securities will be provided for by charging it to the Statement of Comprehensive Income.

21. Adjusted amount and basis of measurement for the above revaluation shall be included in the report provided to ALCO during its scheduled meetings.

DISCLOSURE OF RELATIONSHIPS OF TREASURY PERSONNEL

22. In case a relationship, whether close or remote, exists between any staff member of Treasury and the broker being considered, the same must be disclosed.

23. Investment officials shall also disclose annually, in a written statement, any material interests in financial institutions with which they conduct business.

24. Non-disclosure, whether intentionally or unintentionally, shall be considered as a serious violation, and shall be subject to appropriate disciplinary action by the management.

PERFORMANCE STANDARDS

25. Minimum expected returns shall be determined for each of the categories of investments and those limits shall be treated as a benchmark prior to making any transaction in order to ensure optimum risk return trade off.

26. The investment portfolio performance shall be analyzed at the end of each quarter.

27. Portfolio performance shall be compared against a benchmark measured at the average Treasury Bills rate of the respective quarter.

28. Portfolio performance shall also be measured by comparing its actual year‐to‐date earnings to budgeted year‐to‐date earnings.

29. Benchmarks may change over time based on the portfolio’s weighted average maturity.

DISINVESTMENT CRITERIA

30. Securities shall not be sold prior to maturity with the following exceptions:

A security with declining credit risk may be sold early to minimize loss of principal;

A security swap that would improve the quality, yield, or target duration in the portfolio;

Liquidity needs of the portfolio require that the security be sold; and


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Adverse market or economic conditions.


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TREASURY AND INVESTMENT - REPORTING

ASASAHASASAH

REPORTING


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Reporting

OBJECTIVES

01 Reporting is an effective communication channel within Asasah and with external authorities and is used for the following:

To establish policies, strategies and control environment for the effective execution of tasks; and

To monitor performance of Asasah and carry out analysis against results of previous periods and targets set by the management.

02 The documents and reports generated in the T&I Dept. are regular internal reporting documents that are provided to management for the regular assessment of Asasah’s performance.

03 TE is responsible for preparation of reports relating to treasury and investment function subject to the review of HT&I.

REPORTING REQUIREMENTS

04 A formal structure of internal reporting is established in Asasah that includes monthly, quarterly and annual reports.

05 TE shall prepare reports on quarterly basis in a manner so as to depict clear and full information about the portfolio, including market pricing, adjusted book value, and yields.

06 The following quarterly reports for Held to Maturity (HTM), Held for Trading and Available for Sale (AFS) shall be prepared by TE which are to be submitted to ALCO with the prior review of HT&I:

All bond purchases;

All bond sales and net profits (losses);

Portfolio mix;

Portfolio yield;

Duration and market value risk;

Portfolio cash flow and liquidity

Market appreciation or depreciation of bond portfolio;

Investment Portfolio Strategy;

Actual Performance vs. Projected Performance; and


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Exceptions to the action plan, policy limits and timetable.

07 ALCO shall establish quarterly Investment Strategies providing the following analysis;

Current portfolio composition;

General strategy;

Portfolio duration/market value risk limits;

Desired portfolio composition;

Quality standards;

Profit and loss decisions; and

08 Specific strategies according to portfolio sector.Asasah shall exercise the same degree of care in bond portfolio transactions as it does in documenting loans or any of the other assets of Asasah. The retention of all supporting documentation shall include the following:

Description of each security purchased and reason for transaction;

Designation of portfolio segmentation i.e Held to Maturity (HTM), Held for Trading or Available for Sale (AFS);

Name of Dealer;

Trade date and settlement date;

Issuer;

Coupon/ Invoice #;

Price;

Yield;

Duration, average life and maturity date;

Par value;

Identification number (CUSIP #); and

Description of collateral, if any.


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TREASURY AND INVESTMENT – JOB DESCRIPTION

ASASAHASASAH

JOB DESCRIPTION


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Job Description

ROLE OF TREASURY AND INVESTMENT PERSONNEL

HEAD OF TREASURY AND INVESTMENT (HT&I)

The T&I Dept. is headed by the HT&I, who is assisted by TE. HT&I is responsible for strategic direction and mission adherence of Asasah. Since T&I Dept. has its significance in daily operations of organization, supervision of the treasury and investment functions and ensuring its associated support to other Depts. HT&I should have an experience of at least six years in the treasury department of financial institutions.

The main duties, powers and functions of HT&I shall be as under:

Ensure preparation of reports regarding Asasah’s progress towards its goals approved by the ALCO and BOD, including updating and making changes as required, and involving the BOD in the early stages of developing strategy;

Develop and implement annual capital commitment and detailed investment budgets that support the strategic plan for approval from the BOD;

Assist BOD in authorizing commitment of corporate resources, including contracts, transactions and arrangements in the ordinary course of business, in order to pursue the approved strategies, research plans, and objectives of Asasah, however, major commitments, exposures, and risks are reported to the Board in a regular and timely basis;

Ensure the achievement of Asasah's mission on time and within budget by monitoring the implementation of effective internal controls (Standard Operating Procedures) and also assess credibility of controls.

Assist internal and external auditor for the provision of accurate and timely information. Further it shall facilitate the funding agencies and donors in their monitoring visits and audits;

Establish effective control and coordination mechanisms for all operations and activities, and take reasonable steps to ensure the integrity of the internal control and management information systems;

Ensure that all operations and activities of Asasah are conducted in accordance with laws, regulations, Asasah’s code of business conduct and ethics, Corporate Governance, sound business practices, and the other policies and practices approved by the Board;

Ensure funding agencies reports and other information required by them is sent to them on the committed time and develop a comprehensive plan for the funding requirement of Asasah and donor funded projects;

Responsible for managing the financial and liquidity risks of the business; Ensure compliance with the International Financial Reporting Standards (IFRS) as

applicable in Pakistan, Prudential Regulations, and other directives issued by donor agencies, State Bank of Pakistan, SECP and ICAP as applicable and as practiced in microfinance sector;

Assist HF&A in the process of formulation, execution, and analysis of monthly, quarterly, biannual and annual budgets of Asasah and its projects;


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Comment on financial soundness and viability of proposed strategic partners, annual financial plans, new products initiatives and branch network expansion schedules; and

Carry out other duties as assigned by the (CEO).


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TREASURY EXECUTIVE

TE is responsible for the treasury and investment functions of Asasah and performs the jobs as assigned by the management to ensure smooth functioning of T&I Dept. TE is responsible to do treasury management and to generate the management reports as specified by management. TE should have an minimum experience of one year in the treasury department of financial institutions.

TE shall assist the HT&I in managing the treasury, investment and budgeting functions and also executes the below given responsibilities as delegated by HT&I:

Check and ensure compliance with applicable internal and external policies, limits, procedures, guidelines, rules and regulations relating to treasury functions;

Place excess funds in schemes approved by ALCO;

Implement investment decisions in Capital Market as taken by the management in the ALCO meeting;

Buy and sell foreign exchange after the approval of HT&I;

Prepare Stock Investment proposals and quarterly Market revaluation report;

Prepare Nostro accounts reconciliations and follow up of outstanding issues;

Contribute in the formulation of policies, strategies, plans, systems, procedures, checks and controls relating to T&I Dept;

Cater the reporting requirements of SECP and SBP relating to T&I Dept.;

Search and development of solutions to financial problems; and

Perform any other task assigned by HT&I.


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draft treasury & investment manual of asasah

Documents