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  • SME Banking Activities of BRAC Bank LimitedPage | 1CHAPTER - 1INTRODUCTION
  • SME Banking Activities of BRAC Bank LimitedPage | 21.0 Background of the StudyBRAC Bank Limited, with institutional shareholdings by BRAC, International FinanceCorporation (IFC) and Shorecap International, started its journey in 2001 and in just 8years proved to country‘s fastest growing bank. The Bank operates under a "doublebottom line" agenda where profit and social responsibility goes hand in hand as it strivestowards a poverty-free, enlightened Bangladesh. BRAC Bank Limited is a scheduledcommercial bank in Bangladesh. It established under the Banking Companies Act, 1991and its operation started on July 4, 2001 with a vision to be the market leader through toproviding all sorts support to people in term of promoting corporate and smallentrepreneurs and individuals all over the Bangladesh.The bank consist of major divisions named 1) Corporate banking, 2) Retail banking, 3)Treasury, 4) Small & Medium Enterprise (SME). At present the Bank operating itsbusiness by 69 branches. BRAC Bank is the first local commercial banks that provingonline banking service to its customers from the very beginning of its starts.BRAC Bank, for the first time among local commercial banks, starts providing loanfacilities to small and medium trading, manufacturing and service oriented enterprises allover the country.1.1 Rationale of the StudyAs a part of the Internship Program of Bachelor of Business Administration courserequirement, I am assigned for preparing a report on the activities that I am currentlydoing at BRAC Bank Limited (BBL) for the period of 12 weeks starting from 3thJune2012 to 30thAugust 2012 At BRAC Bank Limited (BBL), I am assigned in the SMEReconciliation Department.1.2 ObjectiveBroad objectiveHow BRAC BANK Ltd operates SME banking operation around the country though itsextensive network1. Why Market concentration and product diversification are considered the mainstrategies for expanding the SME business.
  • SME Banking Activities of BRAC Bank LimitedPage | 3Specific ObjectiveTo support the broad objectives better we have developed some specific objectives. Theseare:1. How BRAC BANK Ltd operates SME banking operation around the country thoughits extensive network What is the Structure of SME division of BBL History of BRAC Bank SME SME Product Details Operation Process of SME Loan Disbursement of BBL2. Why Market concentration and product diversification are considered the mainstrategies for expanding the SME business. Market segmentation Bases for segmenting consumer market Target consumer Target market Differentiated marketing Developing marketing mix SWOT Analysis1.3 Scope of the reportThe report has three parts. First part is the organization part where I covered brief aboutthe organization. Second part is the job part where I covered what I did in the office.Though I worked in a project of SME Reconciliation department but I also covered thereconciliation process. In the third part, this is assign by supervisor, SME Activities ofBRAC Bank Limited. In this part I covered how BRAC Bank operate SME bankingthrough its extensive network and why market concentration and product diversificationare considered the main strategies for expanding the SME business.1.4 Limitation of the studyThe study has suffered from a number of barriers – . Time is also a big constraint for this research. The topic of this report is vast incompare to time. It was difficult to communicate with the customers, as many of them wereunable to give time for interview
  • SME Banking Activities of BRAC Bank LimitedPage | 4 Data from BRAC Bank is highly confidential for the outside people and I hadno authority to use the core banking software. BBL changes its core banking software, MBS to Finacle that‘s why all theemployees are very busy with their work, sometimes I had to wait more thanone week for a piece of information. This report is prepared based on the SME Loan activities, so it doesn‘t provideinformation regarding Financial Statement and ratio analysis. Time is also a big constraint for my research. I have to submit a broader deal ina shorter form of outcome. It was difficult to communicate with the customers, as many of them wereunable to give me much time for interview. As I have taken a sample of 37 observations, there may be sampling error. I had to go under my day to day job responsibility that I was supposed to do so.So I could get few more time to spend in collecting data for preparing myinternship report.I have done a small study basing the SME Sector of BRAC Bank limited. But, BRACBank alone does not practice SME in Bangladesh. So, here is a scope of further studyregarding the other banks and their customer‘s repayment behavior. I have conducted myresearch in urban area. So, it does not focus the scenario rural area. So, here exists a scopeof study.1.5 MethodologyThe report is divided into two parts. One is the Organization part and the other is the project part.The parts are virtually separate from one another.The information for the organization part of the report was collected from secondary sources likebooks, published reports and web site of the BRAC Bank Limited ( Forgeneral concept development about the bank short interviews and discussion session were taken asprimary sources.The information for the project ―Analysis of SME loan in BRAC Bank Limited ―both werecollected from primary and secondary sources. For gathering concept of SME loan, the productprogram Guideline (PPG) thoroughly analyzed. Beside this observation, discussion with theemployee of the SME department and loan administration division the said bank was alsoconducted. More over a market survey was conducted with a specific questioner. To identify theimplementation, supervision, monitoring, and repayment practice –interview with the employeeand extensive of the existing file was and practical case observation was done.
  • SME Banking Activities of BRAC Bank LimitedPage | 5Table 1.1: Data Collection MethodData can be collected through two sources:Primary Data Raw data is a term for data collected on source which has not been subjected toprocessing or any other manipulation. (Primary data), it is also known as primarydata. It is a relative term. New data gathered to help solve the problem at hand. As compared to secondarydata which is previously gathered data. As example is information gathered by aquestionnaire. Information collected directly from the source through observation, conversation,and/or participation. The degree of reliability, validity, and precision requireddepends on how you intend to use the information. Visitor response to surveys isone example of primary data. In this report I used Interviews of Customer relationship officers (CROs) Focus group meetings Direct observationData CollectionPrimary DataSourcesDirect observation=5 monthTrainingSecondary DataOperational ManualOfficial WebsiteBanking JournalsBBL NewspaperResearch Paper
  • SME Banking Activities of BRAC Bank LimitedPage | 6Secondary Data In research, secondary data is collecting and possibly processing data by peopleother than the researcher in question. Information collected by others such as government agencies and/or nonprofits thatpertains to your area of interest. The degree of reliability, validity, and precisionsecondary data depends on how it was collected and interpreted. Census data is oneexample of secondary data. Any information collected from intermediate sources. Industry figures, databaseslibrary sources, and so forth are example of secondary data. In this report I used Operational manual Official Website Banking journals BBL newsletters Research papersAfter collecting all the data they will be coded and data will be processed analyzed andgraphically presented. Quantitative and qualitative data were collected and analyzedaccording to acceptable standards of practice. Different tables and graphs were used tomake the data meaningful and comparable. Qualitative data were analyzed rationally andin comparison with current market condition. Necessary percentages and averages werecalculated and the analyzed results were described step by step. To achieve the objectives Icollected the 37 customers before BRAC bank loan purpose and after the loan takenpurpose is used in the Questionnaire. The average Questionnaire administered time 25min. for official and 20 min. for the customer.
  • SME Banking Activities of BRAC Bank LimitedPage | 7Chapter - 2Organization Part
  • SME Banking Activities of BRAC Bank LimitedPage | 82.0 Overview of the BRAC Bank LimitedBRAC Bank Ltd, a full service commercial bank with Local and International Institutionalshareholding, is primarily drive by creating opportunities and pursuing market niches nottraditionally met by conventional banks. BRAC Bank has been striving to provide ―best-in-the-class‖ services to its diverse range of customers spread across the country under anon-line banking platform.Today, BRAC BANK Limited, one of the latest generation of commercial banks whichstarted its journey on the 4th of July 2001 with a vision to be the absolute market leaderthrough providing the entire range of banking services suitable to the needs of modern anddynamic banking business as well as to promote broad based participation in theBangladesh economy through the provision of high quality banking services. The uniquestrength of BRAC Bank lies in the fact that BRAC one of the world‘s largest privatedevelopment organization is its key shareholder and the bank‘s vision are thus alignedwith those of BRAC.The reason BRAC Bank is in business is to build a profitable and socially responsiblefinancial institution focused on markets and businesses with growth potential, therebyassisting BRAC and stakeholders build a ―just, enlightened, healthy, democratic andpoverty free Bangladesh‖. BRAC Bank fulfills the purpose by reaching for high standardsin doing everything for their customers, shareholders, associates and communities upon,which the future prosperity of their company rests.BRAC Banks envisages providing mass financing by increasing access to economicopportunities for all individuals and business in Bangladesh with a special focus oncurrently under-served enterprises across the rural-urban spectrumBRAC Bank is surviving in the large banking arena through its unique and competitiveproducts and it is the only local bank providing 100% integrated on-line banking services.BRAC Bank Limited consists of four major business divisions namely Corporate BankingDivision, Retail Banking Division, Small and Medium Enterprise (SME) and ForeignTrade & Treasury. Corporate Division provides full range of commercial banking productsand services to any potential corporate clients including multinationals, large or mediumlocal corporate, NGOs, institutional bodies.Retail Division offers a wide array of lucrative and competitive banking products to theindividual customers of the bank. Currently there are six lending products and a number ofother attractive new products will be launched shortly. It also offers different types of term
  • SME Banking Activities of BRAC Bank LimitedPage | 9deposit scheme and attractive STD & Savings deposit schemes giving interest on dailybalance.As part of the total banking solution it has introduced an innovative and one of its kindsRemittance Service under the style and name ―Secured & Easy Remittance Service‖(SERS). The aim of the program is to introduce easy and secured remittance servicewhereby people will be comfortable and secured in remitting funds without hassle anddelay. Using the countrywide network of BRAC comprising more than 1100 field officesthe SRS will ensure secured and only 24 hour lead time delivery of remittance anywherein Bangladesh.BRAC Bank Limited, hereinafter called BBL, is a first growing third generation-scheduledcommercial bank incorporated on 20thMay 1999 as a public limited company underCompanies Act, 1994 with multinational collaboration including IFC of The World BankGroup & Shore Cap. BBL started its operation on 4thJuly 2001. The main sponsor of thebank is the BRAC. The Bank is pioneer and focused on pursuing unexplored marketniches in the Small and Medium Enterprise Business, which hitherto has remained largelyuntapped. BBL believes, this sector of the economy can contribute the most to the rapidgeneration of employment in Bangladesh. BBL caters the banking services to its rapidlygrowing customers through 69 branches and 429 SME Unit Offices.International Finance CorporationThe International Finance Corporation (IFC) is a member of the World Bank Group and isheadquartered in Washington, DC. Established in 1956, IFCs mission is to promotesustainable private sector investment in developing countries, helping to reduce povertyand improve peoples lives.IFC is the largest multilateral source of loan and equity financing for private sectorprojects in the developing world. The organization promotes sustainable private sectorinvestment in developing countries that is economically beneficial, financially andcommercially sound, and environmentally and socially sustainable; as a way to reducepoverty and improve peoples lives. It is the belief of the organization that soundeconomic growth is the key to poverty reduction; that it is grounded in the development ofentrepreneurship and successful private investment; and that a business environment isneeded for the latter to thrive and contribute to improve peoples lives.International Finance Corporations (IFC) funding comes from the Asian DevelopmentBank, Canada, the European Commission, the Netherlands, Norway, the United Kingdom
  • SME Banking Activities of BRAC Bank LimitedPage | 10and IFC itself. IFC is a 19% shareholder in BRAC Bank. A new assistance program signedin August 2005 aims to double the bank‘s number of small and medium enterprise clientsin 18 months through campaigns to target women entrepreneurs and rural clients,introduce new products and train branch managers.Shore Cap InternationalShore Cap International Ltd. is an international private non-profit, equity company seekingto invest in small business banks and regulated micro finance institutions in countries withdeveloping and transitional economies. Founded in mid 2003, Shore Cap has a currentbase of $28.3 million in capital commitments and seeks to support the growth ofdevelopment finance institutions in Africa, Asia and Eastern Europe. The institution hasmade investments totaling $7 million in Bangladesh, India, Cambodia, Armenia, Mongoliaand Kenya. Shore Bank is a 9% investor of Shore Cap and runs the management company,which oversees investment activities.Shore Cap typically invests between $500,000 and $2 million for an ownership position of10-25% of a company. As a minority shareholder, Shore Cap seeks financial institutionswith a strong, experienced management team and a committed set of local development-minded investors. Shore Cap currently owns 18% of BRAC Bank Limited.Shareholding Structure0510152025303540451BRACInternational FinanceCorporationShore Cap InternationalGeneral Public through IPONon-ResidentsBangladeshi’sMutual FundsOthersFigure 2.1- Shareholders of BRAC Bank LimitedShareholders PercentBRAC 31.74%International Finance Corporation 9.50%Shore Cap International 8.75%General Public through IPO 40%Non-Residents Bangladeshi‘s 5%Mutual Funds 5%Others 0.01%Total 100%Table: 2.1- Shareholders of BRAC Bank Limited
  • SME Banking Activities of BRAC Bank LimitedPage | 112.1 BRAC Bank: At a Glance2.1.1. Name of the OrganizationBRAC Bank Limited (BBL).2.1.2. Location Head OfficeBRAC Bank Limited1 Gulshan AvenueGulshan -1Dhaka 1212Web: www.bracbank.com2.1.3 Location of Branches, SME Centers & ATMBRAC Bank Ltd is now going on with 69 Branches, 179 ATM Booths, 30 Cash DepositMachines(CDM), 1558 POS ternminals,19 Utility service bill payment booths & also 1900Remittance delivery points.2.1.4 LOGOThe logo of BRAC Bank has been prepared keeping in mind the goal of the organization.The square structure of the logo means solid and strong.The Golden Color in the lower portion of the logo means the ‗Golden Bangladesh & herfertile land‘. The Blue color in the upper portion means ‗the sky with enormous &unlimited opportunity‘. The white colored curve means ‗Growth and Progress‘. Whitecircles in the blue color mean the flashing sun that gives light to everywhere.2.1.5 GOALSBRAC Bank will be the absolute market leader in the number of loans given to small andmedium sized enterprises throughout Bangladesh. It will be a world - class organization interms of service quality and establishing relationships that help its customers to develop
  • SME Banking Activities of BRAC Bank LimitedPage | 12and grow successfully. It will be the Bank of choice both for its employees and itscustomers, the model bank in this part of the world.2.1.6 Corporate VisionBRAC Bank will be a unique organization in Bangladesh. It will be a knowledge-basedorganization where the BRAC Bank professionals will learn continuously from theircustomers and colleagues worldwide to add value. They will work as a team, stretchthemselves, innovate and break barriers to serve customers and create customer loyaltythrough a value chain of responsive and professional service delivery.Continuous improvement, problem solution, excellence in service, business prudence,efficiency and adding value will be the operative words of the organization. BRAC Bankwill serve its customers with respect and will work very hard to instill a strong customerservice culture throughout the bank. It will treat its employees with dignity and will builda company of highly qualified professionals who have integrity and believe in the Bank‘svision and who are committed to its success. BRAC Bank will be a socially responsibleinstitution that will not lend to businesses that have a detrimental impact on theenvironment and people. So BRAC Bank operates following a specific vision like:―Building a profitable and socially responsible financial institution focused on Marketsand Business with growth potential, thereby assisting BRAC and stakeholders build a"just, enlightened, healthy, democratic and poverty free Bangladesh".2.1.7 Corporate Mission• Sustained growth in ―Small and Medium Enterprise‖ Sector• Continuous low-cost deposit growth with controlled growth in retail assets.• Corporate assets to be funded through self-liability mobilization. Growth in assetsthrough syndications and investment in faster growing sectors• Continuous endeavor to increase non-funded income• Keep our debt charges at 2% to minimum a steady profitable growth• Achieve efficient synergies between the Bank‘s branches. SME unit offices andBRAC field offices for delivery of remittance and Bank‘s other product andservices• Manage various lines of business in a fully controlled environment with nocompromise on service quality• Keep a diverse, far flung team fully motivated and driven towards materializing theBank‘s vision into reality
  • SME Banking Activities of BRAC Bank LimitedPage | 132.1.8 Core Values• Value the fact that one is member of the BRAC family• Creating an honest, open and enabling environment• Have a strong customer focus and build relationships based on integrity, superiorservice and mutual benefit• Strive for profit and sound growth• Work as team to serve the best interest of our owners• Relentless in pursuit of business innovation and improvement• Value and respect people and make decisions based on merit• Base recognition and reward on performance• Responsible, trustworthy and law-abiding in all that we do2.1.9 Achievements Fastest growing bank: BRAC Bank has been the fastest growing Bank in 2004and 2007. It is one of the local private commercial bank that set the standard ofbanking for the leader bank of Bangladesh banking industry. Leader in SME financing through 429 SME unit offices: The idea of SME unitare become very popular to the BRAC bank customer. In the last six years ofoperation, the Bank has disbursed over BDT 7500 corer in loans to nearly2,00,0,000 small and medium entrepreneurs. Biggest suit of personal banking & SME products: BRAC Bank has variety ofproducts for their customer in Branch and also in SME office. Large ATMs (Automated Teller Machine) & POS (Point of Sales) network.Now BRAC Bank has 112 ATM Machine all over the country2.1.10 Performance and Investment Impact Four-fold growth in size and earnings in three years. Loans outstanding grew by 87% during 2007 and total deposits increased by 51%to US$200m. SME lending of US$81.7m to nearly 15,000 SME customers in 2007. Growing retail market presence with 125,000 account holders and 60,000 cashcards in circulation. The bank now has a total of 2500 full-time staff (475 in 2003).
  • SME Banking Activities of BRAC Bank LimitedPage | 14 BRAC Bank customer surveys reveal that an estimated 18,000 new jobs have beencreated thanks to SME loans helping business expansion.2.1.11 Corporate Chronicle and information• Registered office: 1, Gulshan Avenue, Gulshan 1, Dhaka-1212• Company registered number: C – 37782(2082) of 1999• Inaugurantion of Bankign operation: 4thJuly 2001• First SME unit office: 1stJanuary 2002• Signing with Shorecap as investor: 29thDecember 2003• Signign with IFC as investor: 8thMay 2004• First ATM installed: 3rdApril 2005• Preferential share issued: 31stJanuary 2006• Signing with Infosys and 3i Infotech for changing Bank‘s IT platform: 1stAugust2006• 24x7 Phone banking opening: 9thSeptember 2006• Intial public offering of shares held in 2006• Listing with CSE: 24thJanuary 2007• Listing with DSE: 28thJanuary 2007• Commencent of share trading in DSE and CSE: 31stJanuary 2007• Credit card Launching: February 06, 2007• 2500 remittance deliver point Gulshan-1, Dhaka-1212• Introduced probashi Banking: April 14, 2007• Launching of travel related services (TRS); November 20, 2007• AuditorS.F Ahmed & CoChartered Accountants• Legal AdvisorLaw valley, shajan Tower, Commercial Block• Tax AdvisorDelwar Hossain & Associates• 50thBranch: Bashundhara, H- 193, Block B, Safwan Road, Bashundhara R/A• 100thATM: Alliance Franciase, 26 Mirpur Road
  • SME Banking Activities of BRAC Bank LimitedPage | 152.2 Shareholding Structure2.3 Corporate Information Registered Office: 1, Gulshan Avenue, Gulshan-1, Dhaka-1212 Company registration Number: C-37782(2082) of 1999 Inauguration of Banking Operations: 4th July 2001 First SME Unit Office: 1st January2002 Signing with Shore Cap as investor: 29th December 2003 Signing with IFC as investor: 8th May 2004 First ATM installed: 3rd April 2005 Preferential share issued: 31st January 2006 Listing with CSE: 24th January 2007 Listing with DSE: 28th January 2007 Commencement of share trading in DSE and CSE: 31st January 2007 Auditor – S.F Ahmed & Co (Chartered Accountants, House # 25, Road # 13A,Block # D, Banani, Dhaka-1213. Legal Advisor, Law Valley, Shajan Tower, Commercial Block, Suit-202 (FirstFloor). 4 Shegun Bagicha, Dhaka-1000.2.4 Organizational StructureBoards of directors are the sole authority to take decision about the affairs of the business.Now there are 5 directors in the management of the bank. All the directors have goodacademic background and have huge experience in business. The board of directors holdsmeetings on a regular basis. The current management teams and board of directors‘ nameare given in the following table:
  • SME Banking Activities of BRAC Bank LimitedPage | 162.4.1 Board of Directors:2.5 Management Team:
  • SME Banking Activities of BRAC Bank LimitedPage | 172.6 Hierarchy2.7 Products and Services2.7.1 SME BankingBRAC Bank, being the youngest bank, took a step to break away from usual tradition andtapped into the true suburb entrepreneurial initiatives.Today, with over 10,000 crores of loans disbursed till date, BRAC Bank is country‘slargest SME financier that has made more than 265,000 dreams come true! If you have adream on which you trust, let us make it true together.
  • SME Banking Activities of BRAC Bank LimitedPage | 182.7.2 Loan ProductsDeposit ProductsPrapti Current Account2.7.3 Retail BankingWith over 100 outlets, 300 ATMs and over 500,000 plastics in the market, BRAC Bankoffers a wide range of financial solutions to meet everyday need.Be it home loan, car loan, or simply a quick loan.Deposit Products
  • SME Banking Activities of BRAC Bank LimitedPage | 19CardsNon-Stop BankingNonstop banking from 10 a.m. to 8 p.m.Online banking facility in all of the sectionsUp to 5 p.m. for the fixed branchesMore Information2.7.4 Wholesale BankingBRAC Bank offers a full array of Financial Services to Corporations and Institutions.Having access to the deepest end of the country, BRAC Bank is there to assist businessesin Bangladesh. With us on your side, you have the power of local knowledge with thecapabilities of global standard.
  • SME Banking Activities of BRAC Bank LimitedPage | 202.7.5 Probashi BankingWhen you send your hard-earned money from abroad to dear ones at the farthest end ofBangladesh, ask them to collect it from over 3,500 pay out locations of BRAC Bank.Every month, Probashi Banking executes around 150,000 transactions; which has madeBRAC Bank one of the largest players among private commercial banks in channelizinginward remittance in the country.And with ELDORADO, now you can withdraw money from any of the Eldorado memberbanks in addition to BRAC Bank outlets - thats too, instantly!
  • SME Banking Activities of BRAC Bank LimitedPage | 21Chapter - 3Departments of BRAC Bank Limited
  • SME Banking Activities of BRAC Bank LimitedPage | 223.0 Departments of BRAC Bank LimitedIf the jobs are not organized considering their inter relationship and are not allocated in aparticular department it would be very difficult to control the system effectively. If thedepartmentalization is not fitted for the particular works there would be haphazardsituation and the performance of a particular department would not be measured. BracBank Limited does these works very well. Departments are as follows— Human Resource Department Financial Administration department Asset Operations Department Credit Division SME divisions Inter Control and Compliance Department Impaired Asset Management Probashi Banking Operations Treasury Front Treasury Back General Infrastructure Services IT Customer Service Delivery Cards Division Phone Banking Cash Management Payment Service Loan Administration DepartmentA. CORPORATE BANKING DIVISION:Corporate Division provides full range of commercial banking products and services toany potential corporate clients including multinationals, large or medium local corporate,NGOs, institutional bodies.The Corporate Banking Division has a centralized structure through on-line bankingsystem. Any credit facility is processed at the Corporate Banking Division, Head office.After sanctioning of the facility, the limit is put on line and the customer can enjoy thefacility from any of the BRAC Bank branches. Strict adherence to internal control
  • SME Banking Activities of BRAC Bank LimitedPage | 23guidelines and other legal and statutory compliance are followed. The Credit approvalprocess involves separate Credit Division, the Managing Director and finally the Board.Other departments like Foreign Trade, Treasury, and Credit Administration etc. play thesupport role for a comprehensive range of service to the Corporate Banking Division.B. RETAIL BANKING DIVISIONRetail Division offers a wide array of lucrative and competitive banking products to theindividual customers of the bank. Currently there are six lending products and a number ofother attractive new products will be launched shortly. It also offers different types of termdeposit scheme and attractive STD & Savings deposit schemes giving interest on dailybalance.C. SMALL AND MEDIUM ENTERPRISE (SME)SME is an additional and specialized horizon of the bank which serves the bank‘s specialfocus in promoting broad based participation by catering to the small and mediumentrepreneur. The network of SME has already been established throughout Bangladesh.The SME market in Bangladesh is large. BRAC Bank is the absolute market leader in thenumber of loans given to small & medium enterprises throughout Bangladesh. The Bankdisburses almost BDT 700crore of their loan to the SME unit. SME unit is dealing withsmall scale loan which is known as "ANONNO".D. FOREIGN TRADE & TREASURYTreasury Division is one of the major divisions of BRAC Bank. Treasury Division dealswith money market. All treasury related products are processed in conformity with theBanks Operational, Trading, Money market, Overnight, Term placing, Deal settlement,Commercial position keeping, Treasury, Credit, Finance & other applicable policies.Treasury Operations calculates investment figure, prepares the auction application,forwards the application to Bangladesh Bank for Bid and Treasury Operations maintainsand reconciles all accounts with foreign and local banks.The main wings of Brac Bank are described broadly below.
  • SME Banking Activities of BRAC Bank LimitedPage | 243.1. A: CORPORATE BANKINGThe Corporate Banking Division provides full range of commercial banking products andservices. Other Departments such as Foreign Trade, Treasury, and Credit Administrationetc. plays the support role for a comprehensive range of service to the Corporate BankingDivision.Why Corporate Banking: Quality of service Value of innovative solutions Level of trust with clients Market knowledgeThrough the corporate banking clients have access to a wide range of financial servicesincluding: Debt capital Equity capital Ongoing relation support Financial markets3.1. A.1 VALUES Services to customers Quality in everything we do Competitiveness and a will to win Growth and development of our people Continuous productivity improvement Professionalism and ethics in all our actions Growing profit for our stakeholders3.1. A.2 BUSINESS CONCENTRATION (AREA WISE)In line with our corporate strategy initially we will concentrate our business focus to thefollowing locations:Dhaka ChittagongMotijheel AgrabadNawabpur and old parts of Dhaka City KhatunganjGulshanDhanmondi
  • SME Banking Activities of BRAC Bank LimitedPage | 25UttaraKawran Bazar3.1. A.3 TARGET MARKET Pharmaceuticals, toiletries, chemicals and pesticides Power Generation, oil exploration, industrial and household gases (LiquidPetroleum Gases etc.) Edible Oil. Bulk Trading – Essential Commodities, Industrial Raw Materials, AgriculturalInputs Cement Garments, Textiles and related backward linkages industries including spinning,knitting, yarn, garments accessories etc. Food Processing and Beverage Industries Cable and Cable wire Information Technology Leasing Companies / Non Banking Financial Institutions Health Service Industry Non Governmental Organization (N.G.O) and other International DevelopmentOrganizations Importers/dealers of machinery, industrial, electrical equipment Educational Institutions Bone china, ceramics, melamine, plastic products Manufacturing and Trading of Consumer Durables. Telecommunication Ship Breaking, Re-rolling, Corrugated Iron (CI) Sheet Mfg. and related business Air Lines, Shipping Lines, Freight Forwarders, Testing and Inspection agencies Footwear and Leather Tobacco Products Tea3.1. A. 4 TARGET CUSTOMER GROUP Leading Domestic Corporate and Trading Houses Local medium and large Corporate
  • SME Banking Activities of BRAC Bank LimitedPage | 26 MNCs NGOs Educational Institutions3.1. A.5 PRODUCT/SERVICE OBJECTIVESThe Corporate Banking Group would try to serve the financial market of the country withthe following objectives as: To develop and sustain mutually beneficial customer relationships based on highquality service and innovative products. Maintaining a diverse and quality asset base and pursue a sustainable growthstrategy. To provide and deliver services in a cost-effective manner.3.1. A.6 CORPORATE PRODUCT Cash managementBRAC Banks National Collection Services (NCS) is designed to assist corporate withnationwide collection requirements by providing faster funds availability in a cost-effective manner.3.1. A.7 COMMERCIAL BANKING UNITThis is another wing of corporate banking division dealing with all the corporate productsincluding non funded facilities to medium size enterprises where the requirement rangevaries from BDT3.00 million to BDT20.00 million. We are catering financial services to
  • SME Banking Activities of BRAC Bank LimitedPage | 27manufacturing , trading as well as to the service industry irrespective of proprietorship,limited company or non government organizations from Dhaka and Chittagong right at themoment with a view to serve other metropolitan cities of Bangladesh very soon.It started operation one and half years back and right at the moment dealing with morethan one hundred customers with total outstanding of BDT700.00 million includingBDT200.00 million as non funded facilities. Our customers are less structured thancorporate customers and more formal than the small enterprises customers, which is alsoreflected in the loan pricing.Since most of the target customers of commercial banking unit are having bankingrelationship with other institutions they are very much rate and quality sensitive. Keepingthis in mind we are trying to develop a strong market presence within next two years tosupport BRAC Bank‘s objective.3.1. B: RETAIL BANKINGDivisionRetail Division offers a wide array of lucrative and competitive banking products to theindividual customers of the bank. Currently there are six lending products and a number ofother attractive new products will be launched shortly. It also offers different types of termdeposit scheme and attractive STD & Savings deposit schemes giving interest on dailybalance. Retail Banking Division has the following departments: Alternative Delivery Channel Business Intelligence and Service Quality Cards Department Cross Selling Distribution Liability Value Center Non Funded Business Premium Banking Secured Value Center Unsecured Value Center3.1. B.1 ALTERNATIVE DELIVERY CHANNELBRAC Bank‘s developments in alternative delivery channels are relatively new, reflectingdevelopments in, and the diffusion of, new information and communications technology.
  • SME Banking Activities of BRAC Bank LimitedPage | 28The focus of BRAC Bank‘s channels has, to date, been mainly on service providingactivity. Alternative channels provide a means for clients to obtain service and informationvia such means as: ATM (Automated Teller Machine) CDM ( Cash Deposit Machine) POS (Point of Sale)The main driver of the introduction of alternative channels was, initially, the desire towiden the range of customer services available. Alternative channels were seen as a meansof adding to the frontline services and complementing face-to-face contact. Now BRACBank Ltd. funding significantly and created a new focus on efficiency and cost is saving.Developing the use of alternative channels is now seen as an important strategy fordelivering significant savings for BRAC Bank Ltd. BRAC Bank Ltd. plans to invest intothe development of alternative channels where efficiency savings can be realized. So far,the take-up of the current alternative channels by clients has been low.3.1. B.2 BUSINESS INTELLIGENCE UNIT (BIU)The concept of BIU in the banking sector of Bangladesh is relatively new. The mainfunction of BIU is best described as to perform periodical analysis and on-demandanalytical reporting tasks related to Retail Business to ensure that report is provided to theTop Management for effective performance at all times. Generating On-demand reports isa regular exercise for BIU for different Channels and Value Centers. People mightcorrelate MIS with BIU but the major difference is that BIU thrives on the reportscirculated by MIS, which are scrutinized to find out any gap between the target andachievement. It has also taken initiatives to do market analysis to understand the markettrend and competitor‘s position. As stated later BIU is also producingdaily/weekly/monthly reports for the Top Management.3.1. B.3 SERVICE QUALITYService quality essentially deals with customer queries, interacting with aggrievedcustomers, conducting frontline staff service quality assessments with regular reviews,developing materials and methods to augment frontline staff‘s efficiency and standard,providing operational aid to branches to ensure uninterrupted service etc. This unit alsoprovides training sessions to the OCCS and CSO periodically. Training sessions likeWorld Class Customer Service (WCCS) are conducted under this unit in a regular basis.
  • SME Banking Activities of BRAC Bank LimitedPage | 29At the same time to enhance the importance of standard quality service SQ launchescampaigns at different time. Providing streamlined solutions to customer serviceproblems, Investigate service-related complaints, Collect, report and apply serviceintelligence to improve capabilities, Assist in coordination of all wide-scale serviceenhancement projects based on the service complaints, Monitor every Service Enquiry isanswered properly within scheduled time frame And also monitor Enquiry Handlingactivity to make it a standard in service industry.3.1. B.4 CARDS DEPARTMENT3.1 B.4.i Credit CardCredit card is a completely unsecured loan facility for the customers. Through a creditcard a customer uses bank‘s money. One who wants to have it- need to show no guaranteeor something like that.He may use it for purchasing, bills payment etc. purposes withouthaving any cash deposit in bank or even in his pocket. He is allowed to do this against anapproved credit limit set up by the issuer organization. Non-a/c holders can also get theCredit Cards.3.1. B.4. ii ATMATM stands for ―Automated Teller Machine.‖ ATM card is a plastic card to be used inATM machine with some electronically encoded data on the magnetic stripe in it. This isprobably the most popular form of Plastic Money, which is totally machine-basedtechnology. ATM card is used to withdraw, deposit, balance inquiry, account transfer, billspayment, account statement checking etc. ATM card works through PersonalIdentification Number (PIN) pad facility.Customers are given PIN numbers (usually 4 digits), which is totally secured. Every timehe wants to use his ATM card he needs this PIN to use.3.1 B.4. iii VISA Debit CardDebit Card means – the uses of one‘s own money through an electronically encoded cardfrom his pre-deposited account. It works against available money in the account. Withouthaving any money in the specific account-no transaction can take place through DebitCard. Every Debit Card can be used both in ATM and Point-of-Sale (POS) terminals.VISA is a very renowned Debit Card facility providing organization in the world. VISADebit Card means-any Debit Card using VISA logo in it.
  • SME Banking Activities of BRAC Bank LimitedPage | 303.1. B.5 CROSS SELLINGThe vision of cross selling is to ensure the retention of the existing client by increasing thenumber of products own by each client. In other terms cross selling will be working withthe objective that a client will own a product portfolio rather than a single product. It willenable to restrain the competition from snatching the client away.Now the advantage that the competitors are taking is that they are offering an increasedbenefit on one single attributes of the product like .25% increased interest rate, timeflexibility etc. and taking the clients away as most of the clients do not any otherinvolvement. But if the clients own a portfolio it will be difficult for the competitors tooffer the entire product portfolio as they do not have the entire range and at the same timeeven they have the entire product line it will be difficult for them to offer an increasedbenefit for all the products.So cross selling would primarily work a sales channel for the retail banking division andwould deal the existing and upcoming client database. By devising interactive softwareinformation regarding the clientele will be collected and basing on that informationTelesales would initiate the selling process and would be closed by the direct sales team.As long as the required software which is named as Business intelligence Tool (B I Tool)is not ready to be operated information regarding the existing clients would be generatedmanually basing on various assumptions with the help of Business Solution Department.With that information the team would carry on its operation.Cross selling will also deal the references created from the existing client and referencesprovided by the other sources at the same time. It will collect secondary databases fromvarious organizations. So along with dealing the existing clients of the bank it will alsodeal the fresh potential clients.Cross selling team of BRAC Bank is first of its kind in the Bangladeshi banking industry.No other bank so far has introduced the concept of cross selling as such BRAC Bank did.Though it is a common practice of the individuals in the entire industry to cross sell but itis neither a team effort nor backed up the organization of that individual.3.1. B.6 RETAIL DISTRIBUTIONRetail Distribution under Retail Banking has further strengthened its position as a majorchannel of business by stretching its horizon both in richness and richness. The thoughtfuldistribution of branches helped the Distribution team to offer total banking solutions andservices through its online facilities to the customers. BRAC Bank at present has a total of36-branch network in the country. Retail Distribution is responsible for carrying out all
  • SME Banking Activities of BRAC Bank LimitedPage | 31branch activities of the bank. It has been created to serve the acquired customers. Themain task of Distribution is to oversee that branches are performing their duties properlyand carrying out the day-to-day activities of the bank properly and efficiently and at thesame time increasing both asset & liability portfolio Of many deliverables, RetailDistribution concentrates mostly to ensure ‗service excellence‘ which is by adding delightacross all touch-points to make massive contribution towards profitability.3.1. B.7 LIABILITY VALUE CENTERLVC, the most vital wing of Retail Banking Division, is the department that is the ownerof all the retail liability products, assuming ―innovation‖ as the key factor. LVC‘sresponsibility is to create, analyze, and modify all its liability products to ensure growth ofliability portfolio, both in number of customers as well as in deposit volume. In detail,LVC is heavily involved in the following activities, but not limited to: Doing innovation and development of Liability Product based on the best marketpractice. Adding muscles (innovative and stronger features) to existing products to increasesales and volume. Taking necessary actions regarding products that are not producing expected salesor volume. To do so as mentioned in no. 3, the VC takes on many campaigns, comes up withspecial offers, and also encourages and motivates every single touch point, such asbranches, sales centers, etc. to work in a concerted fashion to boost theperformance of a product. LVC is also involved in selling through the Direct Sales Teams across the country . It ensures business through Direct Sales, Cross Sales, Premium Banking, and alsoBranches. LVC also conducts regular market study to attain the competitive advantage in themarket. It looks for the untapped opportunities in the market as well as the scopefor improvements in the product features based on market practice to ensure itsproducts‘ competitiveness in the market.3.1. C: SMALL & MEDIUM ENTERPRISE BANKING DIVISIONSME Banking Division is a business division of BRAC Bank Limited that deals withSmall and Medium sized Entrepreneurs involved in different types of business. SMEbanking division primarily provides loans to small and medium sized trading,
  • SME Banking Activities of BRAC Bank LimitedPage | 32manufacturing, service, agriculture, non-farm activities and agro-based industries locatedacross the country.DistributionAt present SME Banking Division has a reach in all 64 districts of the country through 427unit offices. The functional designation of the loan officers who operate at the unitoffices is Customer Relations Officers (CROs).A zone is comprised of 1-6 unit offices, where the person in-charge of the zone is knownas a Zonal Manager. The reporting manager of a CRO is the Zonal Manager (ZM) orAssociate Relationship Manager (ARM). Zonal Managers/ Associate RelationshipManagers have the authority to approve a loan up to BDT 6 lac. There are 137 Zonaloffices in SME Banking at present. A Territory is comprised of 6-12 zones. There are 14territories at present. The reporting of a Zonal Manager is the Territory Manager. TheAssociate Relationship Managers however eport to the Portfolio Managers.UNITS OF SME BANKING DIVISIONThere are 7 business wings in SME Banking Division.1. General Business Unit2. Women Entrepreneur Cell (WEC)3. Large Business Unit (LBU)4. Manufacturing Business Unit (MBU)5. Supplier & Distributor Finance Unit (SDF)6. Commercial Credit Unit (CCU)7. Vehicle Financing Unit3.1 C.1 GENERAL BUSINESS UNITThis largest business unit of SME Banking Division has long been providing loans toSME entrepreneurs. Regular business wing offers varying products. SME entrepreneursmostly require small finance that this business unit has successfully been offering to alllevel of SME borrowers irrespective of business type. In addition to Small finance thisbusiness unit is also offering finance to medium entrepreneurs.3.1. C.2 WOMEN ENTREPRENEUR CELL (WEC)Women Entrepreneurs Cell (WEC), one of its kinds in the banking industry ofBangladesh, was launched in 2006 under SME Banking Division with an objective to offer
  • SME Banking Activities of BRAC Bank LimitedPage | 33access to formal finance along with training and technical assistance to the womenentrepreneurs across the country.3.1. C.3 LARGE BUSINESS UNIT (LBU)Large Business Cell started its journey from February 2007. The objective for this unit isto increase the average ticket size of the overall SME portfolio and also to tap theunexplored market.3.1. C.4 MANUFACTURING BUSINESS UNIT (MBU)The Manufacturing Business Unit was launched in August 2007 under SME BankingDivision. The objective of launching this unit is to better serve the manufacturing sectorby providing sector-focused loan & other services.3.1. C.5 SUPPLIER & DISTRIBUTOR FINANCE UNIT (SDF)Supplier & Distributor Finance Unit was launched in September 2007 to engine thegrowth of inkage industry, an indispensable sector for any industry.3.1. C.6 COMMERCIAL CREDIT UNIT (CCU)The Commercial Credit Unit (CCU) was launched in October 2007 with the objective ofproviding financial services in the Trade Finance sector with pre & post import facilities.3.1. C.7 VEHICLE FINANCING UNITThis newly formed business unit of SME Banking is aimed at financing the commercialvehicles of SMEs. This unit will operate in some selected areas of the country. In additionto the 7 business units there are 2 mor units in SME Banking Division.3.1. C.8 PRODUCT DEVELOPMENT & RESEARCH UNITThis unit primarily asses the market and observe the potential of developing product orservice to cater different requirements of the existing/potential customers of SMEBanking. Product Development wing also develop campaigns and takes initiative to designmerchandises, with the help of the creative and communication division.3.1. C.9 SME OPERATIONAL RISK MANAGEMENT UNITThis unit comprised of several wings one of which is Recovery & Compliance Reporting,a wing that collects overdue from default clients of SME Banking, follow up litigationagainst the default clients and ensure compliance of internal policies & Bangladesh Bankregulations to the unit offices. Another wing named Coordination maintains liaison of
  • SME Banking Activities of BRAC Bank LimitedPage | 34SME Head office with SME unit offices & other departments. Loan Collection & LegalAffairs wing provides legal assistance & knowledge to personnel at SME unit offices.Monitoring unit reviews prevailing processes of ME Banking Division & ensuresmeticulous business reporting for smooth operation.3.1. C.10 SME PRODUCTSSME is an additional and specialized horizon of the bank which serves the bank‘s specialfocus in promoting broad based participation by catering to the small and mediumentrepreneur. The network of SME has already been established throughout Bangladesh.The SME market in Bangladesh is large. BRAC Bank is the absolute market leader in thenumber of loans given to small & medium enterprises throughout Bangladesh. The Bankdisburses almost BDT 700crore of their loan to the SME unit. SME unit is dealing withsmall scale loan which is known as ANONNO"
  • SME Banking Activities of BRAC Bank LimitedPage | 35Chapter - 4PRODUCTS AND SERVICES
  • SME Banking Activities of BRAC Bank LimitedPage | 364.1 Products and Services Deposit product Loan product Card product4.1. A. DEPOSIT PRODUCTDeposit AccountDifferent Types of account4.1. A.1 Current AccountAn absolute transactional account through which a customer can transact any amount. Thisis a Cheque bearing account normally no interest paid, no bar on deposit and withdraw andit has easy access to other deposit and loan facilities. This account is normally operated byBusinessman.
  • SME Banking Activities of BRAC Bank LimitedPage | 374.1. A.2. Savings AccountType of transactional account through which a customer can transact on a daily basis.Special features of this account include: Limitation on transaction & Size of transaction,large withdrawal require prior notice, Cheque bearing account, Interest paid on savingrate, Access to their deposit facilities and loan facilities except overdraft facility.
  • SME Banking Activities of BRAC Bank LimitedPage | 384.1. A.3. Short term Deposit accountAn absolute transactional account through which a customer can transact any amount withprior notice. Special features of this account include: Normally operated by businesseswith less transaction and individual, more like current account, Interest paid, No bar ondeposit & withdrawal, Access to other deposit facilities and loan facilities, Bar may beimposed on balance maintenance.4.1. A.4. Term Deposit AccountA type of non transactional Account and the amount payable after maturity only. Specialfeatures of this account include: Amount can be fixed by both business & individual withpermission from bank, Interest paid is comparatively higher than TA.No access to other deposit facilities and loan facilities, Term Deposit receipts are givenfrom ank, Example 1/3/6 month Fixed Deposit ½ year fixed deposit, DPS etc.
  • SME Banking Activities of BRAC Bank LimitedPage | 394.1. A.5. Foreign Currency accountA type of Transactional accounts both national & foreigners can open. Special features ofthis account include: Rational require for opening such accounts (Business, Remittance,Foreign income), Special documentation require, Only authorized dealer (AD) branchescan open, Can be interest bearing / noninterest bearing ,Maintained as per foreignExchange guideline of Bangladesh Bank.Broad ClassificationDifferent Types of account
  • SME Banking Activities of BRAC Bank LimitedPage | 40Account Type: Transaction Baseda. Transactional A/Cb. Non Transactional A/CTransactional AccountTransactional account helps the customer to perform his/her daily transaction with depositand withdrawals. A customer is benefited with the interest payment by the bank andreceives cheque books and also can avail loan facilities that the bank offers.Non Transactional accounts are accounts created specially the transactions of thetransactional accounts.1. Office Accounts2. Term Deposit AccountsTransactional AccountsTransactionBasic Features:Currency Currency Based1. Local Currency A/C2. Foreign Currency A/C3. Convertible A/C
  • SME Banking Activities of BRAC Bank LimitedPage | 414.1. B. LOAN PRODUCTSSecured Value CenterSecured Value Center is a part of Retail Banking that oversees all the secured assetproducts of the bank. Currently there are mainly five secured products that are beingoffered by the bank and these are follows:a. Auto Loanb. Secured Loanc. Secured Overdraftd. Home LoanUnsecured Value CenterUnsecured Value Center (UVC) is the owner of all the Unsecured Products of BRACBank .The main purpose of this Center is to monitor, evaluate and boost business of UVC.It is also involved in market study, New Product Development, PPG amendment,maintaining extensive MIS and does everything for betterment of the business. UVC dotheir business through all the channels, i.e. Direct Sales, Distribution, PB and Cross
  • SME Banking Activities of BRAC Bank LimitedPage | 42Selling. Out these channels, Direct Sales is directly attached with the UVC. The mainactivity of the Value Center is to operate smooth business through the all the channels withvalue added.4.1. C. CARD PRODUCTSVISA Debit Card is three types: VISA Debit VISA Electron Δ VISA Flag / Plus ATMAgain this is to inform that – Debit Card also needs PIN based technology to use itthrough. Account number in VISA or any other Debit Card can be embossed or withoutembossed (Indent printed).Visa Debit Card: VISA cards are accepted at all BBL, VISA & Q-Cash ATMs & POSs.DEPOSIT PREMIUM SCHEME (DPS)A certain amount is deposited every month in an account (also called monthly pensionscheme), which is accumulated over a specified period of time. Deposit Premium Scheme(DPS) is the most attracting deposit scheme that is offered by BRAC bank limited. DepositPremium Scheme is specially designed for the fixed monthly income group. Uponmaturity the total amount (total accumulated deposits with accumulated accrued interest)is made available to the DPS account holder.Special Feature of this Scheme:Features• Monthly installments can be as low as Tk. 500 or any multiples of it• Choose any day as your installment date• Receive a Savings a/c with a personalized cheque book
  • SME Banking Activities of BRAC Bank LimitedPage | 43• On-line banking facilities• You dont need to stand in a long queue to deposit your DPS Installments. You canalways deposit more than one installment in your savings account and wellautomatically transfer the installment to your DPS account on due datesBRAC Bank is well poisoned to be the leading Personal Banking business amongst thelocal private banks. Banks conscious efforts in brand building, introducing and supportingnew packaged products, developing PB organization along with non-traditional deliverychannels have resulted in good brand awareness amongst its chosen target markets.Installment based savings schemes are a major category of saving instruments amongstmid to upper middle-income urban population.DPS is an installment based savings scheme (Deposit Premium Scheme) of BRAC Bankfor individual clients. The key differentiators of the product will be – Amount of monthly deposit - The scheme offers the clients the flexibility oftailoring the amount of monthly deposit based on his monthly cash flow position.The minimum monthly deposit will be BDT 500.00 The client will have the optionof depositing any amount in multiples of BDT 500.00. Flexible tenor of the scheme- The client has flexibility of deciding on the tenor ofthe scheme in-terms of number of months. However, the minimum tenor would be10years. Flexibility to open any number of DPS Account- A client can open maximumfive DPS accounts in client‘s name, in his/her spouse‘s name or in the name ofhis/her children or in joint names with any of his/her family members. Premature encashment – if any client closes the deposit account before one year,s/he will not be entitled to any interest. Account running more than a year will beeligible for the prevailing interest offered in the savings account. NO Late payment fee – Clients failing to deposit any installment will not pay anylate payment fee
  • SME Banking Activities of BRAC Bank LimitedPage | 44 Payment through Account – Clients will have to open an Account with BRACBank Limited and a standing instruction will be executed for auto-debit to effectthe monthly installment. OD Facility against DPS - Clients will have the option of taking advance upto90% of the deposited amount at the time of application. However, to be eligible forthe OD facility, the account must be at least 2 years oldRestrictions and Client Eligibility Any Bangladeshi Citizen attaining 18 years of age will be eligible to avail thisproduct by opening an account in any of the branches of BBL. Branch will ensurecompliance with account opening formalities. A minor operated by the legal guardian may also open the account. The tenor and the deposit amount agreed by the applicant and accepted by theBank at the time of opening the account cannot be changed afterwards.Closure of Account The account will immediately cease to operate in case of thefollowing: Death of the account holder.Settlement of the Account Documentation - In order to open the account, the accountholder will execute the following documentation: Fulfilling Account opening formalities Filling up the DPS Application form 2 copy Pass port size Photograph of the applicant 1 copy passport size photograph of the nominee attested by the applicant
  • SME Banking Activities of BRAC Bank LimitedPage | 45Chapter - 5Job Part
  • SME Banking Activities of BRAC Bank LimitedPage | 465.0 IntroductionThe SME, Probashi and Cash management business of Brac Bank Limited is mostlydependent on corresponding banking relationship. BRAC Bank has to open accounts withthe other banks in the remote areas where banks representation not available. Thecorresponding bank accounts are used for SME disbursement, realization, remittance andcash management purpose. Every month we have found a huge number of entries un-reconciled between the bank and the corresponding banks book.Bank has to prepare the periodic reconciliation statements to identify any mismatch.Reconciliation is the process of systematically comparing the balance of bank statementwith the balance as per the company‘s ledger and explaining any differences and takingnecessary measures to correct the wrong entries. It is an important internal controlmechanism of the bank.The responsibilities of reconciliation of BRAC Bank are centralized and given to CentralOperations. There is a separate devoted team under the Central Operations for identifyingthe unmatched items, analyzing the same and guide to the initiating departments to do therectification. Reconciliation section of Central Operations prepares and submits a statusreport on monthly basis and the same to all concerned departments and Operational RiskManagement Departments for their information and monitoring. Also submits a statusreport to MD & CEO and DMD, CIO and Hoed of Operations for their information.Why Reconciliation?To identify the nature of reconciliation items and adjusts these to ensure that the profit andloss and balance sheet reflect the true net position of the bank at the consolidated level.1. Enhance the control environment.2. Minimize the enterprises risk5.1 Job DescriptionIn order to achieve best service quality BRAC bank has separate department called―SERVICE QUALITY DEPARTMENT‖, which is responsible of maintaining over allservices of the bank to satisfy customers. To establish world class guest experience in allits operations it mainly focusing on people, infrastructure, technology, products andprocess. To illustrate the fact, Brac Bank now uses the word ―Guest‖ instead of―Customer‖. In order to ensure such experience Brac Bank always looks for enthusiasticpeople as employee and interns as well.
  • SME Banking Activities of BRAC Bank LimitedPage | 475.2 Key ResponsibilitiesEnsuring first hand services to the guestKeep observing the service activities during the service hourGuiding lost clients to have proper servicesHaving guest suggestion and complains and reporting to BMEnsuring clients solutions and quality services5.2.1 ENSURING FIRST HAND SERVICES TO THE GUEST:Bank is a financial institution so it is very tuff for a guest to know each service point. Theysometimes come up with such problems for which they need not to talk to customerservice manager or Branch manager. Like – how to write a deposit slip or how to useATM card in booth etc. in that situation my primary duty was to greet them so that theyrely upon me to have on the spot service. On the other hand my primary duties areunderstanding guest‘s problem and guide im or her to talk with the right person on theright desk.5.2.2 KEEP OBSERVING THE SERVICE ACTIVITIES DURING THESERVICE HOURS:During the service hour, many unusual situations may arise. So my another duty was tokeep looking into those situations and make instant solutions like keep looking whetherstaff behaving the way they should behave or not. To look after whether any staff isignoring any customers or ot, was my another job duty.5.2.3 GUIDING LOST GUESTS TO HAVE PROPER SERVICES:It is usual situation that different professions people come to bank every day. Someprofession people come to bank for the first time and doesn‘t know overall servicearrangement of the bank. They enter into the branch and starts wondering around withinthe bank. They get completely lost. So, my responsibility was to listen and guide them in aproper way.5.2.4 HAVING CUSTOMER SUGGESTION AND COMPLAINTSSince each branch is a touch point for the bank so it‘s the better option for SQ departmentto have better guest experience. Another duty is to collect such suggestions and complainfrom uests and reporting to the Branch Manager.
  • SME Banking Activities of BRAC Bank LimitedPage | 485.2.5 ENSURING CUSTOMER SOLUTION AND QUALITYSERVICESA guest should have a complete solution of a problem from branch. If it is not possible forcustomer service officer then take him/her to customer service manager even if it is notpossible for the CSM then take him/her to BM. In the meanwhile I have to ensure thequality service to he guest.5.3 Different Aspects of JobThere are five essential areas to excellence in guest experience. BRAC Bank guestexperience standard will apply it the five aspects for excellence in guest experience listedbelow—1) People 2) Premises 3) Papers 4) Processes and 5) Practices People: The team who serves the guests Premises: The location or place where we serve the guests Papers: The documents we use to provide and receive information and tocommunicate with our guest and colleagues Process: the process that enable us to delight our guests Practices: the way we interact and talk with our guests.For keep concentrating on service issues, Brac bank has prepared guest experiencefundamentals for its entire team member. Brac Bank‘s guest standards are— BOLD: All team members are will be bold and on behalf of their guests andcolleagues. They will be first to greet, first to listen and first to make anysuggestions. They are the persons who satisfy the demands of the guests even ifthey are unexpressed RELIABLE: The team member will take full ownership in serving their guests totheir complete satisfaction APPEALING: The team members have to ensure that all guest touch points areappealing and inviting CONSISTENT: The team members will ensure that their guests experiencequality is consistent in all aspects across all guest service point all the time.Apart from the above mentioned jobs, I was appointed for following works as well.Software called Finacle where I have to do:
  • SME Banking Activities of BRAC Bank LimitedPage | 49 CIF (Customer Information Form). A/C verify & close FDR, DPS opening Cheque book, ATM card issue, Active. My major job purpose & principle accountabilities in the banks are as follows: Ensure account opening, modification, closing, and ATM card & Cheque bookrequisition and remittance activities. Implement client service strategies to achieve BRAC Banks objective and plans Ensure quick resoling of client quires and issues Efficiently handle customer complains Properly maintain FDR, ATM, Account and other registers Receiving checks, issue cheque book, Fund transfer Verifying check book register, Customer Signature verification Writing pay order, Statement inquire Checking balance as per individual customer request Providing all kinds of general banking information to the customers Issuing check books and posting them into the system.5.4 Critical Observations & RecommendationBRAC Bank is now mainly focusing on the service quality issue because it believes in longterm relationship with its guest. Bank believes that if every guest has a positive image aboutthe bank then they will wholeheartedly refer BRAC Bank to others. My observation showsthat positive word of mouth has more power than the promotion, products and price. To do soit needs more priority on customer services than any other thing. Due to huge customer baseand cross cultural differences it seems very difficult for the team to properly manage customersatisfaction. So from my point of view the team member should have more cross culturaltraining in order to nderstand guest best.
  • SME Banking Activities of BRAC Bank LimitedPage | 505.5 Reconciliation – Process Flowchart
  • SME Banking Activities of BRAC Bank LimitedPage | 515.6 Description of Process Flow Chart5.6.1 Statement collectionWholesale Banking Operations Department is responsible for collecting the Bankstatements from correspondence Bank by 7thof the following month. Concern staff ofWBO collects Mother A/c statements.SME CRO‘s will collect Child A/c statements andsend those to FIS by 1stweek of every month. After receiving a/c statements FIS willdeliver to original statement to Central Operations by 10thof every month forreconciliation and preserve a copy duly received by Central ops. If any pending of foundany problems in the bank statements Wholesale Banking Operations Department willcommunicate with the concerned CRO/ZM of SME for sending the corrected copy toCentral Operations Department within 05 working days from the date of receipts.5.6.2 Reconciliation Processi) After receiving Bank statement from Wholesale Banking Operations Department,Reconciliation Team takes print of the GL account and cross/match all entries betweenBank statements and GL account to identify unmatched entries.ii) Reconciliation statements of all unmatched entries are prepared by identifying team andsend to analyzing team for adjustment.iii) Respective department will provide all supporting documents if required byreconciliation team within 2/3 working days for analyzing entries5.6.3 Analysis & AdjustmentAdjustment team prepare a statement of all identified mismatch entries with supportingdocuments and send the same to respective departments to pass the necessary correctionentries for adjustmentsUpon receipt the statement (Adjustment advice) from Central Operations, respectivedepartments will pass the correct entries within 03 working days and send a copy toCentral Operations for recording.
  • SME Banking Activities of BRAC Bank LimitedPage | 525.7 Bangladesh Bank Reconciliation5.7.1 Reconciliation ProcessAfter receiving Bank statement from Wholesale Banking Operations Department,Reconciliation Team takes print of Office account ledger and cross/ matches all entriesbetween Bank statements and Office ledger and identifies unmatched entries.After identifying the entries the Identification wing prepare the reconciliation statement ofall unmatched entries and send to Analyzing team for Adjustment.Analysis & AdjustmentAfter analyzing all un adjusted entries, Analysis and Adjustment team will prepare astatements with supporting documents and send it to concern departments to pass thenecessary entries for adjustments.REPORTS and MISReports Prepares the detail monthly reconciliation statement of Inter- branch and send it toBangladesh Bank as per Bangladesh Bank DOS circular no-2 dated January 28,2007.MIS Prepares an aging analysis and forward it to: Managing Director and CEO Deputy Managing Director Chief Information Officer Head of operations All Concerned Department /Branch for information & necessary actionMeeting with Related Departments Arrange monthly meeting with all related departments regarding the status ofreconciliation. Minutes of the meeting are circulated to all participants.
  • SME Banking Activities of BRAC Bank LimitedPage | 53
  • SME Banking Activities of BRAC Bank LimitedPage | 54Chapter - 6Project Part
  • SME Banking Activities of BRAC Bank LimitedPage | 556.0 Definition of SMEAn SME is defined as, ―A firm managed in a personalized way by its owners or partners,which has only a small share of its market and is not sufficiently large to have access tothe stock exchange for raising capital‖. SMEs ordinarily have few accesses to formalchannels of finance and depend primarily upon savings of their owners, their families &friends. Consequently, most SMEs are sole proprietorships & partnerships. As with alldefinitions, this one is not perfect. Depending on context therefore definition of an SMEwill vary.Despite the common features globally, countries do not use the same definition forclassifying their SME sector. Also, a universal definition does not appear feasible ordesirable. SMEs have been defined against various criteria. The three parameters that aregenerally applied by the Governments to define SMEs are: Capital investment in plant and machinery Number of workers employed Volume of production or turnover of businessOther definitions are based on whether the owner of the enterprise works alongside theworkers, the degree of sophistication in management, and whether or not an enterprise liesin the "formal" sector. The definitions in use depend on the purposes these are required toserve according to the policies of the respective countries/Governments.A quantitative definition in each national context is, however, advantageous, as it makes iteasier to target macro-level policies for a specific group of enterprises. The countries withsuch definitions have recorded a higher growth rate in the SME sector. This indicates thatthe more precise the definition, the more effective the transaction of policies intended tobenefit the sector with actual results. In countries where no definition exists, theenterprises are in a disadvantageous position.Definition of SME as per Bangladesh BankOrganizations not a public limited company meet the following criteria
  • SME Banking Activities of BRAC Bank LimitedPage | 56Definition of SME as Per BRAC BankBased on the bank‘s perspective of SME and its stumbling blocks and considering thecontext of Socio-economic status of our country SME investments become:6.1 SME History of BRAC BankHe wants to see poverty banished forever. This has been his single-minded pursuit in life.Ever since a devastating cycle wreaked havoc on the lives of the people and property inthe coastal regions of pre-independence Bangladesh 1970, everything changed for a youngchartered accountant. The young man was so moved by the death and destruction that he,along with some friends, dedicated to set up HELP to carry out relief and rehabilitationefforts. Later after the independence of Bangladesh the young man sold his flat in Londonand decided to set up a relief and rehabilitation center in the war ravaged Bangladesh. Henever looked back.He is Sir Fazle Hasan Abed, the founder and chairperson of BRAC, the world‘s largestNGO, arguably in terms of size and operation. BRAC has been working relentlessly torealize the hidden potential of mankind, especially the ones who are most deprived ofopportunities.
  • SME Banking Activities of BRAC Bank LimitedPage | 57It is this same vision that motivated him to come up with a bank that could realize theuntapped potentials of this country. Traditionally banking in Bangladesh has mainlyaddressed the mid to large sized businesses or the professionals. When Sir Fazle HasanAbed established BRAC Bank he did it with the goal to serve the highly motivated groupof entrepreneurs who wanted to break out of the vicious cycle of poverty and take controlof their own future. We call them the ―Missing Middle‖. His long cherished dream ofavailing quality finance services to these small to medium businesses finally come toreality. BRAC Bank proud to be the pioneering and largest SME bank in Bangladesh,discharging over 10,000 crore taka in SME loan and helping fulfillment of more than256,000 dreams that change hundrerds and thousands of lives everyday.SME banking division of BRAC Bank Limited has successfully made a mark in creatingplatform for small and medium entrepreneurs in ―Access to Finance‖, the key to the primeobstacle towards growth of SMEs. Since inception BRAC Bank upholds the motto tofinance the ―Missing Middle‖ the underserved market segment of SMEs. Years of marketknowledge and understanding, committed resources, countrywide coverage and wellaligned strategies have made the bank an expert in SME financing and the bank hassuccessfully developed an examined and successfully model in SME financing inBangladesh.The bank has incorporated double bottom line approach in its operation –1) Making profit by mobilizing fund from urban to rural areas.2) Performing social responsibility by creating an entrepreneurial class.Along with Small & Medium Enterprise financing, SME banking division is also activelyworking in creating awareness and imparting knowledge to SMEs about financial recordkeeping, dealing with modern banks and industry best practices in SME operation. In anattempt to ensure customer awareness and to strengthen the relationship with customers,SME banking division arranged informative campaigns and road shows for SMEs locatedacross the country.6.2 Importance of SMEThe main focus of BRAC Bank is to develop human and economic position of a country.Its function is not limited only to providing and recovering of loan but also try to developthe economy of a country.So reasons for this program from the viewpoint of BBL:
  • SME Banking Activities of BRAC Bank LimitedPage | 586.2.1 Support Small EnterpriseThe small enterprise, which requires BDT 2 to 30 lacks loan, but they have no easy accessto the banks/financial institutions. For example: In case of Anonno loan, an amount of 3 to8 lacks is provided without any kind of mortgage.26 SME Activities of BRAC Bank Limited6.2.2 Economic DevelopmentEconomic development of a country largely depends on the small and medium sealenterprises. Such as, if we analyze the development history of Japan, the development ofsmall & medium scale enterprises expedite the development of that country.6.2.3 Employment GenerationThe bank gearing employment opportunities by two ways: Firstly, by providing loan to thesmall enterprises expanding, these businesses require more workers. Secondly, Small &Medium Enterprise (SME) program requires educated and energetic people to providesupport to entrepreneurs.6.2.4 Profit MakingSME program is a new dimensional banking system in the banking world. Most of theCROs are providing door-to-door services to the entrepreneurs. Entrepreneurs are satisfiedby the service of the bank and make profit.
  • SME Banking Activities of BRAC Bank LimitedPage | 596.2.5 Encourage ManufacturingThe focus of BRAC Bank is to encourage manufacturing by the entrepreneurs whoproduce by purchasing various types of materials. CRO try to educate them to producematerial if possible because if they can produce in line of purchase profits will be high.6.2.6 Spread the ExperienceAnother reason of BRAC Bank is to spread the knowledge on the importance of SMEbanking regarding various businesses. The customer services officer share their knowledgefrom various businesses and tries to help the entrepreneurs who have shortage of thegathered knowledge. CRO‘s who are the driving force of SME division of BRAC Bankalso gather knowledge about various businesses and make stronger knowledge base.6.3 SME Products6.4 The process of SME LoanFinancial and development assistance designed especially for small and mediumenterprises in Bangladesh is a new and upcoming trend. After the surge of micro-financein the last two decades, small and medium enterprises have come to the limelight in thefinancial sector on account of their contribution to economy and yet limited access tofinance. Both micro-finance institutions and banks are beginning to realize the potential ofthis market and designing new financial products for it. BRAC Bank started providingcredit to small and medium enterprises in 2002 in recognition of their special needs. Withthis end in view-BRAC Bank was opened to serve these small but hard workingentrepreneurs with double bottom line vision. As a socially responsible bank, BRAC Bankwants to see the discharge of grass-roots level to their economic height and also to makeprofit by serving the interest of missing middle groups. BRAC Bank is the market leaderin giving loans to Small and Medium Entrepreneurs and they have been doing it for thelast Eight years since 2002. BRAC Bank‘s SME Unit is the first of its kind to provide
  • SME Banking Activities of BRAC Bank LimitedPage | 60financial services on a national scale to small and medium sized entrepreneurs. After 18months of operation, BRAC Bank approached BRAC RED to undertake an exploratorystudy on the effect of BRAC Bank‘s SME Unit lending on.6.4.1 Anonno RinThis is a small scale loan designed to finance small scale trading, manufacturing andservice ventures, especially to aid the purchase of fixed assets and to finance workingcapital.Eligibility Entrepreneurs aged between 18 to 60 years Entrepreneurs with minimum 2 years experience in the same line of business A business which must be a going-concern with more than 1 year in operationMaximum Amount From minimum BDT 3 lac up to maximum of BDT 8 lacFeatures Loan without mortgage For excellent borrowers who have paid or paying in due times, we offer discountedrates Quick, quality banking throughout the country Potential women entrepreneurs will also get the facilities of this loan6.4.2 Apurbo RinIn order to help our SME borrowers for financing working capital or to purchase fixedassets, BRAC Bank offers APURBO. It caters to the need of entrepreneurs who areoperating in trading, manufacturing, service, agriculture, non-farm activities, agro- basedindustries and other sectors of our economy.Eligibility Entrepreneurs having a minimum of 3 years of some business activities A business which must be a going concern for 3 years Age minimum 25 years and maximum up to 60 yearsMaximum Amount Starting from BDT 8 lac to maximum of BDT 30 lac
  • SME Banking Activities of BRAC Bank LimitedPage | 61Features Without mortgage loan below 10 lac Simple loan processing for expanding your business Quick disbursement Disbursement in one or two installment Flexible monthly repayment loan6.4.3 Pathshala RinThis is a loan designed to meet the needs of small and medium sized private educationalinstitutions, such as kindergartens, schools and colleges etc.Eligibility A small & medium educational institute that is in operation for minimum 3 years The institution should be sole proprietorship, partnership, private limited companyor society The educational institute must be a profit making concernMaximum Amount Minimum BDT 3 lac to maximum BDT 30 lacFeatures Without mortgage for loan below 10 lac Laon for fixed assets purchase & civil construction Loan repayment can be spread up to 4 years Minimum documentation Monthly repayment loan Quick disbursement Flexible interest rate based on security6.4.4 Aroggo RinThis loan is suitable for private clinics, diagnostics centers and doctors chambers topurchase fixed assets under equated monthly installments.Eligibility Institutions with at least 2 years in operation & profit making concern Doctors having 5 years of experienceMaximum Amount
  • SME Banking Activities of BRAC Bank LimitedPage | 62 Minimum of 3 lac to maximum of 30 lacFeatures Loan without mortgage up to 8 lac Easy loan processing Loan repayment schedule is spread up to 3 years 1% loan processing fee Flexible interest rate based on security6.4.5 Digoon RinDIGOON RIN is a loan facility for Small and Medium enterprise. This product‘s mainobjective is to help various Small and Medium entrepreneurs to meet their short-studycash flow shortages or bridge the fund-flow gaps.For your business expansion, you do not need to encash your savings rather you can takedouble amount of loan on your depositEligibility Entrepreneur having minimum 2 years of business activities The business which must be going concern for 2 years Aged between 18 years to 55 yearsMaximum Amount Minimum of 5 lac to maximum of 30 lac BDTFeatures Double amount of loan on your deposit Attractive return against the deposit Flexible repayment plan monthly installment and single installments Quick disbursement6.4.6 Supplier FinanceSUPPLIER FINANCE is a loan facility for the enlisted Suppliers of various large retailers,marketing companies, distributors, exporters etc. This product‘s main objective is to helpvarious Suppliers to meet their short-study cash flow shortages or bridge the fund-flowgaps.Eligibility If you are an enlisted supplier of a corporate house with which BRAC Bank has acorporate tie-up
  • SME Banking Activities of BRAC Bank LimitedPage | 63 Have minimum 3 years of continuous operation Have 1 year continuous relationship with the purchasing firmMaximum Amount Minimum BDT 3 lac up to maximum BDT 30 lacFeatures Equal monthly installment and revolving loan facility 1% of loan amount as the processing fee6.5 Terms and Conditions of SME LoanThe SME department of BRAC Bank will provide small loans to potential borrower underthe following terms and condition: The potential borrowers and enterprises have to fulfill the selection criteria The loan amount is between Tk. 2 lacks to 3.5 crore. Loan can be repaid in two ways:a) In equal monthly loan installment with monthly interest payment, orb) By one single payment at maturity, with interest repayable a quarter ends residualon maturity Loan may have various validates, such as, 3 months, 3 months, 6 months, 9 months, 12months, 15 months, 18 months, 23 months, 30 months and 36 months. The borrower must open a bank account with the same bank and branch where theSME has its account Loan that approved will be disbursed to the client through that account by accountpayee cheque in the following manner: Borrower name, Account name, Banks nameand Branch‘s name The loan will be realized by 1st every month, starting from the very next month‘swhatever the date of disbursement, through account payee cheque in favor of BRACBank Limited A/C. With Bank‘s named and branches name The borrower has to issue an account payable blank cheque in favor of BRAC BankLimited before any loan disbursement along with all other security. The borrower will install a signboard in a visible place of business of manufacturingunit mentioned that financed by ―BRAC Bank Limited‖. The borrower has to give necessary and adequate collateral and other securities as perbank‘s requirement and procedures.
  • SME Banking Activities of BRAC Bank LimitedPage | 64 SME, BRAC Bank may provide 100% of the Net Required Working Capital but notexceeding 75% of the aggregate value of the Inventory and Account Receivables. Suchloan may be given for periods not exceeding 18 months. Loan could also be consideredfor shorter periods including one time principal repayment facility, as stated in loanproduct sheet.6.6 Procedure of BRAC Bank SME LoanLoan Sanction activities: Select potential enterprise: For SME loan, in this step the CRO conduct a survey andidentify potential enterprise. Then they communicate with entrepreneurs and discussthe SME program. Loan Presentation: The function of CRO is to prepare loan presentation based on theinformation collected and provided by the entrepreneur about their Business, land property (Where mortgage is necessary) Collect confidential information: Another important function of a CRO is to collectconfidential information about the client from various sources. The sources ofinformation are suppliers regarding the client‘s payment, customers regarding thedelivery of goods of services according to order, various banks where the client hasaccount, which shows the banks transactions nature of the client. Open clients accounts in the respective bank: When the CRO decided to provide loanto the client then he/she help the client to open an bank account where BRAC bankhas a STD a/c. BRAC bank will disburse the loan through this account. On the otherhand the client will repay by this account. Although there is some exception occur bythe special permission of the authority to repay by a different bank account. Fill up CIB form: CRO give a CIB (Credit Information Burue) form to the client andthe client fill and sign in it. In some case if the client is illiterate then the CRO fill theform on behalf of the client. Then CRO send the filled and signed form to the SME,head office. Sending CIB to Bangladesh Bank: The SME, head office collects all information andsends the CIB form to Bangladesh Bank for clearance. Bangladesh Bank return thisCIB form within 10-12 days with reference no. CIB report from Bangladesh Bank: In the CIB report Bangladesh Bank use any ofthe following reference no:
  • SME Banking Activities of BRAC Bank LimitedPage | 65 NIL: if the client has no loan facility in any bank or any financial institution then BB(Bangladesh Bank) use ‗NIL‘ in the report UC (Unclassified): if the client has any loan facility in any bank or financial institutionand if the installment due 0 to 5.99 then BB use UC in the report SS (Substandard): if the client has any loan facility in any bank or financial institutionand if the installment due 6 to 11.99 then BB use SS in the report DF (Doubtful): if the client has any loan facility in any bank or financial institutionand if the installment due 12 to 17.99 then BB use DF in the report BL (Bad lose): if the client has any loan facility in any bank or financial institution andif the installment due 18 or above then BB uses BL in the report. This report indicates thatthe client is defaulter and the bank should not provide loan the client. Loan decision considering CIB report: Considering CIB report, BRAC bank decidewhether it will provide loan the client or not. If the bank decides to provide loan then theSME of head office keep all information and send all papers to the respective unit office toapply with all necessary charge documents.Loan SanctionThe respective unit office sanctions loan to the client if it is 2 to 5 lacs, and then sends thesanction letter including all necessary charge documents to the loan administrationdivision for disbursing the loan. If the amount is higher than 5 lacs then the respective unitoffice sends the proposal to SME, head office for sanction. The head of SME sanctions theloan and sends the sanction letter including all documents to the loan administrationdivision for disbursement and inform the respective unit office regarding sanction of theloan.Disbursement of SME loani. Pre Disbursement Manual Activities Prepare loan file: Receiving all documents, Loan Administration Division preparea loan file with all documents received from the unit office. Charge documents checking: The loan administration division checks all chargedocuments. Following charge documents are checked: Money receipt (Risk fund). Sanction letter. Demand promising note (With stamp of Tk 20/=)
  • SME Banking Activities of BRAC Bank LimitedPage | 66 Letter of arrangement (With stamp of Tk 150/=) General loan agreement (With stamp of Tk 150/=) Letter of undertaken (With stamp of Tk 150/=) Letter of stocks and goods (With stamp of Tk 150/=) Letter of hypothecation book debt and receivable (With stamp of Tk 150/=) Letter of disbursement Photocopy of trade license (attested by CRO) Insurance (Original copy) Blank claque with signature (one cheque for full amount and others same as no ofinstallment on Favor of BRAC bank, no date, no amount) Two guarantors (one must be Spouse/parents) If the loan provide for purchase of fixed assets or machineries and if the loanamount is over Tk 50,000/= then the stamp of a certain amount is require) Documents deficiency and problem resolving: If there is any error found then itinformed to the respective CRO. If the application form is not filled properly then the filesend to the CRO to fill the application properly. If any document error found then the loanadministration division asked the CRO to send the require documents and the file stored tothe loan administration division. Prepare disbursement list: The loan administration division lists all newsanctioned clients‘ details and send a request to the treasury through internal mail. Disbursement of the amount: Sending the list to the treasury of BRAC bank fordisburse the amount, the treasury disburse the amount to the client through the motheraccount of the clients bank. BRAC bank disburse amount through any of the followingbanks corporate branch nearer the BRAC bank head office and the corporate branch of therespective bank send the amount to the client account in the respective branch. Thesebanks are: BRAC Bank Limited The City Bank Limited Janata Bank Bangladesh Krishi Bank Pubali Bank
  • SME Banking Activities of BRAC Bank LimitedPage | 67 Agrani Bankii. Message sent to the unit office: Completing the disbursement, loan administrationdivision sent a SMS to the respective CRO informing the disbursement of the sectionedloan.MBS (Millennium Banking System) entries for loan disbursement: Initial ID generation: After sending the list to the treasury, the loanadministration division generates an initial ID against the borrower. Enteringrequired information, the banking software MBS automatically provide a ID no forthe borrower. Loan account opening: According to the ID, the loan administration divisionopens a loan account in MBS against the borrower. Entering all requiredinformation, the MBS automatically give an account no. For the borrower. Cost center assign: The loan administration division enter the followinginformation in MBS: Security details set-up Guarantor details set-up Loan other details set-up Risk fund collection: The loan administration division opens a different accountrisk fund of the client. This is known as loan processing fees. Receiving the riskfund, the loan administration division prints voucher and posting the voucher in theMBS. The amount of risk fund is not refundable. Activision of the loan: Loan administration division do the following tasks toactivate the loan Loan sanction details set-up Repayment schedule set-up and printing Loan activation Disbursement and CC wise voucher print Disbursement voucher posting
  • SME Banking Activities of BRAC Bank LimitedPage | 68Post Disbursement Manual Activities Repayment schedule sent to unit office: Completing the disbursement of thesanctioned amount the loan administration division prepare a repayment schedulein MBS and send it to the unit office. CRO from the unit office collect it andreached to the respective client. The client repays the loan according to thisschedule. Loan details MBS entry: The loan administration division enters detailsinformation regarding the loan in MBS. Each officer has an ID no in MBS and ifthere is any error found then the respective officer would be responsible for it. Soeverybody remain alert at the time of MBS entry. Document stamp cancellation: The loan administration division cancels alldocument stamps. In future if any client found defaulter and the bank file suedagainst him then stamps of these document help to get the judgment favor of thebank. But If these stamps are not canceled then the judgment may not on favor thebank. Send the loan file to archive: completing all activities, loan administrationdivision sends the loan file to the archive for future requirement. In future if anydocument of the loan account requires then the bank can collect the file fromarchive and get the necessary document. If the clients take repeat loan then it is notrequire applying all documents because his all documents stored to the bank.6.7 Analysis of SME Loan Repayment BehaviorSME loan in fact, a small loan ranging from 2 lacks to 30 lacks given to small or mediumenterprises not for initiating the business but for the purpose of working capitalmanagement or for purchasing any long term asset. Any sound organization after one yearof their starting of business can apply for this loan. It almost a rare case for BRAC Bankthat an SME borrower will default to repay the loan he/she has taken even the loan isgiven without taking any collateral. There are several reasons for which the SME loanborrowers hardly default. These reasons may like: The loan amount is not as large as it would be difficult to repay it. Mediocre entrepreneurs hardly default to repay loans. They are very consciousabout their reputation in the market.
  • SME Banking Activities of BRAC Bank LimitedPage | 69 As the loan is taken for meeting up of working capital, it can be easy to repay afterthe sales revenue is collected from respective customers.However, from the observation of 40 SME loan borrowers‘ personal and repaymentinformation we find the following results: Average age of SME borrowers is 39 Average education of most of the SME borrowers is Class IX or X. Average Experience (As a promoter of the business) is 11 years (along with someextreme values. Average Experience (As an employee of the same business) is 8 years Monthly income and expenditure of the Entrepreneur is around TK. 30000 and TK.23000 respectively. Average personal and family assets are around TK. 150000 and TK. 240000respectively Almost all of the borrowers are 55% retailer and 45% whole seller Average number of employees they have is 3 Average Amount of loan taken by them is around TK. 379729.7 Average time period of loan they take to repay is 26 months Average amount of loan suppose to be paid is 275314.47 Average amount of loan currently repaid is TK. 286847.62 per person. Average amount of loan due for recovery is TK. 6679.62 per person.We have gathered 8 variables to analyze the relationship of each variable with recoveryrate. These variables are: Age of the borrowers Education of the borrowers Experience of the borrowers related to their business. Amount of loan taken by the borrowers Term of loan Income of the borrowers Personal Asset of the borrowers
  • SME Banking Activities of BRAC Bank LimitedPage | 70 Nature of business6.7.1 Relationship of recovery rate with age of the borrowers:We can analyze the relationship sequentially:The relationship of recovery rate with the age of the customers can be described from thefollowing charts:From the above chart we can see that recovery rate increases as the age of the borrowersincreases. Here the recovery rate is lowest at the age group of 21-25 for the lacking ofexperience and knowledge in the related business. They can‘t make the proper use offunds. And that‘s why their business fails. At the age of 31-35 recovery rate is 100%. Atthat age group people like to behave professionally and control everything with strictdiscipline. They are highly concerned about their career which brings success to theirbusiness. So at that time recovery rate is the highest. Again at the age of 50 and aboverecovery rate is also 100% because of their huge experience and success in business.6.7.2 Relationship of recovery rate with education of the borrowers:From the above chart we can see that Small and medium businesses are not highly affectedwith the educational background of the borrowers. That‘s why recovery rate also is not
  • SME Banking Activities of BRAC Bank LimitedPage | 71much affected with the education of the borrower. There should be some other variablesaffecting it as well.6.7.3 Relationship of recovery rate with experience of the borrower:From the above table we see that recovery rate is highly affected with the experience ofthe borrowers in the business he is engaged with. In fact, it is all out true that a businessand its success is greatly affected by the experience the entrepreneur have on the same lineof business. At the initial periods of the business lack of experience can cause the businessto fail which ultimately results in the default of loan repayments. So BRAC Bank isalways concerned about the related experience of the entrepreneur. They don‘t give SMEloan to anybody having no experience or for initiating any business. And here also we seethat recovery rate is lowest at the experience of 1 to 5 years.6.7.4 Relationship of recovery rate with Amount of loan taken:From the above chart we see that it‘s tough to make a relationship with both the recoveryrate amount of loan taken by the borrowers. But still it can be said that loan amountranging from 250000 to 400000 have a good recovery rate on an average. That‘s whymaximum amount or size of SME loan the authority like to disburse is 300000.
  • SME Banking Activities of BRAC Bank LimitedPage | 726.7.5 Relationship of recovery rate with term of loan:The above table shows that, as the loan duration increases the rate of recovery decreases.This may be the inherent reason of why the authority of BRAC Bank likes to disburse loanat a shorter term of 18 to 24 months.6.7.6 Relationship of Recovery Rate with Income of the Borrowers:In fact, income of a borrower can be a vital factor to repay his loan. And the above graphis a replica of this truth. Here we see that people with higher income group like 30000 to50000 or above have the highest recovery rate. Entrepreneurs having a good skill,knowledge and experience in business can make success in their business which ultimatelyincreases their income as well. So their recovery rate is good than those group of peoplewho have lower income.6.7.8 Relationship of Recovery Rate with the Personal Asset of theBorrower:
  • SME Banking Activities of BRAC Bank LimitedPage | 73Entrepreneurs who have sufficient personal assets and mortgage them for taking the loanhave the record of higher recovery rate. They don‘t have the tendency to make a default inpaying the installments. BRAC Bank likes to pay SME loans after collecting title deeds ofthose personal or family assets. People who don‘t have much personal asset must showthat they have sufficient family asset. Here from the above chart we see that entrepreneurshaving lowest personal asset have the lowest recovery rate of 94%.6.7.9 Relationship of Recovery Rate with the Nature of Business:From the above chart we see that entrepreneurs having retail business have a less recoveryrate than the entrepreneurs having whole sale business. This may happen because wholesale business transactions happen at a large scale. So they can convert their stocks as wellas accounts receivables into cash very quickly before the occurrence of any misfortune.On the other hand, retail business transactions happen at a small lot. So they cannot makeswift conversion of their current asset in to cash.
  • SME Banking Activities of BRAC Bank LimitedPage | 746.8 SME Network Coverage
  • SME Banking Activities of BRAC Bank LimitedPage | 756.9 Highlights of SME Banking Divitions6.10 Obstacles and Challenges faced BRAC Bank Limited inSMEAt the beginning phrase of the SME, BRAC Bank Limited faced lots of obstacles andchallenge. There was a shortage of capital, absence of high technology, high employeeturnover, lack of Skills entrepreneur, no trade license of businessman etc. These problemsare describe in brief in below –Financial ConstraintAt the very beginning of the SME, BRAC Bank have financial constraints. BRAC Bankdoes not have enough liquid money so that they failed to satisfy every customers need.
  • SME Banking Activities of BRAC Bank LimitedPage | 76Absence of High TechnologyAbsence of high technology was another constraint for the BRAC Bank limited. At thattime they do not have strong inter-banking software so that they failed to contact withdifferent SME service centre.High Employee TurnoverIn 2001 employee turnover rate was pretty high. BRAC Bank does not have any legalbindings to their employees. Employees quit their job according to their wish. So it alsohampers the SME Service.Lack of Skills EntrepreneurAt that time entrepreneurs were not educated enough. They do not have sufficient skillsabout the different types of paper requirement. It hampers the loan processing time.Trade LicenseTrade license was another major problem for BRAC Bank. Most of the business man doesnot have their business trade license. Without proper documents it was quite hard tosanction the loan.Poor Physical InfrastructureInadequate supply of necessary utilities like electricity, water, roads and highways hinderthe growth of SME sector.Employee SkillsAt that time employees do not have sufficient knowledge about SME. It was costly to trainall the employees. So lack of proper training to employees was another obstacle for SMEgrowth.Lack of InformationAt that time SME just got a new shape in our country. So no one has clear idea about it. Sovague and wrong information were passed among the people.6.11 Steps Taken to Overcome the ObstaclesIn order to overcome the above mentioned obstacles BRAC Bank started follow somesteps, these steps were –
  • SME Banking Activities of BRAC Bank LimitedPage | 77BRAC Bank started to expand their SME networkIn 2001 BRAC Bank Limited their SME loan business with 4 SME sales and servicecenter. Gradually they have started to expand their network. Now they have 429 SMEsales and service center.Training Session for employeesAt the very beginning of SME operation employees do not have sufficient knowledge tohandle the customer. Besides at that time there were lack of educate employees to join thissector. So BRAC Bank started to train up employees those who have started to join inSME division.Orientation Session for BorrowersBesides training with the employees BBL also started to train the borrowers also. Most ofthe borrowers are not educate at all. Even they don‘t pass the S.S.C or H.S.C. So BBLstarted to organize orientation session for a group of borrowers.Tried to Overcome Financial ConstraintAt the very beginning BBL investment was low in the SME loan. Gradually they havestarted to invest huge in the SME. As they have a strong background of shareholders.Educate the Entrepreneurs At that time most of the entrepreneurs just passed the S.S.Cor H.S.C level. So they have a very poor knowledge about the banking transaction. Theycome for the loan but they don‘t have any trade license. So educate the entrepreneurs wereother steps to overcome the obstacles.Employee Commitment As employee turnover was quite high so BBL started to givehandsome remuneration to their employees. They started to provide some extra facilities totheir employees. Besides they also started to take contract sign for 2 or 3 years from theemployees.Advancement of Technology BRAC Bank Limited also started to develop theirtechnology. In consequent of this they have transfer their software from MBS to Finacle.Now the respective department can easily find out whether the particular borrower paid hisinstallment or not.
  • SME Banking Activities of BRAC Bank LimitedPage | 786.12 Different Business Wings of SME BankingWomen Entrepreneurs cell (WEC), one of its kinds in the banking industry of Bangladesh,was launched in 2006 under SME banking division with an objective to offer access toformal finance along with training and technical assistance to the women entrepreneursacross the countryManufacturing Business Unit (MBU)The manufacturing business unit was launched in august 2007 under SME bankingdivision. The objective of launching this unit is to better serve the manufacturing sector byproviding sector-focused and other services.Supplier and Distributor Business Unit (SDF)Supplier and distributor finance unit was launched in September 2007 to engine thegrowth of linkage industry, an indispensable sector for any industry.Commercial credit unit (CCU)The commercial and credit (CCU) was launched in October 2007 with the objective ofproviding financial services in the trade finance sector with pre and most importantfacilities.Deposit mobilization unitThe unit caters the deposit product requirement i.e of transaction and fixed deposit accountopening and account maintenance of SMEs across the country. In addition this businesswing also educate SME‘s towards modern banking and encourages maintaining regularbanking transaction.
  • SME Banking Activities of BRAC Bank LimitedPage | 796.13 Selection of Potential Enterprise for SME6.13.1 Enterprise selection CriteriaThe success of SME will largely depend on the selection of a business and man behind it.In terms of the business (Enterprise), the following attributes should be sought:1. The business must be in operation for at least one year2. The business should be environment friendly, no narcotics or tobacco business3. The business should be legally registered, i.e., valid trade license, income tax orVAT registration, wherever applicable.4. The business should be in legal trade, i.e.; smuggling will not be allowed or sociallyunacceptable business will not be entertained.5. The business must have a defined market with a clear potential growth6. The business must be located ideally close to the market and the source of its rawmaterials/suppliers. It should have access to all the utilities, skilled manpower‘sthat are required.7. Any risk assessed by the management in turn will become a credit risk for the bank.So effort should make to understand the risk faced by the business.6.13.2 Entrepreneur Selection CriteriaIn order to understand the capability of the management behind the business, the followingshould be assessed:1. The entrepreneur should be physically able and in good health, preferably betweenthe age of 25-50. If he/she is an elderly person closer to 50, it should be seen what thesuccession process will be and whether it is clearly defined or not.2. The entrepreneur must have the necessary technical skill to run the business, i.e.academic background or vocational training, relevant work experience in anotherinstitution or years of experience in this line of business.3. The entrepreneur must have and acceptable social standing in the community(People should speak highly of him), he should possess a high level of integrity (doesn‘tcheat anyone, generally helps people), and morally sound (Participates in communitybuilding)
  • SME Banking Activities of BRAC Bank LimitedPage | 804. The entrepreneur must possess a high level of enthusiasm and should demonstratethat he is in control of his business (Confidently replies to all queries) and has the abilityto take up new and fresh challenges to take the business forward.5. Suppliers or creditors should corroborate that he pays on time and is general innature6. Clear-cut indication of source of income and reasonable ability to save.6.13.3 Guarantor Selection CriteriaEqually important is the selection of a guarantor. The same attribute applicable for anentrepreneur is applicable to a guarantor. In addition he should posses the followings:1. The guarantor must have the ability to repay the entire loan and is economicallysolvent (check his net worth)2. The guarantor should be aware about all the aspect of SEDF loan and hisresponsibility3. Govt. and semi-govt. officials can be selected as a Guarantor such as schoolteacher,college teacher, doctor etc.4. Police, BDR and Army persons, political leaders and workers, and religious leadercannot be selected as a guarantor.5. The guarantor should know the entrepreneur reasonable well and should preferablylive in the same community.6.14 SME Loan Process FlowWhen a customer comes to the unit office for a loan request, first he/she meets with thecustomer relationship officer to discuss about the loan, which loan product is suitable forhim/her. After then the following process takes place.
  • SME Banking Activities of BRAC Bank LimitedPage | 816.15 Terms and Condition of SME LoanThe SME department of BRAC Bank will provide small loans to potential borrower underthe following terms and condition:• The loan amount is between Tk 2 lacs to 30 lacs.• SME will impose loan processing fees for evaluation/ processing a loan proposal asfollowing;Table 4.1: Loan processing feesLoan can be repaid in two ways:
  • SME Banking Activities of BRAC Bank LimitedPage | 82a) In equal monthly loan installment with monthly interest payment, orb) By one single payment at maturity, with interest repayable a quarter end residual onmaturity• Loan may have various validates, such as, 3 months, 4 months, 6 months, 9 months, 12months, 15 months, 18 months, 24 months, 30 months and 36 months.• The borrower must open a bank account with the same bank and branch where the SME hasits accountLoan that approved will be disbursed to the client through that account by account payeecheque in the following manner: Borrower name, Account name, Banks name and Branch‘sname• The loan will be realized by 1stevery month, starting from the very next month‘s whateverthe date of disbursement, through account payee cheque in favor of BRAC Bank Limited A/C.With Bank‘s named and branches name• The borrower has to issue an account payable blank cheque in favor of BRAC Bank Limitedbefore any loan disbursement along with all other security.• The borrower will install a signboard in a visible place of business or manufacturing unitmentioned that financed by ―BRAC Bank Limited‖.• The borrower has to give necessary and adequate collateral and other securities as per bank‘srequirement and procedures.• SME, BRAC Bank may provide 100% of the Net Required Working Capital but notexceeding 75% of the aggregate value of the Inventory and Account Receivables. Such loanmay be given for periods not exceeding 18 months. Loan could also be considered for shorterperiods including one time principal repayment facility, as stated in loan product sheet.• In case of fixed asset Financing 50% of the acquisition cost of the fixed asset may beconsidered. While evaluating loans against fixed asset, adequate grace period may beconsidered depending on the cash generation after the installation of the fixed assets.Maximum period to be considered including grace period may be for 36 months.
  • SME Banking Activities of BRAC Bank LimitedPage | 836.16 MonitoringMonitoring is a system by which a bank can keep track of its clients and their operations.So monitoring is an essential task for a CRO to know the borrowers activities after theloan disbursement. This also facilitates the buildup of an information base for futurereference.6.16.1 Importance of MonitoringThrough monitoring a CRO can see whether the enterprise invested the sanctioned amountin the pre-specified area of his business, how well the business is running, the attitude ofthe entrepreneur, cash credit sales and purchase, inventory position, work in process andfinished goods etc, This information will help the CRO/BRAC Bank to recover the loanaccruing to the schedule and to take the necessary decisions for repeat loans. Moreover,monitoring will also help to reduce delinquency. Constant visit over the client /borrowerensures fidelity between the bank and the borrower and tends to foster a report betweenthem.6.16.2 Area of MonitoringThe purpose is to know the entire business condition and all aspects of the borrowers sothat mishap can be avoided.i. Business Condition: The most important task of the CRO to monitor the businessfrequently, it will help him to understand whether the business is running well or not, andaccordingly advice the borrower, whenever necessary. The frequency of monitoringshould be at least once month if all things are in order.ii. Production: The CRO will monitor the production activities of the business and if thereis any problem in the production process, the CRO will try to help the entrepreneur tosolve the problem. On the other hand the CRO can also stop the misuse of the loan otherthan for the purpose for which the loan was disbursed.iii. Sales: Monitoring sales proceed is another important task of the CRO it will help himto forecast the monthly sales revenue, credit sales etc. which will ensure the recovery ofthe monthly loan repayments from the enterprise as well as to take necessary steps forfuture loans.
  • SME Banking Activities of BRAC Bank LimitedPage | 84iv. Investment: It is very important to ensure that the entire loan has been invested in themanner invented. If the money is utilized in other areas, then it may not be possible torecover the loan.v. Management of raw materials: In case of a manufacturing enterprise, management ofraw materials is another important area for monitoring. If more money is blocked in rawmaterials then necessary, then the enterprise may face a fund crisis. On the other hand theproduction will suffer if there are not enough raw materials.6.16.3 Monitoring SystemThe CRO can consider the following thing for monitoring:i. The CRO will monitor each business at least once a month. He/she will make amonitoring plan/ schedule at the beginning of the month. During monitoring the CROmust use the prescribed monitoring from and preserve in the client file and forward a copyof the report to SME head office immediately.ii. A SME branch will maintain the following files: The file will contain Purchase Receipt,Delivery Memo‘s, and Quotations. In addition, all other papers related to furniture andfixture procurementiii. Other fixed assets and refurbishment: All fixed assets and refurbishment related paperssuch as purchase receipt, delivery memo‘s, quotation, guarantee and warrantee papers,servicing related papers and any other paper related to fixed assets are refurbishment willbe in this file.iv. Lease agreement file: This file will contain all papers related to lease agreementbetween the SESDS office and owners of the leased premises.v. Individual client file: Individual files are to be maintained for each borrower and thatwill hold loan application, Loan Proposal, Copies of Loan Sanction Letter, DisbursementMemo, Monitoring Report, CIB application and Report, Credit report from other bank andall other correspondents including bank Statement file: All types of statement sent to SME head office will be kept in this filechronologicallyvii. Office instruction file: All kind of office instruction regarding administration shouldbe kept in this file.
  • SME Banking Activities of BRAC Bank LimitedPage | 85viii. Operating instruction and guideline files: All kind of office instruction and guidelinesrelated to operating should be kept in this fileix. New forms introduction file: All minutes of meeting, whenever held, should be kept inthis file.x. Security documents and legal aspect file: One set of security documents and lawyer‘sopinions and suggestions regarding issue will be kept in this file. The original should besend to SME head office on a weekly basisxi. Survey form file: After conducting survey, all survey will be kept in this filechronological.6.17 Closing Procedure of SME Loan Pre Closing manual activities1. Receive SMS/Fax requisting for closing: The borrowers repay the loan as perrepayment schedule. When the repayment is being complete the borrower request the unitoffice/CRO to close his loan account. The unit office/CRO sends a SMS/Fax the loanadministration division requesting to close the loan account of the respective borrower.2. Print the SMS/Fax: Receiving the request from the respective unit office/CRO, the loanadministration division takes a paper print and takes necessary steps to close the account.3. Bring the loan file from achieve: The loan account file of the respective borrower isbrought from the archive. And the documents of file are checked with MBS record.4. Obtain approval from the concern authority: it is require the permission of concernedauthority to close the loan. If concerned authority approved the closing of the loan accountthen next initiatives are taken.5. Checking in Finacle: The loan administration division checks the loan status in MBS. Ifthere is any difference found with the SMS/Fax from unit office and MBS then depositssleeps are re-checked. Then the loan administration division calculates the total balance ofthe loan account (Ledger balance + buffer interest +Excise duty)6. SMS sent to concern CRO: Loan administration division sent an SMS to the concernedCRO informing the current balance of the requested loan account.
  • SME Banking Activities of BRAC Bank LimitedPage | 867. Receive and print closing SMS/Fax checking & Freezing: The concerned CRO send afinal SMS to loan administration division informing that the respective borrower clearedall his liabilities regarding the loan. The loan administration division takes paper print ofthe SMS, check it and finally close the loan account. Finacle Entries for Loan closing1. Pre Closign data entry: Completing the manual activities, the loan administrationdivision enters some information to MBS for future requirement and complete followingtasks: Interest/provision charging & print voucher Charges collection & print voucher Final repayment entry & print voucher Final repayment entry checking Repayment voucher posting2. Activate account closing in Fianacle: Completing above mentioned tasks, the loanadministration division finally close the requested loan account in MBS. Post closing manual activities1. Rechecking with deposit slip: Completing MBS activities, the loan administration re-checks all deposit sleeps of the loan account. If there is any error found then it isimmediately resolved, otherwise the file sends to the archive for future requirements. Theclient may take repeat loan in future and then information from this file will help toapprove and disburse loan, which will minimize risk. If the client asks to return securitythen the loan administration releases security completing following tasks: Documents photocopy before security release Closing certificate issuing and security realese2. Daily finacle updating for loan closing: Finally the authorized officer of the loanadministration division update the banking software Finacle by closing therespective loan account.
  • SME Banking Activities of BRAC Bank LimitedPage | 87Chapter - 7Modern Marketing Concept
  • SME Banking Activities of BRAC Bank LimitedPage | 887.0 SME Relates With Modern Marketing ConceptThe goal of modern marketing concept is the customer satisfaction and this satisfactioncomes through integrated marketing efforts. In terms of SME the goal is to economicdevelopment of our country through meeting and exceeding customer needs better thancompetition. In terms of customer orientation, SME provides the best facilities tocustomers regarding their needs. SME provides unsecured loans up to 8 lacs which noneof other banks provide. In spite of integrated effort, SME is a team-based organization.CRO go to the door-to-door business and by depending on them, BBL gives loan toclients. By this BBL gets the direct feedback from the customers about their needs andwants. BBL analyzes the customers‘ wants and tries to give them the product that thecustomer wants.Though it is team base management bank, the corporate goals can be achieved and gainingtrust of management satisfies customers.7.1 Marketing Processes Relate to SMEBasically strategic plans define the organizations overall mission and objective. Withineach business unit, marketing plays a role in helping to accomplish the overall strategicobjectives.7.1.1 Market SegmentationThe market consists of many types of customers, products and needs and the marketer has todetermine which segments offer the best opportunity for achieving company objectives. SMEsegments the market into three categories: Trading, Manufacturing, and Service. In trading
  • SME Banking Activities of BRAC Bank LimitedPage | 89business, there are different kinds like retailer, wholesaler, food business, general stores etc. inmanufacturing, there are mills, bakery, press business, etc and also except purchasingmanufacturer organization also take loans to meet the working capital requirements. In servicebusiness, there are pathology, hospitals and satellite business. Though in our country there isnot much manufacturing organization, so most of the demands go for trading business.However it is a small and medium enterprise, therefore it focuses on small loan clients thatare small types of business like trading, manufacturing, and service. Basicallymanufacturing clients take medium or low amount of loan during short period of time.7.1.2 Bases for Segmenting Consumer MarketsThere is no single way to segment a market. A market has to try different segmentationvariables, alone and in combination, to find the best way to view the market structure. Geographic segmentation:Dividing a market in to different geographic units such as nations, states, region, countries,cities, or neighborhood. In terms of SME, it targets every region around the country in termsof small business. Now the SME has almost 429 unit offices to provide credit facilities to theclients around the country. Each of the SME unit offices mainly setup the district levelsaround the city but not in the rural or undeveloped areas. However, where the potentialenterprises/businesses are more, SME try to develop unit office at that particular region/area tocapture the entire market. Demographic Segmentation:Dividing the market in to groups based on demographic variables such as age, sex, family,income, education, religion, and nationality. In terms of SME, in some cases it is very strict. If
  • SME Banking Activities of BRAC Bank LimitedPage | 90one who has Hindu religion and live close to the border, SME would have very careful toprovide loans to those clients. SME provide loans 20-60 aged peoples. SME is restricted toprovide loans more than age of Behavioral Segmentation:Behavioral segmentation divides buyers in to groups based on their knowledge, attitude, usesor responses to a product. Many marketers believe that behavior variables are the best startingpoint for building market segments. In terms of SME, few clients would be found those whohad done Masters and most of clients are secondary or higher secondary pass. But basicallySME segments clients at least whether the clients can understand his/her own business. SMEgives very importance on attitude. At the first sight if any client behaves rough then CROnever go to that particular client.7.2 Target ConsumerTo succeed in today‘s competitive marketplace, organization must be customer centered andkeeping them by delivering greater value. But before it can satisfy customers, organizationmust first understand their needs and wants. There are too many different kinds of consumerswith too many different kinds of needs and some organizations in a better position to servecertain segments of the market. In terms of SME of BRAC bank, their target customers aresmall and medium enterprises. BRAC bank SME target customers those who have minimumincome of 40-70 thousand Tk. per month. Mostly entrepreneur‘s in our country is illiterate.Some of them are higher secondary and BSC graduate. So SME mainly targeted those clientswho actually understand his own business. There are three sectors of target customers whichSME follows: Trading, Service and Manufacturing. Basically according to the clients demand,SME support them financially to enhance their business.
  • SME Banking Activities of BRAC Bank LimitedPage | 917.3 Target MarketIt is the process of evaluation of each market segment and after then selecting one or moresegments to enter into the target market. In terms of SME, the scope is specified in whichthe target market is small and medium enterprise. However, SME is restricted for leather,jewelry, and alcohol business.7.4 Differentiated marketingUsing a differentiating marketing strategy, an organization decides to target severalmarkets or niches and designs separate offers for each. Basically it provides the loanwithin 25 days and gives the highest months to repay the loan than other banks. In termsof trading business, if the business is not too big then SME is not allow to give more than20 months to repay the loan. On the other hand, in case of manufacturing business, if thebusiness is too big then SME gives the client gross period and more than 30 months torepay the loan. SME also categorizes the dealings with the customers in A, B & C groups.A-Categories officers are dealing with the educated clients, like masters or above or highlysocial client.B-Categories officers are dealing with the undergraduate or normal standard clients.C- Categories officers are dealing with the non-educated or illiterate normal clients.7.4.1 Market PositioningMarket positioning means to occupy a clear, distinctive and desirable place relative toaccomplish products in the minds of target consumers. To meet the customer demands,SME already establish different offices across the country. Before taking the loan CROclearly defines to the clients regarding SME policies and repayment schedules. Topositioning in the market, SME not only provide loan but also they give some valuableideas to enhance the clients business and for economic development.Once a company decides in which segments of the market it will enter, it must decide whatpositions it wants to occupy in those segments. A products positioning in the way theproduct is defined consumers mind relative to competing product.Main head office of SME is in Dhaka city and rest of its unit offices are spread outsurrounding the country. Each unit office consist of 2 or 3 CRO who provides door to doorservices, they even work at night. Many banks have field officers but could not carry outthe unit office facilities. So BRAC bank can reach to the potential clients at anywhere inthe country. The CRO of SME never say to the customer at the first impression that
  • SME Banking Activities of BRAC Bank LimitedPage | 92interest rate is 24%. They try to make understand to the clients mind that 2% per month orequal monthly payment as well as many benefits.7.4.2 Unique Selling Propositions Facilities- the main facility of SME is toprovide quick service to the clients, which might take 15 to 20 days. Hypothecation loansare collateral security free which other banks take securities. If any clients got seriousproblem in business after taking SME loans then it gives reschedule to repay the clientsloan. While taking repeat loan SME provide various facilities to the clients.7.4.3 Different features- IFC and Shore banks are going to carry out equityparticipation with BRAC bank. It will deposit more funds to provide more loans to theclients, which cover around the whole country7.4.4 Different services- to get the loan, client do not have to go in bank directly. Allsorts of work are done by the CRO for clients to have the loan quickly. In terms ofnecessities CRO go to clients home and bring repayments of the loan. In favor of clients,CRO also work in holidays.7.4.5 Marketing Strategies for Competitive AdvantagesTo be successful the company must do a better job than its competitors for satisfyingtarget consumers. Thus marketing strategies must be geared to the needs of consumers andalso to the strategies of competitors. The core competency of SME is that it already set upthe business around the country and marketing officers go to the door to door to theclients. On the other hand, it provides the highest amount for unsecured loans than otherbanks. In addition, it provides extremely quick services to clients by getting the loan.7.5 Developing Marketing MixThe set of controllable tactical marketing tools- product, price, place and promotion thatthe organization blends to produce it wants in the target market. The many possibilitiescan be controlled into four groups of variables known as the four P’s: Product, Price,Promotion and Place.7.5.1 ProductMeans the goods and services combination the company offers to the target market. Inview of SME, they have short term and medium term loans whether CRO providequick and quality services to clients. Customer service is another element of product
  • SME Banking Activities of BRAC Bank LimitedPage | 93strategy. A company designs its products and support services to profitability meet theneeds of target customers. Short terms products means 3/6/9/12 months loan andmidterm product means 15/18/24/30/36 months loan. For example- in Eid occasionmost cloth merchants want short-term loan to carry out a profitable business.Short Term ProductsEasy repay- these categories of products are easy repaid for the clients. When the pickseason comes like Christmas/Eid/Puja then these short-term products could be requiredfor the clients. If the clients can exercise these types of loan at the pick season thenclients business carry out like hot cakes and easily can repay the loan to BRAC bank.Short-term fund requirement- without pick season, many clients could have requiredshort funds to hold the tender or dealership. BRAC bank would be a good hand for theclients to have that dealership.Mid Term ProductsProper Utilization- on average, clients get these categories of loan for 18 to 24 months.So clients can easily utilize the money regarding the prospect of the business.Easy repay- though it is a long time repayment schedule, so clients make the profits to getthe required amount of loan and repay the loan in a monthly basis.PricePrice is the amount of money customers have to pay to obtain the products. In terms ofSME of BRAC bank, clients have to pay a certain amount of processing fees and stampcosts to get the loan. One of the factors that affect the company‘s own pricing moves. Forexample- many banks have processing fees with 1% or 2% additional charge and othermiscellaneous costs. But BRAC bank has withdraws other costs and charges to carry outin the competitive market.• Costly- BRAC bank SME interest rate is 24%. So it is little bit of costly by thecompetitive edge but the client gets this loan within very short period of time. In thissituation client cannot think about the interest rate because at the right time they get theloan, which they can exercise in their business, can yields profits.
  • SME Banking Activities of BRAC Bank LimitedPage | 94• Easy sanction- If the CIB (Credit Information Bureau) is being cleared from BangladeshBank and all information is being transparent from client then the loan is becomesanctioned in favor of client.• All time consultancy- Whether the customers take loan or not, CRO‘s give the moraladvices to the clients for the development of the business.Place (Distribution)It includes company‘s activities that make the product available to target consumers. SMEalready spread out its unit offices around the country. SME tries to reach each and everysmall business enterprise to meet client‘s demands. Marketing channel decisions areamong the most important decision that management faces. Management must makechannel decision carefully, incorporating today‘s needs with tomorrow like sellingenvironment. SME of BRAC bank already has 429 unit offices, which is spreadthroughout the country and 1309 CRO‘s working under these unit offices. These officershave respective selected supervisors who directly report to the SME main head office. SoSME division has everywhere in Bangladesh to serve all respective clients.PromotionIt means activities that communicate the merits of the product and persuade targetcustomers to buy it. For example- up to 8 lacs taka SME don‘t take collateral security toprovide loan. Also for the repeat borrowers SME discounts up to 6% interest rate and Tk.1000 for the respective client. Advertisement is one of the major elements in promotion.SME is focusing customers by printing various leaflets, magazines and showing banners infront of their respective unit offices.Door to door service- it is a door-to-door customer services to clients. CRO knock thedoor of the business enterprise whether the client has required any loan or not.Market to non-Bank people: Some clients do not maintain any account in the bank. Theyare dealing by cash. By providing BRAC bank loans, these sorts of clients can be attachedwith the banks. In addition, they can understand more about banking and can have a goodrelationship with them.
  • SME Banking Activities of BRAC Bank LimitedPage | 95Chapter - 8Comparative analysis
  • SME Banking Activities of BRAC Bank LimitedPage | 968.0 Comparative analysis of SME Credit Scheme of SixDifferent Banks currently Available in BangladeshAbout the Sample BanksDhaka Bank Ltd.The Bank started branch operations at Belkuchi Sirajgonj in April 2003. Prior to theBank‘s intervention, the weaving community did not have the financial strength to stocktheir products till ―Eid ul Fitr‖ when the annual sale takes place. Traders were takingadvantage to the situation by buying up entire productions at low prices and liquidatingstocks just before ―Eid‖. With financial services from Dhaka Bank Limited, the weavershave converted to power looms, significantly increased profitability and reduced theinvolvement of middlemen. Already they have identified several clusters and are workingon improving access to finance within these clusters.Dutch-Bangla Bank Ltd.Dutch-Bangla Bank Limited (the Bank) is a scheduled commercial bank. The Bank wasestablished under the Bank Companies Act 1991 and incorporated as a public limitedcompany under the Companies Act 1994 in Bangladesh with the primary objective tocarry on all kinds of banking business in Bangladesh. The Bank is listed with Dhaka StockExchange Limited and Chittagong Stock Exchange Limited. DBBL a BangladeshEuropean private joint venture scheduled commercial bank commenced formal operationfrom June 3, 1996. The Bank commenced its banking business with one branch on 4 July1996. The bank opened SME windows in 2001.Prime Bank Ltd.As per decision of the Board of Directors of Prime Bank Ltd. in its 78th meeting held on17.11.1999, ―Small & Medium Enterprise (SME) Cell‖ has already been established atHead Office under the Credit Division. Now the bank can replicate quality anywhere inthe world. So, the competitive differentiation comes from swiftness to market andinnovation. And in this regard, small companies‘ right down to the individual can beat bigbureaucratic companies ten out of ten times.Mercantile Bank LtdMercantile bank is a third generation commercial bank. It has opened SME windows in1999 to encourage the small business activities.
  • SME Banking Activities of BRAC Bank LimitedPage | 97Eastern Bank LtdSmall and Medium Enterprises (SME) in Bangladesh contributed 25% of gross domesticproduct (GDP) and 80% of the industrial jobs of the country in 2004. According to ADB, thecountrys estimated 6 million SMEs and micro enterprises firms of less than 100 employeeshave a significant role in generating growth and jobs. This is a sector that has its own distinctneeds and requires specialized focus. Eastern Bank Ltd. (EBL) has launched SME Banking inearly 2005 with this view in mind. Eastern Bank Ltd. Services in SME:•Provide SMEs with easy access to financing.•Deliver products that ensure superior returns to our customers.•Orient customers with industry trends, regulatory issues etc, for their success.•Value long-term relationship bankingBRAC Bank Ltd.The BRAC Bank ltd started its operation in 2001. The SME portfolio includes• Prothoma Rin Exclusively designed for women• Anonno Rin This is a small-scale loan• Apurbo Rin In order to help our SME• Supplier Finance8.1 Criterion for Sample Selection:The banks for comparative analysis have been chosen in the basis of the followingcriterion:Loan size1. Prime Bank Ltd – Taka 1 Lac to Taka 75.00 Lacs2. Dhaka Bank Ltd - Taka 0.50 Lac to Taka 50.00 Lacs3. Eastern Bank Ltd- Taka 1 Lac to Taka 300.00 Lacs4. Mercantile Bank Ltd- Taka 0.50 Lac to Taka 2.00 Lacs5. Dutch-Bangla Bank Ltd- Taka 3 Lac to Taka 50.00 Lacs6. BRAC Bank Ltd- Taka 3 Lacs to Taka 30.00 LacsAmong the banks EBL offers the highest loan amount to the customers where as theBRAC bank offers the lowest loan to its customers.8.1.2 Rate of interest1. Prime Bank Ltd – 13% to 15% p.a.2. Dhaka Bank Ltd - 12% to 13% p.a.
  • SME Banking Activities of BRAC Bank LimitedPage | 983. Eastern Bank Ltd- 14% to 15% p.a.4. Mercantile Bank Ltd- 15% p.a.5. Dutch-Bangla Bank Ltd- 13% to 15% p.a.6. BRAC Bank Ltd- 18% to 24% p.a.In terms of interest rate the Dhaka Bank Ltd offers the lowest rate of interest to itscustomers. The highest rate is charged by BRAC Bank Ltd. The Mercantile Bank Ltd.have the only bank that offers fixed rate for any loan customers.8.1.3 Loan processing fees1. Prime Bank Ltd – .50 % of the loan amount.2. Dhaka Bank Ltd - .00 % of the loan amount.3. Eastern Bank Ltd- not available4. Mercantile Bank Ltd- not available5. Dutch-Bangla Bank Ltd- not available6. BRAC Bank Ltd- .50 % of the loan amountAll the banks do not provide data about loan processing fees to their customers. The primebank and BRAC bank limited only charges .50% as loan processing fess8.1.4 Period of loan1. Prime Bank Ltd – 1 to 5 years.2. Dhaka Bank Ltd – 1 to 3 years.3. Eastern Bank Ltd- up to 1 year.4. Mercantile Bank Ltd- up to 2 years.5. Dutch-Bangla Bank Ltd- 1.5 to 5 years. 6. BRAC Bank Ltd- 1 to 3 years.Among the banks the highest loan maturity date is offered by DBBL and Mercantile BankLimited offers the lowest maturity period8.1.5 Mode of Finance1. Prime Bank Ltd – Term loan and working capital loan2. Dhaka Bank Ltd – Term loan and working capital loan.3. Eastern Bank Ltd- Only working capital loan4. Mercantile Bank Ltd- Only term loan]6. BRAC Bank Ltd- Only term loan ]All theBanks providing SME financing facilities do not provide long-term loan to its customers.Among the banks Prime and Dhaka Bank limited both provides term loan and working
  • SME Banking Activities of BRAC Bank LimitedPage | 99capital loan to their customers. Other bank either provides term loan or working capitalloan to its customers.8.1.6 Comparative Analysis of SME Credit Scheme of Six DifferentBanks
  • SME Banking Activities of BRAC Bank LimitedPage | 1008.1.7 ManagementOverall the management of the banks engaged in SME banking is efficient and havediverse knowledge of banking sector. BRAC bank has initiated to provide training ofstaffs for well managing the SME customers.From the table we can see that the BRAC bank has the highest investment in the SMEsector followed by Eastern Bank Ltd. in second position. While the Prime Bank Ltd.,Dutch-Bangla Bank Ltd., Mercantile Bank Ltd. and Dhaka Bank Ltd. are third, forth, fifthand sixth respectively8.1.8 Portfolio Size of different banks in SME SectorFrom the table we can see that the BRAC bank has the highest investment in the SMEsector followed by Eastern Bank Ltd. in second position. While the Prime Bank Ltd.,
  • SME Banking Activities of BRAC Bank LimitedPage | 101Dutch-Bangla Bank Ltd., Mercantile Bank Ltd. and Dhaka Bank Ltd. are third, forth, fifthand sixth respectively.8.2 Portfolio Size of Six different banks in SME Sector
  • SME Banking Activities of BRAC Bank LimitedPage | 102Chapter - 9SWOT ANALYSIS OF BBL
  • SME Banking Activities of BRAC Bank LimitedPage | 103SWOT analysis is an important tool for evaluating the company‘s Strengths, Weaknesses,Opportunities and Threats. It helps the organization to identify how to evaluate itsperformance and scan the macro environment, which in turn would help organization tonavigate in the turbulent ocean of competition.9.1 STRENGTHSCompany reputationBRAC bank has already established a favorable reputation in the banking industry of thecountry particularly among the new comers. Within a period of 8 years, BBL has alreadyestablished a firm footing in the banking sector having tremendous growth in the profitsand deposits. All these have lead them to earn a reputation in the banking fieldNGO name (BRAC)BRAC is one of the largest NGO of the world and it is operating its activities inBangladesh. BRAC bank is not a NGO bank but many people of them country consider itas a NGO bank like Grameen Bank which is not correct.SponsorsBBL has been founded by a group of eminent entrepreneurs of the country havingadequate financial strength. The sponsor directors belong to prominent resources personsof the country. The Board of Directors headed by its Chairman. Therefore, BBL has astrong financial strength and it built upon a strong foundation.Top ManagementThe top management of the bank is also major strength for the BBL has contributedheavily towards the growth and development of the bank. The top management officialshave all worked in reputed banks and their years of banking experience, skills, expertisewill continue to contribute towards further expansion of the bank. At BBL, the topmanagement is the driving force and the think tank of the organization where policies arecrafted and often cascaded down.Facilities and equipmentBBL has adequate physical facilities and equipments to provide better services to thecustomers. The bank has computerized and online banking operations under the softwarecalled Finacle banking operations. Counting machines in the teller counters have beeninstalled for speedy service ant the cash counters. Computerized statements for thecustomers as well as for the internal use of the banks are also available.
  • SME Banking Activities of BRAC Bank LimitedPage | 104Impressive branchesThis creates a positive image in the minds of the potential customers and many people getattracted to the bank. This is also an indirect marketing campaign for the bank forattracting customers. 56 branches of the bank are impressive and are compatible to foreignbanks.Interactive corporate cultureBBL has an interactive corporate culture. Unlike other local organization, BBL‘s workenvironment is very friendly, interactive and informal. There are no hidden barriers orboundaries while interacting among the superior or the subordinate. The environment isalso lively and since the nature of the banking job itself is monotonous and routine, BBL‘slikely work environment boosts up the spirit and motivation of the employees.Team work at mid level and lower levelAt BBL‘s mid level and lower level management, there are often team works. Many jobsare performed in groups of two or three in order to reduce the burden of the workload andenhance the process of completion of the job. People are eager to help each other andpeople in general are devoted to work.9.2 WEAKNESSESAdvertising and promotion of SME loan This is a major setback for BBL andone of its weakest areas. BBL‘s advertising and promotional activities are satisfactory butit SME loan is not advertised well. It does not expose its SME product to general publicand are not in lime light. BBL does not have neon sign or any advertisement for SME loanin the city. As a result people are not aware of the existence of this bank.Low remuneration packageThe remuneration package for the entry and the mid level management is considerablylow. The compensation package for BBL entry level positions is even lower than thecontemporary banks. Under the existing low payment structure, it will be very difficult toattract and retain higher educated employees in BBL. Specially CRO‘s are not satisfiedwith compensation package provided to them.
  • SME Banking Activities of BRAC Bank LimitedPage | 1059.3 OPPORTUNITIESDiversificationBBL can pursue a diversification strategy in expanding its current line of business. Themanagement can consider options of starting merchant banking or diversify in to leasingand insurance. By expanding their business portfolio, BBL can reduce their business risk.Product line proliferationIn this competitive environment BBL must expand its product line to enhance itssustainable competitive advantage. As a part of its product line proliferation, BBL canintroduce the following products.ATM This is the fastest growing modern banking concept. BBL should grab thisopportunity and take preparation for launching ATM. Since BBL is a local bank, they canform an alliance with other contemporary banks in launching the ATM.9.4 THREATSMultinational banksThe emergence of multinational banks and their rapid expansion poses a potential threat tothe new growing private banks. Due to the booming energy sector, more foreign banks areexpected to arrive in Bangladesh. Moreover, the already existing foreign banks such asStandard Chartered are now pursuing an aggressive branch expansion strategy. This bankis establishing more branches countrywide and already launched is SME operation. Sincethe foreign banks have tremendous financial strength, it will pose a threat to local banks.Upcoming banksThe upcoming private local banks can also pose a threat to the existing private commercialbanks like BBL. It is expected that in the next few years more local private banks mayemerge. If that happens the intensity of competition will rise further and banks will have todevelop strategies to compete against an on slaughter of foreign banks.Contemporary banksThe contemporary banks of BBL such as Dhaka bank, prime bank and Dutch Bangla areits major rivals. Prime bank and other banks are carrying out aggressive campaign toattract ucrative clients as well as big time depositors.
  • SME Banking Activities of BRAC Bank LimitedPage | 106Chapter -10Findings & Recommendation
  • SME Banking Activities of BRAC Bank LimitedPage | 10710.1 FindingsBRAC Bank, as we know, is one of the fastest growing banks in Bangladesh. SMEbanking which has made the performance of this bank so enlightened is its core product tooffer to the small and mediocre business entrepreneurs. In fact no businessman could thinkever before that they could take loan so easily, without any collateral and without going tobank. But BRAC Bank has made this improbable process so successfully through SMEbanking.However from the analysis of SME loan repayment behavior I can make the followingfindings:Age have a significant impact on the recovery of SME loan. Young entrepreneurs have alower rate of recovery. On the other hand as middle aged and experienced entrepreneursare very loyal with their loan repayment they can make proper and timely repayment oftheir loans. And that‘s why most of the SME loan borrowers age rages from 30 to 40.Education does not have any direct relationship with the recovery rate. In fact, Most of theentrepreneurs of retail and whole business (small or medium in size) are not highlyeducated. Most of them studied up to class 9 or 10. Sometimes there are someentrepreneurs who have only alphabetic knowledge or who can give their signature only.But still they are running their business so well for many years. In this case experiencemakes them successful in their business. So, education does have much impact on thesesmall and medium enterprises and also on the recovery rate of SME loans.Experience is the most significant variable which has a great impact on any kind ofbusiness and recovery rate as well. Experienced entrepreneurs run their business sotactfully, identify the exact time what is their pick time of sales and when they need fund.They take the loan in the pick season when they have excess demand but short of capital.Then they ensures the best use of the loan and finally they reach to success and make thedully installments. So their recovery rate is good and that‘s why BRAC Bank looks alwaysfor experienced entrepreneurs.Number of installments (term of loan) and amount of loan taken do affect recovery rateslightly. But trends show that BRAC bank prefers to disburse loan of an amount of 300000and at a term of 18 to 24 months.
  • SME Banking Activities of BRAC Bank LimitedPage | 108Another variable affecting recovery rate very much is the income of the borrowers. Thehigher the existing income of the borrowers, the lower the rate of default. Higher incomegroups make the best use of the loan they have taken and get success. On the other handlower income group may misuse the loan and ultimately may default in payinginstallments.Personal or family asset might have some impact while sanctioning the loan as well aswhen recovering the loan installments. Suppose if a borrower fails to pay one of hisinstallments, bank can find his personal assets as back up for the recovery of theinstallments.Retail business and whole sale business both types of businesses get loans from BRACBank but whole sellers have a higher recovery rate as their business transactions occur atlot size and their collection is much quick.Finally we can say that SME loan is a loan given especially to entrepreneurs who areexperienced small or medium businessmen, more or less middle aged, at least moderateincome generated and who have reasonable personal or family asset. That‘s why theirrecovery rate is so high that is 97%. And their default rate is so small compared to otherloan categories. Sometimes borrowers go for early settlements of their loans.BRAC bank plays a vital role in the SME sector of Bangladesh. Up to April 2010, BBLprovides loans for 265,000 clients and in total 10,000 crore TK. BBL is the pioneer in theSME loan sector. They have taken different strategies for the development of this sector,because it is the main profitable product of BBL. In the recent years they launcheddifferent types of SME loan product for mitigate the different target customers needs.Throughout the survey analysis and 3 months internship period this reports found someshortfalls of SME sector of BBL. The findings of this report are given below:• Most of the customers want to reduce the interest rate and increase tenure.• Some customers are not satisfied with the attitude/behavior of CROs.• Huge number of documents in the helpdesk causes delay in the disbursement process• Zonal office can approve up to 5 lacs, but at present the percentage of repeat customer‘sincrease rapidly and most of the cases they apply for more than 5 lacs.• Lack of marketing activities in the urban area, whereas other competitors are giving moread at different spot.
  • SME Banking Activities of BRAC Bank LimitedPage | 109• The remuneration package for the entry and the mid level management is considerablylow. The compensation package for BBL entry-level position even lower than thecontemporary banks.• Some of the borrowers do not install a signboard in a visible place of business ormanufacturing unit mentioned that financed by ―BRAC Bank Limited‖.10.2 RecommendationFor better improvement of SME, BBL can consider the following recommendation: Reduce the interest rate because most of their competitors are providing loans at alower rate for example most of the competitors banks providing loan at 12-15%interest rate. Increase marketing activities in the urban area because othercompeting industries are given huge ad in urban area which helps them to increasetheir customer base. Give proper training to the CROs with some real life problem because they are allin all for SME loan. Sometimes they made a mistake which results in customerharassment, increase processing time and charges. Look after CROs activities by the ZOs because sometimes they are hidinginformation and make mistakes to prepare financial statements and otherdocuments. Increase amount of SME loan approval by the Zonal officer, at present they canapprove up to 5 lacs. Increase amount up to 10 lacs without collateral security for providing loans Recruit fresh ZOs from outside to control CRO grievances (since present ZOs aremostly promoted CROs who have joined the Bank all most at same time). Frequently check clients are perform all the terms and condition of SME loan. Provide loans to the leather and jewelers industry, because leather is the 3rdexporting product so it is better to encourage them for the economic developmentof Bangladesh Increase the remuneration and compensation package for the entry and mid levelmanagement otherwise BBL can‘t retain the efficient and experienced employees.Policy ImplicationsBRAC Bank Limited is proving itself as the fastest growing bank with establishing its36th branch only in 10 year of its journey and showing remarkable progress of its financial
  • SME Banking Activities of BRAC Bank LimitedPage | 110position with the mission of being countries leading bank providing world class services ina cost effective manner. This bank first introduced the SME loan in commercial bankingsector which help the people of poor society both in rural and urban area. SME loan is oneof such quality product through which they offer the small and mediocre entrepreneurs aquality banking services and earn the maximum profit as well. The recovery rate of thisloan is 97% which is extremely good in comparison to any other bank‘s recovery rate.BRAC Bank has made it possible as the loan is given to experienced, small and mediocreentrepreneurs most of whom are middle aged, slightly educated and having moderateincome and this class of people is very loyal. But they can serve this class of customerswith more commitment and loyalty and they can turn the recovery rate to 100%. For thisthey can make the following policy implications: Redefine mission/vision towards achievement of ―Double Bottom-line‖ Commit resources specifically for growth of SME business. Implement strict and continuous monitoring system of the whole recovery process. Train the Customer Relationship officers more comprehensively and realisticallyso that customers may not face any trouble while getting and repaying the loan. Analyze customers‘ behavior that what type of customer makes default and stopgiving them SME loan. Risk Management department‘s audit report should be more strict and reliable sothat possible defaulter may not get the loan. Whether the borrowers are utilizing the loan on the right purpose should beensured.10.3 ConclusionIt is a great pleasure for me to have practical exposure in BRAC Bank Limited becausewithout practical exposure it couldn‘t be possible for me to compare the theory withpractice and it is well establish that theory without practice is blind.There are number of commercial banks operating their activities in Bangladesh. TheBRAC Bank Limited is a promising one in them. For the future planning and thesuccessful operation in achieving its prime goal in this current competitive environmentthis report can be guideline.SME is the most emerging sector to expand and BRAC Bank has every potentiality toexplore the SME business throughout the country. This report presents some significantways to meet the future challenges in SME business. Nevertheless, the success of SME
  • SME Banking Activities of BRAC Bank LimitedPage | 111banking depends on the expertise and dedication of the field level officers. That is whycontinuous training and motivation is very much relevant to run the SME bankingsuccessfully.The information for the project ―Analysis of SME loan in BRAC Bank Limited ―bothwere collected from primary and secondary sources. For gathering concept of SME loan,the product program Guideline (PPG) thoroughly analyzed. Beside this observation,discussion with the employee of the SME department and loan administration division thesaid bank was also conducted. More over a market survey was conducted with a specificquestioner. To identify the implementation, supervision, monitoring, and repaymentpractice –interview with the employee and extensive of the existing file was and practicalcase observation was done.SWOT analysis is an important tool for evaluating the company‘s Strengths, Weaknesses,Opportunities and Threats. It helps the organization to identify how to evaluate itsperformance and scan the macro environment, which in turn would help organization tonavigate in the turbulent ocean of competition.
  • SME Banking Activities of BRAC Bank LimitedPage | 112Bibliography: Annual Report of BRAC Bank 20011. Annual Report of BRAC Bank 20010. Annual Report of BRAC Bank Limited 2009. Other short notes provided by BRAC Bank. Constraints of SME Development in Bangladesh by Najmul Hossain, October1998 Hmeple, Geore H. Bank Management, 2nd Edition 1986 Jhon Wiles & Sons. George Ruth. Commercial Lending, Amrican BankersAssociation, 1999 Role of Institutional Financing in the Development of Small and MediumEnterprise (SMEs) in Bangladesh, Dr. Momtaz Uddin Ahmed, SME Foundation.‐Bank‐Limited/164557134849?v=info BRAC Bank Bond Prospectus, BRAC Bank 2010
  • SME Banking Activities of BRAC Bank LimitedPage | 113
  • SME Banking Activities of BRAC Bank LimitedPage | 114Appendix 2Departments of BRAC Bank Limited• Human Resources Department• Financial Administration Department• Asset Operations Department• Credit Division• SME Division• Internal Control & Compliance Department• Marketing & Product Development• Impaired Asset Management• Remittance Operation Department• Treasury Front• General Infrastructure Service• Treasury Back• Information Technology Department• Customer Service Delivery• Payment Service• Cards Division• Secured Remittance department• Women Entrepreneur Cell• Cash Management• Call Center
  • SME Banking Activities of BRAC Bank LimitedPage | 115RESEARCH INSTRUMENTMy research instrument was a printed questionnaire to which I gave both close-endedquestions and open-ended questions. It is because to make an explanatory research and toeasily interpret nd tabulate our research work
  • SME Banking Activities of BRAC Bank LimitedPage | 116