Financing the small enterprises in the country is apprehended to be affected badly if the central bank's newly announced loan provisioning policy comes into effect, ultimately hindering the inclusive banking, according to a top official of a SME-focused bank.

"The small businesspersons mostly take term loans for two-three year. Provisions of such collateral-free small loans will considerably rise under the new policy, discouraging the banks to finance this particular sector," Syed Mahbubur Rahman, Managing Director of BRAC Bank, told the FE in an interview recently.

Appreciating the Bangladesh Bank (BB)'s initiative in terms of the whole banking sector, Mr Rahman, however said the small businesses will be affected by the new policy.

Comparing the small enterprise sector to a child, he said, the child is now creeping; it should be given a certain period of time for the sake of its survival so that it can stand on its own foot.

He urged the central bank to continue earlier loan provisioning policy for the small business for at least more five years so that both banks and customers are structured and prepared within the period.

Tightening rules for classifying and rescheduling the loans, the central bank recently issued directive, under which the banks will have to treat the loans, which is overdue for nine months and above, as 'bad or loss' loan. Earlier, the timeframe was 18 months or above.

Thus, the timeframe of categorising the loans as 'substandard' and 'doubtful' was reduced considerably at the new policy.

The new policy will increase both provisions and non-performing loans (NPL) against the funds disbursed to the small businessmen. As per rule of thumb, the NPL will be almost doubled. The increased provisions will reduce profit and distributable liquidity, the BRAC Bank MD said.

"BRAC Bank is a SME-focused bank but at the end

of the day it is a commercial bank as per the BB rules. Whenever, my bottom line will be impacted highly, I will try to get out of that particular segment and get into more profitable ones changing the current (SME-focused) banking model because our main responsibility is to protect the shareholders' interest," he said.

Others might also be discouraged to finance here, ultimately affecting the small business, he said.

Fall of the banks' profit may impact on the capital and consecutively the confirmation of letter of credit (LC) from the foreign banks will be hampered, negatively affecting the bank-business in the country, he apprehended.

While expressing vulnerability of small enterprises compared to other businesses, he said the small loan on the one hand is 'collateral free' and on the other hand has only one revenue-source, making this sector as more prone to bad-impact under the new BB move.

In a query, he said he BRAC Bank is gradually extending its focus to provide innovative services such as cash-cycle loan instead of traditional term loan based on the demands of particular industries and customers.

"We want to do business following demands of the customers so that they get a delightful experience with BRAC Bank," Mr Rahman, who is also chief executive officer (CEO) of the bank, said.

Evaluating the bank's performance, the MD said that BRAC Bank started business about 11 years ago focusing SME sector, which was not discussed at that time. After the bank moved in this connection, now all including the central bank are thinking about it and even an SME foundation was established that is a big achievement of the bank, he added.

News: The Financial Express/Bangladesh/04-Nov-12

Commercial banks or financial institutions (FIs) have been authorised to deduct Value Added Tax (VAT) from commission income on account of mobile banking services.

The National Board of Revenue (NBR) has issued a guideline recently empowering the banks and FIs to deduct commission.

Earlier, taxmen had to collect tax from commission income of each of the parties or agents involved in the mobile banking services.

The NBR recently framed the guidelines for collection of VAT from commission income of the mobile banking following popularity of the service.

According to the VAT law, the government collects 15 per cent VAT (inclusive method) from service charges of mobile banking. On Tk 100 service charges, VAT is Tk 13.04 and service charges are Tk 86.96.

The VAT wing of the revenue board recently issued the guideline for its tax offices and other stakeholders specifying the rules of tax collection from commission income of mobile banking services.

It also sent the guideline to the Bangladesh Bank (BB), the banking sector regulator.

Many parties are involved in the mobile banking including banks, telecom operators, agents at grassroots level and technical service provider.

Both tax officials and stakeholders were in a state of confusion about the way of collecting tax from commission of the mobile banking services.

A senior NBR official said the NBR found that mobile operators requested the banks to handover their part of commission of mobile banking services including VAT.

"It is difficult to collect VAT from each of the agents and parties of mobile banking services. The guideline has been framed to make the system simple," he said.

To obtain the services, mobile phone subscribers have to open accounts in their names with the local agents of banks. Account holders can deposit, withdraw and send money through mobile phones. Each subscriber or client gets a number with their respective mobile phone numbers.

Agents or technical service providers take a service charge from the clients for depositing and sending money. The service charge is distributed among the partners of the services according to the agreement.

Earlier, tax officials had to collect VAT from different points due to absence of specific guidelines.

From now on, only banks and FIs will pay the VAT on behalf of all other partners and give them a certificate of tax payment. The NBR will consider the agents under the VAT registration of banks.

Mobile banking service providers do not give any cash memo at the time of withdrawal of money. So accounts details of clients should include cash memo number, date and time, name and address of the service providers and service seekers, registration numbers, received commission including VAT and signatures, the guideline said.

Recently, bKash limited (a subsidiary of BRAC bank) has gained huge popularity of mobile banking services. It is a joint venture between BRAC Bank Limited, Bangladesh, and Money in Motion LLC, USA. The ultimate objective of bKash is to ensure access to a broader range of financial services for the people of Bangladesh. It has a special focus to serve the low income masses of the country to achieve broader financial inclusion by providing services that are convenient, affordable and reliable. The government also introduced mobile banking services through post offices. But its service charges are tax-free.

News: The Financial Express/Bangladesh/04-Nov-12

Islami Bank Bangladesh Limited organised Business Development Conference for its officers for Comilla, Sylhet and Noakhali zonal offices in Comilla. Prof. Abu Nasser Muhammad Abduz Zaher, Chairman of the bank was present as chief guest while Mohammad Abdul Mannan, Managing Director of the bank presided over the function, said a press release. Md. Nurul Islam and Syed Abdullah Mohammad Saleh, Deputy Managing Directors also spoke.

News: Daily Sun/Bangladesh/04-Nov-12

The Bangladesh Bank has signed a package agreement styled “IT System for CRT and STR” with Thakral Information Systems Pvt Limited on providing IT supports.

Under the agreement, Thakral Information Systems Pvt Limited will supply hardware infrastructure and other essential accessories for the central bank.

The IT support would be required to implement the World Bank funded the Central Bank Strengthening Project (CBSP) aiming at strengthening the capacity of the BB.

The CBSP, launched in 2003 with the financial support of the World Bank, nears completion as most part of the scheme has been completed. Recently, the BB constituted Bangladesh Financial Intelligence Unit (BFIU) in a bid to beef up its money laundering protection activities.

Md Ahsan Ullah, Project Director of CBSP and Executive Director of Bangladesh Bank, and Shahjahan Majumder, Chief Executive Officer of Thakral Information Systems Pvt Limited signed the agreement on behalf of their respective organisations.

Naznin Sultana, Deputy Governor of Bangladesh Bank, ANM Abul Kashem, high official of CBSP and representatives of Thakral Information were present at the signing ceremony. It is expected that with implementation of the CBSP, the Bangladesh Bank would be established as one of the strongest banks in the region.

News: Daily Sun/Bangladesh/03-Nov-12

Md Shafiqur Rahman has been promoted to Managing Director (MD) of Social Islami Bank Limited (SIBL) effective from October 1, 2012.

Shafique, a post graduate in commerce of the University of Dhaka and an associate of the Institute of Bankers, Bangladesh, was DMD of SIBL since 2012.

A seasoned banker with professional banking career for over three decades, Shafique started his career as probationary officer in Sonali Bank Limited in 1977. During his long career, he held various important positions in Sonali Bank Limited as manager of different branches across the country until 2003 including manager of its local office.

He also served Agrani Bank as general manager in 2003 and also manager of its principal branch. He had also worked at Jamuna Bank Limited and South-East Bank Limited as Senior Executive Vice President.

Having worked in various key positions in bank, Shafiq has attained specialisation in almost all areas of banking like investment, foreign exchange, HR, and information technology, treasury and branch management.

In SIBL, he played leadership roles in the management and operation of different divisions like investment risk management, retail and trade finance, RMG and textile and centralised trade processing.

News: Daily Sun/Bangladesh/03-Nov-12