-Draft- MICROFINANCE CREDIT GUARANTEE FACILITY LOAN GUARANTEE AGREEMENT. This Agreement is made on the day of 2009, at Karachi. by and between the:

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1 Annexure -I -Draft- MICROFINANCE CREDIT GUARANTEE FACILITY LOAN GUARANTEE AGREEMENT This Agreement is made on the day of 2009, at Karachi by and between the:,, a banking company/ development finance institution established and operating under the laws of the Islamic Republic of Pakistan, having its registered office at, (hereinafter referred to as the Lender which expression, where the context so requires and permits, shall include its successors-in-interest, assigns, and representatives): through Mr/ Ms., its Chief Executive/ Director/ President/Chairman, who is duly authorized in this behalf; and State Bank of Pakistan, Banking Services Corporation, a statutory corporation established by the SBP Banking Services Corporation Ordinance, 2001 and having its head office at I. I. Chundrigar Road, Karachi acting as an agent of and on behalf of the State Bank of Pakistan (hereinafter referred to as the Guarantor which expression, where the context so requires and permits, shall include its successors-in-interest, assigns, and representatives) through Mr., its Managing Director/ Director, who is duly authorized in this behalf And, microfinance bank/ microfinance institution established and operating under the laws of the Islamic Republic of Pakistan, having its registered office at, (hereinafter referred to as the Borrower which expression, where the context so requires and permits, shall include its successors-in-interest, assigns, and representatives) through Mr/ Ms., its Chief Executive/ Director/ President/Chairman, who is duly authorized in this behalf WHEREAS, in order to facilitate and promote channelization of funds from banks/development finance institutions to microfinance banks/microfinance institutions a guarantee facility namely Pakistan Microfinance Credit Guarantee Facility ( the Facility ) has been introduced by the State Bank of Pakistan. Under the Facility, it is envisaged that the Guarantor shall guarantee the Lender for its partial loss in case of its extending credit to the Borrower as per the Microfinance Credit Guarantee Facility and in accordance with the rules and regulations promulgated by State Bank of Pakistan and Guidelines as adopted for the Facility from time to time and applicable to the Lender, the Borrower and the Guarantor.

2 The Lender, Borrower and Guarantor, hereby enter into this Agreement on the following terms and conditions:. 1. The Guarantee and the Loan Agreement: (a) This Agreement shall cover only loans duly approved by Lender and by the Guarantor and is subject to the Guidelines as adopted by the State Bank/SBP BSC for the Facility; provided, however, that no Guidelines adopted after the date of this Agreement may supersede any provision of this Agreement with which it directly conflicts. The Borrower hereby represents and warrants that it meets the Selection Criteria for Microfinance Providers set under the Facility ("Selection Criteria"). The Guidelines and Selection Criteria issued by State Bank vide BPRD Circular No. 15 dated December 19, 2008, are hereby made a part of this Guarantee Agreement by reference. (b) In connection with each request submitted by Lender to the Guarantor for approval of guarantee under the Facility, the Lender shall perform such credit investigations, analysis, inquiries, reviews and other underwriting functions as Lender would customarily perform if the subject loan were not guaranteed under the Facility and Lender shall advise the Guarantor of all matters with respect to such loan which do not meet or conform to Lender's credit standards. (c) The Loan Agreement will be a separate contract between the Borrower and the Lender. (d) Approval of the Guarantor must be obtained for the Loan Agreement before issuance of the letter of guarantee. (e) The Borrower and the Lender will obtain advance written consent of the Guarantor for any changes to the terms of the Loan Agreement. 2. Lender agrees to provide a loan to Borrower as follows: (a) Purpose of loan: to maximize microfinance outreach. (b) Amount of loan: PKR. (write amount in full-form characters) (c) Repayment schedule: (d) Loan term and rate of interest: 1. The term of the loan will not exceed 5 (five) years. 2. The Interest rate charged by the Lender will be % per annum which is equivalent to SBP Policy discount rate + %. 3. Term and coverage of Guarantee: (a) The extent of risk coverage under the Facility will be restricted to 40% of the losses incurred by the Lender on the principal amount only, subject to a maximum guarantee cover of up to GBP 2.5 million (two million five hundred thousand) per borrower. (b) The guarantee cover shall commence from the date of disbursement to the Borrower of the full amount covered provided under the Facility and remain in force for the agreed tenor of the credit facility which shall not exceed five years.

3 4. General Conditions of Guarantee: (a) The guarantee will only cover the Loan referred to under section 2 above. It will not serve as a security for any new Loan or increases of the original principal amount. (b) The Borrower hereby undertakes to do his utmost to service the Loan granted by the Lender. The Borrower knows and realizes that the Facility is a development tool which makes money available as Loans on appropriate terms to under-privileged people (micro credit borrowers) and that this work can only continue if every Borrower repays faithfully the amount received from the Lender, or as in this case, repays the Loan to the Lender in order to avoid any losses to the Facility which will reduce the Facility's capability of helping other poor people. (c) This Agreement shall be governed by and construed in accordance with the laws of Pakistan. 5. Reporting Requirements: (a) Lender shall complete and forward to the Guarantor a written, quarterly status report of each Loan in the form prescribed by the Guarantor. This report shall be due within 15 (fifteen) days after the end of the reporting period specified in the report. The Guarantor shall not be obligated to provide the guaranteed percentage of the outstanding principal balance of such Loan if the Guarantor determines that the Lender's failure to provide timely and accurate status information requested in accordance herewith caused any substantial harm to the Guarantor 6. Conditions and procedures for calling on Guarantee: (a) The Lender may invoke the guarantee in respect of eligible credit facility if the following conditions are satisfied: - (i) the guarantee in respect of that credit facility is in force; (ii) the amount due and payable to the Lender in respect of the credit facility has not been paid and the dues have been classified by the Lender as Non Performing Loans ( NPLs ). NPL means a loan classified as a non-performing loan based on the instructions and guidelines issued by the State Bank of Pakistan from time to time. (iii) the loan facility has been recalled and the recovery proceedings have been initiated under due process of law; (iv) Provided that the Lender shall not make or be entitled to make any claim on the facility in respect of the said credit facility if the loss in respect of the said credit facility had occurred owing to actions / decisions taken by the Lender contrary to or in contravention of the guidelines issued under the Facility. (v) The claim shall be preferred by the Lender in such manner and within such time as may be specified by the Guarantor in this behalf. (b) The Guarantor shall pay seventy five per cent of the outstanding amounts covered under the guarantee on submission of eligible claim by the Lender, within thirty days, subject to the claim being otherwise found in order and complete in all respects. The balance twenty five per cent of the guaranteed amount will be paid on conclusion of recovery proceedings by the Lender. On a claim being paid, the Guarantor shall be discharged from all its liabilities on hereunder.

4 (c) In the event of default, the Lender shall exercise its rights, if any, to take over the assets of the Borrowers and to realize the amount, if any, from the sale of such assets or otherwise and shall pay the full amount so recovered to the Guarantor before it claims the remaining twenty five per cent of the guaranteed amount. (d) The Lender shall be liable to refund the amount of the claim released under the Facility together with service charges at the rate of 4% (four percent) above the prevailing SBP Policy Discount Rate, if such a demand is made by the Guarantor in case serious deficiencies are observed, in the opinion of the Guarantor, in the matter of appraisal / renewal / follow-up / recovery/conduct of the credit facility or where dual claims are lodged or where material information is suppressed by the Lender for the settlement of claims. The Lender shall pay such service charges, when demanded by the Guarantor, from the date of the initial release of the claim by the facility to the date of refund of the claim. 7. Subrogation of rights and recoveries on account of claims paid: (a) The Lender shall furnish to the Guarantor, the details of its efforts for recovery, realizations and such other information as may be demanded or required by the Guarantor from time to time. The Lender will hold lien on assets given as security for or created out of the credit facility extended to the Borrower, on its own behalf and on behalf of the Guarantor. The Guarantor reserves the right, but shall not be bound, to exercise any subrogation rights and that the responsibility of the recovery of dues including takeover of assets, sale of assets, etc., shall rest with the Lender as an agent of the Guarantor even after the payment of guaranteed amount by the Guarantor; (b) any amount recovered and due to be paid to the Guarantor shall be paid without delay, and if any amount due to the Guarantor remains unpaid beyond a period of 3 (three) days from the date on which it was first recovered, interest shall be payable to the Guarantor by the lending institution at the rate which is 4% (four percent) above SBP Policy Discount Rate for the period for which payment remains outstanding after the expiry of the said period of three days. 8. The Borrower does hereby indemnify and agree and undertake always to keep and hold the SBP, the Guarantor, its employees and agents indemnified and harmless from and against any and all losses, damage, liabilities, payments and obligations incurred, suffered, sustained or required to be paid by or imposed upon the Guarantor, its employees or agents in connection with or arising out of the this Agreement. IN WITNESSES WHEREOF the Parties hereto have set their respective hands hereto on the day, month and year above mentioned. For and on behalf of the Guarantor M.D. SBP, BSC. Director, DFSD Date Date

5 For and on behalf of the Borrower: Name Date Designation: For and on behalf of the Lender: Name Date Designation: Witnesses: Signature Name NIC No. Address: Signature Name NIC No. Address: *********