Banking Industry is one of the most promising industries of our country. Generally by the word “Bank” we can easily understand that it is a financial institution that deals with money. There are different types of banks such as; Commercial Bank, Agricultural Bank, Industrial Bank, Savings Bank, Investment Bank & Exchange Bank. But when we use the term “Bank” without any prefix, or qualification, it refers to “Commercial Bank”. Commercial banks are the primary contributors to the economy of a country. It helps to flow funds from surplus unit to deficit unit and through this it facilitated the efficient allocation of the resources as well as accelerated economic growth. This sector is moving towards new dimension as it is changing fast due to competition, deregulation and financial reforms.
BRAC Bank Limited is a scheduled commercial bank in Bangladesh. It established in Bangladesh under the Banking Companies Act, 1991 and incorporated as private limited company on May 20, 1999 under the Companies Act, 1994. Its operation started on July 4, 2001 with a vision to be the market leader through to providing all sorts support to people in terms of promoting corporate and small entrepreneurs and individuals all over the Bangladesh. BRAC Bank, for the first time among local commercial banks, starts providing loan facilities to small and medium trading, manufacturing and service oriented enterprises all over the country. In this competitive banking industry BRAC Bank trying to differentiate them through their service. BRAC Bank tries to provide service to its customers and gain the customer’s trust. Moreover, BRAC Bank is serving the SMEs industry of the country which normally before BRAC Bank came into existence was unexplored.
Rationale behind the report:
We know that the SME is the most important part of Banking. Developing SME is not only a means to improve the competitiveness but also an alleviation of poverty, generation of sustainable employment, fostering innovation, infusing technology, enabling better credit flow and sustenance of environment issues more effectively and sustainably. The financial requirements of SME have been a matter of concern for the government and hence over the years have gained much importance. This study helps in understanding the financial requirements of SME, as well as suggesting methods of improving the borrowing and lending procedure of the bank. The SME Department is dealing with all types of small and medium loan activities in the bank. The concept of SME and its impact is spread vast in the economy of Bangladesh. Through SME banking, there is a lot of scope for Entrepreneurship Development. Small entrepreneurs of rural–urban spectrum are enjoying the BRAC Bank loan facility without the presence of bank at rural areas. Through SME Banking, comparing banks are made simpler through the concept of Virtual Banking.
The Bank has started its operations from July 04, 2001. The Chairman of the Bank is Mr. Muhammad A (Rumee) Ali. At present the Managing Director & CEO of the bank is Mr. Syed Mahbubur Rahman. The bank has made a reasonable progress due to its visionary management people and its appropriate policy and implementation. BRAC Bank is a commercial scheduled bank extending full range of banking facilities as per the directives of Bangladesh bank. BRAC Bank in surviving in the large banking arena through its unique and competitive products and it is the only local bank that started providing 100% integrated online banking facility though BBL started their career as a last bank in the banking sector out of 53 banks under Bangladesh bank.
A fully operational commercial bank, BRAC Bank focuses on pursuing unexplored market niches in the Small and Medium Enterprise Business, which till now has remained largely untapped within the country. In the last several years of operation, the Bank has disbursed over BDT 9,750 cores in loans to nearly 300,000 small and medium entrepreneurs. The management of the Bank believes that this sector of the economy can contribute the most to the rapid generation of employment in Bangladesh.
The Bank is mainly owned by the largest NGO in Bangladesh- BRAC .The Bank has positioned itself as a new generation Bank with a focus to meet diverse financial need of a growing and developing economy. With local and international shareholding by BRAC, International Finance Corporation and Shore cap International, BRAC Bank is listed in both the Dhaka and Chittagong Stock Exchanges.
BRAC Bank intends to set standards as the market leader in Bangladesh. It will demonstrate that a locally owned institution can provide efficient, friendly and modern full service banking on a profitable basis. It will produce earnings and pay out dividends that can support the activities of BBL major shareholders. Development and poverty alleviation on a countrywide basis needs mass production, mass consumption and mass financing. BBL goal is to provide mass financing to enable mass production and mass consumption, and thereby contribute to the development of Bangladesh.
BRAC Bank has a centralized banking structure through on-line banking system. It consists of four major division’s namely small and medium enterprises division, retail (direct) banking, and corporate banking and treasury division. The Corporate Banking Division provides full range of commercial banking products and services. Other departments such as Foreign Trade, Treasury, Credit Administration etc. plays the support role for a comprehensive range of service to the Corporate Banking Division. BRAC Bank Limited, with institutional shareholdings by BRAC, International Finance Corporation (IFC) and Shore cap International, has been the fastest growing Bank in 2004 and 2005. The Bank operates under a “double bottom line” agenda where profit and social responsibility go hand in hand as it strives towards a poverty-free, enlightened Bangladesh. A fully operational Commercial Bank, BRAC Bank focuses on pursuing unexplored market niches in the Small and Medium Enterprise Business, which hitherto has remained largely untapped within the country.
In the last eleven years of operation, the Bank has disbursed over BDT 9,750 crore in loans to nearly 300,000 small and medium entrepreneurs. The management of the Bank believes that this sector of the economy can contribute the most to the rapid generation of employment in Bangladesh. Since inception in July 2001, the Bank’s footprint has grown to 151 outlets, 250 ATMs and over 500,000 plastics in the market; BRAC Bank offers its clients a wide range of financial solutions to meet their everyday need. In the years ahead BRAC Bank expects to introduce many more services and products as well as add a wider network of SME unit offices, Retail Branches and ATMs across the country. BRAC, a national, private organization, started as an almost entirely donor funded, small scale relief and rehabilitation project initiated by Sir Fazle Hasan Abed to help the country overcome the devastation and trauma of the Liberation War and focused on resettling refugees returning from India. Today, BRAC has emerged as an independent, virtually self-financed paradigm in sustainable human development. It is one of the largest Southern development organizations employing 120,000 people, with greater percentage of women, and working with the twin objectives of poverty alleviation and empowerment of the poor.
Corporate Social Responsibility:
Just as BBL has a corporate identity BBL has a social identity too. As a bank BBL are socially responsible. Fifty percent of its loan portfolio is diverted to Small and Medium Enterprise banking, and as a financial intermediary BBL channel funds from the surplus ends to the needy. Countrywide network of SME Units cater to the needs of small entrepreneurs to help them build their asset base. BBL is market leaders in SME, striving for socio-economic upheaval in Bangladesh.
VISION of BBL:
“Building a profitable and socially responsible financial institution focused on Markets and Business with growth potential, thereby assisting BRAC and stakeholders build a “just, enlightened, healthy, democratic and poverty free Bangladesh”.
BRAC Bank will be a unique organization in Bangladesh. It will be a knowledge-based organization where the BRAC Bank professionals will learn continuously from their customers and colleagues worldwide to add value. They will work as a team, stretch themselves, innovate and break barriers to serve customers and create customer loyalty through 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 Bank will serve its customers with respect and will work very hard to instill a strong customer service culture throughout the bank. It will treat its employees with dignity and will build a company of highly qualified professionals who have integrity and believe in the Bank’s vision and who are committed to its success.
BRAC Bank will be a socially responsible institution that will not lend to businesses that have a detrimental impact on the environment and people.
Mission of BBL:
BRAC Bank has got a number of corporate missions –
- To maintain continuous growth in the “Small and Medium Enterprise (SME)” sector.
- To have sustained low cost deposit growth with controlled growth in Retained Assets.
- To fund Corporate Assets through self-liability mobilization and the growth in assets trough Syndications and Investment in fast growing sectors.
- To make an attempt to increase fee based income.
- To keep Debt Charges at 2% to maintain a steady profitable growth.
- To efficiently coordinate between the bank’s Branches, SME Unit Offices and BRAC field offices for delivery of Remittance and Bank’s other products and services.
- To manage various lines of business in a fully controlled environment with no compromise on service quality.
Value the fact that one is a family member of the BRAC Bank family
- BBL wants to create an honest and open enabling environment.
- BBL has a strong customer focus and wants to build relationships based on integrity, superior service and mutual benefit.
- It endeavors for profit and growth.
- All the employees of BBL have to work as a team to serve the best interest of its owners.
- BBL is in relentless pursuit of business innovation and improvement.
- It always values and respects people and makes decision based on merit.
- BBL bases recognition and reward on performance.
- To be responsible, trustworthy and la – abiding in all that we do.
Goals of the Bank:
BRAC Bank will be the absolute market leader in the number of loans given to small and medium sized enterprises throughout Bangladesh. It will be a world – class organization in terms of service quality and establishing relationships that help its customers to develop and grow successfully. It will be the Bank of choice both for its employees and its customers, the model bank in this part of the world.
|Shore Cap International|
|Institution &General Public|
|Mutual funds through IPO|
Objectives of the Report:
The prime objective of the report is to know the overall services of BBL SME Sector and fulfillment of the Internship program, which is an essential part of the Bachelors of Business Administration at American International University-Bangladesh. The objective of the report is categorized into two parts, one is general objective and the other is specific objectives. These are given below:
(i) General Objective:
· To know SME loan lending activities.
· To study the Reconciliation process.
(ii) Specific Objective:
- To find out basic appraisal of SME loan.
- To know the enterprise selection criteria to provide SME loan.
- To know the terms and conditions of SME loans.
- To know the disbursement and recovery procedures of SME loans.
- To Analyze micro and macro environment of the economy.
- To analyze the Marketing Procedure of SME loans of BRAC Bank
- To make some recommendations and conclusion to further the development of SME loan products of BRAC Bank Ltd.
As the Internship Program is an inseparable part of BBA Program, I have placed at the BRAC Bank Limited at Head Office to work in the Corporate Banking Division, and to be acquainted with the office environment. I have prepared the report from my findings in the organization and will be discussing in following way:-
Assisting Relationship Manager:
A professional who works to improve a firm’s relationships with both partner firms and customers. Relationship management is generally divided into two fields: – customer relationship management (CRM) and business relationship management (BRM). Both fields share the common goal of facilitating good relationships such that the business maximizes the value of its relationships and maintains a good reputation overall.
I am always tried to help relationship manager because they handle a lot of work in a day. Such as, Receiving Document, Filing Document, Providing Statement to Client, Data Entry, Data verification, Coordinating with Back office for Pay order request, Coordinating with Back office for BB Cheque request, Request for transfer fund, Data Analysis, Applying CIB, Preparing Delivery Sheet, Contact with the Client, Contact with the Client, Preparing FSS Statement.
Receiving and Filing Document:
Receiving a document is very crucial for a bank. Here, the bank collects different documents, like corporate office document and makes files for these documents. The corporate division of Banking basically handles Loan agreement.
Providing Statement to Client:
A periodic summary of account activity with a beginning date and an ending date. The most commonly known are checking account statements, usually provided monthly and Brokerage account statements, which are provided monthly or quarterly. Monthly credit card bills are also considered account statements.
Sometimes clients come or call the bank to know about their transaction, and the bank provides the accurate statements to the client about their transaction.
Data entry is the act of transcribing some form of data into another form, usually a computer program. Forms of data that people might transcribe include handwritten documents, information off spreadsheets from another computer program, sequences of numbers, letters and symbols that build a program, or simple data like names and addresses. Some people perform jobs that are exclusively data entry, while others, like programmers, might have to occasionally enter data.
Data entry is another important work for the bank. The Bank transcribes the data from one form to another form through computer programs, e.g. MS Excel.
Data Verification is a process wherein the data is checked for accuracy and inconsistencies after data migration is done. It helps to determine whether data was accurately translated when data is transported from one source to another, is complete, and supports processes in the new system. During verification, there may be a need for a parallel run of both systems to identify areas of disparity and forestall erroneous data loss. A type of Data Verification is Double Entry and Proofreading data. Proofreading data involves someone checking the data entered against the original document. This is also time consuming and costly.
Financial Spread Sheet:
The user uploads or inputs the actual data (I.e. revenue and expenses) and this template automatically calculates the following financial ratios: Liquidity: 1 Current Ratio 2. Quick Ratio (acid test) Asset Management: 3. Average collection period 4. Inventory turnover 5. Fixed-asset turnover 6. TAT Financial Leverage Management: 7. Debt ratio 8. Debt-to-equity 9. TIE 10. Times fixed charges earned Profitability: 11. Gross profit margin 12. Net profit margin 13. ROI 14. ROE.
These spreadsheets are most useful if you are interested in conventional corporate financial analysis. It includes spreadsheets to analyze a project’s cash flows and viability, a company’s risk profile, its optimal capital structure and debt type, and whether it is paying out what it can afford to in dividends.
Filled up CIB form:
The CRO (Companies Registration Office) gives a CIB (Credit Information Bureau) form to the client and the client fills and signs in it. In some cases, if the client is illiterate then the CRO fills the form on behalf of the client. Then the CRO sends the filled and signed form to the SME head office.
Sending CIB to Bangladesh Bank:
The SME head office collects all of the information and sends the CIB form to Bangladesh Bank for clearance. Bangladesh Bank returns this CIB form within 10-12 days with the reference number.
Organization – Wide (Corporate Banking)
As one of the largest banking and financial organizations with an extensive local capability, the BBL is one of the major players in the Corporate banking market. BBL has a full range of products and services for corporate clients, which include: Lease Capital Financing, Term Loan, Trade Facilities, Guarantees, Work Order financing, Floor Financing and Structured Financing & Syndications etc. BRAC BANK LIMITED Corporate Service follows centralized process through online banking system as well as credit facility is processed at the Head office. After processing the facility the limit is put online and customer can enjoy the facility from any of the BRAC Bank Branches. BBL offers a wide range of cash financing, working capital, short and medium-term loans and guarantee facilities from its Head Office and Chittagong divisional branch. Different units under Corporate Banking Division are mentioned below:-
- Regional Corp. Chittagong
- Local Corporate
- Corporate Institutions
- Structured Finance
- Emerging Business
Entrepreneur Selection Criteria:
In order to understand the capability of the management behind the business, the following should be assessed:
- The entrepreneur should be physically able and in good health, preferably between the age of 25-50. If he/she is an elderly person closer to 50, it should be seen what the succession process will be and whether it is clearly defined or not.
- The entrepreneur must have the necessary technical skill to run the business, i.e. academic background or vocational training, relevant work experience in another institution or years of experience in this line of business.
- 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 (Does not cheat anyone, generally helps people), and morally sound (Participates in community building).
- Suppliers or creditors should corroborate that he pays on time and is general in nature
Guarantor Selection Criteria:
Equally important is the selection of a guarantor. The same attribute applicable for an entrepreneur is applicable to a guarantor. In addition he should posses the followings:
- The guarantor must have the ability to repay the entire loan and is economically solvent (Check his net worth).
- The guarantor should be aware about all the aspect of SEDF loan and his responsibility
- Govt. and semi-govt. officials can be selected as a Guarantor such as schoolteacher, college teacher, doctor etc.
- Police, BDR and Army persons, political leaders and workers, and Imam of mosque cannot be selected as a guarantor.
Other Relevant Activity:
Pre Disbursement Manual Activities:
- Prepare loan file: Receiving all documents, Loan Administration Division prepare a loan file with all documents received from the unit office.
- Charge documents checking: The loan administration division checks all charge documents. Following charge documents are checked:
- Money receipt (Risk fund)
- Sanction letter
- Demand promising note (With stamp of Tk 20/=)
- Letter of arrangement & General loan agreement (With stamp of Tk 150/=)
- Letter of undertaken & Letter of stocks and goods (With stamp of Tk 150/=)
- Photocopy of trade license (attested by CRO)
- Blank claque with signature.
- Two guarantors ( one must be Spouse/parents)
- If the loan provide for purchase of fixed assets or machineries and if the loan amount 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 it informed to the respective CRO. If the application form is not filled properly then the file send to the CRO to fill the application properly.
- Disbursement of the amount: Sending the list to the treasury of BRAC bank for disburse the amount, the treasury disburse the amount to the client through the mother account of the clients bank. BRAC bank disburse amount through any of the following banks corporate branch nearer the BRAC bank head office and the corporate branch of the respective bank send the amount to the client account in the respective branch. Such:-
- BRAC Bank Limited
- The City Bank Limited
- Janata Bank
- Bangladesh Krishi Bank
- Pubali Bank
- Agrani Bank
- Initial ID generation: After sending the list to the treasury, the loan administration division generates an initial ID against the borrower.
- Loan account opening: According to the ID, the loan administration division opens a loan account in FINACLE against the borrower. Entering all required information, the FINACLE automatically give an account no. for the borrower.
- Cost center assign: The loan administration division enter the following information in FINACLE:
- Security details set-up
- Guarantor details set-up
- Loan other details set-up
- Risk fund collection.
- Activision of the loan: Loan administration division do the following tasks to activate the loan
- Loan sanction details set-up
- Repayment schedule set-up and printing
- Loan activation
- Disbursement and CC wise voucher print
- Disbursement voucher posting
Challenges and proposed courses of action for Improvement:
Observed in the Organization:
As an Internee, I believe Corporate Banking Division is playing a vital role in the banking sector. This department has great opportunity and power to provide proper service to the customer. In some cases the department is very careful about customer otherwise customer will be discouraged. Some Observations about the department are:
1. Time to time Information: Clients always ask for information to get proper idea as they need. They need instant information. Somehow if we fail to provide that information so they face many difficulties. They could not provide info to their top level. In that case we are just failure. But we are very careful about this. Whenever a client wants, we provide proper information.
2. Ask for Statement: Clients always need to know their account statement or balance information. How much money debited or credited to their account. For transaction they ask for statement. It can be over phone or hard copy. We sent to our clients account statement hard copy.
3. Instant Solution: If a client faces some problem about our Corporate Division. In that case the team actively ready to provide best solution. Otherwise they will not ask in future and we will lose our clients.
4. Best Performing Team: Corporate Division team is the best performing team. In every situation they have intention to provide best service n solution to customer. They always focus to the clients. They are playing a vital role in BRAC Bank.
Above I have discussed about some problem on Corporate Banking Division. But now I am discussing about some problem while I have undergone the internship program. I have tried my level best to learn in that situation. There were exists some limitations. These are:
1. Time Limitations: My Internship duration is only for 3 months. Within 3 months it’s not possible to get proper idea about the study. Corporate Banking Division is a great department. It has lots of Issues, formalities, processing and way to know. But in 3 months are not enough to go through overall processing. Simply to know about cash management within 3 months are not enough. So time is a big factor to increase knowledge.
2. Limitations on Responsibilities: As an internee, my responsibility is less than others officials. I am not authorized to do official work. Most of time I had busy with other responsibilities or maintain the others order. Sometimes I get opportunity to perform so that I can learn from there.
3. Limitations on Facilities: It is a common scenario like every company do not provide computer to use for the intern. From a computer an intern can get many information or idea and easily can learn individually.
4. Other Limitations: A banking official always being busy with their work. So it’s not possible to ask any question on the time.
Bank is a reputed organization. In a bank almost every employee has been busy with their responsibilities. Workload is higher. So officials could not work for low hours. Bankers are always working for longer hours as their jobs become more oriented towards general marketing of financial services.
In Banking sector has “Log In” time but do not have “Log Out” time. Cause Responsibilities are more. So there is no way to leave early from office.
Now I want to discuss about mismatch between assigned tasks of the BRAC Bank Limited with my major finance in below:
1. Under the study of Corporate Finance I got some idea about the Corporate Banking.
2. Under the Study of Portfolio Management I have covered the issue of collection.
3. As an underwriter BRAC Bank play a lead Bank role of the SME Sectors.
4. From the organizational behavior we make the issue regarding grow the customer base through marketing and business development efforts including cross selling to existing customer base.
5. Also noticed the credit quality is maintained and customer reviews are completely timely manner.
6. Seek assistance from CRM at the earliest if adverse trends in a customer financial position are noted.
7. Learn the issue of prudent level of portfolio diversification under the bank management course. It is notices of compliance with financing credit policies and central bank regulation.
Implication to Organization:
Based on based on my 3 month internship I have gathered some practical experiences on Corporate Banking Division. These are:-
- I have learned about procedure and processing of Corporate Division.
- Mainly I have worked for Structure Finance sector. Where Syndicate Term Loan is play very vital role.
- First of all we try to know which company wants to Term Loan. We try to communicate with them.
Important: Corporate Banking team in Structure Finance sector consists of 4 members: 1. Adeeb Shams, Senior Relationship Manager. 2. Aiman Ahmed, Relationship Manager. 3. Samia Tariq, Relationship Manager, 4. Zubair Raza, Relationship Manager. They are really performing well in this sector. My Favorite Aiman Ahmed, He always tries to provide best services to the clients. And continuously he is providing services actively.
Implication to university’s Internship Program:
I believe Internship is the way to gather practical experiences. Where have opportunity to implement our knowledge that we have earned from our class room and academic life. Our best faculties are given us lots of educational knowledge that we can utilize to the organization. Some knowledge we can earn from our best supervisors. I have got chance to utilize my knowledge through my favorite supervisor Kashfia Sharmeen. She gave me lots of opportunities and encourages me completing the report. She gave me more and more basic knowledge and helps me to complete the report.
Identification of Some Problems:
1. Too much work load.
2. Receiving & Filling Document.
3. Receiving phone calls one by one.
4. Prompt Service.
BRAC Bank, for the first time among local commercial banks, starts providing loan facilities to small and medium trading, manufacturing and service oriented enterprises all over the country. The Bank has already established its network in different area of the country with assistance of BRAC.
BRAC Bank is trying to develop economic condition of the country. So the bank provides loan facility 3 to 30 lacs taka to that small and medium enterprise that has no easy access to banks/financial institutes. The bank already established 79 Zonal offices and 399 unit offices all over the country and 1409 Customer Relation Officers (CRO) providing door-to-door service to clients. Till April 2012, the bank provides loan facilities to 300,000 clients which amount is Tk. 10,000 crore. The success of SME will largely depends on the selection of a business and man behind the business. BRAC Bank provides this facility to those whose business operation is minimum one year and environment friendly business. It provides no loan facility to tobacco business. The business should be legally registered and must have valid trade license. The entrepreneur should be physically able, preferably between the ages 25 to 50. Entrepreneur must have the necessary technical skills to run the business. The guarantor must have the ability to repay the entire loan and is economically solvent. The guarantor should know the entrepreneur reasonable well and should preferable live in the same community.
SME loan can be repaid in two ways, 1) In equal monthly loan installment with monthly interest payment. 2) By one single payment at maturity, with interest repayable a quarter ends residual on maturity.
The core competence of the BRAC Bank is to provide the fastest loans to the clients in this country. To retain this competitive advantage BRAC Bank would provide computer and palmtop facilities whether they can give fastest services to clients than other banks. Also to convey the customer focus, BRAC Bank is trying to reduce collateral securities than other banks. It provides more collateral free secured loans to capture the market. Regarding the services by the CRO, almost all clients are satisfied by get these quick facilities from them.
Recommendations for Future Strategic Actions:
For better improvement of SME, BBL can consider the following recommendation:
- Reduce the interest rate because most of their competitors are providing loans at a lower rate for example most of the competitor’s banks providing loan at 12-15% interest rate.
- Increase marketing activities in the urban area because other competing industries are given huge ad in urban area which helps them to increase their customer base.
- Look after CROs activities by the ZOs because sometimes they are hiding information and make mistakes to prepare financial statements and other documents.
- Increase amount of SME loan approval by the Zonal officer, at present they can approve up to BDT 500,000.
- Increase amount up to BDT 1.0 million without collateral security for providing loans.
- Frequently check clients are perform all the terms and condition of SME loan.
- Increase the remuneration and compensation package for the entry and mid level management otherwise BBL can’t retain the efficient and experienced employees.
- SME head office sanction the loan by obtaining CIB form from Bangladesh Bank. SME head office should try to collect CIB form with shortest possible time from Bangladesh Bank.
- Train the Customer Relationship officers more comprehensively and realistically so that customers may not face any trouble while getting and repaying the loan. Make continuous performance evaluation of the CROs.
- The CROs should give higher remuneration.
- The bank should effectively monitor the loan utilization of borrower.
- Analyze customer behavior that what type of customer makes default and stop giving them SME loan.
- SME unit office waits for closing confirmation from head office. Because they cannot disburse the repeat loan until getting the closing confirmation from head office. So head office should give closing confirmation with shortest possible time.
Books & Publication:
- Strategic Management, Charles W. L. Hill & Gareth R. Jones, 7th Edition.
- Business Research Methods, Cooper & Schindler, 9th Edition.
Annual Report and Periodical:
- Annual report of BRAC Bank Limited (2010)
- BRAC Bank Ltd. Prospectus (2010)
- From the web page of BRAC Bank Ltd.