Sajjadur Rahman

The use of technology has widened the reach of banking services. And a big part of growth of the industry can be attributed to the surge in retail banking

ASMA Begum, 45, a widow and mother of two, was tense about her daughter, who was eligible to wed. Her husband died 10 years back and left her nothing but a small piece of land at Bashabo in Dhaka. It was then that her son, a college graduate, informed her of wedding loans that several banks offer.

She took in loans of Tk 1 lakh, to be returned in three years at 18 percent, from a private commercial bank. She pays around Tk 3,300 a month as installment from the income from house rent.

Again, an executive of a private organisation took Tk 2 lakh in loans from a bank to send his younger brother abroad. The total process took just one week.

The retail-banking environment is changing fast. A banker from the 1980s cannot imagine the pace at which banks are operating today. Till 2000, banks carried out conventional banking, offered a few deposit and lending products.

Now days, banks offer loans for housing, cars, education, credit cards, marriage, travel, medical treatment, car CNG conversion, festivals, renovation and what not.

Bankers said the increasing use of modern technology has enhanced both the reach and accessibility of banking services. A big part of growth of the banking industry can be attributed to the surge in retail banking.

Retail banking is typical mass-market banking, where individuals use local branches for banking. Services broadly include deposits, lending, cards and remittance.

Bangladesh is witnessing steep growth in the uptake of retail loans for the past 5-6 years. Retail banking has been growing at double-digits for the past few years, riding on the growing middleclass. Now, all private, both local and foreign, and state-owned banks have come up with more and more retail products to attract customers.

In Bangladesh, the total size of the retail banking industry will be at around $500 million or Tk 3,500 crore, excluding SME, according to Standard Chartered Bank Bangladesh, the pioneer and market leader of retail banking in Bangladesh.

Standard Chartered's retail banking is growing at 15 percent a year, against market growth of 13 percent, said Bitopi Das Chowdhury, head of corporate affairs of the bank.

Brac Bank is also moving fast in grabbing market share. The bank is strengthening its foothold, both in terms of network and products.

“We develop products and services on the day-to-day needs of the customers,” said Abedur Rahman Sikder, head of alternate banking of Brac Bank.

The bank has developed many products and customer touch points in the last five years. In addition to deposit and lending products, the bank has developed card products, internet banking, mobile banking, e-commerce and automated teller machines (ATM).

Recently, Brac Bank introduced Hajj cards and travel cards for customer convenience. The bank's debit card business has also been growing fast. It currently has 250 ATMs of its own and developed partnerships with a number of banks to provide easy services to its clients.

“We also want to spread operations in the rural areas with our ATM services,” said Sikder.

Bangladesh Bank (BB) statistics show, in view of the growing demand for consumer loans, the commercial banks have come forward with loans in different areas, such as purchase of flats and household durables, educational expenses, and the wider use of credit cards.

A BB study shows the growth of credit for flat purchase was recorded at 35.9 percent at the end of September 2009 from September 2008, while consumer loans in consumer goods, credit cards, and educational expenses showed a growth of 76.8 percent.

Bankers said improvements in the job market have boosted the salaries of urban consumers, and hence, people feel it is more important to own a house.

“Mass housing sales has been picking up since the second half of 2009, after a lean period of sales in 2007 and 2008, when the army-backed caretaker government was in power,” said a banker at a foreign bank. High-end home sales are also increasing, he said.

Banks charge 10-13 percent in interest rate for home loans.

Auto loans are also gaining momentum in line with the increase in vehicle sales.

“We see good demand for auto loans and it is one of the fastest growing segments for us,” said an official of United Commercial Bank.

The rate of interest varies between 14.5 percent and 17.5 percent for auto loans.

“Our retail banking is growing faster than expectation,” said Mashrur Arefin, head of retail banking of The City Bank.

sajjad@thedailystar.net

Source: The Daily Star/ Bangladesh/ Jan-04-2011

South Korea's manufacturing activity accelerated in December to its fastest rate in seven months, propelled by an increase in new orders, according to data released by HSBC Monday.

HSBC said that South Korea's Purchasing Managers' Index in December rose to a seasonally adjusted 53.9 from 50.2 in November. A reading above 50 indicates expansion while a reading below signals contraction.

"The Korean economy is ending 2010 on a strong note. With the global trade cycle firing up again, Korea especially stands to benefit," HSBC economist Kim Song-Yi said in a report.

While exports are accelerating again after a recent lull, the labour market is strengthening as well, which should help underpin consumption spending in the coming quarters, she said.

Input prices, however, increased at the fastest pace in December since February 2009 due mainly to rising raw materials prices, pushing up output prices, the HSBC report said.

Source: The Daily Star

Bangladesh's economy is on course to achieve its 6.7 percent growth target in the fiscal year to June 2011 and may reach 7 percent the year after, despite the global slowdown, the central bank governor said on Thursday.

Atiur Rahman said in an interview that although the number of workers migrating had fallen due to employer nations' economic woes, and inflation was still high, exports had been buoyant during the first half of the 2010-11 fiscal year.

Clothing exports, which together with remittances from overseas workers are Bangladesh's main source of foreign exchange, were particularly strong, he told Reuters.

"Exports of ready-made garments have seen a steady increase over the first half of the year and this is very encouraging, and assured us of a strong possibility of attaining the GDP growth of 6.7 percent this year," Atiur said.

The governor said the south Asian country's economy had been greatly helped by successive bumper crops of rice, the main staple for its more than 150 million people, thanks to friendly weather and steppedup government subsidies to farmers. Atiur envisioned a more robust export and farming future for his country, which officials and economists say still struggles to attract foreign investment owing to concerns about the rule of law and about widespread corruption.

Bangladesh has produced an annual average of around 34 million tonnes of rice in the past few years, cutting its dependence on imports. But it still needs to buy around 1.5 million tonnes of rice and wheat annually to ensure food security, especially in case of natural disasters like floods and cyclones, officials have said.

Atiur said that, as the global economy slowly recovers, Bangladesh will also see an upturn. "Our economy had shown enough resilience in the early stages of the slowdown. Now it is showing a steady uptrend, as the global economy is recovering," the governor said. "We are hopeful of doing well."

He praised the performance of Prime Minister Sheikh Hasina since she took office two years ago, noting that the country had not had to confront any big natural disasters in that time. "So far she made relentless efforts to achieve promised goals and made her administration to act. The central bank as guardian of the finances has also streamlined the banking sector to be more friendly to productive sectors," Atiur said.

Hasina had promised to attach top priority to agriculture, exports and education, to take Bangladesh beyond its recent past, which had been characterised by corruption, poor law and order and towering animosity between the main political parties. Charges of corruption are still widespread, however.

The governor said inflation of more than 6 percent, often stoked by rising food costs, falling remittances, and rising demands for power and gas were the government's main challenges. He said clearer and upgraded strategies to address these issues would be outlined in the country's sixth five-year economic plan, likely to be rolled out next June.

Ready-made garments -- supplied to major global retailers such as Wal-Mart, Gap, H&M and other buyers -- account for 80 percent of Bangladesh's annual export earnings of around $13 billion. The garment industry and about $11 billion sent home annually by over 6 million Bangladeshis working abroad provide the main pillars of the economy.

Source: Daily Sun/ BAngladesh/ Jan-04-2011

The crisis of values and ethics afflicts today’s bank and financial services industry both locally and globally, Bangladesh Bank Governor Dr Atiur Rahman said yesterday.

“The recent global financial turmoil was originated from aberrant quests for quick gains from irresponsible risk taking, alongside collusive insider trading by dominant shareholders and senior managements undermining institutional viability and the interests of small equity holders,” Atiur said.

He was speaking at the 10th Nurul Matin memorial lecture on ethics in banking, organised by Bangladesh Institute of Bank Management (BIBM) in Dhaka yesterday.

Former BB Governor AKN Ahmed spoke at the function as chief guest while another former BB Governor Dr Mohammad Farashuddin delivered the theme lecture.

Source: Daily Sun/ BAngladesh/ Jan-04-2011

BRAC Bank recently organised a road-show at Shahjalal University of Science and Technology (SUST) in Sylhet as a part of its campus contacts in various universities across the country.

The proramme aims to explore the future leaders and bring more practical industry exposure to the academia, said a press release.

Source: Daily Sun/ BAngladesh/ Jan-04-2011