SME Foundation has recently agreed to provide Tk 3 crore to Trust Bank to give loans to small and medium entrepreneurs, particularly women, in Jessore and three hill districts at 9 percent interest.

Small women entrepreneurs at the nakshikantha cluster in Jessore will receive the financing without any collateral. Both male and female-led

SMEs in the three hill districts of Rangamati, Bandarban and Khagrachhari will receive the discounted financing, officials said.

ABM Khorshed Alam, acting managing director of the foundation, and M Shah Alam Sarwar, managing director of the bank, inked a deal at a programme at the foundation in the city.

Dilip Barua, chairperson of the foundation and the industries minister, attended the programme.

Since 2009, the foundation has distributed Tk 11 crore as collateral-free loans among SMEs across the country through Mutual Trust Bank, Eastern Bank, NCC Bank and Midas Financing.

News: The Daily Star/Bangladesh/02-Dec-12

Rokia Afzal Rahman, a former adviser to caretaker government, gives an environment-friendly oven to a woman of Dhangmari, a village in the Sundarbans. Farid Hossain, bureau chief of the Associated Press; Hasibur Rahman, executive director of MRDI; Abdullah Al Jubayer, manager for corporate sustainability at HSBC Bangladesh, were also present.

International banking organisation HSBC has extended support for the MRDI's programme for developing Dhangmari, a remote village in the Sundarbans, as a climate model village.

The CSR initiative of the MRDI (Management and Resources Development Initiative) is aimed at improving the health and socio-economic conditions of the village people in a sustainable approach.

The intervention is a part of MRDI's CSR advocacy project implemented in partnership with Manusher Jonno Foundation that aims to mainstream CSR as an alternative source of funding for social development and poverty alleviation.

Under this intervention, eco-friendly ovens were distributed among all 360 families of the village, according to a statement of the MRDI yesterday.

The programme will contribute to addressing the threat of destruction of the Sundarbans, the largest mangrove forest of the world.

Three ponds will be re-excavated and filtering system will be installed in each pond to ensure pure drinking water for the dwellers there, who are at severe health risk due to acute crisis of safe water source.

Moreover, skills training on sewing and stitching will be organised for the interested women of the village that will open up better livelihood options for them.

The initiative will reduce health risk, improve living standard of people of the village and prevent environmental pollution which will ultimately save the Sundarbans, said Rokia Afzal Rahman, former adviser to a caretaker government, while addressing the oven distribution function.

Hasibur Rahman, executive director of MRDI, hoped that people and environment will be directly benefited through success of the programme and other corporate houses will feel encouraged to come up with similar initiative.

Abdullah Al Jubayer, manager for corporate sustainability at HSBC Bangladesh, took the occasion as a pride for them to be able to serve the people of a remote village.

Use of the fuel efficient oven will contribute to easing global warming, said Sudes Kumar Roy, chairman of Bani Shanta union parishad.

Use of less firewood will save trees of the Sundarbans, he said. "It is a simple technology and what is needed is to get used to it."

Green World Communication Ltd will implement the initiative on behalf of HSBC and MRDI.

Dhangmari is the third village in the area where MRDI has come up with such intervention. Two neighbouring villages are already under similar programme of MRDI in which Bank Alfalah and Midas Financing provided support from their CSR funds.

News: The Daily Star/Bangladesh/02-Dec-12

An external panel of the World Bank will start talks with the Anti-Corruption Commission from today to know the progress the anti-graft watchdog made in investigating the evidence of corruption in the Padma bridge project.

The panel will hold several meetings with the anti-graft body till December 6, said an ACC official.

A finance ministry official said the team is also scheduled to meet Finance Minister AMA Muhith today.

Earlier the external panel came to Dhaka on October 14 for the first time.

ACC Chairman Ghulam Rahman said they will meet with the WB external panel today afternoon when their working programme will be chalked out.

Rahman said, “In the meetings we will present the progress in our investigation into the graft allegations and our future plans.”

Chairman of the external panel former chief prosecutor of the International Criminal Court Luis Moreno Ocampo reached Dhaka yesterday afternoon.

The other two panel members are Timothy Tong, former commissioner of the Independent Commission against Corruption of Hong Kong Special Administrative Region; and Richard Alderman, former director of Britain's Serious Fraud Office.

In a statement on November 28, WB Country Director Ellen Goldstein said, “The external panel of internationally-recognised experts will advise the World Bank and co-financiers on the adequacy of the government's investigation.”

The finance ministry official said, whether the financiers, including the WB, will finally provide fund to the Padma bridge project depends on the report of the external panel. Already on November 13, the WB sent a third report to the ACC on corruption evidence.

The ACC official said the third report contained detailed evidence of graft against the public and private officials concerned.

The official said the WB prepared the third report based on information received from the Canadian government and other sources.

The third report also mentions the names of those accused in the earlier report but the latter contains more evidence, the official said.

Prior to the panel's second visit to Dhaka, the co-financiers met in Manila for preliminary discussions on revising the project implementation arrangements from November 28 to 30.

The WB said adequate progress in investigating the corruption evidence is necessary to allow project implementation to move forward.

The original $1.2 billion WB credit for the bridge was cancelled on June 29 due to an insufficient response by Bangladeshi authorities to evidence of a conspiracy of corruption involving senior public officials.

Subsequently, additional actions were undertaken, and on September 20 the government agreed to go by four conditions that also include proper investigation into the allegations.

News: The Daily Star/Bangladesh/02-Dec-12

Recently, we heard the finance minister saying in parliament that the impact of the Hall-Mark scam is felt by other banks as well. This statement actually defies claims of many who asserted that the scam was an isolated incident having little implications for the banking sector.

The Centre for Policy Dialogue (CPD) organised a dialogue on governance in the banking sector in the beginning of November where it was highlighted that the amount is rather quite significant for resource-poor Bangladesh.

Some people, including bank officials, told us later that the CPD's dialogue was not helpful for the banking sector as it could affect the reputation of the banking industry. I could not but feel sorry for those who consider constructive discussions harmful and think that our reputation is still upheld after such a proven disgraceful incident.

The think-tank mentioned in its presentation that the Hall-Mark incident is not only a case of financial loss but also a deep dent on the confidence and trust of the customers of Sonali Bank. It is not the loss of the goodwill of a particular bank only, but also of the total banking industry.

Such an erosion of reputation of banks could have multiple chain effects, leading to a reduction in deposit, high interest rate and a fall in share prices of the concerned bank, which in turn can constrain the role of the banking sector in catalysing the growth of the economy.

It is undeniable that the banking sector, the dominant industry in Bangladesh's financial sector, has flourished during the last three decades as a result of increased demand of the growing economy. If one looks at the pace of development of the banking industry, total asset has grown by 324.2 percent, while deposit has increased by 326.9 percent during 2001-11.

Total deposit is currently 51 percent of GDP. The ratios of money supply, total deposits and total domestic credit to GDP have shown a steady increase over the years, indicating an increased financial depth.

Financial inclusion, though still low compared to the developing countries, have expanded since the independence. Population per bank branch has decreased from 57,700 in 1972 to 17,660 in June 2011, though this does not undermine the fact that a large number of people still remain outside the banking services.

Over the last few years, the country's banking sector has made progress in terms of meeting indicators such as capital adequacy, asset quality, management quality, earnings, liquidity and sensitivity to market risks (CAMELS).

However, the seemingly good performance does not capture the reality which raises doubts as regards the real health of banks, particularly of the state-owned ones. The government embarked on a policy of liberalisation, by denationalising the nationalised commercial banks in the 1980s in view of the deteriorated performance and inefficient resource management. The reform process got momentum in the 1990s and continued afterwards.

The latest major reform programme was the corporatisation and restructuring of the state-owned banks in 2007. This led to some improvements initially. For example, the state banks, for the first time, earned profit in 2008; the amount of non-performing loans came down and expenditure-income ratio reduced.

However, the core strength of these banks remained weak. For example, performance in terms of efficient resource allocation through disbursement of credit to productive sectors, prudent risk analysis, supervisory and management quality, improved customer service and the overall governance continue to depict rather disappointing picture. In this context, a set of key recommendations are presented below.

First, the absence of a comprehensive risk management policy in many banks makes it difficult to handle fraud and other extraordinary cases. Core risk management guidelines of Bangladesh Bank are hardly followed by the state banks.

The manual for loans and advances containing policies, procedures, processing and reporting transactions, review of security and collateral and responsibilities at different levels is not followed by many banks due to which it becomes difficult for banks to handle and manage clients with various levels of exposures.

Second, the internal control department which is supposed to be a critically important department is weak in state banks. This is partly due to incentive failure which prevents hiring of qualified persons for this department. As the nature of the job involves patient scrutiny of compliance, people are reluctant to work here, and those who do, are often in a way dumped in this department.

Third, the practice of appointing directors for the board of the state-owned banks based on the political loyalty and affiliation has to be changed. The "Fit and proper test criteria" of the Bangladesh Bank Guidelines 2010 for the nomination of directors should be implemented fully. Due to political baggage, directors of state banks cannot perform their duties independently and remain morally obliged to listen to political instructions.

Fourth, the recent scam has also exposed the total failure of the senior managers of the bank in discharging their duties. In the state banks, the major preoccupation of the CEOs is to "manage" the board to keep their jobs. Unfortunately, it is also difficult for them to do otherwise in a setting where many decisions are influenced by political instructions. As a result, these officials lack creativity and initiatives towards developing good business plan, effective people management programme, regulatory compliance practice and effort towards clients' satisfaction.

The board should only guide and support the CEO to achieve bank's targets and evaluate his performance on the basis of key performance indicators. The general managers should be transferred from one state bank to another not only to help transfer good practices, but also to reduce the possibility of fraudulent and unethical practices.

Fifth, the human resource (HR) departments of state banks remain weak and powerless to take decisions on recruitment and promotion, partly due to a lack of capacity and external influence. The HR policy of banks should not only arrange for appropriate training but should also involve the reward and punishment practices.

Sixth, an issue related to the HR development is the automation and implementation of management information system in banks. It is apprehended by experts with fair amount of certainty that there may be many more Hall-Mark like cases that wait to be uncovered in other banks. The mess may become unmanageable, if these are not dug out through transparent and automated banking practices.

Seventh, the supervisory and monitoring role of the central bank needs to be significantly strengthened and the Banking and Financial Institutions Division should be dismantled to get rid of dualism in the regulatory mechanism for smooth functioning of the banking sector.

Finally, a commission for the financial sector is being planned by the government for its improvement. It is expected that recommendations of the commission will be implemented with due sincerity.

News: The Daily Star/Bangladesh/02-Dec-12

The board of directors of the Bangladesh Bank (BB) will discuss today (Tuesday) time extension prayers submitted by two proposed banks, which failed to comply with the letter of intent (LoI) requirements in time, officials said.

"Our board may take final decision in the meeting after discussing the matter," a BB senior official told the FE Monday.

He said the central bank will also submit a status paper on other seven proposed banks in the meeting highlighting their latest situation.

The paper will include ensuring deposit of money for complying with paid-up capital, tax-related issues, and default loan position of the sponsors of the proposed banks, he added.

The BB is now checking the tax-related issues with the National Board of Revenue (NBR) in case of local sponsors to ensure whether the blocked money for maintaining the banks' paid-up capital is taxed or not, according to the BB officials.

"We've sent necessary documents to the Credit Information Bureau (CIB) of the central bank to know about non-performing loan issue of the sponsors of the proposed banks," another BB official said.

Under the existing provisions, the paid-up capital of a new bank will be no less than Tk 4.0 billion, and sponsors of the non-resident Bangladeshi (NRB) banks will deposit their paid-up capital in foreign currency.

As part of the scrutiny, the central bank is now collecting information on blocked money for paid-up capital and default loan of the sponsors from the banks concerned and the CIB.

Seven proposed commercial banks earlier applied to the central bank for licences to start their business after complying with the requirements as per the LoI.

The proposed banks, which have submitted documents to the BB, are - Union Bank Limited, Farmers Bank Limited, Meghna Bank Limited, Midland Bank Limited, South Bangla Agriculture and Commerce Bank Limited, NRB Commercial Bank Limited and NRB Bank Limited.

News: The Daily Financial Express/Bangladesh/27-Nov-12