Shahjalal Bank Ltd.

INTRODUCTION1.1 BACKGROUND OF THE REPORT

Internship is a pre requisite towards the attainment of MBA degree of The University of Asia pacific.

This report serves as the out come of the Internship and proof of the on going learning process and

achievement as designed by The University of Asia pacific.

This report is the result of a twelve-week internship at SBL, Dhanmondi Branch. As the internship

involves the topic concerning SBL, Dhanmondi Branch, Performance Evaluation of SBL & in

particular SBL, Dhanmondi Branch is felt necessary & according to this part of study is reported

through the concern organization part. On the other hand the assignment itself is dealt in the

project part.

1.2 OBJECTIVES OF THE REPORT

The objectives of the report are in line with the objective of Internship. The prime goal of Internship

is to provide a hand on practical experience to the student and to generate an opportunity to

match the theoretical concepts with real life situation. As stated above to deal with these

objectives this report has been primarily divided into two parts viz. the organization part & the

project part. The organization part first briefly describes the SBL to have an insight about SBL while

some details have been documented about SBL, Dhanmondi Branch in particular to relate the

assigned topic to the concern branch.

1.3 METHODOLOGY

1.3.1 Study Design

The study combines two distinct parts. These two parts have different characteristics. The

organization part is exploratory in nature. It seeks to find the essential character of the assigned

organization in order to develop an insight. The project part is descriptive in nature. This part is

conclusive and analytical.

1.3.2 Sources of Information

Different data and information are required to meet the goal of this report. Those data and

information were collected from various sources, such as, primary and secondary.

Primary data

Primary data is collected through in depth interview with the bank officials, corporate clients of

Dhanmondi and questioner carried out in the following manners:

The population size: The population size of corporate clients has been estimated as 250.

The sample size: The sample size has been determined at 20 no. of corporate clients. This survey

has been made at query random basis.

Secondary data

Secondary data is collected from different published materials. The used publications consist mainly

financial reports, files and brochures of SBL, other financial institutions of this area, newsletter and

other publications available.

1.4 DATA ANALYSIS

Data collected from different sources were sorted, checked, corrected, edited, organized and

tabulated for the analysis. Analysis was based on contemporary financial and strategic

management concepts and tools.

In depth interviews were organized and analyzed to get the overall picture of the organization and

its prime functions

1.5 SCOPE

There is a certain boundary to cover this report. To achieve the objective of the report, i.e. through

knowledge about the organizational functions and its management, it is not possible to cover each

and every activity performed in the organization. The report has covered only the general overview

of the organization.

Moreover the company itself and financial institutions have got some confidential information

which are not possible to disclose publicly, so those data and information had to be ignored for this

report. In the project part the study concentrated mainly on Dhanmondi area and corporate clients.

1.6 LIMITATIONS

The course was only for twelve weeks, of which first four weeks have been spent in orientation to

the organization and concerned department. It was very difficult to collect all the required

information in such a short period. Due to some legal obligation and business secrecy banks are

reluctant to provide data. For this reason, the study limits only on the available published data and

certain degree of formal and informal interview & limited survey through questionnaire. Although

the particular study is extremely extensive in nature, hard effort was given to make the study

worthwhile and meaningful even then there exists some limitations.

These are as follows:

Due to some legal obligation and business secrecy banks are reluctant to provide data. For

this reason, the study limits only on the available published data and certain degree of

formal and informal interview.

Due to budget constraints, the survey could not be made upto-desired level.

1.7 ORDER OF PRESENTATION OF THE REPOR

The objectives of the course as described earlier are two pronged. One, is to get a taste of the real

organization and hands on experience; two, is to test his acquired theoretical know how in a real

life situation. As a result this Internship report is presented in two parts. One part to cover the

organizational overview of the company and the other part is to cover the project assigned.

Part one is the organization part, which looks at the organization from its very birth to present date

chronologically. This part also provides the organizational profile and their functions.

Part two concentrates on the project assigned which is “ Performance Evaluation of Shahjalal Bank

As a new Bank”. It describes the performance evaluation for Dhanmondi area in order to attract

corporate clients.

2.0 SHAHJALAL BANK LIMITED (SBL) & ITS PROFILE

2.1 General Overview

SBLis based on Islamic Shariah. It started its Banking operation on 10 th May 2001, with the 1st

branch (main branch) opened at 58, dilkusha C/A, Dhaka, for upliftment of economic condition of

its customers as well as to create the habit of savings among the people and thereby fulfilling the

ultimate objective to contribute sustainable economic growth and development in trade and

industry of the country. The sponsors of SBL are leading business personalities and renowned

industrialists of the country.

In order to serve the humanity and to provide services for the well being of all community which

was the basic motto of Hazrat Shahjalal ( R ), a great saint of this subcontinent, the name of the

Bank is well chosen after the name of Hazrat Shahjalal ( R ). The bank is based on Islamic Shariah.

With a view to achieving accelerated growth of Banks, the following area of operations/investment

products as well as schemes have been launched/ to be launched:

1. Financing Export and Import Business2. Industrial Financing3. Trade Finance4. Corporate Banking 5. Retail Banking 6. Syndicate Investment7. Project Financing8. Hire purchase9. Lease Finance10. Phone Banking11. Online Banking12. ATM Service (Proposed)13. Islamic Credit/Debit card (Proposed) etc.

( R ) = “Rahamatullah Alai” meaning “Peace be on you”Schemes of Shahjalal Bank:

1. Millionaire Scheme

2. Double Profit Mudaraba savings Scheme

3. Monthly Income Scheme

4. Monthly Deposit Scheme

5. Hajj Deposit Scheme

6. Expatriates Service Scheme

7. House Hold durable Scheme

8. Small Investment Scheme

9. Investment Scheme for Women

10. Self Employment Scheme

“Allah has permitted trade and forbidden interest” (verse 275 of sura Al-baraka). And as such

Shahjalal Bank Limited operates with the objectives and commitment to implement the economic

and financial principles of Islam in banking arena blending Islamic values and modern technologies

with a view to achieve complete success in this world and hereafter.

◘ To provide quality service to our customers.

◘ To set high standards of integrity.

◘ To extend our customers innovation services acquiring state-of-the- art technology

blended with Islamic principles, and bring total satisfaction to our clients and employees.

◘ To expand Islamic banking through welfare oriented banking system.

◘ Ensure equity and justice in economic activities.

◘ Extend financial assistance to poorer section of the people, and

◘ Achieve balanced growth & equitable development.

The primary objective of Shahjalal Bank limited is to promote, foster and develop the application of

Islamic principles, law and tradition to the transaction of financial, banking and related business

affairs and to promote investment companies, enterprise and concerns which shall themselves be

engaged in business as are acceptable and consistent with Islamic Principles, law and tradition. But

the objective of Shahjalal bank Limited in the context of its role in the economy is as follows;

1. To offer contemporary financial services in conformity with Islamic Shariah

2. To contribute towards economic development and prosperity within the principles of

Islamic justice.

3. To facilitate efficient allocation of resources.

4. To help achieving stability in the economy.

2.2 Human Resource Strength

The total human resource strength of SBL, Dhanmondi Branch at present is 21. Out of which 17

(seventeen) are officer and the rest are staffs.

The quality of human resource in SBL is impressive. All of the officers, senior officers and senior

managers either hold masters degree or some other professional bachelor’s degree. Out of the 5

managerial positions (from SO to SVP), 3 are MBAs and others are masters degree holders in other

disciplines.

To improve the quality of human resource SBL at times make arrangements for their executives to

attend both local and offshore training, seminars etc. In house training is also there. Besides, the

culture itself is supportive to learning since the senior executives are very helpful.

2.3 Management

The company is managed by its Board of Directors consisting of 19 members. The Board appoints

an Executive committee consisting of Chairman, Managing Director, Advisor and four other

directors. The committee is authorized to observe and review major day to day operational

functions including investment plans, budgets and other investment activities.

The Board is also responsible for establishing the company’s policies and reviewing the operational

performance of the company including approval of large Investment transactions and major fund

procurement. The Board appoints, the Managing Director responsible for managing the companies

overall operations within the framework of policies of the company. The Board also appoints the

Policy Committee consisting of eight directors who formulate the personnel policy.

3.0 SECTIONS AND THEIR FUNCTIONS

There are mainly two sections in SBL, viz, General Banking Division and Investment Division. These

Divisions have small departments or units under them. The details of the important sections and

subsections are described below:

3.1 General Banking Divisions

There are certain three sections working together to fulfill the target of the company. a) Cash

department b) Account opening c) Customer Service

3.2 Marketing

The job of marketing section can be divided into two broad categories

Marketing to existing clients: Monthly update is kept on the exposure of the good existing client. If

the exposure gets low for a valuable client then visits are made by the bank executives to make

inquiry on their requirement for finance. Also, continuous effort is made to increase exposure on

any client who has good prospect as a result of a BMRE or some other reason.

Marketing to non-existing clients: From the market information non-existing prospects are also

identified and sought after. Visits are made to meet the CEO or whoever is the concerned person

regarding financing matters and the advantages of taking finance from SBL is highlighted. SBL also

distribute desk calendar, telephone index, and slip pad to prospective clients. Advertisements are

given in various journals of professional bodies.

Each morning the senior executives and the manager (branch incumbent), seat together in a

meeting to discuss about their marketing plan for the day. They fix target clients, based on market

information. In that meeting it is also found out whether any one has any connection in the

targeted companies. Specific executives are assigned with specific target companies.

3.3 Monitoring

Monitoring activities can be summarized as follows:

Pre-execution activities

Review of documents and information provided by the clients before financing or

opening of L/C or disbursement of cheque;

Review of security of unexecuted projects.

Post-execution activities

Weekly visit to clients office or factory or store to check the end use of fund;

Renewal of insurance coverage;

Balance confirmation.

Project Appraisal and Negotiation

The appraisal mechanism is slightly different because the social standing of the borrower plays a

major role. No compromise is made on the earning capacity of the borrower.

3.4 Accounting

Accounting of SBL can be broadly classified in the following two groups

i) General Accounting

ii) Investment Accounting

General Accounting

General Accounting includes accounting for-general and administrative expense, funding operation

and fixed assets.

Activities of accounting subsection includes

Registration of voucher

Posting of voucher in the ledger

Preparation of unadjusted trial balance

Preparation of adjustments (accrual of expenses and income)

Preparation of adjusted trial balance

Investment Accounting

The company maintains its books of account based on the operating method of accounting

according to Generally Accepted Accounting Standards in conformity with the provision of relevant

regulations of Bangladesh Bank.

Collection of receipts i.e. rental, profit

Control of collection i.e. maintain cheque register

Reporting of information regarding rental collection i. e. cash collection statement

Determination of rental statement

Acknowledgement to the Accountholder i. e.-statement of accounts

Preparation of overdue statement i. e. – overdue statement for BOD

Activities regarding delinquent charge i. e.-billing

Treatment of irregular investment Account

3.5 Systems

All the activities in SBL are dependent upon computers. There are almost 8 workstations in SBL,

GUL, i.e. almost 1 PC per one officer. The Network Operating System is Windows NT and almost

all the PCs are supported by Window’98. The Hardware facilities are Pentium 262 MHz, 2 Way SMP.

Their major tasks are :

Network Management

Software Development

Support Activities

Installation

3.6 Human Resource Division

One of the major responsibilities of the human resource division is to enforce the personnel policy

of SBL. This section evaluates the performance of each employee twice a year and maintains

detailed file on each employee.

4.0 KEY INVESTMENT MEASURISTICS OF SBL

4.1 Introduction

Investment is the action of deploying funds with the intention and expectation that they will earn a

return for their owner. When resources are spent to purchase fixed and current assets for use in a

production process or for trading purpose, then it can be termed as real investment. On the other

hand purchase of a legal right to receive an income in the form of profit or dividend may be called

as financial investment.

Where money is deposited with an Islamic bank, the bank makes investment under different modes

approved by Islamic Shariah with a view to earn profit. Not only a bank, but also an individual or

organization can use Islamic modes of investment to earn profit for wealth maximization. Some

popular modes of Islamic investment are discussed below:

Graph no. 4.1: Mode-wise investment (Taka in crores)From the above chart, it is

observed that 56% finance has been made to Bai – Murabaha post import investment, 28% finance

has been made to Bai Muajjal mode of finance i.e. working capital finance, 7% finance has been

made to hire purchase mode of finance

Graph no. 4.2 : Month-wise deposit position of SBL, Gulshan Branch

In the x axis, month has been shown and in the y axis, deposit has been shown. From the above

graph it is observed that continuously deposit has been growing.

Graph no. 4.3 : Month – wise No of Account of SBL, Gulshan Branch

From the above graph, it is observed that the trend of the growth of the No. of Accounts is very

high. This trend indicates that the company's deposit is highly growing.

Overall performance of SBL:

The assigned part was SBL, Gulshan. Now the overall position cold be outlined as below:

Deposit:

Total deposit of Shahjalal Bank stood at taka 1398.30 million as on 31-12-2001. Time deposit

constituted 84.42% of the total deposit mix. Savings constituted 57.28% and demand deposit was

15.58% of the total deposit. The deposit mix of the bank as on 31.12.2001 is given below:

Graph no. 4.4 : Deposit Mix of SBL, Gulshan Branch

Investment:

Taka in Million

Total investments of Shahjalal Bank stood at 216.55 million as on 31-12-2001. The Bank has been

looking for good investment clients having credit-worthiness and good track record. The

investment opportunity seems favorable for spinning, weaving and processing.

Graph no. 4.5: Investment Mix of SBL, Gulshan Branch

Operating Profit

Shahjalal Bank started its banking operation on 10.05.2001. It could reach its break-even position

after five months and earned an operating profit of Tk. 7.38 million at the close of the year ended

on 31-12-2001 within a period of seven months and twenty one days after deduction of the

following items:

a. Provision for unclassified investment;

b. Provision for income tax;

c. Statutory reserve.

5.0 THEORETICAL ASPECT OF ISLAMIC BANKING

5.1 General

An Islamic bank is a financial institution that operates with the objective to implement and

materialize the economic and financial principles of Islam in the banking arena. The Organization of

Islamic Conference (OIC) defines Islamic bank as “a financial institution whose statutes, rules and

procedures expressly state its commitment to the principles of Islamic Shariah and to the banning

of the receipt and payment of interest on any of its operations.

Taka in Million

Islamic banking is not only to earn profit, but also to do good and welfare to the people. Islam

upholds the concept that money, income and property belong to Allah and this wealth is to be used

for the good of the society.

Islamic banks operate on Islamic Principles of profit and loss sharing, strictly avoiding interest,

which is the root of all exploitation and is responsible for large-scale inflation and unemployment.

An Islamic bank is committed to do away with disparity and establish justice in the economy, trade,

commerce and industry; build socio-economic infrastructure and create employment opportunities.

5.2 Basis of Islamic Economic System

Islamic Economic System is based on equitable treatment of assets. Islamic Shariah prevents

injustice in the acquisition and disposal of material resources and requires full utilization of these

resources in order to allow satisfaction of worldly needs of human beings in the optimal manners;

thus, avoiding wastage and enabling human beings to perform their obligations to Allah and the

Society.

Thus, under the Islamic Financial System though dealing in materials is the apparent basis of any

transaction, betterment of overall society, relationship among society members and between the

members and Allah is the ultimate objective. This order is opposed to the modern economic system

which being based entirely on material consideration has become a mathematical model having no

regard to individual human beings.

Islamic economic model has got the following broad features:

i. Fairness and just treatment of other’s property,

ii. Earning of profit by using fair means,

iii. Disclosure of all relevant information pertaining to a transaction, and

iv. Respect for free enterprise and private ownership.

5.3 Basis of Islamic Financial System

The banking system within the Islamic discipline lays emphasis on, but not confines itself only to,

the elimination of fixed pre-determined rate of interest. It allows for the replacement of interest by

return obtained from investment activities and operations that actually generate extra wealth.

Money is not considered capital or even representative capital; rather it is deemed as ‘potential’

capital, which can bring return only when it obtains real increment through investment. Accordingly

under Islamic banking, all banking activities are necessarily related to movement of or investment

in goods, equipments, projects and other tangible business activities, etc., as opposed to

conventional banking where interest is considered to be the return on money irrespective of the

utilization and generation of any effective and real growth or capital through investment.

Islamic Shariah provides rules that cover the allocation of resources, property rights, production,

consumption, the functions and working of markets and distribution of income and wealth. It also

defines, in broader terms, the framework of monetary and banking systems. Since these were not

implemented in their entirety for a considerable duration in the past, it is not possible to subject

the system to any analytical examination. We are, thus, still in the developmental stage as far as

implementation of Islamic Financial System is concerned.

5.4 Objective of Islamic Banking in the Modern Age

While Islamic financial institutions are commercial entities working to generate profit, the above

discussion should have made it contribution to the society by creation of further economic wealth.

In hard terms the objectives of Islamic Banking may be outlined as below:

i. To offer contemporary financial services in conformity with Shariah,

ii. To contribute towards economic development and prosperity with in the principles of

Islamic Justice,

iii. To undertake financial activities which are ethical, socially desirable and profitable and

iv. To serve Ummat al Islam and other nations having Muslim population.

5.5 Historical Background of Interest-free Banking

Before the advent of Islam in the land of Arabia, moneylenders used to charge highly exorbitant

rate of interest. Like many other vices prevailing in those days, the system of charging excess over

the capital, not only helped in maximizing the volume of wealth or idle wealth, but also hindered

the overall growth of the economy that is likely to be achieved through free investment. While at

the individual level the poorer section was turned into pauper as they were required to dispose off

either part or whole of their belongings to get rid of the cumulative burdens of debt, at the national

level the projects which were socially profitable yet economically not feasible because of higher

interest rate had not been undertaken. Furthermore, at the micro level, this discouraged the

people to undertake any economic activity capable of augmenting output, at the macro level, the

higher rate of interest or in other words, limited investment frustrated the efforts to increase

aggregate output and hence welfare of the society. It is from this background that Islam, fourteen

hundred years ago, had successfully identified any excess charged for the use of capital as usury

and once for all forbidden it for the interest of individual as well as social welfare of the entire

humanity.

5.6 Objectives behind Interest -free Banking System

Firstly, payment or acceptance of interest should be understood in the light of all other

innumerable injunctions of Islam. To refrain from paying or accepting interest is as important as the

payment of Zakat to enjoy purified wealth. So, like the five pillars of Islam, the divine order for not

accepting or paying interest is to obtain satisfaction of Allah, Almighty through the use of Allah’s

wealth given to man only to make proper use and derive satisfaction out of it.

Secondly, it is stated in the Quran that the poorer section of the community has got the right on

the wealth of those who have got excess over their own need. So, it is not a question of asking the

poor borrower to pay excess over that lent out rather than helping them in their distress.

Thirdly, the reason behind forbidding interest is to help set up an exploitation-free society. There is

no denying the fact that interest is one of the most important and powerful mechanisms by which

more fortunate exploit the less fortunate.

Fourthly, to help an economy to attain maximum growth. This can be attained by taking concerted

efforts to invest in all possible undertakings or projects regardless of any positive net return

obtained after deducting the utilization cost of capital. Unlike modern theory of interest, Islamic

economic system does not apprehend tat investors will invest only up to the point where the rate

of return over the additional capital invested (marginal efficiency of capital) equalizes the cost

required for using the given capital (rate of interest) for a given time period. But in Islamic

economic system investments are made in the form of ‘Shirkate Inan’ and ‘Mudaraba’. Under both

the systems, investment will continue so long as there exists an element of profit calculated on the

basis of all the costs of running an enterprise other than the cost of using the capital i.e.

predetermined excess over the capital used.

Fifthly, the reason why interest is forbidden is to create opportunities for the savers or capital

owners to apply their own physical and mental capabilities in multiplying their wealth. By this, Islam

has not only discouraged those who despite having Allah’s mercy in the form of wealth do not like

to work but also encouraged the dignity of labour for all. Islam hates those who prefer to lend their

money for interests and destroy their physical and intellectual capabilities. These are the people

who are likely to spend time most extravagantly and squander away their ill-got wealth for all sorts

of evil deeds.

Sixthly, the objective behind the profit-sharing system as opposed to fixed interest is to discourage

the profiteering leading to income concentration. If a business partner knows that he will have to

share with his absentee partner any amount of profit on fifty-fifty basis, he will be less enthusiastic

to maximize his profit through illegal or more risky methods.

Seventhly, by abolishing interest, distributive justice is taken care of under Islamic economic system

better than any other existing economic systems. Under the present system it is found that in

institutional sources of credits the substantial amount of total deposits comes from the lower and

middle income classes. But the investors from the said two income groups have limited access as

well as opportunity to provide supplementary fund required to start any enterprise. They are

constrained to furnish required security to get loans from the banks. On the other hand, the

investors mainly coming from the higher income groups having the double advantage of providing

security as well as additional capital are more preferred by the bankers. In the presence of market

imperfections accompanied by the absence of Government or any other control over profits and

prices, the investors can make a substantial amount of profit under the existing system even after

paying off the bank interest. Thus, income concentrates from relatively poorer section (i.e., the

depositors) to the relatively affluent section (i.e., the borrowers) of the community in existing

system. But under profit sharing or Mudaraba the share holders and the entrepreneurs are equally

benefited by higher profits. On the other hand in case of non-institutional or private source of

credit income concentrates in the hands of lenders who are more affluent than the borrowers with,

of course, a few exceptions. Because of exorbitantly high interest rate of non-institutional credit,

which most often varies from above, zero to 10/12 times as high as the original capital, it is the

lenders class whose incomes get multiplied at the cost of the borrower or the poorer class. So, we

find that in both the situations mentioned above interest rates are equally contributing to the

concentration of income in the hands of the effluents. This answers why any predetermined excess

over capital despite not being exorbitant or unreasonable is treated as ‘Riba’ and as such ‘usury’ in

Islam.

Eighthly, the abolition of interest will help an economy to get rid of the most disastrous effect of

business fluctuation resulting either from over or under production.

6.0 MACRO ENVIRONMENT ANALYSIS

6.1 Political and Legal Forces

For survival & flourishment of any financial institution friendly political & legal environment is a

perquisite. In an environment of under developed economy & unwillingness to show respect to

legality, this problem is more acute in finance sector of Bangladesh.

The legal environment under which all of the financial intermediaries of the country’s capital

market function is relatively well structured. Bangladesh Bank (BB) is the regulatory body to

supervise and control the commercial banking activities. For private sector Banks, the BB has

various operational & regulatory laws & mandatory instruction for the Board of Directors, Advisors

& the corporate management regarding their respective right, power, jurisdiction & limitation etc.

Most recently BB has issued BRPD circular no. 16 pertinent to those factors. Artha Rin Adalat is the

special creation for settling the disputed bank loan, which are already been classified. The standard

company legal framework such as the Companies Act or the Bank Companies Act are not in many

cases adequate to ensure that a banking system will run smoothly and soundly. Regulatory

authorities, usually the Central Bank, but also at times the Government in the ministry of finance

prescribe detailed requirements to oversee bank behavior. Such guidelines have to take into

consideration the overall environment in which a bank operates in a particular country, i.e. political

attitude and business ethics, internal control and market discipline.

The political environment has direct impact on the financial market through party favoritism,

muscles groups & undue pressure for undue financial gain. However these sort of interferences

are gradually decreasing. The Autonomy of the Central Bank is the demand of time & it is achieving

the same under the recent reform program of BB with the World Bank prescription.

6.2 Technological Forces

Today is the era of technology. Service organizations like financial institutions are highly dependent

upon the computer and Internet and online. Commercial Bank has to be involved in international

trade and that's why they have to be technologically equipped to keep the pace with the

international financial market. Market discipline will be meaningful only if there is adequate

information flow. Financial information has to be disclosed promptly in a transparent manner based

on report of trustworthy auditors and prevailing standards of accounting and audit. SWIFT has

replaced the traditional mode of fund transfer while Roiter IT installation has hastened & secured

the foreign currency trading. While all the foreign banks & majority of the local private banks are

entering to electronic banking to a various levels; the importance of electronic banking is now well

felt & accepted. As such like all other banks, SBL is very first adopting this technology & already

installed, Roiter & electronic inter banking & is under process of installing SWIFT.

6.3 Economic Forces

Bangladesh is one of the low-income countries of the world. It has followed the course of planned

development since independence. But planned efforts made over the last 30 years for socio-

economic development were frustrated by external and internal events. Rapid inflation and

stagnation have affected adversely both external resource inflow and export, which in turn,

retarded the growth of Bangladesh economy. On the other hand, frequent natural calamities like

floods, droughts, cyclones etc. caused tremendous loss of crops, which sapped the vitality of the

rural people.

The economy of Bangladesh continued to remain fragile as over half of GDP coming from

agriculture sector remained precariously dependent on nature. So for the lack of resource and

organizational limitations the desired technological transformation of the agrarian economy of

Bangladesh could not make much progress.

During the recent years, the overall GDP in real terms attained modest gains. It registered a growth

of 5.40 percent in 1995/96. The growth in agriculture was 3.70 percent in 1995/96 compared with a

negative growth of 1.04 percent in 1994/95. The growth of industry declined from 8.64 percent in

1994/95 to 5.29 percent in 1995/96. The contribution to GDP was 32.24 percent by agriculture,

11.34 percent by industry, 6.25 percent by construction, 1.94 percent by power, gas and water and

48.21 percent by other services. The growth of agriculture was about 6 percent, industry 3.60

percent and services 6.20 percent. The growth in agriculture was due to significant increase in

major crop production. The decline in growth of the industry sector was due to shortfall in

production of both large and medium scale industries.

The government needs financial resources in order to meet various development expenditures,

payment of salaries and wages to the officers/ employees, and other several sectors. More than 80

percent of internal resources of Bangladesh are mobilized in the form of taxes (direct and indirect),

of which the lion’s share (75 percent) is accrued from the indirect tax. The tax structure of the

country has poorly been administered ever since liberation. The other 5.0 percent of the internal

resources of Bangladesh come from nationalized banks and organizations, interest, industries,

mining and sales of property.

The expenditure sector is composed of private consumption, governmental consumption, private

investment, public investment, and inventories. Food, clothing, energy, health, education, etc.

account for a significant part of private consumption for the people of Bangladesh in general. The

need for investment is obvious for actual development of the country. Private domestic

investment, private foreign investment and pubic investment are the main components of

aggregate

investment. The public investment is also substantial, particularly so far as agriculture, industry,

electricity, gas and other service sectors are concerned. Such investments create agricultural and

industrial infrastructure and thus contribute to industrial growth and economic development of the

country.

Bangladesh represents an open economy with a large non-monetary sector, which means that the

monetary sector in Bangladesh is not developed. The Bangladesh Bank takes the major monetary

management decisions but it is under the direct control of the Bangladesh Government. In order to

improve the competitiveness of Bangladesh exports in the international market the exchange rate

of taka against US dollar has been corrected according to the market demand & supply basis.

It is argued that the existing tax regime in Bangladesh is characterized by a number of undesirable

features, which hinder not only the growth of public revenue but also lead to inefficient resource

allocation and distribution. Thus the government of Bangladesh has introduced Value Added Tax

(VAT) from July 1991, which is thought to be more efficient, transparent, elastic and incentive

compatible.

Like many other developing countries, Bangladesh suffers from both saving-investment and export-

import gaps. Since independence both the gaps have widened because of the development need of

the new nation. The larger part of the government expenditures and investment is met mainly by

foreign capital inflows, which account for about 60 percent of the national budget of the country.

Foreign capital is regarded as additive to the national economy but it may have positive or negative

effects on domestic saving.

Bangladesh imports quite a large variety of items from abroad for which it depends heavily on

foreign aid, assistance, grants and loans. The import-export policy should reflect national

development programs. Priorities and encourage more efficient use of limited resource. Due to lack

of such policy and some barrier in international trade the Bangladesh economy could not flourish

during the last decade.

6.4 Socio- Cultural Forces:

Bangladesh is a densely populated country. 85% of the total population are Muslims and the

business and trades are city based though 95% people are residing in rural area. The default culture

is the burning problem in Bangladesh. All we should be conscious about default culture and avoid

the defaulter socially. On the contrary the loan defaulters are quite comfortable in social & political

environment of Bangladesh and often take the driving role in the society; the reasons being that

most of the loan defaulters are rich, educated & influential & the majority of the remaining are

poor, uneducated & not united.

In some cultures and environment, ours certainly not an exception, private ownership does not

necessarily insulate a bank from political pressure for directed lending. Even in the United States of

America financial scandals of the Savings and Loan Associations were traced to important Senators

and political leaders, and the system had to be salvaged with taxpayers’ money. The Asian financial

crisis of the late nineties has demonstrated that ethical values are not yet firmly entrenched and

followed in many banks in the region and many of the problems that arose were traced to “crony

capitalism”.

Banking business like many other businesses is influenced by particular social and political cultures.

The salvation lies in gradually rising above these constraints and to move towards technical and

professional standards. As interaction increases between national and international business

including banking business, there is a growing “complex business environment where the choice is

not always the simple one between what is right and wrong. It may be more often between right

and less right – in other words between shades of grey. This increases the need for organizations to

adhere to a strong set of values to steer tem through minefield of ethical choices with which they

are faced as they make business decisions.

7.0 MICRO ENVIRONMENT ANALYSIS

7.1 Consumer Profile

The following analysis of the consumer profile SBL, Gulshan has been based on the primary

research conducted by the consultant. The sample of the survey was taken from two groups.

- The first group is existing customer

- The second group is potential customer

The sample size of the first group is 20 and 2nd group is 20. Because of lack of time, the samples

were chosen on a quasi random basis.

7.1.1 Demographic Profile

Of the 40 respondents, 38 were male and 2 were female.

Graph no. 7.1 : Demographic Profile of SBL, Gulshan

Operating income:

The distribution of the operating income of the corporate clients of the sample respondents is

shown in the following graph. It is reasonably safe to predict that the following distribution of

income will reflect the overall population of the segments selected.

Graph no. 7.2 : Operating Income of the Respondent

Years of operation:

The interviewees were then asked about their years of operation, if any 50% of the respondents

said that they had 10-20 years of operation, while only 30% respondents said that they had below

10 years operational activities, 20% of the respondents said that they have 3-4 years of operational

activities.

Graph no. 7.3: Years of operation of the Respondents

Geographic profile:

The geographic profiles of the customers are as follows:

Graph no. 7.4: Geographical profile of SBL Gulshan

7.2 Competitor Analysis

7.2.1 Identifying the Company’s Competitors

Banking history in Bangladesh is very old. From the very inception of this great country, it has got

banking background. For the simplicity of the analysis, the competitor has been divided into four

groups.

01. Multinational / Foreign Banks

02. First Generation Local Banks

03. 2nd Generation Local Banks

04. New Generation Local Banks.

01. Multinational / Foreign Banks: There are eight foreign and multinational banks

operating in this country. One foreign bank has been taken into consideration for this

analysis due to shortage of time.

02. First Generation Local Banks: There are eight banks operating in this country from the

very beginning of country’s liberation. Agrani Bank, Janata Bank, Sonali Bank, Krishi

Bank, Bangladesh Shilpa Ring Sangstha, Pubali Bank, House Building Finance

Corporation are the major player. All the above-mentioned banks are nationalized

banks. Only Sonali bank has been taken into consideration for the analysis of this

report.

03. Second Generation Local Banks : In 1983, the Government of Bangladesh decided to

invite local entrepreneur to launch private banks for gearing up the competition in

banking sector. From 1983 to 1990 some banks have come into existence to serve

better and this era has been identified as second-generation local banks. For this

specific analysis, only one bank named Islami Bank Bangladesh Ltd. has been taken into

consideration.

04. New Generation Local Banks : From early nineties to date, twenty banks have been

conferred banking license and these banks are called new generation local banks. For

the simplicity of the analysis only one bank of this category has been taken into

considerations named Bank Asia Ltd.

7.2.2 Determining the Competitors Objective

Multinational/ Foreign Banks objective: The major objectives of multinational/foreign bank are as

follows:

Selective banking : The foreign bank’s approach in Bangladesh is very much selective. Their

operation in limited with only Dhaka and Chittagong city.

Corporate banking : The foreign bank only serve corporate clients in a limited manner and

they are not involved in retail banking.

Advisory services/ancillary business: The foreign banks heavily concentrated on ancillary

business such as LC advising, add confirmation remittance etc.

Profit maximization: Profit maximization is the main objective of foreign/ multinational

banks a result, their charges & commission are very nigh.

First generation local banks: The major objectives of this generation banks are as follows:

Retail banking: The nationalized banks serve at every corner of the country due to their

large branch network.

Carrying out government decision: Implementing the government decision relating to

money market is one of main objective of nationalized bank. They also carryout collecting

utilities bill in favor of Govt.

Second Generation Local Banks :

Profit maximization: Profit maximization is one of the main objective of second generation

local banks. Their charges and commission are higher than nationalized banks but lower

than that of the foreign banks.

Better service: Providing better service than Govt. bank s one of their objectives.

New Generation Banks :

Profit maximization: As a commercial bank, their main objective is to maximize their profit.

Personalized service: Providing personalized service to the clients are one of the core

objectives of new generation local banks.

7.2.3 Identifying the Competitors Strategy

Multinational/foreign banks strategy : The strategy have been following by foreign banks are as

follows:

Service differentiation strategy: The foreign banks are following service differentiation

strategy.

New product development strategy: The foreign banks are launching new product to

retain the existing customer & attract the new customers.

First Generation bank’s strategy:

Wider area coverage strategy: The nationalized banks are following wider area coverage

strategy. Because, they have the largest branch network in the country.

Low pricing strategy: The nationalized banks are following low pricing strategy. Their

charges, commission are lowest among the banking industry

Second Generation Local Bank’s Strategy:

Service differentiation strategy: Second generation local banks are following services

differentiation strategy. They are emphasizing on quality service.

Reasonable pricing strategy: Second generation local banks are following reasonable

pricing strategy in their deposit and investment product.

New Generation Local Banks Strategy:

New product development strategy: New generation local private banks are following new

product development strategy. They are launching new product with special benefits to

attract the client.

High rate of return based deposit scheme: New generation local banks are offering higher

rate at return in their deposit.

Competitor’s promotional strategy:

The competitor banks are using the following promotional strategy.

Paper advertising: Almost all the competitors are using daily newspaper advertisement to promote

their products.

Sponsoring national sports event: 2nd generation local banks are using national sports event by

sponsoring. This is a very useful promotional tool.

Billboard: Almost all the competitors are using billboard to promote their products.

Television advertisement: Three banks namely, Dutch-Bangla, Dhaka Bank & HSRC are using

television advertisement to promote their producing.

Competitor’s positioning:

The competitor banks are positioning their products feature in the following way:

Profit on daily basis: Daily basis profit on current account is a new way of positioning their deposit

scheme.

Collateral free loan: Foreign banks especially HSBC is positioning their investment product by using

the feature of collateral free loan.

Debit card: New generation bank specially Bank Asia is positioning their new product Debit card to

attract client and it has got a tremendous response from the client.

8.0 MARKET SIZE ESTIMATION

The company has started its operation on 1st May 2001. As a progressive Islamic bank it is licensed

to engage in all sorts of commercial banking activities under the purview of the rules and regulation

of Bangladesh Bank and Islamic Shariah law. There is a huge potential of commercial banking

activities as lot of corporate groups, Shopping mall and other business entrepreneurs are setting

their offices in this area.

The market demand and supply of fund can be enumerated in the following table

Particulars Deposit Investment/Advance/Credit Portfolio

Demand 25000 Million Tk. 30000 Million Tk.

Supply 20000 Million Tk. 15000 Million Tk.

Reference: Annual report of 26 commercial banks

Still there is a huge gap between demand and supply situation of bankable funds. Moreover, in

present days, there are lots of corporate groups are shifting their office in Gulshan area from

Motijheel or other area of the Dhaka city. So demand is increasing and there is a lot of potential to

capitalize the benefit of this gap.

If Shahjalal Bank Ltd. Gulshan Branch can market their products and serve the clients efficiently; it

could be the prime force in banking industry especially in this command area of Gulshan.

8.1 Market Potential

8.1.1 Existing Clients

Twenty-six commercial banks are operating in Gulshan area. On the basis of the management

report, the following no. of clients are getting service from the 26 branch.

Particulars No. of accounts

Retail clients

Corporate clients

70,000.00

150.00

8.2 Potential Clients

On the basis of the growth trend, in-depth interview with bank officials, clients and the trend of

shifting office to this area, the following no. of clients cold be treated as potential clients.

Particulars No. of accounts

Retail clients

Corporate clients

30,000.00

50.00

Sales forecast:

Sales forecast technique: The historical growth trend has been taken into consideration to forecast

the sales volume.

The Total

Item 1st quarter 2nd quarter 3rd quarter 4th quarter

(Tk. Million) (Tk. Million)

(Tk. Million)

(Tk. Million)

Deposit 50 100 200 300

Investment 40 80 120 160

9.0 MARKET SEGMENTATION, TARGETING AND POSITIONING

9.1 Market Segmentation

9.1.1 Bases for segmenting the consumer market

There is no single universal way to segment a market. Usually, marketers try different segment

variables alone and in combination. The following variables might be used for segmenting the

consumer market.

Demographic segmentation:

In terms of age group, the classification of the customer or market segmentation can be made as

follows:

Geographic segmentation:

Geographic segmentation means dividing the whole market into different geographical units. For

this project, the geographic segmentation has been made to the following areas only.

- Gulshan shopping strip

- Gulshan north & south

- Badda area

Psychographics segmentation:

Psychographics segmentation divides potential customers into different groups based on social

class, lifestyle, income level, and personality characteristic. People in the same demographic groups

can have different pyschographic make-ups. For the simplicity of our analysis, psychographic

segmentation has been made in the following way:

- Retail clients

Service pro viding clients

- Corporate clients Manufacturing clients

Trading clients

- Others

Retail clients/consumer are those who don’t have yearly turnover more than Tk. 1000 million.

Corporate clients are those who have yearly turnover is more than Tk. 1000 million.

Others individual and those are not included in the top two groups has been treated on others.

Benefit segmentation:

Benefit segmentation divides potential customers into different groups based on benefit such as

competitive interest rate, commission other priority benefits.

Clients Benefit

Investment clients under 50 million

Tk.

No charges for fund transfer, pay order

Deposit clients under 10 million Tk. 0.5% will be added to usual rate of bank. Any branch

banking facilities without charge

Investment clients over 50 million

Tk.

1% less interest rate will be charged than banks usual rate

Deposit clients over 10 million Tk. 1% interest rate will be added to usual rate of bank. Any

branch banking facilities.

9.2 Market Targeting

After evaluating different segment, the next step is to decide which and how many segments to

serve. This is the problem of target market selection. For SBL, they will serve at Gulshan

geographical segments. For assigned project, the target customers are corporate clients.

Focused segmentation strategy:

At present, Gulshan commercial area consists of different customers group, such as retailer, whole

saler, individual, corporate clients etc. But, here focused segmentation strategy means strategy for

corporate clients.

The Target group is the Corporate Clients. In Gulshan Area lots of corporate clients are setting their

offices and their volume of business are increasing in a reasonable rate.

9.3 Positioning

After segmentation of the market and deciding which segments to serve, the SBL could position its

product to the target customers. The unique selling proposition of SBL cold be as follows:

Quick decision: While appraising a credit proposal, the SBL could take only two working

days to make a decision. This will make the clients comfortable and it gives an edge over

the competitors.

Comparatively lower pricing: Interest rate and other charges are comparatively lower than

the competitors. This will help to attract the existing clients of competitors.

Priority service: For corporate clients, SBL could offer priority service.

Evening banking: SBL could offer evening banking service, which is very much unique and

helpful for corporate clients.

Any branch banking: The SBL could provide any branch banking facilities to the clients,

which is very much helpful to transfer fund one place to another without incurring extra

cost.

10.0 PRODUCT STRATEGIES

Shahjalal Bank Ltd. is a new generation bank and to attract the clients it has launched some deposit

products and some special deposit scheme products which bear highest rate of return.

In Schemes deposit product, Millionaire Scheme deposit product and Monthly Income Scheme are

the most popular product, which is completely a new innovation in banking sector, and widely

accepted by the clients.

10.1 Product Classification

10.1.1 Consumer Products

The consumers products, the Shahjalal Bank Ltd. have launched are as follows: a) Consumer Credit

Scheme b) Millionaire Scheme c) Micro credit

10.1.2 Industrial Product

The industrial products, The Shahjalal Bank Ltd. has launched are as follows: a) Project Finance b)

Working Capital Finance c) Hire Purchase

Shahjalal Bank Ltd. should be concentrating some innovative new products to attract the customer

specially some investment products.

10.1.3 Product Hierarchy

The SBL has launched different type of deposit product as well as investment product. The

hierarchy of those products could be arranged as below:

Deposit product :

1. Al-Wadiah current deposit

2. Mudaraba savings deposit

3. Mudaraba short term savings deposit

4. Mudaraba term deposit

5. Short notice deposit

6. Monthly income scheme

7. Double profit deposit scheme

8. Millionaire scheme deposit

9. Pension deposit scheme

Investment product:

1. Project finance investment product

2. Bai-Muajjal

3. Hire purchase

4. Leasing

5. Murabaha trust receipt

6. Murabaha post import

7. Bai –salam

8. Quard

9. Letter of credit

10. Bank guarantee

11. Bid bond

12. Performance guarantee

10.1.4 Product Mix Decisions

The SBL could mix up their deposit products as well as investment product. The following way

product mix could be made.

1. Letter of credit, followed by Murabaha trust receipt or Murabaha post import finance.

2. Term deposit scheme followed by Quard investment facilities.

3. Monthly income scheme followed by Pension deposit scheme.

10.1.5 Product Line Decisions

The SBL could after any of the deposit or investment products or both from the product line

available. Sometimes SBL offer special benefit for specific product line. However, the product line

decision could be made as follows:

1. Term deposit for 3 months, six months, one year, two year three year or more.

2. Hire purchase, leasing, term financing

10.2 Branding

Branding is the advance stage product marketing. The SBL has got some unique brand of product,

which is as follows:

Project Finance

Murabaha Post import finance

Quard brand

Bai Muajjal investment

Term deposit

Murabaha Post import brand: The corporate clients will get post import facilities if they provide

letter of credit business. Post import finance under Murabaha Brand has got special features such

as tenor for one year.

Quard brand: This investment product has got special features like no interest for the investment

amount, only has to pay service charge.

11.0 STRATEGIC PRICING

Due to secrecy of the financial institution, they are reluctant to provide data related to the pricing

of their products. By interviewing the executives of the different banks in this area and corporate

clients, it is recommended that pricing should be in line with the Priority Customers Pricing of other

banks and if possible should be little lower than that.

11.1 Selecting the Pricing Objectives

The objectives of the selection of pricing are as follows:

- To bring corporate clients as much as possible;

- To search the existing good clients of other banks

11.2 Estimating Demand

On the basis of market survey and other available data the demand can be estimated as follows:

Particulars Deposit Investment/Advance/Credit Portfolio

Demand 25000 Million Tk. 30000 Million Tk.

Supply 20000 Million Tk. 15000 Million Tk.

Reference: Annual report of 26 commercial banks

11.3 Existing Clients

Twenty-six commercial banks are operating in Gulshan area. On the basis of the management

report, the following no. of clients are getting service from the 26 branch.

Particulars No. of accounts

Retail clients

Corporate clients

70,000.00

150.00

11.4 Potential Clients

On the basis of the growth trend, in-depth interview with bank officials, clients and the trend of

shifting office to this area, the following no. of clients cold be treated as potential clients.

Particulars No. of accounts

Retail clients

Corporate clients

30,000.00

50.00

11.5 Estimating Cost

The cost structure of SBL can be outlined as follows:

Variable/ cost of deposit = 10%

Fixed/ administrative cost = 1.5%

So, the cost of fund for SBL= 11.5%

11.6 Analyzing Competitors Cost, Price & Offers

The cost structure, pricing and offers of the competitors of SBL could be outlined as below:

Name of the

competitors

Cost Price Offer

Foreign/ Multinational Cost of deposit= 9% Cost of fund = 10.5 14%

banks Admin exp. = 1.5%

= 10.5%

Risk pr. = 1.0%

Rate of ret. = 2.0%

1st Generation local

banks

Cost of deposit= 7%

Admin exp. = 2.5%

= 9.5%

Cost of fund = 9.5

Risk pr. = 2.0%

Rate of ret. = 1.0%

13%

2nd Generation local

banks

Cost of deposit= 9.5%

Admin exp. = 2%

= 11.5%

Cost of fund = 11.5

Risk pr. = 1.0%

Profit = 1.0%

14.5%

New Generation local

banks

Cost of deposit= 10%

Admin exp. = 1.5%

= 11.5%

Cost of fund = 11.5

Risk pr. = 1.0%

Prof. = 1.0%

14.5%

11.7 Selecting the Pricing Method

The pricing method could be selected as follows:

Cost of fund = 11.5%

Risk premium = 0.5%

Profit = 1.5%

Interest rate = 13.5%

Since the prime objective of pricing is to attract corporate clients, the profit margin has been

determined as lowest as possible.

12.0 STRATEGIC PROMOTIONS

12.1 The framework for Effective Promotions

Since the financial institution is a service-oriented organization, the promotion of service-oriented

products requires special promotion tools such as sponsoring national events, Arrangement of

Social gathering with target corporate clients etc.

12.1.1 Identifying the Target Audience

Keeping the view of corporate customers of Gulshan area is mind the target audience has been

identified as follows:

- Members of Gulshan club

- Members of Dhaka club

- Member of MBA club

- Member of Dhaka chamber of commerce

- Member of FBCCI

- Member of BGMEA

12.1.2 Establishing the Promotion Objective

The objectives of the promotion could be established as follows:

To get the name of SBL be familiar with the corporate clients

To build up a good relation with the corporate client

12.1.3 Choosing a Message

Keeping the promotional objectives in mind, the following message could be chosen.

- “ Cooperating to grow each other”.

The inner meaning of this message is serving the client for growth of the clients as well as SBL itself.

12.1.4 Selecting the Promotion Components

Selecting the promotion components is one of the critical tasks of a marketer. With the

promotional objectives in mind, the following promotional components could be selected as

follows:

- Sticker

- Paper advertising

- Direct mailing

- Greetings and

- Arrangement of social gatherings

- Bill board.

Sticker with the message & logo could be placed to target audience such as Gulshan club, MBA club

for promotional purpose. Arrangement of social gatherings with the target corporate client cold be

very much useful for procuring business or relationship building.

Paper advertising, direct mailing, greeting card; billboard could make an impact on behavioral

aspect of corporate clients.

12.1.5 Setting the Total Promotional Budget & Allocation Resources

The budget totally depended upon the fund available for this purposes. As SBL is a new generation

banks and short span of operation, it is wise to keep enough fund for promotional purposed.

However, the promotional budget of SBL cold be set up as follows:

Paper advertising = Tk. 2 million

Sticker = Tk. 0.05 “

Arrangement of social gatherings = Tk. 0.50 “

Greetings card, direct mailing = Tk. 0.05 “

Bill board = Tk. 1.00”

Total Tk. = Tk. 3.60 million

12.1.6 Evaluating the Promotional Results

The evaluation of promotional activities is a prerequisite of a successful marketing plan. The

following standard could be set up for evaluating the promotional results of SBL.

Tools No. of

Clients

Target Achieved Deviation Remarks

Paper advertising

Sticker

Direct mailing

Bill board

Arrangement of social

gatherings

From paper advertising or any other media how many calls are expected and of them how many

will be clients.

13.0 THE MARKETING PLAN

13.1 Analysis of Current Situation

Analyzing the current situation is a vital part for formulating an effective marketing plan. The4

analysis of current situation could be made in a following manner.

13.1.1 Market Situation

The market demand is increasing as many corporate clients are shifting their offices for Gulshan

area from Motijheel and, other part of the city. The failure of capital market insist the corporal

clients to go to money market for meeting their financing needs. So the overall market is very much

in favor of commercial banking.

The total market situation could be described as follows:

Corporate clients are shifting their offices in Gulshan area from Motijheel or other part of

the Dhaka city.

Failure of capital market encourages corporate clients to go to commercial banks for their

funding needs.

Competition has been increasing rapidly due to influx of new banks.

Undue pressure of political and influential persons is gradually decreasing.

Banking atmosphere is getting better day by day.

The central bank is getting more autonomy now.

13.1.2 Product Situation

The following deposit & investment products got tremendous response from the clients.

Double profit scheme: This deposit product has also got popularity due to its unique nature of

double amount at maturity.

Pre-shipment export finance: Our readymade Garments are the leading export sector, which earns

70% valuable foreign exchange for the country. To execute the export order, the exporter needs

pre-shipment export finance with easy terms and condition.

Post shipment export finance: Some exporter need post shipment finance due to the transit period

of export procedure and settlement of dues. So, those exporters need post shipment finance such

as bill discounting.

13.1.3 Competitive Situation

Though 26 commercial banks are operating in this targeted geographical area, still there is some

demand and supply gap. So, SBL could capitalize this gap by aggressive selling.

The competitive situation could be described as below:

New banks are coming into this area; so competition is increasing.

The total number of banks operating in subject area is twenty-six.

National Bank Ltd. Second generation local bank in the top performance here in Gulshan

region.

Personalized service providing and low pricing are the key features of competitive

advantage.

13.1.4 Macro Environment Situation

The macro environmental situation could be discussed as below:

The political environment has direct impact on the financial market through party favoritism,

muscles groups & undue pressure for undue financial gain.

The Autonomy of the Central Bank is the demand of time & it is achieving the same under the

recent reform program of BB with the World Bank prescription.

Service organizations like financial institutions are highly dependent upon the computer and

Internet and online.

Commercial Bank has to be involved in international trade and that's why they have to be

technologically equipped to keep the pace with the international financial market.

SWIFT has replaced the traditional mode of fund transfer while Roiter IT installation has

hastened & secured the foreign currency trading.

Bangladesh is one of the low-income countries of the world. It has followed the course of

planned development since independence.

In order to improve the competitiveness of Bangladesh exports in the international market the

exchange rate of taka against US dollar has been corrected according to the market demand &

supply basis.

The government of Bangladesh has introduced Value Added Tax (VAT) from July 1991, which is

thought to be more efficient, transparent, elastic and incentive compatible.

Bangladesh is a densely populated country, 85% of the total population are Muslims and the

business and trades are city based though 95% people are residing in rural area.

The loan defaulters are quite comfortable in social & political environment of Bangladesh and

often take the driving role in the society; the reasons being that most of the loan defaulters are

rich, educated & influential & the majority of the remaining are poor, uneducated & not united.

13.2 Opportunity and Issue Analysis

Shahjalal Bank Ltd. is the new generation bank in Bangladesh. As such they have to work hard in the

initial years to develop the client base and create a new standard in banking arena. Banking history

in Bangladesh is very long. Since the inception of this great country in 1971, it has got inherently

the banking culture though it was completely nationalized. But the backdated banking system does

not exist too long, it was urgently required to reform the banking sector and thus Government

decided to inject private banking in Bangladesh to foster the economic pace and development of

the economy. Now the market is very much competitive and 52 private banks and other financial

institutions have entered into the market creating reasonable competition. Within two years span

of time, Shahjalal Bank Ltd. has made a remarkable progress to claim that they are the emerging

force in this sector.

13.2.1 The Strengths of SBL

1. Dedicated human resources: Bank is a service organization and its success depends on the

quality of human resources. Shahjalal Bank Ltd. has got dedicated human resources to

outperform the competitors.

2. Based on Islamic Shariah: The overall activities of Shahjalal Bank Ltd. are based on Islamic

Shariah. Since the 90% people of this country are Muslim and they prefer Islamic Banking

rather than traditional banking, it will give a competitive edge over its Rivals.

3. Diversification of Products: Keeping in view of the competition the company has

introduced diversified products, like working capital financing and house building financing.

Lease financing, Some attractive deposit scheme. This diversity of the product base will

keep the investment portfolio healthy and it is a great strength of Shahjalal Bank Ltd.

13.2.2 Weaknesses of Shahjalal Bank Ltd.

1. Shortage of capital adequacy: Though in the past years the business of SBL was sound, it

failed to raise the capital fund to the highest extent. As a result, it's very difficult to finance

big corporate group.

2. Employee Turnover: SBL has a high employee turnover ratio. Only on this year four out of

thirty two executives left the company for better opportunity. This will create problem for

the company unless situation changes.

13.2.3 Opportunities

1. Great Optimism in Macro Economy: Bangladesh has seen a remarkable development in the

macro economic scenario during the past few years. The GDP is growing steadily with low

inflation contributing to the growth of the savings and investment. The export earning and

the contribution of industrial sector in the GDP are indicating a growing trend. If this

growing trend of macro economy continues, this will create a very good opportunity for

commercial Banks to capitalize.

2. Continuity of Liberalization: Government has continued to liberalize the economy towards

more market orientation. This encouraged both local and foreign investors to invest in

potential sectors. The privatization plan of government is likely to have positive impact on

industrialization. If industrialization under private entrepreneur flourishes, it will open a

new avenue of opportunity for the commercial banks like Shahjalal Bank Ltd.

3. Investment in Infrastructure development: World Bank will facilitate Bangladesh with a six

billion Taka fund for infrastructure development. This will positively effect the industrial out

put as it suffers greatly from infrastructure inadequacy. As a result, More investment will be

required which will be a great opportunity for commercial bank to reap benefit

4. Foreign Investment in Energy Sector: In recent days foreign investment in the energy

sector has increased phenomenally. This creates a good opportunity for all financial

institutions to enter in the booming new sector.

5. Local banks inefficiency: One of the major reasons for thriving of new commercial bank in

Bangladesh is local bank’s inefficiency of providing project loan. This phenomenon still

persists. As a new generation private local bank, Shahjalal Bank Ltd. could capitalize the

inefficiency of other local banks operating in this market.

13.2.4 Threats

1. Competition: The competition in the Banking sector has increased rapidly in the last few

years. Now 52 banks are playing their part in this market. But the main competition SBL will

face when the foreign banking companies will come into the market after 2004.

2. Govt. Policy: Change in the industrial policy of the Government particularly regarding the

textile sector may affect the profitability of Banks. Apart from this, the policy of Govt. not to

deposit their fund to new banks which is less than three years under operation, since the

Government fund is the highest fund in this sector.

4. Legal Loopholes: Due to the failure of efficient enforcement of tax and financial laws Banks,

like all other financial institutions are facing greater default risk. Though the Artha – Rin

Adalat act has been promulgated, but unless and until the proper enforcement of the law is

evident, threat of default remains very high.

13.3 Objectives

13.3.1 Corporate Objectives

The corporate objectives of SBL are as follows:

1. To provide on line banking, ATM and credit card facilities within this calendar year.

2. To open two new divisions including marketing research and new product development

within this calendar year.

3. To provide full-scale evening banking facilities to corporate clients.

13.3.2 Financial Objectives

The financial objective of SBL is as follows:

1. To earn Tk. 20 million as operating profit at the end of the calendar year 2003.

2. To make 50 million remittance business within this calendar year.

3. To make 100 million foreign exchange business within this calendar year.

13.3.3 Marketing Objectives

The marketing objective of SBL to convert twenty potential corporate client into regular clients

within the calendar year 2003. The marketing objectives are follows:

1. To convert 10 potential corporate client into regular clients.

2. To get familiar with all the corporate clients in Gulshan area within this year.

3. To increase 20% business from existing corporate clients.

13.4 Marketing Strategy: By analyzing all the relevant facts, the following marketing strategy might

be formulated to achieve the organizational objective. It may be noted here that this marketing

strategy has been formulated for the corporate clients and only for Gulshan area and it is based on

the following assumptions:

a) Corporate clients have been defined on the basis of the yearly turnover, Profit and banking

transactions.

b) Those have yearly turnover of Tk. 50 Crore, Profit Tk. 1 Crore, banking transactions Tk. 20 Crore

are treated as corporate clients.

13.4.1 Service Differentiation Strategy

Differentiation in terms of superior service should be the strategy to capture the market share. As

Shahjalal Bank Ltd. is a new generation bank and its span of operation is only two years, it has to

snatch away the existing clients of other banks. The key area of differentiation should be as follows:

1) Cash Transactions: Payment and Receipt of Cash Transactions should be

within two minutes where as the Rival Banks take 15 minutes to settle that transactions.

2) Loan/Investment Proposal: Loan or Investment proposal should be

settled within two days whereas the Rival Banks take seven to ten days.

3) Information: Any inquiry or information related banking service should

be provided to customer instantly in a well behaved, friendly manner so that the client feels

comfortable.

4) Transmission of LC/Guarantees: Transmission of LC/Guarantee and or

other ancillary service should be provided to the clients better than that of the client's

expectation.

5) Other Services: Any other banking services should be provided to the

clients in a swift, safe and secured way so that the client will be rest assured of.

13.4.2 Low Pricing Strategy

As a new bank, it has got some advantages relating to classified loan. As a result, the provisioning

requirement of SBL is very low. Besides, the administrative cost is also lower than that of the Rival

Banks, which places the SBL in a better position to offer low prices or profit rate or interest rate to

the customer. Shahjalal Bank can afford to charge lower interest rate by 1to 2% to attract the big

clients. Interest/Profit rate should be as follows:

SL

No.

Particulars Profit/Interest

Rate

Rival's

Profit/ Interest Rate

01. Project Finance 13% 15%

02. Working Capital Finance 13% 15%

03. Term Finance 14% 16%

04. Others 15% 16%

05. Service Charges free 1%

13.4.3 Value Added Special Service Strategy

SBL should take value added special service strategy to serve the corporate clients, which will place

this bank to the Corporate Clients as " Bank of Corporate Clients". The value-added services would

be as follows:

a) The special evening banking facilities could be provided to the Corporate Clients.

b) Pay Order/DD/TT facilities should be provided to the Corporate Clients free of Costs.

c) Regular and well payment behavioral clients should be honored as a Valued & Priority Customer and should be given special attention.

d) SBL could arrange Door-to-Door Service for Corporate & Valued Clients by bank's own staff.

13.5 Marketing Action Plan

On the basis of the survey and analysis, the action plan can be put forwarded as below:

1st stage: Collection of the information of the key person of the corporate clients of Gulshan area

and determine the potential client.

2nd Stage: Identify the financial needs and what they are enjoying from other banks and what might

be offered to them.

3rd Stage: Consultation with the senior executives of the bank, provisional pricing rate should be

determined which would be offered for negotiation as well as what additional benefit could be

offered to the specific corporate clients.

4th stage: Make an arrangement of appointment to discuss about the financial needs and other

aspect of benefit including special offer.

5th stage: Make a deal.

6th stage: Review the offer if the target customers are not agreed.

13.6 Contingency Plan

Banking business is very much regulated with rules and regulation set out by the central bank of

Bangladesh. The Government of Bangladesh is controlling the money market through Bangladesh

Bank. The contingency plan is required due to changes in rules and regulation of Banking and the

changes of macroeconomic environment. The contingency plan might be put forwarded as below:

a) If the central bank imposes the fixed lower rate, the rate of the schedule of SBL should be in

line with that and the service charges should be in conformity with the pricing strategy.

b) If the central bank sets higher deposit rate or set higher rate on Treasury bill, then the pricing of

deposit product should be in line with the changes.

c) There might be other uncontrollable factors, which might affect the decision of pricing schedule

that should be corrected accordingly.

13.7 Implementation

13.7.1 Setting-up Organizational Structure

For implementing the proposed marketing plan, the organizational structure should be refurbished

in the following way.

Marketing department:

Two executives would be working only for marketing to procure corporate clients keeping other

department unchanged.

Allocating Task:

The marketing task should be allocated in the following way:

1. Collection of all corporate clients list who are currently enjoying service from the

competitor banks. Information would be like as following table.

Name of the clients Contact number & key person details

Facilities details & name of the banks

2. Contact the key person of target customers and make appointment with them.

3. Discussion with the customers and make an offer.

4. Review the results.

Coordination, communication & direction:

Every employee of SBL should be aware of the objectives of the organization and it should be well

communicated to all. To get the optimum results, coordination has no alternative. The effort

should be made in a coordinated way. Direction has got some importance to see how well the plan

is going to attain organizational objective.

Motivation:

The employee of the organization is the key source to implement plan. So, to motivate the work

force there should be some financial & auto promotion incentive.

13.8 Control

Setting performance standard: Setting performance standard is the vital part to control the

total activities. There should be a benchmark of activities performance.

Operational Area Standard

Deposit

Cost free deposit

Low cost deposit

High cost deposit

30% of total deposit

50% of total deposit

20% of total deposit

Fund based Investment 60% of total investment

Non Fund based investment 40% of total investment

Determining actual performance and measuring actual against standard:

Determining the actual performance and measuring the actual performance against standard is the

prerequisite of any successful plan. The pro-forma would be like as follows (for the year 2003):

(Figure in crore)

Area Standard Actual Deviation Reason of

deviation

Deposit 75.08 65.35 9.73 Reduce profit

rate

Investment 55.6 50.20 5.40 Almost up to the

mark

Profit 2.62 1.35 1.27

If there is any deviation, the first and foremost task is to identify the reason of why the desired

result is not occurred.

Corrective Measures

After identifying reasons of nonperformance, the corrective action has to be taken immediately.

14.0 STRATEGIC FACTOR ANALYSIS

After interviewing the corporate clients and key officials of the banks and its competitors, it has

been observed that there are some key factors to attract the clients and to procure the substantial

market share.

1. Quick Decision : Now a days, the business environment is so competitive that a single minute

counts and it might be the decisive factor to outperform the competitors. As a result, Client

expects and prefers quick decision regarding finance. Shahjalal Bank Ltd. knows the tricks of

this trade and tries to settle any issue quickly.

2. Prompt Service : Prompt Service is the key success factor to satisfy the customer. All we know

that a satisfied customer is the best marketing promotional tool to attain substantial market

share. Everybody wants to get things done in a swift and secured way to maximize the benefit

of a deal.

3. Secured Service: Bank is a financial Institution. The client of a bank wants their money is being

kept safe and secured. There is no alternative of secured service to retain the customer's

confidence.

4. Reasonable Care : Every body desires to get importance from others and the clients of the bank

are no exception. Reasonable care should be taken while dealing with the customer

irrespective of high profile client and low profile client.

5. Professional Handling : Business is getting complex and cumbersome day by day due to the

globalization. So professional handling is the key requirement to snatch away the corporate

clients of Competitors and make them as a permanent customer.

6. Relationship Marketing : Building up a relationship with the potential customer as well as

existing customer is the key success factor for any Service organization specially Financial

Institution. Relationship could be build up on the basis of the identifying the clients need and

meeting the demands in a superior way.

7. Market intelligence : The information is the key to success. The entire business world is fully

dependent on the information. This is the era of information technology and anybody could get

information by clicking the computer mouse. For decision making it needs some classified

information, which might not be available in the open market and that's why the needs of

market intelligence comes as a key success factor. Banking environment in Bangladesh is highly

competitive and especially in Gulshan area it's a war. By utilizing the marketing intelligence

Shahjalal Bank could outperform others.

8. Technological Advancement : In banking sector of Bangladesh, technological application is not

that wide. Some foreign banks are using technology in their services, but local banks like

Shahjalal bank are still far behind. To get the competitive edge, application of technology is a

must.

9. Quality of Human Resources : The main force of a financial institution is the human resource.

The strength of a financial organization is its employee's quality. The people of the present

society are very much aware of everything. ATM facilities, online banking facilities and other

modern amenities are required to attract good clients and that's why the employee or

workforce should be well trained and knowledgeable. Most importantly, right people should be

in the right place in right time, there is no alternative of quality recruitment.

15.0 COMPETITIVE ADVANTAGE

Among all the Commercial banks Shahjalal Bank Ltd. is in the most ideal position to reap the benefit

of opportunities presented and might emerge as a distant market leader in this particular line of

business.

The comparative strength of Shahjalal Bank in this regard can be summed up as under:

SBL stands on a sound financial foundation to fund the operation and take the risk;

The name of Shahjalal is quite familiar among the general public and market participants due to

the name of Saint Hajrat Shahjalal(R).

SBL does not have classified or default investment portfolios like the competitors.

SBL already have a satisfied and motivated work force to take the lead role;

SBL follows the rules of Shariah.

However, the lacking of SBL in this regard has to be aware of:

SBL does not have the required technical manpower, skill and technology to kick start the e

banking activities in such a way to pose threat to competitors and take the leading role;

With the emergence of new banks, leasing companies and multi-product non-banking

financial institutions, the market share and leadership role of SBL might be under

continuous under threat and erosion; and

The diverse financing need of the clients demand that SBL be a multi-product financial

institution to hold on and increase market share of corporate funding business.

16.0 CONCLUSION AND RECOMMENDATION

From the observation and analysis the following conclusion and recommendations can be drawn.

The immediate action plan that SBL can put into motion can be outlined as under;

SBL can adopt a strategic business plan to launch aggressive banking business immediately, not

in a half hearted way to test the water like the commercial banks venturing into their so called

leasing business, but to take a plunge in the river and swim with firm determination to reach

the other side;

A separate independently marketing and research unit requires being set-up for aggressive

marketing and booking the corporate clients and meet their demands efficiently and effectively.

SBL requires resorting to massive image re-engineering in order to capture the public

perception to take the lead role in this sector.

To have a cutting edge, SBL requires developing and introducing innovative corporate finance

and capital market products, suiting the varied needs of corporate clients and investors and the

demand of the day to position itself as a force to reckon within this specialized line of business.

The business is certainly there and the leadership is for the taking of the competent, but the

question is-is SBL willing and prepared to take-up the challenge, or else it remains only an after

thought on the sidelines. Corporate banking has always been a dog’s war everywhere.

BIBLIOGRAPHY

Islami Bank Bangldesh Limited, Annual Report, 1995-2000

Shahjalal Bank Limited, Annual Report, 2001

Boolets of Islami Bank Banlgdesh Ltd.

Thoughts on Islamic Banking by Islamic Econocics Research Bureau, Dhaka, 1982

Banks and Financial Institutions, 1999-2000, Finance Division, Finance Ministry, Govt.

Thoughts on Economics, Special Issue on Islamic Banking, 1987

The Quarterly Journal of Islamic Economics Research Bureau.

Thought on Economics, 1986

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Strategies for taking charge, Second Edition

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Strategic Marketing Management and Research

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