SME Banking In Bangladesh: A Study on Brac Bank Limited

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SME Banking In Bangladesh: A Study on Brac Bank Limited

Company Profile

Short History

Brac Bank Ltd (BBL) is a banking company incorporated in the People’s Republic of Bangladesh with limited liability. It was set up at the instance of the Government in 1976 as a joint venture between the Government of Bangladesh and sponsors in the private sector with the objective of working as a finance company within the country and setting up joint venture banks/financial institutions abroad.

Bank s Mission

Bank’s Mission is to provide service to its clients with the help of a skilled and dedicated workforce whose creative talents, innovative actions and competitive edge make its position unique in giving quality service to all institutions and individuals that it cares for. The bank is committed to the welfare and economic prosperity of the people and the community, for drive from inspiration and drive for onward progress to prosperity.

BBL wants to be the leader among banks in Bangladesh and make its indelible mark as an active partner in regional banking operating beyond the national boundary. In an intensely competitive and complex financial and business environment, BBL particularly focus on growth and profitability of all concerned.

Milestones in the Development of BBL

1976 – Established as an Investment & Finance Company under arrangement of joint venture with the Govt. of Bangladesh.

1980 – Commenced operation in Foreign Exchange Business in a limited scale.

1982 – Obtained permission from the Govt. to operate as a commercial Bank.

1983 – Setup its first overseas joint venture (Bank of Maldives) on the Republic of Maldives.

– Commenced operation as a full-fledged commercial Bank in Bangladesh.

1985 – Set up a joint venture Exchange Company in the Sultanate of Oman.

1987 – Set u\\p its first overseas branch in Pakistan at Karachi.

1993 – Set up its second overseas branch in Pakistan at Lahore.

1994 – Set u\p its first joint venture in Nepal for banking operation.

1999 – Set \\up its second joint venture in Nepal tor lease financing.

2003 – Ban\k celebrated its 20th founding anniversary.

– Overseas Branches in Pakistan amalgamated with NDLC, to establish a joint venture Ban\k: NDLC-BBL.

Management

The Bank has in its Management a combination of highly skilled and eminent bankers of the country of varied experience and expertise successfully. The thirteen members of the Board of Directors are responsible for the strategic planning and overall policy guidelines of the Bank. Further, there is an Executive Committee of the Board to dispose of urgent business proposals. Besides, there is an Audit Committee in the Board to oversee compliance of major regulatory and operational issues.

The CEO and Managing Director, Deputy Managing Director and Head of Divisions are responsible for achieving business goals and overseeing the day to day operation. The CEO and Managing Director are assisted by a Senior Management Group consisting of Deputy Managing Director and Head of Divisions who supervise operation of various Divisions centaury and co-ordinates operation of branches. Key issues are managed by a Management Committee headed by the CEO and Managing Director. This facilitates rapid ‘decisions. There is an Asset Liability Committee comprising member of the Senior Executives headed by CEO and Managing Director to look into all operational functions and Risk Management of the Bank.

Network

BBL always considers client service the most vital factor to face ever increasing competition and challenge in the Banking sector and as such places on it utmost importance. With that end in view the Bank continued its SMEized approach with speed, precision and accuracy. Presently the number of branches stands at 65 covering almost all the important places of the country, 16 in Nepal and 8 affiliated Branches out side the country. Moreover world – wide international correspondents’ network of the Bank has been continuously expanding covering the important countries in all the continents of the world. Besides, the Bank has arrangement with a number of Exchange house at Singapore, U.A.E. Oman, Qatar and Kuwait to facilitate remittances from expatriate Bangladeshi citizens.

Capital and Reserve

During the year of 2008, the authorized capital of the bank remained unchanged at Tk 500 million. The Paid-up capital stood at Tk. 406.44 million. The reserve fund of the Bank increased by Tk. 64.39 million from Tk 737.19 million in 2007 as against Tk 672.80 million in the previous year.

Deposit

The deposit of the bank registered an increase of 9.00 per cent in the year of 2005. At the close of 2004, total deposits stood at Tk 22505.17 million as against Tk 20774.49 million in the previous year.

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Credit

The bank continued its participation in different credit programs for financing new industrial projects, working capital, trade finance international trade etc. The sector wise loan disbursement is shown below:

Table 2: Sector Wise Credit

Sector	Tk in Million
Continuous Loan	6873.65
Demand Loan	749.64
Term Loan (UP to 5 years)	1890.1
Term Loan (Over 5 years)	1323.28
Staff Loan	105.31
Total	10941.98

Foreign Trade

The bank continued its role as a facilitator in promoting countries export business. The export business handled by the bank marked an impressive 12 percent growth during 2008 recoding an increase of Tk. 4185 million from Tk. 29513.90 to Tk. 3369827 million in 2007.

Human Resource Development

Human Resources Development is focused on recruitment and in-house training for both on the job and off the job Bank staff members through the Bank Academy. BBL Academy — the oldest institution in the private sector — was conceived of as an in-house training center to take care of the training needs of the Bank internally. Academy is fully equipped with a professional library, modem training aids and professional faculty. Library has about 4941 books on banking, economics, accounting, management, marketing and other related subjects. Main training activities consist of in-depth foundation programs for entry level Management Trainees. Specialized training programs in the areas like general banking, advance, foreign exchange, marketing and accounts etc. are also organized by the Academy depending on need. Frequently outreach programs are organized to meet demand for new and specialized skills.

During its 23 years of existence, Academy not only conducted courses, workshops and seminars as required by the Bank, but it also organized training programs for the Bank of Maldives, Nepal Bangladesh Bank Limited and Oman International Exchange LLC. In addition, Academy has also the credit of organizing system of Bank of Maldives. In addition to conducting courses internally, The Academy also selects candidates for nomination to various courses conducted by distinguished training organizations in the country including Bangladesh Bank Training Academy and Bangladesh Institute of Bank Management. The Academy also re-designs its courses, programs etc, regularly to need the requirement of new skills arising out of various directives, guidelines of the Central Bank and significant changes in the banking sector from time to time.

Performance

At the end of December 2005 the Authorized Capital, Paid -up Capital and Reserve Fund of BBL was 500 million; 406 million and 737 million respectively. In the year 2004 the advance of the bank was Tk.21280.28 million. Following table and figures will show us the scenario of BBL from 2003 to December 2005.

Table: Over View of the Bank in Recent Years

Sl.	Description	2009		2008		2007
		Taka	USD	Taka	USD	Taka	USD
1	Authorized Capital	500.00	7.14	500.00	8.14	500.00	8.47
2	Paid up Capital	406.44	5.80	406.39	6.61	406.39	6.89
3	Tier-I Capital	1269.18	18.13	1186.93	19.32	1,115.02	18.90
4	Tier-II Capital	485.23	6.93	421.87	6.87	421.87	7.15
5	Total Capital	1754.41	25.06	1608.80	26.18	1536.89	26.05
6	Total Deposit	22505.17	321.50	20774.49	338.07	19799.33	335.58
7	Total Loans & Advances	21694.90	309.92	21280.88	346.31	20450.90	346.63
8	Investment	2971.47	42.44	2666.29	43.39	2406.27	40.78
9	Total Asset	30201.05	431.44	28575.83	465.03	27101.27	459.34
10	Import Business	26929.45	408.94	24810.12	403.74	25412.20	430.72
11	Export Business	33698.27	528.61	29513.90	480.29	27557.30	467.07
12	Remittance	4744.94	89.03	4297.79	69.94	3344.00	56.68
13	Guarantee Business	2481.40	35.45	550.56	8.96	2206.43	37.40
14	Total Income	2672.20	38.17	2687.02	43.73	2543.83	43.12
15	Total Expenditure	2122.66	30.32	1986.77	32.33	1921.75	32.57
16	Operating Profit	549.54	7.85	700.25	11.40	622.08	10.54
17	Credit Deposit Ratio	96.40%	–	102.44%		103.29%	–
18	Return on Asset	0.27%	–	0.25%		0.24%	–
19	Return on Equity	6.04%	–	5.92%		5.63%	–

General Banking

Genera! Banking is the starting point of all the banking operations. it is the department which provides day to day services to the customers. Every day it receives deposits from the customers and meets their demand for cash by honoring cheques. It opens new accounts, remits funds, issues demand draft and pay orders etc. Since bank is confined to provide services every day, general banking is also known as SME banking. General banking is the core department of a commercial bank. General banking department is that department which is mostly exposed to the maximum number of customer. Motijheel Corporate Branch of BBL has all the required sections of general banking and these sections are run by manpower with nigh quality banking knowledge.

1. Sections of General Banking Department

General banking department comprises of the following sections:

1. Cash section
2. Account opening section
3. Dispatch section
4. Remittance section
5. Deposit section
6. Accounts section

2. Functions of General Banking Department

Functions of different sections of general banking department are enumerated below:

1. Cash Section

Cash section deals with all types of negotiable instruments, cash and other instrument and treated as a sensitive section of the bank. It is the most vital and sensitive organ of the branch as j deals with all kinds of cash transactions. This section starts the day with cash in vault. Each day some cash that is opening cash balance are transferred to the cash officers from the cash vault. Net figure of this cash receipts and payments are added to the opening cash balance. This figure is called closing balance. This dosing balance is then added to the vault. This is the final case balance figure for the bank at the end of any particular day.

The following things are done in the cash section:

• Cash payment is made only against cheque
• It makes payment only against its printed valid cheque
• It receives deposits from the depositors in form of cash
• It collects money only its receipts forms

b. Account Opening Section

All banks are operated on the basis of bank-customer relationship and this relationship is established through opening an account. Opening account is the contract of customer with banks, which is enforceable by law. Now a day all new & existing account holders have to fill up a Know Your Customer (KYC) Form in addition with other required papers.

i. Account Opening Procedure

Any person of sound mind can open account in any bank. The person who is interested in opening of any type account goes to the bank and expresses himself/herself to open an account. Then he/she is supplied an account opening form and a specimen signature card. Before opening an account the following formalities must be completed by the customer.

1. The form is filled up by the applicant himself/herself.
2. Introduction by a valued account holder.
3. Two copies of photographs of account holder attested by the introducer.
4. One copy of photograph of the nominee attested by the account holder.
5. National ID
6. TIN (if necessary)

Account opening procedure is shown in the following flow chart

Figure-St Account opening procedure

Account is opened

The authorized officer Scrutinizes the introduction and Examines the documents

Source: Primary

ii. Relevant Documents

Types of attached documents usually vary with the nature of the A/Cs being opened. Following are the list of documents that should be enclosed with the account opening form.

In case of club

1. Certified copy of resolution
2. Certified copy of by-laws and constitutions
3. Copy of Government approval (if registered)

In case of co-operative society

• Copy of by-laws duly certified by the co-operative officer
• Certified copy of resolution
• Certified copy of certificate of registration issued by the Registrar.
• In case of minor
• Affix the word after the title of the A/C
• Special instruction regarding operation of NC
• The form is to be filled up and signed by legal guardian

In case of Public limited Company

• Certified copy of the memorandum and articles of the company
• Certificate of incorporation of the company
• Certificate from registrar of the joint stock companies that the company is entitled to commence business
• Copy of the latest balance sheet
• Certified copy of resolution
• List of Directors with address
• Authorized signature

iii Issuance of Cheque Book

An account holder can get a fresh cheque book only against requisition on the prescribed requisition slip attached with the cheque book issued earlier, after proper verification of the signature of the account holder. A new cheque book should be delivered to the account holder or his duly authorized representatives.

2. Dispatch Section

Dispatch section is fully controlled by the Establishment Department. Any kind of letter, DO, IT, MI, cheque and telex are also transferred and received through this section. There are two types of letter they continuously received. These are as follows:

Inward letter

Outward letter

At first recording is required whether it is inward/outward registered/unregistered letters. Then letters are disbursed to their respective destination. inward letters are firstly segmented according to their different sections and thereafter an entry is given to the Inward Register Book. For local letters which area is not far from the branch are delivered through messengers. In such

Cases, firstly the entry is to be made in Dispatch Register Book and then a peon is to be maintained which contains only dispatch number and receiver’s address.’ For this, the messenger will get TK.20 as a conveyance

d. Remittance Section

Remittance means transferring funds from one place to another place. Banks extend these facilities to its customers by means of receiving money from one branch of the bank and making arrangement for payment to another branch within the country. The remittance facilities of a commercial bank enable its customers to avoid risk arising out of theft or loss in carrying cash money from one place to another or making payment to someone in another place. Banks take the risk and ensure payment to the beneficiary by charging the customer a commission.

Considering the urgency and nature of transaction, the modes of bank remittances may be categorized as under:

• Demand Draft (DD)
• Telegraphic Transfer (TI)
• Pay Order (P0)

i. Demand Draft (DD)

Demand Draft (DD) is a negotiable instrument, payable on issued by the branch

of a bank containing an order to another branch of the same bank to pay a certain sum of money to a certain person or order on demand. It is basically used for transferring and payment of money. The difference between PC and OD is in terms of place only. P0 used for remitting money within the city whereas DD is used for within the country. The commission is minimum TK.25.00 or TK.1 .50 per thousand whichever is greater.

ii. Issuance of DD

When a person wants to purchase a DD from a bank, the bank confirms about the existence of the branch where the DD is to be issued or drawn as asked for by the applicant.

Then the party submits application duly filled up on bank’s prescribed form. Thereafter, the applicant will be asked to deposit the amount mentioned in the D along with commission. On receipt of cash, a voucher is passed and scrolled by at least two officers. Then the DD is issued and recorded in the DD issue Register. Test number is affixed on both DD and Advice as per rule.

iii. Payment of DD

The holder of the DD submits it to the paying bank for payment and in genera!, banks make payments after it receives the corresponding advice from the issuing bank. On receipt of the DD advices from different branches, the paying banker will verify the genuineness of the advices by way of verifying test numbers and signature.

iv. Cancellation of DD

The purchaser of DD can cancel it by submitting an application stating that the DD is no longer required. In this case, the issuing branch verifies the signature and the purchaser has to pay TI( 40.00 as cancellation charge.

v. Issuing of Duplicate DD

If the DD is lost, the purchaser may ask the issuing branch to issue a duplicate DD. But before issuing a duplicate 00, the branch observes the following information:

Verify purchasers signature on the DD application slip

Take indemnity bond from purchaser

Clearance from paying branch whether the DD is already paid or not to be obtained

DD cancellation advice to be sent to the paying branch

Lastly, the duplicate DD is issued and the word “DUPLICATE” in red ink is stamped in the front side of the DD block.

vi. Telegraphic Transfer (TT)

Sometimes the remitter requires the funds immediately. In this case, the banker is requested to remit the funds telegraphically. Different modes are telegram, telephone, telex, fax

etc Among those, telegraphic transfer is the most rapid and convenient but expensive method. TI is issued against cash, cheque and letter of instruction.

vii. Issuance of TT

Procedures followed by BBL Naya Paltan Branch regarding issuing of TT are stated below:

• The customer deposits money with BBL Naya Paltan Branch to sent
• The customer obtains a cash memo containing TI serial Number
• Ti serial Number notifying party name is mentioned in the telex message
• The telex department confirms transaction of the telex

viii. Payment of TT

After receiving the telex, it is decoded at first then the TI serial number and test number are verified. TK.50.00 is taken as postal & Telex charge. The minimum commission is TK.50.00 or 0.15% of the amount whichever is higher.

ix. Pay Order (PO)

PO is an instrument that contains an order for payment to the payee only in case of local payment. P0 s in the form of receipts and issued by joint signature of two officials. It ensures payment to the payee as the money deposited by the purchaser of P0 is kept in the bank’s own NC named P0 NC. It is not transferable and therefore, it can only be paid to the payee, the payee’s banker or the person holding the letter of authority from the payee.

x. Issuance of PO

Procedures followed by BBL Naya Paltan Branch regarding issuing of PO are stated below:

Deposit money by the customer along with application form

Give necessary entry in the bills payable Register where payee’s name, date, P0 No. etc are mentioned

After scrutinizing and approval of the instrument by the authority, it is delivered to customer

Signature of the customer is taken on the counter part

xi. Reasons for issuing PO

• Remittance purpose
• Advice to pay
• Payment against bill submitted to the bank
• xii. Payment of PO

As the PO issued by the bank is crossed one it is not paid over the counter. On the contrary the amount is transferred to the payee’s account. To transfer the amount the payee must duly stamp the PO. The PO can only be encashed through the branch that has issued the instrument.

xiii. Cancellation of PO

The following procedures are followed to refund pay order by cancellation:

• Submit written request to refund the Pa attaching therewith the original PC
• Verify purchasers signature with the original application form on record
• Managers prior permission is required before refunding the amount of PO
• PO should be affixed with a stamp cancelled’ under proper authentication
• No charge is created for cancellation Record the cancelled PC in the PO issue Register

e. Deposit Section

Deposits are the life-blood of a commercial bank. Without deposits there is no business for the commercial bank. Accepting deposits is one of the two classic functions of commercial banks. Bank deposits can be broadly classified as follows:

I. Demand Deposit

These deposits can be withdrawn without any prior notice. IF1C Bank Ltd. accepts demand deposits through the opening of-

1. Current Account
2. Savings Account

ii. Lime Deposit

The deposit which is payable at a fixed date or after a period of notice is a time deposit. BBL accepts time deposits through the opening of-

Fixed Deposit Receipt (FDR)

Fixed deposits receipts are the deposits in which an amount of cash is deposited in bank for a fixed period specified in advance. Normally, the money on a fixed deposit is not repayable before the expiry of a fixed period. In case of fixed deposits receipts, the bank needs not to hold a cash reserve to repay money to the customer.

Short Term Deposit (STD)

Short term deposits are deposits which as deposits for at least 7 days to get interest. The interest offered for STD is less than that of savings account.

Pension Savings Scheme (PSS)

Empower for a secure and prosperous future with BBL PSS. Partnership for a prosperous and secure future.

Features:

Under this Scheme Customer can open a deposit scheme for Tk.500, Tk.i000, 11c2000 and TK.500C) per month tor 3 or 5 years whichever suits you.

Customer can make the deposit within 10th of each month (In case of holiday the next working day).

Customer can get Loan up to 80% of the deposited amount

Customer can receive the entire deposit amount with interest at one go or receive a pension on a monthly basis at a desirable amount of your monthly installments.

For a Table of Deposit Scheme and after Maturity Payable Amount is given below:

Monthly Installment 3 Years Scheme 5 Years Scheme

Tk.500 Tk.20322 Tk.36266

Tk.1000 1k 40645 Tk12532

Tk.2000 Tk.61 290 Tk.145064

Tk5000 Tk.203225 Tk362661

Extra Benefits:

If anyone fails to deposit monthly installments continuously for 3 consecutive months his/her account will become automatically inoperative. But, it can be revalidated on the 4th month on receiving all outstanding installments along with a written application. He/She will be given two (2) opportunities during the 3 years scheme and three (3) opportunities during the 5 years scheme to avail this option.

Customer can pay installments by transferring from your CD/SB account maintained with the concerned branch.

Installments may also be paid in advance.

Customer can dose the account at any time by a written application.

Monthly installments to P55 will quality as investments in yearly Income Tax return

f. Accounts Section

Accounts section maintains all records of transactions and all types of statement. At the end of transaction hour all concerned sections send vouchers of transaction to this section. The major functions of this section are stated below:

• It records the profit & loss NC and statement of asset & liabilities
• It prepares daily, weekly, monthly, half yearly and yearly fund position
• It records all transactions in the cash book
• It prepares monthly salary statement, provident fund statement and administrative expenditure statement

Foreign Exchange Department

The foreign exchange department deals with import, export, foreign remittance and post import financing. It facilitates international trade through its various modes of services. It bridges between and exporters. It the bank is authorized dealer in foreign exchange market, it can remit foreign exchange from local country to foreign country. This department mainly deals with foreign currency.

Banks play a vital role by minimizing the risk of two parties, namely buyer and salient. In fact without the help of banks we can not think about a congenial international trade environment. Now the question comes how banks help international trade. We know that in a local trade there is a chance to know each other. But in international trade the involved parties stay two distant places.

In case of international trade, for a buyer the following risks are involves:

• Risk of non-delivery of goods
• Risk of receiving sub standard goods
• Risk of fraud in goods

Again for a seller the following risk is involved:

The risk of non-payment

Some in Terms Regarding Foreign Exchange

Every business has its own terminology. Similarly international trade has some terms also. The following terms are normally used in foreign exchange department

a. Letter of Credit (L/C)

Letter of credit (L/C) is a payment guarantee to the seller by the buyer’s bank. It is in fact, a credit contract whereby the buyer’s bank is committed to place an agreed amount of money at the seller’s disposal under some conditions.

b. Clean Credit

If the conditions of the credit do not require for presentation of specified documents, it is called clean credit.

c. Documentary Credit

If the presentation of specified document is obligatory, the credit is called a documentary credit Documentary credits are issued on behalf of the buyer to cover situation of performance, Le, the issuing bank agrees to make payment to the beneficiary once he surrenders the requisite complying document.

d. Revocable Credit

In this case the issuing bank can cancel the credit at any time without giving prior notice to the beneficiary. Here the bank enjoys liberty.

e. Irrevocable Credit

In this case the issuing bank can not cancel, amend or modify the credit at any way.

f. Beneficiary

Beneficiary is the party in whose favor the letter of credit is issued. He/she is the seller or buyer.

g. Applicant

The person who requests the bank to issue L/C can be termed as applicant. The applicant bank open LIC in line with the terms and conditions of sales between seller and buyer.

h. Advising Bank

Advising bank or the notifying bank advises the credit to the beneficiary thereby authenticating the genuineness of the beneficiary.

i. Issuing Bank

The issuing bank is one, which issues the credit It undertakes to make payments provided the terms and conditions of the credit have been complied with. Especially the issuing bank should satisfy himself on the credit worthiness of the applicant.

j. Confirming Bank

The bank which adds its guarantee to the credit opened by another bank and undertakes the responsibility of payment under the credit in addition to that of the issuing bank.

k. Negotiating Bank

The bank which is nominated or authorized by the issuing bank to pay, to incur deferred payment liability, to accept draft or to negotiate the credit. Normally negotiating bank is the banker of the beneficiary.

I. Reimbursing Bank

The bank which is authorized to honor the reimbursement claims in settlement. it is normally the bank with which the issuing bank has account from which payment is to be made.

Functions of Foreign Exchange Department

The foreign exchange department is mainly divided into three wings in accordance with major activities. The wings are shown in the following diagram:

Figure-6: Different sections of foreign exchange department

Source: Primary

a. Import Section

This section helps LIC opening and post import financing. In case of import, the importers are asked by their exporters to open UC so that their payment against goods is ensured. Hence, import of merchandise essentially involves two things such as bringing of goods physically into the country and remittance of foreign exchange towards the cost of the merchandise and services connected with its dispatch to the importer.

i. L/C Opening Process

At first, the importer will request banker to open UC along with the following documents.

• L/C application and agreement form duly signed by the importer
• Indent or pro-forma invoice
• Import registration certificate
• Tax payers identification number
• L/C authorization form properly filled in and signed by the importer
• One set of import permit form
• Insurance cover note with money receipt
• Membership certificate of chamber of commerce
• Vat registration certificate
• A bank account in the BBL.

After receiving the L/C authorization form and other documents, the branch officials carefully scrutinize the documents and lodge the same in their respective books and duly verify the signature of the importer put on the LIC authorization form.

ii Verification of the Application

The branch officials verify all the information given in the application carefully with special emphasis on the following points:

• Whether the required columns of the application form are duly filled in prescribed manners
• Whether the LJC application is stamped properly
• Whether the items to be imported are e or not
• Whether the terms and conditions stipulated in the L/C form are consistent with the Bangladesh Bank’s foreign exchange guidelines
• Survey report or certificate in case of old machinery

iii. Sanction of L/C

The concerned officer verifies the documents and presents the case with a proposal for approval of the competent authority. The authority examines the documents, terms and conditions, and makes correction if necessary and then approves the opening of L/C. After obtaining the approval of the brandi incumbent authority to L/C proposal, the respective officer will pass the vouchers. Thereby, particulars of L/C are entered in the L/C opening register and get L/C number. Then the transmission of L/C is done through airmail to the advising bank.

iv. Advising an L/C

Generally, the advising bank is situated in the beneficiary county. It becomes customary to advice a documentary credit to the beneficiary through an advising bank. The advising bank verifies the signature or test the officers of the issuing bank while advising and complete this phase.

v. Import Procedure

The import procedures are as follows:

• The buyer and the seller complete a sales contract provided for payment by documentary credit.
• The buyer instructs his bank to issue a credit in favor of the seller.
• The issuing bank then sends message to another bank.
• The advising bank informs the seller through his bank that the credit has been issued.
• The seller receives the credit and he informs the buyer that he is in the position to lead the goods and dispatch.
• The seller then sends the documents evidencing the shipment to the bank where the credit is available.

The bank checks the documents against the credit. If they meet the requirements of the credit, the bank then makes payment, accepts or negotiates according to the terms of the credit The bank, if other than the issuing bank, sends the documents to the issuing bank. The issuing bank checks the documents, if they satisfy the terms on condition of the credit, the bank release them to the buyer upon payment of the amount due or other terms agreed between importer and the issuing bank. The buyer sends transport documents to the carrier who will then proceed to deliver the goods.

b. Export Section

This section deals with export trade financing. Readymade textile garments, jute, jute-made products, frozen shrimps and tea are the main goods that Bangladeshi exporter exports to foreign countries. Garments sector is the largest sector that exports the lion share of the country export. Most of the exporters who export through BBL Motijheel Corporate Branch are readymade garment exporters. They open L/C in this branch to export their goods, which they open against the import L/C opened by their foreign importers.

i. Export Procedure

The export trade of the country is regulated by the import and export act, 1950. There are a number of formalities that an exporter has to fulfill before and after shipment of goods. These formalities are enumerated as follows:

The exports from Bangladesh are subject to export trade control exercised by the Ministry of Commerce through Chief Controller of Import & Export (CCI & E). No exporter is allowed to export any commodity permissible for export from Bangladesh unless he is registered with CCI&E and holds valid export registration certificate (ERC). The ERC is required to be renewed every year. The ERC number is to be incorporated on export (EXP) forms and other documents connected with exports.

After having the registration, the exporter applies for getting EXP form along with trade license, ERC and certificate from the CCI&E.

Upon registration, the exporter may proceed to secure the export order. This can be done by contracting the buyers directly through correspondence.

During making contract the exporter has to be mentioned description, quantify & price of the goods and shipment, insurance, inspection, attribution etc.

After making the deal and on having the I/c opened in his favor, the exporter starts for procuring or manufacturing the contracted goods.

If the goods are raw-jute or jute-made materials then registration of sale certificate is required to export that.

After completing the above formalities the goods are sent for shipment

c. Remittance Section

Remittance means transferring funds from one place to another place. Banks extend these facilities to its customers by means of receiving money from one branch of the bank arid making arrangement for payment to another branch within the country. The remittance facilities of a commercial bank enable its customers to avoid risk arising out of theft or loss in carrying cash money from one place to another or making payment to someone in another place. Banks take the risk and ensure payment to the beneficiary by charging the customer a commission.

Modes of Payment of Export

The payment of export bills is made in the following ways:

a. Sight Payment

When the payment is made immediately after presentation of documents is called payment at sight.

b. Deferred Payment

If the payment is made on a specified future date or event after presentation of the export docs then it is called as deferred payments. Deferred payments may be at rate of 30-60- go-I 80-360 days.

3. Acceptance Credit

If exporter presents a bill of exchange payable to him and drawn at the agreed tenor on the bank that is to be accepted. The exporter can then represent it for payment on maturity. Alternatively he can discount it in order to obtain immediate payment.

d. Negotiation Credit

If the exporter has to present a boil of exchange payable to him in addition to other docs that the bank negotiates then it is called negotiation credit.

FUNCTIONAL DIVISIONS OF BBL.

The BBL has a centralized banking structure through online banking system that resembles the ABN·AMRO Model. BBL consisted of four major divisions namely-

Retail Banking

SME Division

Corporate Banking

Treasury Division.

Other important division are Credit Administration, Loan Administration, Trade Fin, IT, HRM, CCU, Internal Control etc, which work to support the major business divisions.

Retail Banking:

Retail Banking is known as general banking where the individual customers get services time to time from the local branches of the larger commercial banks. In BBL retail section has been divided into two parts –

Distribution – Serve the acquired customers

Sales – Business acquisition.

They both are interdependent and work closely with each other. Retail offers different types of competitive banking products to the customers. The retail division of the BBL also offers some special types of deposits and loan scheme for the customer attention.

Retail Deposit Products:

Current Account.

Saving Account (Maximize and Normal Saving Account).

Deposit Premium Scheme (DPS).

Short Term Deposit (STD).

FDR.

Retail Loan Products:

• Jibondhara Loan
• Utsab Loan
• Executive Loan
• Education Loan
• Fast Loan
• Travel Loan
• Home Loan
• Auto Loan

SME Division:

The biggest operational division of BBL is the SME (Small & Medium Enterprise) Division. SME is directly related to business of the bank. BBL extends loans to potential small and medium trading, manufacturing and service enterprises. This loan is able to provide quick and quality banking services to targeted business at any places of the country. Potential women entrepreneurs will also get the facilities of SME loan; this initiation is to play a role in the socio-economic development of the country by expansion of business as well as creation of employment. BBL was titled to be the fastest growing bank in 2008 & 2009, and it had a profit of 250 corer taka. The profitability of the bank came mostly from the SME sector. SME division is enriched with more than 700 staffs and it has almost 80 unit offices all over the country.

STRUCTURE of SME division:

Field Level: In the field level there are three types of designated BBL staff operates. They are Relationship Manager (RM), Relationship Officer (RO) and Assistant Relationship Officer (ARO).

CORPORATE Division:

Like SME, corporate department has also two different wings – Corporate Banking division & Cash Management.

Corporate Banking Division:

Corporate Banking is a specialized area of BBL, which addresses the diverse financial needs of Corporate Clients.

This division exists to provide banking services and financial partnership with local and foreign business houses (Public and Private Limited Companies), NGO’s, trading houses, joint ventures and various government bodies/corporations etc. As the financial partner of choice for the corporate sector, BBL wants to be distinguished by its:

Quality of service

• Value of innovative solutions
• Level of trust with clients
• Customer knowledge

Corporate clients can access a wide range of financial services offered by corporate banking division including:

• Debt Capital
• Equity Capital
• Ongoing relation support
• Financial Markets

Products: BBL provides a comprehensive range of innovative corporate financial solutions tailored to suit each company’s needs. This range includes both funded and non-funded facilities. Following are some of the products that BBL offers to its clients:

• Corporate Finance
• Loan Syndication
• Project Finance: Short and Medium term
• Finance/Credit Extension
• Overdrafts
• Demand Finance
• Working Capital Finance
• Receivable Discounting
• Pre and Post Export Financing
• Short-term loan
• Trade
• Letter of credit.
• Guarantee: Performance, Security, Advance Payment etc.
• Lease financing.

Target Market:

Pharmaceuticals, Toiletries, Chemicals and Pesticides

Power Generation, oil exploration, Industrial and household gases (Liquid, Petroleum Gases etc.)

Edible oil, Bulk Trading –Essential Commodities, Industrial Raw Materials, Agricultural Inputs, Cement.

Garments, Textiles and related backward linkages industries including spinning, Knitting, Yarn, Garment accessories etc.

Food Processing and Beverage Industries.

Cable and Cable wire, Information Technology.

Leasing Companies/Non Banking Financial Institutions.

Health service Industry, Non Governmental Organizations.

Importers/dealers of machinery, Industrial, Electrical equipment

Education Institutions, Bone china, Ceramics, Melamine, plastic products.

Manufacturing and Trading of Consumer Durables, Telecommunication, and Contractor Finance.

Ship Breaking, Re-rolling Corrugated Iron (CI) Sheet Mfg and related business.

Air Lines, Shipping Lines, Freight Forwarders, Testing Inspection agencies, Footwear and Leather.

Target Customers Group:

Leading Domestic Corporate and Trading Houses.

Local medium and large corporate.

Educational Institutions.

TRS division also has Priority Service System for their Corporate Customer, which manages their business finance and cash resources very conveniently. Priority Service Banking includes the following special services:

Pick-up & Delivery Services

Auto fax Report

Corporate Help Line

Inward Remittance Information

Express Payment

Liquidity, this division borrows money from other financial institution on the same basis. On the other hand the back office keeps records of the fund position of the bank.

Key Aspects Related to the Marketing of SME Products in BBL

Demand Creation:

The SME division of BBL basically provides micro credit loans to small and medium enterprises. Because of its unique nature, the demand for SME loans is different in nature to the demand for corporate or SME loans. A huge portion of the target market has traditionally been neglected by the banking sector and hence, is ignorant about banking activities. Thus, awareness building has been, and still is, a vital activity of the demand management process of SME loans. The process flow of demand creation is as follows:

The RM plays a vital role in all the stages of demand creation apart from market identification and product development. They provide door-to-door services for the clients and at the same time are always in search for potential new clients. Because clients are ignorant about banking products that may satisfy their needs, the RM identify their needs, evaluate their requirements and determine which products are most suitable for them.

The major security of the SME products is building relationship between clients and banks. Demand basically comes from two groups: new customers and repeat customers. Because banks are facing new marketing realities like changing demographics, slow growth economy, more sophisticated competitors etc., BBL cannot afford to lose clients. The key to customer retention is superior value and satisfaction. As BBL recognizes this fact, repeat borrowers of SME products enjoy lots of extra benefits.

Market Segmentation:

The market consists of many types of customers, products and needs and the marketer has to determine which segments offer the best opportunity for achieving company objectives. BBL segments the market for banking products into three categories based on the nature of the consumer:

Table : Market Segmentation of BBL
Segment	Target Market
Corporate	Enterprises with loan requirement of Taka 600 lacs or more
Small & Medium Enterprise	Enterprises with loan requirement of Taka 5-500 lacs
Retail	Individuals with loan requirements for consumer purposes of Taka 50000thousand-10 lacs

By segmenting its consumers into these categories, BBL is trying to serve niche markets where there is ample opportunity for growth.

Within SME, the market is further segmented on the basis of the nature of the business as follows:

Target Customers

To succeed in today’s competitive marketplace, organizations must be able to hold on to its customers by delivering greater value. In order to do this, an organization must be able to identify the customers who would be benefited from their products. BBL Bank has targeted the small and medium enterprises that have small loan requirements as the target consumers of their SME products. However, BBL does not finance business startups. The business has to be at least two years old to avail the SME loan facilities offered by BBL. Most of such businesses are sole proprietorships. There are some partnerships as

Well, but limited companies are rarely seen in this category. The survey that I had conducted brought up the following results as common characteristics of the respondents:

The mean age of the respondents was 38.71 years and mode was 33 years.

71.50% of the respondents did not pursue education after completing their HSC. 44.50% of the respondents did not complete HSC.

The average working capital requirement of the respondents per month was almost Tk. 28,000.

Thus the target customers can be classified as the entrepreneurs who have little or no formal education, between the age group of 30-40 years and having working capital requirement of around Tk. 30,000.

Market Positioning:

Every product must have a unique proposition that will enable it to fulfill the customers’ needs. In case of loans, there are four factors that might influence the clients’ decisions regarding the selection of a loan from a bank:

Interest Rate

Collateral

Time Involved in Acquiring the Loan

Repayment Scheme and Tenure

Not all factors influence every segment of the market. In the survey conducted, the following findings were revealed when the respondents were asked about their prime reason for obtaining SME loans from BBL:

Developing The Marketing Mix for SME Loans:

Product:

In order to serve the market more efficiently, BBL has designed various products that will be able to satisfy the needs of the clients. The summary of all the SME loan products of BBL can be found in Appendix III. However, a few important factors are worth mentioning here.