Intern Report on BRAC Bank

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SME LOAN OFBRAC BANK

LIMITEDInternship Report

BRAC

BANK

SOUTHEAST UNIVERSITY



2SME loan of BRAC Bank Limited

LATTER OF TRANSMITTAL

31st

December, 2011

MD. RIAD HASSAN

Senior lecturer

School of Business Studies

Southeast Univer sity

Subject: Submission of Internship Report.

Dear Sir,

I would like convey to your knowledge that as per our BBA Program. I have prepared myinternship report under the topic of ³SME Loan of BRAC Bank Ltd.´ under your kind

supervision. Now I like to submit my paper to you. I have tried my best to prepare the Report inconsistence with the optimal standard under your valuable direction.

I request you modestly to accept my paper as it may suffer from some shortcomings. I desired

and endeavored to make this report a complete one. Therefore, I hope that this will meet the

standard of your judgment.

Thanking you for your kind supervision.

Your s faithfully,

Saeed Ahmed

Batch:18

th

(B)ID: 2008-01-0000-173

Major: Finance

Department of Business Administration




3 SME loan of BRAC Bank Limited

TITLE PAGE

Internship Report On

SME loan of BRAC Bank Ltd.

Prepared For

MD. RIAD HASSAN

Senior lecturer

School of Business Studies


Prepared by

Saeed Ahmed

Batch: 18th (B)

ID: 2008-01-0000-173

Major: Finance

Department of Business Administration


Date of Submission

31st

December, 2011




ACKNOWLEDGEMENT

It is a great pleasure to prepare internship report on SME loan of BRAC Bank Ltd. On

this manner I would like to thank s and convey my gratitude to honorable Supervisor MD. Riad

Hassan, Senior lecturer, School of Business Studies, Southeast Univer sity, for letting me prepare

this report and I would also like to express my sincere appreciation to him for his kind support

and guidance.

I express my grateful appreciation to Tahniyat Ahmed Karim, Head of Human Resource

Department BBL, Bangladesh, for giving permission to perform my internship work in their

organizations. I am most grateful to my organization supervisor, Faisal Uddin Ahmed (Associate

Manager, ROC) BRAC Bank Limited, for providing required information and his knowledgeable

guideline which contributed a lot for writing this report. I also want to express my s pecial thank s

to, Mr. Adnan, Mr. Plash, Mr. Mizan, Mr. Prince, Mr. Rana, Mr. Nayon, Mr. Rasel, Mr. Sharif,

and Mr. Shammi as well as all other employees and CRO under whom I have completed my

three months internship program and gather practical knowledge about the Banking operations.

Finally, I am grateful to my family, my friends and all other per sons who gave me

support and ideas to carry out my report by sacrificing their important time.




EXECUTIVE SUMMARY

BRAC Bank Limited is incorporated as a public limited company on 4th

of July 2001

under the company acts 1994 with able leader ship of Mr. Fazle Hassan Abed who is the

chairman of the bank. BRAC Bank limited a full service commercial bank with local and

international institutional shareholding. BRAC Bank has been striving to provide best-in-the-

class services to its diver se range of customer s s pread across the country under an on-line

banking platform. The bank consists of major divisions named corporate banking, Retail

banking, Probashi banking, small & Medium Enterprise (SME).

Now a day¶s SME loan sector is one of the major driving forces in the development of a

market economy. In recent time researcher s and bank s are give much attention on it, BRAC bank

is one of them and now BBL is the market leader of SME loan. For BBL, SME loan is the

³heart´ of the bank, because their major sources of income come from SME loan. The study will

give in-depth knowledge about SMEs and SME loan in case of BRAC Bank Ltd. This report will

also discuss loan portfolio of BBL. Moreover this is an exploratory study which will explore

impact of marketing strategy on the SME loan of BRAC Bank Limited. Some topic s like

Portfolio analysis, Ratio analysis, Analysis of Demand Management, Market Segmentation,

Target Marketing and Market Positioning these are chosen for properly complete the study.

Further a survey analysis is also prepared to evaluate customer behavior and their satisfaction

level.




TABLE OF CONTENT

LATTER OF TRANSMITTAL ........................................................................................................................ 2

TITLE PAGE .............................................................................................................................................. 3

ACKNOWLEDGEMENT .............................. ........................ ................................ ...................... .................. 4

EXECUTIVE SUMMARY ............................................................................................................................. 5

TABLE OF CONTENT ................................................................................................................................. 6

LIST OF TABLES ........................................................................................................................................ 8

LIST OF FIGURES ...................................................................................................................................... 9

CHAPTER ONE: INTRODUCTION ............................................................................................................. 10

(1.1)BACK GROUND OF THIS REPORT ..................................................................................................... 10

(1.2) OBJECTIVE OF THE STUDY ......................... ................................ ...................... ............................... 11

CHAPTER TWO: METHODOLOGY ................................ ....................... ................................ ..................... 12

(2.1) Primary Sources ............................................................................................................................. 12

(2.2) Secondary sources ......................................................................................................................... 12

(2.3) Processing of Data ......................................................................................................................... 12

(2.4) Limitations of the study ................................................................................................................. 12

CHAPTER THREE: OVERVIEW OF BRAC BANK LIMITED ................................ ....................... ..................... 13

(3.1) About BRAC Bank Limited .............................................................................................................. 13

(3.2) Mission .......................................................................................................................................... 14

(3.3) Vision ............................................................................................................................................ 14

(3.4) Objectives...................................................................................................................................... 14

(3.5) SME Banking division ..................................................................................................................... 15

(3.6) Strengths of SME division .............................................................................................................. 15

(3.7) Performance of BRAC Bank Limited ............................................................................................... 16

(3.8) Shareholding Structure .................................................................................................................. 16

CHAPTER FOUR: CRITERIA & CONDITION OF SME LOAN ........................... ........................ ...................... 17

(4.1) Selection Criteria of Potential Enterprise for SME .......................................................................... 17

(4.2) Terms and Conditions of SME Loan ................................................................................................ 19

CHAPTER FIVE: PROCEDURE OF SME LOAN ............................................................................................ 21




(5.1) Loan Sanction activities ................................................................................................................. 21

(5.2) Disbursement of SME loan ........................ ................................ ...................... ............................... 22

(5.3) SME Loan Recovery Procedures ..................................................................................................... 25

(5.4) Closing procedures of SME loan in BRAC Bank: .............................................................................. 25

(5.5) Monitoring ............................. ........................ .............................. .............................. .................. 27

CHAPTER SIX: ANALYSIS OF SME LOAN IN BRAC BANK LIMITED ............................... ....................... ........ 28

(6.1) SME in BRAC Bank ......................................................................................................................... 28

(6.2) Reason of SME program from the view point of BRAC Bank ......................................... .................. 28

(6.3) Structure of SME division of BRAC Bank & SME Network Coverage ............................................. ... 30

(6.4) Products & their features............................................................................................................... 31

CHAPTER SEVEN: PERFORMANCE ANALYSIS OF SME LOAN IN BRAC BANK LIMITED .......................... ..... 37

(7.1) Portfolio analysis of SME loan ......................... ................................ ...................... ......................... 37

(7.2) Ratio analysis: ............................. ................................ ...................... ................................ ............. 38

(7.3) Analyzing of marketing Strategies related to SME loan ............................... ....................... ............ 39

(7.4) Marketing Process Relates to SME loan ......................................................................................... 40

(7.5) Survey analysis in terms of questionnaire .......................................... ...................... ..................... 44

CHAPTER EIGHT: FINDINGS .................................................................................................................... 48

CHAPTER NINE: RECOMMENDATION & CONCLUSION ............................... ........................ ..................... 49

(9.1) Recommendation .......................................................................................................................... 49

(9.2) Conclusion ..................................................................................................................................... 50

CHAPTER TEN: APPENDIXES ................................................................................................................... 51

(10.1) Sample Questionnaire of Survey on SME Loan: ............................................................................ 51

(10.2) List of Abbreviation ............................. ......................... ............................ ................................ .... 52

CHAPTER ELEVEN: BIBILIOGRAPHY ............................ ........................ ................................ ..................... 53




LIST OF TABLES

Table No 1: Shareholder Structure of BRAC Bank Ltd. « « « « «16

Table No 2: Loan processing fees « « « « « « « «19

Table No 3: Rules of Anonno Rin « « « « « « « «31

Table No 4: Range of the product under trade plus « « « « « «36

Table No 5: Loan and Advance portfolio analysis « « « « « «37

Table No 6: Interest on loan and advance portfolio analysis « « « « «37

Table No 7: Ratio analysis « « « « « « « « «38

Table No 8: Percentage Change Analysis of Demand of SME loan (2007) « « «39

Table No 9: List of Abbreviation « « « « « « « «52




LIST OF FIGURES

Figure 1: SME Loan Process.................................................................................................................... 15

Figure 2: Shareholder structure of BRAC bank ltd. ............................ ........................ .............................. 16

Figure 3: Structure of SME Division ........................................................................................................ 30

Figure 4: SME Network Coverage ........................................................................................................... 30

Figure 5: Target Market of BRAC Bank ................................................................................................... 41

Figure 6: Age limit of the client .............................................................................................................. 44

Figure 7: Educational qualification of the clients .............................. ...................... ................................ 44

Figure 8:Purpose of loans ...................................................................................................................... 45

Figure 9: Time Requirement for Loan ..................................................................................................... 45

Figure 10: Different categories of business ............................................................................................ 46

Figure 11: Rate of interest ..................................................................................................................... 46

Figure 12: Repay monthly installment ......................... ................................ ...................... ..................... 47

Figure 13: Services by the CRO of SME of BRAC Bank Limited ............................. ....................... ............. 47




CHAPTER ONE: INTRODUCTION

(1.1)BACK GROUND OF THIS REPORT

The importance of financial intermediaries in the development of the overall economy of

country cannot be described in short. From the inception of the civilization the banking sector

dominate the economic development of a country by mobilizing the saving from the general

people and channeling those saving for investment and thus economic development and growth.

Banking Industry is one of the most promising industries of our country. The importance

of this sector revealed through its contribution in the economic growth of the country. This sector

increase economic growth through mobilizing funds from surplus unit to the deficit unit.

Banking Industry is moving towards rapid changes due to technological innovation and

diver sified needs of its customer s.

The key to successful banking lays in the ability of balance many activities. The BRAC

Bank Limited has a res ponsibility to ensure efficient and effective banking operation in a sound

manner. The bank focused on relationship based Banking, as it believes that the pur suit of profit

and developmental goals are mutually reinforcing. This focus makes the bank to emphasize more

on to explore and access market opportunities as well as build asset base to its clients conforming

significant contribution to the profitability of the Bank.

Now a day¶s education is a tool to under stand the real world and apply knowledge for the

betterment of the society. Internship Program brings a student closer to the real life situation and

helps

to get a career withs

ome experience. For the interns

hip program, eachs

tudent has

to attachwith an organization. My internship was in ³The BRAC Bank Limited´ at Service Quality

department under Central Operation .This Internship Report is prepared as a partial fulfillment of

the requirement of BBA program. The study paper prepared based on the SME Loan of BRAC

Bank Limited. To fulfill the report properly I have also discussed overview and performance

analysis of BRAC Bank Limited. My supervisor Md. Riad Hassan, Senior Lecturer, School of

Business Studies, Southeast Univer sity authorized me to prepare it.




(1.2) OBJECTIVE OF THE STUDY

To present an overview of The BRAC Bank Ltd.

To evaluate the performance of the bank

To get some idea about functional units

To know the SME loan activities in BRAC Bank

To know the enterprise selection criteria to provide SME loan

To know the terms and conditions of SME loans

To analyze the SME sector in Bangladesh

To analyze the Marketing Procedure of SME loans of BRAC Bank

To conduct a survey through administering a questioner

To know the expectations of customer s of BRAC Bank

To know the internal strength of SME related services of BRAC Bank Ltd.

To know the dis bur sement and recovery procedures of SME loans

To make some recommendations and conclusion to further the development of SME

loan products of BRAC Bank Ltd.




CHAPTER TWO: METHODOLOGY

(2.1) Primary Sources

Previous performance matter s booklet.

Open ended and close ended questions.

Data collected from internal report.

Face to face communication with the supervisor and employees of the BRAC Bank Ltd.

(2.2) Secondary sources

Annual performance report of BBL.

Bank records

Journal

sof the Bank

Different book s, training paper s, manuals etc. related to the topic.

Official Website of the Bank

(2.3) Processing of Data

After collection of the raw data, the following computer packages has been used in editing

and processing the entire report

MS-Excel

MS-Word

(2.4) Limitations of the study

Time is the big constraint for my research. I have to submit a broader deal in a shorter

form of outcome. In this limited time I can take just snap short not ongoing things of

SME loan of BBL.

Data from BRAC Bank is highly confidential for the outside people and I had no

authority to use the core banking software.

It was difficult to communicate with the customer s, as many of them were unable to give

me much time for interview.

As I have taken a sample of 60 observations, there may be sampling error. I had to go under my day to day job res ponsibility that I was supposed to do so. So I

could get few more time to s pend in collecting data for preparing my internship report.




CHAPTER THREE: OVERVIEW OF BRAC BANK LIMITED

(3.1) About BRAC Bank Limited

BRAC Bank Limited is one of the latest generations of scheduled commercial bank s in

Bangladesh. It established in Bangladesh under the Banking Companies Act, 1991 and

incorporated as private limited company on 20 May 1999 under the Companies Act, 1994.BRAC

Bank Limited started its Journey on the 4th of July 2001 with a vision to be the absolute market

leader through providing the entire range of banking services suitable to the needs of modern and

dynamic banking business as well as to promote broad based participation in the Bangladesh

economy through the provision of high quality banking services.

BRAC Bank Limited, with institutional shareholdings by BRAC, International Finance

Corporation (IFC) and Shore Cap International has been the fastest growing Bank in 2004 and

2005. The Bank operates under a "double bottom line" agenda where profit and social

res ponsibility go hand in hand as it strives towards a poverty-free, enlightened Bangladesh.

BRAC Bank is extending full range of banking facilities as per the directives of

Bangladesh Bank. It intends to set standards as the absolute market leader in Bangladesh by

providing efficient, friendly and modern fully automated on-line service on a profitable basis.

Since inception, it has introduced fully integrated online banking service to provide all kinds of

banking facilities from any of its conveniently located branches.

BRAC Bank s envisages providing mass financing by increasing access to economic

opportunities for all individuals and business in Bangladesh with a s pecial focus on currentlyunder -served enterprises across the rural-urban s pectrum.

BRAC Bank is surviving in the large banking arena through its unique and competitive products

and it is the only local bank providing 100% integrated on-line banking services.

In the last five year s of operation, the Bank has dis bur sed over BDT 1500 crore in loans

to nearly 50,000 small and medium entrepreneur s. The management of the Bank believes that

this sector of the economy can contribute the most to the rapid generation of employment in

Bangladesh. Since inception in July 2001, the Bank's footprint has grown to 36 branches, 392

SME unit offices and 67 ATM sites across the country, and the customer base has expanded to

200,000 deposit and 45,000 advance accounts through 2007.

Within this short time the bank has been successful in positioning itself as progressive

and dynamic financial institution in the country. It has able to create a unique image for itself and

earned significant solution in the banking sector of the country as a bank with a difference. In the

year s ahead BRAC Bank expects to introduce many more services and products as well as add a

wider network of SME unit offices, Retail Branches and ATMs across the country.




(3.2) Mission

Building a profitable and socially res ponsible financial institution focused on Marketing

and Business with growth potential, thereby assisting BRAC and stakeholder s build a

³just, enlightened, healthy, democratic and poverty free Bangladesh´.

(3.3) Vision

Sustained growth in µSmall & Medium Enterprise¶ sector

Continuous low-cost deposit growth with controlled growth in Retail Assets

Corporate Assets to be funded through self -liability mobilization. Growth in Assets

through Syndications and investment in faster growing sector s.

Continuous endeavor to increase fee based income

Keep our Debt Charges at 2% to maintain a steady profitable growth

Achieve efficient synergies between the bank¶s branches. SME unite offices and BRAC

field offices

for delivery of Remittance and Bank¶s

other products

andservice

s

Manage various lines of business in a fully controlled environment with no compromise

on service quality

Keep a driver s, far flung team fully motivated and driven towards materializing the

Bank¶s vision into reality

(3.4) Objectives

Building a strong customer focus and relationship based on integrity, superior service.

To create an honest, open and enable environment

To add value and res pect people and make decisions based on merit To strive for profit & sound growth

To value the fact that they are a member of the BRAC family ± committed to the

creation of employment opportunities across Bangladesh.

To work as a team to serve the best interest of the owner s

To relentless in pur suit of business innovation and improvement

To base recognition and reward on performance

To res ponsible, trustworthy and law-abiding in all that we do

To mobilize the savings and channeling it out as loan or advance as the company

approve.

To establish, maintain, carry on, transact and undertake all kinds of investment and

financial business including underwriting, managing and distributing the issue of

stock s, debentures, and other securities.

To finance the international trade both in import and export.

To develop the standard of living of the limited income group by providing Consumer

Credit.




(3.5) SME Banking division

The objective of this division is to achieve a two folded bottom line i.e. to build a

profitable organization by contributing to the society and the economy, and eliminating poverty

from the country. This division has so far covered 113000 customer s by reaching the door steps

of small and medium enterprises involved in different business sector s in the country. BRAC has

long been serving the fund requirements of trader s, manufacturer s, importer s, supplier s &

distributor s, Women entrepreneur s and other service provider s like medical &educational

institutes in a focused way. SME has also introduced a unique way of reaching the clients, s pread

throughout the country with 2000 efficient &n dedicated employee in the 392 unit offices. SME

Loan process flow is shown below.

When a customer comes to the unit office for a loan request, fir st he/she meets with the

customer relationship officer to discuss about the loan, which loan product is suitable for

him/her. After then the following process takes place:

(3.6) Strengths of SME division

Dynamic human resource

Countrywide distribution network & coverage

Continuous development in creating innovative products

Unique loan approval process & monitoring

Robust risk management system

Figure 1: SME Loan Process




(3.7) Performance of BRAC Bank Limited

BRAC Bank Limited will be the most successful private sector commercial bank in our

country, though it started its operation few year s back. It has achieved the trust of the general

people and made reasonable contribution to the economy of the country by helping the people

investing allowing credit facility.

(3.8) Shareholding Structure

The emergence of BRAC Bank Limited is an important event in the country¶s financial

sector at the inception of financial sector reform. The authorized capital of PBL is Tk. 1000

million and paid up capital of the same bank is Tk. 500 million.

Table No. 1: Shareholder Structure of BRAC Bank Ltd .

Shareholders Percent

BRAC 31.74%IFC 9.50%

Shore Cap International 8.76%

General Public through IPO 40%

Non-Residents Bangladeshi¶s 5%

Mutual funds through IPO 5%

Total 100%

Figure 2: Shareholder structure of BRAC bank ltd.




CHAPTER FOUR: CRITERIA & CONDITION OF SME LOAN

(4.1) Selection Criteria of Potential Enterprise for SME

Enterprise Selection Criteria

The success of SME will largely depend on the selection of a business and man behind it. In

terms of the business (Enterprise), the following attributes should be sought:

The business must be in operation for at least one year

The business should be environment friendly, no narcotics or tobacco business

The business should be legally registered, i.e., valid trade license, income tax or VAT

registration, wherever applicable.

The business should be in legal trade, i.e.; smuggling will not be allowed or socially

unacceptable business will not be entertained.

The business must have a defined market with a clear potential growth

The business must be located ideally close to the market and the source of its raw

materials/supplier s. It should have access to all the utilities, skilled manpower¶s that are

required.

Any risk assessed by the management in turn will become a credit risk for the bank. So

effort should make to under stand the risk faced by the business

Entrepreneur Selection Criteria

In order to under stand the capability of the management behind the business, the following

should be assessed:

The entrepreneur should be physically able and in good health, preferably between the

age of 25-50. If he/she is an elderly per son closer to 50, it should be seen what the

succession process will be and whether it is clearly defined or not.

The entrepreneur must have the necessary technical skill to run the business, i.e.

academic background or vocational training, relevant work experience in another

institution or year s of experience in this line of business.

The entrepreneur must have and acceptable social standing in the community (People

should s peak highly of him), he should possess a high level of integrity (Does not cheat

anyone, generally helps people), and morally sound (Participates in community building)




The entrepreneur must possess a high level of enthusiasm and should demonstrate that he

is in control of his business (Confidently replies to all queries) and has the ability to take

up new and fresh challenges to take the business forward.

Supplier s or creditor s should corroborate that he pays on time and is general in nature

Clear -cut indication of source of income and reasonable ability to save.

G uarantor Selection Criteria

Equally important is the selection of a guarantor. The same attribute applicable for an

entrepreneur is applicable to a guarantor. In addition he should posses the followings:

The guarantor must have the ability to repay the entire loan and is economically solvent

(Check his net worth)

The guarantor should be aware about all the as pect of SEDF loan and his res ponsibility

Govt. and semi-govt. officials can be selected as a Guarantor such as schoolteacher,

college teacher, doctor etc.

Police, BDR and Army per sons, political leader s and worker s, and Imam of mosque can

not be selected as a guarantor.

The guarantor should know the entrepreneur reasonable well and should preferably live

in the same community




(4.2) Terms and Conditions of SME Loan

The SME department of BRAC Bank will provide small loans to potential borrower

under the following terms and condition:

The potential borrower s and enterprises have to fulfill the selection criteria The loan amount is between tk 2 lacs to 30 lacs.

SME will impose loan processing fees for evaluation/ processing a loan proposal as

following:

Table No 2: Loan processing fees

Loan Amount Loan Processing Fee

2 lacs to 2.99 lacs Tk 5000

3 lacs to 5 lacs Tk 7500

5.01 lacs to 15 lacs Tk 10,000

15.01 lacs to 30 lacs Tk 15,000

Loan can be repaid in two ways:

o In equal monthly loan installment with monthly interest payment, or o By one single payment at maturity, with interest repayable a quarter end residual

on maturity

Loan may have various validates, such as, 3 months, 4 months, 6 months, 9 months, 12

months, 15 months, 18 months, 24 months, 30 months and 36 months.

The borrower must open a bank account with the same bank and branch where the SME

has its account

Loan that approved will be dis bur sed to the client through that account by account payee

cheque in the following manner: Borrower name, Account name, Bank s name and

Branch¶s name

The loan will be realized by 1st

every months, starting from the very next months

whatever the date of dis bur sement, through account payee cheque in favor of BRAC

Bank Limited A/C . With Bank¶s named and branches name

The borrower has to issue an account payable blank cheque in favor of BRAC Bank

Limited before any loan dis bur sement along with all other security.

The borrower will install a signboard in a visible place of business of manufacturing unit

mentioned that financed by ³BRAC Bank Limited´.




The borrower has to give necessary and adequate collateral and other securities as per

bank¶s requirement and procedures.

SME, BRAC Bank may provide 100% of the Net Required Working Capital but not

exceeding 75% of the aggregate value of the Inventory and Account Receivables. Such

loan may be given for periods not exceeding 18 months. Loan could also be considered

for shorter periods including one time principal repayment facility, as stated in loan

product sheet.

In case of fixed asset Financing 50% of the acquisition cost of the fixed asset may be

considered. While evaluating loans against fixed asset, adequate grace period may be

considered depending on the cash generation after the installation of the fixed assets.

Maximum period to be considered including grace period may be for 36 months.




CHAPTER FIVE: PROCEDURE OF SME LOAN

(5.1) Loan Sanction activities

Select potential enterprise: For SME loan, in this step the CRO conduct a survey and

identify potential enterprise. Then they communicate with entrepreneur s and discuss the

SME program.

Loan Presentation: The function of CRO is to prepare loan presentation based on the

information collected and provided by the entrepreneur about their business, land

property (Where mortgage is necessary)

Collect confidential information: Another important function of a CRO is to collect

confidential information about the client from various sources. The sources of

information are supplier s regarding the clients payment, customer s regarding the delivery

of goods of services according to order, various bank s where the client has account whichshows the bank s transactions nature of the client.

Open clients accounts in the res pective bank: When the CRO decided to provide loan to

the client then he/she help the client to open an bank account where BRAC bank ha s a

STD a/c. BRAC bank will dis bur se the loan through this account. On the other hand the

client will repay by this account. Although there is some exception occur by the s pecial

permission of the authority to repay by a different bank account.

Filled up CIB form: CRO give a CIB ( Credit Information Beurue) form to the client and

the client fill and sign in it. In some case if the client is illiterate then the CRO fill the

form on behalf of the client. Then CRO send the filled and signed form to the SME, head

office.

Sending CIB to Bangladesh Bank: The SME, head office collect all information and send

the CIB form to Bangladesh Bank for clearance. Bangladesh Bank return this CIB form

within 10-12 days with reference no.

CIB report from Bangladesh Bank: In the CIB report Bangladesh Bank use any of the

following reference no:

o NIL: if the client has no loan facility in any bank or any financial institution then

BB (Bangladesh Bank) use µNIL¶ in the report

o UC (Unclassified): if the client has any loan facility in any bank or financial

institution and if the in

stallment due 0 to 5.

99then BB u

se UC in the report

o SS (Substandard): if the client has any loan facility in any bank or financial

institution and if the installment due 6 to 11.99 then BB use SS in the report

o DF(Doubtful): if the client has any loan facility in any bank or financial

institution and if the installment due 12 to 17.99 then BB use DF in the report




o BL (Bad lose): if the client has any loan facility in any bank or financial

institution and if the installment due 18 or above then BB use BL in the report.

This report indicates that the client is defaulter and the bank should not provide

loan the client.

Loan decision considering CIB report: Considering CIB report, BRAC bank decide

whether it will provide loan the client or not. If the bank decides to provide loan then the

SME of head office keep all information and send all paper s to the res pective unit office

to apply with all necessary charge documents.

Loan Sanction: The res pective unit office sanction loan to the client if it is 2 to 5 lacs and

they send the sanction letter including all necessary charge documents to the loan

administration division for dis bur sement the loan. If the amount is higher than 5 lacs then

the res pective unit office send the proposal to SME, head office for sanction. The head of

SME sanction the loan and send the sanction letter including all documents to the loan

administration division for dis bur sement and inform the res pective unit office regarding

sanction of the loan.

(5.2) Disbursement of SME loan

Pre Disbursement Manual Activities

Prepare loan file: Receiving all documents, Loan Administration Division prepare a loan

file with all documents received from the unit office.

Charge documents checking: The loan administration division check s all charge

documents. following charge documents are checked:o Money receipt (Risk fund)

o Sanction letter

o Demand promising note (With stamp of Tk 20/=)

o Letter of arrangement (With stamp of Tk 150/=)

o General loan agreement (With stamp of Tk 150/=)

o Letter of undertaken (With stamp of Tk 150/=)

o Letter of stock s and goods (With stamp of Tk 150/=)

o Letter of hypothecation book debt and receivable(With stamp of Tk 150/=)

o Letter of dis bur sement

o Photocopy of trade license (attested by CRO)

o Insurance (Original copy)

o Blank claque with signature (one cheque for full amount and other s same as no of

installment on Favor of BRAC bank, no date, no amount)

o Two guarantor s ( one must be Spouse/parents)

o If the loan provide for purchase of fixed assets or machineries and if the loan

amount is over Tk 50,000/= then the stamp of a certain amount is require)




Documents deficiency and problem resolving: If there is any error found then it informed

to the res pective CRO. If the application form is not filled properly then the file send to

the CRO to fill the application properly. If any document error found then the loan

administration division asked the CRO to send the require documents and the file stored

to the loan administration division.

Prepare dis bur sement list: The loan administration division lists all new sanctioned

clients details and send a request to the treasury through internal mail.

Dis bur sement of the amount: Sending the list to the treasury of BRAC bank for dis bur se

the amount, the treasury dis bur se the amount to the client through the mother account of

the clients bank. BRAC bank dis bur se amount through any of the following bank s

corporate branch nearer the BRAC bank head office and the corporate branch of the

res pective bank send the amount to the client account in the res pective branch. These

bank s are:

o BRAC Bank Limited

o The City Bank Limitedo Janata Bank

o Bangladesh Krishi Bank

o Pubali Bank

o Agrani Bank

Message sent to the unit office: Completing the dis bur sement, loan administration

division sent a SMS to the res pective CRO informing the dis bur sement of the sectioned

loan.

MBS entries for loan disbursement

Initial ID generation: After sending the list to the treasury, the loan administration

division generates an initial ID against the borrower. Entering required information, the

banking software MBS automatically provide a ID no for the borrower.

Loan account opening: According to the ID, the loan administration division opens a loan

account in MBS against the borrower. Entering all required information, the MBS

automatically give an account no. for the borrower.

Cost center assign: The loan administration division enter the following information in

MBS:

o Security details set-up

o Guarantor details set-up

o Loan other details set-up




Risk fund collection: The loan administration division opens a different account risk fund

of the client. This is known as loan processing fees. Receiving the risk fund, the loan

administration divisions print voucher and posting the voucher in the MBS. The amount

of risk fund is not refundable.

Activision of the loan: Loan administration division do the following task s to activate the

loan

o Loan sanction details set-up

o Repayment schedule set-up and printing

o Loan activation

o Dis bur sement and CC wise voucher print

o Dis bur sement voucher posting

Post Disbursement Manual Activities

Repayment schedule sent to unit office: Completing the dis bur sement of the sanctioned

amount the loan administration division prepare a repayment schedule in MBS and send

it to the unit office. CRO from the unit office collect it and reached to the re s pective

client. The client repays the loan according to this schedule

Loan details MBS entry: The loan administration division enter s details information

regarding the loan in MBS. Each officer has an ID no in MBS and if there is any error

found then the res pective officer will be res ponsible for it. So every body remains alert at

the time of MBS entry.

Document stamp cancellation: The loan administration division cancels all document

stamps. In future if any client found defaulter and the bank file sued against him thenstamps of these document help to get the judgment favor of the bank. But If these stamps

are not canceled then the judgment may not on favor the bank.

Send the loan file to archive: completing all activities, loan administration division sends

the loan file to the archive for future requirement. In future if any document of the loan

account require then the bank can collect the file from archive and get the necessary

document. If the client take repeat loan then it is not require to apply all documents

because his all documents stored to the bank.




(5.3) SME Loan Recovery Procedures

Receive SMS/Fax for installment deposits: When the borrower repays any installment of

the loan then he/she informs it to the unit office/CRO. Then the unit office/CRO sends a

SMS through mobile phone or a Fax to the loan administration division informing the

repayment. Loan administration divisions collect these SMS /Fax and take a paper print

of these SMS.

Entry the installment information to MBS: Loan administration division entry the

repayment installment information to the banking software MBS.

Print Voucher s: Completing the entry, the loan administration division takes paper print

of all voucher s in a prescribed yellow paper.

Cross Check SMS/Fax and solve problems (If any): The loan administration is

res ponsible for all entry in MBS. If the there is any error found in future then the

res pective officer who is entering these information in MBS will be liable for it. It will be

easily identified by user ID. So they always aware to ensure the correct entry. Completing

the entry of information, they print a hard copy and cross check it with the SMS/Fax. If there any error found then it is solved and ensure the correct information entry.

Repayment voucher check and posting: If it confirmed that all entering information is

correct and there is no error, then the res ponsible officer of the loan administration

division posts it to MBS. If one time posted, it is not rectifiable without permission of the

higher authority. So the loan administration is always aware regarding the recovery

procedures of SME loan.

(5.4) Closing procedures of SME loan in BRAC Bank:

Pre-closing manual activities

Receive SMS/Fax requesting for closing: The borrower repay the loan as per repayment

schedule. When the repayment is being complete the borrower request the unit Office/

CRO to close his loan account. The unit office/CRO sends a SMS/Fax the loan

administration division requesting to close the loan account of the res pective borrower.

Print the SMS/Fax: Receiving the request from the res pective unit office/CRO, the loan

administration division takes a paper print and takes necessary steps to close the account

Bring the loan file from archive: The loan account file of the re s pective borrower brought

from the archive. Cross-checked the documents of file with MBS record.

Obtained approval from the concern authority: it is require the permission of concerned

authority to close the loan. If concerned authority approves the closing of the loan

account then next initiatives are taken.




Checking in MBS: The loan administration division check s the loan status in MBS. If

there is any difference found with the SMS/Fax from unit office and MBS then deposits

sleeps are re-checked. Then the loan administration division calculates the total balance

of the loan account (Ledger balance + buffer interest +Excise duty)

SMS sent to concerned CRO: Loan administration division sent an SMS to the concerned

CRO informing the current balance of the requested loan account.

Receive and print closing SMS/Fax checking & freezing: The concerned CRO send a

final SMS to loan administration division informing that the res pective borrower cleared

all his liabilities regarding the loan. The loan administration division takes paper print of

the SMS, check it and finally close the loan account.

MBS entries for loan closing

Pre clo

sing data entry: Completing the manual activitie

s, the loan admini

stration divi

sion

enter s some information to MBS for future requirement and complete following task s:

o Interest/provision charging & print voucher

o Charges collection & print voucher

o Final repayment entry & print voucher

o Final repayment entry checking

o Repayment voucher posting

Activate account closing in MBS: Completing above mentioned task s, the loan

administration division finally close the requested loan account in MBS.

Post closing manual activities:

Re-checking with deposit slips: Completing MBS activities, the loan administration re-

check all deposit sleeps of the loan account. If there is any error found then immediately

resolves it otherwise the file sends to the archive for future requirements. The client may

take repeat loan in future and then information from this file will help to approve and

dis bur se loan which will minimize risk. If the client ask s to return security then the loan

administration releases security completing following task s:

o Documents photocopy before security release

o Closing certificate issuing and security release

Daily MIS updating for loan closing: Finally the authorized officer of the loan

administration division update the banking software MBS (Millennium Banking System)

by closing the res pective loan account.




(5.5) Monitoring

Monitoring is a system by which a bank can keep track of its clients and their operations.

So monitoring is an essential task for a CRO to know the borrower s activities after the loan

dis bur sement. This also facilitates the buildup of an information base for future reference. The

CRO will monitor each business at least once a month. He/she will make a monitoring plan/

schedule at beginning of the month

During monitoring the CRO must use the prescribed monitoring form and preserve in the

client file and forward a copy of the report to SME head office immediately.

Area of Monitoring

The purpose is to know the entire business condition and all as pects of the borrower s so

that mishap can be avoided.

Business Condition: The most important task of the CRO to monitor the business frequently, it will help him to under stand whether the business is running well or not, and

accordingly advice the borrower, whenever necessary. The frequency of monitoring

should be at least once month if all things are in order.

Production: The CRO will monitor the production activities of the business and if there is

any problem in the production process, the CRO will try to help the entrepreneur to solve

the problem. On the other hand the CRO can also stop the misuse of the loan other than

for the purpose for which the loan was dis bur sed.

Sales: Monitoring sales proceed is another important task of the CRO it will help him to

forecast the monthly sales revenue, credit sales etc. which will ensure the recovery of the

monthly loan repayments from the enterprise as well as to take necessary steps for future

loans.

Investment: It is very important to ensure that the entire loan has been invested in the

manner invented. If the money is utilized in other areas, than it may not be possible to

recover the loan.




CHAPTER SIX: ANALYSIS OF SME LOAN IN BRAC BANK LIMITED

(6.1) SME in BRAC Bank

Banking Industry is one of the most promising industries of our country. The importance

of the sector revealed through its contribution in the economic growth of the country. And now a

day worldwide SMEs are recognized as engines of economic growth (Ahmed 1999).So SME

finance has become a remarkable topic in the finance sector of Bangladesh.

Brac Bank fir st fined out that the SME market in Bangladesh is large. From 2002 they

have started to provide SMEs loan. From that time Brac bank s pecial focus in promoting broad

based participation by catering to the small and medium entrepreneur. Brac bank has already

been established network of SME through out Bangladesh. Bank has adopted trust as a corporate

value which is short form for team work, res pect for all people, unquestionable integrity,

excellence in everything Brac Bank of SME do, Sense of urgency in getting things done and total

commitment. All employees are expected to conduct themselves in accordance with the rules and

regulations of the bank. And now one of the major product and service of Brac Bank Ltd. is SME

loan. Their main reasons for providing SME lone is to Support Small Enterprise, Economic

Development, Spread the experience, Encourage Manufacturing, Profit Marking and

Employment Generation Brac Bank start with a vision to be the absolute market leader in the

number of loans given to small and medium sized enterprises through out Bangladesh.

(6.2) Reason of SME program from the view point of BRAC Bank The main focus of BRAC Bank is to develop human and economic position of a country. Its

function is not limited only to providing and recovering of loan. But also try to develop economy

of a country. So reason for this program from the viewpoint of BRAC Bank is:

Support Small Enterprise: The small enterprise which requires 2 to 30 lack s taka loan,

has no easy access to the bank s/financial institutions. For example: 3 to 8 lacs amount of

loans is provided without any kind of mortgage.

Economic Development: Economic development of a country largely depends on the

small and medium seal enterprises. Such as, if we analyze the development history of

Japan, the development of small & medium

scale enterpri

ses

expedite the development of that country.




Employment Generation: The bank is generating employment opportunities by two ways:

o Fir stly, by providing loan to the small enterprises expanding, as these business

requires more worker s.

o Secondly, Small & Medium Enterprise (SME) program requires educated and

energetic people to provide savories to entrepreneur s.

Profit Making: SME program is a new dimensional banking system in the banking world.

Most of the CRO¶s are providing door to door services to the entrepreneur s. The

entrepreneur s are satisfied by the service of this bank and the bank also makes more

profit.

Encourage Manufacturing: A focus of BRAC Bank is to encourage manufacturing by the

entrepreneur s who are producing by purchasing various types of materials. CRO¶s try to

educate them to produce material if possible because if they can produce in line of

purchase profits will be high.

Spread the experience: Another reason of BRAC Bank is to s pread the knowledge of

regarding various businesses. The customer services officer get knowledge from various businesses is and tries to help the entrepreneur s who have shortage of the gathered

knowledge by CRO¶s.




(6.3) Structure of SME division of BRAC Bank & SME Network Coverage

Figure 3: Structure of SME Division

Figure 4: SME Network Coverage




(6.4) Products & their features

Anonno Rin

³Anonno Rin´ is a business loan designed to finance small scale trading, manufacturing and

service ventures, es pecially to to help small and medium entrepreneur s to meet their short-

term cash flow shortages and bridge the fund-flow gaps

Eligibility

o Entrepreneur s aged between 18 to 60 year s

o Entrepreneur s with minimum 2 year s experience in the same line of business

o A business which must be a going- concern with more than 1 year in operation

Maximum Amount

o From minimum BDT 3 lac up to maximum of BDT 9.5 lac

Features

o Loan without mortgage

o Loan for Working Capital Finance and/or fixed assets purchase

o Easy repayment system of monthly installment or Single Installment

o For excellent borrower s who have paid or are paying in due times, we offer

discounted rates

o Quick, quality banking throughout the country

Table No 3: Rules of Anonno Rin

Loan Study Installment (Principal)

Repayment

Interest Repayment

3 months-9 months One single payment atmaturity

Monthly

12, 15, 18, 21, 24, 27,

30, 33, 36 months

Monthly installment Monthly with installment

Apurbo Rin

Apurbo is a loan facility for Small and Medium business. Apurbo loan has been designed

and targeted for relatively bigger business units requiring loan above tk. 8 lacs to 30 lacs.

Eligibilityo Entrepreneur s having a minimum of 3 year s of some business activities

o A business which must be a going concern for 3 year s

o Age minimum 25 year s and maximum up to 60 Year s

Maximum Amount

o Starting from BDT 8 lac to maximum of BDT 30 lac




Features

o Without mortgage for loan below 10 lac

o Simple loan processing for expanding your business

o Quick dis bur sement

o Dis bur sement in one or two installments

o Flexible monthly repayment plan

Pathshala Rin

This is a loan designed to meet the needs of small and medium sized private educational

institutions, such as kindergartens, schools and colleges etc.

Eligibility

o A small & medium educational institution that is in operation for minimum 3

year s The institution should be sole proprietor ship, partner ship, Private Limited

Company, or Society

o The educational institute must be a profit making concern

Maximum Amount

o Minimum BDT 3 lac to maximum BDT 30 lac

Features

o Without mortgage for loan below 10 lac

o Loan for fixed assets purchase & civil construction

o Loan repayment can be s pread up to 4 year s

o Minimum documentation

o Monthly repayment plano Quick dis bur sement

o Flexible interest rate based on security

Aroggo Rin

³Aroggo´ is a loan allowed to various Health service Provider like private clinics,

diagnostics center s and doctor s' chamber s. The product offer s fixed assets purchase financing

under equated Monthly Installments.

Eligibilityo Minimum 2(two) year s in operation

o Health center must be located in the same address for at least 6 months

o Health center must be a profit making concern

o Doctor s having 5 year s of experience can avail the loan in his/her per sonal name

Maximum Amount

o Minimum of 3 lac to maximum of 30 lac




Features

o Loan without mortgage up to 9.5 lac

o Easy loan processing

o Loan repayment schedule is s pread up to 3 year s

o 1% loan processing fee

o Flexible interest rate based on security and loan amount

Digoon Rin

This is a double loan on your deposit. Now you do not need to encash your savings rather

you can take double amount of loan on your deposit for your business expansion.

Eligibility

o Entrepreneur having minimum 2 year s of business activitie

o The business which must be a going concern for 2 year s

o Cash security (BRAC Bank FDR) 50% of the loan amount.

Maximum Amount

o Minimum of 5 lac to maximum of 30 lac BDT

Features

o Double amount of loan on your deposit

o Attractive return against the deposit

o Flexible repayment plan in monthly installment and single installments

o Quick dis bur sement

Prothoma Rin

"PROTHOMA RIN" is a loan facility for small and medium sized business, which are

operated by women entrepreneur. The product offer s terminating loan facilities for the purpose

of working capital finance and/or fixed assets purchase.

Eligibility

o Entrepreneur s with minimum 2 year s experienc in the same line of business

o Minimum 1(One) year of continuous business history

Loan Limit:

o From minimum BDT 3 lac up to maximum of BDT 9.5 lac Features

o Loan without Mortgage

o Easy repayment system

o Minimum documents

o Easy & faster processing




Supplier Finance

Supplier Finance is a loan facility for the enlisted Supplier s of various large retailer s,

marketing companies, distributor s, exporter s etc. This product¶s main objective is to help various

Supplier s

to meet their short

-study ca

sh flow

shortage

sor bridge the fund

-flow gap

s.

Eligibility

o If you are an enlisted supplier of a corporate house with which BRAC Bank has a

corporate tie- up

o Have minimum 3 year s of continuous operation

o Have 1 year continuous relationship with the purchasing firm

Maximum Amount

o Minimum BDT 3 lac up to maximum BDT 30 lac

Feature

s

o Equal monthly installment and revolving loan facility

o 1% of loan amount as the processing fee

BIZNESS Account

³Bizness Account´ is an interest bearing current account for sole proprietor ship business

Entrepreneur.

Eligibility

o Small and medium sized business entrepreneur of a sole proprietor ship business o Opening balance only BDT-10, 000.00

Features

o 4% interest on daily balance

o Smart Business Card

o Cash withdrawal limit in ATM BDT 1,00,000 per day and any amount in POS

o 24 hour Access to ATMs/ POS

o Tk -50, 000 withdrawn facility (per day) from ATM & Tk -100, 000 from POS

o No Minimum Balance, No Ledger Fees, No hidden cost




T rade Plus:

Under SME Banking BRAC Bank launched a new product ³Trade Plus´. Trade Plus is a

composite facility for small & medium sized import-oriented businesses to meet their trade

finance requirements.

The product benefits:

o Two types of Letter of Credit Facilities ± One Off LC and Revolving LC

o LATR, Revolving Loan as well as Bank overdraft facilities

o Easy & faster processing.

Eligible to apply: An importer of a company of last one year and having 2 (two) year¶s

experience in the same line of business and operating the current business for last one

year you can avail BRAC Bank µ Trade Plus¶

Documents need to get the loan: Valid trade license, a copy of your IRC (import

registration certificate), a V.A.T. Regi

stration certificate, a T.I.N. Certificate and a copy

of your Pro-Forma Invoice.

1. PURPOSE OF USE THE LETTER OF CREDIT:

Use the Letter of Credit to import various legal commodities into Bangladesh, such as

raw materials, finished products, etc.

Required LC margin: Margin is negotiable, but not less than 10%.

Use FDR as Cash Margin: Use FDR for possible to get this facility. FDR may be in the

name of individual or Proprietor ship Company or Limited Company. Third party FDR is

acceptable to the Bank provided the relationship between the FDR holder & borrower is

known and recorded.

2. DISBURSEMENT & REPAYMENT SYSTEM OF LATR:

Dis bur sement: Client will submit a request letter to retire the LC document from his/her

Bizness account. Full loan amount will be dis bur sed in the client¶s link account (Bizness

account) & full PAD will be adjusted from the Bizness Account.

Repayment: Single Installment at maturity of loan.

3. DISBURSEMENT & REPAYMENT SYSTEM OF R EVOLVINGLOAN:

Dis bur sement: Customer can transfer full or partial value of loan limit as loan form the

loan account to LC account for retirement of LC documents at the time of LC document

retirement by submitting a request letter to the Bank. Customer will not allowed further

withdrawal/transfer till the full adjustment of previous loan.

4. DISBURSEMENT & REPAYMENT SYSTEM OF OVERDRAFT:




Dis bur sement Mode: Limit will be set in your business account and you can withdraw or

pay any amount (within limit).

Amount of Trade Plus: The range of the products under Trade Plus are as follows:

Table No 4: Range of the product un der trade plus

LC One-Off BDT 3.00 Lac ± BDT 30.00 Lac

LC (Revolving) BDT 5.00 Lac ± BDT 30.00 Lac

LATR BDT 3.00 Lac ± BDT 30.00 Lac

Revolving Loan BDT 5.00 Lac ± BDT 30.00 Lac

Overdraft BDT 5.00 Lac ± BDT 30.00 Lac

5. CHARGES/FEES FOR THE FACILITY:

Interest rate:

o For all funded facilities (i.e LATR, Revolving Loan and Overdraft), it is 18. %

p.a. (Floating) Under commercial Lending Sector

o Processing Fee for funded facilities: 1% of loan amount + VAT

LC Schedule of Charges:

o LC Commission: 0.60% of the LC Amount plus VAT.

o Swift Charges: BDT 2750 + VAT

o Document Handling Charges: BDT 1000

o LC Application Form ± Full Set: BDT 300 + Stamp Charges at Actual

6. SECURITY REQUIREMENT:

For LATR 3 lac to Below 10 lac: Usual charge documents, per sonal guarantee of

s pouse/family member, post dated cheque for full amount.

For Revolving loan 5 lac to below 10 lac: FDR as security for 20% of loan limit, other

usual charge documents, per sonal guarantee of s pouse/family member and post dated

cheque for full amount.

For Revolving loan 10 lac to Below 30 lac: Registered mortgage of land property

(minimum force sale value 125% of the loan amount) or Registered mortgage of land

property + FDR (Face value of FDR and force sale value of Registered mortgage of land

property = 100% of the loan limit), Hypothecation, post dated cheques, per sonal

guarantor. For Overdraft 10 lac to Below 30 Lac: Registered mortgage of land property (minimum

force sale value 150% of the loan amount) or Registered mortgage of land property +

FDR (Face value of FDR and force sale value of Registered mortgage of land property =

100% of the loan limit), Hypothecation, post dated cheques, per sonal guarantor.




CHAPTER SEVEN: PERFORMANCE ANALYSIS OF SME LOAN IN BRAC BANK

LIMITED

(7.1) Portfolio analysis of SME loan

T he main objective of this analysis is

a) To see that how much loan bank provided for which product.

b) To see that how much interest bank received from which product.

c) Comparing the bank¶s performance of its different products.

d) Evaluating trends in the bank¶s position over time.

Table No 5: Loan and Advance portfolio analysis:Category 2005 2006 2007

(Loan Disbursed) (TK) (TK) (TK)

Retail 3,104,610,273 4,262,149,929 6,036,994,144

Corporate 3,440,055,448 4,890,889,834 5,508,974,188

SME 4,852,960,094 9,937,018,916 19,718,168,870

Staff 52,344,311 97,194,773 149,008,029

Total 11,449,970,126 19,187,253,452 31,413,145,231

Table No 6: Interest on loan and advance portfolio analysis:

Category 2005 2006 2007

(Interest received) (TK) (TK) (TK)

Retail 290,619,137 643,523,534 805,959,899

Corporate 291,491,605 575,372,015 712,097,870

SME 844,159,210 1,520,110,900 2,952,692,810

Staff 2,377,030 5,487,755 8,096,006

Total 1,428,646,982 2,744,494,204 4,478,846,585




The portfolio of loan has increased from 2005 to 2006 and also 2006 to 2007.

Bank¶s interest received on loan also going in to upper trend. After comparing three year s

portfolio it¶s found that bank get highest interest income in the year 2007.

In every sector (Retail, Corporate, Staff and SME) loan has increased year to year. But

SME loan has increased at notable amount es pecially from 2006 to 2007.

Bank also received also a notable amount of interest from SME loan.

(7.2) Ratio analysis:

T he main objective of this analysis is

a) To see that how much percentage of loan bank provided for each product.

b) To see that how much percentage of interest bank received from each product.

c) To under stand the bank¶s performance of its different products.

Table No 7: Ratio analysis:

Category 2005 2006 2007 Category 2005 2006 2007

(Loan) (%) (%) (%)(Interestreceived)

(%) (%) (%)

Retail 27.11 22.21 19.21 Retail 20.34 23.44 17.99

Corporate 30.04 25.49 17.55 Corporate 20.4 20.96 15.9

SME 42.4 51.79 62.77 SME 59.09 55.4 65.93

Staff 0.45 0.51 0.47 Staff 0.17 0.2 0.18

Total 100 100 100 Total 100 100 100

After ration analysis of three year s it found that almost in all sector their portfolio is

decreasing but only in SME sector their portfolio is increasing. Their staff loan also

increasing but its quantity is very low comparer to SME loan.

SME cover s the highest portion of their portfolio. In 2005 its 42.4%, in 2006 it is more

than half of the total portfolio, and in 2007 it is 62.77% of the total portfolio. So here we

found that from 2005 to 2006 SME loan increase 9.39% and from 2006 to 2007 its

increase 10.78%. that means SME loan trend is upper word

Now a days SME loan is more profitable that¶s why Brac bank giving more importance

on SME loan.




Interest income from SME loan has also increased from 2005 to 2007 as well as 2006 to

2007.but in other sectored interest income is also decreasing as like its loan portfolio

Form 2005 to 2006 bank s interest income from retail and staff loan was started to

increasing but in 2007 it¶s started to decrease a lot.

Additionally we see that only SME loan showing positive change but all other loan is

showing negative changes.

(7.3) Analyzing of marketing Strategies related to SME loan

BRAC Bank basically provides small micro credit loans and also its product is different

terms of small and medium terms of loans. Though it is lead the way division and makes isolate

plans to increase demand in the market in terms of small and medium enterprise. So SME

provides the loan that affects the level, timing and nature of demand in a way that helps customer

to enhance their business in s pite of economic development. SME already have Zonal offices,

392 unit offices around the country and 2000 CRO to serve door -to-door customer services and

also it exists close to 113,000 customer s.

Table No 8: Percentage Change Analysis of Demand of SME loan (2007)

Category 2006 2007

Percentage

Chance in 2007

(%)

Total No. of loans requested by

the clients8232 14726 78.9

Total No of loan disbursed 7649 14380 87.9

Total amount of loan disbursed 19,187,253,452 31,413,145,231 63.71

After Percentage Change Analysis of Demand Management ration (2007) it found that

their management performance is increasing.

In year 2007 their number of loan request increases by 78.9% and their number of loan

dis bur sement also increases by 87.9%.




(7.4) Marketing Process Relates to SME loan

Market Segmentation

In terms of our country most financial institution starts out with extensive business and

marketing plans to attract potential customer s. For a good market plan fir st we need to segment

our market and than started to provide our service. In our literature review we stated that we can

segment our market in 4 ways these are Geographic, Demographic, Psychographic and

Behavioral Segmentation. So now we see how BRAC bank follows it. For view market structure

BRAC bank try to follows market segmentation strategy

Geographic segmentation: In terms of SME loan, it targets every region around the

country in terms of small business. Now the SME has almost 392 unit offices to provide

credit facilities to the clients around the country. Each of the SME unit offices mainly

s

etup the dis

trict levels

around the city but not in the rural or undeveloped areas

. Demographic Segmentation: In terms of SME loan, in some cases it is very strict. If

some one who has Hindu religion and live close to the border, SME would have very

careful to provide loans to those clients. SME provide loans 20-60 aged peoples. SME is

restricted to provide loans more than age of 65.

Psychographic Segmentation: In terms of SME loan, clients are differing in attitudes,

interest and activity like some are time constrained and some are money constrained. So

bank always tries to focus these things and than very careful provide loans to those

clients.

Behavioral Segmentation: In terms of SME loan, few clients would be found those who

had done MS and most of customer s are secondary or higher secondary pass. But basically SME segments customer s at least whether the customer s can under stand his/her

own business.




T arget Marketing

As we know that there are too many different kinds of consumer s with too many different

kinds of needs. And we have to keeping them by delivering superior service. Therefore before

target consumer and

started to

sati

sfy cu

stomer

s, bank fir

st need to under

stand con

sumer need

s

and wants. In terms of SME loan, BRAC bank s target market is small and medium enterprise.

There are three sector s of target marketing which SME follows: Trading, Service and

Manufacturing.

Figure 5: Target Market of BRAC Bank

From the diagram we notice that in these 3 types of business there are different types of

business sector. In our country now a day¶s main business is garments and departmental store,

few people want to do fast food business and very few people wants to started retail or bakery.

As a result most of the demands go for trading business. Basically according to the customer s

demand, SME support them financially to develop their business.

But BBL scope is also much s pecified because they are restricted on leather, jewelry andalcohol business. So BRAC bank use a differentiating marketing strategy for decides to target

several markets or niches and designs separate offer s for each market. Most of the BRAC bank

time they provide the loan within 25 days and to repay the loan they give the highest months than

other bank s. Their loan providing time and monthly repay system depends on the business size

BRAC bank SME also categorizes the dealings with the customer s in A, B & C groups.




A-Categories officer s are dealing with the high-educated clients, like MBA or PhD

holder or highly social client.

B-Categories officer s are dealing with the undergraduate or normal standard clients.

C- Categories officer s are dealing with the non-educated or illiterate normal clients.

Market Positioning

For competitive market positioning SME already establish different unit offices across the

country. Each unit office consists of 2 or 3 CRO who provides door to door services, if needed

than they work at night. For make a position in the market CRO clearly defines to the customer s

about SME policies and repayment schedules. The CRO of SME never say to the customer at the

fir st impression that interest rate is 24%. They try to make under stand to the clients mind that 2%

per month or equal monthly payment as well as many benefits. To positioning in the market,

SME not only provide loan but also they give

some valuable idea

sto develop the cu

stomer

s

business and for economic development. For market positioning BRAC bank gives

Reschedule System- If after taking SME loans any customer s got serious problem in

business then it gives reschedule to repay the clients loan.

Quick Service- The main facility of SME is to provide quick service to the customer s,

they provide loan within 15 to 20 days.

Direct Services- To get the loan all work are done by the CRO for customer s so that

customer get loan quickly and customer also don¶t need to go in bank directly. If

necessities CRO go to customer s home and bring repayments of the loan. CRO also work

in holidays for support their customer s.

Developing Marketing Mix

Once the company decided on its overall marketing strategy, it¶s ready to plan the marketing

mix. In literature review we know about marketing mix and its variable. So now we see how

BRAC bank plans about marketing mix.

1. Product: In view of SME loan BRAC bank has 2 type loans Short term loan and mid

term loan. Short term products means 3/6/9/12 months loan and mid term product means

15/18/24/30/36 months loan. After product plan company should plan about customer service strategy. BRAC bank s CRO give quick and quality services to customer s. Needs

of target customer s BRAC bank design its products and support services.

Short Term Products: Pick season¶s product - For the customer s these categories of

products are easy to repay. Its pick season loan that means this loan for s pecial season or

occasion like in the Eid occasion most cloth merchants want short term loan to carryout a




profitable business. In this s pecial season or occasion there cloth sells like hot cakes so

they easily can repay the loan to BRAC bank.

Off Pick season¶s product - some time in off pick season many customer s

required short term loan to hold the tender or dealer ship. So for this type of customer s

BRAC bank also provide lone which is Shirt fund requirement.

Mid Term Products: Easy repay- these types of loan for long time repayment schedule, so

customer s can repay the loan in a monthly basis. Accurate utilization- some time

customer wants mid term or long term lone for running there business so for these

categories of customer BRAC bank provide 18 to 24 months loan. So clients can easily

utilize the money regarding the pros pect of the business.

2. Price: In terms of SME loan, BRAC bank receives a certain amount of processing fees

and stamp costs for giving the loan to the customer.

Free consultancy- for develop the business the officer of BRAC bank give moral advices

without taking any money.

Costly- BRAC bank SME interest rate is little bit costly compare to other bank s. There

interest rate is 24%. But BRAC bank take lees time to provide these lone compare to

other bank s. In this situation customer think about time value of money so they don¶t

think about the interest rate because at the right time they get the loan which they can

exercise in their business.

3. Place: In terms of SME loan, bank tries to reach each and every small business

enterprise to meet client¶s demands. Brac bank already has 392 unit offices, which is

s pread throughout the country and 2000 staff s working under these unit offices.

Availability: SME division has everywhere in Bangladesh to serve all res pective

customer s. Bank has lots of unit offices so customer can easily get loan from any place.

4. Promotion: one of the major elements of promotion is advertisement. SME is focus

customer s by printing various leaflets, magazines and showing banner s in front of their

res pective unit offices.

Door to door service- Bank all time provides door -to-door customer services to

customer s. CRO go to the business enterprise door to collect information that the

customer has required any loan or not.




(7.5) Survey analysis in terms of questionnaire

A survey has been made analyze the customer behavior on SME loan of BRAC Bank

Ltd.

Age limit of the client

In this survey, it found that a large number s of customer s are carrying out business whose

ages are between 30 to 50.Only18% customer s are on above 50 year s. For SME banking in our

country, it will be very risky to provide loans above 60 aged clients.

Figure 6: Age limit of the client

Educational qualification of the clients:

In this survey, it found that in our country the educational qualification

sof the mo

st client

sare

very poor at this business level. Most customer s have passed SSC and only few completed

Graduation or Master s. Long run decision-making might not help for low educational

background. SME consider those customer s who can under stand his/her own business. For

generate their business CRO also gives guidelines.

Figure 7: Educational qualification of the clients

36%

46%

18%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Age of Client

Series1

Series1 36% 46% 18%

Below 30 Below 30 to 50 Above 50

38%

30%

21%

11%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Education Qualification

Series1

Series1 38% 30% 21% 11%

SSC HSC Graduate Masters




Purpose of loans:

In this survey, it found that most of the customer s need loan to meet their working capital

necessities. I also found that in our country every customer likes trading business rather than

manufacturing busine

ss. Thu

sonly 20% cu

stomer

sdemand manufacturing loan

sto purcha

se of

fixed assets. And many few customer need loan for other purpose.

Figure 8:Purpose of loans

C lients want fast service:

In this survey, it found that 60% of the customer s want the loan below 15 days because after

getting the loan clients buy the raw materials or order supplier s. 33% of the customer s want theloan with in 20 days because these customer s are not hurry for carry out business. Only 7% of

customer want loan more than 20 days because in this case clients deposits land security. So

automatically it takes more time to get the loan.

Figure 9: Time Requirement for Loan

73%

20%

7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Purpose of Loan

Series1

Series1 73% 20% 7%

Working CapitalPurchasing

Fixed AssetOthers

60%

33%

7%

0%

10%

20%

30%

40%

50%

60%

Time Requirement For Loan

Series1

Series1 60% 33% 7%

15 Days 20Days Above 20 Days




Different categories of business:

In this survey, it found that 52% of the clients are involved on trading business on the basis of

bank s

enterprisescenario. In our country almo

st3

2% clients

are doing manufacturing busine

ss

and 16% are engaged in service business.

Figure 10: Different categories of business

Rate of interest:

In this survey, it found that 57% customer s are satisfied on interest rate compare with other

bank s in terms of less security. 38% customer s are not happy with interest rate. They claim

interest rate should be reduced. 5% customer s are not fully agreed to comment on this regard.

Figure 11: Rate of interest

52%

32%

16%

0%

10%

20%

30%

40%

50%

60%

Different Categories of Business

Series1

Series1 52% 32% 16%

Tradi ng M anufac turing S ervi ce

57%

38%

5%

0%

10%

20%

30%

40%

50%

60%

Interest Rate Satisfactory Level

Series1

Series1 57% 38% 5%

Satisfactory Dissatisfactory No coments




Repay monthly installment:

In this survey, it found that 75% customer s are happy to repay the loan by equal monthly

installment. They are happy because they know when where and how they will repay the money.

So there is

no argument between customer

sand CRO. And I found that 25% cu

stomer

sare not

happy because for it some time they have to give more interest on there loan.

Figure 12: Repay monthly installment

Services by the C RO of SME of BRAC Bank Limited:

In this survey, it found that that almost all customer s are satisfied by service of CRO. CRO is all

in all to provide loan to customer s in SME. 27% customer are average satisfy about CRO

service. Some times customer s those who do not get loan from SME they become dissatisfied but

they can complain to top management regarding CRO. In this case top level manager s handle the

situation to solve problem. For this reason only 8% customer are dissatisfied about CRO service.

Figure 13: Services by the CRO of SME of BRAC Bank Limited

After analyzing this survey, it found that most of the customer think s that the SME loan of Brac

Bank is now providing quick services and also quality services. Customer mentioned that present

level of customer service is doing very good and CRO also very helpful. Finally customer try to

says that depends on customer problem continuously Brac bank try to improve there SME loan

sector.

75%

25%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Client Repay Monthly Installment

Series1

Series1 75% 25%

Yes No

65%

27%

8%

0%

10%

20%

30%

40%

50%

60%

70%

Service by CRO satisfactory or not

Series1

Series1 65% 27% 8%

S at is fac to ry A ver ag e Di ss at is Fac to ry




CHAPTER EIGHT: FINDINGS

Fastest growing bank in the country for the last five year s

Leader in SME financing through

392 unit office

s

Biggest suit of per sonal banking & SME products

Large ATMs (Automated Teller Machine) & POS (Point of Sales) network

In the BRAC Bank basically the most of the user s are business man. In our country there

is various kind of businessman. We also found that above 50% user s are businessman.

Maximum client¶s age is between 30 to 50 year s.

We know that Bangladesh is a poor country and the educational background of

Bangladeshi people is not too high level. Our user s, basically businessmen are not too

educated and they have very poor decision making power. This is the main drawback in

our Banking field.

Most of the businessman are want to take SME loan for develop their business. This SME loan is very helpful for meet the daily expenses. That means they use this loan as

working capital. Very less people use this kind of loan for purchase fixed assets.

It is also found that the rate of interest is satisfactory than other Bank s. That¶s why the

clients are very happy with our rate of interest.

Time duration play a very major role in the mind of client s. Because they want to take

loan easily & early with minimum difficulties. In our country maximum people know

that loan taking is time consuming and very difficult.

Maximum clients are happy to repay their loans in equal installments with very easy

process.

We know that new marketing concept is door to door marketing. When the

representative of BRAC Bank go to door to door, the clients are want to collect right

information at right way to take a decision about loan.

According to our survey, we know that maximum clients are satisfied with our

CRO.CRO is all in all of providing SME loan. Maximum clients are happy with this

facility. They also think that BRAC Bank provide quick and quality service.

During internship with BRAC bank it found that for make a good impression to the

customer at fir st bank never say to the customer that there interest rate is 24%.

BRAC bank in some level they don¶t require collateral security against loan but some

time they require collateral security against loan. From our literature review we knowthat one of the characteristic of SME loan is no collateral so it can say that they are not

really practicing SME loan dis bur sement system.

From the portfolio analysis it found that in terms of loan dis bur sement and interest

income from SME loan is increasing and now it¶s in a good position. In 2007 bank earn

65.93% interest in come from SME loan and their most of the income come from SME

loan.




CHAPTER NINE: RECOMMENDATION & CONCLUSION

(9.1) Recommendation

By analyzing the whole report conducted for BRAC Bank Limited, some

recommendations could be made on the following issue to improve the overall performance.

They should target the business man for the SME loan, because maximum user s are

business man.

They should think about the middle agar s. Because maximum user s are between 30 to

50 year s of age. And they are not interested of our loan. .

They should provide loan easily with minimum efforts. That means the process of

taking loan should be fast, easy and genuine.

They should left the hidden charges because our clients afraid about that. It should be

open and disclose for everyone.

They should improve their service, advertising and something new which will make

different with other s.




(9.2) Conclusion

BRAC Bank Limited is proving itself as the fastest growing bank and showing

remarkable progress of its financial position with the mission of being countries leading bank

providing world-class services in a cost effective manner. This bank fir st introduces the SME

loan in commercial banking sector, which help the people of poor society both in rural and

urban. One thing can be noted that time horizon is too little to predict or evaluate the

performance but the analysis clearly represents the better performance of the BRAC Bank

Limited since its inception in year 2001. This report aims at providing an overall analysis of the

repayment behavior of the SME loan borrower s of BRAC Bank Limited. Before going to the

analysis, it is mandatory to know something about the organization, its core products that it

offer s to its customer s; about the SME loan, its classifications and the whole of its process

starting from loan sanction to recovery and closing of the loan. Here I tried to focus the bank¶s

history of origination, it

smi

ssion and vi

sion, major department

sand bu

sine

ssunit

sand major products and services. Here I focused on the terms and conditions of giving SME loan, enterprise

selection criteria and documentation. Then talked about the procedure of SME loan, the sanction,

dis bur sement, repayment and closing of SME loan. After talking about the whole process of

SME loan, I made an attempt to analyze the repayment behavior of SME loan borrower s.

After analyzing the BRAC bank I may conclude that in developing countries like Bangladesh

small & medium enterprises have come into the forefront of development agenda due to the

recognition of their contribution in fostering growth, sustaining global economic recovery,

generating employment and reducing poverty.




CHAPTER TEN: APPENDIXES

(10.1) Sample Questionnaire of Survey on SME Loan:

BRAC Bank Limited

SME Survey form

Unit name«««««.

1. Date «««««««.

2. Name of the business organization: .................................................................

3. Address/Location of the business: «««««««««««««««««.

4. Nature of the business: Trading manufacturing Service Other s

5. Legal status of the business: «««««««««««««««««««..

6. Does the business have legal registration? Yes No

7. Name of the principal owner: «««««««««««««««««««.

8. Age of the principal owner: ««««««««««««««««««.......

9. Educational qualification of the owner: «««««««««««««««.

10. Date of commencement of the business: «««««««««««««««

11. Owner skills and experience in the business: «««««««««««««.

12. Initial investment in the business: «««««««««««««««««..

13. Monthly income from the business: «««««««««««««««««14. Monthly income from other sources (if any): «««««««««««««.

15. Does the business have any loan from other financial institution? Yes No

If yes, Amount: ««««««, Name of the intuition: «««««««««

16. Does the business require any loan? Yes No

17. From where do the business / Factory buy its raw materials?

From local market ««««.. From Abroad «««««««««««««.

18. Does the pays his supplier s/creditor s regularly? Yes No

19. CRO¶s comments regarding the business owner s: «««««««««««.




(10.2) List of Abbreviation

Table No 9: List of Abbreviation

SSHORT

FORMFULL FORM

CRO Customer Relation Officer

ROC Regional Operating Centre

BDT Bangladeshi Taka

PSRM Process Service Risk MIS

ATM Automated Teller Machine

POS Point of Sale

HRD Human Resource Department

CIB Credit Information Bureau

ERM Enterprise Risk Management

GIS General Infrastructure Services

LC Letter of Credit

CSD Consumer Service Delivery

BBL BRAC Bank Limited

NGO Non Government Organization

IFC International Finance Organization

CEO Chief Executive Officer

RTOL Real Time On-lineSME Small and Medium Enterprise

IT Information Technology

MBS Millennium Banking System

DSE Direct Sales Executive

PIN Per sonal Identification Number

MIS Management Information System




CHAPTER ELEVEN: BIBILIOGRAPHY

Book s, Publications and Journals of BRAC Bank Limited

Valuable discussion of supervisor s during the period of internship.

Pros pectus Of BRAC Bank Limited published in July 2007.

Kotler, P., & Armstrong, G., (2004). Principle of Marketing (10th

Ed). New Jer sey,

USA: Pear son-Hall, Inc.

OECD (2004).Promoting Entrepreneur ship and Innovative SMEs in a Global Economy:

Towards a More Res ponsible and Inclusive Globalization.

Annual Report of BRAC Bank (2007 & 2010).

Bangladesh Economic Review 2007, Economic Advisor¶s wing, Finance Division

Ministry of Finance.

Bangladesh Bureau of Statistics, Statistics, June 2007. Handout & training paper s provided by BBL

Discussion with CRO of SME division

Websites: www.bracbank.com

www.bangladesh- bank.org

www.cpd- bangladesh.org