INDEPENDENT UNIVERSITY, BANGLADESH

Fin 405

Section: 01

Term Assignment

Submitted To

ABDULLAH AL AABAD

Submitted By

NAFIS AHMED

ID--0720129

Term Assignment on

LankaBangla Finance Limited

Table of Content page No

LankaBangla at a Glace 03

Corporate Management 04

Product and Services

04

Sources and Uses of Funds07

Legal and Government Regulations09

LBFL risk factor and its management09

Conclusion12

List of references 13

LankaBangla at a Glace

LankaBangla Finance Limited (LBFL) a joint venture financial institution established with

multinational collaboration is in operation since 1997 having license from Bangladesh Bank

under Financial Institutions Act, 1993. With institutional shareholding structure, educated &

motivated human resources, friendly working environment & dynamic corporate culture has

enabled LBFL to be a diversified financial services providing institution of the country.

Technical support provided by Sampath Bank Limited, Sri Lanka has been working as a catalyst

to emerge LBFL as most innovative financial solution provider strictly in compliance with the

rules & regulations of Bangladesh Bank. 

Legal form

Public Limited Company, incorporated in Bangladesh on November 5, 1996 under Companies

Act, 1994. Certificate to Commence business was received on October 30, 1997.

Vision

To be the nation’s most preferred financial services provider.

Mission

To lead by example through a commitment that empowers the organization at every level to

strive for the highest levels of quality, customer care and stakeholder value.

GOALs

To lead by example through a commitment that empowers the organization at every level to

strive for the highest levels of quality, customer care and stakeholder value. To be the most

sought after facilitator in creating wealth. To optimize the value of being our Customer,

Shareholder or Employee. To establish strong regional presence.

Core Values

Integrity: LBFL are committed to conduct that reflects the highest standards of integrity in

everything we do.

Teamwork: It is the essence of LB ability to succeed as a trusted and preferred provider of

financial solutions to their clients.

Respect: LBFL respect every individual. They draw strength from equal opportunity at the same

time supporting personal growth and development.

Professionalism: LBFL are committed to the highest standards of professionalism, they pursue

innovation, and they continually quest for quality at each level.

Key Strength

Exceptional quality and professionalism in its service offering to clients An experienced and dedicated senior management team A trained and professional sales team A competent equity market research unit The widest network of local branches. International affiliation

Corporate Management

The management of company comprises a team of 62 young, energetic and experienced

professional under the leadership of Mr. Mafizuddin Sarker, Managing Director a veteran leasing

personality of the country having over 30 years of experience in investment banking, leasing and

corporate financing.

Product and Services

Lease Finance

LBFL provide lease Finance facilities to all market segment of customers, individuals, Small &

Medium Enterprises, Commercial Houses, Large Corporate organizations. All types of items are

leased like automobile, personal computer, medical Laboratory Equipment, Industrial

Machinery, Trucks, Buses, Trawlers, Marine vessels, Construction Equipment, Generator,

Transformer, Boiler, Agricultural Equipment etc.

Term finance

LBFL provide Term Loan to medium and large corporate entities to meet their short medium &

long term fund requirements for development of production facilities on easy and flexible terms.

Work order financing

LBFL provide Loans to corporate entities to finance work orders that they receive from private

reputed companies, Government, multi-national companies and defense authorities. In such cases

they require that the payment to be received from the contract be fully assigned in favor of

LankaBangla which will then facilitate direct payment of the receivables to us when the work

order is completed. Such financing will normally be for periods ranging from 6 months up to 1

year, covering the provide requirement to complete the work order.

Factoring

As peoples business grows, they need working capital. Especially Healthy companies need cash

to finance expansion, to fund stocks, to meet overheads/ salaries. LBFL specialize in providing

people with instant cash through the purchase of accounts receivable or debts outstanding which

is a financing technique known as Factoring. Factoring moves people’s cash flow forward

creating immediate cash to improve your financial position and increase their purchasing power.

Thereby, it provides them with the economic strength to expand production, increase sales and

profits.

AUTO loan

Auto Loan is one of the popular schemes of LankaBangla. A vast number of individuals and

institutions have already availed the benefits of car loan scheme, which is very simple and terms

of the loan are also tailored to the needs of the borrower.

Corporate finance

Debt Syndication

LBFL carry out placements of corporate debt through syndication & assist clients to leverage on

debt as an instrument to raise capital for various requirements including new projects,

expansions, and modernizations. They have strong relationships with lending banks, in-depth

product knowledge and a skilled negotiation prowess.

Mergers & Acquisitions

LankaBangla acts as the financial advisor for the total merger or acquisition transaction whether

the client is the bidder or the target. They work closely with their clients on all aspects of an

M&A deal starting from origination to closure. Corporate Finance's hands-on practical

approaches help facilitate achieve successful transactions. Their work includes identification of

the business to be acquired, strategic planning of the acquisition, valuations, transaction

structuring and advice on financing, legal issues to work towards successful completion.

Financial advisory

In today's environment of complex transactions and competitive markets, increasing the value of

business requires skills and experience. Thus LBFL help clients to undertake the right decision

the right way to make their business more competitive and profitable by providing integrated and

objective advisory services. They provide assistance in due diligence, support the creation of

financial models, act as lead advisors, aid in overall project management and provide solutions

on financial and corporate matters.

Restructuring Advisory

Corporate Finance also provides restructuring advisory services to under performing companies

and companies experiencing liquidity problems, in all sectors and in all markets.

Merchant Banking

As a merchant banker with foresight in the changes, LBFL have expanded their service horizon

of merchant banking by offering a comprehensive range of financial solutions starting from debt

to equity through public offering, private equity and corporate advisory service; personalized

portfolio investment products.

Deposit scheme

LankaBangla offers various Deposit Schemes with attractive rate of return. People are entitled to

select any of these schemes as per their requirement.

LankaBangla Cumulative Term Deposit

LankaBangla Periodic Return Term Deposit

LankaBangla Double Money Term Deposit

LankaBangla Money Builders Term Deposit

Home Loan

LankaBangla has been operating in the market as a leading diversified financial services

company engaged in lease finance, term loans, domestic factoring of receivables, merchant

banking, stock broking and credit card operations. They offered home Loan, Home Loan under

Bangladesh Bank refinancing scheme , real Estate Development Finance

Stock broking

LankaBangla Securities Limited (LBSL) is a subsidiary of LBFL and a leading equity brokerage house in

the country with a diverse clientele of institutions, high net worth individuals, foreign funds and retail

investors. The company commenced stock broking activities in 1997 and has over time become the

largest stock broking company in the country having developed a strong team of highly skilled and

experienced professionals.

Sources and Uses of Funds:

Uses of Funds:

LBFL acts as both Non-banking Financing Institution (NBFI) and Development Finance Institution (DFI). Its investment portfolio consists of

Lease finance

Term finance

Work order finance

Factoring

Auto loan

Corporate finance

Sources of funds

LBFL collects their large portion of fund from different types of attractive deposits scheme. LBFL is authorized by Bangladesh Bank to receive deposit from individual and institution.

LB Cumulative Term DepositUnder this scheme customers Deposit will turn into a desirable amount through accumulation of interest. The minimum tenure of the scheme is at least 2 years. If their deposit amount is Tk. 100,000 the receivables on maturity will be:

2 Years 3 Years 4 Years 5 Years

Tk.123,766 Tk. 138,620 Tk.154,561 Tk.172,335

LB Periodic Return Term Deposit

Under this scheme customer can draw the interest periodically (Monthly/Quarterly/Half-yearly/Annually) keeping the original deposited amount intact.

LB Double Money Term DepositDeposit amount placed at a time will turn double on completion of 6 years 3 months.

LB Money Builders Term DepositUnder this scheme the depositor will open an account with a minimum amount of Tk. 100,000,

there after he/she will deposit a fixed amount on monthly basis for an agreed period. On expiry the depositor will receive the deposited amount along with the interest accrued there on.

BFL also get a large amount of fund from their shareholders. The shareholding structure of

LBFL consists of Commercial Banks, Investment Bank, Corporate & prominent Industrialists

from home & abroad. The current structure is:

Sl. No Detail Percentage

1 Foreign Sponsors:

a) Sampath Bank Limited, Sri Lank 16.57%

28.00%

b) First Gulf Asia Holdings Limited,

Saudi Arab

11.43%

2. Local Sponsors:

a)One Bank Limited, Bangladesh 10.01%

b)SSC Holdings Limited, Bangladesh 2.26%

c)Shanta Apprels Limited, Bangladesh 2.26%

36.05%

d) Others - Bangladeshi Individuals,21.52%

3. General Shareholders: 35.95%

Shareholding Structure 100.00%

Legal and Government Regulations

LankaBangla is a values driven organization. They recognize that their company's reputation is a

priceless asset. As a significant business entity LBFL not only focus on quality of service but

also concentrate on honesty, simplicity, conscientiousness, accountability and CSR. What ever

rules and regulation are given by different regulatory bodies like Bangladesh Bank or SEC LBFL

always tries to reflect it on their work. Companies internal control management ensures that

employees and whole organization follows honesty and do what ever is necessary to increase

shareholder value.

LBFL risk factor and its management

In present challenging financial and economic scenario effective risk management is vital for

growth of stakeholders' value. The measure of risk of any investment depends on several factors.

To measure the influence of risk and analyzing ways of controlling and allocation, it needs

critical and sophisticated mathematical and computation tools. Any Financial Institution needs to

make a balanced trade off between the risk and reward. An established risk management system

is in place in LankaBangla through proper and effective implementation of departmental policies

and operational guidelines approved by the Board of Directors as well as the guidelines

circulated by the Bangladesh Bank to address the Core areas like Credit Risk, Liquidity Risk,

Market Risk and Operational Risk.

Credit Risk

Credit Risk encompasses potential losses arising from the failure of a counter party to perform

according to contractual arrangement with the company. LankaBangla following steps are in

place to manage Credit Risk:

- Multi-tier approval process

- Independent approval from management partner, Sampath Bank Limited

- Clean Credit Report (CIB) for every client

- Past payment performance of the borrower before approval

- Strong Credit Administration for defaulted clients

- Interim as well as annual review of the client business/operation

ii. Liquidity Risk

Liquidity Risk is the posibility that an institution will be unable to meet its obligations as they

fall due because of inability to liquidate assets or obtain adequate funding or that it cannot easily

unwind or offset specific exposures without significantly lowering market prices because of

inadequate market depth or market disruptions. This arises from undesirable variance between

maturities of assets and liabilities. The purposes of managing Liquidity Risk is to ensure that all

upcoming funding commitments and deposits encashment can be met when due. Liquidity Risk

management of Lankabangla usually is well managed by the Treasury Department considering

the availability of fund to meet its investment requirement as well as to discharge short term and

long term financial obligations.

iii. Market Risk

Market Risk can be defined as the probable changes in the earning due to fluctuation in a variety

of market factors such as rate of interest, foreign exchange rate, and changes in equity prices.

The Treasury Department reviews the trend analysis of market interest rate movement and carry

out assets liability gap analysis, forwards this to the Asset Liability Management Committee

(ALMCO) regularly for their reviews and to assess the changes, as a result re-pricing the interest

rates of products to minimize and control the interest rate risk. To manage this market risk they

arrange the funding facilities with competitive interest rate to match with maturity.

iv. Operational Risk

Operational risk is the risk of losses which arises due to lack of systems, procedures and internal

control, ignorance of compliance requirement non-compliance of corporate governance practices

and so on.

The Main causes that leads to operational risk is as under;-

- Incompetence, insufficient training, lack of integrity and turnover of efficient employees

- Business volume variation, organizational complexity, major changes in products

- lack of regular monitoring, ineffective procedures, shortcoming of company structure

- lack of automation, simultaneous manual and automation process, IT complexity

- Natural calamities, deteriorated social and political context.

Risk control and measurement techniques taken by LankaBangla are as under;-

- Proper and adequate internal control policies, procedures & manuals are in place to minimize

these operational risks.

- Effective internal audit function and direct access of Internal Auditor to the Board and Audit

Committee.

- The Internal Audit Department undertakes regular periodic and on demand audit .as advised by

the management to review the operation .and compliance to statutory requirement in Head Office

as well as Branches

- Conduct credit rating through external institution

- Allocation of duties and multilayer approval process

- Up gradation of hardware and software to keep up to date ICT facilities

- IT Audit is conducted on regular basis

- Adequate Data Backup system

Rating of Riskiness of LankaBangla Operation

Type of risk Rating

Credit Risk Moderate

Liquidity Risk Moderate

Market Risk Moderate

Operational Risk Moderate

Conclusion

In Bangladesh commercial Banks have spread their command in financial system, but we have to

recognize the fact that non-Bank Financial Institutions are also significant for smooth economy.

Company like LBFL is providing some additional and dynamic financial services which helped

them to become well known. In one hand they are providing support for those financial sectors

that was not served by commercial bank. As an efficient company LBFL helps in minimizing

risk which in turn helps the economy as a whole. As LBFL becoming stronger and efficient day

by day it can be hoped that if they get necessary support from government it will be able to play

a more historic role in the economic development of Bangladesh.

List of references

(1) http://www.lankabangla.com/

(2) http://www.paksearch.com

(3) http://www.lankabangla.com/financial_highlight.php