Small and Medium Enterprise

Executive summary There are number of commercial banks operating their activities in Bangladesh. The BRAC Bank Limited is a promising one among them. It has a vast contribution in the economic development of the country. In the years ahead BRAC Bank expects to introduce many more services and products as well as add a wider network of SME unit offices, Retail Branches and ATMs across the country. The bank promotes broad-based participation in the Bangladesh economy through the provision of high quality and modern banking services.

SME loan is one of such quality product through which they offer the small and medium entrepreneurs a quality banking services and earn the maximum profit as well. In our country commercial banks usually provides bigger amount of loans to larger industries and trading organizations but the small and medium entrepreneurs were overlooked. With this end in view-BRAC Bank was opened to serve these missing middle group that are small but striving entrepreneurs.

As a socially responsible bank, BRAC Bank wants to see the emancipation of grass-roots level to their economic height and also to make profit by serving the interest of missing middle groups. In the analysis of this report it is found that they have some lacking in the banking operation. If they can overcome those lacking they will stabilize themselves as a leader in this industry and will be a unique organization. 1. 1 Origin of the Report

As a part of the Internship BBA program of Mohammadpur Kendriya College, Dhaka Bangladesh requirement, I was assigned for doing my internship in The BRAC Bank Limited (BBL) for the period of 12 weeks starting from May 2010 to July 2010. In BBL I was assigned in the Loan Administration Division for first six weeks and remaining six weeks in Credit Division of the head office, Gulshan. My organizational supervisor was Mr. Shah Alam Bhuyan, FAVP & Head of Loan Administration. My project is ‘Analysis of SME loan in BRAC Bank Limited’ which was assigned by organizational supervisor of the said bank. My faculty supervisor Mr.

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Abu Zahid Md. Zoglul Pasha,chairman,Department of Business Administration,Mohammadpur Kendriya College, Dhaka, also approved the project and authorized me to prepare this report. 1. 2 Background of the study Banking Industry is one of the most promising industries of our country. The importance of the sector revealed through its contribution in the economic growth of the country. This sector accelerates economic growth through mobilizing funds from surplus unit to the deficit unit. Banking Industry is moving towards rapid changes due to technological innovation and diversified needs of its customers.

Through this report an individual can expect to have a good knowledge and understanding on the various methods of operation performed by BRAC Bank Limited particularly in the area of Financial Institutional Services. From the last three months of the bank’s disbursement, everything is tried to include in precise form. I have tried my level best to put more emphasis on the SME loan since it was the topic of my internship program. This report is to be used only for the academic purpose. I have collected all the necessary and relevant data from various primary, secondary and tertiary sources.

After three months long hard labor, it has become possible for me to make the report comprehensive and factual. 1. 3 Objective of the study • To find out basic appraisal of SME loan • To know the enterprise selection criteria to provide SME loan • To know the terms and conditions of SME loans • To know the work process and monitoring system of Asset operation Department • To access the key performance indicator of the department • To know how the SME loan borrowers would behave in repaying their loan. • To know whether SME loan borrowers are dully paying their installments or not. . 4 Scope of the Study The study will provide the scopes of knowing the following: a) The total concept SME loan b) BRAC Bank specially focusing on SME loan to promote small entrepreneurs all over the country c) Characteristic of SME loan as a sophisticated area of finance. d) Recent performance level of the BRAC Bank SME loan in the country. e) Entry of commercial banks into SME banking industry in Bangladesh f) Small entrepreneurs of rural –urban spectrum are enjoying the BRAC Bank loan facility without coming in the bank 1. 5 Methodology The study uses both primary data and secondary data.

The report is divided into two parts. One is the Organization Part and the other is the Project Part. The parts are virtually separate from one another The information for the Organization part of the report was collected from secondary sources like books, published reports and web site of the BRAC Bank Limited (www. bracbank. com) . For general concept development about the bank short interviews and discussion session were taken as primary source. The information for the Project ” Analysis of SME loan in BRAC Bank Limited ” both were collected from primary and secondary sources.

For gathering concept of SME loan , the Product Program Guideline (PPG) thoroughly analyzed. Beside this observation, discussion with the employee of the SME department and loan administration division the said bank was also conducted. More over a market survey was conducted with a specific questioner. To identify the implementation, supervision, monitoring and repayment practice- interview with the employee and extensive study of the existing file was and practical case observation was done. [pic] 2. The Economy and Overall Banking Sector 2. World Economy- An over view As we enter into the new millennium the process of trade liberalization and globalization have presented new challenges as well as greater opportunities. Economic boundaries of nations are being abolished and the world is gradually becoming a global village, In the beginning of the year 1999 the Euro currency started to replace the currency of eleven European union countries. In the financial service sector profound changes have been taking place globally. E-commerce is becoming the predominant mode of transactions.

We are witnessing revolutionary changes in the fields of cost control, retail channels, range and delivery of services, accessibility and reach. These changes have already triggered off reorganization, amalgamation, and takeover of financial institution globally. 2. 2 Bangladesh Economy-An over view The improved political environment in the country, after a delayed period of civil disobedience brought a much-awaited economic stability during the financial year (FY) 2002-2004. The macro economic development during the year was marked by a healthy GDP growth and moderate inflation.

For the second year running a bumper rice harvest maintained growth at above 5% and GDP growth during the FY 2004 was at 5. 52%. On the other hand, the growth performance in industry was slow with manufacturing growth 3. 3% being one of the lowest rates in the recent years. Several unfavorable factors contributed to this situation which included disturbance in the supply of natural gas which in the turn affected the power supply and production activities. Furthermore, labor disputes during the second quarter of the year badly affected the operation of Chittagong port.

In the services sector, growth in transportation, storage and communication contributed to about 13% to the total GDP but growth in trade sector was slow due to lower import growth. During the year some positive initiative were taken in the banking sector with improvements in the legal and regulatory environment to improve loan recovery but unfortunately the high quantum of non performing assets and under capitalization continued to plague the entire banking sector thus causing a major threat to the macro economic stability. The size of classified loans increased significantly which contributed to lower profitability of the banks.

Reserve of gross foreign exchange of the BB stood lower at US$3033. 88 million at the end of March,2005 compared to US$3179. 41 million at the end of February. This was, however, higher than US$2653. 50 million at the end of March, 2004. The pressure on foreign exchange reserve continue due to low aid disbursement and sizeable private capital outflow, which amounted to around US$ 120 million. The official exchange rate was devaluated by 4. 6% in seven steps in FY 2002 and in two steps during July-August 02 thus raising the cumulative rate of devaluation to 6. 7%. The external account declined from over 5% of GDP to less than 3% ( US$ 0. million) in FY 02 which was mainly a result of healthy export growth (14%) and a significant increase in remittances from abroad, which in turn was due to stable political environment and a higher rate of contraction in import of food grains and capital goods. Investment rate in FY 04 showed some increase and the declining trend in private savings was substantially reserved. The national savings rate increased from 11. 9% of GDP in FY 03 to 14. 6% in FY 04. This was partly due to increased inward remittances, increase in nominal interest rates and lower rate of inflation. Some key indicator of the economy of Bangladesh are given follows: Total revenue collection : The government of Bangladesh collect total revenue during July-March,2004-05 increased by Tk. 2351. 08 crore or 11. 72 % to Tk. 20294. 60 crore compared to Tk. 18165. 49 crore during the same period of the preceding year ? Outstanding borrowing of the government: At the end of February,2005 the outstanding borrowing of the government stood at Tk. 35031. 91 crore, recording an increase of Tk. 1543. 47 crore or 4. 61% over June,2004 ? Exports: During July-February, 2004-05 total export of the country stood higher by US$622. 86 million or 13. 00% to US$5415. 60 million compared to US$4792. 4 million during the same period of the preceding year ? Import payments: During July-January, 2004-05 total import payment increased by US$1233. 70 million or 21. 31% to US$7023. 50 million compared to US$5789. 80 million during the same period of the preceding year. ? Fresh opening of import LCs: During July-February, 2004-05 fresh opening of import LC’s increased by US$1834. 58 million or 24. 30 % to US$ 9382. 84 million compared to US$7548. 26 million during the same period of the preceding year ? Total remittances: During July-March,2004-05 stood total remittances of the country higher by US$320. 20 million or 12. 9 percent to US$2823. 03 million compared to US$2502. 83 million during the same period of the preceding year ? Gross foreign exchange reserves: Reserve of gross foreign exchange of the BB stood lower at US$3033. 88 million at the end of March,2005 compared to US$3179. 41 million at the end of February. This was, however, higher than US$2653. 50 million at the end of March, 2004 ? Gross foreign exchange balances: Balances of gross foreign exchange held abroad by commercial banks stood higher at US$397. 16 million at the end of March, 2005 compared to US$364. 67 million at the end of February, 2005 and US$312. 1 million at the end of March, 2004 ? The rate of inflation: The inflation rate increased to 6. 38 % in February, 2005 from 5. 52 percent of January, 2005. 2. 3 Introduction on economic development and the evolving of BRAC Bank The context of the financial and economic condition of Bangladesh, 2003-2004 was a remarkable year. September 11 tragedy when deteriorating the world economy, also affected our economy. But effort for implementation of the on going reforms in the financial and others of the economy were strengthened and a pragmatic approach to macroeconomic management was adopted during the year under report.

To bring about desired pace in overall economic activities a moderately accommodative monetary policy was pursued during 2003-2004 in close consonance with the rehabilitation and development programmed. Of course there was a policy for keeping inflection at a tolerable rate. The face of overall economic activities in the country gathered momentum during 2003-2004 for extending agricultural loans at easy terms and for arrangement and supply of agricultural input including fertilizers a fair price. As a result an agriculture friendly environment was created in the country.

Growth rate of GDP has been strengthened during the year mainly due to strong expansion of agriculture sector and significant pickup of export demand right and effective policy at the right time in successful implementation of agriculture rehabilitation program and hard labor of the country’s toiling production contributed to humped production of food crops during the year. As a result, total food grain production increased by 14. 2% bolstering overall output growth of the agricultural sector up from 3. 3% in 2002-2003 to 5. 5% in 2003-2004.

Improved global economic environment led to perceptible buoyancy of demand for Bangladesh export commodities, which also helped increased industrial productions. Growth rate of the industrial sector increased from 3. 2% in 2002-2003 to 4. 3% 2003-2004. As a result, over all growth rate of GDP accelerated from 5. 3% in the previous year to 5. 52% in 2003-2004. The gross domestic savings in the current market prices during the year under report increased by Tk 3999. 80 crore or 10. 3% to Tk 42901. 40 crore and gross investments increased by Tk 5393. 0 crore or 11. 1% to Tk 54150. 5 crore. In this context a new dynamic bank emerged named BRAC Bank, a fully online scheduled commercial bank opened in 2001, is dedicated to offer its clientele truly international standard banking services. BRAC Banks customer friendly product with convenient features is all designed to meet the grouting and changing needs. Most important, The BRAC Bank has a team of expert sales persons who will take banking at the doorsteps of customers. 3. The Organization 3. 1 Introduction

BRAC Bank Limited is a scheduled commercial bank in Bangladesh. It established in Bangladesh under the Banking Companies Act, 1991 and incorporated as private limited company on 20 May 1999 under the Companies Act, 1994. BRAC Bank will be an unique organization in Bangladesh. The primary objective of the Bank is to provide all kinds of banking business. At the very beginning the Bank faced some legal obligation because the High Court of Bangldesh suspended activity of the Bank and it could fail to start its operations till 03 June 2001.

Eventually, the judgment of the High Court was set aside and dismissed by the Appellate Division of the Supreme Court on 04 June 2001 and the Bank has started its operations from July 04, 2001. The importance of financial intermediaries in the development of the overall economy of country cannot be described in short. From the inception of the civilization the banking sector dominate the economic development of a country by mobilizing the saving from the general people and channeling those saving for investment and thus economic development and growth.

In ancient time The importance of commercial banks after the ravage of the liberation war to develop a better economy was severally needed and it is needed now and will be required in future also. In time to time Government of Bangladesh agreed to permit the private commercial banking in the country. BRAC bank will be knowledge based organization where the BRAC Bank professionals will learn continuously from their customers and colleagues world wide to add value.

It will work as a team, stretch, themselves innovate and break barriers to serve customers and create customers loyalty through a value chain of responsive and professional delivery. The bank promotes broad-based Participation in the Bangladesh economy through the provision of high quality banking services. BRAC Bank will do this by increasing access to economic opportunities for all individuals and business in Bangladesh with a special focus on currently under-served enterprises and households across the rural – urban spectrum.

BRAC Bank believes that the pursuit of profit and developmental goals is mutually reinforcing. Increasing the ability of under – served individuals and enterprises to build their asset base and access market opportunities will increase the economic well being for all Bangladeshis at the same time, this will contribute significantly to the profitability of the Bank. BRAC Bank intends to set standards as the Market leader in Bangladesh. It will produce earnings and pay out dividends that can support the activities of BRAC, the Bank’s major shareholder.

Development and poverty alleviation on a countrywide basis needs mass production, mass consumption and mass financing. BRAC Bank goal is to provide mass financing to enable mass production and mass consumption, and thereby contribute to the development of Bangladesh. BRAC Bank intends to set standard as the market leader in Bangladesh by providing efficient, friendly and modern fully automated online service on a profitable basis Aiming at offering commercial banking service to the customers’ door around the country, BRAC Bank limited established 13 branches up-to this year.

This organization achieved customers’ confidence immediately after its establishment. Within this short time the bank has been successful in positioning itself as progressive and dynamic financial institution in the country. The is now widely acclaimed by the business community, from small entrepreneur to big merchant and conglomerates, including top rated corporate and foreign investors, for modern and innovative ideas and financial solution. Thus within this short time it has been able to create an unique image for itself and earned significant solution in the banking sector of the country as a bank with a difference.

The emergence of BRAC Bank Limited is an important event in the country’s financial sector at the inception of financial sector reform. The authorized capital of PBL is Tk. 1000 million and paid up capital of the same bank is Tk. 500 million. ShareholdersNo. of SharesAmount in Tk. Percentage BRAC 3,173,900 317,390,00063. 48% Shore cap Int’l Ltd. 875,700 87,570,00021. 61% Int’l Finance Corp. 949,800 94,980,000 19. 00% Others 600 60,000 0. 01% ______________________ ________ Total5,000,000 500,000,000 100. 00% [pic] The Chairman of the Bank is Mr.

Fazle Hasan Abed. Now the Managing Director of the bank is Mr. Ehsanul Haque. The bank has made a reasonable progress due to its visionary management people and its appropriate policy and implementation. 3. 2 Vision BRAC Bank will be a unique organization in Bangladesh. It will be a knowledge-based organization where the BRAC Bank professionals will learn continuously from their customers and colleagues worldwide to add value. They will work as a team, stretch themselves, innovate and break barriers to serve customers and create customer loyalty through a value chain of responsive and professional service delivery.

Continuous improvement, problem solution, excellence in service, business prudence, efficiency and adding value will be the operative words of the organization. BRAC Bank will serve its customers with respect and will work very hard to instill a strong customer service culture throughout the bank. It will treat its employees with dignity and will build a company of highly qualified professionals who have integrity and believe in the Bank’s vision and who are committed to its success. BRAC Bank will be a socially responsible institution that will not lend to businesses that have a detrimental impact on the environment and people. 3. Mission BRAC Bank will adhere to highly professional and ethical business principles and internationally acceptable banking and accounting standards. Every BRAC Bank professional will need first of all a commitment to excellence in all that he/she does, a keen desire for success, a determination to excel and a drive to be the best 3. 4 Goals BRAC Bank will be the absolute market leader in the number of loans given to small and medium sized enterprises through out Bangladesh. It will be a world class organization in terms of service quality and establishing relationships that help its customers to develop and grow successfully.

It will be the Bank of choice both for its employees and its customers, the model bank in this part of the world 3. 5 Objectives The objective of BRAC Bank Limited are specific and targeted to its vision and to positioned itself in the mindset of the people as a bank with difference. The objective of BRAC Bank Limited are as follows: • Building a strong customer focus and relationship based on integrity, superior service. • To creating an honest, open and enabling environment • To value and respect people and make decisions based on merit • To strive for profit & sound growth To value the fact that they are a member of the BRAC family – committed to the creation of employment opportunities across Bangladesh. • To work as a team to serve the best interest of our owners • To relentless in pursuit of business innovation and improvement • To base recognition and reward on performance • To responsible, trustworthy and law-abiding in all that we do. • To finance the international trade both in import and export. • To develop the standard of living of the limited income group by providing Consumer Credit. To finance the industry, trade and commerce in both the conventional way and by offering customer friendly credit service. • To encourage the new entrepreneurs for investment and thus to develop the country’s industry sector and contribute to the economic development. 3. 6 Bank’s Culture Bank has adopted trust as a corporate value which is acronym for team work, respect for all people, unquestionable integrity, excellence in everything BRAC Bank of SME do, Sense of urgency in getting things done and total commitment.

All employees are expected to conduct themselves in accordance with the rules and regulations of the bank. 3. 7 Bribes and inducements It is not acceptable to offer or receive any form of bribe or inducement, or direct anyone else to do so on behalf of the bank. The following activities are strictly prohibited: • Payment or other benefits which violate the country’s law or the bank’s policies • Payment or other benefits for procurement of business • Payment or other benefits to public officials or politicians t induce them to exercise their discretion in the bank’s favor 3. Management of BRAC Bank Limited Boards of directors are the sole authority to take decision about the affairs of the business. Now there are 5 directors in the management of the bank. All the directors have good academic background and have huge experience in business. Mr. Fazle Hasan Abed is the chairman of the bank. The board of directors holds meetings on a regular basis. 3. 9 Departments of BRAC Bank Limited If the jobs are not organized considering their interrelationship and are not allocated in a particular department it would be very difficult to control the system effectively.

If the departmentation are not fitted for the particular works there would be haphazard situation and the performance of a particular department would not be measured. BRAC Bank Limited has does this work very well. There are ? Human Resources Department ? Financial Administration Department ? Loan Administration Division ? Credit Division ? SME Division ? Internal Control & Compliance Department ? Marketing & Product Development ? Remittance Operation Department ? Treasury Division ? General Services division ? Information Technology Department 3. 10 Business Units

There are five different business units generating business BRAC Bank Limited: i) Small & Medium Enterprise (SME) ii) Corporate Banking iii) Retail Banking iv) Treasury v) Remittance Services All the units are being operated in a centralized manner to minimize costs and risks. 3. 11 Products and Services i) Small & Medium Enterprise (SME) SME unit is dealing with small-scale loan for small and medium enterprise, which is known as “ANONNO”. “ ANONNO”? Any potential small and medium trading, manufacturing and service enterprises all over the country can apply for “Anonno” within a limit of Tk. . 0 lac to Tk. 30. 0 lac. Potential women entrepreneurs will also get the facilities of “Anonno”. The aim is to play a role in the socio-economic development of the country by expansion of business as well as creation of employment. Loan terms are of different term like 3, 4, 6, 7, 9, 12, 15, 18, 24, 30, and 36 months. In case of fixed assets purchase more than 18 months term is applicable. Loan is provided for purchase of fixed assets, inventory and on receivables. Loan can be repaid i) By equal monthly installments (with interest) ii) By one single payment at maturity.

In this case, partial Interest will be paid quarterly and residue at maturity along with principal. Enterprise Selection Criteria to provide ‘Anonno’ facility • The Entrepreneur must be physically able and between 25-50 age • The business must be legally valid, i. e. have valid trade license, income tax or VAT registration (Wherever applicable). • The business must be in operation for at least one year • The business must have all necessary infrastructural facilities and adequate work force • The entrepreneur must be socially acceptable The entrepreneur must have clear-cut and specific source of income and ability to save • The business must have a defined market with clear growth potentials ii) Corporate Banking BRAC Bank’s Corporate Banking team provides banking services as well as financial partnership with local large and medium organization. Services that corporate team provides are • Debt capital • Equity capital • Ongoing relation support • Financial markets • Lease Finance iii-a) Retail Banking BRAC Bank’s Retail Division is being operated centrally.

Under the Retail Banking Division all the branches, which acts as sales & service center, are reportable to Head of Retail Banking. Different products of Retail Banking are as follows: i) Deposit Products ii) Lending Products iii) Locker Services iv) Remittance Services etc. The product and services that are currently available are given below: Depository Product BRAC Bank Limited is now offering 6 depository products for mobilizing the savings of the general people: • Savings A/C • Current A/C • STD A/C • Fixed Deposit A/C • DPS A/C Loan Product

BRAC Bank is offering the following loan and advance product to the client for financing different purpose that fulfill the requirements of the bank and have good return to the investment as well as satisfy the client. The loan and advance products are: iii-b New Product and services The bank has its concentration for new product and services development for satisfying its customer and increasing its customer base. The bank firmly believes that technology based product and services will play significant role in the performance of the bank as people are getting more conscious about their service quality.

They prefer now faster service with least cost. For delivering faster service the bank has introduced online banking service from the very beginning. There are some new products and services that BBL has lately introduced. These are: ? Now Loan ? Salary Loan ? Credit card Services (Proposed) ? Islami Banking Services (Proposed) ? ATM services BRAC Bank Limited is always emphasizing the improvement of banking service and betterment of living standard of the general people of Bangladesh. The product and services are targeted to the lower level to the upper level income group in deposit collection.

For lending, the services are made if certain requirements are fulfilled. iv) Treasury iv-a) Money Market Desk BRAC Bank has a strong presence in the Treasury Market in Bangladesh. The Money Market Desk of the Treasury Division mainly deals in Bangladeshi Taka transactions. The basic activities undertaken by the Money Market Desk are: ? Management of Statutory Reserves viz. Cash Reserve Ratio (CRR) & Statutory Liquidity Ratio (SLR) ? Daily Funds & Liquidity Management ? Investment Management Iv-b) Products and services ? Call/Overnight Lending & Borrowing Term Money Borrowing & Lending ? Repurchase Agreement (Repo) ? Treasury Bills (T-Bills) v) Secured Remittance Services(SRS) BRAC Bank has introduced an innovative Remittance services for Bangladeshis living abroad with some unique features compared to any of the existing Remittance Program. Bangladeshi expatriates can now send their money to their relatives any where in Bangladesh even to the remotest part within 24 hours at a reasonable cost and Competitive exchange rate vi) Information Technology BRAC Bank Ltd. is currently running countrywide true online fully automated baking system.

The system allows their customers to do transactions all around the country. The bank cheques are all marked with Barcodes that makes each cheque unique and disallows it to be duplicated. All the signature and customer information with their pictures can be verified from any console at any branch on the bank. We also ensure Offsite backup and Disaster Recovery. Their Goal is to provide a true online baking system, which will not only fulfills the demand of time but also set new benchmarks in twenty-first centuries banking world. Special Feature • All Branches are computerized 99% banks work is automated using latest technology. • BRAC Bank is a member of SWIFT community • Intercity Branches are connected via optical fiber backbone network. • 3. 12 Branches BRAC Bank Limited is fast growing commercial banks in our country. The said bank has established a good operating network throughout the country. It has 14 branches throughout the country till October 2005. 3. 13 Performance of BRAC Bank Limited BRAC Bank Limited will be the most successful private sector commercial bank in our country, though it started its operation few years back.

It has achieved the trust of the general people and made reasonable contribution to the economy of the country by helping the people investing allowing credit facility. 3. 14 Capital Fund The authorized and paid up capital of BBL is TK. 1000 million and TK. 500 million respectively. The paid up capital is one of the strongest in the banking industry. The bank going to raise its paid up capital in the month September, 2005 by TK. 500 million with issuing public share of 5,00,000 of TK. 100 each.. [pic] 4 Overview and prevailing process of SME Loan 4. 1 Basic of SME Loan The most valuable natural resource of Bangladesh is its people.

As a nation we struggled for our independence and now the attainment of economic uplift is the main goal. Micro lenders are working here in the financial field, providing very small amount and on the other hand regular commercial banks have been providing bigger amount of loans to larger industries and trading organizations. But the small and medium entrepreneurs were overlooked. This missing middle group is the small but striving entrepreneurs, who because of lack of fund cannot pursue their financial uplift, as they have no property to provide as equity to the commercial banks.

With this end in view-BRAC Bank was opened to serve these small but hard working entrepreneurs with double bottom line vision. As a socially responsible bank, BRAC Bank wants to see the emancipation of grass-roots level to their economic height and also to make profit by serving the interest of missing middle groups. 50% of its total portfolio usually collected from urban areas, are channeled to support these entrepreneurs who in future will become the potential strength of our economy. BRAC Bank is the market leader in giving loans to Small and Medium Entrepreneurs.

They have been doing it for the last five years. 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 tries to develop the economy of a country. So reasons for this program from the viewpoint of BRAC Bank Ltd: SME Products Offered By BRAC Bank Ltd. (BBL) 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. Eligibility 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 Maximum Amount From minimum BDT 3 lac up to maximum of BDT 8 lac Features 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 Apurbo Rin In order to help our SME borrowers for financing working capital or to purchase fixed assets, BRAC Bank offers APURBO.

It caters to the need of entrepreneurs who are operating in trading, manufacturing, service, agriculture, non-farm activities, agro- based industries and other sectors of our economy. Eligibility Entrepreneurs having a minimum of 3 years of some business activities A business which must be a going concern for 3 years Age minimum 25 years and maximum up to 60 Years Maximum Amount Starting from BDT 8 lac to maximum of BDT 30 lac Features Without mortgage for loan below 10 lac Simple loan processing for expanding your business Quick disbursement Disbursement in one or two installments Flexible monthly repayment plan

Pathshala Rin This is a loan designed to meet the needs of small and medium sized private educational institutions, such as kindergartens, schools and colleges etc. Eligibility A small & medium educational institution that is in operation for minimum 3 years The institution should be sole proprietorship, partnership, Private Limited Company, or Society The educational institute must be a profit making concern Maximum Amount Minimum BDT 3 lac to maximum BDT 30 lac Features Without mortgage for loan below 10 lac Loan for fixed assets purchase & civil construction Loan repayment can be spread up to 4 years

Minimum documentation Monthly repayment plan Quick disbursement Flexible interest rate based on security Aroggo Rin This loan is suitable for private clinics, diagnostics centers and doctors’ chambers to purchase fixed assets under equated monthly installments. Eligibility Institutions with at least 2 years in operation & a profit making concern Doctors having 5 years of experience Maximum Amount Minimum of 3 lac to maximum of 30 lac Features Loan without mortgage up to 8 lac Easy loan processing Loan repayment schedule is spread up to 3 years 1% loan processing fee Flexible interest rate based on security

Digoon Rin DIGOON RIN is a loan facility for Small and Medium enterprise. This product’s main objective is to help various Small and Medium entrepreneurs to meet their short-study cash flow shortages or bridge the fund-flow gaps. Double loan is based on your deposit. For your business expansion, you do not need to encash your savings rather you can take double amount of loan on your deposit. Eligibility Entrepreneur having minimum 2 years of business activities The business which must be a going concern for 2 years Aged between 18 years to 55 years Maximum Amount Minimum of 5 lac to maximum of 30 lac BDT

Features Double amount of loan on your deposit Attractive return against the deposit Flexible repayment plan in monthly installment and single installments Supplier Finance SUPPLIER FINANCE 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 gaps. Eligibility 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 Maximum Amount Minimum BDT 3 lac up to maximum BDT 30 lac Features Equal monthly installment and revolving loan facility 1% of loan amount as the processing fee 4. 2 SME Network coverage by BRAC Bank |[pic] | 4. 3 Security Documentation Required for SME Loan A document is a written statement of facts and a proof or evidence of particular transaction between parties involved.

While allowing any disbursements against credit facilities to borrowers, it should be ensured that prior to any disbursements; security documentation is fully and properly completed. 4. 4 Purpose of Decorate Documentation and its Importance Documentation is necessary for the acknowledgement of a debt and its terms and conditions by the borrower and the creation of charge on the securities in favor of the bank by the borrower. Correct and proper documentation allows a bank to take legal measures against the borrowers in the non-payment of the debt.

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. 4. 5 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 suitable: • 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 Pratirakkha sanchay patra, Bangladesh sanchay patra, ICB unit certificates and wage earner development bond, all considered Quasi or Near cash items.

All these instruments, one lien, have to be confirm by the • 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 issuer. • Shipping documents of imported goods 4. Land related securities documentation process Each SME unit office will lilies with at least two local lawyers who will work on behalf of the bank. These always will be employed whenever a borrower and where the security will be landed and immovable property accept a loan sanction. Any one of the lawyers will be provided with photocopies of all the relevant land related documents and while handing over show the original documents to them,. The lawyers will carry out checks of the originals and if satisfied returned to the borrower.

The documents generally provided are: • 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-registerar’s records. • Duplicate Carbon Receipt or DCR • Latest Khajna or land rent receipt • Purchase such as CS Khatian, SA Khatian and BS Khatian • Mouja Map Municipal rent receipts if the land falls within a municipal area The lawyer will then carry out a search at the Sub-registrar of land’s office to check if the proffered land is actually registered in the name of the proposed mortgagor and whether the said land is free from any encumbrances. The Sub-register’s office, which means that the land or immovable property can be mortgaged to the bank, then the lower will provide his own opinion on the acceptability of the property, whether it is legally held and explain the chain of ownership.

If all is acceptable, the lawyer will draw up the Mortgage Deed that will be registered, the irrevocable power if attorney to sell the land and the Memorandum of Deposit of Title Deed. The lawyer will have the borrower or the Mortgagor, if different or 3rd party, sign the documents in front of the Sub-registrar of land to register the mortgage, The CRO must ensure that the receipt for the original Mortgage deed must be signed off (Discharged) at the back of the receipt so that the bank may obtain the originals in the future.

The borrower will bear all the charges and will pay directly at the Sub-Registrar’s office including the cost of the stamp paper required. The cost of the lawyer will also be realized from the borrower be an account payee cheque in favor of the lawyer and handed over to the lawyer straight away. The charges related to the creation of mortgage and other associated costs are incorporated in a separated sheet and are attached herewith.

The CRO will have all other security documents, as sent by SME HO, signed by the borrower and hand carry all the security documents including all the original land documents and deliver those to the credit administration officer who will check the list of documents and receive those through a check list in writing. The credit administration officer once satisfied will prepare the disbursement memo to disburse the loan. 4. 7 There are two type of mortgage’s that are popular and usually accepted in Bangladesh: ) Equitable Mortgage or Memorandum of Deposit of Title Deeds It is created by a simple deposit of title deeds supported by a Memorandum of Deposit of Title Deeds along with all the relevant land documents. All the searches and verification of documents as stated above must be carried out to validate the correct ownership of the property. This deed also provides the bank power to register the property in favor of the bank for further security, if needed. Registered Mortgage It is created by an execution of a Mortgage Deed registered irrevocably in favor of the bank at the Sub-Registrar of land’s office.

This virtually gives the bank the right to posses and self if accompanied with a registered irrevocable power of attorney to sell the property executed by the owner of the property, in case of default. 4. 8 Basic Charge Documents Sanction Letter Once a loan is approved, the borrower is advised by a ‘Sanction or offer letter’ which states the terms and condition s under which all credit facilities are offered and which forms an integral part of there security documentation. If the borrower accepts, then a contract between the bank and the borrower is formed and which both party are obligated to perform.

Accordingly, all other charge documents and securities are drawn up and obtained. A standard sanction letter is attached herewith. All documents shall be stamped correctly and adequately before or at the time of execution. An un-stamped or insufficiently stamped document will not form basis of suit. Stamps are of 4 (Four) kinds. These are Judicial, Non judicial, Adhesive and Embossed impressed. Documents to be executed (Signed) by the borrowers concerned must be competent to do so in official capacity. Following precautions should be taken at the time of execution of the security documents: The signature on the documents should be made in the presence of the CRO. The CRO should sign as witness on all charge documents. • The document are to be filled in with permanent ink or typed • If the document consist more than I page, the borrower should sign on each page • If the signature of any third party is required to be obtained whose specimen signature is not available, then the main applicant should verity the specimen signature of the third party • No document or column in any document should remain blank • As far as possible there should be no erasure, cancellation or alternation in the document.

If, however, there is any correction, overwriting or alteration, then that must be authenticated by a full signature of the signatory. After stamping and execution of documents, the question of registration comes up. However, not all documents are required to be registered. For the extension of any type of credit/loan facility, the following loan documents, which are considered basic, should be obtained from all borrowers: • Demand Promissory Note • Letter of Continuity (This is not always taken if there is only loan disbursement) • Letter of Arrangement • General Loan Agreement Letter of Disbursement • General Loan Agreement • Letter of Disbursement; Basically a letter requesting disbursement of the loan • Letter of Installment, in case the facility is to be repaid in installment 4. 9 Other Basic Charge Documents i) Demand Promissory Note (DP Note) ii) Letter of Continuity iii) Letter of Arrangement iv) General Loan Agreement v) Letter of Disbursement 4. 10 Other Security Documents i) Letter of Undertaking ii) Letter of Hypothecation of Goods & Stocks and Book Debt and Receivable: iii) Letter of Hypothecation of Plant & Machinery v) Letter of Lien v) Right of Set Off vi) Letter of Disbursement vii) Personal Guarantees 4. 11 Terms and Conditions of SME Loan The SME department of BRAC Bank will provide small loans to potential borrower under the following terms and condition: • The potential borrowers and enterprises have to fulfill the selection criteria • The loan amount is between tk 3 lacs to 30 lacs. • SME will impose loan processing fees for evaluation / processing a loan proposal as following : Loan AmountLoan Processing Fee 3 lacs to 5 lacsTk 7500 5. 01 lacs to 15 lacs Tk 10,000 5. 01 lacs to 30 lacsTk 15,000 • Loan can be repaid in two ways: a) In equal monthly loan installment with monthly interest payment, or b) By one single payment at maturity, with interest repayable a quarter end residual on maturity • Loan may have various validates, such as, 3 months, 4 months, 6 months, 9 months, 12 months, 15 months, 18 months, 24 months, 30 months and 36 months. • The borrower must open a bank account with the same bank and branch where the SME has its account • Loan that approved will be disbursed o the client through that account by account payee cheque in the following manner: Borrower name, Account name, Banks name and Branch’s name • The loan will be realized by 1st every months, starting from the very next months whatever the date of disbursement, through account payee cheque in favor of BRAC Bank Limited A/C. With Bank’s named and branches name • The borrower has to issue an account payable blank cheque in favor of BRAC Bank Limited before any loan disbursement along with all other security. The borrower will install a signboard in a visible place of business of manufacturing unit mentioned that financed by “BRAC Bank Limited”. • The borrower has to give necessary and adequate collateral and other securities as per bank’s requirement and procedures. • SME, BRAC Bank may provide 100% of the Net Required Working Capital but not exceeding 75% of the aggregate value of the Inventory and Account Receivables. Such loan may be given for periods not exceeding 18 months. Loan could also be considered for shorter periods including one time principal repayment facility, as stated in loan product sheet.

In case of fixed asset Financing 50% of the acquisition cost of the fixed asset may be considered. While evaluating loans against fixed asset, adequate grace period may be considered depending on the cash generation after the installation of the fixed assets. Maximum period to be considered including grace period may be for 36 months. 4. 12 Selection of Potential Enterprise for SME Enterprise Selection Criteria The success of SME will largely depend on the selection of a business and man behind it. In terms 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 aw 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. Entrepreneur Selection Criteria In order to understand the capability of the management behind the business, the following should be assessed: 1. The entrepreneur should be physically able and in good health, preferably between the age of 25-50.

If he/she is an elderly person closer to 50, it should be seen what the succession process will be and whether it is clearly defined or not. 2. The entrepreneur must have the necessary technical skill to run the business, i. e academic background or vocational training, relevant work experience in another institution or years of experience in this line of business. 3. The entrepreneur must have and acceptable social standing in the community (People should speak highly of him), he should possess a high level of integrity (Does not cheat anyone, generally helps people), and morally sound (Participates in community building) 4.

The entrepreneur must possess a high level of enthusiasm and should demonstrate that he is in control of his business (Confidently replies to all queries ) and has the ability to take up new and fresh challenges to take the business forward. 5. Suppliers or creditors should corroborate that he pays on time and is general in nature 6. Clear-cut indication of source of income and reasonable ability to save. 4. 13 Guarantor Selection Criteria Equally important is the selection of a guarantor. The same attribute applicable for an entrepreneur is applicable to a guarantor.

In addition he should posses the followings: 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 responsibility 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

Micro Environment Analysis Marketing management job is to attract and build relationship with customers by creating customer value and satisfaction. It depends on other factors in the organization microenvironment- suppliers, customers, competitors; various publics, which make up the organizations, value delivery system. The company needs to study its customer marketer closely in terms of Small and Medium Enterprise of BRAC Bank Limited and their customers group is specified. Their target group is only Small and Medium Enterprise client. The CRO closely monitor and try to build good report with clients.

On the other hand corporate clients are different to have the loan. Each market type has special characteristics that call for careful study by the marketer. In terms of SME, most clients are carrying out trading business rather than manufacturing business. Few clients are attached with service business like pharmaceutical, hospital, homeopath etc. In the trading business clients want loans to meet their working capital requirement. On the other hand, client want 10-15 for purchasing fixed assets. In our country mostly 35-40 years old clients are carrying out loans regarding the type of their business.

The clients who interested to take the loan of SME then they have maintained at least one year running business. It is a policy of this bank because in the mean while client can understand his business and can set a future plan. The educational qualification of our clients is very poor. Clients are undergraduate but carry out good business. SME support their clients who are carrying out good business and also give suggestions and guidelines to develop their business. If any client has maintain loans with other banks then SME is restricted to provide loans for that clients.

The client to have a clearance certificate to get the loan from the BRAC bank. It has been found out that in our country most clients need small loans to develop their own business. The world is being globalized and modernized. So by think of it client take risks to enhance and develop their business and BRAC bank is a good helping hand to help them. In our country, clients want more time to repay the loan. BRAC bank gives adequate time for the client to repay the loan whether they can get benefit from it. Clients are very happy to repay the loan by equal monthly installment.

Clients know the right time to repay the loan at the right place. But in the pick season, most client wants short fund requirement to carry out good business. Regarding interest rates, clients are not talk about more because clients get the loan at the right time from the BRAC bank. Clients are also happy by the issuance of security preferences because they do not have to provide any collateral security for hypothecation or unsecured loans. SME of BRAC bank networks has everywhere in Bangladesh. So clients can have the SME loans wherever his business exists in the country.

Also clients get the fast service from the BRAC bank. The purpose of this loan is the economic development in our country, which might divert the clients mind after having the loans for expansion. Many clients have ambition to expand from trading to manufacturing business to generate more profit. When a CRO would visit a business, the client must provide the proper and right information and show the right documents for justifying a good client. If any CRO feel bad smell in the business then the CRO reject that client without concerning the management.

So clients should be feel comfortable to provide proper information to have the loan. Regarding the service by the CRO, almost all clients are satisfied by get these quick facilities from them. Though it is pioneer division of this bank, so client should be fully satisfied by having this facility. [pic] Ratios Analysis of BRAC Bank Ltd. 5. 1 Return on Equity The return on equity implies on return that a firm generates against its common equity. So this is very important to increase net worth of the bank, maximize the value of the share, reputation of the bank, less risky of the investment.

For this, the banks always try to increase its return on equity. Return on equity = (Net Income/Total Equity) [pic] 100 |2002 |2003 |2004 |2005 |2006 |2007 | |-18. 04% |7. 65% |16. 82% |24. 61% |49. 6% |63. 3 | [pic] From this table we can see that ROE was increasing from 2003 to 2005. The BRAC Bank Limited is in better position incasing of ROE.

So we can say that the BRAC Bank Limited was increased net worth, maximize the value of the share, reputation of bank is high and performed less risky investment. 5. 2. Return on Asset The rate of return on assets (ROA) measures the ability of management to utilize the real and financial resources of the bank to generate returns. ROA is commonly used to evaluate bank management. Return on Asset = (Net Income /Total Assets) [pic]100 |2002 |2003 |2004 |2005 |2006 |2007 | |-1. 3% |0. 67% |0. 99% |1. 14% |0. 787% |0. 644% | From the analysis, we see that Return on Assets (ROA) increased year to year. So we can say that the BRAC Bank Limited has the ability to utilize the real and financial resources to generate return. 5. 3 Equity Multiplier: A bank’s equity multiplier compares asset with equity such that large values indicate a large amount of debt financing relative to stockholders equity. Thus EM measures financial leverage and represents both a profit and risk measure.

EM affects a banks profit because it has a multiplier impact on ROA to determine banks ROE. Equity multiplier = Total assets/ Total equity |2002 |2003 |2004 |2005 |2006 |2007 | |9. 83 |11. 47 |16. 97 |21. 56 |14. 18 |15. 1 | [pic] From the above figures, we see that Equity multiplier has an increasing trend. From this ratio, since the bank is profitable, equity holders get more profit. 5. 4 SME Loan Ratio:

The SME loan ratio indicates the extent to which assets are devoted to SME loans as opposed to other asset including cash, securities and plant and machinery. SME Loan ratio = (Net loans and advances /Total asset) [pic]100 |2002 |2003 |2004 |2005 |2006 |2007 | |49. 80% |63. 19% |58. 11% |63. 87% |65. 11% |70% | [pic] [pic] [pic] SWOT Analysis: SWOT analysis is an important tool for evaluating the company’s Strengths, Weaknesses, Opportunities and Threats.

It helps the organization to identify how to evaluate its performance and scan the macro environment, which in turn would help organization to navigate in the turbulent ocean of competition. Strengths: Company reputation: BRAC bank has already established a favorable reputation in the banking industry of the country particularly among the new comers. Within a short period of time, BBL has already established a firm footing in the banking sector having tremendous growth in the profits and deposits. All these have lead them to earn a reputation in the banking field

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

Many jobs are performed in groups of two or three in order to reduce the burden of the workload and enhance the process of completion of the job. People are eager to help each other and people in general are devoted to work. Weaknesses: Advertising and promotion of SME loan: This is a major set back for BBL and one of its weakest areas. BBL’s adverting and promotional activities are satisfactory but in case of SME loan is not advertised well. It does not expose its SME product to general public and are not in lime light. BBL does not have neon sign or any advertisement for SME loan in the city.

As a result people are not aware of the existence of this bank. Number Of Branches: To provide the banking service to the nation, other private commercial banks have already operate in different location of the country. This is happen because BRAC Bank starts their operation later than many other private commercial banks. This is a wick point for BRAC Bank from this point of view. Low remuneration package : The remuneration package for the entry and the mid level management is considerably low. The compensation package for BBL entry level positions is even lower than the contemporary banks.

Under the existing low payment structure, it will be very difficult to attract and retain higher educated employees in BBL. Specially CRO’s are not satisfied with compensation package provided to them. Opportunities: Large Market: The area of Bangladesh is not big enough, but its number of citizen is large. Huge number of Small and Medium Entrepreneurs are operating their business here. So it is an opportunity for any bank to serve in this large potential market “BRAC” is a popular sound: BRAC is one of the largest NGO of the world and it is operating its activities in Bangladesh. People in Bangladesh always get this NGO beside them.

For this BRAC has a faith and popularity among Bangladeshi people. It is an opportunity for BRAC Bank Ltd. to utilize this popular name. Difficult To Start A New Bank: Now a day it is difficult to open a new private commercial Bank. Because to operate a new Bank it is essential to fulfill huge procedure. For this government policy there is less possibility to see a new bank in this under developed country. This can be consider as an opportunity for BRAC Bank. Threats: Multinational banks: The emergence of multinational banks and their rapid expansion poses a potential threat to the new growing private banks.

Due to the booming energy sector, more foreign banks are

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