Internship Presentation on Function & Process Involved in SME Banking of Mercantile Bank Ltd.

1. 9/14/2015 Prepared by Sazzad Hossain 1

2. Presentation on
“Function and Process Involved in
SME Banking of Mercantile Bank Ltd”
Prepared by
Sazzadf Hossain
ID#
12102434
Program : BBA
2015
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3. CHAPTER ONE
INTRODUCTION
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PART ONE: ORGANIZATIONAL PART

4. Objective of the Report
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5. The main concern was about SME financing Procedure under
Mercantile Bank Limited.
It also covers over view of the
how the bank defines SME,
what are the different SME products offered ,
how and why they are different from other products,
what are the constraints to obtain required finance by the SME,
what is the overall performance of the bank in the SME sector in
terms of loans disbursement and recovery.
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Scope of the report
5

6. Short Time Period
Data Insufficiency
Lack of Records
Poor Library Facility
Less Experience
Limitations
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7. CHAPTER TWO:
OVERVIEW
OF
THE ORGANIZATION
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8. Company Information
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Name of the Bank Mercantile Bank Limited
Status Public Limited Company
Date of Incorporation May20, 1999
Date of Commencement June 02, 1999.
Subscription for Shares October 21-22, 2003
Listed in Dhaka Stock Exchange February 16, 2004
Listed in Chitagong Stock Exchange February 26, 2004
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9. “Will become most caring, focused for equitable growth based on
diversified deployment of resources and nevertheless would remain
healthy and gainfully profitable Bank”
“Would make finest corporate citizen”
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Mission
Vision
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10. Mercantile Bank Securities Ltd. (MBSL)
formed on 27 June 2010 to deal with stock dealing and
broking.
Mercantile Exchange House (UK) Limited
incorporated as private limited company on December 01,
2010 London with a view to providing faster remittance
services to the Bangladeshi living and working in UK.
Subsidiaries
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11. Objectives of the Organization
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12. Product and Service
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13. Product and Service
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14. CHAPTER THREE:
ORGANIZATIONAL ANALYSIS
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15. Prepared by Sazzad Hossain
Board of Directors
Chairman Morshed Alam, M.P
Vice Chairman A. S. M. Feroz Alam
M. S. Ahsan
Director
Alhaj Akram Hossain
(Humayun)
Dr. Mahmood Osman Imam,
MBA, FCMA
Md. Shahabuddin Alam
Md. Anwarul Haque
M. Amanullah
Md. Abdul Hannan
Mohd. Selim
A.K.M. Shaheed Reza
Alhaj Mosharref Hossain
Dr. Md. Rahmat Ullah
Managing Director & CEO M. Ehsanul Haque
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17. 9/14/2015 Prepared by Sazzad Hossain
Corporate Culture
 The client comes first.
 Search for professional excellence.
 Openness to new ideas & new methods to encourage creativity.
 Quick decision-making.
 Flexibility and prompt response.
 A sense of professional ethics.
Internal Environment Analysis
17

18. Authorized
Capital
Size:Taka
1,910.39
Crore
Total Loans
and
Advances:
Taka
11,706.00
Crore
Total
Deposit:
Taka
13,499.65
Crore
Capital
Surplus: Taka
435.55 Crore
Paid-Up
Capital:
Taka 868.43
Crore
Interest Earning
Assets: Taka
13,971.20 Crore
Income
from
Investment:
Taka 279.60
crore
FINANCE
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Corporate Resources
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19. Internal Environment Analysis cont…
Marketing
offers a wide range of
conventional financial
products.
has an array of tailor-
made financial products
and services.
24 hours banking services
through Debit/Credit
cards.
The Bank launched “My-Cash”
Banking.
R & D
launched Temenos T24
online system.
has introduced customer
relations management
system.
has also introduced full
Online Banking facility to
the customer.
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20. Internal Environment Analysis cont…
HRM
employee turnover in MBL is
acceptable
MBL follows a structured
recruitment policy for fresh
and experienced officers
using training institutes of
HRD to train its
professionals
IT
connected through VSAT
and fiber optic cable link
used Personnel Management
Information System (PMIS),
CIS, Foreign Exchange
Returns software etc
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21. External Environment Analysis
Porter’s 5 forces Model
Criteria Range Facilities Situation
Bargaining
Power of Buyers Low Opportunities favorable
Bargaining
Power of Suppliers Medium Threat Unfavorable
Threat of
New Entrants Medium Opportunities Favorable
Threats of Substitutes Moderately
Low
Opportunities
Unfavorable
Threat of Rivals High Threats Unfavorable
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22. Prepared by Sazzad Hossain
SWOT Analysis
Strengths
 Good Assets quality.
 Satisfactory business growth.
 Diversified product line.
 Good profitability.
 Experienced top management.
Weaknesses
 Depends on fixed deposit.
 Limited delegation of power.
 MIS at primary stage.
 Limited branch network.
Opportunities
 SME business.
 Real time online banking.
Threats
 Increased compliance in the market.
 Market pressure for Dollar crisis.
 Market pressure for increasing the
SLR.
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23. 
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Distribution of Market Share
Graphical Analysis of Financial Position
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24. 
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Graphical Analysis of Financial Position
Return on Investment ( ROI ) Return on Asset (ROA)
2014 2013 2012 2011 2010
Ratio 1.91% 2.36% 1.31% 0.93% 0.84%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
ROI
2014 2013 2012 2011 2010
Ratio 0.76% 1.33% 1.03% 1.70% 1.86%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
2.00%
ROA
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25. 
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Return on Equity (ROE) Earnings per Share (EPS))
Graphical Analysis of Financial Position
2010 2011 2012 2013 2014
Ratio 24.83% 20.59% 13.42% 16.84% 9.11%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
ROE
2010 2011 2012 2013 2014
BDT 2.87 2.84 2.09 3 1.61
0
0.5
1
1.5
2
2.5
3
3.5
EPS
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26. 
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Price Earnings Ratio Debt Ratio
Graphical Analysis of Financial Position
2010 2011 2012 2013 2014
Times 8.62 13.83 12.21 12.88 14.14
0
2
4
6
8
10
12
14
16
P / E Ratio
2010 2011 2012 2013 2014
Debt Ratio 0.92 0.94 0.94 0.91 0.92
0.895
0.9
0.905
0.91
0.915
0.92
0.925
0.93
0.935
0.94
0.945
Debt Ratio
26

27. Chapter Four
Sectional Analysis (SME
Banking)
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28. Small & Medium Enterprise
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
to the stock exchange for raising capital
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29. Small
Enterprise
Medium
Enterprise
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Sectors The amount of
fixed assets
excluding land &
building
Number
of labor
Service 50,000-50,00,000 25
Trading 50,000-50,00,000 25
Manufacturin
g
50,000-1,50,00,000 50
Sectors The amount of fixed
assets excluding land
& building
Number
of labor
Service 50,00,000-
10,00,00,000
50
Trading 50,00,000-
10,00,00,000
50
Manufacturin
g
1,50,00,000-
20,00,00,000
150
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30. Prepared by Sazzad Hossain
SME financing of MBL
follow a separate business strategy in financing SME loan.
priority is given to small entrepreneurs.
settle the loan disbursement process within very reasonable time
from the date of acceptance of the application.
establish a separate ‘Women Entrepreneurs Dedicated Desk’ with
necessary and suitable manpower.
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31. Services of SME Loan
MOUSUMI
(Short Term
Single Payment
Seasonal Loan).
CHAKA
( Term loan )
ANANNYA
(Women
Entrepreneur
’s Loan).
SAMRIDDHI
(Continuous
Loan)
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32. Prepared by Sazzad Hossain
S
L
Product
Name
Nature Maximum
Loan
Tenor
Inter
est
Rate
Loan Type
1 Chaka Term loan 3 years 15% Equal Monthly
Installment
2 Ananya Women
Entrepreneur
loan
3 years 10% Equal Monthly
Installment
3 Samriddhi Continuous loan 3 years 13% Equal Monthly
Installment
4 Mousumi Short term
Seasonal loan
Maximum
09 months
15% Single
Installment
Services procedure of SME Loan
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33. Preliminary Steps for Loan Processing
Relation building or Customer acceptance
Identification of Customer Needs.
i. For Working Capital (W/C) Finance
ii. For Fixed Asset (F/A) Finance
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34. • Applicant’s Required Papers:
Trade License of business (Up to Date).
T.I.N Certificate.
Voter ID / National ID.
Photograph four (4) copies.
Original rental deed copy of Shop / Business
institute.
Bank Statement 12 months.
Recent Electricity bill of shop/Business institute.
Recent electricity bill of residence. (If applicable)
Recent rents recite copy of Shop / Business
institute.
Photograph of Shop / Business institute (6-8).
Name, Relation, Profession, Address & Mobile No.
of four (4) close relatives.
Pad of Shop/Business institute (10).
Documentation Required to Apply ( Applicant)
• Required Financial Information:
Stock to be purchased from proposed loan amount and
their value & quantity.
Yearly operating expenses of the client’s business
Current receivable and buyer list.
Current payable and supplier list.
Fixed assets list
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35. Documentation Required to Apply (Guarantor)
1. Spouse Guarantor
Voter ID / National ID.
Photograph two (2) copies.
2. Relative Guarantor
Voter ID / National ID.
Photograph two (2) copies.
Visiting Card. (If applicable).
Trade License of business Up
to Date. (If applicable)
3. Business Guarantor
 Voter ID / National ID.
 Photograph two (2) copies.
 Visiting Card.
 Trade License of business
 TIN certificate.
 Recent electricity bill of
residence.
4. Guarantor- Permanent
Residence in Dhaka
 Voter ID / National ID.
 Photograph two (2) copies.
 Visiting Card.)
 Trade License of business
 TIN certificate.
 Recent electricity bill of
residence.
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36. Assess CHARACTER: Willingness to Pay.
Assess CAPACITY: Ability to Pay.
Assess Market CONDITIONS.
Assess CAPITAL of Borrowers
Assess COLLATERAL against loan.
Credit Assessment by MBL
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37. 9/14/2015 Prepared by Sazzad Hossain
Secondary Steps for Loan Processing
Drafting of Proposal & Recommendation
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38. 9/14/2015 Prepared by Sazzad Hossain
Credit Risk Grading
Loan Status Overdue Installments Provision percentage
Unclassified Less than 3 1%
Specially Mentioned
Account (SMA)
3 installments 2%
Substandard 6 installments 20%
Doubtful 12 installments 50%
Bad Debt 18 installments 100%
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39. 9/14/2015 Prepared by Sazzad Hossain
Credit Recovery
Days Past Due
(DPD)
Collection Action
1-14  Letter, Follow up &Persuasion over phone
15-29  1st Reminder letter & Serial. No. 1 follows
30-44  2nd reminder letter + Single visit
45-59
 3rd reminder letter
 Group visit by team member
 Follow up over phone
 Warning on legal action by next 15 days
60-89
 Call up loan
 Final Reminder & serve legal notice
 Legal proceedings begin
 Repossession starts
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40. PART 2
ACTUAL TASK PART
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41. • Joining date: 17 May 2015.
• Leaving date: 17 August 2015.
In the period of my three months internship program, I have got a Job
in Mercantile Bank limited .
I am now Direct Sales Executive ( DSE )
My main job specification and responsibilities are in General Banking
Department and SME Loan Recovery.
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42. 9/14/2015 Prepared by Sazzad Hossain
Account Opening Section
Current Deposit (CD) Account
Sl No. Month A/c No Amount
1st Month May, 2015 24 Accounts Tk. 1,00,00,000/=
2nd Month June, 2015 21 Accounts Tk. 1,33,00,900/=
3rd Month July, 2015 25 Accounts Tk. 90,90,000/=
Savings Bank (SB) Account
Sl No. Month A/c No Amount
1st Month May, 2015 50 Accounts Tk. 10,00,000/=
2nd Month June, 2015 40 Accounts Tk. 5.50.00/=
3rd Month July, 2015 39 Accounts Tk. 4,90,000/=
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43. 9/14/2015 Prepared by Sazzad Hossain
Account Opening Section
Monthly Saving Scheme (MSS)
Fixed Deposit Receipt (FDR) Account
Sl No. Month A/c No Amount
1st Month May, 2015 122 Accounts Tk. 2,00,000/=
2nd Month June, 2015 101 Accounts Tk. 1,49,000/=
Sl No. Month A/c No Amount
1st Month May, 2015 49 Accounts Tk. 62,00,000/=
2nd Month June, 2015 62 Accounts Tk. 49,00,000/=

44. SME Section
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45. 9/14/2015
SME Loan Sanction Amount
Activities 1st 10 days 2nd 10 Days 3rd 10 Days
Demand Promissory Note 23 26 25
Letter of Undertaking 20 16 17
Letter of Arrangement 15 15 17
Letter of lien for FD/SD 12 13 12
Letter of Disbursement 10 12 12
Letter of Installment 09 12 12
Letter of Authority 09 10 10
Letter of Continuity 06 07 09
Letter of Guarantee (1st) 05 07 09
Letter of Guarantee ( 2nd) 05 07 09
Letter of Guarantee (3rd) 05 07 09
Letter of Hypothecation 05 05 08
Supplementary Agreement 05 05 08
Letter of Revival 05 05 08
Letter of Bank Agreement 05 05 08
Total SME loan process(in No.) 05 Borrowers 05 Borrowers 08 Borrowers
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46. 9/14/2015 Prepared by Sazzad Hossain
SME Recovery
Dated Target Recovery Recovery
Amount (BDT)
June 28,2015
–
July 08, 2015
12 Borrowers 7 Borrowers BDT 35,00,000
July 09,2015
–
July 18, 2015
10 Borrowers 8 Borrowers BDT 24,00,000
July 19,2015
–
July 28, 2015
13 Borrowers 13 Borrowers BDT 52,00,000
46

47. PART 3:
PROJECT PART
P R E P A R E D B Y S A Z Z A D H O S S A I N 47

48. RESEARCH PROBLEM/ TOPIC
Survey Research on
“Problems and Prospects of SME Loan Management:
A Study on Mercantile Bank Limited,
Ashulia Branch”
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49. Description of Activities Days
Develop Research Methodology 5 Days
Making the research plan 5 Days
Developed the hypothesis 6 Days
Conduct survey research 7 Days
Data analysis and Findings with Interpretation 7 Days
Total Duration 30 Days
Project Time Line
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50. Cost & Budgeting
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Particular’s Amount (tk)
Transportation 1200
Printing, Photocopy & Binding 1100
Cell phone & Internet Bill 400
Others Expenses 200
Total 2900
50

51. Sources and collection of data
The data of this study has been collected through questionnaire and interview.
For the secondary sources, information has been collected from different
journals, articles, research publications and internet.
Primary Data:
Questionnaires with Structure question by the survey of SME Loan Receivers.
Secondary Data:
Website of Mercantile Bank Limited.
Practicum Report
Course lecture Sheet
Annual report
Hand note provided by Mercantile Bank Limited
Internet
Methodology
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52. Prepared by Sazzad Hossain9/14/2015 52

53. 1. HA: MBL follows the strict procedure to Borrower’s assessment in SME loan.
2. HA: MBL ensures less time consumption for sanctioning SME loan.
3. HA: The interest rates of SME Loan of the bank are higher compared to other
banks.
4. HA: Women Entrepreneur’s loan is available without collateral.
5. HA: Loan repayment period is reasonable to repay for the SMEs loan by the
Borrowers.
6. HA: MBL Recovery procedures are effective to recovery the SME loan
7. HA: SME loan facilities of the bank are standard for getting loan to the
borrowers.
Hypothesis Development
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54. Hypothesis Testing
Prepared by Sazzad Hossain
H1 H2 H3 H4 H5 H6 H7
1.Strongly disagree
5 9 2 3 10 6 12
2.Disagree
4 13 7 3 14 4 12
3.Neither agree
nor disagree 5 3 6 3 3 5 2
4.Agree
14 6 11 18 5 11 5
5.Strongly Agree
8 5 10 9 4 10 5
Total
124 93 128 135 87 123 87
Average (ẋ)
3.44 2.58 3.56 3.75 2.42 3.42 2.42
Standard
Deviation ()
1.32 1.38 1.23 1.16 1.32 1.69 1.18
Z-TEST VALUE
4.27 0.35 5.16 6.47 0.36 3.25 0.41
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55. Hypothesis Calculation
Prepared by Sazzad Hossain
14%
11%
14%
39%
22%
H 1
Strongtly disagree
Disagree
Neither agree or Disagree
Agree
Strongly agree
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56. Hypothesis Calculation
Prepared by Sazzad Hossain
19%
41%9%
19%
12%
H 2
Strongly Disagree
Disagree
Neither agree or disagree
Agree
Strongly agree
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57. Hypothesis Calculation
Prepared by Sazzad Hossain
5%
19%
17%
31%
28%
H 3
Strongly Disagree
Disagree
Neither agree or
disagree
Agree
Strongly Agree
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58. Hypothesis Calculation
Prepared by Sazzad Hossain
9%
8%
8%
50%
25%
H 4
1.Strongly disagree
2.Disagree
3.Neither agree nor
disagree
4.Agree
5.Strongly Agree
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59. Hypothesis Calculation
Prepared by Sazzad Hossain
28%
39%
8%
14%
11%
H 5 Strongly disagree
Disagree
Ntheeir Agree or Disagree
Agree
Strongly agree
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60. Hypothesis Calculation
Prepared by Sazzad Hossain
17%
11%
14%
30%
28%
H 6
Strongly Disagree
Disagree
Neither Agree or Disagree
Agree
Strongly Agree
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61. Hypothesis Calculation
Prepared by Sazzad Hossain
33%
33%6%
14%
14%
H 7
Strongly Disagree
Disagree
Neither Agree or Disagree
Agree
Strongly Agree
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62. Findings
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63. Prepared by Sazzad Hossain
Findings
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64. Prepared by Sazzad Hossain
Findings
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65. 1. The first step for Mercantile Bank Limited would be to minimize gap by
relaxing bank some strict procedures or with given some more
opportunities.
2. The bank should ensure less time consumption for sanctioning of SME
loan in easier way, even if in a limited manner,.
3. MBL is continuing their SME with a higher interest rate. To collect more
customers MBL needs to reduce the interest rate comparison with
others.
Recommendations
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66. 4. the same clients dealing in other types of loans, the banks can greatly
benefit themselves if they provide the collateral security relaxation not only
women’s entrepreneur loan but also other SME’s loan.
5. Mercantile bank ltd. needs to increase more period of time to repay the
loans. If they give the opportunity, there will be more loyal SME loans
borrowers who get more initiation to borrow the money.
6. MBL needs to improve more effective procedures by which they
successfully recover the SMEs Loan.
7. Currently, MBL is not eager about the SME loan. They need to improve
their SME Division and provide more loan loyally towards the borrowers.
Continue
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67. 9/14/2015 Prepared by Sazzad Hossain 67

68. 9/14/2015Prepared by Sazzad Hossain
DO
YOU
HAVE
ANY
QUESTION
68

69. • poysermath (2012), Stats: Hypothesis Testing (Traditional Method) [online video] Date: April 17, 2012. Available
from-https://www.youtube.com/watch?v=rWFDXt-MlNs [accessed date: July 25, 2015]
• poysermath (2012), Stats: Finding Z-value Given the Probability [online video] Date: July 12, 2012. Available from-
https://www.youtube.com/watch?v=ER-e1wwhjXY [accessed date: July 25, 2015]
• Alex A (2013), what is Research [online video] Date: October 25, 2013. Available from-
https://www.youtube.com/watch?v=Og4BGyZr_Nk [accessed date: July 25, 2015]
• MBL (2015), SME Loan [Online] February 18, 2015,Available from: http://www.MBL.com/SME-Loan_home.php
[Accessed: 1 July, 2015]
• MBL (2015), SME Loan [Online] February 18, 2015,Available from: ttp://www.MBL.com/SME-Loan.php [Accessed:
1 July, 2015]
• MBL (2015), SME Loan [Online] February 18, 2015,Available from: http://www.MBL.com/ SMEl Loan [Accessed: 1
July, 2015]
• International Finance Corporation. Annual Report (2014), available from: www.mblbd.com/annualreport
[Accessed: 5 July, 2015]
• “Internship Paper on MBL” Scribd. Retrieved June 1, 2015 available from:
http://www.scribd.com/doc/114646709/MBL [Accessed: 20 July, 2015]
• “Non-Banking financial activities and performance of MBL” Assignment Point. Retrieved June 14, 2015 available
from:
• http://www.assignmentpoint.com/business/internship-report-on--banking-financial-activities-and-performance-
of-MBL.html [Accessed: 25 July, 2015]
• G.Zikmand William, (2003), “Business Research methods”, (7th edition), SouthWestern Mason, Ohio, Japan.
[Accessed: 1 July, 2015]
• MBL. Annual Report (2014), PP. 04-122.
• MBL. Annual Report (2013), PP. 04-122.
• MBL. Annual Report (2012), PP. 04-122.
• John V Lesiker. , Business communication. , (11th Edition), New York: McGraw – Hill, 2003, PP. 158-163. , 223-241.
• Ross, Stephen A., Westerfield, Randolph W., Jeffe, Jeffrey. , (Eds.) Corporate Finance, New Delhi: Tata McGraw-Hill
Publishing Company Limited, 2004, PP. 26-31.
• Saunders, Anthony. , Cornett, Marcia Millon., (Eds.) Financial Institutions Management. , Singapore: McGraw – Hill,
2003, PP. 138-153. , 323-341
Prepared by Sazzad Hossain
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