The managing director of Shahjalal  Islami Bank, Abdur Rahman Sharker has observed that despite global economic recession, poor infrastructure and volatile capital market, the banking sector of Bangladesh has been performing well.

In an exclusive interview with the Independent, he however, pointed out that default culture, intensive competition, vulnerable capital market, government borrowing from banking sector, absence of secondary market for treasury bill/bond hampered the growth of banking sector.

 Excerpts:How do you observe the performance of banking sector in the country?Up to September 2011 total deposit (excluding interbank and govt deposit) reached  3,959,420 million Taka whereas total deposit at the end of December 2010 was 3,461,377 million Taka that is 14.39% growth over December 2010.

Bank Credit increased by 14.33% to 4,342,849 million taka in September 2011 from 3,798,439 million Taka in December 2011. However, due to increase of Government borrowing, among the component of Bank credit, exceptional growth was found in Bank Investment (29.29%). Except income from capital market service, most of the banks able to secured tremendous growth of profit in others areas of its operation like net interest income, commission, exchange, other investment income etc.

Despite global economic rescission, infrastructure shortage, volatility of capital market, banking sectors of Bangladesh are performing well. What are the areas of your bank working ?We work in every areas of banking operation like deposit mobilization, investment, export/import business, foreign remittance, guarantee business etc.

We are present in every sector of business/industries like, readymade garment, textile, energy, transport, water and sanitation, environment, rural development education, social protection and health, science and technology, financial markets, agriculture, SME, automobiles, steel, chemicals, and pharmaceuticals etc.What are the new  services in your bank?

This year we have introduced school banking, off-shore banking, women entrepreneur finance, agro finance etc.Do you think there is any necessity of new banks? There is no denying the fact that the financial system plays a significant role in the economic development of a country.

The importance of an efficient financial sector lies in the fact that it ensures domestic resources mobilisation, generation of savings, and investments in productive sectors. In fact, it is the system by which a country’s most profitable and efficient projects are systematically and continuously directed to the most productive sources of future growth.

Moreover, we know that a significant percentage of rural population is not covered by banking sector, Unauthorised money collecting and lending organisations deceive them. However, Bangladesh Bank should have comprehensive research about the requirement of more banks in the light of long term GDP growth, long term monetary policy and other economic and social factors.

Bangladesh Bank also has clear guidelines for setting up new bank as well as merger and liquidation of the weak bank. Political considerations should not be given importance while awarding license for new bank.What is the overall performance of your Bank?Despite liquidity crunch, capital market volatility, we have been able to achieve deposit growth by 25.44%, investment growth by 25%.

Our capital adequacy ratio is 10.65% which is above the requirement of 10% as per Basel-II. This year we are going to open 10 new branches. Our income from core banking business significantly increased from that of previous years.  What is the target for current and next year?Current year is already nearing its end.

In the next year we have plans to expand our business and to increase our branch network throughout the country, we have also plans to set-up more ATM booths, introduce new deposit and investment products specially for SME and agro based products and mobile banking to include the segment of rural people outside bank coverage.

Who are the main targets of your loan disbursement projects?In Bangladesh, demand for loan product is dominated by corporate clients. However, we are taking initiatives to expand credit in SME, agriculture, and women entrepreneur sectors covering the need of rural people providing financial services. 

How do you evaluate the overall condition of your bank?Strong capital base, quality assets (very low default investment), prudent and efficient management team, professional dedicated board members, remarkable growth of deposit, investment, profit, diversified customer base bring the bank in strong footing among the third general banks in Bangladesh.

What do you think about reaching out to the banking services to those not covered by banking sector ? People living at the base of the pyramid are typically “unbanked,” meaning they do not have bank accounts and cannot access related financial services, such as consumer credit, home mortgages, or business loans.

SJIBL is working with businesses and entrepreneurs to introduce new tools and payment systems that enable low-income people to gain access to quality banking services, as well as income-generating opportunities. SJIBL is pioneering new directions for companies to use micro-credits as a vehicle to bring innovative solutions to the pressing needs of the majority.

We are emphasising, opening of more branches (agri/SME branch) to rural ‘unbanked’ areas of the country.What about the banking services in the villages? How many branches of your banks are located in the village areas?There is no doubt that a significant percentage of village people is ‘unbanked’ and we are trying our best to reach village people. At present we have 22 rural branches out of 63 branches.

This year we got license for 3 more rural branches. Do you want to introduce mobile banking, if yes, then when and how?Yes, we are actively working on it and hopefully by 2012 we will introduce mobile banking.What is your future plan and programme to expand your service and network?In future, we have plans to diversify our service throughout the country through introduction of new, innovative deposit and investment product, ATM service, mobile banking, full fledged online banking, priority banking etc. What about the default loan culture?

What are the remedial measures you suggest?Persistent loan defaults has become the  order of the day in developing countries. There has been hardly any bank or financial institutions in developing countries which has not experienced persistent loan default. Loan defaults occur when borrowers are not willing or able to repay loans. Loan defaults are one of the critical problems in banking industry in Bangladesh.

Following may reduce default loan culture:1. Awareness among the borrower that bank deals with public money which should be repaid in time.2. Strengthen and ensure internal control mechanism.3. Formation of loan workout department or problem loan handling department in the individual banks.

4. Keeping bank free from all sorts of influences and rationalising and increasing the efficiency of the manpower5. Rescheduling should not be allowed for more than two times.6. Quicken legal process7. Ensuring effective supervision of Bangladesh Bank by increasing the efficiency of human recourses.8. Extending cooperation to loan defaulters by the administration should be stopped.

9. Ensuring ethical standard and effective cooperation among bankers, legal advisers and court as well.10. Finding out means for stopping frequent stay-orders by the courts11. Making provisions to allow only large loans to make writ applications to special bench of High Court.

12. Providing severe punishment to corrupt bankers.How do you evaluate the overall banking sector compared to the banking on global perspective?Compared to global perspective, banking sector of Bangladesh is more resilient to risk, because of its capital structure (significant portion of capital are Tier-I-crore capital), Bangladesh Bank’s strong vigilance, absence of derivative products, diversification of products, insignificant exposure to foreign market, strong remittance inflows, commitment to fulfill its social responsibilities, strong customer base, growing market, in-house practice of corporate governance etc..

However, default culture, intensive competition, vulnerable capital market, government borrowing from banking sector, absence of secondary market for treasury bill/bond hampered the growth of banking sector.

The Independent/Bangladesh/ 29th Dec 2011