Bangladesh is an overpopulated country and agricultural sector is saturated. Most of the people engage in agricultural sector so over employment problem arise in the agricultural sector on the other hand capital is scarce in this count industrialist should focus on labor intensive small businesses and this is the primary reason for evolving SME. SME plays an important role in the economic and social life and it can generate large numbers of non-agriculture jobs, exports, sales and value addition. They contribute to the employment creation as well as to the improvement of skills by providing on the job training to individuals who have already little experience and knowledge. It is strongly believed that with the right policies and frameworks, SMEs have a crucial role to play for the economy of a developing country like Bangladesh by adopting new technologies and approaches.
There are at least six million small and medium enterprises (SMEs), which have employed around 80 percent of the total industrial workforce (excludes agriculture, Financial Institutions and forestry sector) and contribute nearly 25 percent to the Bangladesh’s gross domestic products (GDP). Nearly 95 percent of the country’s total business falls under the category of micro, small and medium enterprises that share more than 40 percent of the entire manufacturing output and therefore, SMEs can be termed as the driving force behind the expanding economy.
SME has become a common slogan today around the world including Bangladesh. It is now very much in the public and trade support institutions policy limelight in Bangladesh, but still SMEs are facing lots of problems among the problems; access to credit has been the key factor during the last two decades. Nowadays Financial institutions, including state owned and private commercial banks, are also rendering their support by providing investment facilities and promotional services to SMEs throughout the country. Though the risk has been increases because lack of experience and education of proprietor, fund divert policy of entrepreneur, political instability and due to law and order situation.
Objectives of the Report
- To describe reconciliation process of BRAC Bank Ltd.
- To identify problems related to reconciliation process of BRAC Bank Ltd.
- To make some recommendations to solve the problems of BRAC Bank Ltd.
BBL, the SME based commercial bank is under general special guidelines of the central bank framed for the banking system as a whole and for bank of individual sectors. Scope of the study is quite clear. Since Central Support, operation help desk and reconciliation department controls the SME loan activities in the bank, studying these core themes, Opportunities are there to learn other aspects of SME matters. BBL is now giving emphasis to create a constructive and meaningful competition with the private sector banking and NGO (who are trying to develop rural life).
This study makes attempt to cover with in its scope all most all the significant aspects of rural development scheme.
The data required for this study was collected from both primary and secondary data. Methodology that was followed to prepare this report has collected data from many sources. Such as-
Sources of data:
- Primary data sources:
· Officers of BBL, Head Office.
- Secondary data sources:
· Annual Report of BRAC Bank Ltd.
· Documents from Reconciliation Process of BBL, Head Office
· Operational manual.
· Websites: www.bracbank.com
Data Collection method
1. Personal interview: Face -to-face conversation and interview with the respective officers of the head office.
2. Personal Observation: Observing the procedure of banking activities followed by Reconciliation department.
Sample size: 5 officers.
Sampling Method: Convenience sampling method.
BRAC Bank Limited, with institutional shareholdings by BRAC, International Finance Corporation (IFC) and Shore cap International, has been the fastest growing Bank in 2004 and 2005. The Bank operates under a “double bottom line” agenda where profit and social responsibility go hand in hand as it strives towards a poverty-free, enlightened Bangladesh.
A fully operational Commercial Bank, BRAC Bank Limited focuses on pursuing unexplored market niches in the Small and Medium Enterprise Business, which has remained largely untapped within the country. In the last five years of operation, the Bank has disbursed over BDT 32,188.26 million in loans to nearly 67047 small and medium entrepreneurs in 2009. The management of the Bank believes that this sector of the economy can contribute the most to the rapid generation of employment in Bangladesh. The Bank’s footprint has grown to 69 branches, 429 SME unit offices and 179 ATM booths, 30 cash deposit machines, 1558 POS terminals, 19 utility services bill payment booths, 1900 remittance delivery points across the country. In the years ahead BRAC Bank Limited TED expects to introduce many more services and products as well as add a wider network of SME unit offices.
|Name of Shareholder||% of Shareholding|
|International Finance Corporation||9.50%|
|Shore Cap International Limited||8.75%|
|Institutions and General Public||47.11%|
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. 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 Chairman of the Bank is Sir 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.
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 channelling 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.
“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”.
· Sustained growth in ‘small & Medium Enterprise’ 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, 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 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.
Departments of BRAC Bank Ltd
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:
- Human Resources Department
- Financial Administration Department
- Central Support, operation help desk and reconciliation
- Credit Division
- SME Division
- Internal Control & Compliance Department
- Marketing & Product Development
- Impaired Asset Management
- Remittance Operation Department
- Treasury Front
- Treasury Back
- General Infrastructure Service
- Information Technology Department
- Customer Service Delivery
- Cards Division
- Call Center
- Cash Management
- Secured Remittance department
- Women Entrepreneur Cell
- Payment Service
There are five different business units generating business BRAC Bank Limited:
- Small & Medium Enterprise (SME)
- Corporate Banking
- Retail Banking
- Remittance Services
All the units are being operated in a centralized manner to minimize costs and risks
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 Limited of SME do, Sense of urgency in getting things done and total commitment.
Management of BRAC Bank Ltd
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. Fazle Hasan Abed is the chairperson of the bank. The board of directors holds meetings on a regular basis.
Performance of BRAC Bank Ltd
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.
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.
Goodwill: BRAC Bank LTD has already established a favourable 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.
Efficient 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.
Lack of 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. As a result large numbers of 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.
Remuneration: 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 difficult to attract and retain higher educated employees in BBL. Especially CROs are not satisfied with compensation package provided to them.
ATM: BBL always tries to provide excellent services to its customers. By considering this thing BBL provides ATM card to its customers and also provide available ATM booth in different locations in whole country.
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.
Available Branches: With its proper and useful operational network, there is an opportunity for IFIC to further expand its branches in many remote and new location of the country which will deliver services to customer and earn a healthy profit for the bank.
Competition: Competition is the threat of any business. At the age of modern business the competition is increasing. Every bank has an intention to provide better services compared to others for capturing the customers.
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 bank 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 Bangla are its major rivals. Prime bank and other banks are carrying out aggressive campaign to attract lucrative clients as well as big time depositors.
Structure of the organization:
Board of Directors
Deputy Managing Director
Executive Vice President
Senior Vice President
Assistant Vice President
Senior Principal Officer
Assistant Officer Grade-I
Assistant Officer Grade-II
Assistant Officer Grade-III
The SME, Probashi and Cash management business of BRAC Bank Limited is mostly dependent on corresponding banking relationship. BRAC Bank Limited has to open accounts with the other banks in the remote areas where banks representation not available. The corresponding bank accounts are used for SME disbursement, realization, remittance and cash management purpose. Every month we have found a huge number of entries un-reconciled between the bank and the corresponding banks book.
Bank has to prepare the periodic reconciliation statements to identify any mismatch. Reconciliation is the process of systematically comparing the balance of bank statement with the balance as per the company’s ledger and explaining any differences and taking necessary measures to correct the wrong entries. It is an important internal control mechanism of the bank.
The responsibilities of reconciliation of BRAC Bank Limited are centralized and given to Central Operations. There is a separate devoted team under the Central Operations for identifying the unmatched items, analyzing the same and guide the initiating departments to do the rectification. Reconciliation section of Central Operations prepares and submits a status report on monthly basis and the same to all concerned departments and Enterprises Risk Management Departments for their information and monitoring. Also submits a status report to MD & CEO and DMD for their information.
RECONCILIATION – PROCESS FLOWCHART
Bank Statements collected by Wholesale Banking Ops and print of General Ledger
GL transactions and balance Statement transactions and balance
Crossing all transactions to identify unmatched entries
Prepare statement on unmatched entries
Statement reports send to analyzing team
Identify the reasons and guide to related department for adjustment
Monthly MIS to MD & CEO, COO, HOERM
Monthly Meeting with All Dept Heads
Wholesale Banking Operations Department is responsible for collecting the Bank statements from correspondence Bank by 7th of the following month. They keep the original copy with them and send the photocopy to Central Operations Department by 10th of every month. If there have any errors in the statements, Central Operations will return the statements to Wholesale Banking Operations.
Wholesale Banking Operations Department will communicate with the correspondence bank and send the corrected copy to Central Operations Department within 05 working days from the date of receipts.
Figure: Bank Statement from other Bank
After receiving Bank statement from Wholesale Banking Operations Department, Reconciliation Team takes print of the GL (General Ledger) account and cross/match all entries between Bank statements and GL account to identify unmatched entries.
Figure: General Ledger
Reconciliation statements of all unmatched entries are prepared by identifying team and send to analyzing team for adjustment.
Respective department will provide all supporting documents if required by reconciliation team within 2/3 working days for analyzing entries.
Analysis & Adjustment:
Adjustment team prepare a statement of all identified mismatch entries with supporting documents and send the same to respective departments to pass the necessary correction entries for adjustments
Upon receipt the statement (Adjustment advice) from Central Operations Department, respective departments will pass the correct entries within 03 working days and send a copy to Central Operations Department for recording.
BRAC Bank Limited, as we know, is one of the fastest growing banks in Bangladesh. SME banking which has made the performance of this bank so enlightened is its core product to offer to the small and medium business entrepreneurs. SME loan is a loan given especially to entrepreneurs who are experienced small or medium businessmen, more or less middle aged, at least moderate income generated and who have reasonable personal or family asset. In fact no businessman could think ever before that they could take loan so easily, without any collateral and without going to bank. But BRAC Bank Limited has made this improbable process so successfully through SME banking. Finally, I would like to mention certain factor which does not matched with modern banking system but it’s regularly practiced in this particular department-
- When the Unit offices send hand written bank statement the officers, sometimes, can’t understand it; as a result, the officers can not perform reconciliation process properly.
- Loan closing statement is also hand written. When the borrower comes to close their loan, the officers are using hand written closing system. It creates another type of problem and takes more time.
- The employees are not efficient enough to perform all the activities properly.
- Customer Relationship Officers are not getting enough time to monitor reconciliation process. Every CRO has to fill up the individual target which is given by the head office.
- When the borrower repays any installment of the loan then he/she informs it to the unit office/CRO. Then the unit office/CRO sends an SMS through mobile phone or a Fax to the AOD informing the repayment. The AOD collects these SMS /Fax and takes a paper print of these SMS. But there is no monitoring system if CRO fails to send SMS to the head office.
- The officers of Reconciliation Department are to perform long time duties and work hard but they think they don’t get enough salary; as a result, they are not satisfied with their job.
• When the unit offices send bank statement, the bank statement must be crystal clear and understandable. Photo copy or hand written statement should be avoided.
- Loan closing procedure should be computerized. So that customers can get service in short time. Though BRAC Bank is computerized bank., but try to increase more computer and internet facilities in the unit offices so that CRO’s can communicate with the department in a short period of time.
• To perform reconciliation process properly, the bank should recruit efficient employees for reconciliation department.
- The bank should implement strict and continuous monitoring system to perform reconciliation process properly.
• The bank should effectively monitor the borrower and CRO’s when they send SMS/Fax to head office about repayment of the loan amount.
- To bank can increase various facilities to motivate the employees in the department.
- The bank should organize some training programs to increase the efficiency of employees in the reconciliation department.
Though BRAC Bank Ltd is the first growth SME bank in banking sector, it has good future. This bank is trying to show some different example in banking section. BBL is performing SME Banking and also performing modern banking system. So this bank is getting extra priority form the people who want to do business with modern bank.
The purpose of this report was to an analysis of reconciliation process of BRAC Bank Limited” a study on head office.
From the analysis I think reconciliation is must be needed to find the mismatch on behave of SME loan.
· E-learning manual and FINACLE Core Banking System Software
· Annual Report.
· Manual of Credit Approval and Monitoring policies, BRAC Bank Limited, Volume 2, No. 1.
· Other short notes provided by the bank in different times.