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is new challenge to every bank. The
success or failure of banks greatly depends on SME loan. On the
other hand, credit (whatever general or SME) perchance falls in
hands of defaulter imposing colossal stress on money supply with many other
concomitant side effects.

Against such a backdrop, banks will
have to strike a delicate balance on the seesaw, so smooth credit circulation
in economy can be ensured in order that rural and urban development work does
not suffer, and at the same time credit must not get into a noxious nexus.

Every bank maintains a credit system
to manage its credit. Compliance with some standards in credit management has
been critical for banks to avoid both pecuniary as well as regulatory penalty.
This paper attempts to impart insight on the credit management, especially on SME
of banks. It shows fundamental credit risk policies and challenges to SME
credit. It also shows the guidelines that should govern the implementation of
more detailed lending procedures and risk grading systems so that,
subsequently, banks can establish the balance between healthy flows of credit
in economy simultaneously with saving itself from the loss of bad debt. As well
as bank can maintain proper SME lending for development of rural
and urban area.

concept is explored at length due to
its far-reaching contribution in our economy particularly in elimination of
penury. Then it features the risk of credit for banks, Bangladesh Bank’s
prescriptions on its handling and method of risk measurement and loan
classification. With a brief introduction to BRAC Bank Limited, the
report details thoroughly on the SME credit appraisal, processing
and disbursement. These are very vital for vigilance yet vulnerable to
overlook. The paper ends up with recommendations of do’s and don’ts.

1.2 Statement of the
Research Problem:

A bank’s existence depends mainly on
SME loan. BRAC BANK is one of the leading banks for loan lending. But the bank
faces a lot of problems about SME loan, which are mention below:

1) Before lending the lacking of
properly analyzes the business risk of the borrowers and bank can not forecast
whether there the business will succeed or fail in broad investigation.

2) Bank is not performing well in good
loan project selection, because of pressure from lobbing group.

3) In most of the cases, bank fails to
determine the value of security against the loan.

4) Sometimes delay in disbursement

5) Negative attitude of borrowers to
repay the loan.

1.3 Objectives of the Study

The sensible motives of
preparing the report on SME Banking are to depict the overall
scenario of banking sector at a glance with the light of BRAC Bank. The prime objectives of this study are to analysis SME
Banking in Bangladesh on perspective of BRAC Bank for building Strong image of SME.

Specific Objectives:

explain the unique brand image of SME.

represent the unique features provided by BRAC Bank to its SME
clients and how they perceived those.

find out the factors on which the customers’ satisfaction level depends.

suggest ways of improving the service standard and satisfaction level of the

show the real condition of BRAC Bank Limited in terms of SME
credit in Bangladesh.

appraise the competitive position of BRAC Bank Limited.

create myself as a young Entrepreneur to become a future leader of SME

identify problems and potentials and provide some suggestions that would help
BRAC Bank Limited for more progress on SME credit.

1.4 Methodology of the study

Collecting data directly from the practical field is called
primary source of data. In this case samples were picked up on a judgmental
basis. The methods that were used to collect the primary data are as follows:

to face conversations with the employees and opportunities were given by the
management to work in relevant fields in BBL.

personal interviewing and interacting customers at BBL and officials of other
competitive banks.

various organizational procedures.

unstructured papers and weekly report of the bank

other banks personnel

The secondary
data has been collected from different publications of BRAC Bank. To clarify
different conceptual matters, Internet and different articles published in the
journals & magazines have been used. The Secondary Sources are:

Secondary data were collected

prior research report

different books and periodicals related to the banking sector

Newspapers and Internet.

reports of BBL.

of Bangladesh bank

In processing the data and presenting these tables and graphs
has been used. SWOT analysis has been used as analytical tool. It is rarely
involves structured questionnaire, large sample and probability sampling plans.
Observation method is used in some cases to complete the paper.

1.5 Limitations of the

Limitations, which I
faced while doing my internship report are discussed below:

research was not possible due to access constraints.

data and document collection were difficult due to the organization

availability of data in a systematic way.

from other banks faces the verification problem. There is no scope for
authenticate this data from any reliable source.

of the reference book is another limitation.

lack of experience, faults may arise in the report though I made maximum effort
to avoid all of these.


2.1. The Historical
Background BRAC Bank LTD:


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 Mr.
Muhammad A (Rumee) Ali. Now the Managing Director and & CEO of the bank is
Mr. Syed Mahbubur Rahman, Managing Director & CEO. The bank has made a
reasonable progress due to its visionary management people and its appropriate
policy and implementation.

Profile of BRAC Bank Limited:


BRAC Bank Limited, with institutional
shareholdings by BRAC, International Finance Corporation (IFC) and Shore cap
International, has been the fastest growing Bank in 2004 and 2005. The Bank
operates under a “Double Bottom Line” agenda where profit and social
responsibility go hand in hand as it strives towards a poverty-free,
enlightened Bangladesh.

A fully operational Commercial Bank, BRAC Bank focuses on pursuing unexplored
market niches in the Small and Medium Enterprise Business, which hitherto has
remained largely untapped within the country. In the last ten years of
operation, the Bank has disbursed over BDT 2 billion in loans to nearly 83,000
small and medium entrepreneurs. The management of the Bank believes that this
sector of the economy can contribute the most to the rapid generation of
employment in Bangladesh. Since inception in July 2001, BRAC Bank becomes
one of the country’s fastest growing banks with 151 branches, over 250 ATM’s,
421 SME Unit Offices and over 8,183 employees.

Figure: Share holders contribution

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



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

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.


» Continuous low cost deposit growth with controlled growth in Retained

» 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 of 

BRAC field offices for delivery 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

bank’s vision into reality

2.6 Core

C stands for being Creative, Be a person of innovative ideas in solving
issues, thinking different ideas to reach one destination; do new associations
between existing ideas or concepts for the organization’s overall growth. 

stands for being Reliable, Be worthy of reliance or trust at work so
everyone could depend

on you.

stands for remaining Youthful, Be a person of
freshness and vibrant characteristic at work. Feel young at HEART and project
enthusiasm during performing duties. 

Be a person of willing to move forward and
apply conscious choice, willpower, discipline and passion at work.

stands for being Transparent, Be transparent at work at all level both
internally and externally. Show openness and honesty through communication to
bring transparency

stands for being Accountable, Be accountable for own actions and take
responsibilities for the outcome of the actions; be responsible and answerable
towards customers, organization, regulatory bodies as well as the society.

Long Term Strategy:

Summed up in
a single sentence, BRAC Bank’s long-term strategy is to go where the market
is. The SME market in Bangladesh is large. The report produced by the
Shore Bank team, (Ronald Grzywinsky, Mary Houghton and Lynn Pikholz) and the
independent consultant, Kaiser Zaman, indicates that the market size would be
over hundreds of billions of taka. He quoted:

“As a result
of the achievements of the micro-credit providers, Bangladesh now has an hour
glass shaped banking market in which credit and other limited financial
services are valuable to both very large and very small businesses and very
wealthy and very poor individuals. While there is well – known informal system
that provides credit to businesses, virtually nothing is available from either
banks or micro finance provider to the million the middle – businesses and
individual- who are severely constrained in their ability to produce and save
for lack of access to financial resources and services. Until modern,
competitive financial services are readily available – including credit in
amounts, terms and conditions that small can access, Bangladesh will not be
able to create the large middle class that is a prerequisite to social

Corporate Social Responsibility (CSR) of BRAC Bank:

Since the inception as a responsible
corporate body BRAC Bank Ltd. has undertaken various initiatives considering
the interest of customers, employees, shareholders, communities and environment.
These initiatives go beyond the statutory obligation/mandatory compliances to
voluntary activities that promote sustainable development. Corporate Social
responsibility (CSR) is a fundamental part of the way BRAC Bank does business.
It’s an opportunity to build better relationships with all stakeholders by
paying closer attention to how we fulfill our social, economic, environmental
and ethical responsibilities.

We are working towards reducing waste
and the more efficient use of resources. The second step is reducing our
indirect environmental impact by managing our investing activities. Paper
communication between the divisions/Customer centers of BRAC Bank has been
replaced with on-line communication where possible, resulting in significant reduction
in paper usage.

Management of BRAC Bank Limited


Quazi Md. Shariful Ala

Mr. Mark

Nihad Kabir

Tamara Hasan Abed

Mr. Shib
Narayan Kairy

Hafiz G.A. Siddiqi


Mr. Syed Mahbubur Rahman

Director and CEO

Members of BRAC Bank Limited Management Committee

Mr. Syed
Mahbubur Rahman

Director & CEO

Mohammad Mamdudur


Managing Director

Mr. Rais
Uddin Ahmad

Nabil Mustafizur Rahman

Credit Officer

Tahniyat Ahmed Karim

Head of

Mr. Shah
Alam Bhuiyan

Head of
Operations& Acting Head of


Risk Management

Mohammed Rahmat Pasha

Head of
Treasury & Financial Institutions

Mr. Syed
Faridul Islam

Head of

Khwaja Shahriar

Head of
Cash Management

Custodial Services

Probashi Banking

Mr. Zeeshan
Kingshuk Huq

Head of
Corporate Affairs

Mr. Md.
Sarwar Ahmed

Head of
IAM – SME & Retail Banking

Firoz Ahmed Khan

Head of
Retail Banking


and Services of BRAC Bank Ltd.


Products of BRAC Bank Limited

  1. Small
    & Medium Enterprise (SME)

becomes one of the country’s fastest
growing banks. With 70 branches, 59 SME Sales & Service Centers, over 195
ATM’s, 429 SME Unit Offices and over 7,000 employees.

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.

In 2010, BBL alone distributed loans
to 67,047 Small and medium entrepreneurs’ amounting to BDT. 32,188.26 million;
in 2010, Bank also open 29 SME Service Centers.. SME
division maintains a portfolio of 259,799 small and medium Entrepreneurs with
BDT 111,917.87 million. Last year disbursed BDT 32,188.26 million to 67,047 SME


Current Account





Equity Loan




SME Products

SME Loan flow is shown below:

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:

B. Corporate Banking

the facilities our corporate Division offers to our customers are mainly of


Non-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.


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:

C. Retail

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

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.

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:

Deposit Products

Lending Products

Locker Services

Services etc.

3.2 Services of BRAC Bank Limited

Services Department under BBL Operations has been created with a vision of
providing one stop banking services to our internal & external customers by
ensuring service excellence and accelerating the efficiency through experienced
and competent human capital and using advanced technology. Under the Operations
umbrella Banking Services Department facilitates the specific services focusing
on a particular activity, eagerness to take challenges and develop expertise in
it, which in turn augment the service quality, reduce turn-around-time (TAT)
and give a competitive edge.

b) Corporate Banking

The Corporate
Banking Division has a centralized structure through on-line banking
system.  Any credit facility is processed at the Corporate Banking
Division, Head Office.  After sanctioning of the facility, the limit is
put online and

The customer
can enjoy the facility from any of the BRAC BANK branches.

A fully
operational commercial Bank, BRAC BANK focuses on perusing unexplored market
niches in the Small and Medium Enterprise Business, which hitherto has remained
largely untapped within the country, the Bank has provide support to more than
200000 Small and Medium Enterprise. Since inception in July 2001 the bank’s
footprint has grown to 69 branches, 59 SME Sales Center, 429 unit offices and
more than 177+ ATMs across the country.

The banks
operate under a “double bottom line” agenda where profit and social
responsibility to hand in hand as it strives towards a poverty free,
enlightened Bangladesh.

adherence to internal control guidelines and other legal and statutory
compliance are followed.  The Credit approval process involves separate
Credit Division, the Managing Director and finally the Board.

Departments such as Foreign Trade, Treasury, Asset Operations etc. plays the
support role for a comprehensive range of service to the Corpora

b) Other Banking Services:

provides a comprehensive range of innovative corporate financial solutions
tailored to suit each company’s needs.  At the center of client’s
relationship with BRAC BANK is an experienced and professional Management team
with extensive industry knowledge.  The Relationship Management team works
closely with the client to understand and solve the financial requirements of
the company.  Our knowledge about various industry sectors encompasses
global issues, the dynamics of the economy’s effect on the industry and
business cycles and insight into market activity within this
industry. Following are some of the products that we offer
our corporate clients:

§  Loans

§  Short term

§  Mid Term Loans

§  Long Term Loans

§  Letter of

§  Guarantee

§  LTR

§  LBP

§  Overdraft

§  Lease
Financing, Work Order Financing, Floor Financing, Channel Financing


Fastest growing
bank in the country for the last four years

Leader in SME
financing through 7000 offices.

Biggest suit of
personal banking & SME products.

Large ATMs
(Automated Teller Machine) & POS (Point of Sales) network.

SME Banking Division is a business
division of BRAC Bank Limited that deals with Small and Medium sized
Entrepreneurs involved in different types of business. The loan products
offered by SME Banking Division are ANONNO, APURBO, AROGGO, Prapti current
TRADE PLUS and Business equity loan. The SME loan range is from BDT 3 lac to
BDT 50 lac (Funded: BDT 3 lac to BDT 50 lac), Non Funded: BDT (1 lac to BDT 30
lac). SME banking division offers Term loan, Continuous (Cash covered) loan and
Letter of Credit. Short Term: up to 9 months, Long Term: from 12 to 60 months.
If the loan amount is more than BDT 50 lac and then SME Banking refers it to
Corporate Banking another business division of BRAC Bank.

It is compulsory for a borrower to
have a current A/C either with BBL or with a correspondent bank branch if there
is no BBL branch in the locality. The City Bank Ltd, Janata Bank, Bangladesh
Krishi Bank, Pubali Bank Ltd, Agrani Bank and Rupali Bank Limited are the
correspondent banks of BRAC Bank. Bank transaction record is mandatory for
Bizness Loan & Trade Plus only.

The SME loans are usually given for
working capital finance, fixed asset finance and trade finance. Loan amount is
decided based on the fund requirement calculation, not on the basis of
collateral value. However, Lawyer’s opinion is necessary for mortgage purpose.
Registry Mortgage is necessary generally when the loan amount is BDT 10 lac or more.

Working capital financing cannot be more than 75% of the
total of the average regular receivables and average inventory. Fixed asset
finance cannot be more than 90% of the purchase price, but the debt equity
ratio in fixed assets investment in the projected year (after purchase of new
fixed assets) cannot be more than 1 (one). A customer can apply for a repeat
loan when 80% of the previous loan tenure has passed and made a satisfactory
repayment. If all installments are paid on due dates, they will also get a
concession on the existing interest rate. 

Generally, SME only provides business loans in
the enterprise’s name.

However, loan can be sanctioned in the personal name of the
borrowers, if the tenant borrower cannot
obtain trade license showing his name as owner of the business due to the
conditionality imposed by the market committee/owner.


Fire insurance is mandatory to avail
a loan except for a few concerns like poultry, fishery and farming.

Our Network and Reach:

Today BRAC Bank is considered as a
fourth generation bank extending full range of banking facilities by providing
efficient, friendly, modern and fully automated online services. In 2010 30 new
SME sales and Service centers were opened at the following locations: Gouripur,
Sirajganj, Konabari, Pahartoli, Badda, Bagerhat, Bahadderhat, Swarupkathi,
Bashabo,panth, Dolaikhal, Gulistan, Hathazari, Hazaribag, Jatrabari, Shampur,
Kadamtoli, Karwanbazar,Arihazar, Magura, Mirpur-1, mohammadpur, motijeel,
Naogaon, Comilla, Netrokona, Pirojpur, Purana Palton, Bondor And Uttara.

At present SME Banking Division have
14 products among which 13 are loan products and one deposit product.

SME Credit Model:

SME credit risk management is based
on Product Program Guidelines (PPG) for each product developed from the board
approved policy. BRAC Bank Limited developed & applies in-house assessment
methodologies for evaluating the creditworthiness of the SME borrowers to
identify credit risks and establish underwriting standards.

There are 7 business wings in SME
Banking Division.

General Business Unit

Women Entrepreneur Cell (WEC)

Large Business Unit (LBU)

Manufacturing Business Unit (MBU)

Supplier & Distributor Finance Unit (SDF)

Commercial Credit Unit (CCU)

Vehicle Financing Unit

This largest business unit of SME
Banking Division has long been providing loans to SME entrepreneurs.
Regular business wing offers varying products. SME entrepreneurs
mostly require small finance that this business unit has successfully been
offering to all level of SME borrowers irrespective of business
type. In addition to Small finance this business unit is also offering finance
to medium entrepreneurs. 

Women Entrepreneurs Cell
(WEC), one of its kinds in the banking industry of Bangladesh, was launched in
2006 under SME Banking Division with an objective to offer access to formal
finance along with training and technical assistance to the women entrepreneurs
across the country.


3. Large Business Unit

Large Business Cell started its
journey from February 2007. The objective for this unit is to increase the
average ticket size of the overall SME portfolio and also to tap
the unexplored market.

4. Manufacturing Business Unit

The Manufacturing Business Unit was launched in August 2007
under SME Banking Division. The objective of launching this unit is to better
serve the manufacturing sector by providing sector-focused loan & other

The Commercial Credit Unit (CCU) was
launched in October 2007 with the objective of providing financial services in
the Trade Finance sector with pre & post import facilities.

This newly formed business unit of SME
Banking is aimed at financing the commercial vehicles of SMEs. This unit will
operate in some selected areas of the country. In addition to the 7
business units there are 2 more units in SME Banking Division.

3.6 Products of SME:

Deposit Products

Current Account” an interest bearing current account. This account ensures
the profitable and easy transaction facilities for Businesses.



Any institution can open this account in the name of
the Institution

Opening balance only BDT. 5,000 only.


bearing current account

Up to 4%
interest on daily balance

Card with BDT-100,000 withdrawn facility (per day) from ATM & BDT-
300,000 from POS

No upfront
relationship fees

No inter-city
or intra-city online transaction charges

No Relationship
fee will be charged if half yearly average is BDT 25,000, along with free
cheque book.

Loan Products


Anonno Rin

This is a small-scale loan designed
to finance small scale trading, manufacturing and service ventures, especially
to aid the purchase of fixed assets, and to finance working capital.


· Entrepreneurs aged
between 18 to 60 years

· Entrepreneurs with
minimum 2 years experience in the same line of business

· A business which must be
a going- concern with more than 1 year in operation


· From minimum BDT 3
lac up to maximum of BDT 10 lac


· Loan without mortgage

· For excellent borrowers
who have paid or are paying in due times, we offer discounted rates

· Quick, quality banking
throughout the country

· Potential women
entrepreneurs will also get the facilities of this loan

Loan Study

(Principal) Repayment

Interest Repayment

3 months-9 months

One single payment at


12, 15, 18, 21, 24,

30, 33, 36 months

Monthly installment

Monthly with


Interest rate

for New Loan 

for 1st time repeat (if applicable)

for 2nd time repeat & so on (if applicable)

Loan processing Fees

of base loan amount+ VAT

on present & future assets, two  personal guarantors & post dated


: An asset product offered to women
entrepreneurs to expand their businesses. This product’s main objective is to
help women entrepreneurs to meet their short-term cash flow shortages or bridge
the fund-flow gaps.

3 lac to below 10 lac


to 36 months

Installment- 3 to 9 months


of base loan amount+ VAT

on present & future assets, two personal guarantors & post dated


This loan facility caters cash flow
requirement of medium sized enterprises located around the unit offices which
are at proximity of the BRAC Bank Branches. To avail this loan facility healthy
banking track record is required and medium sized entrepreneurs can avail this
loan facility against 30% to 50% cash security.

10 lac to 50 lac

10 lac to below 20 lac – 12 to 48 months

20 lac to 50 lac – 12 to 60 months.

of loan amount+ VAT for new loan


Bank FDR (50% of the loan amount for new loan & 30% for repeat loan),
Hypothecation on present & future assets, two personal guarantors &
post dated cheques

Proshar Rin


: Proshar is a loan facility for
Small and medium sized manufacturing industries located in the surrounding
areas of unit offices across the country. It is primarily meant for working
capital finance/ fixed asset purchase for the business.

3 lac to  30 lac

3 lac to below 10 lac -12 to 36 months For 10 lac to 15 lac-12 to 48 months

above 15 lac to 30 lac – 12 to 60 month

Loan processing Fees

3 lac to below 10 lac -2.5 % of  base amount+ VAT

10 lac to 30 lac-1 % of loan  amount+ VAT

3 lac to below 10 lac- 17.25% for new loan & 17% for 1st repeat & so on
(if applicable)

10 lac to 30 lac- 17%

3 lac to below 10 lac -Hypothecation on present & future
assets, two personal guarantors & post dated cheques

10 lac to 30 lac-Registry Mortgage of land property, Hypothecation on present
& future assets, two personal guarantors & post dated cheques

Funded- BDT 1 lac to 30 lac

– BDT 3 lac to  30 lac

days /deal

-1 % of loan amount+ VAT

Funded (PAD)- 17%

–17.8% (LATR, Revolving Loan, overdraft)

LATR -Hypothecation on present & future assets, personal guarantor &
post dated cheques

For 5 lac to below 10 lac-BRAC Bank FDR 20%, Hypothecation on present &
future assets, personal guarantor &  post date d cheques

10lac to 30 lac-Registry Mortgage of land property, Hypothecation on present
& future assets, personal guarantor & post dated cheques

– Registry Mortgage of land property, Hypothecation on present & future
assets, two personal guarantors & post dated cheques

equity loan

Business Equity Loan is a loan facility
for the enlisted Suppliers of various large retailers, marketing companies,
distributors, exporters etc. This product’s main objective is to help various
Suppliers to meet their short-study cash flow shortages or bridge the fund-flow



· If you are an enlisted
supplier of a corporate house with which BRAC Bank has a corporate tie- up

· Have minimum 3 years of
continuous operation

· Have 1 year continuous
relationship with the purchasing firm


· Minimum BDT 4 lac up to
maximum BDT 30 lac


· Equal monthly installment
and revolving loan facility

· 1% of loan amount as the
processing fe

to 12 months

– For BDT 4 to below 10 lac -17.8%

BDT 10 to 30 lac -17.%

For BDT 4 to below 10 lac – 17%

BDT 10 to 30 lac – 16%

Suppliers Finance

Loan a loan for various suppliers
& distributors to expand their businesses



BDT 3 lac to below 10 lac


EMI-12 to 36 months

Single Installment – 3 to 9 months


Required loan amount + up front installment(if any)+
all fees and charges with applicable VAT

processing Fees

2.5% of base loan amount+ VAT

Interest Rate

17.25% for New Loan

3.7. Basic Appraisal of Small
&Medium Enterprise:


Business or project appraisal is a
technique of evaluating and analyzing Business from various aspects, primarily
the risks associated with that business enterprise. At the time of appraisal of
any manufacturing, trading or service related organization, factory or
industry; one has to perform a feasibility study on the different aspects.
These are:

  1. Management
    and Personal Aspects
  2. Technical
  3. Marketing
  4. Financial
  5. Social
    Economic Aspects
  6. Security

During the appraisal prosecute the
Customer Relation Officer (CRO) should endeavor to obtain details about the
prospective borrowers, some of which are:

    1. Business
      related information
    2. Credit
    3. Liquidity
    4. Management

In considering the above, one should
look at the business is managed. The CRO should also consider clients previous
credit history like facilitates sought and availed, loan repayment an overdue
record, if any.

One should also check the client bank
account and amount of balance maintained. Management’s qualification,
experience, successor and maintenance of records should provide insight in to
the business.

From a business perspective, this
aspects deals with design of the system in place, the operation of the
business, the different type of physical resources used, the technology used,
the capacity to handle business and all other inputs (labor, raw materials,
utilities etc.)

Among the technical factors to be
investigated during an appraisal are:

  • The
    size of project
  • The
    process, materials, equipment, and reliability of technical systems to be
  • Location
    of projects
  • Sustainability
    of the plans, layout and design used
  • Total
    quantity of the goods /Service produced/Traded monthly
  • Environment
    of the business and its surrounding areas
  • Availability
    to various factors of production, both physical and human
  • Raw
    materials availability, price level and its variation to be considered

A CRO should consider the following
factors of a business before making any loan commitment with a customer: Total
demand and supply of the products in the market that the business operates in
growth of sales and major marketing threats that the business may face.

This aspect allows us to check the
financial health of a business, through an analysis of the profit and loss
account, balance sheet, cash flows, ratios and requirement of working capital.
If the collection of the financial data can be done properly, then it may be
able to make a somewhat realistic picture of the business financial position.
However, all the data collected must be crosschecked as much as possible with
the physical features of business.

The following things are to be
considered and restudied at the time of verifying the financial feasibility of
the business:

  • Current
    year’s profit/Loss of the business and probable profitability of business
    after taking the loan

  • Restructure
    of assets, liabilities and net worth of the manufacturing/ trading /
    service institution before and after taking loan

  • Present
    net cash flow of the business after disbursement of loan should be

  • To
    know the cash position of the institution

  • To
    know the source of income, production and other expenditure of the
    business probable financial risks of the business

Here the analyst like to observe the
contribution of the business to the country’s GDP, the employment generated,
the sort of adverse impact of the business on the environment, it is another
benefit to the country.

Along with observation of different
aspects and views of the projects, the CRO should also see closely the aspects
of the projects and ensure about the reliability to the mortgaged
property/assets. Ensure proper survey or verification of the security offered

Ensure attachment of survey report.

3.8 Reasons of SME program from the
viewpoint of BRAC Bank:

The main focus of BRAC Bank is to develop human and
economic position of a country. Its function is not limited only to providing
and recovering of loan. But also try to develop economy of a country. So reason
for this program from the viewpoint of BRAC Bank is:

  1. Support
    Small Enterprise:
    The small enterprise, which requires 2 to 30, lacks taka loan, but
    these has no easy access to the banks/financial institutions. For example:
    In 3 to 8 lac amount of loans is provided without any kind of mortgage.
  2. Economic

    Economic development of a country largely depends on the small and medium
    seal enterprises. Such as, if we analyze the development history of Japan,
    the development of small & medium scale enterprises expedite the
    development of that country.
  3. Employment
    bank gearing employment opportunities by two ways:

Firstly, by providing loan to the
small enterprises expanding, these businesses require more workers.

  • Profit
    program is a new dimensional banking system in the banking world. Most of the
    CRO’s are providing door to door services to the entrepreneurs. The
    entrepreneurs are satisfied by the service of this bank and the bank also
    makes more profit.
  • Encourage
    focus of BRAC Bank is to encourage manufacturing by the entrepreneurs who
    are producing by purchasing various types of materials. CRO’s try to
    educate them to produce material if possible because if they can produce
    in line of purchase profits will be high.  
  • Spread
    the experience:

    Another reason of BRAC Bank is to spread the knowledge of regarding
    various businesses. The customer services officer get knowledge from
    various businesses is and tries to help the entrepreneurs who have
    shortage of the gathered knowledge by CRO’s.
  • The CRO’s who are the driving force
    of SME division of BRAC Bank also gather knowledge about various businesses and
    make stronger knowledge base

    3.9 Security Documentation against

    A document is a written statement of
    facts and a proof or evidence of particular transaction between parties

    a. Purpose of Decorate Documentation
    and its Importance

    Documentation is necessary for the
    acknowledgement of a debt and conditions by the borrower and the creation of
    charge on the securities in favor of the bank by the borrower.

    If filing a suit with the courts
    against a default borrower becomes necessary, the court will first review all
    documents. If any of the documents is found to be defect or incomplete, the
    very purpose of security documentation will be defeated and a court ruling in favor
    the bank cannot expect. Proper care should, therefore, be taken while
    completing security documentation.

    b. Type of Securities

    The following listed securities may
    be obtained from borrower against loan to enterprises, either individually or
    in a combination. It is really up to the bank what they would like to accept as
    security from the borrower as not all the securities stated below are

    • Mortgage
      of loan and other immovable property with power of attorney to sell
    • Lien
      of Fixed Deposits receipts with banks and other non-banking financial
      institutions, lined, these have to confirmed by the issuer ( Now these are
      rarely accepted)
    • Lien
      of Pratirakshay sanchay patra, Bangladesh sanchay patra, ICB unit
      certificates and wage earner development bond, all considered Quasi or
      Near cash items. All these instruments, one liend, have to be confirm by
    • Lien
      of shares quoted in the stock exchange ( This is rarely accepted)
    • Pledge
      of goods (Banks are akin to stay away from such securities now a days)
    • Hypothecation
      of Goods, Book Debt & Receivables, Plant & Machineries
    • Charge
      on fixed assets of a manufacturing enterprise
    • Lien
      of cheque, Drafts and order
    • Lien
      of work orders, payment to be routed through the bank and confirmed by the
    • Shipping
      documents of imported goods

    b-i) Land related securities
    documentation process

    . The documents generally provided

    • Title
      Deeds or Deed of conveyance otherwise known as ‘Jomeer Dalil’ which
      signifies ownership of a particular land.
    • Baya
      Dalil or Chain of Documents which signifies that the conveyance of titles
      has been proper and legal.
    • Mutation
      Certificate if Khatian which signifies that the title if the land has been
      duly registered in the Government/Sub-registrar’s records.
    • Duplicate
      Carbon Receipt or DCR
    • Latest
      Khajna or land rent receipt
    • Purchase
      such as CS Khatian, SA Khatian and BS Khatian
    • Mouja
    • Municipal
      rent receipts if the land falls within a municipal area

    b-ii) There are two type of
    mortgagee’s that are popular and usually accepted in Bangladesh:

    i) Equitable Mortgage or Memorandum
    of Deposit of Title Deeds

    ii) Registered Mortgage

    3.10 Selection of Potential
    Enterprise for SME:

    The success of SME will largely
    depend on the selection of a business and man behind it. In studies of the
    business (Enterprise), the following attributes should be sought:

    1. The
      business must be in operation for at least one year
    2. The
      business should be environment friendly, no narcotics or tobacco business
    3. The
      business should be legally registered, i.e., valid trade license, income
      tax or VAT registration, wherever applicable.
    4. The
      business should be in legal trade, i.e.; smuggling will not be allowed or
      socially unacceptable business will not be entertained.
    5. The
      business must have a defined market with a clear potential growth
    6. The
      business must be located ideally close to the market and the source of its
      raw materials/suppliers. It should have access to all the utilities,
      skilled manpower’s that are required.
    7. Any
      risk assessed by the management in turn will become a credit risk for the
      bank. So effort should make to understand the risk faced by the business.

    Guarantor Selection Criteria

    1. The
      guarantor must have the ability to repay the entire loan and is
      economically solvent ( Check his net worth)
    2. The
      guarantor should be aware about all the aspect of SEDF loan and his
    3. Govt.
      and semi-govt. officials can be selected as a Guarantor such as
      schoolteacher, college teacher, doctor etc.
    4. Police,
      BDR and Army persons, political leaders and workers, and Imam of mosque
      cannot be selected as a guarantor.
    5. The
      guarantor should know the entrepreneur reasonable well and should
      preferably live in the same community


    3.11 Sanction and reject procedures
    of BRAC Bank’s SME Loan:

    Loan Sanction activities

    • Select
      potential enterprise:
      For SME loan, in this step the CRO conduct a survey and identify
      potential enterprise. Then they communicate with entrepreneurs and discuss
      the SME program.
    • Loan

      The function of CRO is to prepare loan presentation based on the
      information collected and provided by the entrepreneur about their
      business, land property ( Where mortgage is necessary)
    • Collect
      confidential information
      : Another important function of a CRO is to collect
      confidential information about the client from various sources. The
      sources of information are suppliers regarding the clients payment,
      customers regarding the delivery of goods of services according to order,
      various banks where the client has account which shows the banks
      transactions nature of the client.
    • Open
      clients accounts in the respective bank
      : When the CRO decided to provide loan to the
      client then he/she help the client to open an bank account where BRAC bank
      has a STD a/c. BRAC bank will disburse the loan through this account. On
      the other hand the client will repay by this account. Although there is
      some exception occur by the special permission of the authority to repay
      by a different bank account. 
    • Filled
      up CIB form
      CRO give a CIB (Credit Information Burue) form to the client and the
      client fill and sign in it. In some case if the client is illiterate then
      the CRO fill the form on behalf of the client. Then CRO send the filled
      and signed form to the SME, head office.

    • Sending
      CIB to Bangladesh Bank
      : The SME, head office collect all information and send the CIB form
      to Bangladesh Bank for clearance. Bangladesh Bank return this CIB form
      within 10-12 days with reference no.
    • CIB
      report from Bangladesh Bank
      : In the CIB report Bangladesh Bank use any of the
      following reference no:

    NIL: if the
    client has no loan facility in any bank or any financial institution then BB
    (Bangladesh Bank) use ‘NIL’ in the report

    UC (Unclassified): if the client has any loan facility in any bank or financial
    institution and if the installment due 0 to 5.99 then BB use UC in the report

    SS (Substandard): if the client has any loan facility in any bank or financial institution
    and if the installment due 6 to 11.99 then BB use SS in the report

    if the client has any loan facility in any bank or financial institution and if
    the installment due 12 to 17.99 then BB use DF in the report

    BL (Bad lose):
    if the client has any loan facility in any bank or financial institution and if
    the installment due 18 or above then BB use BL in the report. This report
    indicates that the client is defaulter and the bank should not provide loan the

    • Loan
      decision considering CIB report
      : Considering CIB report, BRAC bank decide whether it
      will provide loan the client or not. If the bank decides to provide loan
      then the SME of head office keep all information and send all papers to
      the respective unit office to apply with all necessary charge documents.

    3.12 SME Loan Recovery Procedures:


    The repayment process starts
    immediately after one month of the loan taken. Suppose if a loan is taken in
    July 7, 2010 then the repayment process will be started from August 7, 2010 and
    the borrower will pay his/her first installment in that date. Before that date,
    the borrowers will be informed about the number of installments and amount of
    each installment. He can deposit the installment by himself or by the Customer
    relationship officer (CRO).

    Again they can deposit the
    installments either in any branch of BRAC Bank or in any correspondence bank
    (where BRAC Bank has no branch). If the borrower cannot pay the installment in
    the stipulated date, interest will be charged for each day before they pay that
    installment. Again interest will be reduced if the borrower pays the
    installment before the date of repayment. Interest will be charged and added to
    the principal amount for every month or every 3 three months depending on the
    policy for each loan disbursement.

    Receive SMS/Fax for installment

    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 loan
    administration division informing the repayment. A loan administration division
    collects these SMS /Fax and takes a paper print of these SMS.

    Entry the installment information to

    Loan administration division entries
    the repayment installment information to the banking software MBS.

    Completing the entry, the loan
    administration division takes paper print of all vouchers in a prescribed yellow

    Check SMS/Fax and solve problems (If

    The loan administration is
    responsible for all entry in MBS. If there is any error found in future then
    the respective officer who is entering this information in MBS will be liable
    for it. User ID will easily identify it. So they are always aware of to ensure
    the correct entry. Completing the entry of information, they print a hard copy
    and check it with the SMS/Fax. If there is any error found then it is solved
    and ensures the correct information entry. 

    Repayment voucher check and posting



    Strong management & good relationship between management

    Sound working environment

    Efficient employees

    Distinct Operating Procedures-BBL is known for its distinct operating

    BBL provides hassle free customers services to its customers

    BRAC Bank also implements Management by objectives everywhere 


    There is few chance of job rotation.

    Lack of financial and non-financial motivation.

    Inadequate human resource to cover the work load.

    Huge work load.

    There is little chance to be a regular employee from
    contractual officer.

    Recruiting contractual employee.

    Employees who lack commitment and are less motivated due to
    their designation.

    Lack of experienced employee.


    There are vast areas to develop the sector; people of our
    country are living in village. They can easily establish their business by
    SME loan.

    There is high demand in sectors such as Housing.

    The ultimate goal of BBL is to expand its activities across
    the whole country.


    High rate of interest rate.

    Shift from Comparative advantage to Competitive advantage

    Contractual employees are always prone to frequent job

    Due to the weak salary structure permanent employees may
    switch jobs.

    The current global financial turmoil is a huge threat to
    BRAC Bank.

    SWOT analysis helps the organization
    to identify how to evaluate its performance and

    3.14 Porter Five Forces analysis:

    orter’s 5 forces analysis is a
    framework for the industry analysis and business strategy development developed
    by Michael E. Porter. It uses concepts developed in Industrial Organization
    (IO) economics to derive 5 forces that determine the competitive intensity and
    therefore attractiveness of a market..

    Michael Porter has identified five
    forces that are widely used to assess the structure of any industry. Porter’s
    five forces are:

    power of suppliers

    power of buyers

    of new entrants

    of substitutes and

    among competitors.

    Together, the strength of the five
    forces determines the profit potential in an industry by influencing the
    prices, costs, and required investments of businesses—the elements of return on
    investment. Stronger forces are associated with a more challenging business.


    Intensity of Rivalry
    amongst competitors

    Rivalry among competitors is often the strongest of the five competitive
    forces, but can vary widely among industries. If the competitive force is weak,
    companies may be able to raise prices, provide less service for the price, and
    earn more profits. If competition is intense, it may be necessary to enhance
    product offerings to keep customers, and prices may fall below break-even

    In Bangladesh there are more than 30 commercial banks that compete in the
    same industry. The national banks have the highest banking network in
    Bangladesh. They compete with other banks with their low cost of operation and
    government support. Again, Standard Chartered bank is the largest multinational
    banking network in Bangladesh that has its network in many metropolitans of
    Bangladesh. There are other international banks such as HSBC that also take
    part in the competition and are aggressive in nature. Due to the increasing
    number of banks in Bangladesh it makes difficult for the existing banks such as
    BRAC Bank Limited to compete in the long run.

    In the Banking Sector, competition is about offering customers the most
    attractive combination of services introducing new products, offering more
    customer services, or creating a stronger brand image than competitors.

    Threat of new entrants:

    Analyzing the threat of new entrants involves examining the barriers to
    entry and the expected reactions of existing firms to a new competitor.
    Barriers to entry are the costs and/or legal requirements needed to enter a
    market. These barriers protect the companies already in business by being a
    hurdle to those trying to enter the market. In addition to up-front barriers, a
    new competitor may inspire established companies to react with tactics to deter
    entry, such as lowering prices or forming partnerships. The chance of reaction
    is high in markets where firms have a history of retaliation, excess cash, are
    committed to the industry.

    The threat of new entrants is
    moderate in the context of Bangladesh. Over the years it is seen that
    increasing number of local banks have emerged in the local market. Moreover it
    is seen that new international banks have also started their operations in
    Bangladesh and also slowly increasing their branches countrywide.

    In the context of BBL the various new
    & upcoming Banks pose a significant threat, being new entrants in the
    banking sector of Bangladesh. But BBL is aware of these potential competitors
    and is trying to expand countrywide to make the sector unattractive & to
    create entry barrier.

    of substitute products

    Products from one business can be replaced by products from another. If
    one produces a commodity product that is undifferentiated; customers can easily
    switch away from that product to a competitor’s product with few consequences.
    In contrast, there may be a distinct penalty for switching if the product is
    unique or essential for the customer’s business.

    Substitute products are those that
    can fulfill a similar need to the one a product fills. The threat that
    substitute products pose to an industry’s profitability depends on the relative
    price-to-performance ratios of the different types of products or services to
    which customers can turn to satisfy the same basic need. The threat of
    substitution is also affected by switching costs – that is, the costs in areas
    such as retraining, retooling and redesigning that are incurred when a customer
    switches to a different type of product or service

    BBL continuously faces the threat of
    various substitute products launched by its strong competitors in the market
    place. For example, the launch of premiere banking by SCB poses a strong threat
    on BBL’s premium customer group and BBL is at a condition where it should
    launch an even better product. Various local and international banks these days
    are coming up with low cost new products which may pose a strong threat to
    BBL’s banking. Since the switching costs are not that high there is always a
    chance of customer changing their preferred banking services from a particular

    power of suppliers

    Any business requires inputs—labor,
    parts, raw materials, and services. The cost of inputs can have a significant
    effect on a company’s profitability. Whether the strength of suppliers
    represents a weak or a strong force hinges on the amount of bargaining power
    they can exert and, ultimately, on how they can influence the terms and
    conditions of transactions in their favor. Suppliers would prefer to sell to at
    the highest price possible or provide with no more services than necessary. If
    the force is weak, then one may be able to negotiate a favorable business deal
    for themselves. Conversely, if the force is strong, then one will be in a weak
    position and may have to pay a higher price or accept a lower level of quality
    or service.

    The depositors of BRAC Bank Limited are the main suppliers of the
    bank. Considering the economic condition of the country it can be said that the
    bargaining power of the suppliers are very high. The main reason behind this is
    that after the caretaker government took over the country huge amount of wealth
    of politicians have been confiscated which otherwise would have been deposited
    in different banks. As a result the banks in Bangladesh are in shortage of
    depositors. Due to the shortages of depositors, the depositors are being able
    to bargain a better negotiation. Moreover the BRAC Bank Limited is not being
    able to decrease their interest rate on deposits which makes the bargaining
    power of the suppliers very high.

    Bargaining power of

    The power of buyers describes the effect that customers have on the
    profitability of a business. The transaction between the seller and the buyer
    creates value for both parties. But if buyers (who may be distributors,
    consumers, or other manufacturers) have more economic power, then the firm’s
    ability to capture a high proportion of the value created will decrease, and
    the firm will earn lower profit.

    Considering the global financial downturn and also the current
    economic situation of the country it is seen that customers are reluctant to go
    for new investments and also due to the global financial turmoil it is seen
    that imports have been reduced to a greater extent. As a result fewer importers
    are opening LC’s through BRAC and other banks. Moreover fewer investors are
    taking loans from the banks.

    As the switching costs is not that
    high, customers often tend to go for those banks where they provide low cost
    and quality services These factors implies that the customers of BRAC Bank have
    a high bargaining power.



    loan is popular in rural area. But problem is management cost is very high for
    that reason people are discouraged on SME loan.

    a rural area base loan system, bank face huge problem to collect minimum
    documentation against on loan.

    problem are arise when CRO going to collect installment. It’s really tough to
    collect installment.

    loan borrowers are not qualified for loan.

    are vast areas in agriculture to investment. But investment is very low.

    is no specific research institution for SME loan.

    processing time is 1 month or more. So it creates a problem.

    feels CRM harassment.

    want long term loan, now maximum time is 36 months.

    big problem is online problem, because of that most of the unit office are in
    rural area for that reason bank can’t contract with unit office by online.


    & recommendations

    BRAC Bank Limited is
    proving itself as the fastest growing bank only in 9 years of its journey and
    showing remarkable progress of its financial position with the mission of being
    countries leading bank providing world-class services in a cost effective
    manner. This bank first introduces the SME loan in commercial banking sector,
    which help the people of poor society both in rural and urban. One thing can be
    noted that time horizon is too little to predict or evaluate the performance
    but the analysis clearly represents the better performance of the BRAC Bank
    Limited since its inception in year 2001. Even though BRAC Bank’s different
    performance parameters are good, it should expand its operations to the rural
    mass people who basically are deprived from different quality services of BRAC
    Bank Limited. It is possible because it has a great linkage with the BRAC, a
    micro-finance institution, spread all over the country.


    First of all Bank
    should have to find those causes that increases cost. Then take right action to
    minimize the cost.

    Identify the
    qualify person who is able to collect the loan.

    documentation collect is another main duty for bank. Because of that without
    documentation loan recovery are difficult.

    CRM harassment
    should be minimized.

    CRO needs to
    increase personal relationship with potential customer.

    Bank should be
    launch motivational activities. Like Successful Entrepreneur of the year award.

    Bank should
    increase their nursery process after sanctioning their loan.

    Time management
    should be minimized.

    They have to use
    such kind of server by that every unit office can contract head office.


    • Annual Report of 2010.

    • Annual Report of 2001,
      2002, 2003, 2004 and 2005.

    • Annual Bank
      Performance Report (2005), Bangladesh Bank.

    • Corporate Update
      (2005), Brac Bank Limited.

    • Hazel T. (1993),
      Financial Institutions and Markets, A Global Perspective, McGraw-Hill
      International, New York, NY.

    • Manual of Credit
      Approval and Monitoring policies, Brac Bank Limited, Volume 2, No. 1.
    • Peter S. (2005), Bank
      Management & Financial Services, 6th Edition, McGraw-Hill
      International, New York, NY.

    • Scott B. (1996),
      Essentials of Management Financing, 12th Edition, The Dryden
      Press, Orlando.

    • Timothy W. (2003),
      Bank Management, 5th Edition, South-Western, Mosco.

    • T.T. Sethi (2003),
      Money Bank and International Trade, 2003 Edition, S. Chand & Company
      Ltd. New Delhi, India.

    • Other short notes provided
      by the bank in different times.