SME Banking and services in Bangladesh

Introduction

The development of small and medium enterprises (SMEs) in developing countries is generally believed to be a desirable end in view of their perceived contribution to decentralized job creation and generation of output. SMEs constitute the dominant source of industrial employment in Bangladesh (80%), and about 90% of the industrial units fall into this category. The actual performance of SMEs, however, varies depending on the relative economic efficiency, the macro-economic policy environment and the specific promotion policies pursued for their benefit.

For the JOBS Program, Zaid Bakht (1998) and Salahuddin Ahmad, et al. (1998) developed research papers that describe the policy environment within which SMEs in Bangladesh operate. The reports also discuss the accompanying legal, regulatory and administrative constraints to employment creation by SMEs. This paper attempts to highlight the findings of those two studies. To complement the issues discussed in those two papers, a summary of industrial problems, as perceived by entrepreneurs during the past one decade (HIID, 1988; MCCI 1992; World Bank 1994; JOBS 1998), is also presented in this report.

In Bangladesh, SMEs playing a significant role for the development of our economy by creating employment opportunity and producing important alternative machines and machinery parts for saving huge foreign currency for our country. So as a part of our development strategy, we should intensify our efforts to develop this sector to grow industrial base and volume of foreign trade. As we know that in this age of globalization, it is impossible to stop the flow of foreign goods to any country. Only quality products can meet the challenges in global market. For meeting this situation SMEs need to upgrade their technological capabilities and production facilities in order to produce quality products at a competitive price.

The evidence for the re-emphasis on the SMEs is manifest in the Government’s own policy intent, in any reasonable survey of the literature, and in any compilation of economic statistics regarding the industrial sector. Though the SME sector is becoming gradually a rising industrial sector of our country and contributing more and more to our export, this sector faces several common problems like lack of technical know-how, shortage of long-term financial support, lack of skilled workers, marketing link, R & D, knowledge on safety measures, hygiene, environmental pollution, etc. We need to acquire proper institutional knowledge in the fields of technological and managerial education and ask academics and researchers to work more vigorously for the sector’s rapid development.

SMEs in Bangladesh produce a multitude of labour intensive goods including, consumer items, toys small tools and paper products for the domestic market. Further development of these industries offers various investment opportunities. Export-oriented production in SMEs has gained momentum in the past few years. Entrepreneurs from Hong Kong, Japan and Korea have taken advantage of Bangladesh’s cheap and easily trainable labour and its infrastructure facilities to manufacture products for the export market.

Origin of the report

I am lucky to say that our honorable teacher Mr. Md. Mamunur Rashid, Lecturer, Department of Business Administration, Stamford University, Bangladesh, assigned me the report on “SME banking in Bangladesh”. The data required for preparing this report has been collected from the various sources of most recent years.

Background of the report

After Liberation of Bangladesh, intensive efforts were undertaken to accelerate the rate of industrialization in the country. At the beginning, import substitution and subsequently export-led economic growth strategy was pursued for industrialization. In order to attain this objective, large amount of industrial credit was funneled to the industrial sector. But the whole exercise of industrialization came to a halt with the massive diversion of resources to other non-priority sectors. Policy makers, of late, have come to recognize the contribution of SME sector towards economic development in the country. Small and medium enterprises have been recognized as one of the most important means for providing better economic opportunities for the people of least developing countries like Bangladesh. A developing economy like that of ours suffers from many peculiar problems such as disproportionate pressure of population on agriculture due to lack of rural industrialization, unemployment and underemployment of human and materials resources, unbalanced regional development etc. The contribution of small and medium enterprises in the solution of these problems is beyond doubt, provided they are organized and run on scientific basis.

Small and medium enterprises are particularly suitable for densely populated countries like Bangladesh where SME sector can provide employment with much lower investment per job provided. Out of 11% employment of the civilian labor force provided by the manufacturing sector, about two thirds are estimated to be provided by the small and cottage industries sector. Again, development of small industries facilitates the effective mobilization of capital and labor resources. They also help in raising standards of living of people in rural areas. Contribution of SME sector to GDP remained above 4% during the period from 1985-86 to 1999-00. Moreover, the present contribution of SME sector to GDP is approximately 5% and SME sector employs 25% of the total labor forces, thus this sector is the present available sector for creation of jobs (Saha, Sujit R. 2007).

Research papers developed by Bakht, Zaid (1998) and Ahmad, Salahuddin et al. (1998) described that the policy environment within which SMEs in Bangladesh operate accompanies legal, regulatory and administrative constraints to employment creation by SMEs. The robustness of SME contributions to employment generation is a common phenomenon in most developing countries in that the magnitude varies between 70% to 95% in Africa and 40% to 70% in the countries of the Asia-Pacific region (Ahmed, M.U. 1999).Liberalization of industrial and trade regimes along with globalization are likely to have had significant effects on Bangladesh’s SMEs (Ahmed, 2002; Bhattacharya et. al., 2000).

Various recent studies (Ahmed, M.U. 2001, ADB 2001, USAID 2001) show that SMEs have undergone significant structural changes in terms of product composition, degree of capitalization and market penetration in order to adjust to changes in technology, market demand and market access brought by globalization and market liberalization. The official data show that the share of private investment in Bangladesh’s GDP in the late 1990s, which may be considered as the post-reform era, has remained more of less constant at around 15% (Bhattacharya, 2002). This may be interpreted as an evidence of stagnant private sector activities in the country.

The recent private sector survey estimates the contribution of the micro, small, and medium enterprises (MSMEs) is 20-25% of GDP (Daniels, 2003). While SMEs are characteristically highly diverse and heterogeneous, their traditional dominance is in a few industrial sub-sectors such as food, textiles and light engineering and wood, cane and bamboo products. According to SEDF sources quoted from ADB (2003), food and textile units including garments account for over 60% of the registered SMEs.

Despite these contributions in the economy of the country, Banking sectors are not interested in financing the small and medium enterprises; rather there is a decline in the amount of advances by the Banking sector. There are approximately 52 Banks operating in our country and all are serving large enterprises rather than SMEs though only the small enterprise’s contribution is 5% in GDP of Bangladesh in 2007.But why?

What are the causes for which Banks are not interested in financing this sector? From recent statistical data of Sonali Bank of Bangladesh, we see that the credit recovery rate is 51.44% in this sector. Why this recovery rate is not large enough? Why the SMEs are failing to payback their credit to the lenders? We have tried to find out the answer of these questions in this research paper.

Purpose of the report

Based on the above discussion the following objectives are set for the study:

To review the role of SMEs in the economy as well as current status of SMEs and their financing by Banks in Bangladesh.
To find out the reason why the Banks are not interested (problems) to finance the SMEs.
To review the present role of Regulatory Authorities in SME financing and development.

Scope of the report

This study has focused upon the liquidity and profitability of private banks in Bangladesh. I hope this study will help me to know more clearly about the liquidity and profitability of private banks in Bangladesh.

Methodology of the report

The study was conducted mainly based on secondary information although some information relating to entrepreneurs have been collected primarily. The sources of data include Office Records, BIBM – Library, Different Research Paper regarding SMEs, Different Publications on SMEs of different banks and some websites.

Sample banks of DNCBs, PCBs, and FCBs from the sample frame, was selected purposively considering the amount of loan size, interest rate, loan processing fees, period of loans, mode of finance and management.

Policies relating to SME financing such as fiscal policy, monetary policy and internal policies of commercial banks was examined thoroughly with a view to find out the influence of existing policies on SME financing. Trend and pattern of bank financing to SME was analyzed by classifying the financing in terms of areas, rate of interest, types, category, and banks.

Data processing and analysis: The collect data from the secondary sources were analyzed to reveal the nature of financial statement analysis. Ratio analysis technique is used in analysis. Computer generated Word Processing programs, such as; MS Word was used to generate the report. The main analysis of data was done with the following computer programs

The Powerful Spreadsheet Analyzer MS Office Excel
Word Processor MS Office Word.

Limitations of the Report

Since this research is only for academic purpose, there were some limitations in this study. These are mentioned below:

Discussion about the Small and Medium Enterprises is a vast subject, but only some selected areas are covered in the research paper.
The study is basically based on secondary data.
The main limitation while preparing this report was time. So it was not possible to focus everything deeply.
Lack of Information’s source.
Lack of sufficient privileges.

This is my truthful declaration that the report is prepared only on secondary data. But in some cases, I found the problem of shortage of necessary data and in that cases I took supposed data, so there is a little chance of misappropriation.

Place of SMEs in the National Economy of Bangladesh

Any precise quantitative estimate of the importance of SMEs in Bangladesh economy is precluded by non-availability of comprehensive statistical information about these industries at the national level. The latest BSCIC estimates suggest that there are currently 55,916 small industries and 511,612 cottage industries excluding handlooms. Including handlooms, the number of cottage units shoots up to 600,000 units indicating numerical superabundance of the SCIs in Bangladesh. Quoting informal Planning Commission estimates, the SMDF puts the number of medium enterprises (undefined) to be around 20,000 and that of SCIs to be between 100,000 to 150,000. This wide variation in the BSCIC and Planning Commission estimates of the numerical, size of the SMEs might be due to at least two reasons: (a) different set of definitions of the SMEs and (b) different coverage of SME families. This strongly suggests the need for adopting and using an uniform set of definitions for SMEs by all Government agencies to help formulation of pro-active SME promotion policies. Whatever the correct magnitude, the SMEs are undoubtedly quite predominant in the industrial structure of Bangladesh comprising over 90% of all industrial units. This numerical predominance of the SMEs in Bangladesh’s industrial sector becomes visible in all available sources of statistics on them (Ahmed, M.U 2001). Together, the various categories of SMEs are reported to contribute between 80 to 85 per cent of industrial employment and 23 per cent of total civilian employment (SEDF, 2003)2. However, serious controversies surround their relative contribution to Bangladesh’s industrial output due to paucity of reliable information and different methods used to estimate the magnitude. The most commonly quoted figure by different sources (ADB, World Bank, Planning Commission and BIDS) relating to value added contributions of the SMEs is seen to vary between 45 to 50 per cent of the total manufacturing value added. While the SMEs are characteristically highly diverse and heterogeneous, their traditional dominance is in a few industrial sub-sectors such as food, textiles and light engineering and wood, care and bamboo products. According to SEDF sources quoted from ADB (2003), food and textile units including garments account for over 60% of the registered SMEs. However, as identified by various recent studies, (Ahme, M.U. 2001, ADB 2001, US-AID 2001) the SMEs have undergone significant structural changes in terms of product composition, degree of capitalization and market perpetration in order to adjust to changes in technology,market demand and market access brought by globalization and market liberalization.

SME Banking and services in Bangladesh

Historically, Bangladesh followed a development strategy in which private investment was controlled through a host of regulations involving investment sanctioning, credit disbursement, import licensing, foreign exchange allocation, etc. While these regulatory barriers thwarted private investment in general, the impact fell unevenly on SMEs. This was because of the relative inability of the SMEs to cope with the regulations compared to their large-scale counterparts. Thus, the policy regime was largely biased against the SMEs although, paradoxically, promoting SME development was a stated objective of successive governments. In a bid to render its industrial sector internationally competitive and to move towards greater efficiency in its production structure, Bangladesh implemented a number of economic reforms during the 1980’s, underwritten by the familiar structural adjustment policy. These included deregulation of sanctioning procedure and relaxation of other regulatory barriers, easing of import procedure, reducing trade barriers, following a market oriented exchange rate policy, and implementation of fiscal, monetary and public enterprise reforms. These reforms helped remove a large part of the policy bias against SMEs that prevailed earlier. Recent studies confirm that these reforms had positive impacts reflected in a fairly rapid growth of the sector during the past decade. However, because of their structural weaknesses, the SMEs may need more pro-active policies for their development in addition to the further removal of the policy biases.

Policy Issues

Public Development Outlay

Although successive five-year plan documents have mentioned development of small, medium and cottage enterprises as priority area, public development expenditure in this sector has not been commensurate with this declared policy. Thus, in the Fourth Five Year Plan, the revised public allocation to this sector was Taka 2,016 million which was a meager 0.58 per cent of the total public development outlay in the plan. What is even worse, only about 69 per cent of this small allocation were actually invested during the plan period. In the current Fifth Five-Year Plan, the share of the sector in total public development expenditure has gone down even further. If the sector has to make much headway, there is need for substantial increase in public investment in the sector particularly in the area of training, extension, research, market promotion, etc. A collaborative effort of the government with business associations, non-governmental organizations NGOs and other development partners is recommended in such public outlays.

Trade Policy

During the past decade, substantial reforms have been carried out in the external trade regime of Bangladesh. The import procedure has been greatly eased and deregulated. Import tariffs have been lowered and quantitative restrictions virtually eliminated. All these have facilitated greater access of domestic producers to imported raw materials. This has particularly benefited SMEs as they were affected more adversely by the regulated trade regime.

However, import liberalization has also exposed domestic producers to competition from foreign goods. To ensure a level playing field and to enable domestic SMEs to compete effectively with imports, the following policy concerns need to be addressed.

Prior Announcement of Policy Changes:

To enable domestic producers, particularly the SMEs, to prepare themselves to face external competition there is need for adequate forewarning about impending policy direction. This is particularly true of trade policy measures. If the government makes prior announcements of its impending trade policy changes, particularly with respect to tariff schedules, investors will be aware of the degree of competition they will be facing with the changes and will make adjustments in their investment and production plans accordingly.

Tariff Rationalization:

To encourage domestic production, there should be adequate gap between duty on raw materials and duty on finished products. In fixing duty on finished products, possible under-invoicing and dumping should be taken into account, as otherwise, effective duty rates on finished goods will turn out to be lower than that on raw materials in spite of the higher statutory rate on the finished item.

Appropriate Tariff Valuation:

To avert the problem of under-invoicing, a system of tariff value has been put in place for certain categories of imports. There are complaints that these tariff values are often not in line with the going world price of these items which sometimes puts domestic producers at a relatively disadvantaged position.

Fiscal Policy

Value Added Tax:

The main components of indirect tax in Bangladesh are Value Added Tax (VAT), Supplementary Duty and Excise Duty. VAT is imposed on producer, manufacturer, importer, exporter or service renderer under the Value Added Tax Act, 1991, on goods or specified services, at the rate of 15% at every stage of transfer. VAT paid against the input is adjustable against the VAT on output to be collected from the buyers and the net sum stands payable on delivery of goods or specified services to the VAT authority. Exemption is allowed to certain goods or service or certain taxpayers.

All cottage industries, except those producing particular products, are exempted from VAT. But, manufacturer, producer or service renderer (other than cottage entrepreneurs), whose annual turnover does not exceed Taka 1.5 million are required to pay Turnover Tax at the rate of 2.5 per cent in lieu of 15 per cent VAT. This limit is too low for small industries. As a result, small industries are subjected to the same 15 per cent VAT as their large-scale counterparts. In addition, supplementary duty is imposed at variable rates on certain categories of consumption goods across all size categories. Finally, excise duty applies to a limited number of items irrespective of size classification.

Thus, in terms of indirect taxes, there is virtually no differentiation between SMEs and their large-scale counterparts, which is considered inequitable by most SMEs.

Tax Holiday:

Similarly, there are no differentiated treatments of SMEs either with respect to duty on capital machinery or direct taxes. There are provisions of tax holidays for enterprises of all size categories subject to rules and procedures set by the National Board of Revenue. To avail themselves of tax holiday, enterprises recommended by the relevant sponsoring agencies have to get the approval of the National Board of Revenue which is a cumbersome and lengthy process. The tax holiday, however, is not available to sole proprietorship enterprises which are the usual form of small and cottage industries in Bangladesh.

Wealth Tax:

Wealth tax is payable by an individual if his net wealth exceeds Taka 2.5 million. As per existing law, no wealth tax is payable by a company, the usual legal form of a large industry. On the other hand, the legal form of small industries is usually sole proprietorship, and hence these enterprises have to pay wealth tax on their business capital.

Thus, fiscal policy in Bangladesh is not particularly tailored to provide support to SMEs, which is pointed out by most SME entrepreneurs as a critical policy constraint hindering SME growth.

SMEs and NGOs

SMEs appear to be facing discriminatory competition from the commercial activities of NGOs. On the other hand, smaller units may be receiving valuable assistance in the form of training or market information from the NGOs. NGOs should be promoting small businesses and not themselves become competitors – crowding out private enterprises. Further research and debate on the role of NGOs in promoting SMEs is propounded

SME Financing: present status & Contribution to our Economy:

SME (Small and Medium Enterprises)

SME business is a non-public limited companies but a business for self-employment or for social welfare.

>According to the latest circular of BANGLADESH BANK (Date – 26/05/2008), the definition of Small & Medium Enterprise sector is given below:

►Small Enterprises – Small enterprises refer to those enterprises which are not any Public Limited Companies and which fulfill the following criteria-

1.Service Concern– Having an investment of Tk. 50,000 to Tk. 50, 00,000 excluding land & building and / or employing up to 25 workers.

2.Business Concern – Having an investment of Tk. 50,000 to Tk. 50, 00,000 excluding land & building and / or employing up to 25 workers.

3.Manufacturing Concern – Having an investment of Tk. 50,000 to Tk. 1,50,00,000 excluding land & building and / or employing up to 50 workers.

►Medium Enterprises – Medium enterprises refer to those enterprises which are not any Public Limited Companies and which fulfill the following criteria-

1. Service Concern– Having an investment of Tk. 50,00,000 to Tk. 10,00,00,000 excluding land & building and / or employing up to 50 workers.
2. Business Concern – Having an investment of Tk. 50,00,000 to Tk. 10,00,00,000 excluding land & building and / or employing up to 50 workers.
3. Manufacturing Concern – Having an investment of Tk. 1,50,00,000 to Tk. 20,00,00,000 excluding land & building and / or employing up to 150 workers.

Partition of SME Enterprises: SMEs in Bangladesh are also defined for purposes of industrial policies by Ministry of Industries (MOI). Historically, this definition has been in terms of fixed investment brackets, and a dual mode definition is in place, separate for manufacturing establishments, and service establishments.

>According to the Industrial policy 2005, small and medium enterprises shall be categorized using

the following definitions:

Manufacturing enterprise:

Small Enterprises

An enterprise should be treated as small if, in current market prices, the replacement cost of plant, machinery and other parts / components, fixtures, support utility, and associated technical services by way of capitalized costs (of turnkey consultancy services, for example), etc., excluding land and building, were to be up to tk. 15 million;

Medium enterprise

an enterprise would be treated as medium if, in current market prices, the replacement cost of plant, machinery and other parts / components, fixtures, support utility, and associated technical services by way of capitalized costs (such as turnkey consultancy services), etc., excluding land and building, were to be up to tk. 100 million;

Non-manufacturing enterprise:

Small enterprise – an enterprise should be treated as small if it has less than 25

Workers, in full time equivalents;

Medium enterprise – an enterprise would be treated as medium if it has between 25

And 100 employees.

Brief Overview of SME Financing:

There is a great interest in small and medium enterprises (SME) as a major plank of poverty reduction in Bangladesh. The government has formulated a comprehensive industrial policy 2005 by putting special emphasis for developing SMEs as a thrust sector for balanced and sustainable industrial development in the country to help deal with the challenges of free Market economy and globalization.

Some data with a national scope those are pertinent to characterizing SMEs in Bangladesh

as of 2001-2003. There are some 78,440 private sector establishments of various sizes in Bangladesh with some 3.5 million workers employed in them.

Current Status of SME Financing by Banks in Bangladesh:

BB Sets SME Financing Target at tk 625b for 2011:

(Collected news about SME loan from Financial Express)

The central bank has set the target for disbursement of loans at over Tk. 625 billion for the small and medium enterprise (SME) sector in calendar year, 2011, marking a 64 .56 per cent increase over that of the previous year.

The banks and financial institutions initially set the target at Tk. 240 billion in 2010. But the SME financing target was later revised upward for the year – to Tk. 380 billion to meet the growing demand for such credits.
SME sectors:

Besides, The loans will be given to more than 60 categories of operations in the SME sector such as-

● light engineering

● handicraft,

● flower,

● fish processing,

● handloom, rice-mill

Jamdani, Rajshahi Silk

●Jamdani,Rajshahisilk, Bank of Small Industries and Commerce Bangladesh Ltd. (BASIC) is entrusted with the responsibility of providing medium and long-term loans for promotion and development of small-scale industries. The memorandum and Articles of Association of the bank stipulates that 50% of loanable funds shall be used for financing small scale and cottage industries. The outstanding credit of BASIC stood at Tk158.9 crore at the end of December 2001 for small and cottage industries sector that rose to Tk178.7 crore by 12.46% at the end of December 2002.

Comments of Analysts:

►“We’ve already taken a three-tier monitoring arrangement to ensure growth of the SME sector in the country,” the BB official said, adding that the central bank has advised the banks and financial institutions to invest their funds on a cluster basis, along with an area-approach method.

►Under the monitoring arrangement, the head office of the central bank, its nine branch offices across the country and head offices of all commercial banks will regularly review the implementation of SME credit programmers.

►”We’ve put emphasis on cluster and area-approach methods for disbursement of such loans with the aim of easing inflationary pressures on the economy through creation of jobs across the country,” the BB official noted.

►“Developing countries like China are getting 20 to 30 per cent of their GDP from SMEs whereas this sector in Bangladesh is contributing 20 per cent to GDP with 60 per cent of total labour employed,” Mr Aftab said.

SME: Thrust sector deserves appropriate support:

SME has been considered as the thrust sector in the economic development of the country with growing importance from all walks of life. It is evident that, substantial increase in SME and Retail Credit portfolios along with commercial, corporate and institutional lending, would lead the banks to its higher trajectory of growth, minimizing the risk of lending through portfolio diversification. As such, most of the banks have taken up aggressive marketing policy to augment their exposure in SME and Retail Credit. Though SME concept is nothing new, as evident from the establishment of Bangladesh Small and Cottage Industries Corporation (BSCIC), but a fresh look into and Endeavour to boosting the sector are still imperative. Bangladesh Bank re-finance scheme for SME is laudable. The role of IFC-SEDF for creating awareness among the entrepreneurs and banks/NBFIs to be more focused in SME deserve appreciation.

Prospects:
Un-employment problem is a growing concern all over the world more particularly in developing countries, and the panacea to the setback mostly lies in massive development of labor incentive SME sector. SME in many cases can be set up at domestic and household level contributing to cost cutting. Family members may also participate in the process.

►The government is considering a special package for the SME sector:

Determining the economy growth government initiating to develop SME . The government considers a further cut in bank interest rates, especially for small and medium enterprises (SMEs) to help the sector grow faster, said the commerce minister yesterday. ?We have already brought down the interest rate to support the country’s entrepreneurs. We are considering reducing the rate further to help different sectors, especially the SMEs, grow faster,? said Faruk Khan. Now Analysis SME loans through a graph based on 2010 fiscal policy.

In the first nine months of this year, the banking sector exceeded the whole year’s target for giving loans to small and medium enterprises (SME) — but only thanks to a new definition of SME loan, according to some bankers. The bankers said the definition included existing non-SME portfolios as SME loans, helping raise disbursed funds to Taka 382.83 billion (US$5.4 billion) against a target of Taka 239.95 billion. If a trader borrows Taka 100 million, it can be mentioned as medium enterprise loan because of the definition,” said an official with the SME credit department of a private bank. He said many banks have shown their loans up to Taka 150 million as SME credit, which exaggerated the disbursed figure. Bangladesh Bank data shows less than Taka 150 billion was lent to the SMEs in 2009

SME From the speech of Budget 2010-11:

[183]. Considering the SME sector as one of the main agenda of economic development, for the first time in 2010, we have fixed a target of Tk. 23,995 crore as SME loan to be disbursed by the banks and financial Institutions. The banks and financial institutions will distribute loans to the SMEs and women entrepreneurs in accordance with the ascertained target.

[184]. Under the ‘SME Re-financing Scheme’ managed by Bangladesh Bank, an amount of Tk.1,541 crore has been refinanced from three funds up to April, 2010 to various banking and nonbanking financial institutions. The beneficiary coverage of this scheme is 15,672 SMEs.

[185]. In order to create an equitable and well-organized development of the industrial sector, a directive has been issued to establish a ‘Women Entrepreneur Dedicated Desk’ in each bank and financial institution to ensure better opportunity for the women entrepreneurs to receive loans on

easier terms and conditions.

Contribution of SMEs in the Economy:

In view of present economic development effort in Bangladesh the SME sector plays an important role. These are reflected in the following performance /activities of this sector:

►During the Fourth Five year plan, a total of 0.35 million jobs were created against the target of 0.4 million.

►Contribution of SME sector to GDP remained above 4.5% during the period from2000-01 to 2004-2005 despite decline in the amount of advances by the banking

sector to this sector.

►SME sector employs 25% of the total labour force. As a result, this sector is the present available sector for creation jobs.

►SME sector help alleviate poverty, increase income level of rural people and promote agro-industrial linkage in Bangladesh.

►SME sector requires lower energy supply, lower infrastructure facilities and this

sector imposes less environmental risk. They contribute towards better utilization of local resources and skills that might otherwise remain unutilized.

►Small industries being labour oriented are capable of generating more employment.

►They are necessary to maintain and retain traditional skills and handicrafts.

►They are the only medium for diversification of rural economy and for peaceful and concurrent socio-economic development of all classes of people. From the above discussion, we can say that SMEs are playing an important role in our economy in various ways.

Role of SMEs Export Growth in Bangladesh

Bangladesh maintained its upward strides in economic growth duly manifested by positive developments of the major macro-economic indicators. GDP growth was 6.43 percent in 2006-2007 compared to 6.63 percent in 2005-2006. The growth of GDP was 5.96 percent for the year 2004-2005. The national savings and investment reached 29.20 and 24.30 percent of GDP respectively in 2006-2007. Per capita GDP and GNI would cross U$ 482 mark for the first time in Bangladesh and stand at US$ 482 and US$ 520 respectively. The contribution of service sector in the GDP was 52.33% in 2007-2008; while industry and agriculture sectors were 28.58% and 19.09% respectively.

After all, small and medium enterprises, including the tiny and ‘micro’ enterprises comprise virtually all (about 99.85%) of all business enterprises outside agriculture in Bangladesh. Large enterprises account for only 0.15% of the said enterprises. SMEs including micro enterprises account for some 81.2%, while only 0.15% of all business enterprises employ a full 18.8% of the employment of all business enterprises outside agriculture. Clearly, small and medium enterprises including micro enterprises have a ground-breaking, monolithic and humongous importance in the economy of Bangladesh in the context of pro-poor growth.

The government launched a strategy of industrialization focused on the manufacturing sector. Industries (manufacturing) sector expanded at an average rate of 6.44% per annum throughout the years of FY 1972-2005. The average growth of industry sector (manufacturing) during 1992-96 was 8.21 percent. But during 1997- 2003, the growth rate rose to 6.8 percent. Manufacturing sector registered 10.77% growth for the 2005-2006. It was 9.52% for the year 2006-2007.

The growth of SMEs in a number of industries, particularly in the field of plastic, food, footwear, rubber products, chemicals, job printing and certain categories of metal based products. Plastic industry has not only succeeded in substituting imports but has also been able to penetrate the export market in specific range of products such as drums and bulk containers etc. The industry has also been producing items that are considered deemed export, e.g. accessories for the garments industry etc. Similar export successes have also been achieved by imported metal based engineering product industries. Thus, export of engineering products has experienced nearly 27% annual growth during the last 10 years, with production carried out by enterprises belonging to the SME sector. Easy import of components has also facilitated the rapid growth of a wide variety of footwear products in the country. Similarly, lower cost of imported paper and ink has helped commercial job printing to grow rapidly. Import of packaging materials at lower cost has contributed to the growth of other food industry. Rubber products and other chemical products also seem to have benefited from easier access to raw materials due to trade liberalization. Pilferage from the export oriented garments factories of fabric imported duty free also adversely affected the SMEs in weaving.

The growth of SMEs has been the trend in domestic demand. On the other hand, SMEs in dominant manufacturing industries such as grain milling seem to have stagnated due to relatively low income elasticity of demand for these products.

SMEs Defined

SMEs in Bangladesh are defined for purposes of industrial policies by the Ministry of Industries (MOI). Historically, this definition has been in terms of fixed-investment brackets, and a dual-mode definition is in place, separate for manufacturing establishments, and service establishments.

1. For manufacturing industries, the Revised SME defined:

(i) an enterprise would be treated as small if, in today’s market prices, the replacement cost of plant, machinery, structures, and other parts/components, fixtures, support utility, and associated technical services (such as turn-key consultancy), i.e. Tk. 50,000 to 1.5 crore ( 0.05 million to Tk. 15 million and / or workforce not more than 50 ;

(ii) an enterprise would be treated as medium if, in today’s market prices, the replacement cost of plant, machinery, building, structures, and other parts/components, fixtures, support utility, and associated technical services (such as turn-key consultancy), i.e Tk 1.5 crore to Tk 20 crore ( tk 15 million to Tk. 200 million and/ or workforce not more than 150 ;

From both definitions above, land and building is excluded.

2. For non-manufacturing activities (such as trading or other services), the Revised SME defined:

(iii) an enterprise would be treated as small if the fixed capital is Tk. 50,000 to Tk. 50,00000 (0.05 million to Tk. 5 million and / or workforce not more than 25;

(iv) an enterprise would be treated as medium if the fixed capital is Tk. 50,00000 to Tk. 10,00,00000 (5 million to Tk. 100 million and / or workforce not more than 50; From both definitions above, land and building is excluded.

Government Initiative for SME Export Development

(i) Government Policies and Strategies for SMEs : The government has committed in the PRSP and as well as in the Industrial Policy 2005 to consider SMEs as vehicles for quality of life improvement, economic growth and poverty alleviation of the common people. The Government will play the role as a facilitator removing policy obstacles and neutralizing market failures and secondly will provide necessary promotional support to SMEs. The poverty Reduction Strategy Paper (PRSP) Stateg: The Government will pursue an employment intensive industrialization with emphasis on SMEs and export oriented industries.

(ii) Booster Sectors: For promotional support SME policy Strategies 2005 has identified the following 11 booster sectors: (1) Electronics and electrical; (2) Software development; (3) Light engineering and metal-working; (4) Agro-processing/agri-business/ plantation agriculture/ specialist farming/tissue-culture and related business; (5) Leather- making and leather goods; (6) knitwearmaking and leather goods; (7) Plastics and other synthetics; (8) Healthcare and diagnostics; (9) Educational services; (10) Pharmaceuticals/cosmetics/toiletries; and (11) Fashion-rich personal effects, wear and consumption goods

(iii) Revenue and financial Incentives: The industrial enterprises identified as Thrust Sectors including small and medium enterprise (SMEs) in the Industrial Policy 2005 will enjoy special fiscal and financial incentives.

Private Sector Initiatives for SME Export Development

Product Launching for SMEs: Product launching by trade association, chambers, among which FBCCI, DCCI, CCCI NASCIB, WEAB, regional chambers and district chambers.

FBCCI SME Fair: The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has contributed a grate deal in promoting SMEs products of Bangladesh through the SME fair annually.

SCI Fair of NASCIB: National Association of Small and Cottage Industries of Bangladesh (NASCIB) organizes various Small and Cottage Industries (SCI) Exhibitions, Regional Fairs, Seasonal Exhibitions, Product Promotion of NASCIB members and Trade fairs, of which the Yearly National SCI Mela held annually is participated not only be women entrepreneurs of Dhaka but also from different districts of Bangladesh. Besides NASCIB assists its women entrepreneur members in SME in the participation of important International Trade Fairs and regional melas, where women entrepreneurs’ SME products are in great demand and these women have proved their efficiency by receiving orders for their products at different fairs.

Various Type of Fairs: Trade Fairs for product promotion and export orders are held every year by various Trade Associations as “Exposition” themes with exhibitions, displays and fashion shows. Among them are BGMEA, BKMEA, Bangladesh Engineering Industry Owners Association (BEIOB), Plastic Manufacturers and Exporters Association. Pharmaceutical Owners Association, Textile Mill Owners Association , Bangladesh Furniture Industries Association, Bangladesh Electrical Association and Bangladesh Weaver association etc.

Barriers for SME Export

(i) Insufficiencies Information: Problems in identifying, selecting and contracting international markets due to information insufficiencies. (i) Limited information to locate markets; (ii) Unreliable data about the international Market; (iii) Locating foreign business opportunities; (iv) inability to contact overseas customers;

(ii) Functional Barriers: Insufficiencies of various functions internal to the enterprises such as human resources, production and finance with regards to exporting: (i) Lack of managerial time to deal with internationalization; (ii) Insufficient quantity of personnel for internationalization; (iii) Lack of excess production capacity for exports; (iv) Shortage of working capital for financing exports;

(iii) Marketing Barriers: Pressures imposed by external forces on adapting the elements of the company’s marketing strategy including barriers associated with the company’s product, pricing,

distribution logistics and promotional overseas: (i) Developing new products for foreign markets; (ii) Adapting export product design/style; (iii) Meeting export product quality/ standards/

specifications; (iv) Offering technical/after-sales service; (v) Offering satisfactory prices to customers; (vi) Granting credit facilities to foreign customers; (v) Complexity of foreign distribution channels; (vi) Maintaining control over foreign middlemen; (vii) Unavailability of warehouse facilities abroad; (viii) Excessive transportation/insurance costs; (ix) Adjusting export promotional activities to the target market;

(iv) Procedure Barriers: Barriers associated with the operational aspects of transactions with foreign customers. (i) Unfamiliar exporting procedures/ paperwork; (ii) Difficulties in communicating with overseas customers; (iii) Slow collection of payments from abroad; (iv) Difficulties in enforcing contracts and resolving disputes;

(v) Government Barriers: Barriers associated with the actions or inaction by the home government in relation to its indigenous companies and exporters. (i) Lack of home government

assistance/incentives; (ii) Unfavorable home rules and regulations; (iii) Unfavorable foreign rules and regulations;

(vi) Customer and Competitor Barriers: Barriers associated with the firm’s customer and competitor in foreign market’s which can have an immediate effect (i) Different foreign customer habits/ attitudes; (ii) Keen competition in overseas markets;

(vii) Business Environment Barriers: Barriers associated with the economic, political-legal and socio-cultural environment of the foreign market’s within which the company operates or is planning to operate. (i) Foreign currency exchange risks; (ii) Unfamiliar foreign business practices; (iii) Different socio-culture traits; (iv) Verbal/Non-verbal language differences; (v) Inadequate of infrastructure for e-commerce; (vi) Political instability in foreign markets;

(viii) Tariff and non-tariff Barriers: (i) High tariff barriers; (ii) Inadequate property rights protection (PRP); (iii) Restrictive health, safety and technical standards; (iv) Arbitrary tariff classification and reclassification; (v) Unfavorable quotas and/ or embargoes; (vi) High costs of customs administration;

Market Development Initiative for Export

A major focus of the trade associations and chamber bodies should be to gather information regarding existing and potential markets and advise entrepreneurs regarding products and their qualities which are in demand now or can be in demand in future. What design and packaging charges and improvements would make particular products more attractive to customers, particularly abroad, should also be regularly assessed. Properly designed market development efforts such as negotiations, advertisements and exhibitions, both at home and abroad, that would be helpful towards expanding sales should be in the portfolio of their market development activities. Like many other countries the SMEs of Bangladesh have been affected by the precipitous economic liberalization in the early 1990s without first taking action preparatory to liberalization. All kinds of foreign goods including ordinary consumer items have been coming into the country easily. The domestic industries, given their relative inefficiency, cannot compete with these imported items in terms of price and also, not infrequently, quality. As a result existing enterprises have been failing and possible new ones have not been coming up initiating a process of de-industrialization. Finally special care must be taken both by the entrepreneurs as well as by the relevant government agencies to, ensure quality control and to make the products up to the international standard to remain alive in the competitive world market. Consequently, small businesses always trying to keep one step ahead of their rivals”.

Major Export flourishing in Bangladesh:

1. SME Sub-Sectors

(i) Agro-process, agro-based and agro-supportive industries ;(ii) Handicraft: braided rug of jute & cotton etc., (iii) artificial flower making, etc; (iv) computer soft ware and ICT; (v) micro-electronics; (vi) food processing and food staffs; (vii) floriculture; (viii) gift items; (ix) poultry and cattle; (x) jute goods; (xi) electrical appliances, (xii) leather and leather goods; pottery; (xiii) light engineering; (ivx) staffed toys; (xv) RMG, knitwear etc.; (xvi) aquaculture; (xvii) automobiles; (xviii) horticulture and (xix) medicinal plants culture; pharmaceutical

2. Sub- Sectotal SME Export Information

Gift items :The country’s gift items manufacturing firms participated in the Tokyo International Gift Fair held on September 2- 5, 2008 . Bangladeshi participating companies displayed SME products like handicrafts, home textile, jute products, nakshi katha, scarf, bags, belts, wallets, show pieces, wall- mat, candle, cushion cover pottery and such other products. From this fair Bangladesh participants received US$ 20,000 spot orders in addition to 120.000 prospective orders. SAARC Trade Fair in Colombo, held from August 28 – 31 2008 was also able to receive spot order worth US$ 490.000. Pharmaceuticals items, Soft Drink, Jamdani Saree, Dhakai Moslin, Silk Scrap, and Other products were put on display in the Colombo fair. The prospects of exporting shoes and gift items and RMG products to Japan.

Home Textile: Export of home textile products can fetch US$1.0 billion by the next few years as many of the country’s regional rivals have shifted their focus on producing high-value textiles. Exports of home textile items such as bed linen, cushion, blanket, nakshikatha, curtain and pillow will continue to boom in the next years. Home textile products have the potentials to earn $1.0 billion from export by 2012-13 fiscal years. If the current rate of growth continues, by next four years home textile would emerge as the third highest export earning sector. A number of countries of north and South America, Europe, Africa, middle and Southeast Asia are major markets of Bangladesh’s home textiles. The demand for home textile to the USA and Europe, which account for Bangladesh’s 80 per cent export market, rose sharply in the recent months amid declining shipments from some south and Southeast Asian countries.

Electrical & Electronics Products: There is huge markets for electrical goods in different countries across the globe including Europe and Middle East. Bangladesh is near about self-sufficient in electrical goods and accessories. Apart from some 5 per cent sophisticated items 95 per cent electrical products are made in Bangladesh, at the last edge to be self-sufficient in producing all kinds of fans cables within two to three years. There is huge prospect of exporting electrical goods abroad if government helps in this regard. The products of electrical accessories like substation equipment, household electrical appliances, tube light and incandescent bulb, electrical and electronic ballast, supper enamel copper wire, energy saving bulb, voltage stabilizer, electrical cables, energy saving bulbs, electric motor, electric meter, transformers, light fittings, electrical fan, capacitor, IPS-UPS and varnish have a tremendous market for export into African countries . A local electronics assembling company will set up a liquid crystal display (LCD) television assembling plant and refrigerators the first of its kind in Bangladesh.

Camera Lens Plant: The lenses used in some of the world’s most famous camera brands are being produced in Bangladesh with such success that the company involved plans to expand I operations. Apart from camera lenses the company also produces lenses for fax machines, photocopies, security cameras, scanners and projectors.The company earns around US$ 8 million annually by exporting products.In producing lenses workers need to follow nine stages such as curve generating, smoothing, polishing, cleaning, inspection, centering, coating, second time inspection and packing for export.

Automobiles: The first ever fuel-less and environment friendly electric bike and electric rickshaw was formally launched by Electric bike and electric rickshaw would save huge foreign currency by reducing diesel use, air pollution and transport cost. The people of middle and lower income bracket will be able use it for their affordable prices. A leading automobile distributors is to assemble Mercedes-Benz buses in Bangladesh. The company will be able to cut the price of Mercedes-Benz buses by about Tk 40 lakh to nearly Tk 1.10 crore after the establishment of the assembling plant.Currently one Mercedes-Benz bus costs around Tk 1.50 crore as it enters Bangladesh in completely built form. The local assembling plant will help us offer lower prices due to cheap labour. A local manufacturing firm has initiated a move to produce CNG-run motorcycles. Main targets is to export motorcycles after meeting the domestic demand. The company has moved to produce CNG-run motorcycles, considering its cheap fuel cost. The duty structure on import of raw materials is a big constraint for the manufacturers. We can export our motorcycles to neighbouring countries, including India take advantage of the duty-free access under SAFTA in the future.

Bicycle Export: The country exported bicycles worth US$ 64.28 million in the just concluded fiscal year. Bangladesh exported around half a million bicycles in 2007-08. There is huge demand for our bicycles in the European countries. Currently, world’s some of the leading companies including Raleigh of UK, Avocet Sports, PCM of UK, Motor and Sports of the UK, Aldi of Holland, Bachtenkirch Interbike of Germany, M&F De Scheemaeker of Belgium and Formula Cycling of Belgium are importing bicycles from Bangladesh. Bangladesh is also trying other potential markets like Canada, the United Kingdom (UK) through supplying bicycles in a limited scale.The UK is a leading importer that imports bicycles worth around 220 million euro a year. Bangladesh alone exported bicycles worth 13 million euro to the UK in calendar 2007.Bicycle industry is a light engineering sector and most of parts are locally available.Bangladesh can export around 2.0 million pieces of bicycles a year.

Light Engineering : Currently, the light engineering has been producing highly demanded products like crushing machines, bicycle, spare parts of shallow engines, carbon rod for dry-cell batteries, pistons, etc. The sector is also producing agricultural tools like power-tiller and its spare parts, irrigation pumps, crank shaft, automobile components like bracket, accelerator, oil expeller, marine parts like bush and others. Besides, it is also manufacturing parts for textiles, jute and tea, food processing, construction, and tools required for furniture industry. A light engineering company has started export of flour machines to Australia recently. The light engineering sector is growing on an average 30 per cent annually and it is now eyeing export around half a billion US dollars in 2008- 09 fiscal. The light engineering sector exported US$ 310 million in 2006-07 fiscal year. There are around 40,000 light engineering units across the country and its local market size is estimated to be around Tk.200 billion with its 40000 units. The case for the light engineering sub-sector, which is but part of the Small and Medium Enterprises (SMEs), should not be looked upon as just one of the so many other claimants to government largesse. In fact, the light engineering sub-sector is the key to the development of heavy industry.

Local Firm Makes Heavy Crane: A local engineering industry, manufactured heavy barge-mounted crane at its own factory, an achievement that will pave the way to end manual lifting of heavy machinery. Having a capacity to lift around 300 tonnes of machinery or tools at a time, the crane will also be useful to lifting sunken vessels in a short time. If any company introduces such kind of heavy crane it will help save time and the completion of construction work will be possible in a span of two to three years. As we are saving huge amount of foreign currency we seek government patronisation so that we can develop crane for overseas market.”As a support industry for shipbuilding, the company is trying to explore international market for its product.

ATM Body Frames to be Manufactured Locally : A local manufacturer is set to produce automated teller machine’s (ATM) body frame, which would help develop the electronic banking sector even further. Initially, 10 ATM body frames will be delivered and 500 more frames by 2010. A private company involved in providing ATM machines to many banks of the country. In recent years, electronic channels of banking, especially ATM, have become popular among the urban population. However, the costs that they incur to manufacture such ATM bodies is substantially lower than the imported ones. A local light engineering products manufacturer at Dholaikhal that manufactured these bodies, the cost of manufacturing each ATM body is Tk 1.5 lakh where as imported price is an ATM machine for Tk 5 lakh, which was Tk 11 lakh previously, as they do not have to pay import duties anymore.

Apparel Industry: The country’s export earnings from the Readymade Garments (RMG) sector may well reach the $ 25 billion mark by the year 2013 if it remains competitive in the global market.During the same timeframe, the industry should grow in terms of capacity to employ 2 million more people in this sector. RMG export which contributes around 76 percent of the country’s annual export income, stood at $ 10.7 billion at the end of the of the fiscal year 2007-2008 posting a growth of 16 percent from the previous year.The industry, the lifeline of Bangladesh economy at the same time, directly employs more than 2.2 million people, while indirectly benefiting around 10 million.

Textiles Industry : The country’s total export earnings from ready-made garment items, textile fabrics, terry towels and home textiles exceeded $1.24 billion in July this year.Of the total, knitwear and woven garments together accounted for earnings over $ 1.19 billion in July.The EPB statistics knitwear and woven garments grew around 71.64 per cent to $1187.80 million, with knitted items growing 84.50 per cent and woven 58.55 per cent in July. Pharmaceutical, raw jute, agro processed foods and tobacco exports also continued their hefty growth in July amid continued demand for the Bangladeshi goods among the expatriate communities.However, export earnings from vegetables, leather and tea dropped during the period under review.

Pharmaceutical : The country’s pharmaceutical market had a valuation of US$700 million in 2007 and that a compound annual growth rate (CAGR) of 18.79% through to 2012 can be expected. The greatest challenge facing the industry is the end of the patentfree regime in 2016, when local pharmaceutical companies will have to cease the production, distribution and sale of medicine that have intellectual property protection elsewhere in the world. Forward thinking local drugmakers will have to adapt their product portfolio as necessary or suffer a steep drop-off in sales. However, the global ‘patent cliff’ in 2011 will mitigate this watershed.

Glass Industry: The local multi-billion taka glass industry that sprang up in a span of three years now exports produces to a number of countries after meeting around 95 per cent of the domestic demand. The present market size is around Tk 300 crore. Previously the country was fully dependent on imported glass, whereas it now imports only 5 per cent of its demand for colored and luxurious designed glass from China, Thailand and Indonesia. Most of the raw materials, including dolomite, limestone and chemicals, for float and sheet glass need to be imported from abroad. The local glass companies are also exporting their produces mainly to South Asian countries, including India, Nepal, Bhutan and Sri Lanka. The government to take necessary measures to ease the border difficulties to smoothen the shipment of consignments, as glasses are usually exported through borders. Recently, the government is considering giving 10 percent incentives on exporting sectors, which, the industry people hope, would help the sector boom.

Label export : The label-manufacturing sector of the country has an investment of Tk 50 billion involving about 40,000 persons and the total volume of export amounted to $ 500 million in 2007 with an annual growth rate of about 20 per cent.

Jute-Blended Denim: A local fabric producer has successfully developed better and durable denim woven from blended yarns of jute and cotton. Bangladesh’s $10 billion apparel export industry produces a huge quantity of denim apparels. Woven garment manufacturers are the main users of denim for making jackets and jeans for global buyers. In the last fiscal year ended in June 2007, the country earned only $147 million from export of more than 0.6 million tons of raw jute.

Diamond Cutting: Diamonds cut and polished in Bangladesh have grabbed the limelight on the international market. But the export potential of Bangladeshi-cut diamond is yet to be fully realized1 due to bureaucratic tangles and novelty of the industry. When most of Indian-finished diamonds get $7,000 to $15,000 for each carat, Bangladeshi diamonds earn around $25,000 to $35,000 for each carat for their superior quality. The importing countries check sealing and certificates on the packages of imported diamonds. The export would reach about $10 million within next year if the government allows a bonded warehouse for diamond jewelry. The global diamond cutting industry is worth around $63 billion, with India as the major stakeholder. The country’s skilled workforce, engaged in traditional jewelry industry, can heavily contribute to the diamond cutting trade

Bags: Bangladesh made a big impact in the world’s biggest shipbuilding fair in Hamburg, bagging export orders worth US$250 million and carving a niche among the nations of ship manufacturers. The ten ships weigh 7250 tons each and have an order price of over $170 million. A prime location for building small ships thanks to its abundant cheap labor and traditional expertise.

Leather and Lather Goods: Bangladesh is going to launch a global standard testing laboratory to test and certify exportable leather and footwear products to meet the demands of international buyers. The country’s export of leather goods and footwear products will definitely increase as the local exporters will be able to receive international standard certificate from the local authorities. Meanwhile, leather worth $261.67 million was exported during July-May period of 2007-08 fiscal year against its target of $264.47 million for the same period. During the same period, the manufacturers exported footwear worth $145.73 million against its target of $147.92 million, while leather bags and purses worth $7.86 million were exported against its target of $11.65 million.

Recommendations for Export Development of SMEs

The proposed strategies and policies to be implemented on short term, medium term & long term basis.

1. Extensive Financial Support to SMEs: Various banks, financing institutions, NGOs may further increase its technical and financial support to SMEs through its various financing facilities and windows, which may significantly contribute to the creation and development of SMEs.

2. Trade Fairs, Exhibitions, Symposiums, Seminars and Workshops: Trade fairs, exhibitions, symposiums, seminars, workshops etc. on SMEs should be organized on a regular basis. Publications of all these events should be made available for all SME establishments. Chambers around the country can arrange exhibitions for SMEs products, so that larger number of consumers may gain awareness about the diversity and quality of SMEs products.

3. Periodical Professional Training Courses for SMEs: Periodical professional training courses should be arranged for technical staff of SMEs. Moreover training in management of small enterprises and efficient marketing can also be provided. Training programme/workshop should be organized for the development of SMEs capabilities to acquire enhanced knowledge and skills about how to choose, use and improve technology.

4. Seed Money, Leasing, Venture Capital and Investment Funding: There is a great need for improving different aspects of financial services of SMEs, such as seed money, leasing, venture capital and investment funding.

5. Seeking International Financing: Various international donor agency/bank extends financing to SMEs through National Development Financing Institutions (NDFIs). It is found that they are not explored properly. The procedure of those donor agencies/banks for loan facilities to SMEs through NDFIs may be reviewed and term and conditions may be examined in order to make international financing more accessible to SMEs in the country.

6. E-Commerce: Electronic Commerce has also great potential for development around the country and abroad. Through this device, matching of buyers orders to sellers can be done in such products in which SMEs are dealing. Such exchange of information about sellers and purchasers shall be most useful for Agro products, leather products, textiles and clothing, IT and metal products as well as raw materials and intermediate goods.

7. Alleviating Poverty through SMEs Development: There is great scope of alleviating poverty through SMEs development. So poverty alleviation strategies and policies for SMEs should be developed, in order to provide job opportunities and enhance living standards for large segment of this poverty ridden country.

8. Expansion and Diversification of SMEs: Bangladesh’s industrial sector needs expansion and diversification. For this purpose, growth of SMEs is essential. However, SMEs have to equip themselves with modern technologies and effectively use them to raise their production efficiency.

9. Inter-Firm Linkages: In order to develop sub-contracting among large and small enterprises around the country and between Bangladesh and other SAARC or OIC countries, Subcontracting Exchange Schemes can be launched. Professional associations and National Chambers can set-up such establishment. They may collect information about engineering industries components, and what vendor industries can provide such components. In this way, inter-firm linkages could be expanded at home and abroad.

10. Credit Guarantee Scheme & Financing of SMEs: Financing SMEs can be successful, if two arrangements can be undertaken:

i. Separate institutions dealing with SMEs loans should be established around the country. They can provide adequate volume of finance, on less strict terms and can supervise the loan repayment process as well.

ii. Credit guarantee schemes. Credit guarantee schemes for SMEs can be an effective means of supporting small enterprises development, especially in our country where access to credit is constrained for small borrowers.

11. Sub-Contracting Exchange Schemes among Large and Small Enterprises: In order to develop sub-contracting among large and small enterprises among member countries, Sub- Contracting Exchange Schemes can be launched. Professional Associations can set-up such an establishment. They may collect information about engineering industries components, and what vendor industries can provide such components. This way inter-firm linkages can be expanded around the country.

12. Technology Transfer: Technology transfer is of vital importance for development of SMEs. Technology transfer through various means and reverse engineering to be arranged through Government and private levels.

History of Bank in Bangladesh

Bank:

Banks are the most financial institution of the economy. They are the principal source of credit (loan able fund) for millions of households (individuals and families) and for most local units of the government. Moreover, for small business ranging from grocery stores to automobile dealers, banks are often the major source of credit to stock the shelves with merchandise or to fill dealer’s showroom with new goods. When the business and consumers need financial information and financial planning, it is the bankers to whom they turn most frequently for advice and council.

Worldwide, banks grant more installments loans to consumers than any other financial institution. Banks are among the most important source of short term working capital for business and have become increasingly active in recent years in making long term business loans for new plant and equipment.

Bank is financial intermediaries that offers the widest range of financial services- especially credit, savings and payment services and perform the widest range of financial function of any business firm in the economy. The multiplicity of bank services and function has led to banks being labeled “financial department stores”.

Origin of the Word

The name bank derives from the Italian word banco “desk/bench”, used during the new beginning by Florentine bankers, who used to make their transactions above a desk covered by a green tablecloth. However, traces of banking activity can found even in ancient times.

In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would set up their stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from which the words banco and bank are derived.

What Is the Economic Function of a Bank?

Commercial banks play an important role in the financial system and the economy. As a key component of the financial system, banks allocate funds from savers to borrowers in an efficient manner. They provide specialized financial services, which reduce the cost of obtaining information about both savings and borrowing opportunities. These financial services help to make the overall economy more efficient.

How Banks Work

Banks operate by borrowing funds-usually by accepting deposits or by borrowing in the money markets. Banks borrow from individuals, businesses, financial institutions, and governments with surplus funds (savings). They then use those deposits and borrowed funds (liabilities of the bank) to make loans or to purchase securities (assets of the bank). Banks make these loans to businesses, other financial institutions, individuals, and governments (that need the funds for investments or other purposes). Interest rates provide the price signals for borrowers, lenders, and banks.

Through the process of taking deposits, making loans, and responding to interest rate signals, the banking system helps channel funds from savers to borrowers in an efficient manner. Savers range from an individual with a $1,000 certificate of deposit to a corporation with millions of dollars in temporary savings. Banks also service a wide array of borrowers, from an individual who takes a loan of $100 on a credit card to a major corporation financing a billion-dollar corporate merger.

The table below provides a June 2001 snapshot of the balance sheet for the entire U.S. commercial banking industry. It shows that the bulk of banks’ sources of funds comes from deposits – checking, savings, money market deposit accounts, and time certificates. The most common uses of these funds are to make real estate and commercial and industrial loans. Individual banks’ asset and liability composition may vary widely from the industry figures, because some institutions provide specialized or limited banking services.

Functions of a Bank

1. Recognition of Right to Credit:

The view thus given of bank credit in general furnishes the key to the view which should be taken of the bank itself. It is, as we have already seen, a credit institution – an institution for the investigation, discussion, and recording of credits. It is not, in this aspect, what some have described it, an enterprise for “manufacturing” credit. The “manufacture” of credit, as clearly appears from what has already been said, is impossible. A basis of credit is automatically created whenever real buying’ power or value is in process of being brought into existence. Such power is created during the expenditure of labor and capital, but the real worth or value is often intimately associated with the other elements that appear in the general operations of his concern. The basis only appears when it is dissociated from the other elements in the aggregate of goods and expert means are needed to recognize it. The first function of a bank, then, is that of recognizing through scientific analysis the real nature and amount of the values which are presented. Fundamentally, therefore, the credit department of a bank is the basic element in its organization. It is true that in the past many banks have been able to do without credit departments and that at the present time there are not a few of them – chiefly the smaller and less advanced types of institution – which have no credit departments, or only very rudimentary organizations of the sort. These, however, usually accept the work of credit departments operated by their city correspondents. The true work of a bank credit department is done whenever any loan is made. It may be that the work of credit analysis is incidentally performed by the president or a vice-president of the bank or by some other officer who happens to have charge of the work of lending, but the function is there.

2. Guaranteeing of Values:

Secondly, the bank, after recognizing or analyzing credit, guarantees it. It does this by substituting its own credit for that of the “borrower” or owner of wealth. If A, for example, is producing steel from pig iron, the bank ascertains the value of the products which he has in process, which, we may say, is $25 per ton. It undertakes to loan, say, $10 per ton, and in order to carry out its part of the agreement it obligates itself to pay $10 on demand to anyone who may be designated by the owner of the plant. The owner leaves with the bank his own note, which may be secured or may be simply a claim upon his general assets. In either case, however, the loan is made on the strength of existing value. It represents that part of the value of the product which the bank is willing to guarantee. The bank does not expect to be called upon to meet this obligation for $10 per ton. On the contrary, it expects to offset the obligation against other claims, and as a net result it believes that it will not be called upon to reduce its holding of specie. That, however, is to be determined at a later time. The bargain which the bank makes when it enters into relationships with the borrower involves the substitution of its own obligation for that of the owner of the goods, and this is the essential point in the whole operation.

3. Transferring of Titles:

Thirdly, the bank not only undertakes to put its obligation in place of that of the borrower, but it undertakes to keep this obligation steadily redeemable on demand in money, or in lieu of such redemption, to shift the “credit” from A to B and from B to any other that the latter may indicate, through a process of bookkeeping which involves the receiving, recording, and paying of claims drawn against the total credit which has been allowed. Closely connected with this function are the subordinate duties of exchange and remittance, which, as will be seen at a later point, are variants of the same general function.

Overview of Banking Environment in Bangladesh:

The banking industry in Bangladesh is more than 600 years old. In Bangladesh 1970’s banking sector in Bangladesh entered into new era when the entire commercial banks and financial institution were nationalized after the emergence of Bangladesh as an independent nation in 1970’s (except foreign banks) with fixed landing and deposit rates .

History of Banking Sector of Bangladesh:

The banking system at independence consisted of two branch offices of the former State Bank of Pakistan and seventeen large commercial banks, two of which were controlled by Bangladeshi interests and three by foreigners other than West Pakistanis. There were fourteen smaller commercial banks. Virtually all banking services were concentrated in urban areas. The newly independent government immediately designated the Dhaka branch of the State Bank of Pakistan as the central bank and renamed it the Bangladesh Bank. The bank was responsible for regulating currency, controlling credit and monetary policy, and administering exchange control and the official foreign exchange reserves. The Bangladesh government initially nationalized the entire domestic banking system and proceeded to reorganize and rename the various banks. Foreign-owned banks were permitted to continue doing business in Bangladesh. The insurance business was also nationalized and became a source of potential investment funds. Cooperative credit systems and postal savings offices handled service to small individual and rural accounts. The new banking system succeeded in establishing reasonably efficient procedures for managing credit and foreign exchange. The primary function of the credit system throughout the 1970s was to finance trade and the public sector, which together absorbed 75 percent of total advances.

The government’s encouragement during the late 1970s and early 1980s of agricultural development and private industry brought changes in lending strategies. Managed by the Bangladesh Krishi Bank, a specialized agricultural banking institution, lending to farmers and fishermen dramatically expanded. The number of rural bank branches doubled between 1977 and 1985, to more than 3,330. Denationalization and private industrial growth led the Bangladesh Bank and the World Bank to focus their lending on the emerging private manufacturing sector. Scheduled bank advances to private agriculture, as a percentage of sectored GDP, rose from 2 percent in FY 1979 to 11 percent in FY 1987, while advances to private manufacturing rose from 13 percent to 53 percent.
The transformation of finance priorities has brought with it problems in administration. No sound project-appraisal system was in place to identify viable borrowers and projects. Lending institutions did not have adequate autonomy to choose borrowers and projects and were often instructed by the political authorities. In addition, the incentive system for the banks stressed disbursements rather than recoveries, and the accounting and debt collection systems were inadequate to deal with the problems of loan recovery. It became more common for borrowers to default on loans than to repay them; the lending system was simply disbursing grant assistance to private individuals who qualified for loans more for political than for economic reasons. The rate of recovery on agricultural loans was only 27 percent in FY 1986, and the rate on industrial loans was even worse. As a result of this poor showing, major donors applied pressure to induce the government and banks to take firmer action to strengthen internal bank management and credit discipline. As a consequence, recovery rates began to improve in 1987. The National Commission on Money, Credit, and Banking recommended broad structural changes in Bangladesh’s system of financial intermediation early in 1987, many of which were built into a three-year compensatory financing facility signed by Bangladesh with the IMF in February 1987.
One major exception to the management problems of Bangladeshi banks was the Grameen Bank, begun as a government project in 1976 and established in 1983 as an independent bank. In the late 1980s, the bank continued to provide financial resources to the poor on reasonable terms and to generate productive self-employment without external assistance. Its customers were landless persons who took small loans for all types of economic activities, including housing. About 70 percent of the borrowers were women, who were otherwise not much represented in institutional finance. Collective rural enterprises also could borrow from the Grameen Bank for investments in tube wells, rice and oil mills, and power looms and for leasing land for joint cultivation. The average loan by the Grameen Bank in the mid-1980s was around Tk2,000 (US$65), and the maximum was just Tk18,000 (for construction of a tin-roof house). Repayment terms were 4 percent for rural housing and 8.5 percent for normal lending operations.
The Grameen Bank extended collateral-free loans to 200,000 landless people in its first 10 years. Most of its customers had never dealt with formal lending institutions before. The most remarkable accomplishment was the phenomenal recovery rate; amid the prevailing pattern of bad debts throughout the Bangladeshi banking system, only 4 percent of Grameen Bank loans were overdue. The bank had from the outset applied a specialized system of intensive credit supervision that set it apart from others. Its success, though still on a rather small scale, provided hope that it could continue to grow and that it could be replicated or adapted to other development-related priorities. The Grameen Bank was expanding rapidly, planning to have 500 branches throughout the country by the late 1980s.
Beginning in late 1985, the government pursued a tight monetary policy aimed at limiting the growth of domestic private credit and government borrowing from the banking system. The policy was largely successful in reducing the growth of the money supply and total domestic credit. Net credit to the government actually declined in FY 1986. The problem of credit recovery remained a threat to monetary stability, responsible for serious resource misallocation and harsh inequities. Although the government had begun effective measures to improve financial discipline, the draconian contraction of credit availability contained the risk of inadvertently discouraging new economic activity.
Foreign exchange reserves at the end of FY 1986 were US$476 million, equivalent to slightly more than 2 months’ worth of imports. This represented a 20-percent increase of reserves over the previous year, largely the result of higher remittances by Bangladeshi workers abroad. The country also reduced imports by about 10 percent to US$2.4 billion. Because of Bangladesh’s status as a least developed country receiving concessional loans, private creditors accounted for only about 6 percent of outstanding public debt. The external public debt was US$6.4 billion, and annual debt service payments were US$467 million at the end of FY 1986.

Various Banks in Bangladesh

The commercial banking system dominates Bangladesh’s financial sector. Bangladesh Bank is the Central Bank of Bangladesh and the chief regulatory authority in the sector. The banking system is composed of four state-owned commercial banks, five specialized development banks, thirty private commercial Banks and nine foreign commercial banks. The Nobel-prize winning Grameen Bank is a specialized micro-finance institution, which revolutionized the concept of micro-credit and contributed greatly towards poverty reduction and the empowerment of women in Bangladesh. There are basically four types of Banks:-

Bangladesh Bank

Bangladesh Bank

Headquarters	Dhaka, Bangladesh
Established	16 December 1971
Governor	Dr. Atiur Rahman
Central Bank of	Bangladesh
Currency	Taka
ISO 4217 Code	BDT
Reserves	10 Billion US $
Website	http://www.bangladeshbank.org.bd
Bangladesh Bankis the Central bank of Bangladesh. It is the monetary authority of the country. It came into existence under the Bangladesh Bank Order 1972 (Presidential Order No. 127 of 1972) which took effect on 16 December 1971. Through this order, the entire operation of the former State Bank of Pakistan in the eastern wing was transferred to Bangladesh Bank.Bangladesh Bank has 9 branch offices, two in Dhaka city (sadarghat and Motijheel), and one each in Chittagong, Khulna, Rajshahi, Sylhet, Bogra, Rangpur and Barisal. The head office discharges its duties with 28 departments.History After the liberation war, and the eventual independence of Bangladesh, the Government of Bangladesh reorganized the Dhaka branch of the State Bank of Pakistan as the central bank of the country, and named it Bangladesh Bank. This reorganization was done pursuant to Bangladesh Bank Order, 1972, and the Bangladesh Bank came into existence with retrospective effect from 16 December 1971.

Objectives

As the central Bank of Bangladesh, the broad objectives of the Bank are :

To regulate currency issuance and to keep foreign exchange reserves.
To manage the monetary and credit system of Bangladesh with a view to stabilizing domestic monetary value.
To preserve the par value of the Bangladeshi Taka.
To promote and maintain a high level of production, employment and real income in Bangladesh; and to foster growth and development of the country’s productive resources.
To reserve all the rights of the bank.

Functions

Bangladesh Bank performs all the functions that a central bank of any country is expected to perform, and such functions include maintaining the price stability through economic and monetary policy measures, managing the country’s foreign exchange and the gold reserve and regulating the banking sector of the country. Like all other central banks across the globe, Bangladesh Bank is both the Government’s banker and the banker’s bank, a “Lender of the Last Resort”. Bangladesh Bank, like most of the central banks of different countries, exercises monopoly over the issue of currency and the banknotes. Except for the 1 and 2 taka notes, it issues all other denominations of Bangladeshi Taka.

Bangladesh Bank is empowered to act as the watchdog of the country’s banking system, and all scheduled banks are accountable to Bangladesh Bank, which has extensive powers to ensure soundness of the banking system. No bank can commence banking business in Bangladesh and no existing bank can open a new branch in or outside the country or shift any branch from one place to another without obtaining a license/permission from the Bangladesh Bank.

Organization

The highest official in the bank is the Governor (currently Dr. Atiur Rahman). The Governor chairs the Board of Director. The Executive Staff, also headed by the Governor, are responsible for the day to day affairs.

Current Board of Directors

Chairman

Dr. Atiur Rahman

Director

Md. Nazrul Huda
Dr. Wahid Uddin Mahmud
Dr.Momtaz Uddin Ahmed
Dr.Sufia Ahmed
Dr. Hossain Zillur Rahman
Dr.Mohammad Tareque
Mr.Jafar Ahmad Chowdhury
Mr. Muhammad Abdul Mazid

Current Executive Staff

Governor

Dr. Atiur Rahman

Deputy Governor

Md. Nazrul Huda
Ziaul Hasan Siddiqui
Md. Murshid Kuli Khan

Economic Advisor

Habib Ullah Bahar

Executive Director

Khandakar Muzharul Haque
Md. Abul Quasem
A.T.M. Nasiruddin
Chowdhury Mohidul Haque
Mir Abdur Rahim
Md. Harunur Rashid Chowdhury
Md. Mofiz Uddin Chowdhury
Nazneen Sultana
Md. Mofizuddin Chowdhury
Devaki Kumar Saha
A. H. M. Kai Khasru

Former Governors

A.N.M. Hamidullah 1972-1974
A.K.N. Ahmed 1974-1976
M. Nurul Islam 1976-1987
Shegufta Bakht Chaudhuri 1987-1992
Khorshed Alam 1992-1996
Lutfar Rahman Sarkar 1996-1998
Dr. Mohammed Farashuddin 1998-2001
Dr. Fakhruddin Ahmed 2001-2005
Dr. Salehuddin Ahmed 2005-2009
Dr. Atiur Rahman 2009-Present

The new governor of Bangladesh Bank will be Kamrul Hasan Zoardar.

Commercial Banks

State-owned Commercial Banks

The banking system of Bangladesh is dominated by the 4 Nationalized Commercial Banks, which together controlled more than 54% of deposits and operated 3388 branches (54% of the total) as of December 31, 2004 The nationalized commercial banks are:

Sonali Bank
Janata Bank
Agrani Bank
Rupali Bank

Private Commercial Banks

Private Banks are the highest growth sector due to the dismal performances of government banks (above). They tend to offer better service and products.

AB Bank Ltd
BRAC Bank Limited
Eastern Bank Limited
Dutch Bangla Bank Limited
Dhaka Bank Limited
Islami Bank Bangladesh Ltd
Pubali Bank Limited
Uttara Bank Limited
IFIC Bank Limited
National Bank Limited
The City Bank Limited
United Commercial Bank Limited
NCC Bank Limited
Prime Bank Limited
SouthEast Bank Limited
Al-Arafah Islami Bank Limited
Social Islami Bank Limited
Standard Bank Limited
One Bank Limited
Exim Bank Limited
Mercantile Bank Limited
Bangladesh Commerce Bank Limited
Mutual Trust Bank Limited
First Security Islami Bank Limited
The Premier Bank Limited
Bank Asia Limited
Trust Bank Limited
Shahjalal Islami Bank Limited
Jamuna Bank Limited
ICB Islami Bank
Moon Bank Limited
United Bank Limited

Foreign Commercial Banks

Citibank
HSBC
Standard Chartered Bank
Commercial Bank of Ceylon
State Bank of India
Habib Bank
National Bank of Pakistan
Wori Bank
Bank Alfalah

Specialized Banks and Credit Agencies

Out of the specialized banks, two (Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank) were created to meet the credit needs of the agricultural sector while the other two ( Bangladesh Shilpa Bank (BSB) & Bangladesh Shilpa Rin Sangtha (BSRS) are for extending term loans to the industrial sector. The Specialized banks are:

Grameen Bank
Bangladesh Krishi Bank
Bangladesh Development Bank Ltd
Rajshahi Krishi Unnayan Bank
Basic Bank Ltd (Bank of Small Industries and Commerce)
Ansar VDP Unnyan Bank

Various Schemes and Banking Products of Formal Banking

Product & Services:

Deposit Products:

1. Current A/C

2. Savings Bank Deposit A/C

3. Short Term Deposit A/C

4. Term Deposit A/C

5. Premium Term Deposit A/C

6. Instant Earnings Term Deposit A/C

7. Special Savings Scheme

8. Special Fixed Deposit Scheme

9. NFCD

10. RFCD

11. Money Double Program

Loans and Advance Products

Working Capital Financing
Commercial and Trade Financing
Long Term (Capital) Financing
House Building Financing
Retail and Consumer Financing
SME Financing
Agricultural Financing
Import and Export Financing

Cards

ATM Card
Credit Card (Local, International and Dual)

Remittance Products

Special Interest rate on Savings and Term Deposits
Wage Earners Welfare Deposit Pension Scheme
Loans for Real Estate (Land purchase and House construction/renovation)
Advance against Regular Remittance

Services

Brokerage House

Member, Dhaka Stock Exchange Ltd.
Full Service Depository Participant

Treasury Service

Primary Dealer of Govt. Approved Securities

Remittance Service

Correspondence arrangement with more than 330 Financial Institutions all over the World
For Wage Earners Remittance we have Agency arrangement with 12 reputed Exchange Houses covering major Locations of our Expatriate

Categories of Overall Banking Activities:

Banks activities can be divided into three categories. These are as follows:-

General Banking Activities
Credit or loan activities
Foreign exchange activities

What is General banking Activities?

General Banking (GB): It is the starting point of all the banking operation. It does the most important and basic works of the bank. It also plays a vital role in deposit mobilization. A bank starts its operation providing services to the customers by its general banking activities. The efficiency of general banking activity that provided by each bank reflects the whole service given by that bank. With the increasing competition customers are mostly impressed by the efficiency of this department. The whole general banking activity is consisted of receiving deposit, remitting fund, and meeting the demand of customers.

General Banking Section:

To maintain different types of deposit account
Local Remittance
To operate clearing house activities
To maintains safety deposit lockers
Cash Section
Capital Market operation
Online Banking
ATM and Credit Card Services

Account Opening Section:

The relationship between banker and customer begins with the opening of an account by the customer. Opening of an account binds the customer into a contractual relationship under a legal framework of the “Contract Act -1872”. But selection of a customer for opening an account is very crucial for a bank. So Banks takes the highest caution in this regard.

Banks opens the following accounts for its customers

Current Account:

A current deposit account may be operated in several times during a working day. There is no restriction on the number and the amount of withdraws from a current account and the banker does not allow any interest on the current account. There are two facilities for the people who open a current account. They are:-

Over draft facility
Collection of check transfer of money rendering agency, general utility service.

A person can open a current a/c or any entity. The entity can be a partnership firm, limited company, proprietorship firm, association, clubs etc. For opening a current account of the above, the requirements and steps, which are followed by this branch, are like: –

For a person:

There is an individual application form for opening personal current a/c. The person, who wants to open this type of a/c, is said to fulfill the following requirement:

a) Name/ Father’s Name/ Husband’s Name:

b) Present and Permanent Address:

c) Occupation:

d) Mandate in Writing:

e) Declaration of Nominee:

f) Letter of Introduction:

g) Specimen Signature:

h) Passport Size Photograph:

i) Initial deposit.

For Join Stock Companies, Association, Clubs etc:

In case of opening a current a/c of join stock companies, association, clubs etc. the following requirements are said to fulfill:

a) True copies of certificate of incorporation or registration (in case of companies and registered bodies).

b) True copies of certificate of commencement of business (in case of limited company).

c) True copies of memorandum and articles of association (in case of limited company). The rules of regulation by laws (in case of associations, clubs etc.)

d) True copy of resolution of the Board of Directors of Managing committee / Governing Body, regarding conduct of account.

e) Certificate list containing names and signature of the Board of Directors/ Officer Bearers.

For Partnership / Proprietorship Company:

To open a current a/c on the name of any partnership or proprietorship company, the following document are required:

a) Filled up application form stating about the name and address of the firm.

b) Partnership deed.

c) Trade License.

d) Two copies of photographs.

e) Endorsement of an a/c holder of the same branch. (for partnership companies).

f) Undertaking / declaration about the partnership is taken by the bank in a white paper (for proprietorship firm)

For Private & Public Limited Company:

The document are required by the bank to open a current a/c be:

a) Copy of the certificate of incorporation or registration.

b) Copy of the certificate of business.

c) True copy of memorandum of association and articles of association abide by laws.

d) True copy of resolution of the Board of Directors / Managing Committee /Governing Body regarding conduct of the account.

In order to open an account, the customer is first of all asked to fill up the application form given from the bank. The bank requires few documents of the client due to the producers, such as proposal for opening an a/c, name and full address (both present and permanent).

Savings Account:

A saving a/c is meant for the person of the lower and middle classes who wishes to save a part of their income to meet their future needs and intend to earn an income from their saving.
All the feature are like CD a/c except some restrictions imposed by the bank.
The bank offers a reasonable rate of interest.
The number of withdrawals over period of times is limited. Only two withdrawals are permitted per week. But more than that no interest will be paid on rest of the amount for that month.
The total amount of one or more withdrawals on any date should not exceed 25% of the balance in the a/c unless 7 days advance notice is given.

Short-term Deposit Account:

Entries Passed

A deposit slip shall be prepared crediting the STD a/c with the amount of the deposit.

Cash————-Dr.

STD a/c (Party)———Cr.

If the amount shall be deposited by check or transfer of a/c, the following entries shall be passed—

Party C/D, S/D a/c———-Dr.

STD a/c——————————–Cr.

The a/c opening form shall be pasted in the passing file in numerical order. The credit voucher shall be passed in the STD a/c of the party. In case of letter of authority to debit the STD a/c of the customer, voucher will be prepared and the following entries shall be passed:-

STD a/c (Party)—————Dr.

C/D (Party)————————Cr.

Minimum 7 days notice period is required for withdrawal of any sum of money from STD a/c. Banker is not legally liable to the customer, if the check is dishonored under the following conditions, although the check is properly drawn:

If the fund is insufficient.
If the payment is stopped by the drawer.
If payment is stopped by the court by issuing garnishee order.
Any competent authority issues Attached order.
Check is presented after the death of the customer.
Notice of assignment.
Check presented after the business/banking hour as declared earlier.

Letter of Introduction

This is a letter of certification, from a person, who is a valid customer of that particular branch and maintaining any kind of a/c. usually a customer from other branch is not allowed to be the introducer, but it is permitted. The process of introducing a new client can be done on the form itself. There is a space in the application where the introducer will write his/her a/c no. and sign his/her specimen signature. It always advisable on the part of the banker to allow the prospective customer to open an a/c only with a proper introduction from a responsible person, known to both the parties.

A letter of introduction always protects a banker in the following ways

Protection against fraud
Protection against invariant overdraft
Protection against undiscouraged bankrupt
Protection against negligence under sec. 131 of NI Act
Protection against giving incorrect information follow the banker

Declaration of Nominee

The person who wants to open an a/c can mention one or two nominee. The application will give a declaration in the space given on the a/c opening form, stating the name and father’s name, age address, relation and percentage of share (if more than one). The a/c holder can change the nominee any time and it will be valid, only after the of the a/c holder.

Specimen Signature

The applicant will sign on the application and he will be provided with an extra paper where he will sign three or more signatures, which he has to maintain all through the duration of the account.

Interview

At the time of the opening of a new a/c, this concerned branched always takes an interview with prospective customer so as to obviate the chances of preparation of any fraud at the letter stage.

Initial Deposit

It is always a common practice among the bankers to allow a new customer to open an a/c only in cash.

Operation Instruction

If any party wants his/her a/c to be operated by some body else, s/he will provide the banker in writing statement about the operator.

Verification of Document

The banker should verify some of the important documents, like the Memorandum of Association, Article Association by laws Copy etc. In verification of certain other documents like, trust Deed Probate, Letter of Administration etc. may be needed. Conversant with the provision of special acts, since a banker is to deal with different classes of customers, s/he has to be thoroughly conversant with certain laws.

Pay in Slip, Check Book and Pass Book

The customer is supplied with a pay in slip book to use for depositing cash or check of bill into a/c. The customer is also supplied with a checkbook for drawing money as and when the customer wishes, which normally contains 10 to 50 bank forms. If the customer does not like to have a checkbook, then s/he can make use of withdrawal form for withdrawing money. But there is no use of such kind of form in this branch. In addition to the above, a customer is given a passbook, which reflects the customer’s a/c in the banker’s ledger. It usually contains the rules and regulations of the bank and terms and conditions of deposits.

Fixed Deposit Account:

A fixed deposit a/c is repayable after the expiry of a predetermined period fixed by the customer himself. The period varies from three months to five years. The customer may open his/her a/c for different time periods, which may be for three months, six months, one year, two years, three years, four years, five years.

Though FDR is an a/c, it is something different from other a/c. FDR is a long-term deposit. Usually customers are allowed to open this a/c for a certain period. The rate of interest varies in accordance with the terms of deposit.

The amount of FDR is payable once at a time. After the term for which the a/c was opened, the FDR gets its maturity. Paying the principle amount plus interest less income tax then fulfills the claim.

Monthly Savings Deposit Account:

It is a new project, which is a scheme like DPS. The installment payment is to be made to the bank within the first 10 days of each month. It can be opened for 5years and 10 years maturity for Tk. 500 and 10000.

Special Fixed Deposit Scheme:

Any amount of TK. 1,00,000/= or multiple may be deposited under this scheme.
Duration of the scheme is 3 (Three) years.
Monthly interest will be given to the depositor against the deposited amount.
Like ‘Deposit Pension Scheme’ this scheme includes the following features for the convenience of clients.
The monthly installments of TK. 500.00 to 2,500.00 may be deposited every month during the entire period of scheme.
The duration of the scheme is 5 years or 10 years.

Local Remittance:

Cash handling from one place to another is risky. So, bank remits funds on behalf of the customers to save them from any mishaps through the network of their branches. There are four modes of remitting money from one place to another. These are –

Pay order (PO)
Demand Draft (DD)
Telegraphic Transfer (TT)
Mail Transfer (MT)

Clearing Activities:

Outward Bill for Collection:

The instrument of the Bank includes checks; pay order, demand draft etc. The Bank collects its own instrument from other banks through Clearing House as the clients with no charges or commissions required to perform this service submit them in different locations.

Inward Bill for Collection:

The Bank provides the instruments to other banks through Clearing House, which have been collected from different clients. It performs this kind of service for its clients without requiring any charges or commission.

Locker Service:

Locker services are available for the clients in exchange of fees. In this context the client gets a locker in Bank with a key and the permission to keep goods or documents with the consent of the Bank.

Online Banking:

Coputerization of the Branches and Head Office as well is underway with a view to providing guality and prompt service to the customers. Now the Bank starts, On Line Banking.

ATM Service & Credit Card:

The Bank to extend modern banking faciliy to the customers allowing 24 hrs accesses to any ATM dispenser situated . The network will be expanded phase by phase in other parts of the country. Recently they also established alots of ATM BOOTH as well.

Types of loans granted by commercial banks:

1. Secured loan

A secured loan is a loan in which the borrower pledges some asset (e.g., a car or property) as collateral (i.e., security) for the loan.

2. Mortgage loan

A mortgage loan is a very common type of debt instrument, used to purchase real estate. Under this arrangement, the money is used to purchase the property. Commercial banks, however, are given security – a lien on the title to the house – until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.

In the past, commercial banks have not been greatly interested in real estate loans and have placed only a relatively small percentage of their assets in mortgages. As their name implies, such financial institutions secured their earning primarily from commercial and consumer loans and left the major task of home financing to others. However, due to changes in banking laws and policies, commercial banks are increasingly active in home financing.

Changes in banking laws now allow commercial banks to make home mortgage loans on a more liberal basis than ever before. In acquiring mortgages on real estate, these institutions follow two main practices. First, some of the banks maintain active and well-organized departments whose primary function is to compete actively for real estate loans. In areas lacking specialized real estate financial institutions, these banks become the source for residential and farm mortgage loans. Second, the banks acquire mortgages by simply purchasing them from mortgage bankers or dealers.

In addition, dealer service companies, which were originally used to obtain car loans for permanent lenders such as commercial banks, wanted to broaden their activity beyond their local area. In recent years, however, such companies have concentrated on acquiring mobile home loans in volume for both commercial banks and savings and loan associations. Service companies obtain these loans from retail dealers, usually on a no recourse basis. Almost all bank/service company agreements contain a credit insurance policy that protects the lender if the consumer defaults.

3. Unsecured loan

Unsecured loans are monetary loans that are not secured against the borrowers assets (i.e., no collateral is involved). These may be available from financial institutions under many different guises or marketing packages:

Bank Overdrafts
Corporate Bonds
Credit card Debt
Credit Facilities or Lines of Credit
Personal loans

There are so many banks in Bangladesh providing SME banking services. But I choose 5 well reputed banks. They are also providing SME banking service. Not only this, they are doing this from the very beginning of the SME banking.

The Banks are:

ü AB Bank

ü BRAC Bank

ü Dutch Bangla Bank Limited

ü EXIM Bank

ü Standard Chartered Bank

AB Bank

Company Profile

Background of AB Bank Limited

AB Bank Limited, the first private sector bank was incorporated in Bangladesh on 31st December 1981 as Arab Bangladesh Bank Limited and started its operation with effect from April 12, 1982.

AB Bank is known as one of leading bank of the country since its commencement 29 years ago. It continues to remain updated with the latest products and services, considering consumer and client perspectives. AB Bank has thus been able to keep their consumer’s and client’s trust while upholding their reliability, across time.

During the last 29 years, AB Bank Limited has opened 82 Branches in different Business Centers of the country, one foreign Branch in Mumbai, India and also established a wholly owned Subsidiary Finance Company in Hong Kong in the name of AB International Finance Limited. To facilitate cross border trade and payment related services, the Bank has correspondent relationship with over 220 international banks of repute across 58 countries of the World.

In spite of adverse market conditions, AB Bank Limited which turned 28 this year, concluded the 2008 financial year with good results. The Bank’s consolidated profit after taxes amounted to Taka 230 cr which is 21% higher than that of 2007. The asset base of AB grew by 32% from 2007 to stand at over Tk 8,400 cr as at the end of 2008.

The Bank showed strong growth in loans and deposits. Deposit of the Bank rose by Tk. 1518 cr ie., 28.45% while the diversified Loan Portfolio grew by over 30% during the year and recorded a Tk 1579 cr increase. Foreign Trade Business handled was Tk 9,898 cr indicating a growth of over 40% in 2008.

The Bank maintained its sound credit rating in 2008 to that of the previous year. The Credit Rating Agency of Bangladesh Limited (CRAB) awarded the Bank an A1 rating in the long term and ST-2 rating in the short Term.

AB Bank believes in modernization. The bank took a conscious decision to rejuvenate its past identity – an identity that the bank carried as Arab Bangladesh Bank Limited for twenty five long years. As a result of this decision, the bank chose to rename itself as AB Bank Limited and the Bangladesh Bank put its affirmative stamp on November 14, 2007.

The Bank decided to change its traditional color and logo to bring about a fresh approach in the financial world; an approach, which like its new logo is based on bonding, and trust. The bank has developed its logo considering the contemporary time. The new logo represents our cultural “Sheetal pati” as it reflects the bonding with its clientele and fulfilling their every need. Thus the new spirit of AB is “Bonding”. The Logo of the bank is primarily “red”, as red represents velocity of speed and purity. Our new logo innovates, bonding of affiliates that generate changes considering its customer demand. AB Bank launched the new Logo on its 25th Anniversary year.

AB Bank commits to nation to take a lead in the Banking sector through not only its strong financial position, but also through innovation of products and services. It also ensures creating higher value for its respected customers and shareholders. The bank has focused to bring services at the doorstep of its customers, and to bring millions into banking channels those who are outside the mainstream banking arena. Innovative products and services were introduced in the field of Small and Medium Enterprise (SME) credit, Women’s Entrepreneur, Consumer Loans, Debit and Credit Cards (Local & International), ATMs, Internet and SMS Banking, Remittance Services, Treasury Products and Services, Structured Finance for Corporate, strengthening and expanding its Islamic Banking activities, Investment Banking, specialized products and services for NRBs, Priority Banking, and Customer Care. The Bank has successfully completed its automation project in mid-2008. It envisages enabling customers to get banking services within the comfort of their homes and offices.

AB Bank has continuously invests into its biggest asset, the human resource to drive forward with its mission “to be the best performing bank in the country.” The bank has introduced Dress Code for its employees. Male employees wear designed ties and females wear Sharee or Salwar Kamiz, all the dresses are consisted with the unique AB Bank logo.

AB is recognized as the people’s choice, catering to the satisfaction of its cliental. Their satisfaction is AB’s success.

Corporate Information of AB Bank Limited

Name of the Company : AB Bank Ltd

Legal Form: A public limited company incorporated on 31st December, 1981 under the Companies Act, 1913 and listed in the Dhaka Stock Exchange Ltd and Chittagong Stock Exchange Ltd.

Vision & Mission

Vision Statement
“To be the trendsetter for innovative banking with excellence & perfection”
Mission Statement
“To be the best performing bank in the country”

Core Values

Our Compliances
We consider adherence to national policies and objectives a priority for giving our customers the best financial support with corporate integrity, meaning a fully compliant bank along with involvement in social development.

Our Customers
We give the best priority on our customer demand and through our endless effort we assure the best satisfaction to our customers.

Our Shareholders
We assure the best return to our shareholders’ by commenced performance over a rolling year.
Our Team Members
We provide secure, satisfying employment, ensuring the contribution of each individual to the success of ABBL.

Products & Services

Retail Banking

Personal Banking Loan Products

Product Name			Personal Loan
Purpose			Personal loan may be availed for any purpose deemed appropriate for lifestyle and personal exigencies including purchase of household items, marriage, travel, medical treatment, CNG conversion, Festival, renovation etc.
Loan Limit			MinimumTk.50,000/- Maximum Tk. 5,00,000/- ( upto Tk. Ten lac covered by tangible security acceptable to the bank.)
Charges			Applicationfee: Tk.500/- Processing fee: 1% on the approved loan amount or Tk. 2000/- whichever is higher
Tenor			Min 12 months Max 36 months Max 60 months (for house/office renovation loan)
Rate of Interest			14.50% p.a. – 17.50% p.a.
Security			Hypothecation of the product to be purchased.
Guarantee			Personal guarantee of spouse/parents only.
Product Name		Auto Loan
Purpose		Purchase of Brand new cars Purchase of Re-conditioned cars
Loan Limit		80% of the value of the brand new car or reconditioned car but not exceeding BDT 20,00,000/-
Charges		Application fee: Tk. 500/- Processing fee: 1% on the approved loan amount or Tk. 5000.00 whichever is higher
Tenor		Reconditioned Car: Max 60 months Brand new Car: Max 72 months
Rate of Interest		14.50% p.a. – 17.50% p.a.
Security		Hypothecation of the vehicle to be purchased.
Guarantee		Personal guarantee of spouse/ parents only.
Product Name	Education Loan (disbursed to parents/guardian)
Purpose	To assist Parents/guardians for Admission/Education Fees, Semester Fees, Study abroad for their children/wards
Loan Limit	Minimum Tk. 50,000/- Maximum Tk. 5,00,000/- (upto Tk.Ten lac covered by tangible security acceptable to the bank)
Charges	Application fee: Tk. 500/- Processing fee: 1% on the approved loan amount or Tk. 1000.00 whichever is higher
Tenor	Min 12 months Max 48 months
Rate of Interest	14.50% p.a. – 17.50% p.a.
Guarantee	Personal guarantee of spouse/parents only
Product Name				Education Loan (for executive)
Purpose				To assist Executives pursue Higher Studies/professional qualification at local/overseas institutions
Loan Amount				Minimum Tk. 50,000/- Maximum Tk. 5,00,000/- (upto Tk.Ten lac covered by tangible security acceptable to the bank)
Charges				Application fee: Tk. 500/- Processing fee: 1% on the approved loan amount or Tk. 1000.00 whichever is higher
Tenor				Min 12 months Max 48 months
Rate of Interest				14.50% p.a. – 17.50% p.a.
Guarantee				Personal guarantee of spouse/parents
Product Name					Home Loan
Purpose					1. Purchase of apartment/house within the Municipal areas of town/cities in Bangladesh. 2. Purchase of independent house not more than 5 years old. 3. Completion of construction of a new house.
Loan Limit					Minimum BDT 500,000/- Maximum 80% of the value of the flat or construction cost for completion but not more than Tk. 1,00,000,00/-
Charges					Application fee: Tk. 500/- Processing fee: 1% on the approved loan amount
Tenor					Minimum 3 Years Maximum 15 Years
Rate of Interest					13.00% p.a.
Security					Registered mortgage of property supported by a registered irrevocable general power of attorney
Guarantee					Personal guarantee of spouse/ parents/legal heir

Secured Loan

Product Name	Personal Loan
Purpose	To meet personal requirement of fund
Loan Amount	Maximum 95% of the present value of the security
Charges	Processing fee: Tk. 1000/-
Tenor	Min 12 months Max 36 months
Rate of Interest	For ABBL FDR, 3% higher than the rate of deposit 12.00 % p.a. -15.00 % p.a. (for other Bank FDR)
Security	Lien over FDR, ICB Unit Certificate, RFCD, NFCD, CD account(s) etc. One personal guarantee in case of third party cash collateral
Product Name	Personal Overdraft
Purpose	To meet personal requirement of fund
Loan Amount	Maximum 95% of the present value of the security
Charges	Processing fee: Tk. 1000/-
Tenor	Revolving with annual review
Rate of Interest	For ABBL FDR, 3% higher than the rate of deposit 12.00 % p.a. -15.00 % p.a. (for other Bank FDR)
Security	Lien over FDR, ICB Unit Certificate, RFCD, NFCD, CD account(s) etc. One personal guarantee in case of third party cash collateral

Corporate Banking

Corporate Lending

Our specialist teams offers a comprehensive service providing finance to large and medium-sized business based in Bangladesh. For more information as to how we might best meet your corporate debt needs, please contact us at our Corporate Head Office.

Structure Finance

We have a specialist Structured Finance Team who arrange and underwrite finance solutions including Debt and Equity Syndication for financial sponsors, management teams and corporates. Also we provide corporate advisory services. We aim to provide tailored financing solution with a dedicated team who can rapidly respond to client needs.
Following are some of the products and financial tools of Corporate Banking:

Project Finance
Working Capital Finance
Trade Finance
Cash Management
Syndicated Finance, both onshore & off-shore
Equity Finance, both onshore & off-shore
Corporate Advisory Services

SME Banking

SME Loan

Considering the volume, role and contribution of the SMEs, in the last two decades AB Bank has been patronizing this sector by extending credit facilities of different types and tenor. As of now 54% of the bank’s total loan portfolio is segmented to the SMEs which deserve all out attention in our plans, projections and forecasting.

As such the bank has emphasized on the following issues:

To provide the best services to the SME sector
To increase the SME portfolio of ABBL significantly
To improve the quality of ABBL’s portfolio

SME Sectors in which AB Bank has participated so far:

Agro machinery
Poultry
Animal Feed
Dairy Product
Fruit Preservation
Hotel & Restaurants
Garments Accessories
Leather products
Plastic product
Furniture : Wooden & Metal
Ink
Paint
Printing & Packaging
Wire & Cable
Aluminum
Cement and Lime Plaster
Clinics and Hospitals
Engineering & Scientific Instruments

Large Loan & Project Finance

In order to cater the demand of client AB Bank has segmented its portfolio in terms of loan size. As per this segmentation any loan over Tk. 10.00 Crore falls under the purview of Large Loan Unit.
In AB Bank, there is also a separate Project Finance unit who evaluate the business. The unit is entrusted to handle the portfolio in a focused manner. AB Bank is always in fore front to support establishment of new projects of diverse nature which will help to broaden the manufacturing arena vis-à-vis to generate to employment.
At the moment AB Bank ‘s exposure in Large Loan & Project Finance portfolio is distributed in the following sectors:

SL	Sector	ABBL Exposure (Limit) (Fig. in Lac Tk.)
1	Agro- Business	12,717.56
2	Cement Power, Glass	38,691.92
3	Consumer Products	21,855.00
4	Edible Oil	36,057.53
5	Engineering & Construction	18,106.42
6	Financial Institution	1,414.70
7	Food & Beverage	27,044.24
8	Hotel	2,505.26
9	Health Care	3,928.62
10	Printing & Packaging	11,867.61
11	Real Estate	10,451.49
12	Micro-finance	5,763.15
13	Export	9,441.63
14	RMG & Backward Linkage	94,826.13
15	Ship Breaking	18,029.20
16	Steel	42,824.97
17	Telecom & Computer Accessories	11,479.89
18	Trading	77,579.89
	Total ( including syndicated exposure)	444,585.21
	Less Syndicated Exposure	51,560.29
	Total Large Loan & Project Finance portfolio without syndicated exposure	3930,24.92

Loan Syndication

Syndication or club financing is a growing concept in Banking Arena of Bangladesh. Syndicated finance diversifies the risk of one bank on a single borrower and increases the quality of loan through consensus or cumulative judgment and monitoring of different banks / financial institutions.
AB Bank, the first bank in the private sector also took initiative to adapt to this growing concept.
In 1997, AB Bank for the first time arranged a club financing with Dhaka Bank Ltd to raise Tk. 6700 lac – out of which ABBL financed Tk. 5700 Lac and Dhaka bank financed Tk. 1000 Lac.
In 1999, AB Bank arranged its second syndicated credit facility with IPDC to raise Tk 3563 Lac.
Since then AB Bank did not look back.
Since 1997 to 2007 (till date), AB Bank has raised total Tk. 25989.56 Lac as Lead Arranger. The following banks from time to time have been our partners in these syndications : Dhaka Bank, IPDC, EXIM Bank, Bank Asia, Oriental Bank, NCC Bank, The City Bank, Trust Bank, Bank Asia.
AB Bank has also participated in different syndications arranged by other Banks, out of which till date 6 (six) syndication has successfully been completed. AB Bank exposure in these completed syndications was Tk. 4700 Lac.
At the moment AB has participation in 19 (nineteen) syndicated facilities. AB Bank’s exposure in the ongoing syndication is Tk. 51560.29 Lac which is diversified in the following ten sectors:

Facilities offered to NRBs
Opening of Foreign Currency A/C: We open Foreign Currency Account in USD/GBP/EUR/JPY for NRBs. Foreign Currency can be remitted by the Nationals of Bangladesh living Abroad earned by them as wage earners or from other sources. The deposit amount can also be used for remittance to other countries as per their requirement. Nominee of Account holder can also able to operate this Account.

NFCD: We issued Foreign Currency Fixed Term Deposit in USD/GBP/EUR with different tenure. Interest is paid in respective Foreign Currency. Rates of Interest are published in our daily Exchange Rate.

Wage Earners Development Bond: These Bonds can be issued from the balance of the FC account with tenure for five years. Rate of interest is 12% p.a. in BDT.

USD Premium Bond: These Bonds can be issued from the balance of the FC account with a tenure for Three years. Rate of interest is 7.5% p.a. in BDT.

USD Investment Bond: These Bonds can be issued from the balance of the FC account with a tenure for Three years. Rate of interest is 6.5% p.a. in USD.

In addition to the above, we also have Drawing Arrangements with 20 (Twenty) Exchange/Money Transfer Remittance Houses all over the globe to facilitate fast, reliable and hassle-free inward remittance to the expatriate Bangladeshis around the world. We also have special arrangements to credit Beneficiary’s account maintained with us on the same day through our extensive real time on-line network.

List of Exchange / Money Transfer Remittance Houses are as follows:

To provide the Islamic banking services in accordance with the principles of Islamic Shariah, AB Bank has established Islamic Banking Wing and started its functioning by opening full-fledged Islamic banking branch on 23.12.2004. The branch is known as AB Bank Islami Banking Branch, Kakrail, and is situated at 82, Kakrail, Ramna, Dhaka. Prominent Islami Banker Mr. M. Azizul Huq has joined the Bank as its Islamic Banking Consultant. A dedicated team of experienced Islamic bankers is working under his active guidance both at head office and branch level. A competent Shariah Council consisting of Islamic scholars, Ulema, Fukaha and Islamic bankers headed by Mr. Shah Abdul Hannan, a prominent Islamic scholar and former Secretary, Government of Bangladesh has also been formed to guide the Islamic banking affairs. Board of directors as well as management of the bank are very much interested to promote Islamic banking system in the bank aiming at opening more Islamic branches in the near future. AB Bank has already obtained membership of Islamic Banks Consultative Forum (IBCF) and Central Shariah Board for Islamic Banks of Bangladesh.
The goals and objectives of Islamic banking Wing are as under:

To facilitate the Islamic banking system in the country
To create new entrepreneurs and to arrange required finance for them
To play effective role for socio economic development of the country
To give assistance in launching welfare oriented economic system under Islamic values

Under this wing AB Bank extends the following Islamic banking services:

Deposit services
Investment services

Under Deposit services the following services are being rendered:

Mudaraba Savings Account
Mudaraba Short Noticed Account
Mudaraba Term Deposit Account (with different terms)
Mudaraba Monthly Profit Account
Al-Wadiah Current Deposit Account
Mudaraba Deposit Pension Scheme

Besides Mudaraba Hajj Deposit Scheme and some other schemes are under process.

Investment Services

AB Bank Islmic Banking Wing provides investment facilities for project finance, working capital finance, SME finance, consumer / retail baking finance etc. under following modes:

Hire-Purchase under Shirkatul Melk (HPSM): Under this mode the Bank and the client procure asset such as machinery, land , car etc. on equity participation basis. The Bank rents out its portion of assets to the client for a certain period. The client pays the rental with a part of principal amount on monthly / quarterly basis. The client gets its proportionate ownership with the payment of monthly / quarterly installments. On maturity, total ownership of the assets automatically goes to the client as and when final payment of the account is made.
Ijara or Leasing: It is more or less like the HPSM. In this case equity participation may or may not exist. Ownership of the asset is not automatically transferred to the client with the payments of installments. On maturity, the bank transfers the ownership to the client on payment of certain transfer fees.
Bai-Muajjal / Bai-Murabaha: These modes are applicable for working capital finance. Under these schemes bank purchases goods / raw materials as per requirement of the client. In case of Bai-Muajjal bank receives the sales proceed on deferred payment basis. On the other hand in case of Bai-Murabaha Bank receives the sale price at the time of delivery of the goods / raw materials. Before handing over the goods / raw materials the bank generally keeps the same in its custody under pledge.
Musharaka : Under this mode the Bank and clients jointly participate in a project, in a scheme or project. Profit is shared between the Bank & the concerned client as per pre-agreed ratio. On the other hand loss is shared according to capital ratio.
Mudaraba: Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital). Profit is shared between the two sides as per pre-agreed ratio.

Sector of Investment:

Islamic Banking Wing of the bank finances in all sectors i.e., Industry, business, Agriculture, Real Estate etc. if purpose of the investment is permissible under Islamic Shariah.

Limit of Investment:

Investment is offered to the extent of single borrower exposure limit as fixed by the Bangladesh Bank from time to time.

Foreign Trade:

Islamic Banking Wing provides the following services at its foreign trade desks:

Opening of LCs
Post -Import Finance
Export bill purchase and negotiation
Pre-shipment financing etc.

AB Bank Islamic Banking Wing has been continuously trying to expand it’s service horizon keeping the necessity of valued clients in view and upholding the principle of Islamic Shariah.

Investment Banking

6.1. AB Investment Limited (ABIL)

AB Investment Limited, a subsidiary of AB Bank Limited incorporated under the Companies Act 1994 and running its Merchant Banking operations being licensed by the Securities and Exchange Commission.

ABIL’s Head Office is located at WW Tower (Level-7), 68, Motijheel C/A, Dhaka-1000. ABIL has two branch offices at Agrabad, Chittagong and Chowhatta, Sylhet.

6.2. Custodial Service

Customers:
Investors who are interested to invest in the Bangladesh Capital Market
• Non Resident Bangladeshi (NRBs)
• Foreign Institutional and individual clients
• Local Institutions
• Sponsors’ group and High net worth client

Services:
• Safe custody of client securities
• Foreign Trade Execution and Settlement
• Share transfer in the name of client
• Complete the Dematerialization process as per client request
• IPO, Private Placement & Right share subscription as per client instruction
• All types of corporate action that includes cash dividend, bonus share and right share collection
• Open BO account and facilitate opening of Trading Account
• Instant information regarding client securities position as per their request
• Quarterly reporting to the client by Custodial Department

Account Opening Procedure

Criteria for opening an account:
- The non-resident investor shall open a NITA(Non-resident investors’ taka account) with any commercial bank in Bangladesh, with freely convertible foreign currency remitted from abroad through normal banking channel or by transfer of funds from the non-resident investor’s foreign currency account, if any, in Bangladesh;
- Any two Bangladeshi national and Non Resident Bangladeshi of sound mind having a minimum age of 18 years may open two accounts on each in their single name and the other in their joint names.
- Account opening absolutely depends upon the management of AB Bank Ltd.
- Proper documents should be submitted at the time of account opening.
- Foreign investor has to open FC account along with NITA account at the time of custodial account opening.

Account opening formalities

Foreign Currency Account & Non-resident Taka Account (NITA) Opening:
- Duly signed account opening form
- Submit Name, signature and photograph of the Nominee
- Transaction profile
- Signature of an introducer must be incorporated
- Supporting Documents:
  - Copy of the passport
  - Bank statement/ Work permit (in case of NRB)

Custodial Account Opening:
- Duly Signed account opening form of Custodial
- Duly signed custodial agreement (must be signed on all pages)
- Duly signed Power of Attorney (POA) in non-judicial stamp of Tk. 150/-
- Supporting Documents:
  - Copy of the passport
  - Bank statement/ Work permit (in case of NRB)
Beneficiary Owner (BO) Account Opening:
- Duly signed BO account opening form
- Duly signed BO agreement (must be signed on all pages)

Brokerage Account Opening:
- Duly signed account opening form with AB Securities Limited
- Nomination Form duly signed
- Agreement with AB Securities Limited
- Supporting Documents:
- Copy of the passport
- Bank statement/ Work permit (in case of NRB)

6.3. Brokerage Service

Introduction:
AB Securities Limited (ABSL) is a subsidiary company of AB Bank Limited having holding 99.60% shares of the ABSL. Earlier, AB Bank Limited provided stock broking services through Arab Bangladesh Bank Foundation (ABBF) since 2006. Incompliance with Bangladesh Bank’s directives, AB Bank Limited formed separate subsidiary company under Company Act 1994 in name of AB Securities Limited (ABSL) and shifted its stock broking services from ABBF to ABSL. ABSL started its new journey on 2nd August, 2010 with improved customer service, highly skilled professionals and state of art technologies. Memberships of both Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited has been transferred in name of ABSL to provide more efficient and professional broking services to the capital market investors.

Services of ABSL:

AB Securities Limited (ABSL) is one of the country’s leading securities broker houses of Dhaka Stock Exchange (member # 201) and Chittagong Stock Exchange (member # 101). ABSL has started its operation on 2nd August 2010. We have already started our operation in full swing through our corporate head office and Chittagong Branch Office and Chowhatta (Sylhet) Branch Office. We are planning to establish nationwide branch network as well as step into international arena.

Services:

Brokerage Services: AB Bank’s subsidiary, AB Securities Limited, which has corporate memberships on the Dhaka and Chittagong Stock Exchanges, can act as brokers on behalf of local and foreign individual and institutional client to trade in the local capital market.

We provide broking services under following categories:
a) Individual & Joint Account (Local, NRB & Foreign)
b) Institution Investment Account (Local and Foreign)

Margin Loan Facilities: We also provide margin loan facility to our valued clients as per desecration of management of ABSL.
Stock Dealer Service: ABSL also has the stock dealer license to manage own portfolio as well as can manage reputed institution’s portfolio accounts.
CDBL Services as full service Depository Participant (DP):As a full service depository participant, ABSL provides following services:a) BO (Beneficial Owner) accounts opening and maintenance.
b) Dematerialization & c) Rematerialization
c) Freeze (freeze request and release request) and suspensions
d) Pledging, unpledging and confiscation
e) BO ISIN balances and master maintenance enquiry

6.4. Future Products

Expansion
to extend our Merchant Banking services across the country, MBW has already launched its operation in Agrabad (Chittagong). We are going to open 3 new service networks in Mohakhali (Dhaka), Uttara (Dhaka) and Sylhet soon.

New Business
In addition, AB Bank will also expand its operations in the investment banking in the following areas:

Business Area	Status
Islamic Capital Market Products	Processing
Derivatives Products	Supporting infrastructure going to be prepared
Asset Management / Mutual Fund	We are planning to launch and manage Mutual Fund in future.

AB Bank Visa Electron Debit Card

“The most perfect accompaniment to life”

Makes your life comfortable
Smart way of payment
No need to carry cash
Large ATM and POS network
lower annual fees
No hidden charge

Who can apply for a card?

If you are maintaining an account with any of the branches of ABBL, you are able to have ABBL Visa Debit Card. Only thing you need to do is, visit your branch and fill up the Application form and submit it. You will receive your card within 7 working days.

Tips for usage

Card Activation

• After receiving the card, sign the acknowledgement slip and send it to Card Division or any branch of

ABBL or call Card Division for activation.

• Put your signature on the signature panel at the back of your card.

Caution during making transactions

• Please do not let your card be taken out of your sight at any merchant outlet to prevent possible
Misuse

• After using your card at a merchant outlet, please ensure that the card returned to you is yours

• Before signing the Sales Slip check at the amount charged

• Retain your copy of the Sales Slip of all transactions until they appear in your Card Account Statement
for your future reference

PIN Maintenance

• Destroy the PIN mailer after memorizing your PIN
• Do not write the PIN on the card or keep the PIN inside your wallet
• Change the PIN every month

For Lost/Stolen Card
If the card is lost or stolen, simply call AB Bank’s Help Desk at 9558510. You also can report the loss by fax to ABBL, Card Division immediately.

Lost Debit/ Credit Card

For lost Debit / Credit Card please email to the following address: cardsteam@abbank.com.bd or call our Card Division at 9558510. Your card will be replaced within 4-5 working days, and will be couriered to your mailing address you provided in your card application form.

Note: Please find Lost/ stolen Card Application Form in the “Forms Center”

Address Change

For address change in your Card please email to the following address: cardsteam@abbank.com.bd or call our Card Division at 9558510. Your new address will be updated in the Card Management System.

Note: Please find Card address change Application Form in the “Forms Center”

Safe Deposit Locker

Looking for a safe storage place for your valuables?

A Safe Deposit Locker with AB Bank is the solution to your concern. Located at select branches in cities all over the country, our lockers ensure the safe keeping of your valuables.

Advantages / Key Benefits:

Wide Availability.
Lockers available in various sizes. i.e. Small, Medium and Large with varying rents.
Lockers are rented out for a minimum period of one year. Rent is payable in advance.
The rent may be conveniently paid from your deposit account with us.
Direct debits for locker rentals from your account rid you of the hassles in writing out cheques.

Eligibility:

An individual (not minor), firms, limited company, associations, clubs, trusts, societies, etc may hire a locker.
Nomination for Safe Deposit Locker:

The Lockers and their contents can be nominated to people near and dear to you.
Nomination facility is available to individual hirer of Safe Deposit Locker.
In the case of a sole hirer of a safe deposit locker, nomination can be made in favour of only one individual.
Where the safe deposit locker is hired in the name of a minor, the nomination shall be made by a person lawfully entitled to act on behalf of the minor.

Terms & Conditions:

For obtaining a Locker at AB Bank you must be an account holder with our Bank.
Lockers can be allotted individually as well as jointly.
The Locker holder is permitted to add or delete names from the list of persons who can operate the Locker and can have access to it.
Loss of Key is to be immediately informed to the concerned Branch.
For Schedule of Rentals, please contact the branch nearest to you.

Schedule of Charges & Commissions

Schedule of Charges & Commissions

General

This guide is intended to give you a clear picture of the fees that we charge for your outmost commonly used services. We hope that the simple tables as stated in this guide will help you manage your money more effectively. If you have any queries about the charges listed in the guide, kindly visit or contact any of our Branch Offices for the exact details or seek your own professional help.

N. B.

1.VAT is applicable @15% on all fees and commissions effective from 1^st July 2002, as per Government circular no. SRO 117-Law/ 2002/342-VAT, dated 6 June 2002 and SRO#171-Law/2004/ 417-VAT dated June 10, 2004.

2.VAT is not applicable for Commission, Fees or Charges for back to back LC against Master LC, Local back to back LC and Export related all LC’s including Cash LC.

3.Any Government Taxes, Duties or other charges will be recovered in addition to the foregoing and as per Government Regulations.

4. Stamp charges are levied where applicable.

5.Correspondent/Other Bank charges, if any, will be additionally recovered from customers.

6.The Bank reserves the right to assess charges on transaction which are not covered by this schedule and to amend without prior notice the terms, conditions or rate stated in this schedule.

7.Any service, which is not mentioned above, will be charged separately as per the charges.

8.If the Bank provides services to its clients at reduced rate to encourage their clients, VAT to be collected as per Standard Charge i.e. as per Schedule of Charges.

SME Banking

Considering the volume, role and contribution of the SMEs, AB Bank has been patronizing this sector by extending credit facility of different types and tenor. As of now 54% of the bank’s total loan portfolio is segmented to the SMEs which deserves all out attention in plans, projection and forecasting.

As such the bank has emphasized on the following issues:

To provide the best services to the SME sector.
To increase the SME portfolio of ABBL significantly
To improve the quality of ABBL’S portfolio.

SME Sector in which AB Bank has participated so far:

Agro machinery
Poultry
Animal Feed
Dairy Product
Fruit Preservation
Hotel & Restaurants
Garments Accessories
Leather Products
Plastic Product
Furniture : Wooden & Metal
Ink
Paint
Printing & Packaging
Wire & Cable
Aluminum
Cement & Lime Plaster
Clinics and Hospitals
Engineering & Scientific Instruments.

ABBL offers the following SME loan products:

I. Uddog loan.

II. Goti loan.

III. Aparajita loan.

IV. Proshar loan.

V. Choto puji loan.

VI. Digun loan.

Large Loan & Project Finance

In order to cater the demand of client of AB Bank has segmented its loan size. As per this segmentation any loan over TK 10.00 core falls under the preview of large loan unit.
In AB Bank, there is also a separate Project Finance unit who evaluate the business. The unit is entrusted to handle the portfolio in a focused manner. AB Bank is always in front to support establishment of new projects of diverse nature which will help to broaden the manufacturing arena to generate to employment.

BRAC Bank

Company Profile

BRAC Bank is a fully operational Commercial Bank. Since inception in July 2001, the Bank’s footprint has grown to 56 branches, 30 SME Service Centers, 427 SME unit offices and 112 ATM sites across the country services are :

SME ( Small and Medium Enterprises ) Banking
Retail Banking
Corporate Banking
NRB Banking

Corporate Vision

Building profitable and socially responsible financial institution focused on Market and Business with Growth potential, thereby assisting BRAC and stakeholders to build a just, enlightened, healthy democratic and poverty free Bangladesh.

Corporate Mission

	Sustained growth in Small & 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 Assets through syndications and investment in faster growing sectors.

	Continuous endeavor to increase non-funded income

	Keep our debt charges at 2% to maintain a steady profitable growth

	Achieve efficient synergies between the bank’s branches, SME unit offices and BRAC field offices for delivery of remittance and Bank’s other products and services

	Manage various lines of business in a full controlled environment with no compromise on service quality

	Keep a divers, far flung team fully controlled environment with no compromise on service quality

	Keep a diverse, far flung team fully motivated and driven towards materializing the bank’s vision into reality.

Core Values

Our Strength emanates from our owner – BRAC. This means, we will hold the following values and will be guided by BRAC as we do our work.

	Value the fact that one is a member of the BRAC family

	Creating an honest, open and enabling environment

	Have a strong customer focus and build relationships based on integrity, superior service and mutual benefit

	Strive for profit & 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 do.

Retail Banking » Deposit Products

	Savings Accounts

	Triple Benefit Savings Account

	Savings Classic Account

	Aporajita Account

	Future Star Account
	Current Accounts

	Current Classic Account

	Current Plus

	EZee Account

	Salary Account

	Campus Account


	Term Deposits

	DPS

	Fixed Deposit General

	Flexi DPS

	InterestFirst Fixed Deposit

	Freedom Fixed Deposit (FFD)

	Abiram Fixed Deposit

Retail Banking » Loan Products


	Loan Products

	Salary Loan

	Quick Loan

	Auto Loan

	Home Loan

	Secured Loan/Overdraft

Retail Banking » Cards


	Credit Card

	Platinum Card

	VISA Classic

	VISA Gold

	Universal Card

	– Universal VISA Classic

	– Universal VISA Gold

	– Co-branded Universal ICDDR,B Card

	Schedule of Charges

	Payment of Credit Card bill

	Debit Card

	– VISA Planet Card

	– Hajj Card

	– Travel Card

	Fast Rewards Programs

	– Earning Points

	– Redeeming Points

	PayFlex Programs

	– PayFlex Program

	Exciting Offers & Discounts

	– Fuel Stations

	– Hospitals

	– Discount on CNG Conversion at Intraco CNG Ltd.

	– Discounts on Restaurants & Outlets

	– Hotels & Holiday Resorts

	Seagull Hotels

	Jamuna Resort

SME Banking

BRAC Bank, being the youngest bank, took a step to break away from usual tradition and tapped into the true suburb entrepreneurial initiatives.

Today, with over 14,500 crorers of loans disbursed till date, BRAC Bank is country’s largest SME financier that has made more than 320,000 dreams come true!

If you have a dream on which you trust, let us make it true together.

Loan Products

Ø Anonno Rin
Ø Apurbo Rin
Ø Prothoma Rin
Ø Durjoy
Ø Shomriddhi Rin
Ø Shompod Rin
Ø Shokti Rin

Deposit Product

Ø Prapti Current Account
Ø Prachurjo Fixed Account

ANONNO SME LOAN

What is ANONNO SME Loan?

ANONNO is a business loan to meet any kind of business needs, which starts from BDT 3 Lac to10 Lac.

	No security required

	Overdraft facility

	Easy installment

	Easy loan processing.

Eligibility

	Any kind of business having valid trade license, which has been operating at least 2 or more years.

	Sole proprietorship, Partnership or Private Limited company

	Small & mid-sized businesses (Production, Trading, Service, Agro based products and others)

APURBO SME LOAN

What is APURBO SME Loan?

APURBO is a loan facility for Small & Medium Entrepreneurs. To meet any kinds of business needs, APURBO is offering BDT 1 million to BDT 5 million loans against registered mortgages.

Specialty of this loan

Term loan and overdraft based on your business needs.

	Limited documents

	10 to 50 Lac Loan

	Easy installment and overdraft facility

Eligibility

	Any kind of business having valid trade license, which has been operating at least 3 or more years.

	Those who have property/land/building

PROTHOMA SME LOAN

What is PROTHOMA SME Loan?

Prothoma is a term loan for small scaled business operated by women entrepreneur, Maximum BDT 1 million is offered to meet business needs.

	No security required

	As low as 10% interest rate

	Tenure from 1 to 4 years

	Easy loan processing

Eligibility

Any kind of business having valid trade license, which is at least 2 years of old.

Sole proprietorship, Partnership or Private Limited Company Small & mid-sized business (Production, Trading, Service and others)

DURJOY SME LOAN

What is DURJOY SME Loan?

To meet your business needs DURJOY is offering BDT 3 Lac to BDT 2.5 million Loan without any security.

Specialty of this loan

	Up to BDT 25 Lac loan in the name of business

	Easy installment up to 5 years

	Convenient interest rate

	Overdraft facility

Eligibility

	Any kind of business having valid trade license, which has been operating for at least 3 years.

	Sole proprietorship, Partnership or Private Limited Company

	1 year bank statement

SHOMRIDDHI SME LOAN

What is SHOMRIDDHI SME Loan?

To meet import-export related expenses, post import expenses, tax/duty payment, local bill purchase and working capital, SHOMRIDDHI loan is offering BDT 1 Lac to BDT 10 million.

	LC and LATR facility

	Revolving loan, overdraft

	Local bill discounting facility

Letter of Credit (LC)/Loan against trust receipt (LATR)

	LC opening facility: from BDT 1 Lac to BDT 10 million

	Up to 90% loan against LC

Revolving Loan

	Import duty payment or goods purchase facility

	Loan up to BDT 10 million

Local Bill Purchase

Loan up to BDT 10 million in export

Specialty of this loan

	Easy loan processing

	Convenient interest rate

	Loan payment facility up to 180 days.

Eligibility

	Any kinds of businesses having valid trade license and which has been operating for at least 3 years.

	Sole proprietorship, Partnership or Private Limited Company.

SHOMPOD SME LOAN

What is SHOMPOD SME Loan?

SHOMPOD is a loan facility starting from BDT1 million to BDT 35 million against home or business premise mortgage.

Specialty of this loan

With overdraft facility which will help you to meet your working capital need.

	Loan against home or business premise mortgage to meet business needs.

	Loan is also available to purchase business premise

	Up to BDT 35 million loan facility

	Installment facility up to 10 years

	Convenient interest rate

Eligibility

Small & mid-sized of business having valid trade license, which has been operating for at least 3 years in Dhaka & Chittagong.

SHOKTI SME LOAN

What is SHOKTI SME Loan?

Business loan under which you can avail BDT 1 million to BDT 7 million to meet your any kind of business needs.

	Loan against partial security or fixed deposit

	At least 1 year bank statement

PRACHURJO SME LOAN

“Prachurjo” is a lucrative fixed deposit for small and medium businesses. With a minimum 1,00,000 TK, any business enterprise having valid trade license can open this account.

Specialties

	Tenure: Minimum 3 months and maximum 36 months

	No fees except govt excise / duty on interest earned,

	Interest is applicable on maturity

	No pre-encashment fees

Who are eligible for this deposit?

	Everyone involving in sole proprietorship, partnership and private limited companies

	Small and medium typed businesses (Educational institution, NGO and Co-operative society and others)

Accounting Talks

v Till date, BRAC Bank has served 3,20,000 entrepreneurs, with SME loans valued at BDT 144,330 million through its 424 SME Unit Offices.

v A concerted effort from the largest business division of the country has ensured balance sheet growth alongside economy.

v BDT 37,400 million asset disbursement was supplemented by BDT 8,970 million deposits. Fit-for-purpose strategies and strong drives towards both asset and liability made these successes possible. The year came to an end with a net positive growth in both asset and liability. 10% asset growth has been made by our own liability.

v SME banking division has strengthened its foothold in Bangladesh more than ever before. As the core business of BRAC Bank Limited, SME Banking refined its widespread network by bringing all the unit offices under the Bank’s server network, thereby enabling faster communication with the Head Office.

v The Medium Business unit was launched with a dedicated team for mid-tier customer.

Dutch-Bangla Bank Limited

Company Profile

Historical Background

Dutch-Bangla Bank Limited is a scheduled commercial bank. The Bank was established under the Bank Companies Act 1991 and incorporated as a public limited company under the Companies Act 1994 in Bangladesh with the primary objective to carry on all kinds of banking business in Bangladesh. The Bank is listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. DBBL- a Bangladesh European private joint venture scheduled commercial bank commenced formal operation from June 3, 1996. The head office of the Bank is located at Senakalyan Bhaban (4th floor), 195, Motijheel C/A, Dhaka, Bangladesh. The Bank commenced its banking business with one branch on 4 July 1996.

Dutch Bangla Bank Limited (DBBL) a public company limited by shares, incorporated in Bangladesh in the year 1995 under companies Act 1994. With 30% equity holding, the Netherlands Development Finance company (FMO) of the Netherlands is the international cosponsor of the Bank. Out of the rest 70%, 60% equity has been provided by prominent local entrepreneurs and industrialists & the rest 10% shares is the public issue. During the initial operating year (1996-1997) the bank received skill augmentation technical assistance from ABN Amro Bank of the Netherlands.

DBBL’s focus is to provide one counter service to clients covering: Commercial Banking (Deposit Accounts), Consumer Banking (Retail Baking) – Traveler Cheques- Foreign & Inland

Remittances, Financial Services, Corporate Banking, Asset & liability management, Liquidity &

capital Resources Management, Information technology, Human Resources. DBBL Internet

banking enables customer to access his/her personal or business accounts anytime anywhere from home, office or when traveling. Internet Banking gives customer the freedom to choose his/her own banking hours. It can save time, money and effort. It’s fast, easy, secure and best of all.

DBBL, since its inception was active in various social activities, which increased manifold over

the period of time and its growth. It is one of the fast growing leading online banks in private

sector. The emergence of Dutch-Bangla Bank Ltd. in the private sector is an important event in

the banking area of Bangladesh. The Netherlands Development Finance Company (FMO) of the

Netherlands is the international sponsor of the Bank. The FMO is the Dutch development bank of the Netherlands specialized in the financing of private enterprises in Asia, Africa, Latin America and Eastern Europe. Dutch-Bangla Bank Ltd. came into existence with joint venture as a public limited company incorporated in Bangladesh on June 26, 1995 with the primary objectives to carry on all kinds of banking business in and outside of Bangladesh. DBBL has started its business with foreign bank. DBBL commenced its business as scheduled bank with effect from July 04, 1995 with one branch-Motijheel Branch, Dhaka, with a motto to grow as a leader in the banking arena of Bangladesh through better counseling and effect service to clients and thus to revitalize the economy of the country. All the branches are currently providing truly On-Line banking facility. DBBL resumed its operational activities initially with an authorized capital of Tk.400 million and paid up capital of Tk.202.14 million.

An over view of DBBL

Dutch-Bangla Bank is a second generation commercial private Bank. During the period of its

operation, this bank creates a milestone of success in banking sector. This bank holds an experienced team of banking professional. They achieve this success because of their experienced banking professional team, proper management & so on. Dutch-Bangla Bank Limited is a Bangladesh–Netherlands joint venture scheduled commercial bank established in Bangladesh with the primary objective to carry on all kinds of banking business in and outside of Bangladesh. Starting with one Branch in 1996, DBBL has expanded to thirty nine (39) branches including nine Branches outside of the capital. To provide client services all over Bangladesh it has established a wide correspondent banking relationship with a number of local banks. To facilitate international trade transactions, it has arranged correspondent relationship with large number of international banks which are active across the globe.

In addition to its banking activities, Dutch-Bangla Bank Limited takes part in different national

activities promoting sports, culture, social awareness, etc. Participation in these activities as

sponsors is part of its business development policy.

Philosophy of DBBL

The objectives of Dutch-Bangla Bank Limited remains to offer modern & innovative products &

services to its clients in Bangladesh the partnership with FMO is optimistically scene to offer

scopes opportunities to draw on modern tools & techniques of Banking from western world which could be blended with the currently prevalent local customs & practice. The Bank is committed to being a sophisticated prominent and professional institution, providing a one window service to its customers. During the first five years Dutch Bangla Bank’s strategy was focused on continuing in provident of internal procedures and operating structures, to have a greater control on the quality of our business and to provide better management direction. After five years of working on the Banks structure, its culture and controls, the management is confident that the Bank can move forward on a rapid growth path. The DBBL’s corporate philosophy is to build its nonfunded fees and commission income stream, thus reducing its reliance on interest income alone.

Core objective of DBBL

Dutch-Bangla Bank believes in its uncompromising commitment to fulfill its customer needs and

satisfaction and to become their first choice in banking. Taking cue from its pool esteemed

clientele, Dutch-Bangla Bank intends to pave the way for a new era in banking that uphold and

epitomize its vaunted marquees “Your Trusted Partner”

Focus of DBBL

DBBL’s focus is to provide one counter service to our clients covering:

Commercial Banking (Deposit Accounts)

Consumer Banking (Retail Baking)-

Traveler Cheques
Foreign & Inland Remittances
Financial Services
Corporate Banking
Asset & liability management
Liquidity & capital Resources Management
Information technology
Human Resources

Mission

Each business unit needs to define its specific mission within the broader company mission.

Dutch-Bangla Bank engineers enterprise and creativity in business and industry with a commitment to social responsibility. “Profits alone” do not hold a central focus in the Bank’s

operation; because “man does not live by bread and butter alone”. Mission statements are at their

best when they are guided by a vision.

Vision

“To become a leading banking institution and play a pivotal role in the development of the

country”

Vision, a compelling view of a future yet to be, creates meaning and purpose which catapults both individuals and organizations to high levels of achievement. Dutch-Bangla Bank dreams of better Bangladesh, where arts and letters, sports and athletics, music and entertainment, science and education, health and hygiene, clean and pollution free environment and above all a society based on morality and ethics make all our lives worth living. DBBL’s essence and ethos rest on a

cosmos of creativity and the marvel-magic of a charmed life that abounds with spirit of life and

adventures that contributes towards human development.

Strategies of DBBL

The strategies are as follows:

To manage and operate the Bank in the most efficient manner to enhance financial performance and to control cost of fund
To strive for customer satisfaction through quality control and delivery of timely services
To identify customers’ credit and other banking needs and monitor their perception towards our performance in meeting those requirements.
To review and update policies, procedures and practices to enhance the ability to extend better service to customers.
To train and develop all employees and provide them adequate resources so that customers’ need can be reasonably addressed.
To promote organizational effectiveness by openly communicating company plans, policies, practices and procedures to employees in a timely fashion
To diversify portfolio both in the retail and wholesale market
To increase direct contact with customers in order to cultivate a closer relationship between the bank and its customers.

Objectives of DBBL

To earn and maintain CAMEL Rating ‘Strong’
To establish relationship banking and improve service quality through development of Strategic Marketing Plans.
To remain one of the best banks in Bangladesh in terms of profitability and assets quality.
To introduce fully automated systems through integration of information technology.
To ensure an adequate rate of return on investment
To keep risk position at an acceptable range (including any off balance sheet risk)

Departments of DBBL

Human Resources Department

Success of any organization largely depends on the efficiency & competence of its manpower.

The organization provides a comprehensive range of human resources services to staff and managers and all prospective employees. A full list of staff and their relevant areas of responsibility are conduct here. This includes Senior Management, Operations group – including

HR Advisors, Staff Development, and Job Evaluation & Systems & Management Information

group.

Our vision is to be a department that leads on and delivers the University’s Staff Experience

Strategy, works as a business partner within the organization and leads by example in relation to

university values.

Services provided under this department:

We provide the following range of services:-

Strategic planning and organizational development
faculty and departmental operational advice, support and services
staff development
projects and information management

Equality and Diversity

The organization is committed to the support and implementation of the equality and diversity

agenda as laid out in our policy.

‘

International Division

Internal trade means foreign currency and includes all deposits, credit and balances payable

in foreign currency as well as all foreign currency instruments, such as, Drafts, Travelers Cheques, Bills of Exchange, and Promissory Notes payable in any foreign country. Anything that conveys a right to wealth in another country is Foreign Exchange.

DBBL provides premium quality service for repatriation and collection of remittance with the help of its first class correspondents and trained personnel. By introducing on-line banking service and becoming a SWIFT Alliance Access Member, which enable its branches to send and receive payment instruction directly, which helps provide premium services.

Credit department

Risk is an integral part of business & the main role of our risk management principle is to find the optimal balance of risk & return. Bangladesh bank has undertaken a project to install a core risk management system in every bank. DBBL Bank Ltd installing the same system in respect to Asset liability management, Foreign exchange management, internal control & compliance, Anti money laundering. The bank prudently controls asset allocation through limiting exposure to industry sector & setting client limit. Moreover, the bank approved a new organization structure to accommodate core risk management perspective.

IT department

Dutch-Bangla Bank Limited (DBBL) undertook a project with BASIS (Bangladesh Association of Software and Information Services) to award the best IT uses by Bangladeshi companies. DBBL and BASIS organized IT award-giving ceremony in this regard. The award Ceremony was held on 30th November 2005, which was the day before last day of BASIS SOFfEXP02005 (November 27-December 01, 2005). This was a gala evening (with dinner and cultural program) attended by around 700 dignitaries including government high officials & policy makers, corporate heads, representatives from development agencies, IT policy makers, academicians and the IT industry members. In this regards, DBBL’s contribution in supporting this event was 50% of the estimated cost with Tk.6.25 Lac.

PRODUCTS AND SERVICES

1. Products and services offered by DBBL

Retail Banking
Remittance and collection
Import and export handling and financing
Corporate Banking
Project Finance
Investment Banking
Consumer credit
Agriculture Loan
Real time any branch banking
24 Hours Banking through ATM
- DBBL-NEXUS ATM & Debit card
- DBBL-Maestro/Cirrus ATM & Debit card
- DBBL Credit card
- Internet Banking
- SMS Banking
- On line Banking through all Branches

Banking Products

Various deposits:

Savings Deposit Account
Current Deposit Account
Short Term Deposit Account
Resident Foreign Currency Deposit
Foreign Currency Deposit
Convertible Taka Account
Non-Convertible Taka Account
Exporter’s FC Deposit(FBPAR)
Current Deposit Account-Bank
Short Term Deposit Account-Bank

Loan & Advances

Loan against Trust Receipt
Transport Loan
Consumer Credit Scheme
Real Estate Loan (Res. & Comm.)
Loan Against Accepted Bill
Industrial Term Loan
Agricultural Term Loan
Lease Finance
Other Term Loan
FMO Local currency Loan for SME
FMO Foreign currency Loan
Cash Credit (Hypothecation)
Small Shop Financing Scheme

ATM Services

We can find DBBL ATMs beside our home, in our office premise, nearby market, university,

college & school premises, Airport, Railway stations etc., throughout the country. Using any of

the DBBL ATM pools any where in the country, you can perform the following:

Account balance enquiry
Cash withdrawal – 24 hours a day, 7 days a week, 365 days a year
Cash deposit to a certain number of ATMs any time
Mini statement printing
PIN (Personal Identification Number) change

All the ATMs can accept DBBL-NEXUS ATM / POS card, DBBL-Maestro/Cirrus Debit card and DBBL Credit card

Treasury

DBBL is well equipped for treasury operation through subscribing Reuters’s terminal and operating in SWIFT network. It is also well equipped with competent human resources for efficient dealing.

DBBL’s treasury quotes competitive exchange rate for major currencies:

Spot Sale/Purchase
Forward Sale/Purchase
Money market Inter bank & Corporate
SWAPS

Account Service

DBBL provides all the accounts services as prescribed by the guidelines of Central Bank (Bangladesh Bank). DBBL offers competitive interest rate and provides premium quality services for the accounts. Account services are:

Foreign Currency Account
Non-Resident Foreign Currency Deposit Account (NFCD)
Resident Foreign Currency Deposit Account (RFCD)
Convertible and Non-Convertible Taka Account

Foreign Trade

DBBL extends finance to the importers in the form of:

Opening of L/C (Foreign/Local)
Credit against Trust Receipt for retirement of import bills.
Short term & medium term loans for installation of imported.

Import Finance

DBBL extends finance to the importers in the form of:

1. Opening of L/C

2. Credit against Trust Receipt for retirement of import bills.

Export Finance

1. Pre-Shipment Finance

Pre-Shipment finance in the form of:

I) Opening of Back-to-Back L/C

II) Export Cash Credit

Post-Shipment Finance

Post-Shipment finance in the form of:

I) Foreign/Local Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance with the

help of its first class correspondents and trained personnel. By introducing on-line banking service and becoming a SWIFT Alliance Access Member, which enable its branches to send and receive payment instruction directly, which helps provide premium services. Remittance services

provided by DBBL are:

Inward Remittance: Draft, TT
Outward Remittance: FDD, TT, TC and Cash (FC)

Western Union

Western Union Financial Services Inc. U.S.A. is the number one and reliable money transfer

company in the world. This modern Electronic Technology based money transfer company has

earned world wide reputation in transferring money from one country to another country within

the shortest possible time. Dutch-Bangla Bank Limited has set up a Representation Agreement

with Western Union Financial Services Inc. U.S.A. as on 14th February 2006.

DBBL Internet Banking

DBBL Internet banking enables customer to access his/her personal or business accounts anytime

anywhere from home, office or when traveling. Internet Banking gives customer the freedom to

choose his/her own banking hours. It can save time, money and effort. It’s fast, easy, secure and

best of all.

Using any of the DBBL ATM pools any where in the country, you can perform the following:

Securities with DBBL Internet Banking
A/c Opening & Accessing Internet Banking
Internet Banking Features
Terms & Conditions of Internet Banking

EXIM Bank

Company Profile

History of EXIM Bank

Export Import Bank of Bangladesh Limited was established in the year 1999 under the leadership of Late Mr. Shahjahan Kabir, Founder Chairman who had a long dream of floating a commercial bank which would contribute to the socio-economic development of our country. He had a long experience as a good banker. A group of highly qualified and successful entrepreneurs joined their hands with the founder chairman to materialize his dream. In deed, all of them proved themselves in their respective business as most successful star with their endeavor, intelligence, hard working and talent entrepreneurship. Among them, Mr. Nazrul Islam Mazumder who is an illuminated business tycon in the Garments business in Bangladesh became the Honorable Chairman after the demise of the honorable founder chairman. He is also the chairman of Bangladesh Association of Banks (BAB). Under his leadership, BAB has emerged as an effective forum for exchanging views on problems being faced by the banking sector of Bangladesh and for formulating common policy guidelines in addressing such problems.

This Bank starts functioning from 3rd August, 1999 with its name as Bengal Export Import Bank Limited. On 16th November 1999, it was renamed as Export Import Bank of Bangladesh Limited with Mr. Alamgir Kabir as the Founder Advisor and Mr. Mohammad Lakiotullah as the Founder Managing Director respectively. Both of them have long experience in the financial sector of our country. By their pragmatic decision and management directives in the operational activities, this bank has earned a secured and distinctive position in the banking industry in terms of performance, growth, and excellent management. Under the leadership of Mr. Lakiotullah, the Bank has migrated all of its conventional banking operation into Shariah Based Islami Banking in the year July 2004.

In the year 2006, Mr. Kazi Masihur Rahman became the Managing Director of the bank when Mr. Lakiotullah left the bank after completion of his successful 7 years as MD. Mr. Kazi served in the bank for next five years. Under his leadership, the bank has been placed on a state of the art centralized IT platform with two modern data centers where world renowned core banking software TEMENOS T24 is running along with some alternate delivery channels like ATMs and SMS banking.

In 25th August, 2011, Mr. Md. Fariduddin Ahmed has joined in the bank as Managing Director. With his long experience in the Shariah Based Islami banking in Bangladesh, EXIM Bank is going to take a new shape where IT-enable banking service will spread in the market.

Our Vision

The gist of our vision is ‘Together Towards Tomorrow’. Export Import Bank of Bangladesh Limited believes in togetherness with its customers, in its march on the road to growth and progress with service. To achieve the desired goal, there will be pursuit of excellence at all stages with climate of continuous improvement, because, in Exim Bank, we believe, the line of excellence is never ending. Bank’s strategic plans and networking will strengthen is competitive edge over others in rapidly changing competitive environment. Its personalized quality services to the customers with trend of constant improvement will be the cornerstone to achieve our operational success.

Our Mission

The Bank’s mission gives emphasis to:

Provide quality financial services especially in Foreign Trade
Continue a contemporary technology based professional banking environment
Maintain corporate & business ethics and transparency at all levels
Sound Capital Base
Ensure sustainable growth and establish full value to the honorable stakeholders
Fulfill its social commitments and
Above all, to add positive contribution to the national economy

Corporate Culture

During the last two decades Corporate Culture has become an important theme in business as an intangible concept which clearly plays a meaningful role in corporations, affecting employees and organizational operations. It is not the only determinant of business success or failure, a positive culture can be a significant competitive advantage over organizations with which a firm competes. We, as an amenable bank, believe if the employees identify with the culture, the work environment tends to be more enjoyable, which boosts morale and leads to increased levels of teamwork, sharing of information, and openness to new ideas.

Products & Services

Retail Banking

– Deposits

– Investments

– Cards

– Internet Banking

– SMS Banking

– Locker Services

Corporate Banking

– Investments

– Foreign Exchange & Trade Finance

– Correspondent Banking

– Import Finance

– Export Finance

SME Banking

– EXIM Uddyog

– EXIM Abalamban

Agri Banking

– EXIM Kishan

Remittance

Foreign Remittance

– Exim Exchange Company (UK) Ltd.

– Exim Exchange Company (Canada) Ltd.

– SWIFT

– International Operation

SME Banking

EXIM Uddyog

EXIM UDDYOG is an investment scheme facilitating project aimed to provide fixed and working capital in the field of small & medium level poultry, dairy, fisheries, and agro-based industries etc spread all over Bangladesh through our branches & SME Service Center. The product offers terminating investment facilities for the purpose of working capital finance and/or fixed assets purchase. The investment risk of the product is to cover by a strict evaluation and assessment of customer’s credit history and track record with any bank/financial institution in Bangladesh.

Features of investment

To extend investment facilities for BMRE of existing poultry/dairy/fisheries farm.
To ensure investment for real entrepreneur of small & medium farm in the light of Islami Shariah.
To provide investment facility very promptly and easiest condition.
of investment single or multiple phases according to the nature & requirement of business.
Facility of repayment through single or multiple installments according to the return of business.
In case of working capital, opportunity of renewal of the limit on expiry.
Opportunity of enhanced investment on the basis of satisfactory business transaction and business requirement.

Rules of investment

A Bank account holder with a valid trade license.
An application in a prescribed form.
Record of successful business operation for 02 (two) years.
For small entrepreneur limit of investment is Tk. 2.00 lac to Tk. 10.00 lac.
For fixed capital validity is 01 (one) to 03 (three) years and for working capital validity is 01(one) year, which is renewable on expiry upon satisfactory business transaction.

Rate of Profit / Rent

For fixed/working/capital rant/profit rate will be simple and to be fixed by the bank time to time.
Other charges (for fixed investment)

– Risk fund

– Supervision/management fees [to be fixed by the bank time to time]

Equity investment ratio

For small entrepreneur: 50:50
For medium entrepreneur: 60:40

Mode of investment

For fixed capital: Izara Bill Bia (IBB)
or working capital: Bai-Muajjal (BIAM) / Bai-Murabaha

Source of investment

Bank’s own fund

Security

Primary: hypothecation/mortgage on fixed and floating assets of the business.
collateral:

For small entrepreneur: if the project is situated on own land, mortgage of the land and if applicable personal guarantee of (with net worth statement) 02 (two) local persons (acceptable to bank). If the project is situated on rented or leased property, security may be asked for on the basis of nature/status of the investment proposal.

For medium entrepreneur, satisfactory security should be provided to cover the investment.

Criteria/factors for selection of investment customer

Value of fixed asset.
Expertise of entrepreneur.
Annual transaction & income.
Compliance of existing investment rules & regulation.

EXIM Abalamban

EXIM ABALAMBAN is an investment scheme facilitating project aimed to provide fixed and working capital in the field of small & medium level General business and Workshop & light engineering etc spread all over Bangladesh through our branches & SME Service Center. The product offers terminating investment facilities for the purpose of working capital finance and/or fixed assets purchase. The investment risk of the product is to cover by a strict evaluation and assessment of customer’s credit history and track record with any bank/financial institution in Bangladesh.

Feature of investment

To extend investment facilities for operating and extending small and medium level business & industries.
To provide investment facility very promptly and easiest way.
Disbursement of investment single or multiple phases according to the nature & requirement of business.
Facility of repayment at a time or installments according to the return of business.
In case of working capital/ trading, opportunity of renewal of the limit on expiry.
Opportunity of enhanced investment on the basis of satisfactory business transaction and business requirement.

Rules of investment

An application in a prescribed from.
A valid trade license with a document of establishment of the business.
Field of investment:
General business- Working capital investment
Workshop & light engineering Fixed & working capital investment.
Rice mill (Chatal)- – Fixed & working capital investment.

Limit of investment

For small entrepreneur limit of investment will be within Tk. 2.00 lac to Tk. 10.00 lac.
For medium entrepreneur limit of investment will be within Tk. 10.00 lac to Tk. 50.00 lac.
For fixed capital validity is 01(one) to 03(three) years and for working capital validity will be 01(one) year, which is renewable on expiry upon satisfactory business transaction.

Rate of Profit / Rent

For fixed/working/capital rant/ profit rate will be simple and to be fixed by the bank time to time.
Other charges (for fixed investment)

– Risk fund to be fixed by the bank time to time

– Supervision/ management fees

Equity investment ratio

For small entrepreneur : 50:50
For medium entrepreneur : 60:40

Mode of investment

For fixed capital : Izara Bil Bia (IBB)
For working capital : Bai- Muajjal (BAIM)/ Bai-Murabaha

Source of investment

Bank’s own fund

Security

Primary: hypothecation/ mortgage on fixed and floating assets of the business.
Collateral:
For small entrepreneur: if the project is situated on own land, mortgage of the land and if applicable personal guarantee of (with net worth statement) 02 (two) local persons (acceptable to bank). If the project is situated on rented or leased property, security may be asked for on the basis of nature /status of the investment proposal.

Criteria/ factors for selection of investment customer

Value of fixed asset.
Expertise of entrepreneur
Annual transaction & income.
Compliance of existing investment rules & regulation.

Standard Chartered

Company Profile

History

Standard Chartered was formed in 1969 through a merger of two banks: The Standard Bank of British South Africa, founded in 1863, and the Chartered Bank of India, Australia and China, founded in 1853.Both companies were keen to capitalise on the huge expansion of trade and to earn the handsome profits to be made from financing the movement of goods between Europe, Asia and Africa.

The Chartered Bank

Founded by James Wilson following the grant of a Royal Charter by Queen Victoria in 1853.

Chartered opened its first branches in Mumbai (Bombay), Kolkata and Shanghai in 1858, followed by Hong Kong and Singapore in 1859.

Traditional trade was in cotton from Mumbai (Bombay), indigo and tea from Kolkata, rice from Burma, sugar from Java, tobacco from Sumatra, hemp from Manila and silk from Yokohama.

Played a major role in the development of trade with the East which followed the opening of the Suez Canal in 1869 and the extension of the telegraph to China in 1871.

In 1957 Chartered Bank bought the Eastern Bank together with the Ionian Bank’s Cyprus Branches. This established a presence in the Gulf.

The Standard Bank

Founded in the Cape Province of South Africa in 1862 by John Paterson. Commenced business in Port Elizabeth, in January 1863.

Was prominent in financing the development of the diamond fields of Kimberley from 1867 and later extended its network further north to the new town of Johannesburg when gold was discovered there in 1885.

Expanded in Southern, Central and Eastern Africa and, by 1953, had 600 offices.

In 1965, it merged with the Bank of West Africa, expanding its operations into Cameroon, Gambia, Ghana, Nigeria and Sierra Leone.

From the early 1990s, Standard Chartered has focused on developing its strong franchises in Asia, Africa and the Middle East. It has concentrated on consumer, corporate and institutional banking and on the provision of treasury services – areas in which the Group had particular strength and expertise.

Since 2000 the Bank has achieved several milestones with a number of strategic alliances and acquisitions, which have extended the customer and geographic reach and broadened the product range that Standard Chartered offers.

Our business

Standard Chartered PLC, listed on the London, Hong Kong and Mumbai stock exchanges, ranks among the top 20 companies in the FTSE-100 by market capitalisation. The London-headquartered Group has operated for over 150 years in some of the world’s most dynamic markets, leading the way in Asia, Africa and the Middle East. Its income and profits have more than doubled over the last few years primarily as a result of organic growth, supplemented by acquisitions.

Consumer Banking

Consumer Banking offers a broad range of products and services to meet the borrowing, wealth management and transaction needs of individuals.

Wholesale Banking

Wholesale Banking has a client-focused strategy, providing trade finance, cash management, securities services, foreign exchange and risk management, capital raising and corporate finance solutions.

SME Banking

Our SME Banking division offers products and services to help small and medium enterprises manage the demands of a growing business, including the support of our international network and trade expertise.

Islamic Banking

Standard Chartered Saadiq’s dedicated team provides comprehensive international banking services and a wide range of Shariah-compliant financial products based on Islamic values.

Standard Chartered Private Bank

Our Private Bank advisors and investment specialists provide customised solutions to meet the unique needs and aspirations of high net worth clients.

SME Banking

The constant economic growth in Bangladesh means ample opportunities for you to grow your dream business. However, countless obstacles, intense business environment and steep competition require you to have the very best banking partner. This is where Standard Chartered Bank’s SME Banking comes into play with its wide range of business responsive products, services and superior customer service.

We make available:

Business Installment Loan
Orjon
Loan Against Property
Trade & Working Capital
Business Priority Account
Business Premium Account
Business Plus Account
Straight 2 Bank
Door Step Banking
Transaction Services

v Business Installment Loan

Do not let fund shortage hold back your business expansion. Fight back all fund related constrains with Standard Chartered Bank’s Business Installment Loan. Inject up to BDT 7 Million to truly make your business fly!

Features

This loan will help you meet your financial needs for your business expansion. You can make long term investments with this business loan and build up your equity by repaying the loan in convenient equated monthly installments (EMI). You can avail this loan through some simple documentation and against competitive cash securities.

Maximum Loan: BDT 7,000,000 (Seventy Lacs) only
Minimum Loan: BDT 1,000,000 (Ten Lacs) only
Interest Rate: 19.5% per annum
Tenor: 3 Years – 5 Years (i.e. 36 to 60 EMI payments)
Cash Security: 30% to 50% of the loan amount

Please note that the above requirements are not exhaustive and the bank may require further documentation for credit assessment on a case to case basis.

Charges

Loan Processing Fee: 1% of the approved loan amount
Early Settlement Charge: 5% on outstanding amount if repaid at any given time before maturity of the loan
VAT and Stamp Charge: All charges and fees are subject to 15% VAT, to be paid by the customer. Stamp charge will be at actual to be paid by the customer.

v Orjon

In Bangladesh the number of women-owned company continues to grow, and Standard Chartered Bank is dedicated in helping the women entrepreneurs to grow their business by offering competitive Business Loans specially designed for women.

Standard Chartered’s Orjon provides the liquidity you need to grow your business or meet your cash flow requirements. The loan enables you to obtain financing without any requirement of land or property collateral.

Features:

‘Orjon’ has been crafted to perfection to support the business needs of women entrepreneurs. The following features depict the very reasons as to why ‘Orjon’ can be instrumental in your business success:

Maximum Loan: BDT 7,000,000 (Seventy Lacs) only
Minimum Loan: BDT 1,000,000 (Ten Lacs) only
Interest Rate: 18.5% per annum
Tenor: 3 Years – 5 Years (i.e. 36 to 60 EMI payments)
Cash Security: 30% to 50% of the loan amount

Charges

Loan Processing Fee: 1% of the approved loan amount
Early Settlement Charge: 5% on outstanding amount if repaid at any given time before maturity of the loan
VAT and Stamp Charge: All charges and fees are subject to 15% VAT, to be paid by the customer. Stamp charge will be at actual to be paid by the customer.

v Loan Against Property

At Standard Chartered we strive to meet your needs in a competitive and dynamic business environment. We understand that, as an SME, you require quick access to cash, and the flexibility to leverage your assets to fuel your business growth.

Standard Chartered’s Loan Against Property provides the liquidity you need to grow your business or meet cash flow requirements. The loan enables you to leverage your property to obtain financing.

Features

Loan against property is very flexible and is designed to meet the different financial needs of your business. Want to expand your business leveraging on your existing property? With Loan Against Property you can undertake long term investments for expansion. In the process Loan Against Property also enables you to build up business equity by repaying the loan in monthly installments.

Maximum Loan: BDT 28,000,000 (taka two crore eighty lac) only
Minimum Loan: BDT 1,400,000 (taka fourteen lac) only
Interest Rate: 16% per annum
Tenor: 3 Years – 10 Years (i.e. 36 to 120 EMIs payments)
Maximum % of loan amount against market value of the property:
For Commercial Property 60% of property’s current market value
For Residential Property 70% of property’s current market value

Following table indicates the monthly repayment amount or the equal monthly installments (EMI) is given below:

Eligibility

To be eligible to apply for this loan, the applicant must fulfill the following criteria:

At least 3 years of experience in same business
A minimum annual turnover of BDT 7,000,000 (Taka Seventy Lac) only

Property Documentation Requirement:

For Government/Leasehold Land:
1. Lease Deed/ Ownership Deed (photocopy)
2. Baya Deed for at least 25 years, if any (photocopy)
3. Development Agreement/ Joint Venture Agreement with the land owner/ developer
4. Power of Attorney (if any)
5. Power of Attorney Acceptance Letter from lessor of the property
6. Mutation (any one)

a) Mutation Letter from RAJUK/ CDA

b) Mutation Letter from National Housing Authority (NHA)

c) Mutation Letter from Ministry of Works

Duplicate Carbon Receipt (DCR) with Mutation Order Sheet
Up to date Municipality Tax Receipt
Up to date Land Tax Receipt
Non-Encumbrance Certificate (NEC)
Approved Plan/ Layout Plan and Approval Letter by RAJUK/CDA/Concerned Authority
Any other documents as advised by the bank’s lawyer

For Private/Freehold Land:

Ownership Deed (photocopy)
Baya Deed for atleast 25 years, if any (photocopy)
Development Agreement/ Joint Venture Agreement with the land owner/ developer
Power of attorney (if any)
Recent Survey Report (i.e. Math Parcha Duly attested)
CS, SA, RS Parcha (PS, BS, RS Parcha- only applicable for Chittagong)
Mutation Parcha and Mutation Proposal Sheet
Duplicate Carbon Receipt (DCR) with Mutation Order Sheet
Up to date Municipality Tax Receipt
Up to date Land Tax Receipt
Non-Encumbrance Certificate (NEC)
Approved Plan/ Layout Plan and Approval Letter by RAJUK/ CDA/ Concerned Authority
Any other documents as advised by the bank’s lawyer

Please note that the above requirements are not exhaustive and the bank may require further documentation for credit assessment on a case to case basis.

Charges

Loan Processing Fee: 1.5% of the approved amount
Valuation Fee: BDT 5000 per property
Legal fee: BDT 7000 property
Early Settlement Fee: 5% on outstanding amount if repaid at any given time before maturity of the loan
VAT and Stamp Charges: All charges and fees are subject to 15% VAT, to be paid by the customer. Stamp charge will be at actual to be paid by the customer.

Please note both valuation and legal fees are non-refundable and inclusive of processing fee of 1.5%+VAT of the loan. Both fees will be discounted from the said processing fee at the time of loan disbursement if the loan is approved by the bank, the facility is availed by the customer and the property(s) are mortgaged in favor of the Bank.

v Trade and Working Capital Financing

Here at Standard Chartered Bank your needs and our offers go hand in hand. If your business requires various combinations of banking facilities then our Trade and Working Capital Financing is here to provide you the perfect blend.

The lists of benefits that Standard Chartered Bank offers to face your needs are:

Letter of Credit
Loan Against Trust Receipt (LATR)
Revolving Loan (RL)
Local Bill Discounting (LBD)
Term Loans
Bank Guarantee
Shipping Guarantee
Foreign Exchange Forward
Overdraft Facilities

Features

The beneficial features of Standard Chartered’s Trade and Working Capital are:

Facilities of up to BDT 120,000,000 (taka twelve crore) only for single customers and up to BDT 150,000,000 (taka fifteen crore) only for groups
Fast access to trade lines and transactions
Dedicated experts to support with all your banking needs
Easy access to operational accounts
Competitive rates for foreign exchange services
Wide options of instruments to serve as security or collateral
Acceptable collaterals: Property, Cash/Bond/FD, Stock Hypothecation, Personal Guarantee, Corporate Guarantee, etc.

Eligibility

To avail these benefits a business must fulfill the following criteria:

Minimum Annual turnover of BDT 200,000,000 (Taka twenty crore) only
3 years of business experience

v Business Priority Account

As you deserve the best, we offer your Business Priority Account through which you will enjoy the privileges of personalized and superior account services for your business.

Benefits

Tiered Interest Rate
Online Banking facility across all Standard Chartered branches
Access to ATMs (Sole Proprietorship Only)
Internet Banking and SMS Banking
Evening Banking Facility in select Branches
24-hour Contact Center (Sole Proprietorship Only)
Experienced Relationship Manager to take care of all your daily banking requirements
FREE Issuance of Pay Order and Demand Draft
FREE Online Intercity Transaction Facility
FREE Over-the-Counter Transaction
FREE Monthly Account Statements
FREE Daily e-Statements
FREE Exclusively Designed Personalized Cheque Book
A host of other exclusive privileges offered by Priority Banking, including free valet parking, discounts, fee waivers and privileges

Eligibility

By maintaining a minimum half-yearly average balance of BDT 1,000,000, any of the following type of business entities & individuals can benefit from Business Priority Account

Sole Proprietorship
Partnerships
Self-Employed Professionals
Limited Liability Company (LLC)
Local Development Organizations (Only Liability Relationship)

v Business Premium Account

The Business Premium Account has been designed to create a relevant and exclusive package that will make your business thrive. By becoming a Business Premium Accountholder, you can enjoy the following distinctive services:

Benefits

Tiered Interest Rate
Online Banking facility across all Standard Chartered branches
Access to ATMs (Sole Proprietorship Only)
Internet Banking and SMS Banking
Evening Banking Facility in select Branches
24-hour Contact Center (Sole Proprietorship Only)
Team of Relationship Managers
FREE Exclusively Designed Personalized Cheque Book
FREE Online Intercity Transaction Facility.
FREE Over-the-Counter Transaction
FREE Monthly Account Statements
FREE Daily e-Statements

Eligibility

By maintaining a minimum half-yearly average balance of BDT 500,000, any of the following type of business entities & individuals can benefit from Business Premium Account

Sole Proprietorship
Partnerships
Self-Employed Professionals
Limited Liability Company (LLC)
Local Development Organizations (Only Liability Relationship)

v Business Plus Account

Standard Chartered has put together the custom-made Business Plus Account especially designed to support the ambitious growth of SMEs such as yourself. By becoming a Business Plus Accountholder, you can enjoy the following distinctive services:

Benefits

Tiered Interest Rate
Online Banking facility across all Standard Chartered branches
Access to ATMs (Sole Proprietorship Only)
Internet Banking and SMS Banking
Evening Banking Facility in select Branches
24-hour Contact Center (Sole Proprietorship Only)
Free up-gradation from normal Current Account to Business Account
FREE 1st Cheque book
FREE Out-Station Cheque Collection
FREE Monthly Business Statements

Eligibility

By maintaining a minimum monthly average balance of BDT 250,000/-, any of the following business entities can benefit from Business Plus Account

Sole Proprietorship
Partnerships
Self Employed Professionals
Limited Liability Company (LLC)
Local Development Organizations (Only Liability Relationship)

v Straight 2 Bank

Efficiency and responsiveness are two of the driving force of any business. Beholding these two fundamentals Standard Chartered Bank offers the Straight 2 Bank service to all SME customers. Banking was never as easy as Straight 2 Bank.

Straight2Bank is positioned to become the key channel for all SME Banking clients by providing enhanced product offering, greater geographic reach, time efficiency, improved operational support model, and comprehensive secured platform.

Straight 2 Bank is an online service through which you can view your bank statements and make certain crucial transactions like fund transfer, DD instruction etc. You can also view your daily transactions, which is updated every half an hour! Enjoy the true essence of real-time banking. Enjoy banking with Standard Chartered anytime, anywhere!

v Door Step Banking

In today’s competitive business environment time is money, and money saved is money earned. With this idea the SME Banking team brings you Doorstep Banking, a customizable service that allows you to securely conduct banking transactions without leaving your doorstep, which in turn saves your precious time.

Doorstep Banking is a cash/cheque pickup and delivery service from different cash collection and payment points of your business. This service saves your regular commuting time to our branches for cash transactions. It is also very safe as the transportations of the cash/cheques will be done using bullet proof armored vehicles, which will be present at your preferred pickup/delivery points at a very affordable price.

v Transaction Service

To bring out the best option for your business’ deposits, Standard Chartered Bank offers its SME Transaction Services. We have formulated a matrix of tiers with respective features that are bound to show up with the most beneficial transactions.

Standard Chartered Bank offers three types of accounts. These are SME Business Prioriy Account, SME Call Account and Business account. Each of these account types are subdivided into Business Plus, Business premium and Business Priority segments.

Findings

SME service in our country became more attractive to all kind of business owners. All kind of banks are already started providing the SME services to the small and medium business owners. They are creating new facilities to make it more helpful for the business owners. They are trying to help poor people and family by providing this service to the women. The government of Bangladesh also paying attention in this service, so the small and medium business owners can get more benefits from the banks and others who provide this service to them.

Recommendations

1. Seed Money, Leasing, Venture Capital and Investment Funding:

There is a need for improving different aspects of financial services of SMEs, such as seed money, leasing, venture capital and investment funding. There is a lack of long-term loans; interest rates are high, Guarantee/Security issues, exchange risks etc. All these limit the development of SMEs. Finance, both short and long term, should be provided at market cost of capital. Fund should be made available through encouragement for setting up ‘Venture Capital’ organization in Bangladesh. The concept of venture capital (VC) has successfully Operating in the USA, EU countries, and Canada.

2. Establishment of Small Business Investment and Lending Corporation (SBILC):

We should start with ‘something effective’ for industrial development in general and the SMEs sector in particular. Such a step, for example, could be the establishment of a separate corporate body. That means a separate financing institution could be developed, with joint ownership of the public and private sector. To make the proposed initiative effective in achieving its goals, government may set up a Small Business Investment and Lending Corporation (SBILC).

The SBILC can be formed under Small Business Investment and Lending Act passed through the Parliament. Under SBILC there may have external and Internal Financing policies. Taken from the different countries experiences the different types of financing policies and program that can be introduced through SBILC, is enumerated below:

Low Doc Loan Program, which may allows small business to use a simple one-page application for loans up to Tk.50, 000; loans between Tk.50, 000 andTk.1, 00,000 may require the one-page application plus personal tax returns for three years and a personal financial statement from entrepreneur.
Direct loans, this type of loan may be provided directly to the small business with public funds and no participation. The interest rate charged on direct loans depends on the cost of money to the government and it changes as general interest rates fluctuate. It can be limited to a fixed ceiling.
Immediate participation loan can be made from a pool of public funds and private loans.
Guaranteed loan. When private lenders extend loans to small businesses, SBILCin those cases can provide guarantee for repayment in case the borrower defaultson the loan, which may be given for a defined amount of loan and up to certain percentage e.g., 80% or 75% of loans.
Seasonal line of credit programme, may be offered for short-term capital to growing companies needing to finance seasonal buildups of inventory or accounts receivable. The maturity period cannot be exceeding 12 months and the company must repay it form cash flow. Accounts receivables and inventory can be collateral for the loan.
Contract loan programme, is another short-term loan guarantee, but it is designed to finance the cost of labour and materials needed to perform a contract. Maturity times are up to 18 months.
Export working capital programme. Under this prgramme the SBILC may give guarantee 90 percent of bank credit line up to a certain limit. In such case Loan proceeds must be used to finance\e small business exports.
Disaster Loans. As their name implies, disaster loans can be provided to small businesses devastated by some king of financial or physical losses (such as tremendous flood, earthquakes). Disaster loan may carry below-market interest rates.
Greenline revolving line of credit programme. Greenline programme can be designed to increase small companies’ access to working capital by providing them with revolving lines of credit. It can be different than traditional loans, which may require fixed monthly payments; the Greenline programme may employ highly flexible revolving loans, in which cash-hungry small businesses able to draw on a credit line only when they need the money. This loan programme can be designed to provide short-term credit to allow small businesses to finance the sale of their products and services until they can collect payment for them.

3. Periodical Professional Training Courses for SMEs & for Entrepreneurship Development:

Periodical professional training courses should be arranged for technical staff of SMEs. Moreover training in management of small enterprises and efficient marketing can also provide. Islamic Chamber regularly organizes training workshops on management, marketing, procurement of technologies, quality control system and financing of SMEs, for the benefit of representatives of private enterprises and staff of member chambers indifferent regions of the Islamic World. Training programme / workshop should be organized for the development of SMEs capabilities to acquire enhanced knowledge and skills about how to choose, use and improve technology. At present, no such institution exists except a project of the BSCIC called ‘SCITI (Small and Cottage Industries Training Institute). Training on different aspects of SMEs activities for entrepreneurs is crucial for the development of an entrepreneurial.

4. Establishment of R&D Institute for Enterprise and Entrepreneurship Development, Training and Research Institute:

In a country like Bangladesh, where entrepreneurial initiative is rare and shy, a separate institute for enterprise and entrepreneurship development, training and research should be developed. To make it a ‘center of excellence’ in SMEs development, it should be designed, involving educational institutions, business associations, relevant government bodies, private research agencies, and individual consultants having experience in SMEs development.

5. Establishment of a separate bank for women entrepreneurs:

Establishment of a separate bank for women entrepreneurs will accelerate the development of women SME through their increased access to formal financial institutions.

6. Minimum quota for women entrepreneurs:

Maintaining a minimum quota for loan disbursement to women entrepreneurs and proactively seek out female clients.

7. Training program for women entrepreneurs:

Increase the capacity of women entrepreneurs through training and awareness raising activities on financial management, business procedures and other regulatory process such as trade license, tax and VAT, etc. At the same time, initiatives should be undertaken to sensitize the people working with respective regulatory institutions so that women SME can easily arrange necessary documents for loan application and other procedures.

8. Implementation and Monitoring of Policy Measures for SMEs:

Only policy prescription is not the end, if it is not implemented through different measures timely and properly. How far policy measures are implemented, along with, what effect – desired or not – such policy measures has had on the development of SMEs should also be monitored from time to time. This monitoring will provide feedback for taking corrective actions, if necessary, to ensure desired effect of the policy adopted.

Conclusions

As the experiences of SME finance in Bangladesh suggest, there is critical need for putting in place a credit delivery system that evaluates the credit worthiness of borrowers, on a basis other than fixed asset ownership. The evaluation may require examining transaction records of the borrowers, assessing the value of movable assets etc. There will also be the need for enhanced post disbursement monitoring. An effective SME finance policy will have to cover such enhanced cost of credit administration. In addition to credit guarantee or refinancing facility there will have to be adequate rediscount facility for the primary lender to accommodate these costs. The financing scheme should also include special provisions for women entrepreneurs. Indeed, the Implementation of appropriate policies and strategies is a prerequisite to harness sustainable competitiveness of SMEs around the country. Suggestive remarks have been stipulated in this write up. With that paradigm, proactive policy is essential to enact them. The first step this regard is to make firm’s filly aware of the competitive challenges they have to face. The next step is to help SMEs prepare to meet the challenge by understanding their strengths and weaknesses and providing the inputs they need to help them upgrade. The main inputs are finance, market information, training, infrastructure development, R&D, management tools, technology, skills and links with institutions for support services. SMEs are considered to be the seedbed for the development of entrepreneurial skills and innovation. Small capital requirement makes easy entry and exit possible and private sector entrepreneurial activities have many important spillover and positive externality effects. However, liberalization of the economy along with rapid globalization has posed severe challenges to SMEs not only in international markets but also in the domestic economy. Since SMEs are based on relatively small investment, their survival depends on readily available markets with easy access. In today’s world, market development is a much more challenging task, which requires coordinated efforts by individual business enterprises and the Government. Bangladesh has failed to maximize the benefits derived from the SME sector, which promises and needs to play a pivotal role in promoting and sustaining the industrial as well as overall economic growth. The failure can be attributed to various reforms and trade liberalization measures that have squeezed the sphere of Government’s activity in business. Consequently, the private sector has to lead the economy in a dynamic growth path. The role of SMEs in providing productive employment and earning opportunities has emerged as an important concern among policy makers, donor agencies and researchers. Regardless of the correct magnitude, SMEs undoubtedly play a very important role in the economy of Bangladesh in terms of output, employment, and private sector activities. They are quite predominant in the industrial structure of Bangladesh comprising over 90% of all industrial units. Together, the various categories of SMEs are reported to contribute between 80-85% of industrial employment and 23% of total civilian employment (SEDF, 2003). However, serious controversies surround their relative contribution to Bangladesh’s industrial output due to paucity of reliable information and different methods used to estimate the magnitude. The most commonly quoted figure by different sources (ADB, World Bank, Planning Commission and BIDS) relating to value-added contributions of the SMEs is seen to vary between 45-50% of the total manufacturing value added.

Bibliography

v Financial Decision Making Concepts, Problems and Cases, 4^th edition

– John J Hampton

v An introduction to effective working capital (liquidity) management,

-Michael Lembach.

v Financial Statement Analysis

Theory Application and Interpretation

– By Leopard A Bernstrein

v Fundamental of Financial Management

– By E.F. Brigham

v Financial Management

– By I M. Pandey

v Intermediate Accounting

– By Donald E. Kieso

Jerry J. Weygandt

v Internet

v Annual Reports.

Assignment Point - Solution for Best Assignment Paper

SME Banking and services in Bangladesh

Introduction

Scope of the report

SME Banking and services in Bangladesh

SME: Thrust sector deserves appropriate support:

Origin of the Word

What Is the Economic Function of a Bank?

Organization

Current Board of Directors

Chairman

Current Executive Staff

Former Governors

State-owned Commercial Banks

Foreign Commercial Banks

For a person:

For Partnership / Proprietorship Company:

For Private & Public Limited Company:

Entries Passed

Letter of Introduction

A letter of introduction always protects a banker in the following ways

Declaration of Nominee

Specimen Signature

Interview

Initial Deposit

Operation Instruction

Verification of Document

Pay in Slip, Check Book and Pass Book

Monthly Savings Deposit Account:

Types of loans granted by commercial banks:

1. Secured loan

2. Mortgage loan

v Orjon

Features:

Charges

v Loan Against Property

Features

Eligibility

Property Documentation Requirement:

Charges

v Trade and Working Capital Financing

Features

Eligibility

v Business Priority Account

Benefits

Eligibility

v Business Premium Account

Benefits

Eligibility

v Business Plus Account

Benefits

Eligibility

v Straight 2 Bank

v Door Step Banking

v Transaction Service

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