For the first time ever in Bangladesh, BRAC Bank Ltd. (BBL) has launched Bangladesh's first e-commerce banking platform in alliance with Visa, thereby opening an opportunity for Bangladeshi citizens to use Visa cards for shopping online. Any Bangladeshi with internet access now can shop online with a Visa card or any card issued by BRAC Bank. Attending as the chief guest, Dr. Atiur Rahman, Governor of Bangladesh Bank, inaugurated the country’s first e-commerce banking system at a city hotel.

Md. A. (Rumee) Ali, Chairman of BBL, Syed Mahbubur Rahman, Managing Director and Chief Executive Officer of BBL and Uttam Nayak, Group Country Manager (India and South Asia) of Visa were present along with senior officials, leading merchants and clients.

“The central bank has continuously been facilitating bringing banking to the doorsteps of the general mass. This online shopping is another milestone in that journey. I am happy to inaugurate this service brought first time in Bangladesh and that too by a Bangladeshi bank,” the Banglaesh Bank Governor said.
Md. A. (Rumee) Ali, said, “I think this will pave the way for many companies to start doing business online.
This hopefully will be the start of online business revolution for Bangladeshi companies enabling them to keep up with the rest of the world and innovate how they interact with their customers.”
Uttam Nayak in his speech said that e-commerce would not only reduce cost of transaction but also save couple of hours rather than shopping physically.
E-commerce facilitates remote payments which are better than face-to-face payments, he said and adding it will give an opportunity to include more people in banking transaction, one’s who buying goods and other’s who selling goods.
Firoz Ahmed Khan, Head of Retail Banking, while demonstrating the new service features at the launching ceremony said that the new shopping platform would work just any other developed online stores work.
Consumers can browse and choose their products on either the online super-stores or individual shops and then they can add the products to their cards through checking out finally, they simply need to put their details from BBL or Visa card.
Online ticket booking with ones credit card and general retail purchases online have been something many credit card holders have been waiting to be able to do for years while many working Bangladeshis facing problems as the shops are normally closed at 8 pm., he said.
BRAC Bank online shopping is open for 24 hours making it possible for retail products, companies and stores to keep earning long after shopping hours are over, he added.

Southeast Bank Limited signed a participatory agreement with Bangladesh Bank at the head office of the central bank to avail of refinancing facility for Small and Medium Enterprises Financing on Sunday. Mr. Mahbubul Alam, Managing Director of Southeast Bank Limited and Mr Sukamal Sinha Choudhury, General Manager, SME & Special Programs Department of BB signed the agreement on behalf of respective sides. Mr. Md. Harunur Rashid Chowdhury, Executive Director of Bangladesh Bank presided over the meeting.

Through this agreement Southeast Bank will be able to avail refinancing facility from an ADB supported fund amounting USD 95.00 million equivalent to Tk 6.67 billion. Bangladesh Bank has been entrusted with the responsibility to administer the fund. The fund will help Southeast Bank to widen and expand its SME lending program in rural and semi urban areas at a subsidized rate.

Senior officials of SME and Special Programs Department of Bangladesh Bank attended the ceremony. From Southeast Bank Mr. Mohammed Gofran, Deputy Managing Director, Mr. Panu Ranjan Das, Vice President, Mr. M.M. Khaled Omar, Senior Assistant Vice President & Head of SME, Mr. Donald Rosette, Assistant Vice President and Head of R&D were also present.

Source: Financial Express/Bangladesh/24 Jan 2011

The Asian Development Bank (ADB) board approved a $2 million grant to launch a remittance investment project to provide safe, affordable remittance services to thousands of Bangladeshi migrant workers and their families. The Japan Fund for Poverty Reduction will be used in the project to fund technology linking micro finance institutions and banks. It will give at least 20,000 rural migrant worker households access to formal remittance services for the first time, ADB said in a statement yesterday.

Mayumi Ozaki, finance specialist (rural and microfinance) for ADB's South Asia Department said, "Currently, many rural migrants and their families are forced to rely on informal remittance outlets which are undocumented and risky,". "This project, using debit cards, points of sale terminals and other innovations will allow people in remote areas to send and receive funds through the formal banking system." The project will fund remittance and financial literacy training and an awareness campaign to provide guidance to returning migrant workers on investment products and employment opportunities.

The objective is to help each household save, or invest, an additional $300 a year, ADB said. The Bangladesh government will contribute $29,000, with banks and microfinance institutions providing nearly $386,000, for a total cost of over $2.4 million. The finance ministry is the executing agency for the project, which will run for three years to 2013.

News Source: The Daily Star/Bangladesh/20 Jan 2011

Rejaul Karim Byron

Most private banks have ventured into risky business to bag excessive profits that inflated share prices and call-money rates.

According to Bangladesh Bank (BB) statistics, the credit-deposit ratio in private banks was 89 percent last year, which was 73 percent in state-owned commercial banks (SCB) and 83 percent in foreign banks.

Banks are allowed to lend up to 82 percent after maintaining a statutory liquidity requirement against deposits. If any bank wants to go for aggressive banking it can raise the ratio to 85 percent by adding capital alongside deposits, the central bank said.

It was revealed that 20 out of 30 private banks lend up to 85 percent against deposits. Some banks lend more than 100 percent, which means they lend by borrowing from the call-money market at higher interest rates.

Lending growth of 30 out of 43 local and foreign commercial banks was much higher than their deposit growth.

According to senior bankers, banks cannot lend more than its deposit growth but many private sector banks, even SCBs, defy the norm.

The deposit growth of one private bank was 4 percent whereas its credit growth was 22 percent. Another private bank posted 34 percent deposit growth, while its credit growth was 64 percent.

Bangladesh Bank officials said the banks went into risky banking to make high profits overnight.

In recent times, the banks made most of such investments in the share market to take returns on investment. As a result, shares were overvalued, one of the officials said.

The chief executive officers of private banks receive high salaries, so the shareholders consider their banks will make more profits quickly, enabling them to earn more in turn, said an official of Sonali Bank to The Daily Star.

K Mahmud Sattar, president of the Association of Bankers Bangladesh (ABB) and managing director of City Bank, said there was huge liquidity surplus in the banking sector last year. As a result, the banks put emphasised increased credit investment.

While lending excessive amounts, many banks failed to manage their assets and liability properly, he added.

“Our banking sector is in a very strong position now. Depositors have no risk as the banks are going for aggressive banking. Some banks may not have maintained ideal practices though.”

Sonali Bank Chairman Kazi Baharul Islam and Krishi Bank Chairman Khandker Ibrahim Khaled said such risky and aggressive banking must be stopped.

If a bank is caught practising so risky and aggressive banking in any other country including neighbouring India, the central banks take punitive action against the delinquent banks.

Islam said it also shows the incompetence of the bank authorities in fund management. Alongside, it seems that there was lack of competent supervision on the part of the board of directors of the banks concerned.

The central bank should take stern actions in this regard, he said.

“If the central bank goes for taking actions, you reporters should write that Bangladesh Bank is up to destroying the capital market,” said Sattar.

BB Executive Director SK Sur Chowdhury said lending should be within 80 percent of its deposits for sound and safe banking. The central bank monitors it regularly to ensure that banks do not cross the limit. BB has been issuing warning letters, he said.

Many observers hold the central bank responsible for the recent slump in the share market. They say if the BB had monitored strictly and checked the aggressive banking, the shares would not have been overvalued.

A central bank official said BB was warning the banks since June last year. Despite resistance from some powerful quarters, the central bank advised the banks on July 6 last year to be cautious in lending in the capital market.

News: The Daily Star /Bangladesh/17 Jan 2011

Md Fazlur Rahman

Gone are the days when budding entrepreneurs in Bangladesh stumbled to get access to funds to start their own ventures or expand existing operations. Commercial banks and many other non-banking financiers are now more than willing to facilitate their dreams with funds.

Banks and other financial institutions have been in operations in Bangladesh since its independence in 1971. But it was not until 1999 when banks paid heed to the small and medium enterprises (SMEs), which make up 75 percent of the domestic economy.

However, getting a loan is not an easy job for the first time entrepreneur. There were a number of banks in the country before the new millennium, but they were not serious about standing next to the SMEs, say entrepreneurs. They believe there have been positive changes in how banks look at them, but there is still a long way to go.

“Banks should look at the potential of an entrepreneur and make investments accordingly, rather than giving priority to their likes and dislikes,” said Abdul Mannan, owner of Remo Chemicals in Dhaka.

“Banks still only look at things like whether the borrower will be able to make regular repayments or not. This is not entrepreneur banking.”

He said small enterprises have become large over the years around the world. “We can do the same. In Bangladesh, there are many potential entrepreneurs who can do a good job. But they cannot go far for an absence of easy credit.”

“We are still talking about the cost of funds, whereas other countries have progressed far. We cannot develop in this way.”

Mannan said the banks are more interested in trading activities rather than manufacturing.

Of late, there has been a trend among the financial institutions to reach out to the SMEs. Credit goes to the central bank for this. Bangladesh Bank (BB) set targets for the financiers in 2009 for SME banking.

Local banks disbursed Tk 38,283 crore among 234,969 SMEs in the first nine months of 2010, against a target of Tk 23,995 crore. BB data shows that less than Tk 15,000 crore was lent to the sector in 2009.

In 2009, the central bank redefined SMEs and loan limits, and directed the banks to prioritise small enterprises and women entrepreneurs. The loan range for small entrepreneurs was set at Tk 50,000 to Tk 50 lakh. For the medium enterprises, no limit has been mentioned. The banks decide the amount for such entrepreneurs on the basis of need.

There are about 6 million SMEs and micro enterprises in Bangladesh, according to Asian Development Bank.

The SME is the largest sector in terms of employment generation, even though it accounts for 6 percent of the country's $100-billion economy, according to Bangladesh Economic Review 2009.

The SME sector now contributes up to 25 percent to the gross domestic product and accounts for about 40 percent of manufacturing output, 80 percent of industrial jobs and nearly 25 percent of total labour force, according to SME Foundation. Currently, banks have marked interest rates for the SMEs at between 14 and 20 percent.

Central bank officials said there is still apprehension among banks about SMEs as they do not have a clear picture of the sector and its potential.

“However, they are gradually becoming interested. Now, banks are interested for two reasons -- new business and persuasion from the central bank,” said an official of SME and Special Programmes Division of BB.

He said under the liberalised financial system, BB can not force banks to go for any particular area. “But we have been very effective in telling them what areas and segments they should cover. We have introduced some awards for the banks that comply, like easy approval of new branches.”

“As a result, many banks have come forward and are disbursing loans to the sector.”

The central bank official said banks in Bangladesh have always wanted to net large or corporate clients. “There is huge competition among banks today as there are a significant number of banks in the market. But the number of corporate houses is not that big compared to that of financial institutions.”

Banks' scope for large loans is shrinking. As a result, SMEs have emerged as a new area of business.

BB and SME Foundation are arranging a number of programmes to give banks a better understanding about the sector, to change their mindset. “But the momentum is still not there, but we are hopeful,” the official said.

SMEs face difficulties due to reluctance by banks to provide loans. Many banks are shy to lend to them because of high processing and monitoring costs.

Bankers however said banks are enthusiastic about tapping into the sector.

“We are very aggressive. Today, clients do not need to come to banks; rather our field level officers identify them and take products to them,” said Syed Faridul Islam, head of SME banking of BRAC Bank.

“SME is a major sector for growth potential for banks. We have proved that banks can still be profitable by serving SMEs. The sector has brought new growth opportunities for us,” he said.

He said: “Whenever we receive any query about loans, our officials visit them, take note of their demand and business conditions. After verifying the applicant's qualifications, we offer products.”

“Things have changed in the last three-four years, thanks to Bangladesh Bank's awareness drive,” said Islam.

BRAC Bank is the fourth largest SME bank in the world, with 429 unit offices across the country, exclusively catering to growing entrepreneurs. Today, with over 10,000 crores of loans disbursed till date, it is the country's largest SME financier.

Since its inception in 2001, it has disbursed nearly Tk 14,000 crore among three lakh entrepreneurs across the country.

Islam said interest rates for SME loans are high due to high cost of funds and monitoring.

Non-bank financial institutions also have a strong presence in SME lending.

Shafique-ul-Azam, managing director of Midas Financing Ltd, a leading non-bank financial institution, said they need a maximum of 10 days to complete a loan process.

“We need more time as we have to collect reports from Bangladesh Bank's Credit Information Bureau about the applicant on whether he or she has borrowed money from any other bank or institution.”

He said they only ask for papers that really matter. “For any businessman, we seek the trade licence, record of six month's sales and papers if he runs his business on rented house. We do not want to discourage them.”

“We even help applicants process the application, as many still find it hard just to complete the form,” he said.

Azam said his institution gives up to 5 percent rebate on interest to entrepreneurs who make timely repayment. “I think we are unique in this regard. We see banks give incentives to people who do not make payment regularly.”

Unlike many banks and non-bank financial institutions, Midas provides up to a six-month grace period to borrowers to help them generate money. “We give them time on the basis of the project. For example, a poultry farmer will not be able generate profits in the following month of a loan. In that case, we give them three-month grace period, when he will only pay interest,” Azam said.

In the last three months, Midas disbursed TK 101 crore among SMEs, taking its total loan outstanding to Tk 400 crore in the sector.

fazlur.rahman@thedailystar.net                                                                               

News: The Daily Star /Bangladesh/17 Jan 2011