Cellphone operators, banks and multinational companies imported software worth Tk 25 billion (Tk 2500 crore) in the last three years, putting further pressure on balance of payment, while undermining local firms' capacity.

Local software exporters smell a rat behind the rising growth of software imports by multinationals and banks, but the customs authority has linked the rise to lower taxes.

In an internal assessment last month, Dhaka Customs House found that the country's biggest mobile telephony firm Grameenphone alone purchased overseas software of Tk 6.51 billion (Tk 651.85 crore) during the period. The imports by five other mobile phone operators amounted to Tk 5.34 billion.

Other than mobile companies, both government and private commercial and specialized banks imported software worth Tk 4.64 billion (Tk 464 crore).

Dhaka Customs House last week wrote a letter to Bangladesh Bank requesting to look into the rising growth of software import trends. It said the low import duty-- 6.71 per cent may be one of the reasons the multinationals are importing software instead of locally manufactured ones.

Leading ICT personality Mostafa Jabbar told the FE that importing foreign software by passing capable local companies is a crime. "We have been discussing with the government since long to impose higher duty on imported software but the government did not respond to our demand.

Jabbar said the multinational companies might have other reasons including transfer of profit in the name of software import. He suggested for an investigation into the massive import.

Mostafa Jabbar said bank directors sometimes influence bank management to import software so that they can earn additional money from foreign companies behind the scene.

Habibullah N Karim, a software exporter and ICT expert said the local companies can produce all types of software other than some switching software for mobile companies.

"There is no rationale to import such huge amount of software. The cost will be ten times less if those are manufactured locally," Habibullah N Karim said.

Echoing with Jabbar he said the companies might have other motive behind the practice.

He expressed dissatisfaction over import of banking software by government banks. He said Sonali Bank, Bangladesh Commerce Bank and Rajshahi Krishi Unnayan Bank (RAKUB) formed a consortium and appointed Indian company Polarish to install automation system.

"It is absolutely a bull sheet that the government banks are recruiting Indian firms for automation when local companies can do it by ensuring the same quality and security," Habibullah N Karim added.

He said Janata Bank and Agrani Bank also asked Indian companies to install their core banking software.

He suggested an increased rate of duty on software like -ERP, application, core banking and billing software.

Eexpressing his utter dissatisfaction Jabbar said through import of software by government and private banks directors get benefit from foreign companies.

Bangladesh Association of Software and Information Services (BASIS) President Mahbub Jaman said local companies cannot develop some of the switching software for mobile companies but about 70 per cent of other software can be produced locally.

He said the government should introduce some rules and regulations so that banks and mobile companies give priority to local companies in installing software.

Meanwhile, software exports from Bangladesh have nearly doubled in the first five months of the current fiscal year, compared to the same period of the last fiscal.

The country exported information technology and IT enabled services (ITES) worth $29.05 million in July-November, up from $14.82 million in the same period a year ago, according to data from Bangladesh Association of Software and Information Services (BASIS).

Bangladesh exported software worth $45.31 million in fiscal 2010-11.

BASIS has 503 members who develop software in the country, said Tamzid Siddiq Spondon, joint secretary general of BASIS. There are some other companies as well, he said.

According to the Software and IT Service Catalogue 2011 by BASIS, there are over 800 registered software and ITES companies in Bangladesh.

In addition, there are a few hundred unregistered small and home-based software and IT ventures that are carrying out business for both local and international markets, according to the catalogue.

The total size of the industry is estimated to be around $250 million and it employs over 30,000 people.

Financial Express/Bangladesh/ 9th April 2012

The central bank has approved six more private commercial banks (PCBs), aiming to help strengthen the ongoing financial inclusion programmes through bringing unbanked people under the banking network, Bangladesh Bank (BB) officials said.

The decision came at a meeting of the BB's board of directors, held at its central office Sunday, with BB Governor Atiur Rahman in the chair.

The six approved PCBs are: Union Bank Limited, Modhumoti Bank Limited, the Farmers Bank Limited, Meghna Bank Limited, Midland Bank Limited and South Bangla Agriculture and Commerce Bank Limited.

"The board has approved the six PCBs after a thorough scrutiny of all 16 short-listed applications one by one," Deputy Governor of the BB SK Sur Chowdhury told reporters after the meeting.

He also said the board has also decided to issue letters of intent (LoI) to the approved six PCBs, giving them a period of six months to comply with the existing rules and regulations for setting up new commercial banks.

"We'll issue licenses to the PCBs after their proper compliance with all conditionalities," Mr. Sur said, adding that loan defaulters and tax evaders would not be allowed to be the directors of new banks.

The proposed chief executive officers (CEO) of the approved PCBs will have to present their business plan before the board, he said while explaining the conditionalities for the new banks.

The authorities concerned of the approved PCBs will have to deposit the amount of their paid-up capital worth Tk 4.0 billion with the central bank, before starting their operation, the BB deputy governor added.

"All the applicants are Bangladeshi citizens. The BB board has considered those who were found eligible, based on their qualifications," he said replying to a query if the approvals were given only to Awami League (AL)-affiliated people.

The proposed chairmen of newly-approved banks are: Union Bank Limited -- Shahidul Alam, Modhumoti Bank -- Humayun Kabir, Farmers Bank -- Dr Mohiuddin Khan Alamgir, Meghna Bank -- AHN Ashiqur Rahman MP, Midland Bank -- Moniruzzaman Khandker and South Bangla Agriculture and Commerce Bank -- SM Amjad Hossain.

"Since bank licences were last issued in 2000-01, there have been many significant developments in the Bangladesh economy," the central bank said in a statement, explaining the economic context and rationale behind issuing new bank licences.

The economy has grown and the banking system has become more competitive but there are still a large number of under-banked people in Bangladesh, the BB added.

Recent estimates from a survey conducted by the Institute of Microfinance found that only 45 per cent of the nearly 9000 households surveyed do have access to banks and micro-finance institutions (MFIs) for loans.

The population per branch (21065) and the ratio of loan accounts per 1000 adults (42) suggest that the outreach of the formal financial sector in Bangladesh is lower than that in India (14485 and 124 respectively) and Pakistan (20340 population per branch and 47 loan accounts per 1000), according to the statement.

"As such, the new banks will help increase the quality of banking services by increasing competition in the banking sector. They will also be able to meet the unfulfilled demand for credit by the private sector whose needs have grown in line with a fast expanding economy," it noted.

Moreover, for new banks the ratio of opening rural and urban branch will be 1:1 which will help increase bank branches in rural areas and improve financial inclusion, the central bank said.

Earlier, 37 applications were submitted to the central bank for setting up of new PCBs. Of them, 21 were rejected by a preliminary scrutiny committee mainly due to lack of necessary papers and documents.

Last Thursday, the central bank approved three new commercial banks sponsored by non-resident Bangladeshis (NRBs) to help boost the inflow of foreign exchange.

Currently, a total of 47 commercial banks are in operation in Bangladesh.

Financial Express/Bangladesh/ 9th April 2012

The High Court (HC) Sunday issued a rule upon the government to explain as to why the Securities and Exchange Commission's order--- asking directors to hold minimum 2 per cent stakes in their own firms listed with stock exchanges---should not be declared illegal.

After hearing a writ petition filed by the National Credit and Commerce (NCC) Bank director Sheikh Abdul Monim, the HC bench comprised of Justice Farid Ahammad and Justice Sheikh Hasan served the SEC the show-cause notice.

A bunch of institutions and people, such as, secretaries of finance and commerce, SEC chairman, Bangladesh Bank governor, NCC Bank managing director, registrar of Joint Stock Companies and farm, and Dhaka Stock Exchange and Chittagong Stock Exchange have been asked to reply within four weeks.

Petitioner's lawyer Reaz Uddin said as per the SEC directives issued on November 22 last year, directors of listed companies would lose their position unless they hold minimum 2 percent of their own companies’ stakes by May 22.

The SEC in its order had said sponsors, directors and promoters of a company listed with any stock exchange will have to individually hold minimum 2 per cent stake in the firm for all time.

Meanwhile, DSE in an emergency board meeting Sunday evening discussed about possible fallout of the writ petition on the stock market.

Senior vice president of DSE Ahmad Rashid said since the High Court did not issue stay order against the SEC directive, share purchase by the directors will continue and that it is legitimate.

The Independent/Bangladesh/ 9th April 2012

Mobile banking is a far-reaching vision that promises to improve financial inclusion of huge unbanked population who still remains outside the bank’s ambit, said Md. Mehmood Husain, Managing Director of Bank Asia. About 80 per cent of the country’s population still lives in rural areas and most of them do not have access to Bank accounts.

Those who have relative abroad, face a lot of problems in receiving remittances. “Express Cash -- a mobile banking service – of our Bank will address this disadvantages,” said the managing director,” adding that it is easier and faster domestic remittance service. This is fully web-based, secured and quick to deliver.

It enables remitter faster and more efficient financial transfers, increasing the volume of trade and subsequent payments to workers and their families, said Mehbood, also the president of the Bank , while talking to the Independent recently at his office. He dwelt on various issues centering the country’s banking sector, its problem and prospects, human resource developments and performance of his Bank , its services and visions.

Bank Asia always maintains its endeavour for IT based product innovation. Not only the Express Cash, it also introduced an Online Payment Gateway Service Provider (OPGSP) – AlertPay -- in Bangladesh for freelancers and IT experts to get money smoothly from abroad against export of their services.

Mehmood said a huge number of youth, even outside the capital, are now earning foreign currencies through outsourcing as freelancers. “We are trying to collect their data and contact them to help them receive money from abroad,” added he.

In the recent past, the Bank also launched a good number of products to meet customers’ growing demand. Some of the products included LankaBangla Card Cheque to meet the cheque service of NBFI’s credit card customers, Smart Junior Saver Account -- an Islamic banking product -- to bring the children-students of tender age under the umbrella of banking services.

Dwelling on the overall health of the country’s banking sector, he pointed out that the tight liquidity situation that persisted even few month ago has eased up to a large extent. He, however, said that the money market is still relatively tight and attributed the reason mainly to the contractionary Monetary Policy.

“The present liquidity situation is not a crisis. It is not an obstacle, rather it is an outcome of the central bank’s policy impact,” he said stressing the need for aligning banks strategies with Bangladesh Bank’s monetary policy stance. “We should not entertain unproductive sector.”

Bangladesh’s economy, he said, is gradually turning over from the impact of capital market volatility and tight money market situation. However, soaring inflationary situation and growing political unrest are still looming large. At this point, there is an acute need for right coordination between monetary policy and fiscal policy to ensure sustainable growth of the banking sector. Moreover, stable inflationary situation is also a key driving factor for banking business.

Despite the tight financial situation, the Bank was quite upbeat to close the year 2011 with adequate capital. During the year total eligible capital fund was enhanced by Tk. 4,290 million and the total fund stood at Tk. 12,447 million. The capital adequacy ratio stood at 14.88 per cent against minimum requirement of 10 per cent .Total operating profit (consolidated) was Tk. 4,224 million.

The Bank has proposed 20 per cent stock dividend of Tk. 1,051 million for 2011. During the year the deposit was increased by 10.15 per cent and loans and advances by 4.17 per cent. The import business of the Bank was, however, declined by 9.9 per cent to Tk. 99,414 million over last year. But the export was Tk. 74,795 million which registered an impressive growth of 30.57 per cent.

In financial sector, role of human resource development plays a more critical role than any other institutions. The country has huge population but the industry hardly gets skilled, smart and knowledgeable manpower. The industry is growing fast. Every year, most of the banks are extending their branches which require huge number of skilled manpower.

Most of the young graduates entering the profession are not staying longer in a single Bank. Many of them are frequent flyer, moving from one bank to another. They are more focused on their ranks and package enhancement rather than acquiring skill, knowledge and experiences. If the trend continues, Mehmood fears that the industry will face a severe leadership crisis in near future.

Despite the constraints, the banking sector registered sizable growth in deposit, advance, import and export in the year 2011. At present some 47 banks are operating in the country. As per 2010 Household Income and Expenditure Survey only 1.52 per cent of total loans were given by private commercial banks.

Taking this information into account, Mehmood said that a limited number of new private commercial banks may enter into market to accelerate financial inclusion for combating poverty by small deposit service, financing the ‘missing middle’, channelling foreign remittance of poor migrant workers, etc.

Regarding the high lending rate, he said undoubtedly it is high, but this is not the only reason which impacting growth of industrialisation. Rising global inflationary situation, higher raw material cost, lack of electricity and gas are also negatively affecting the country’s industrial sector.

The fundamentals that are being considered for loan pricing are cost of deposit, operating expenditure and risk premium. Thus, we have to take care of all these fundamentals to reduce the loan pricing and for this we have to ensure stability of capital market, mitigate the liquidity pressure in money market, speed-up inward remittance flow and balance devaluation of Taka against US Dollar, etc.

The managing Director, having working experience in all three generation private commercial banks, joined Bank Asia in August 2011. He dwelt in details the governance pattern, leadership style and behavioural approach in all three generation banks.

As a third generation bank, Bank Asia also performs well and secured 14th position among all private commercial banks. The Bank also believes in giving back to the community. The Bank continues its efforts to look beyond short-term quantitative gains, and concentrate on issues that make the institution socially responsible.

In 2011, the Bank spent Tk. 26.10 million for CSR activities, which included Tk. 15.59 million in education sector that benefited some 2,500 students, Tk. 1.43 million in health sector that benefited around 10,600 people (mainly children) and Tk. 9.08 million in disaster management, environment protection, sports, art and culture patronisation.

The Bank provides the same quality services both in rural and urban areas. It has been playing an active role in disbursing Agricultural and Rural credit through its rural branches as well as NGO networks. For providing micro credits, they are jointly working with some NGOs.

In current fiscal (2011-2012), the Bank has a target to disburse Tk. 1,510 million as Agriculture and rural credit, out of which about 63 per cent has already been disbursed. The Bank has 70 branches all over Bangladesh; out of which 17 branches and 4 SME and Agri branches operating in rural areas. This constitutes 30 per cent of the total branches.

In the year 2011 the Bank provided Tk. 54 million for importing and installation of Solar Home Systems in different rural off-grid areas through NGOs. This solar power program has benefited around 1,600 rural houses.

The Bank also provides remittance disbursement service to rural people all over Bangladesh through 21 rural and SME and Agri branches, 2,000 outlets of its 7 partner NGOs and also through Eldorado network which is a 10-bank web based remittance processing system. The network is continuously increasing.

The lack of infrastructural development reflected by poor transportation facility and shortage of energy supply is the major challenge for SME growth in Bangladesh. Still, SME is one of the most promising sectors in terms of employment generation and contribution to national GDP. Bank Asia has been sincerely putting its effort to increase SME services. At the end of the year 2011 the SME portfolio stood at Tk. 2,405 million which registered 12.26 per cent growth.

With a view to bring qualitative development in SME sector Bank Asia financed Tk. 2.6 million at Rajanagor thana of Munshigonj to make bamboo and cane handicrafts which generated direct and indirect employment for some 450 people in the vicinity.

Bank Asia is planning to finance small and medium software companies, farming and raw leather manufacturing units. The Bank believes, that  in coming years, the SME portfolio of the Bank will move upward significantly.

Regarding measures taking to reduce non-performing loans, Mehmood said, the Bank are very careful to prevent bad loans from happening. A good loan may turn to non-performing ones due to lack of proper monitoring and supervision. To prevent bad loans Bank Asia selects its credit customers very prudently and diligently.

“We assess credit worthiness of our customer by applying various risk management tools; then we determine what type of loan products would be suitable for the customer in a given scenario,” said Mehmood.
Once the Bank starts doing business with a customer, it tries to stay together for longer period in good time (booming business) and as well as in bad time (loss scenario).

In good time the Bank applies cautious monitoring to prevent any fund diversion and in bad time it strengthens supervision for optimal utilization of fund by the customer.  With these initiatives Bank Asia was able to restrict NPL (non performing loan) ratio at 2.72 per cent of total loan portfolio as on balance sheet date in 2011.

Regarding qualities of a banker, he said that a banker must understand that the banking sector is directly connected with national economy; every decision taken by them may have positive or negative impact on the country’s overall economy. He should also have sufficient knowledge about the shifting of dynamics of global economy and technological innovation which leads the global business.

A banker must know his customers and their business needs. Accordingly, he will be able to exploit the business potentials of his country and cater technology driven products and services for the benefit of his customers.

The Independent/Bangladesh/ 9th April 2012

Bangladesh Bank (BB) on Sunday signed two separate agreements with International Islamic Trade Finance Corporation (ITFC), members of Islamic Development Bank Group, regarding USD 1.7 billion loans for imports of petroleum products by Bangladesh Petroleum Corporation (BPC).

One agreement styled “Framework Mudaraba Agreement for USD 1 Billion” while, the other titled “Syndicated Mudaraba Agreement”, according to a BB press release.

BB governor Dr Atiur Rahman and ITFC chief executive officer Dr. Waleed Al-Wohaid have inked the agreements on respective their parts at the central bank headquarters in Dhaka.

The BB annually receives US $ 1 billion in loans from ITFC each year for petroleum import by BPC. This year, the ITFC members will provide another US $ 1 billion in loans under syndicated financing by IDB Group members. Of the latter US $ 1 billion, the central bank’s contribution is $ 300 million, according to the press statement.

Twenty-seven foreign financial institutions would take part in the syndication.

The Independent/Bangladesh/ 9th April 2012