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Analysis of Repayment behavior of the Retail loan borrowers Of BRAC Bank Ltd.

EXUCUTIVE SUMMARY

BRAC Bank Limited is a scheduled Commercial Bank in Bangladesh. It established in Bangladesh under the Banking Companies Act, 1991 and incorporated as Private Limited Company on May 20, 1999 under the Companies Act, 1994. Its operation started on July 4, 2001 with a vision to be the market leader through to providing all sorts’ support to people in term of promoting corporate and Retail loan all over the Bangladesh. BRAC Bank will be a unique organization in Bangladesh. The bank consist of major divisions named 1) Corporate banking, 2) Retail banking, 3) Treasury, 4) Small & Medium Enterprise (SME). At present the Bank operating its business by 56 Branches. BRAC Bank is the first local commercial banks that proving online banking service to its customers from the very beginning of its starts. BRAC Bank, for the first time among local commercial banks, starts providing loan facilities to Retail loan trading, manufacturing and service oriented enterprises all over the country. The Bank has already established its network in different area of the country with assistance of BRAC.

BRAC Bank is trying to develop economic condition of the country. So the bank provides loan facility Various types of category, there are 12 retail loan provide the BBL, But this bank maximum profit earn small and medium enterprise (SME), The last 6 month of retail loan are provide 2690738936.00 . BRAC Bank provides this facility to those whose business operation is minimum one year and environment friendly business. It provides no loan facility to tobacco business. The business should be legally registered and must have valid trade license. The entrepreneur should be physically able, preferably between the ages 25 to 50. He/She must have the necessary technical skills to run the business and acceptable social standing in the community i.e. people should speak highly of him/her. BRAC Bank gives equally important to the guarantor to getting the SME facility. The guarantor must have the ability to repay the entire loan and is economically solvent. The guarantor should know the entrepreneur reasonable well and should preferable live in the same community. Retail loan can be repaid in one ways, 1) in equal monthly loan installment with monthly interest payment. Interest repayable a quarter ends residual on maturity. Customer relation officers search new potential customer by providing door-to-door service. They talk with clients and monitor their manners, activities of their business and provide the loan to the potential customers. BRAC Bank may provide 100% of net required working capital but not exceeding 75% of the aggregate value of the inventory and account receivable. Normally, organizations meet their working capital from over draft loan but BRAC Bank designed the loan to meet working capital but as term loan which is repaid in installment. The customer relation officers also monitor the borrower’s activities after the loan disbursement. Monitoring also facilitates the build up of an information base for future reference.

Retail Banking operation acts as the last line defense of the bank. This division is responsible for the complete disbursement, recovery and closing procedures. The respective select potential enterprise, collect confidential information about the enterprise, open clients account is the respective bank where BRAC Bank has its own account, filled up CIB form and send it to the Asset Operation Department. Then the Retail Banking Operation Department starts its activities. Retail Banking Operation Department sends the CIB form to the Bangladesh Bank to know the CIB status of the applicant. If the report found clean then it send back to the unit office for send proposal for the loan. Then the unit office sanction loan and send it again in Retail Banking Operation Department for disbursement. Retail Banking Operation Department then prepare a loan file and checks all necessary documents, prepare a list and disburse it. Then Retail Banking Operation Department starts enter all information regarding the loan in the banking software “Millennium Banking System (MBS)” which includes initial ID generation, loan account opening, and risk fund collection, activation of the loan.

Post disbursement manual activities includes repayment schedule send to unit office, documents stamp cancellation, send the loan file to archive. Recovering activities include receive SMS/Fax for installment deposit, entry the installment information to MBS, print vouchers, cross check SMS/Fax and solve problems, repayment voucher check and posting. Closing activities includes receive SMS/Fax requesting for closing, bring the loan file from archive, obtained approve to closing from the concern authority, checking in MBS, SMS sent to concern customer service officer (CSO), receiving and print closing SMS/Fax.

The core competence of the BRAC Bank is to provide the fastest loans to the clients in this country. To retain this competitive advantage BRAC Bank would provide computer and palmtop facilities whether they can give fastest services to clients than other banks. Also to convey the customer focus, BRAC Bank is trying to reduce collateral securities than other banks. It provides more collateral free secured loans to capture the market. Regarding the services by the CRO, almost all clients are satisfied by get these quick facilities from them. Though it is pioneer division of this bank, the tried to give an in-depth analysis for every factor, which relates the Retail division from the perspective of customer satisfaction and dissatisfaction.

Part 1

1.0. Introduction

BRAC Bank Limited is a scheduled commercial bank in Bangladesh. It established in Bangladesh under the Banking Companies Act, 1991 and incorporated as private limited company on May 20, 1999 under the Companies Act, 1994. Its operation started on July 4, 2001 with a vision to be the market leader through to providing all sorts’ support to people in term of promoting corporate and small entrepreneurs and individuals all over the Bangladesh.

BRAC Bank will be a unique organization in Bangladesh. The Bank consists of major divisions named 1) Corporate banking, 2) Retail banking, 3) Treasury, 4) Small & Medium Enterprise (SME). At present the Bank operating its business by 56 Branches. BRAC Bank is the first local commercial banks that proving online banking service to its customers from the very beginning of its starts.

BRAC Bank, for the first time among local commercial banks, starts providing loan facilities to small and medium trading, manufacturing and service oriented enterprises all over the country.

1.1 Background of the study:

Through this report an individual can expect to have a good knowledge and understanding on the various methods of operation performed by BRAC Bank Limited particularly in the area of Financial Institutional Services. From the last three months of the bank’s disbursement, everything is tried to include in precise form. The tried level best to put more emphasis on the Retail loan Process and its recovery since it was the topic of internship program. This report is to be used only for the academic purpose. The collected all the necessary and relevant data from various primary, secondary and tertiary sources. After three months long hard labor, it has become possible for me to make the report comprehensive and factual. The data is truly and strictly confidential and no one can use its components in full or partial. would like to give thanks to everyone who has helped and encouraged in the process of preparing this report.

1.2 Significance

This report is the result of three-month internship in BRAC BANK LIMITED. The enter as an internee in BRAC BANK LIMITED beginning Feb 25th. 2010 to 25th May. 2010. And have completed this internship period successfully. This internship report contains all the information that gather at the time of my internee in BRAC BANK LIMITED. The topic is Analysis of Repayment behavior of the Retail loan borrowers Of BRAC Bank Ltd. All these information will help the management to identify various scopes and limitations of the Institution and Project department and to take decisions regarding the improvement or reengineering of this Department. This is the basic rationale behind the study. Besides, it would be a great opportunity for me to get familiar with this system. So this study is very significant for both the company and me. They satisfy my work and give an opportune job. Now this time an employee of BRAC Bank Limited. Retail Banking Operations (RBO).

1.3. Scope of the report:

Scope of the study is quite clear. Since Asset Operations Department is dealing with all types of loan activities in the bank, studying these core themes, Opportunities are there to learn other aspects of matters.

• Concept of Retail and its impact in overall economy of Bangladesh
• Entrepreneurship development situation through Retail banking
• Importance of Retail banking in context of Bangladesh
• Pioneer’s strategy regarding Retail banking
• Small entrepreneurs of rural –urban spectrum are enjoying the BRAC Bank loan facility without the presence of bank at rural area.
• Virtual banking concept through Retail banking
• Core concept of retail banking operation.

1.4. Objective of the Report:

1.4.1 Broad Objectives

• To analyze the repayment behavior of Retail loan borrowers

• To know Retail loan and its process of recovery

• And Process of retail banking.

1.4.2 Specific Objectives

• To find out basic appraisal of Retail loan
• To know the enterprise selection criteria to provide Retail loan
• To know the terms and conditions of Retail loans
• To know the disbursement and recovery procedures of Retail loans
• To make some policy implications and conclusion to further the development of Retail loan products of BBL.
• To know the work process and monitoring system of Retail Banking Department
• To access the key performance indicator of the department
• To know how the Retail loan borrowers would behave in repaying their loan.
• To know whether Retail loan borrowers are dully paying their installments..

1.5. Methodology:

In fact, aim was to collect as much information as it can be possible for me to make an overview of the bank, its mission and vision, its departments and its functions. Of course had to collect enough information so that can make an analysis of Retail loan and the specific behavior of its borrowers. The collected around forty customers’ information so that could know something about their age, education, experience, loan repayment behavior and so on. The data collected allowed to make an analysis regarding Retail loan, its process starting from sanction of loan to closing of loan and especially regarding Retail loan borrowers behaviors that is whether they are paying dully or lately or they have any default tendency.

1.5.1 Types of Research:

It is descriptive research.

Collection primary Data:

For collecting primary data is depth interview technique has been used through set of small rayed but very original and standard informal way will be used in the information. Primary data also collected using questioner survey to the customer and employee.

Collection secondary Data:

In order to collect secondary Data defiance related materials like BRAC Bank limited address difference daily newspaper, Operational manual Official Website Banking journals has been used, moreover various library sources used as secondary of sources an collections early mentioned data and information

1.5.2. Sources of data:

For collecting the required data, have used different sources or methods like the following:

1. Primary data sources:

• Interviews of Customer relationship officers (CRO)
• Focus group meetings
• Direct observation
• And also an employee retail banking operation.

2. Secondary data sources:

• Operational manual
• Official Website
• Banking journals
• BBL newsletters
• Research papers

1.5.3.Data collection procedure:

Data processing and Analysis:

After collecting all the data they will be coded and data will be processed analyzed and graphically using MS word, Excel and MS word.

Techniques of analysis:

Quantitative and qualitative data were collected and analyzed according to acceptable standards of practice. Different tables and graphs were used to make the data meaningful and comparable. Qualitative data were analyzed rationally and in comparison with current market condition. Necessary percentages and averages were calculated and the analyzed results were described step by step.

1.5.4. Questionnaire:

The collected the 37 customers before BRAC bank loan purpose and after the loan taken purpose am used in the Questionnaire. The average Questionnaire administered time 25 min. for official and 20 min. for the customer.

1.5.5. Sampling planning;

1.5.5.1 Population: The entire customer works in the local area of BRAC Bank Ltd.

1.5.5.2 Sampling unit: All the sampling unit of the every is on customer of BRAC Bank Ltd.

1.5.5.3 Sample frame: NO well-structured sample frame is found.

1.5.5.4. Sampling procedure: non-probability convenience sampling produce is used in the survey.

1.5.5.5. Sampling size: The sampling size is 37 for customer

1.5.5.6. Data analysis and reporting:

Data collection: data use here was drawn mainly from secondary sources. Necessary dealing room operation executives were interviewed with in formal questions, branch management of generate boundary wad also interviewed with informal questions. This report handling of over all banking activity and customer relationship management are highlighted other secondary sources used are annual report of the bank.

1.6 Limitations:

The study has suffered from a number of barriers

• Data from BRAC Bank is highly confidential for the outside people and had no authority to use the core banking software.
• BBL changes its core banking software, MBS to Finical that’s why all the employees are very busy with their work, sometimes had to wait more than one week for a piece of information.
• Time is also a big constraint for research. have to submit a broader deal in a shorter form of outcome.
• It was difficult to communicate with the customers, as many of them were unable to give me much time for interview.
• As have taken a sample of 37 observations, there may be sampling error.
• had to go under day-to-day job responsibility that was supposed to do so. So could get few more time to spend in collecting data for preparing internship report.

Part 2

2.0. Background of the Organization:

BRAC Bank Limited is a scheduled commercial bank in Bangladesh. It established in Bangladesh under the Banking Companies Act, 1991 and incorporated as private limited company on 20 May 1999 under the Companies Act, 1994. BRAC Bank will be a unique organization in Bangladesh. The primary objective of the Bank is to provide all kinds of banking business. At the very beginning the Bank faced some legal obligation because the High Court of Bangladesh suspended activity of the Bank and it could fail to start its operations till 03 June 2001. Eventually, the judgment of the High Court was set aside and dismissed by the Appellate Division of the Supreme Court on 04 June 2001 and the Bank has started its operations from July 04, 2001.

The importance of financial intermediaries in the development of the overall economy of country cannot be described in short. From the inception of the civilization the banking sector dominate the economic development of a country by mobilizing the saving from the general people and channeling those saving for investment and thus economic development and growth. In ancient time, the importance of commercial banks after the ravage of the liberation war to develop a better economy was severally needed and it is needed now and will be required in future also. In time-to-time Government of Bangladesh agreed to permit the private commercial banking in the country. BRAC bank will be knowledge-based organization where the BRAC Bank professionals will learn continuously from their customers and colleague’s world wide to add value. It will work as a team, stretch, they will innovate and break barriers to serve customers and create customers loyalty through a value chain of responsive and professional delivery. The bank promotes broad-based participation in the Bangladesh economy through the provision of high quality banking services. BRAC Bank will do this by increasing access to economic opportunities for all individuals and business in Bangladesh with a special focus on currently under-served enterprises and households across the rural – urban spectrum. BRAC Bank believes that the pursuit of profit and developmental goals is mutually reinforcing.

Increasing the ability of under – served individuals and enterprises to build their asset base and access market opportunities will increase the economic well being for all Bangladeshis at the same time, this will contribute significantly to the profitability of the Bank. BRAC Bank intends to set standards as the Market leader in Bangladesh. It will produce earnings and pay out dividends that can support the activities of BRAC, the Bank’s major shareholder. Development and poverty alleviation on a countrywide basis needs mass production, mass consumption and mass financing. BRAC Bank goal is to provide mass financing to enable mass production and mass consumption, and thereby contribute to the development of Bangladesh. BRAC Bank intends to set standard as the market leader in Bangladesh by providing efficient, friendly and modern fully automated online service on a profitable basis aiming at offering commercial banking service to the customers’ door around the country, BRAC Bank limited established 26 branches up-to this year.

This organization achieved customers’ confidence immediately after its establishment. Within this short time the bank has been successful in positioning itself as progressive and dynamic financial institution in the country. It is now widely acclaimed by the business community, from small entrepreneur to big merchant and conglomerates, including top rated corporate and foreign investors, for modern and innovative ideas and financial solution. Thus within this short time it has been able to create an unique image for itself and earned significant solution in the banking sector of the country as a bank with a difference. The emergence of BRAC Bank Limited is an important event in the country’s financial sector at the inception of financial sector reform. The authorized capital of BBL is Tk. 1000 million and paid up capital of the same bank is Tk. 500 million.

Fig-1 Shareholders of BRAC Bank Limited

The Chairman of the Bank is Mr. Fazle Hasan Abed. Now the Managing Director of the bank is Mr. Imran Rahman. The bank has made a reasonable progress due to its visionary management people and its appropriate policy and implementation.

Logo of BRAC Bank:

2.1 Corporate Vision:

BRAC Bank will be a unique organization in Bangladesh. It will be a knowledge-based organization where the BRAC Bank professionals will learn continuously from their customers and colleagues worldwide to add value. They will work as a team, stretch themselves, innovate and break barriers to serve customers and create customer loyalty through a value chain of responsive and professional service delivery. Continuous improvement, problem solution, excellence in service, business prudence, efficiency and adding value will be the operative words of the organization. BRAC Bank will serve its customers with respect and will work very hard to instill a strong customer service culture throughout the bank. It will treat its employees with dignity and will build a company of highly qualified professionals who have integrity and believe in the Bank’s vision and who are committed to its success. BRAC Bank will be a socially responsible institution that will not lend to businesses that have a detrimental impact on the environment and people. So Brac Bank operates following a specific vision like:

“Building a profitable and socially responsible financial institution focused on Markets and Business with growth potential, thereby assisting BRAC and stakeholders build a “just, enlightened, healthy, democratic and poverty free Bangladesh”.

2.2. Corporate Mission:

· Sustained growth in Retail banking operation sector.

· Continuous low cost deposit growth with controlled growth in Retained 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 fee based income

· Keep our Debt Charges at 2% to maintain a steady profitable growth

· Achieve efficient synergies between the bank’s Branches, Manage various lines of business in a 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

2.3. Goals:

BRAC Bank will be the absolute market leader in the number of loans given to small and medium sized enterprises through out Bangladesh. It will be a world-class organization in terms of service quality and establishing relationships that help its customers to develop and grow successfully. It will be the Bank of choice both for its employees and its customers, the model bank in this part of the world.

2.4. Organ gram:

Fig: 2.A corporate Organ gram of Brac Bank Limited.

2.5. Marketing Mix

The set of controllable tactical marketing tools- product, price, place and promotion that the organization blends to produce it wants in the target market. The many possibilities can be controlled into four groups of variables known as the 7 P’s: Product, Price, Promotion and Place.

2.5.1. Product

Means the goods and services combination the company offers to the target market. In view of retail loan, it has 12-product loan provide of BBL, they have short term and medium term loans. Whether CRO provide quick and quality services to clients. Customer service is another element of product strategy. Companies design its products and support services to profitability meet the needs of target customers. Short terms products means per month target loan the sales persons, they are find out the borrower.

Short Term Products:

Easy repay- these categories of products are easy repaid for the clients. When the pick season comes like Christmas of EID then these short-term products could be required for the clients. If the clients have that loan at the pick season then cliets business carries out hot cakes and easily can repay the loan to BRAC bank.

Shirt fund requirement– without pick season, many clients could have required short funds to hold the tender or dealership. BRAC bank would be a good hand for the clients to have that dealership.

Mid Term Products

Proper Utilization– on average, clients get these categories of loan for 6 to 180 months. (Include Home loan). So clients can easily utilize the money regarding the prospect of the business.

Easy repay– though it is a long time repayment schedule, so clients make the profits to get the required amount of loan and repay the loan in a monthly basis.

2.5.2. Price–

The amounts of money customers have to pay to obtain the products. In terms of Retail banking operation of BRAC bank, clients have to pay a certain amount of processing fees and stamp costs to get the loan. One of the factors that affect the companies own pricing moves. For example- many banks have processing fees with 1.5% charge and other miscellaneous costs. But BRAC bank has withdraws other costs and charges to carry out in the competitive market.

• Costly- BRAC bank retail loan interest rate is vary to product ways minimum 3% to 19.5 %, So it is little bit of costly by the competitive edge but the client gets this loan within very short period of time. In this situation client cannot think about the interest rate because at the right time they get the loan, which they can exercise in their business, can yields profits.
• Easy sanction– If the CIB (Credit Information Bureau) is being cleared from Bangladesh Bank and all information is being transparent from client then the loan is become sanctioned in favor of client.
• All time consultancy– without taking any money, the officer of this bank give moral advices to clients to develop the business.

2.5.3. Place (Distribution)

Includes company’s activities that make the product available to target consumers. Retail loan already spread out its unit offices around the country. Retail tries to reach each and every small business enterprise to meet client’s demands. Marketing channel decisions are among the most important decision that management faces. Management must make channel decision carefully, incorporating today’s needs with tomorrow like selling environment. Retail banking operation of BRAC bank already has 56 braches and ROC office, which is spread throughout the country and lots of staffs working under Brac bank. These officers have respective selected supervisors who directly report to the Retail main head office. So Retail division has everywhere in Bangladesh to serve all respective clients.

2.5.4. Promotion-

Promotion Means activities that communicate the merits of the product and persuade target customers to buy it. Brac bank to provide some condition of Every sales person for the collection of borrowers, For example- if a sales person up to 15 lacs taken Retail product sale the bank provide per lac 500 tk. Paid, in this case they collection maximum product sale then the bank paid 600 Tk.

Door to door service– it is a door-to-door customer services to clients. The sales persons knock the door of the business enterprise whether the client have required any loan or not.

Market to non-Bank people: there are some clients who do not maintain any account in the bank. They are dealing by cash. By providing BRAC bank loans, these sorts of clients can be attached with the banks. Also they can understand more about banking and can have a good relationship with them.

Neglected People– there are some people who are very afraid of dealing with the bank. They were very simple dresses too afraid to the bank. But they are carrying out good business and potential clients. They could be target for the BRAC Bank Limited

e. People. Banking service usually depends on direct information between customer and a firm is employee BBL maintains a good relationship with its customer service quality it’s often arrested bared on customer interrelations with front line. Staff and BBL devotes signifience effect to necessity. trading and motivating they employees.

2.5.5. Physical environment:

The appearance of bbl vehicles in terror furnishing, requirement staff member, sings, printed materials and\d visible cues all provided tangible evidence of the bank services unity. Bbl managers its Physical environment very carefully as it can have a profound impact customer impression

They have:

• Setting arrangement for customer.
• Necessary furniture and elective equipment.
• Prayer time space
• Well decorated office space
• Skilled tech place.

2.5.6. Process:Brac Bank Limited creats and delivery process requires the design and implement by effective process. A process is the method and sequence of action in the bbl designs its process in such a way that leads that fast dynamic and very well effective service delivery and result in satisfaction customers. In the process of ht bank high productivity and decrease likelihood of service failure in the bank most of the direction comes from head office abut there difference culture in different brunch based on location but every whir a specifics highly maintained.

5. People.

6. Physical environment

7. Process.

Fig.3. The 7 P’s of the marketing mix in terms of Retail loan BRAC bank Ltd.

2.6. Company SWOT Analysis:

SWOT analysis is an important tool for evaluating the company’s Strengths, Weaknesses, Opportunities and Threats. It helps the organization to identify how to evaluate its performance and scan the macro environment, which in turn would help organization to navigate in the turbulent ocean of competition.

2.6.1. Strengths:

Company reputation:

BRAC bank has already established a favorable reputation in the banking industry of the country particularly among the new comers. Within a period of 5 years, BBL has already established a firm footing in the banking sector having tremendous growth in the profits and deposits. All these have leaded them to earn a reputation in the banking field

Sponsors:

BBL has been founded by a group of eminent entrepreneurs of the country having adequate financial strength. The sponsor directors belong to prominent resources persons of the country. The Board of Directors headed by its Chairman Mr. F H Abed. Therefore, BBL has a strong financial strength and it built upon a strong foundation.

Top Management:

The top management of the bank is also major strength for the BBL has contributed heavily towards the growth and development of the bank. The top management officials have all worked in reputed banks and their years of banking experience, skills, expertise will continue to contribute towards further expansion of the bank. At BBL, the top management is the driving force and the think tank of the organization where policies are crafted and often cascaded down.

Facilities and equipment:

BBL has adequate physical facilities and equipments to provide better services to the customers. The bank has computerized and online banking operations under the software called MBS banking operations. Counting machines in the teller counters have been installed for speedy service ant the cash counters. Computerized statements for the customers as well as for the internal use of the banks are also available.

Impressive branches:

This creates a positive image in the minds of the potential customers and many people get attracted to the bank. This is also an indirect marketing campaign for the bank for attracting customers. 13 branches of the bank are impressive and are compatible to foreign banks.

Interactive corporate culture:

BBL has an interactive corporate culture. Unlike other local organization, BBL’s work environment is very friendly, interactive and informal. There are no hidden barriers or boundaries while interacting among the superior or the subordinate. The environment is also lively and since the nature of the banking job itself is monotonous and routine, BBL’s likely work environment boosts up the spirit and motivation of the employees.

Team work at mid level and lower level:

At BBL’s mid level and lower level management, there are often team works. Many jobs are performed in groups of two or three in order to reduce the burden of the workload and enhance the process of completion of the job. People are eager to help each other and people in general are devoted to work.

2.6.2. Weaknesses:

Advertising and promotion of SME loan:

This is a major set back for BBL and one of its weakest areas. BBL’s adverting and promotional activities are satisfactory but it SME loan is not advertised well. It does not expose its SME product to general public and are not in lime light. BBL does not have neon sign or any advertisement for SME loan in the city. As a result people are not aware of the existence of this bank.

NGO name (BRAC):

BRAC is one of the largest NGO of the world and it is operating its activities in Bangladesh. BRAC bank is not a NGO bank but many people of them country consider it as a NGO bank like Grameen bank which is not correct.

Low remuneration package:

The remuneration package for the entry and the mid level management is considerably low. The compensation package for BBL entry level positions is even lower than the contemporary banks. Under the existing low payment structure, it will be very difficult to attract and retain higher educated employees in BBL. Specially CRO’s are not satisfied with compensation package provided to them.

2.6.3. Opportunities:

Diversification:

BBL can pursue a diversification strategy in expanding its current line of business. The management can consider options of starting merchant banking or diversify in to leasing and insurance. By expanding their business portfolio, BBL can reduce their business risk.

Product line proliferation:

In this competitive environment BBL must expand its product line to enhance its sustainable competitive advantage. As a part of its product line proliferation, BBL can introduce the following products.

ATM: This is the fastest growing modern banking concept. BBL should grab this opportunity and take preparation for launching ATM. Since BBL is a local bank, they can form an alliance with other contemporary banks in launching the ATM.

2.6.4. Threats:

Multinational banks:

The emergence of multinational banks and their rapid expansion poses a potential threat to the new growing private banks. Due to the booming energy sector, more foreign banks are expected to arrive in Bangladesh. Moreover, the already existing foreign banks such as Standard Chartered is now pursuing an aggressive branch expansion strategy. This bank is establishing more branches countrywide and already launched is SME operation. Since the foreign banks have tremendous financial strength, it will pose a threat to local banks.

Upcoming banks:

The upcoming private local banks can also pose a threat to the existing private commercial banks like BBL. It is expected that in the next few years more local private banks may emerge. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against an on slaughter of foreign banks.

Contemporary banks:

The contemporary banks of BBL such as Dhaka bank, prime bank and Dutch Bangle are its major rivals. Prime bank and other banks are carrying out aggressive campaign to attract lucrative clients as well as big time depositors.

Default culture:

This is a major problem in Bangladesh. As BBL is a new organization the problem of non-performing loans or default loans is very minimum or insignificant. However, as the bank becomes older this problem arises and the whole community suffers from this chronic diseases. BBL has to remain vigilant about this problem so that proactive strategies are taken to minimize this problem if not elimination.

2.7. Objectives of the Bank:

The objective of BRAC Bank Limited is specific and targeted to its vision and to position itself in the mindset of the people as a bank with difference. The objective of BRAC Bank Limited is as follows:

• Building a strong customer focus and relationship based on integrity, superior service.
• To creating an honest, open and enabling environment
• To value and respect people and make decisions based on merit
• To strive for profit & sound growth
• To value the fact that they are the members of the BRAC family – committed to the creation of employment opportunities across Bangladesh.
• To work as a team to serve the best interest of our owners
• To relentless in pursuit of business innovation and improvement
• To base recognition and reward on performance
• To responsible, trustworthy and law-abiding in all that we do
• To mobilize the savings and channeling it out as loan or advance as the company approve.
• To establish, maintain, carry on, transact and undertake all kinds of investment and financial business including underwriting, managing and distributing the issue of stocks, debentures, and other securities.
• To finance the international trade both in import and export.
• To develop the standard of living of the limited income group by providing Consumer Credit.
• To finance the industry, trade and commerce in both the conventional way and by offering customer friendly credit service.
• To encourage the new entrepreneurs for investment and thus to develop the country’s industry sector and contribute to the economic development.

2.8. Bank’s Culture:

Bank has adopted trust as a corporate value which is acronym for team work, respect for all people, unquestionable integrity, excellence in everything BRAC Bank of SME do, Sense of urgency in getting things done and total commitment.

All employees are expected to conduct themselves in accordance with the rules and regulations of the bank.

2.9. Management of BRAC Bank Limited:

Boards of directors are the sole authority to take decision about the affairs of the business. Now there are 5 directors in the management of the bank. All the directors have good academic background and have huge experience in business. Mr. Mohammed Ali Rumee is the chairperson of the bank. The board of directors holds meetings on a regular basis.

2.10. Departments of BRAC Bank Limited:

If the jobs are not organized considering their interrelationship and are not allocated in a particular department it would be very difficult to control the system effectively. If the departmentalization is not fitted for the particular works there would be haphazard situation and the performance of a particular department would not be measured. BRAC Bank Limited has does this work very well. Departments are as follows:

1. Human Resources Department

2. Financial Administration Department

3. Asset Operations Department

4. Credit Division

5. SME Division

6. Internal Control & Compliance Department

7. Marketing & Product Development

8. Impaired Asset Management

9. Remittance Operation Department

10. Treasury Front

11. Treasury Back

12. General Infrastructure Service

13. Information Technology Department

14. Customer Service Delivery

15. Cards Division

16. Call Center

17. Cash Management

18. Secured Remittance department

19. Women Entrepreneur Cell

20. Payment Service

2.11. Business Units:

There are five different business units generating business BRAC Bank Limited:

• Small & Medium Enterprise (SME)
• Corporate Banking
• Retail Banking
• Treasury
• Remittance Services

All the units are being operated in a centralized manner to minimize costs and risks.

2.11.1. Products and Services:

Small & Medium Enterprise (SME):

For SME loan operation,

BRAC Bank Ltd has in total 900 unit offices, 80 zonal office, 12 territory and 1800 Customer Relationship Officers. These CROs work for the Bank to converge clients for getting the SME loan. Once CROs get the loan application and if it is less than 500,000 TK then zonal officer has the authority to approve the loan. But if it is above 500,000 then the CROs send it to Head Office for all necessary approval. After approving the loan then Asset Operation Department starts its work. As the scopes of businesses are growing, the amount of files and disbursement is getting bigger. In May 2007, AOD has processed 3249 files amounting Tk. 1,235,200,000. So SME Division’s success greatly relies on the performance. Up to April 2007, BBL provides loans for 70000 clients and in total 2265 crore TK. But the most important thing is only 17 crore TK is bad loan; this is a great achievement for SME unit of BBL. Currently they have 44147 outstanding clients and in total 1070 crore TK SME loan.

2.11.2. SME Products-

1. Prothoma Rin.

2. Supplier Finance.

3. Anonno Rin.

4. Digoon Rin.

5. AroggoRin.

6. Pathshala Rin.

7. Opurbo Rin.

2.12. SME Loan process flow is shown below.

When a customer comes to the unit office for a loan request, first he/she meets with the customer relationship officer to discuss about the loan, which loan product is suitable for him/her. After then the following process takes place:

2.13.1. Corporate Banking:

Categories- the facilities our corporate Division offers to our customers are mainly of two-

Funded Facilities Non-Funded Facilities

Funded Facilities-

Funded tells us that this type of facilities allows the customer to have money ‘on his hand’ for use i.e. he will get money as to meet his business demand. Examples are-

Working Capital Loan.

Over Draft Facility.

Term Loan.

Lease Finance.

Demand Loan.

Non-Funded Facilities-

Non-Funded facilities are those type of facilities where customers don’t get fund on their hand rather get Bank’s Guarantee service to do international trading-import and export. Letters of Credit, Bank guarantees etc. are the examples of the non-funded facilities.

Working Process of corporate wing-

An example will be handy to understand when the corporate wing starts its work. Say you are one of our clients. You need Tk. 5 core to be used in your business. The first you may contact is the RM (Relationship Manager) who is our delegate to make all kinds of negotiation with you. He then Would take the proposal to the corporate Head takes it for further analysis such as whether it would be profitable venture for the Bank, or whether the Bank can disburse more in the industry etc. Then if the Corporate Head thinks it fit to go ahead, he then would take the file to the credit division – works to find out the worthiness of the borrower and other relevant facts important to assess the possibility of recovery. Then it goes to the credit committee and then finally the file goes to the Managing Director. A diagram is given for better understanding-

2.13. Retail Banking:

Retail Loans are consumers’ loan. Based on the customer demand these loans are given. BRAC Bank has a wide range of retail loan-

1. Car Loan. 2. Doctor’s Loan.

3. Secured Loan/OD. 4. High Flyer Loan.

5. Top Up Loan. 6. Credit Card Loan.

7. Study Loan. 8. Teacher’s Loan.

9. Now Loan. 10. Salary Loan.

2.14.1 Process Flow of Retail Loan

BRAC Bank’s Retail Division is being operated centrally. Under the Retail Banking Division all the branches, which acts as sales & service center, are reportable to Head of Retail Banking. Different products of Retail Banking are as follows:

i) Deposit Products

ii) Lending Products

iii) Locker Services

iv) Remittance Services etc.

The product and services that are currently available are given below-

2.13.2. Depository Products

BRAC Bank Limited is now offering 6 depository products for mobilizing the savings of the general people:

· Savings A/C

· Current A/C

· STD A/C

· Fixed Deposit A/C

· DPS A/C

2.13.3. Loan Products

BRAC Bank is offering the following loan and advance product to the client for financing different purpose that fulfill the requirements of the bank and have good return to the investment as well as satisfy the client. The loan and advance products are:

2.13.4. New Product and services

The bank has its concentration for new product and services development for satisfying its customer and increasing its customer base. The bank firmly believes that technology based product and services will play significant role in the performance of the bank as people are getting more conscious about their service quality. They prefer now faster service with least cost. For delivering faster service the bank has introduced online banking service from the very beginning. There are some new products and services that BBL has lately introduced. These are:

• Now Loan
• Salary Loan
• Credit card Services (Proposed)
• Islamic Banking Services (Proposed)
• ATM services

BRAC Bank Limited is always emphasizing the improvement of banking service and betterment of living standard of the general people of Bangladesh. The product and services are targeted to the lower level to the upper level income group in deposit collection. For lending, the services are made if certain requirements are fulfilled.

2.13.5. Treasury

Money Market Desk

BRAC Bank has a strong presence in the Treasury Market in Bangladesh. The Money Market Desk of the Treasury Division mainly deals in Bangladeshi Taka transactions. The basic activities undertaken by the Money Market Desk are:

• Management of Statutory Reserves viz. Cash Reserve Ratio (CRR) & Statutory Liquidity Ratio (SLR)
• Daily Funds & Liquidity Management
• Investment Management

Treasury Services

· Call/Overnight Lending & Borrowing

· Term Money Borrowing & Lending

· Repurchase Agreement

· Treasury Bills (T-Bills)

2.13.6. Secured Remittance Services (SRS)

BRAC Bank has introduced an innovative remittance services for Bangladeshis living abroad with some unique features compared to any of the existing remittance program. Bangladeshi expatriates can now send their money to their relatives any where in Bangladesh even to the remotest part within 24 hours at a reasonable cost and competitive exchange rate.

2.13.7. Information Technology (IT)

BRAC Bank Ltd. is currently running countrywide true online banking system. The system allows their customers to do transactions all around the country. The bank cheques are all marked with Barcodes that makes each cheque unique and disallows it to be duplicated. All the signature and customer information with their pictures can be verified from any console at any branch on the bank. We also ensure Offsite backup and Disaster Recovery. Their Goal is to provide a true online baking system, which will not only fulfill the demand of time but also set new benchmarks in twenty-first centuries banking world.

Special Features

• All Branches are computerized
• 99% of the bank’s work is automated using latest technology
• BRAC Bank is a member of SWIFT community
• Intercity Branches are connected via optical fiber backbone network

2.14. Branches & SME SCs:

BRAC Bank Limited is fast growing commercial banks in our country. Bank has established a good operating network throughout the country. It has 36 branches throughout the country till June 2008.

2.15. Performance of BRAC Bank Limited:

BRAC Bank Limited will be the most successful private sector commercial bank in our country, though it started its operation few years back. It has achieved the trust of the general people and made reasonable contribution to the economy of the country by helping the people investing allowing credit facility.

2.16. Capital Fund:

The authorized and paid up capital of BBL is TK.1000 million and TK.500 million respectively. The paid up capital is one of the strongest in the banking industry. The bank is going to raise its paid up capital in the month September, 2006 by TK.500 million with issuing public share of 5, 00,000 of TK.100 each.

Internal and External source of cash

(Amount in Taka)

2.17. Strategic Marketing Theories relate to SME BRAC Bank Limited

In terms of business, marketing management as the analysis, planning, implementation and control of programs designed to create builds and maintains beneficial exchange with

Target clients for the purpose of achieving organizational objectives.

Demand management

As a small and medium enterprise of BRAC bank, it basically provide small micro credit loans and also its product is different terms of small and medium terms of loans. Though it is pioneer division and makes demarcate plans to increase demand in the market in terms of small and medium enterprise. So SME provides the loan that affects the level, timing and nature of demand in a way that helps customer to enhance their business in spite of economic development. SME already have Zonal offices, 265unit offices around the country and 583 CRO to serve door to door customer services and also it exists close to 14482 clients.

Sample of MIS report has given below:

Fig: 6. Sample of MIS report .

Building Customer Relationship:

The main security of SME is building relationship between clients and banks. Demands basically comes from two groups: new customers and repeat customers. SME do not want to lose good customers because banks are facing new marketing realities like changing demographics, slow growth economy, more sophisticated competitors etc. For the repeat borrowers BRAC bank SME provides lots of extra benefits to clients to obtain satisfaction. The key to customer retention is superior value and satisfaction. With this in mind many banks are going to extreme to keep their customer satisfied.

SME relates with the modern marketing concept

First it provides customer satisfaction.

Second customer satisfaction through integrated effort.

Finally, for integrated effort to come about organization belief that goals should and can be achieved.

In terms of SME the goal is to economic development of our country through meet and exceed customer needs better than competition. In terms of customer orientation, SME provides the best facilities to customers regarding their needs. SME provides unsecured loans up to 5 lacs which none of other banks provide. In spite of integrated effort, SME is a team based organization. CRO go to the door to door business and by depend on their behalf SME gives the loan to clients. Though it is team base management bank, the behalf that corporate goals can be achieved and customers are satisfied by gaining trust of management.