€¦ · Web viewThesis Report. On “SME Banking and services in Bangladesh” . Table of Content. SL NO. Topic’s Name Page No. 1 Letter of Transmittal 2 Certificate of Approval

Thesis ReportOn

“SME Banking and services in Bangladesh”

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Table of Content

SL NO.

Topic’s Name Page No.

1 Letter of Transmittal2 Certificate of Approval3 Declaration4 Acknowledgement

Chapter -One

1 Introduction2 Origin of the report3 Background of the report4 Purpose of the report5 Scope of the report6 Methodology of the report7 Limitations of the report

Chapter -Two

1 Place of SMEs in the National Economy of Bangladesh.

2 SME Development in Bangladesh.3 Policy Issues.4 SME Financing: present status & Contribution to our

Economy.4.1 Brief Overview of SME Financing.4.2 SME: Thrust sector deserves appropriate support.4.3 The government is considering a special package for the SME

sector.4.4 SME From the speech of Budget 2010-11.4.5 Contribution of SMEs in the Economy.


Chapter –Three

1 Role of SMEs Export Growth in Bangladesh.2 Action Plan to support the SME Centers,

Women Entrepreneurship and one-stop facility

Chapter -Four

1 History of Bank in Bangladesh2 Various Banks in Bangladesh3 Various Schemes and Banking Products of

Formal Banking

Chapter -Five

1 Some Selected Banks in Bangladesh who provides SME banking services.

Chapter -Six

1 Findings2 Recommendations3 Conclusions

4 Bibliography


Chapter – Ι

This Chapter covers the followings:

1) Introduction

2) Origin of the report

3) Background of the report

4) Purpose of the report

5) Scope of the report

6) Methodology of the report

7) Limitations of the report


Introduction

The development of small and medium enterprises (SMEs) in developing countries is

generally believed to be a desirable end in view of their perceived contribution to

decentralized job creation and generation of output. SMEs constitute the dominant source of

industrial employment in Bangladesh (80%), and about 90% of the industrial units fall into

this category. The actual performance of SMEs, however, varies depending on the relative

economic efficiency, the macro-economic policy environment and the specific promotion

policies pursued for their benefit.

For the JOBS Program, Zaid Bakht (1998) and Salahuddin Ahmad, et al. (1998) developed

research papers that describe the policy environment within which SMEs in Bangladesh

operate. The reports also discuss the accompanying legal, regulatory and administrative

constraints to employment creation by SMEs. This paper attempts to highlight the findings

of those two studies. To complement the issues discussed in those two papers, a summary of

industrial problems, as perceived by entrepreneurs during the past one decade (HIID, 1988;

MCCI 1992; World Bank 1994; JOBS 1998), is also presented in this report.

In Bangladesh, SMEs playing a significant role for the development of our economy by

creating employment opportunity and producing important alternative machines and

machinery parts for saving huge foreign currency for our country. So as a part of our

development strategy, we should intensify our efforts to develop this sector to grow industrial

base and volume of foreign trade. As we know that in this age of globalization, it is

impossible to stop the flow of foreign goods to any country. Only quality products can meet

the challenges in global market. For meeting this situation SMEs need to upgrade their

technological capabilities and production facilities in order to produce quality products at a

competitive price.


The evidence for the re-emphasis on the SMEs is manifest in the Government’s own policy

intent, in any reasonable survey of the literature, and in any compilation of economic

statistics regarding the industrial sector. Though the SME sector is becoming gradually a

rising industrial sector of our country and contributing more and more to our export, this

sector faces several common problems like lack of technical know-how, shortage of long-

term financial support, lack of skilled workers, marketing link, R & D, knowledge on safety

measures, hygiene, environmental pollution, etc. We need to acquire proper institutional

knowledge in the fields of technological and managerial education and ask academics and

researchers to work more vigorously for the sector’s rapid development.

SMEs in Bangladesh produce a multitude of labour intensive goods including, consumer

items, toys small tools and paper products for the domestic market. Further development of

these industries offers various investment opportunities. Export-oriented production in SMEs

has gained momentum in the past few years. Entrepreneurs from Hong Kong, Japan and

Korea have taken advantage of Bangladesh’s cheap and easily trainable labour and its

infrastructure facilities to manufacture products for the export market.

Origin of the report

I am lucky to say that our honorable teacher Mr. Md. Mamunur Rashid, Lecturer, Department

of Business Administration, Stamford University, Bangladesh, assigned me the report on

“SME banking in Bangladesh”. The data required for preparing this report has been collected

from the various sources of most recent years.

Background of the report

After Liberation of Bangladesh, intensive efforts were undertaken to accelerate the rate of

industrialization in the country. At the beginning, import substitution and subsequently

export-led economic growth strategy was pursued for industrialization. In order to attain this

objective, large amount of industrial credit was funneled to the industrial sector. But the

whole exercise of industrialization came to a halt with the massive diversion of resources to


other non-priority sectors. Policy makers, of late, have come to recognize the contribution of

SME sector towards economic development in the country. Small and medium enterprises

have been recognized as one of the most important means for providing better economic

opportunities for the people of least developing countries like Bangladesh. A developing

economy like that of ours suffers from many peculiar problems such as disproportionate

pressure of population on agriculture due to lack of rural industrialization, unemployment and

underemployment of human and materials resources, unbalanced regional development etc.

The contribution of small and medium enterprises in the solution of these problems is beyond

doubt, provided they are organized and run on scientific basis.

Small and medium enterprises are particularly suitable for densely populated countries like

Bangladesh where SME sector can provide employment with much lower investment per job

provided. Out of 11% employment of the civilian labor force provided by the manufacturing

sector, about two thirds are estimated to be provided by the small and cottage industries

sector. Again, development of small industries facilitates the effective mobilization of capital

and labor resources. They also help in raising standards of living of people in rural areas.

Contribution of SME sector to GDP remained above 4% during the period from 1985-86 to

1999-00. Moreover, the present contribution of SME sector to GDP is approximately 5% and

SME sector employs 25% of the total labor forces, thus this sector is the present available

sector for creation of jobs (Saha, Sujit R. 2007).

Research papers developed by Bakht, Zaid (1998) and Ahmad, Salahuddin et al. (1998)

described that the policy environment within which SMEs in Bangladesh operate

accompanies legal, regulatory and administrative constraints to employment creation by

SMEs. The robustness of SME contributions to employment generation is a common

phenomenon in most developing countries in that the magnitude varies between 70% to 95%

in Africa and 40% to 70% in the countries of the Asia-Pacific region (Ahmed, M.U.

1999).Liberalization of industrial and trade regimes along with globalization are likely to

have had significant effects on Bangladesh’s SMEs (Ahmed, 2002; Bhattacharya et. al.,

2000).

Various recent studies (Ahmed, M.U. 2001, ADB 2001, USAID 2001) show that SMEs have

undergone significant structural changes in terms of product composition, degree of

capitalization and market penetration in order to adjust to changes in technology, market


demand and market access brought by globalization and market liberalization. The official

data show that the share of private investment in Bangladesh’s GDP in the late 1990s, which

may be considered as the post-reform era, has remained more of less constant at around 15%

(Bhattacharya, 2002). This may be interpreted as an evidence of stagnant private sector

activities in the country.

The recent private sector survey estimates the contribution of the micro, small, and medium

enterprises (MSMEs) is 20-25% of GDP (Daniels, 2003). While SMEs are characteristically

highly diverse and heterogeneous, their traditional dominance is in a few industrial sub-

sectors such as food, textiles and light engineering and wood, cane and bamboo products.

According to SEDF sources quoted from ADB (2003), food and textile units including

garments account for over 60% of the registered SMEs.

Despite these contributions in the economy of the country, Banking sectors are not interested

in financing the small and medium enterprises; rather there is a decline in the amount of

advances by the Banking sector. There are approximately 52 Banks operating in our country

and all are serving large enterprises rather than SMEs though only the small enterprise’s

contribution is 5% in GDP of Bangladesh in 2007.But why?

What are the causes for which Banks are not interested in financing this sector? From recent

statistical data of Sonali Bank of Bangladesh, we see that the credit recovery rate is 51.44%

in this sector. Why this recovery rate is not large enough? Why the SMEs are failing to

payback their credit to the lenders? We have tried to find out the answer of these questions in

this research paper.

Purpose of the report

Based on the above discussion the following objectives are set for the study:

•To review the role of SMEs in the economy as well as current status of SMEs and

their financing by Banks in Bangladesh.

•To find out the reason why the Banks are not interested (problems) to finance the

SMEs.


•To review the present role of Regulatory Authorities in SME financing and

development.

Scope of the report

This study has focused upon the liquidity and profitability of private banks in Bangladesh. I

hope this study will help me to know more clearly about the liquidity and profitability of

private banks in Bangladesh.

Methodology of the report

The study was conducted mainly based on secondary information although some information

relating to entrepreneurs have been collected primarily. The sources of data include Office

Records, BIBM - Library, Different Research Paper regarding SMEs, Different Publications

on SMEs of different banks and some websites.

Sample banks of DNCBs, PCBs, and FCBs from the sample frame, was selected purposively

considering the amount of loan size, interest rate, loan processing fees, period of loans, mode

of finance and management.

Policies relating to SME financing such as fiscal policy, monetary policy and internal policies

of commercial banks was examined thoroughly with a view to find out the influence of

existing policies on SME financing. Trend and pattern of bank financing to SME was

analyzed by classifying the financing in terms of areas, rate of interest, types, category, and

banks.

Data processing and analysis: The collect data from the secondary sources were analyzed to

reveal the nature of financial statement analysis. Ratio analysis technique is used in analysis.

Computer generated Word Processing programs, such as; MS Word was used to generate the

report. The main analysis of data was done with the following computer programs

1. The Powerful Spreadsheet Analyzer MS Office Excel

2. Word Processor MS Office Word.


Limitations of the ReportSince this research is only for academic purpose, there were some limitations in this study.

These are mentioned below:

1. Discussion about the Small and Medium Enterprises is a vast subject, but only

some selected areas are covered in the research paper.

2. The study is basically based on secondary data.

3. The main limitation while preparing this report was time. So it was not

possible to focus everything deeply.

4. Lack of Information’s source.

5. Lack of sufficient privileges.

This is my truthful declaration that the report is prepared only on secondary data. But in some

cases, I found the problem of shortage of necessary data and in that cases I took supposed

data, so there is a little chance of misappropriation.


Chapter – IΙ

1) Place of SMEs in the National Economy of Bangladesh.

2) SME Development in Bangladesh.

3) Policy Issues.

4) SME Financing: present status & Contribution to our

Economy.

4.1) Contribution of SMEs in the Economy.

4.2) SME From the speech of Budget 2010-11.

4.3) The government is considering a special package for the SME sector .

4.4) Prospects.

4.5) SME: Thrust sector deserves appropriate support.

4.6) SME sectors.

4.7) Comments of Analysts.

4.8) Current Status of SME Financing by Banks in

Bangladesh.

4.9) Brief Overview of SME Financing.

4.10) Manufacturing enterprise.

4.11) SME (Small and Medium Enterprises)


http://gurumia.com/2009/05/24/the-government-is-considering-a-special-package-for-the-sme-sector/

Place of SMEs in the National Economy of Bangladesh

Any precise quantitative estimate of the importance of SMEs in Bangladesh economy is

precluded by non-availability of comprehensive statistical information about these industries

at the national level. The latest BSCIC estimates suggest that there are currently 55,916 small

industries and 511,612 cottage industries excluding handlooms. Including handlooms, the

number of cottage units shoots up to 600,000 units indicating numerical superabundance of

the SCIs in Bangladesh. Quoting informal Planning Commission estimates, the SMDF puts

the number of medium enterprises (undefined) to be around 20,000 and that of SCIs to be

between 100,000 to 150,000. This wide variation in the BSCIC and Planning Commission

estimates of the numerical, size of the SMEs might be due to at least two reasons: (a)

different set of definitions of the SMEs and (b) different coverage of SME families. This

strongly suggests the need for adopting and using an uniform set of definitions for SMEs by

all Government agencies to help formulation of pro-active SME promotion policies.

Whatever the correct magnitude, the SMEs are undoubtedly quite predominant in the

industrial structure of Bangladesh comprising over 90% of all industrial units. This numerical

predominance of the SMEs in Bangladesh’s industrial sector becomes visible in all available

sources of statistics on them (Ahmed, M.U 2001). Together, the various categories of SMEs

are reported to contribute between 80 to 85 per cent of industrial employment and 23 per cent

of total civilian employment (SEDF, 2003)2. However, serious controversies surround their

relative contribution to Bangladesh’s industrial output due to paucity of reliable information

and different methods used to estimate the magnitude. The most commonly quoted figure by

different sources (ADB, World Bank, Planning Commission and BIDS) relating to value

added contributions of the SMEs is seen to vary between 45 to 50 per cent of the total

manufacturing value added. While the SMEs are characteristically highly diverse and

heterogeneous, their traditional dominance is in a few industrial sub-sectors such as food,

textiles and light engineering and wood, care and bamboo products. According to SEDF

sources quoted from ADB (2003), food and textile units including garments account for over

60% of the registered SMEs. However, as identified by various recent studies, (Ahme, M.U.

2001, ADB 2001, US-AID 2001) the SMEs have undergone significant structural changes in

terms of product composition, degree of capitalization and market perpetration in order to

adjust to changes in technology,market demand and market access brought by globalization

and market liberalization.


SME Development in Bangladesh

Historically, Bangladesh followed a development strategy in which private investment was

controlled through a host of regulations involving investment sanctioning, credit

disbursement, import licensing, foreign exchange allocation, etc. While these regulatory

barriers thwarted private investment in general, the impact fell unevenly on SMEs. This was

because of the relative inability of the SMEs to cope with the regulations compared to their

large-scale counterparts. Thus, the policy regime was largely biased against the SMEs

although, paradoxically, promoting SME development was a stated objective of successive

governments. In a bid to render its industrial sector internationally competitive and to move

towards greater efficiency in its production structure, Bangladesh implemented a number of

economic reforms during the 1980's, underwritten by the familiar structural adjustment

policy. These included deregulation of sanctioning procedure and relaxation of other

regulatory barriers, easing of import procedure, reducing trade barriers, following a market

oriented exchange rate policy, and implementation of fiscal, monetary and public enterprise

reforms. These reforms helped remove a large part of the policy bias against SMEs that

prevailed earlier. Recent studies confirm that these reforms had positive impacts reflected in a

fairly rapid growth of the sector during the past decade. However, because of their structural

weaknesses, the SMEs may need more pro-active policies for their development in addition

to the further removal of the policy biases.

Policy Issues

Public Development Outlay

Although successive five-year plan documents have mentioned development of small,

medium and cottage enterprises as priority area, public development expenditure in this

sector has not been commensurate with this declared policy. Thus, in the Fourth Five Year

Plan, the revised public allocation to this sector was Taka 2,016 million which was a meager

0.58 per cent of the total public development outlay in the plan. What is even worse, only


about 69 per cent of this small allocation were actually invested during the plan period. In

the current Fifth Five-Year Plan, the share of the sector in total public development

expenditure has gone down even further. If the sector has to make much headway, there is

need for substantial increase in public investment in the sector particularly in the area of

training, extension, research, market promotion, etc. A collaborative effort of the

government with business associations, non-governmental organizations NGOs and other

development partners is recommended in such public outlays.

Trade Policy

During the past decade, substantial reforms have been carried out in the external trade regime

of Bangladesh. The import procedure has been greatly eased and deregulated. Import tariffs

have been lowered and quantitative restrictions virtually eliminated. All these have facilitated

greater access of domestic producers to imported raw materials. This has particularly

benefited SMEs as they were affected more adversely by the regulated trade regime.

However, import liberalization has also exposed domestic producers to competition from

foreign goods. To ensure a level playing field and to enable domestic SMEs to compete

effectively with imports, the following policy concerns need to be addressed.

Prior Announcement of Policy Changes:

To enable domestic producers, particularly the SMEs, to prepare themselves to face external

competition there is need for adequate forewarning about impending policy direction. This is

particularly true of trade policy measures. If the government makes prior announcements of

its impending trade policy changes, particularly with respect to tariff schedules, investors will

be aware of the degree of competition they will be facing with the changes and will make

adjustments in their investment and production plans accordingly.


Tariff Rationalization:

To encourage domestic production, there should be adequate gap between duty on raw

materials and duty on finished products. In fixing duty on finished products, possible under-

invoicing and dumping should be taken into account, as otherwise, effective duty rates on

finished goods will turn out to be lower than that on raw materials in spite of the higher

statutory rate on the finished item.

Appropriate Tariff Valuation:

To avert the problem of under-invoicing, a system of tariff value has been put in place for

certain categories of imports. There are complaints that these tariff values are often not in line

with the going world price of these items which sometimes puts domestic producers at a

relatively disadvantaged position.

Fiscal Policy

Value Added Tax:

The main components of indirect tax in Bangladesh are Value Added Tax (VAT),

Supplementary Duty and Excise Duty. VAT is imposed on producer, manufacturer, importer,

exporter or service renderer under the Value Added Tax Act, 1991, on goods or specified

services, at the rate of 15% at every stage of transfer. VAT paid against the input is adjustable

against the VAT on output to be collected from the buyers and the net sum stands payable on

delivery of goods or specified services to the VAT authority. Exemption is allowed to certain

goods or service or certain taxpayers.

All cottage industries, except those producing particular products, are exempted from VAT.

But, manufacturer, producer or service renderer (other than cottage entrepreneurs), whose

annual turnover does not exceed Taka 1.5 million are required to pay Turnover Tax at the rate

of 2.5 per cent in lieu of 15 per cent VAT. This limit is too low for small industries. As a

result, small industries are subjected to the same 15 per cent VAT as their large-scale


counterparts. In addition, supplementary duty is imposed at variable rates on certain

categories of consumption goods across all size categories. Finally, excise duty applies to a

limited number of items irrespective of size classification.

Thus, in terms of indirect taxes, there is virtually no differentiation between SMEs and their

large-scale counterparts, which is considered inequitable by most SMEs.

Tax Holiday:

Similarly, there are no differentiated treatments of SMEs either with respect to duty on

capital machinery or direct taxes. There are provisions of tax holidays for enterprises of all

size categories subject to rules and procedures set by the National Board of Revenue. To avail

themselves of tax holiday, enterprises recommended by the relevant sponsoring agencies

have to get the approval of the National Board of Revenue which is a cumbersome and

lengthy process. The tax holiday, however, is not available to sole proprietorship enterprises

which are the usual form of small and cottage industries in Bangladesh.

Wealth Tax:

Wealth tax is payable by an individual if his net wealth exceeds Taka 2.5 million. As per

existing law, no wealth tax is payable by a company, the usual legal form of a large industry.

On the other hand, the legal form of small industries is usually sole proprietorship, and hence

these enterprises have to pay wealth tax on their business capital.

Thus, fiscal policy in Bangladesh is not particularly tailored to provide support to SMEs,

which is pointed out by most SME entrepreneurs as a critical policy constraint hindering

SME growth.

SMEs and NGOs

SMEs appear to be facing discriminatory competition from the commercial activities of

NGOs. On the other hand, smaller units may be receiving valuable assistance in the form of


training or market information from the NGOs. NGOs should be promoting small businesses

and not themselves become competitors – crowding out private enterprises. Further research

and debate on the role of NGOs in promoting SMEs is propounded

SME Financing: present status & Contribution to our Economy:

SME (Small and Medium Enterprises)

SME business is a non-public limited companies but a business for self-employment or for

social welfare.

>According to the latest circular of BANGLADESH BANK (Date – 26/05/2008), the

definition of Small & Medium Enterprise sector is given below:

►Small Enterprises – Small enterprises refer to those enterprises which are not any Public

Limited Companies and which fulfill the following criteria-

1.Service Concern- Having an investment of Tk. 50,000 to Tk. 50, 00,000 excluding land &

building and / or employing up to 25 workers.

2.Business Concern - Having an investment of Tk. 50,000 to Tk. 50, 00,000 excluding land

& building and / or employing up to 25 workers. 3.Manufacturing Concern - Having an investment of Tk. 50,000 to Tk. 1,50,00,000

excluding land & building and / or employing up to 50 workers.

►Medium Enterprises – Medium enterprises refer to those enterprises which are not any

Public Limited Companies and which fulfill the following criteria-

1. Service Concern- Having an investment of Tk. 50,00,000 to Tk. 10,00,00,000


2. Business Concern - Having an investment of Tk. 50,00,000 to Tk. 10,00,00,000



3. Manufacturing Concern - Having an investment of Tk. 1,50,00,000 to Tk.

20,00,00,000 excluding land & building and / or employing up to 150 workers.

Partition of SME Enterprises: SMEs in Bangladesh are also defined for purposes of

industrial policies by Ministry of Industries (MOI). Historically, this definition has been in

terms of fixed investment brackets, and a dual mode definition is in place, separate for

manufacturing establishments, and service establishments.

>According to the Industrial policy 2005, small and medium enterprises shall be categorized

using

the following definitions:

Manufacturing enterprise:

Small Enterprises

An enterprise should be treated as small if, in current market prices, the replacement cost of

plant, machinery and other parts / components, fixtures, support utility, and associated

technical services by way of capitalized costs (of turnkey consultancy services, for example),

etc., excluding land and building, were to be up to tk. 15 million;

Medium enterprise

an enterprise would be treated as medium if, in current market prices, the replacement cost of

plant, machinery and other parts / components, fixtures, support utility, and associated

technical services by way of capitalized costs (such as turnkey consultancy services), etc.,

excluding land and building, were to be up to tk. 100 million;


□Non-manufacturing enterprise:

Small enterprise – an enterprise should be treated as small if it has less than 25

Workers, in full time equivalents;

Medium enterprise - an enterprise would be treated as medium if it has between 25

And 100 employees.

Brief Overview of SME Financing:

There is a great interest in small and medium enterprises (SME) as a major plank of poverty

reduction in Bangladesh. The government has formulated a comprehensive industrial policy

2005 by putting special emphasis for developing SMEs as a thrust sector for balanced and

sustainable industrial development in the country to help deal with the challenges of free

Market economy and globalization.

Some data with a national scope those are pertinent to characterizing SMEs in Bangladesh

as of 2001-2003. There are some 78,440 private sector establishments of various sizes in

Bangladesh with some 3.5 million workers employed in them.

Current Status of SME Financing by Banks in Bangladesh:

BB Sets SME Financing Target at tk 625b for 2011:

(Collected news about SME loan from Financial Express)

The central bank has set the target for disbursement of loans at over Tk. 625 billion for the

small and medium enterprise (SME) sector in calendar year, 2011, marking a 64 .56 per cent

increase over that of the previous year.


The banks and financial institutions initially set the target at Tk. 240 billion in 2010. But the

SME financing target was later revised upward for the year - to Tk. 380 billion to meet the

growing demand for such credits.

Serial

no Types of Banks name Estimated

01. Owned commercial banks and financial

institutions

Tk 134.99 billion

02 private commercial banks Tk 451.76 billion

03 foreign commercial banks Tk 15.93 billion

04 country's non-banking financial institutions Tk 22.65 billion

Total:

SME sectors:

Besides, The loans will be given to more than 60 categories of operations in the SME sector

such as-

● light engineering

● handicraft,

● flower,

● fish processing,

● handloom, rice-mill

Jamdani, Rajshahi Silk

●Jamdani,Rajshahisilk,

Bank of Small Industries and Commerce Bangladesh Ltd. (BASIC) is entrusted with the

responsibility of providing medium and long-term loans for promotion and development of

small-scale industries. The memorandum and Articles of Association of the bank stipulates

that 50% of loanable funds shall be used for financing small scale and cottage industries. The

outstanding credit of BASIC stood at Tk158.9 crore at the end of December 2001 for small

and cottage industries sector that rose to Tk178.7 crore by 12.46% at the end of December

2002.


Comments of Analysts:

►"We've already taken a three-tier monitoring arrangement to ensure growth of the SME

sector in the country," the BB official said, adding that the central bank has advised the banks

and financial institutions to invest their funds on a cluster basis, along with an area-approach

method.

►Under the monitoring arrangement, the head office of the central bank, its nine branch

offices across the country and head offices of all commercial banks will regularly review the

implementation of SME credit programmers.

►"We've put emphasis on cluster and area-approach methods for disbursement of such loans

with the aim of easing inflationary pressures on the economy through creation of jobs across

the country," the BB official noted.

►“Developing countries like China are getting 20 to 30 per cent of their GDP from SMEs

whereas this sector in Bangladesh is contributing 20 per cent to GDP with 60 per cent of total

labour employed,” Mr Aftab said.

SME: Thrust sector deserves appropriate support:

SME has been considered as the thrust sector in the economic development of the country

with growing importance from all walks of life. It is evident that, substantial increase in SME

and Retail Credit portfolios along with commercial, corporate and institutional lending,

would lead the banks to its higher trajectory of growth, minimizing the risk of lending

through portfolio diversification. As such, most of the banks have taken up aggressive

marketing policy to augment their exposure in SME and Retail Credit. Though SME concept

is nothing new, as evident from the establishment of Bangladesh Small and Cottage

Industries Corporation (BSCIC), but a fresh look into and Endeavour to boosting the sector

are still imperative. Bangladesh Bank re-finance scheme for SME is laudable. The role of

IFC-SEDF for creating awareness among the entrepreneurs and banks/NBFIs to be more

focused in SME deserve appreciation.

Prospects:

Un-employment problem is a growing concern all over the world more particularly in

developing countries, and the panacea to the setback mostly lies in massive development of


labor incentive SME sector. SME in many cases can be set up at domestic and household

level contributing to cost cutting. Family members may also participate in the process.

►The government is considering a special package for the SME sector:

Determining the economy growth government initiating to develop SME . The government

considers a further cut in bank interest rates, especially for small and medium enterprises

(SMEs) to help the sector grow faster, said the commerce minister yesterday. ?We have

already brought down the interest rate to support the country's entrepreneurs. We are

considering reducing the rate further to help different sectors, especially the SMEs, grow

faster,? said Faruk Khan. Now Analysis SME loans through a graph based on 2010 fiscal

policy.

In the first nine months of this year, the banking sector exceeded the whole year's target for

giving loans to small and medium enterprises (SME) -- but only thanks to a new definition of

SME loan, according to some bankers. The bankers said the definition included existing non-

SME portfolios as SME loans, helping raise disbursed funds to Taka 382.83 billion (US$5.4

billion) against a target of Taka 239.95 billion. If a trader borrows Taka 100 million, it can

be mentioned as medium enterprise loan because of the definition," said an official with the

SME credit department of a private bank. He said many banks have shown their loans up to

Taka 150 million as SME credit, which exaggerated the disbursed figure. Bangladesh Bank

data shows less than Taka 150 billion was lent to the SMEs in 2009

SME From the speech of Budget 2010-11:


http://www.asianewsnet.net/home/searchresult.php?sec=2&keysh=SME


http://www.asianewsnet.net/home/searchresult.php?sec=2&keysh=loan

http://www.asianewsnet.net/home/searchresult.php?sec=2&keysh=banks










http://gurumia.com/2009/05/24/the-government-is-considering-a-special-package-for-the-sme-sector/

http://gurumia.com/2010/12/02/sme-sectors-contribution-to-gdp-double-prospect/small-and-medium-enterprises-sme-loan/

[183]. Considering the SME sector as one of the main agenda of economic development, for

the first time in 2010, we have fixed a target of Tk. 23,995 crore as SME loan to be disbursed

by the banks and financial Institutions. The banks and financial institutions will distribute

loans to the SMEs and women entrepreneurs in accordance with the ascertained target.

[184]. Under the ‘SME Re-financing Scheme’ managed by Bangladesh Bank, an amount of

Tk.1,541 crore has been refinanced from three funds up to April, 2010 to various banking and

nonbanking financial institutions. The beneficiary coverage of this scheme is 15,672 SMEs.

[185]. In order to create an equitable and well-organized development of the industrial sector,

a directive has been issued to establish a ‘Women Entrepreneur Dedicated Desk’ in each bank

and financial institution to ensure better opportunity for the women entrepreneurs to receive

loans on

easier terms and conditions.

Contribution of SMEs in the Economy: In view of present economic development effort in Bangladesh the SME sector plays an

important role. These are reflected in the following performance /activities of this sector:

► During the Fourth Five year plan, a total of 0.35 million jobs were created against the

target of 0.4 million.

► Contribution of SME sector to GDP remained above 4.5% during the period

from2000-01 to 2004-2005 despite decline in the amount of advances by the banking

sector to this sector.

► SME sector employs 25% of the total labour force. As a result, this sector is the

present available sector for creation jobs.

► SME sector help alleviate poverty, increase income level of rural people and promote

agro-industrial linkage in Bangladesh.

► SME sector requires lower energy supply, lower infrastructure facilities and this

sector imposes less environmental risk. They contribute towards better utilization of local

resources and skills that might otherwise remain unutilized.

► Small industries being labour oriented are capable of generating more employment.

► They are necessary to maintain and retain traditional skills and handicrafts.


► They are the only medium for diversification of rural economy and for peaceful and

concurrent socio-economic development of all classes of people. From the above discussion,

we can say that SMEs are playing an important role in our economy in various ways.

Chapter – ΙII

1. Role of SMEs Export Growth in Bangladesh.

2. Action Plan to support the SME Centers, Women

Entrepreneurship and one-stop facility


In Bangladesh, SMEs playing a significant role for the development of our economy by

creating employment opportunity and producing important alternative machines and

machinery parts for saving huge foreign currency for our country. So as a part of our

development strategy, we should intensify our efforts to develop this sector to grow industrial

base and volume of foreign trade. As we know that in this age of globalization, it is

impossible to stop the flow of foreign goods to any country. Only quality products can meet

the challenges in global market. For meeting this situation SMEs need to upgrade their

technological capabilities and production facilities in order to produce quality products at a

competitive price.

The evidence for the re-emphasis on the SMEs is manifest in the Government’s own policy

intent, in any reasonable survey of the literature, and in any compilation of economic

statistics regarding the industrial sector. Though the SME sector is becoming gradually a

rising industrial sector of our country and contributing more and more to our export, this

sector faces several common problems like lack of technical know-how, shortage of long-

term financial support, lack of skilled workers, marketing link, R & D, knowledge on safety

measures, hygiene, environmental pollution, etc. We need to acquire proper institutional

knowledge in the fields of technological and managerial education and ask academics and

researchers to work more vigorously for the sector’s rapid development.

SMEs in Bangladesh produce a multitude of labour intensive goods including, consumer

items, toys small tools and paper products for the domestic market. Further development of

these industries offers various investment opportunities. Export-oriented production in SMEs

has gained momentum in the past few years. Entrepreneurs from Hong Kong, Japan and

Korea have taken advantage of Bangladesh’s cheap and easily trainable labour and its

infrastructure facilities to manufacture products for the export market.


Role of SMEs Export Growth in BangladeshBangladesh maintained its upward strides in economic growth duly manifested by positive

developments of the major macro-economic indicators. GDP growth was 6.43 percent in

2006-2007 compared to 6.63 percent in 2005-2006. The growth of GDP was 5.96 percent for

the year 2004-2005. The national savings and investment reached 29.20 and 24.30 percent of

GDP respectively in 2006-2007. Per capita GDP and GNI would cross U$ 482 mark for the

first time in Bangladesh and stand at US$ 482 and US$ 520 respectively. The contribution of

service sector in the GDP was 52.33% in 2007-2008; while industry and agriculture sectors

were 28.58% and 19.09% respectively.

After all, small and medium enterprises, including the tiny and ‘micro’ enterprises comprise

virtually all (about 99.85%) of all business enterprises outside agriculture in Bangladesh.

Large enterprises account for only 0.15% of the said enterprises. SMEs including micro

enterprises account for some 81.2%, while only 0.15% of all business enterprises employ a

full 18.8% of the employment of all business enterprises outside agriculture. Clearly, small

and medium enterprises including micro enterprises have a ground-breaking, monolithic and

humongous importance in the economy of Bangladesh in the context of pro-poor growth.

The government launched a strategy of industrialization focused on the manufacturing sector.

Industries (manufacturing) sector expanded at an average rate of 6.44% per annum

throughout the years of FY 1972-2005. The average growth of industry sector

(manufacturing) during 1992-96 was 8.21 percent. But during 1997- 2003, the growth rate

rose to 6.8 percent. Manufacturing sector registered 10.77% growth for the 2005-2006. It was

9.52% for the year 2006-2007.

The growth of SMEs in a number of industries, particularly in the field of plastic, food,

footwear, rubber products, chemicals, job printing and certain categories of metal based

products. Plastic industry has not only succeeded in substituting imports but has also been

able to penetrate the export market in specific range of products such as drums and bulk

containers etc. The industry has also been producing items that are considered deemed

export, e.g. accessories for the garments industry etc. Similar export successes have also been

achieved by imported metal based engineering product industries. Thus, export of

engineering products has experienced nearly 27% annual growth during the last 10 years,


with production carried out by enterprises belonging to the SME sector. Easy import of

components has also facilitated the rapid growth of a wide variety of footwear products in the

country. Similarly, lower cost of imported paper and ink has helped commercial job printing

to grow rapidly. Import of packaging materials at lower cost has contributed to the growth of

other food industry. Rubber products and other chemical products also seem to have

benefited from easier access to raw materials due to trade liberalization. Pilferage from the

export oriented garments factories of fabric imported duty free also adversely affected the

SMEs in weaving.

The growth of SMEs has been the trend in domestic demand. On the other hand, SMEs in

dominant manufacturing industries such as grain milling seem to have stagnated due to

relatively low income elasticity of demand for these products.

SMEs DefinedSMEs in Bangladesh are defined for purposes of industrial policies by the Ministry of

Industries (MOI). Historically, this definition has been in terms of fixed-investment brackets,

and a dual-mode definition is in place, separate for manufacturing establishments, and service

establishments.

1.For manufacturing industries, the Revised SME defined:

(i) an enterprise would be treated as small if, in today’s market prices, the replacement cost of

plant, machinery, structures, and other parts/components, fixtures, support utility, and

associated technical services (such as turn-key consultancy), i.e. Tk. 50,000 to 1.5 crore

( 0.05 million to Tk. 15 million and / or workforce not more than 50 ;

(ii) an enterprise would be treated as medium if, in today’s market prices, the replacement

cost of plant, machinery, building, structures, and other parts/components, fixtures, support

utility, and associated technical services (such as turn-key consultancy), i.e Tk 1.5 crore to Tk

20 crore ( tk 15 million to Tk. 200 million and/ or workforce not more than 150 ;

From both definitions above, land and building is excluded.

2.For non-manufacturing activities (such as trading or other services), the Revised

SME defined:

(iii) an enterprise would be treated as small if the fixed capital is Tk. 50,000 to Tk. 50,00000

(0.05 million to Tk. 5 million and / or workforce not more than 25;


(iv) an enterprise would be treated as medium if the fixed capital is Tk. 50,00000 to Tk.

10,00,00000 (5 million to Tk. 100 million and / or workforce not more than 50; From both

definitions above, land and building is excluded.

Government Initiative for SME Export Development(i) Government Policies and Strategies for SMEs : The government has committed in the

PRSP and as well as in the Industrial Policy 2005 to consider SMEs as vehicles for quality of

life improvement, economic growth and poverty alleviation of the common people. The

Government will play the role as a facilitator removing policy obstacles and neutralizing

market failures and secondly will provide necessary promotional support to SMEs. The

poverty Reduction Strategy Paper (PRSP) Stateg: The Government will pursue an

employment intensive industrialization with emphasis on SMEs and export oriented

industries.

(ii) Booster Sectors: For promotional support SME policy Strategies 2005 has identified the

following 11 booster sectors: (1) Electronics and electrical; (2) Software development; (3)

Light engineering and metal-working; (4) Agro-processing/agri-business/ plantation

agriculture/ specialist farming/tissue-culture and related business; (5) Leather- making and

leather goods; (6) knitwearmaking and leather goods; (7) Plastics and other synthetics; (8)

Healthcare and diagnostics; (9) Educational services; (10)

Pharmaceuticals/cosmetics/toiletries; and (11) Fashion-rich personal effects, wear and

consumption goods

(iii) Revenue and financial Incentives: The industrial enterprises identified as Thrust Sectors

including small and medium enterprise (SMEs) in the Industrial Policy 2005 will enjoy

special fiscal and financial incentives.

Private Sector Initiatives for SME Export DevelopmentProduct Launching for SMEs: Product launching by trade association, chambers, among

which FBCCI, DCCI, CCCI NASCIB, WEAB, regional chambers and district chambers.

FBCCI SME Fair: The Federation of Bangladesh Chambers of Commerce and Industry

(FBCCI) has contributed a grate deal in promoting SMEs products of Bangladesh through the

SME fair annually.

SCI Fair of NASCIB: National Association of Small and Cottage Industries of Bangladesh

(NASCIB) organizes various Small and Cottage Industries (SCI) Exhibitions, Regional Fairs,

Seasonal Exhibitions, Product Promotion of NASCIB members and Trade fairs, of which the

Yearly National SCI Mela held annually is participated not only be women entrepreneurs of


Dhaka but also from different districts of Bangladesh. Besides NASCIB assists its women

entrepreneur members in SME in the participation of important International Trade Fairs and

regional melas, where women entrepreneurs’ SME products are in great demand and these

women have proved their efficiency by receiving orders for their products at different fairs.

Various Type of Fairs: Trade Fairs for product promotion and export orders are held every

year by various Trade Associations as “Exposition” themes with exhibitions, displays and

fashion shows. Among them are BGMEA, BKMEA, Bangladesh Engineering Industry

Owners Association (BEIOB), Plastic Manufacturers and Exporters Association.

Pharmaceutical Owners Association, Textile Mill Owners Association , Bangladesh Furniture

Industries Association, Bangladesh Electrical Association and Bangladesh Weaver

association etc.

Barriers for SME Export(i) Insufficiencies Information: Problems in identifying, selecting and contracting

international markets due to information insufficiencies. (i) Limited information to locate

markets; (ii) Unreliable data about the international Market; (iii) Locating foreign business

opportunities; (iv) inability to contact overseas customers;

(ii) Functional Barriers: Insufficiencies of various functions internal to the enterprises such

as human resources, production and finance with regards to exporting: (i) Lack of managerial

time to deal with internationalization; (ii) Insufficient quantity of personnel for

internationalization; (iii) Lack of excess production capacity for exports; (iv) Shortage of

working capital for financing exports;

(iii) Marketing Barriers: Pressures imposed by external forces on adapting the elements of

the company’s marketing strategy including barriers associated with the company’s product,

pricing,

distribution logistics and promotional overseas: (i) Developing new products for foreign

markets; (ii) Adapting export product design/style; (iii) Meeting export product quality/

standards/

specifications; (iv) Offering technical/after-sales service; (v) Offering satisfactory prices to

customers; (vi) Granting credit facilities to foreign customers; (v) Complexity of foreign

distribution channels; (vi) Maintaining control over foreign middlemen; (vii) Unavailability

of warehouse facilities abroad; (viii) Excessive transportation/insurance costs; (ix) Adjusting

export promotional activities to the target market;


(iv) Procedure Barriers: Barriers associated with the operational aspects of transactions

with foreign customers. (i) Unfamiliar exporting procedures/ paperwork; (ii) Difficulties in

communicating with overseas customers; (iii) Slow collection of payments from abroad; (iv)

Difficulties in enforcing contracts and resolving disputes;

(v) Government Barriers: Barriers associated with the actions or inaction by the home

government in relation to its indigenous companies and exporters. (i) Lack of home

government

assistance/incentives; (ii) Unfavorable home rules and regulations; (iii) Unfavorable foreign

rules and regulations;

(vi) Customer and Competitor Barriers: Barriers associated with the firm’s customer and

competitor in foreign market’s which can have an immediate effect (i) Different foreign

customer habits/ attitudes; (ii) Keen competition in overseas markets;

(vii) Business Environment Barriers: Barriers associated with the economic, political-legal

and socio-cultural environment of the foreign market’s within which the company operates or

is planning to operate. (i) Foreign currency exchange risks; (ii) Unfamiliar foreign business

practices; (iii) Different socio-culture traits; (iv) Verbal/Non-verbal language differences; (v)

Inadequate of infrastructure for e-commerce; (vi) Political instability in foreign markets;

(viii) Tariff and non-tariff Barriers: (i) High tariff barriers; (ii) Inadequate property rights

protection (PRP); (iii) Restrictive health, safety and technical standards; (iv) Arbitrary tariff

classification and reclassification; (v) Unfavorable quotas and/ or embargoes; (vi) High costs

of customs administration;

Market Development Initiative for ExportA major focus of the trade associations and chamber bodies should be to gather information

regarding existing and potential markets and advise entrepreneurs regarding products and

their qualities which are in demand now or can be in demand in future. What design and

packaging charges and improvements would make particular products more attractive to

customers, particularly abroad, should also be regularly assessed. Properly designed market

development efforts such as negotiations, advertisements and exhibitions, both at home and

abroad, that would be helpful towards expanding sales should be in the portfolio of their

market development activities. Like many other countries the SMEs of Bangladesh have been

affected by the precipitous economic liberalization in the early 1990s without first taking

action preparatory to liberalization. All kinds of foreign goods including ordinary consumer

items have been coming into the country easily. The domestic industries, given their relative


inefficiency, cannot compete with these imported items in terms of price and also, not

infrequently, quality. As a result existing enterprises have been failing and possible new ones

have not been coming up initiating a process of de-industrialization. Finally special care must

be taken both by the entrepreneurs as well as by the relevant government agencies to, ensure

quality control and to make the products up to the international standard to remain alive in the

competitive world market. Consequently, small businesses always trying to keep one step

ahead of their rivals".

Major Export flourishing in Bangladesh:

1. SME Sub-Sectors

(i) Agro-process, agro-based and agro-supportive industries ;(ii) Handicraft: braided rug

of jute & cotton etc., (iii) artificial flower making, etc; (iv) computer soft ware and ICT;

(v) micro-electronics; (vi) food processing and food staffs; (vii) floriculture; (viii) gift

items; (ix) poultry and cattle; (x) jute goods; (xi) electrical appliances, (xii) leather and

leather goods; pottery; (xiii) light engineering; (ivx) staffed toys; (xv) RMG, knitwear

etc.; (xvi) aquaculture; (xvii) automobiles; (xviii) horticulture and (xix) medicinal plants

culture; pharmaceutical

2. Sub- Sectotal SME Export Information

Gift items :The country’s gift items manufacturing firms participated in the Tokyo

International Gift Fair held on September 2- 5, 2008 . Bangladeshi participating

companies displayed SME products like handicrafts, home textile, jute products, nakshi

katha, scarf, bags, belts, wallets, show pieces, wall- mat, candle, cushion cover pottery

and such other products. From this fair Bangladesh participants received US$ 20,000 spot

orders in addition to 120.000 prospective orders. SAARC Trade Fair in Colombo, held

from August 28 - 31 2008 was also able to receive spot order worth US$ 490.000.

Pharmaceuticals items, Soft Drink, Jamdani Saree, Dhakai Moslin, Silk Scrap, and Other

products were put on display in the Colombo fair. The prospects of exporting shoes and

gift items and RMG products to Japan.

Home Textile: Export of home textile products can fetch US$1.0 billion by the next few

years as many of the country’s regional rivals have shifted their focus on producing high-

value textiles. Exports of home textile items such as bed linen, cushion, blanket,


nakshikatha, curtain and pillow will continue to boom in the next years. Home textile

products have the potentials to earn $1.0 billion from export by 2012-13 fiscal years. If

the current rate of growth continues, by next four years home textile would emerge as the

third highest export earning sector. A number of countries of north and South America,

Europe, Africa, middle and Southeast Asia are major markets of Bangladesh’s home

textiles. The demand for home textile to the USA and Europe, which account for

Bangladesh’s 80 per cent export market, rose sharply in the recent months amid declining

shipments from some south and Southeast Asian countries.

Electrical & Electronics Products: There is huge markets for electrical goods in

different countries across the globe including Europe and Middle East. Bangladesh is

near about self-sufficient in electrical goods and accessories. Apart from some 5 per cent

sophisticated items 95 per cent electrical products are made in Bangladesh, at the last

edge to be self-sufficient in producing all kinds of fans cables within two to three years.

There is huge prospect of exporting electrical goods abroad if government helps in this

regard. The products of electrical accessories like substation equipment, household

electrical appliances, tube light and incandescent bulb, electrical and electronic ballast,

supper enamel copper wire, energy saving bulb, voltage stabilizer, electrical cables,

energy saving bulbs, electric motor, electric meter, transformers, light fittings, electrical

fan, capacitor, IPS-UPS and varnish have a tremendous market for export into African

countries . A local electronics assembling company will set up a liquid crystal display

(LCD) television assembling plant and refrigerators the first of its kind in Bangladesh.

Camera Lens Plant: The lenses used in some of the world’s most famous camera

brands are being produced in Bangladesh with such success that the company involved

plans to expand I operations. Apart from camera lenses the company also produces

lenses for fax machines, photocopies, security cameras, scanners and projectors.The

company earns around US$ 8 million annually by exporting products.In producing lenses

workers need to follow nine stages such as curve generating, smoothing, polishing,

cleaning, inspection, centering, coating, second time inspection and packing for export.

Automobiles: The first ever fuel-less and environment friendly electric bike and electric

rickshaw was formally launched by Electric bike and electric rickshaw would save huge

foreign currency by reducing diesel use, air pollution and transport cost. The people of

middle and lower income bracket will be able use it for their affordable prices. A leading

automobile distributors is to assemble Mercedes-Benz buses in Bangladesh. The

company will be able to cut the price of Mercedes-Benz buses by about Tk 40 lakh to


nearly Tk 1.10 crore after the establishment of the assembling plant.Currently one

Mercedes-Benz bus costs around Tk 1.50 crore as it enters Bangladesh in completely

built form. The local assembling plant will help us offer lower prices due to cheap

labour. A local manufacturing firm has initiated a move to produce CNG-run

motorcycles. Main targets is to export motorcycles after meeting the domestic demand.

The company has moved to produce CNG-run motorcycles, considering its cheap fuel

cost. The duty structure on import of raw materials is a big constraint for the

manufacturers. We can export our motorcycles to neighbouring countries, including

India take advantage of the duty-free access under SAFTA in the future.

Bicycle Export: The country exported bicycles worth US$ 64.28 million in the just

concluded fiscal year. Bangladesh exported around half a million bicycles in 2007-08.

There is huge demand for our bicycles in the European countries. Currently, world’s

some of the leading companies including Raleigh of UK, Avocet Sports, PCM of UK,

Motor and Sports of the UK, Aldi of Holland, Bachtenkirch Interbike of Germany, M&F

De Scheemaeker of Belgium and Formula Cycling of Belgium are importing bicycles

from Bangladesh. Bangladesh is also trying other potential markets like Canada, the

United Kingdom (UK) through supplying bicycles in a limited scale.The UK is a leading

importer that imports bicycles worth around 220 million euro a year. Bangladesh alone

exported bicycles worth 13 million euro to the UK in calendar 2007.Bicycle industry is a

light engineering sector and most of parts are locally available.Bangladesh can export

around 2.0 million pieces of bicycles a year.

Light Engineering : Currently, the light engineering has been producing highly

demanded products like crushing machines, bicycle, spare parts of shallow engines,

carbon rod for dry-cell batteries, pistons, etc. The sector is also producing agricultural

tools like power-tiller and its spare parts, irrigation pumps, crank shaft, automobile

components like bracket, accelerator, oil expeller, marine parts like bush and others.

Besides, it is also manufacturing parts for textiles, jute and tea, food processing,

construction, and tools required for furniture industry. A light engineering company has

started export of flour machines to Australia recently. The light engineering sector is

growing on an average 30 per cent annually and it is now eyeing export around half a

billion US dollars in 2008- 09 fiscal. The light engineering sector exported US$ 310

million in 2006-07 fiscal year. There are around 40,000 light engineering units across the

country and its local market size is estimated to be around Tk.200 billion with its 40000

units. The case for the light engineering sub-sector, which is but part of the Small and


Medium Enterprises (SMEs), should not be looked upon as just one of the so many other

claimants to government largesse. In fact, the light engineering sub-sector is the key to

the development of heavy industry.

Local Firm Makes Heavy Crane: A local engineering industry, manufactured heavy

barge-mounted crane at its own factory, an achievement that will pave the way to end

manual lifting of heavy machinery. Having a capacity to lift around 300 tonnes of

machinery or tools at a time, the crane will also be useful to lifting sunken vessels in a

short time. If any company introduces such kind of heavy crane it will help save time and

the completion of construction work will be possible in a span of two to three years. As

we are saving huge amount of foreign currency we seek government patronisation so that

we can develop crane for overseas market.”As a support industry for shipbuilding, the

company is trying to explore international market for its product.

ATM Body Frames to be Manufactured Locally : A local manufacturer is set to

produce automated teller machine’s (ATM) body frame, which would help develop the

electronic banking sector even further. Initially, 10 ATM body frames will be delivered

and 500 more frames by 2010. A private company involved in providing ATM machines

to many banks of the country. In recent years, electronic channels of banking, especially

ATM, have become popular among the urban population. However, the costs that they

incur to manufacture such ATM bodies is substantially lower than the imported ones. A

local light engineering products manufacturer at Dholaikhal that manufactured these

bodies, the cost of manufacturing each ATM body is Tk 1.5 lakh where as imported price

is an ATM machine for Tk 5 lakh, which was Tk 11 lakh previously, as they do not have

to pay import duties anymore.

Apparel Industry: The country’s export earnings from the Readymade Garments

(RMG) sector may well reach the $ 25 billion mark by the year 2013 if it remains

competitive in the global market.During the same timeframe, the industry should grow in

terms of capacity to employ 2 million more people in this sector. RMG export which

contributes around 76 percent of the country’s annual export income, stood at $ 10.7

billion at the end of the of the fiscal year 2007-2008 posting a growth of 16 percent from

the previous year.The industry, the lifeline of Bangladesh economy at the same time,

directly employs more than 2.2 million people, while indirectly benefiting around 10

million.


Textiles Industry : The country’s total export earnings from ready-made garment items,

textile fabrics, terry towels and home textiles exceeded $1.24 billion in July this year.Of

the total, knitwear and woven garments together accounted for earnings over $ 1.19

billion in July.The EPB statistics knitwear and woven garments grew around 71.64 per

cent to $1187.80 million, with knitted items growing 84.50 per cent and woven 58.55 per

cent in July. Pharmaceutical, raw jute, agro processed foods and tobacco exports also

continued their hefty growth in July amid continued demand for the Bangladeshi goods

among the expatriate communities.However, export earnings from vegetables, leather

and tea dropped during the period under review.

Pharmaceutical :.The country’s pharmaceutical market had a valuation of US$700

million in 2007 and that a compound annual growth rate (CAGR) of 18.79% through to

2012 can be expected. The greatest challenge facing the industry is the end of the

patentfree regime in 2016, when local pharmaceutical companies will have to cease the

production, distribution and sale of medicine that have intellectual property protection

elsewhere in the world. Forward thinking local drugmakers will have to adapt their

product portfolio as necessary or suffer a steep drop-off in sales. However, the global

‘patent cliff’ in 2011 will mitigate this watershed.

Glass Industry: The local multi-billion taka glass industry that sprang up in a span of

three years now exports produces to a number of countries after meeting around 95 per

cent of the domestic demand. The present market size is around Tk 300 crore. Previously

the country was fully dependent on imported glass, whereas it now imports only 5 per

cent of its demand for colored and luxurious designed glass from China, Thailand and

Indonesia. Most of the raw materials, including dolomite, limestone and chemicals, for

float and sheet glass need to be imported from abroad. The local glass companies are also

exporting their produces mainly to South Asian countries, including India, Nepal, Bhutan

and Sri Lanka. The government to take necessary measures to ease the border difficulties

to smoothen the shipment of consignments, as glasses are usually exported through

borders. Recently, the government is considering giving 10 percent incentives on

exporting sectors, which, the industry people hope, would help the sector boom.

Label export : The label-manufacturing sector of the country has an investment of Tk 50

billion involving about 40,000 persons and the total volume of export amounted to $ 500

million in 2007 with an annual growth rate of about 20 per cent.

Jute-Blended Denim: A local fabric producer has successfully developed better and

durable denim woven from blended yarns of jute and cotton. Bangladesh’s $10 billion


apparel export industry produces a huge quantity of denim apparels. Woven garment

manufacturers are the main users of denim for making jackets and jeans for global

buyers. In the last fiscal year ended in June 2007, the country earned only $147 million

from export of more than 0.6 million tons of raw jute.

Diamond Cutting: Diamonds cut and polished in Bangladesh have grabbed the

limelight on the international market. But the export potential of Bangladeshi-cut

diamond is yet to be fully realized1 due to bureaucratic tangles and novelty of the

industry. When most of Indian-finished diamonds get $7,000 to $15,000 for each carat,

Bangladeshi diamonds earn around $25,000 to $35,000 for each carat for their superior

quality. The importing countries check sealing and certificates on the packages of

imported diamonds. The export would reach about $10 million within next year if the

government allows a bonded warehouse for diamond jewelry. The global diamond

cutting industry is worth around $63 billion, with India as the major stakeholder. The

country’s skilled workforce, engaged in traditional jewelry industry, can heavily

contribute to the diamond cutting trade

Bags: Bangladesh made a big impact in the world’s biggest shipbuilding fair in

Hamburg, bagging export orders worth US$250 million and carving a niche among the

nations of ship manufacturers. The ten ships weigh 7250 tons each and have an order

price of over $170 million. A prime location for building small ships thanks to its

abundant cheap labor and traditional expertise.

Leather and Lather Goods: Bangladesh is going to launch a global standard testing

laboratory to test and certify exportable leather and footwear products to meet the

demands of international buyers. The country’s export of leather goods and footwear

products will definitely increase as the local exporters will be able to receive

international standard certificate from the local authorities. Meanwhile, leather worth

$261.67 million was exported during July-May period of 2007-08 fiscal year against its

target of $264.47 million for the same period. During the same period, the manufacturers

exported footwear worth $145.73 million against its target of $147.92 million, while

leather bags and purses worth $7.86 million were exported against its target of $11.65

million.

Recommendations for Export Development of SMEsThe proposed strategies and policies to be implemented on short term, medium term &

long term basis.


1. Extensive Financial Support to SMEs: Various banks, financing institutions, NGOs

may further increase its technical and financial support to SMEs through its various

financing facilities and windows, which may significantly contribute to the creation and

development of SMEs.

2. Trade Fairs, Exhibitions, Symposiums, Seminars and Workshops: Trade fairs,

exhibitions, symposiums, seminars, workshops etc. on SMEs should be organized on a

regular basis. Publications of all these events should be made available for all SME

establishments. Chambers around the country can arrange exhibitions for SMEs

products, so that larger number of consumers may gain awareness about the diversity and

quality of SMEs products.

3. Periodical Professional Training Courses for SMEs: Periodical professional training

courses should be arranged for technical staff of SMEs. Moreover training in

management of small enterprises and efficient marketing can also be provided. Training

programme/workshop should be organized for the development of SMEs capabilities to

acquire enhanced knowledge and skills about how to choose, use and improve

technology.

4. Seed Money, Leasing, Venture Capital and Investment Funding: There is a great need

for improving different aspects of financial services of SMEs, such as seed money,

leasing, venture capital and investment funding.

5. Seeking International Financing: Various international donor agency/bank extends

financing to SMEs through National Development Financing Institutions (NDFIs). It is

found that they are not explored properly. The procedure of those donor agencies/banks

for loan facilities to SMEs through NDFIs may be reviewed and term and conditions may

be examined in order to make international financing more accessible to SMEs in the

country.

6. E-Commerce: Electronic Commerce has also great potential for development around

the country and abroad. Through this device, matching of buyers orders to sellers can be

done in such products in which SMEs are dealing. Such exchange of information about

sellers and purchasers shall be most useful for Agro products, leather products, textiles

and clothing, IT and metal products as well as raw materials and intermediate goods.

7. Alleviating Poverty through SMEs Development: There is great scope of alleviating

poverty through SMEs development. So poverty alleviation strategies and policies for

SMEs should be developed, in order to provide job opportunities and enhance living

standards for large segment of this poverty ridden country.


8. Expansion and Diversification of SMEs: Bangladesh’s industrial sector needs

expansion and diversification. For this purpose, growth of SMEs is essential. However,

SMEs have to equip themselves with modern technologies and effectively use them to

raise their production efficiency.

9. Inter-Firm Linkages: In order to develop sub-contracting among large and small

enterprises around the country and between Bangladesh and other SAARC or OIC

countries, Subcontracting Exchange Schemes can be launched. Professional associations

and National Chambers can set-up such establishment. They may collect information

about engineering industries components, and what vendor industries can provide such

components. In this way, inter-firm linkages could be expanded at home and abroad.

10. Credit Guarantee Scheme & Financing of SMEs: Financing SMEs can be successful,

if two arrangements can be undertaken:

i. Separate institutions dealing with SMEs loans should be established

around the country. They can provide adequate volume of finance, on less

strict terms and can supervise the loan repayment process as well.

ii. Credit guarantee schemes. Credit guarantee schemes for SMEs can be an

effective means of supporting small enterprises development, especially in

our country where access to credit is constrained for small borrowers.

11. Sub-Contracting Exchange Schemes among Large and Small Enterprises: In order to

develop sub-contracting among large and small enterprises among member countries,

Sub- Contracting Exchange Schemes can be launched. Professional Associations can set-

up such an establishment. They may collect information about engineering industries

components, and what vendor industries can provide such components. This way inter-

firm linkages can be expanded around the country.

12. Technology Transfer: Technology transfer is of vital importance for development of

SMEs. Technology transfer through various means and reverse engineering to be

arranged through Government and private levels.

Action Plan to support the SME Centers, Women Entrepreneurship and

one-stop facility


Sl. No. Policy Decision Action Taken Further Action to be

Taken

1. Bringing uniformity

in SME definition:

For

removing the

ambiguity in

prevailing SME

definition.

Bangladesh Bank issued a circular

in 2008 to bring uniformity in

SME definition, in consultation

with National Board of Revenue

(NBR), Board of Investment (BoI)

& Ministry of Industries (MoI)

(Circular attached).

The final draft of "

The Industrial Policy,

2010" has already

been approved by

cabinet on

06/09/2010 and

published in the

Web- site by MoI.

With inclusion of

uniform definition

of SME (copy

available in the

Web-site).

2. Access to SME

financing: To

develop & boost up

the SME sector as

well as the overall

economy of the

country.

Following funds are now in

operation in Bangladesh governed

by different entities like

Bangladesh Bank, SME

Foundation & Ministry of Finance

(Banking & Financial

Institutions Division):

i) Bangladesh Bank Fund;

ii) EGBMP/IDA Fund;

iii) ADB Fund and

iv) SME Credit Wholesaling

Foundation Fund.

- These funds have already been

channelized through different

Banks/NBFIs with a view to

helping

easy access to SME entrepreneurs.

Further funds for the

development of SME

from ADB & JICA

are in pipeline. -ADB

fund will be available

for SME financing in

Bangladesh Bank

from October/2010.

The Loan and Project

agreement among

Govt. of Bangladesh,

Bangladesh Bank

and

ADB was signed on

October 12, 2009.

- Negotiation with

JICA is expected in

2011.


3. Issuance of

Guidelines

for financing SME

sector through

different Banks &

NBFIs: To involve

different Banks &

NBFIs for the sound

development of

SME sector.

The following circulars with

Necessary guidelines have already

been issued through Bangladesh

Bank:

BB’s ACSPD Circular No. 01

dated 02-05-04 has introduced a

Refinance Scheme for Small

Enterprise Sector to provide

maximum 100% refinance

facilities to support the

development of the small

enterprises.

BB's ACSPD circular No-02

dated

19/07/2005 was issued to

encourage & boost up the SME

sector availing the ADB Fund.

BB’s SMESPD Circular issued

on 19-07-10 has introduced a

Refinance Scheme for SME Sector

to provide refinance facilities to

enterprises outside Dhaka &

Chittagong

metropolitan area.

BB’s SMESPD issued a circular

on 15/02/2010 to reduce the lower

loan limit of the entrepreneurs.

BB, ACSPD circular No. 05

dated

04/05/08 issued by Bangladesh

Bank with following important

terms & conditions:

The Banks & Financial

Institutions should inform BB

Bangladesh Bank will

issue further New

Guidelines &

Directives as and

when necessary.


about the target of their SME

credit disbursement within the

annually disbursed of total

loanable fund.

40% of the total SME loan

would be provided for Small

Entrepreneurs & rest of the 60%

for Medium Entrepreneurs.

Setting up dedicated desk for

SME etc.

4. SME Support

Centers for One

Stop Facility :

To assist and

promote the SME

Entrepreneurs.

i) Bangladesh Bank has issued a

circular on May 8, 2008 regarding

the introduction of SME Service

Centres for Loan disbursement

and recovery in the Small and

Medium Enterprise (SME) Sector

in Banks. The Service Centres will

be allowed to perform the

following functions :

a) The SME Service Centres

will render banking

services only for receiving

application, disbursement,

monitoring and recovery of

loan to SME sector.

b) The SME Service Centres

will be allowed to receive

foreign remittances and

deliver/ handover the same

in domestic currency to the

payees concerned.

c) The SME Service Centres

will be allowed to open a

Promotional works

like-workshop,

seminar, symposium

and also training

programmes are

continuing and will

be

continued. - Setting

up of SME product

display centre is

under progress in

SME Foundation and

it

is expected to

function by

October/2010. The

products of SMEs

will

be exhibited in the

display centre. It will

help, among others,

develop marketing

opportunities for the


seperate desk in order to

prioritize the women

entrepreneurs involved in

the promotion of Small and

Medium Enterprise (SME)

Sector.

ii) Help line Outreach Centre:

Ministry of Industries (MoI) under

the direct support and supervision

of SMESDP project is operating 71

helpline centers all over the

country. These centers are

established to facilitate existing

and potential entrepreneurs

regarding easy

access to business information.

iii) "Women Entrepreneur's

Dedicated Desk" Bangladesh Bank

has established a ‘Women

Entrepreneur's Dedicated Desk’ in

SME & Special Programs

Department and advised all

the banks and non-bank FIs to

establish a separate desk to help

the women entrepreneurs regarding

all sorts of facilities and

information

Of SME.

SMEs.

5. Women

Entrepreneurship

Development:

To extend the

involvement of

i) Bangladesh Bank Initiatives:

BB has issued ACSPD Circular

No-01 dated February 7, 2007

declaring the special allocation of

15% of total SME Refinance able

An ADB financed

TA

programme is going

to be implemented by

Women Chambers of


women in the

economic activities

loan for women entrepreneurs.

*At the initial stage total amount

of fund for women entrepreneurs

were TK 45 crore which is now

raised to TK 120 crore.

BB issued a circular on March,

2008 directing all Banks & NBFIs

to set up separate "Women

Entrepreneur's Dedicated Desk"

and to provide necessary training

to the suitable workforce after

recruiting them to assist &

encourage women entrepreneurs

and also advising them to consider

the

disbursement upto TK 25,00,000/-

only against personal guarantee.

BB, ACSPD Circular Letter No.

02 dated March 02, 2009 has been

issued directing Banks & NBFIs

approaching to BB for refinancing

claim after disbursing 10% of

their total SME loan to the Women

Entrepreneurs.

ii) SME Foundation's Initiatives:

Women Entrepreneurship

development is one of the most

prioritized commitments of SME

Foundation (SMEF). SMEF is

working in diversified sectors in

relation with the empowerment of

women entrepreneurs in SMEs.

The goal of these activities is to

bring

Commerce of

Bangladesh from

December, 2010.

Bangladesh Bank will

issue further circulars

as and when

necessary to facilitate

more financing for

the

women entrepreneurs

and to promote

women

entrepreneurship all

over the country.

- SME Foundation

has

already planned to

arrange at least 8

training programs on

different trades to

promote women

entrepreneurship in

this fiscal year.

- 30 women

entrepreneurs will be

trained on

beautification course

in October/2010.

- National SME

women's entrepreneur

award will be given

in

October/2010.


the women entrepreneurs in the

mainstream of development

process and thus ensure their

empowerment. The remarkable

initiatives undertaken by the

SMEF for women

entrepreneurship development are:

A five year Gender Action Plan

has been developed for Women

Entrepreneurship Development.

A working Group has been

established to provide strategic

support for Women

Entrepreneurship

Development.

Arrangement has been made for

encouraging Women Entrepreneur

by awarding 'Best SME Women

Entrepreneurship Award'.


Chapter – ΙV

This Chapter covers the followings:

1. History of Bank in Bangladesh

2. Various Banks in Bangladesh

3. Various Schemes and Banking Products of Formal Banking


History of Bank in Bangladesh

Bank:

Banks are the most financial institution of the economy. They are the principal source of

credit (loan able fund) for millions of households (individuals and families) and for most

local units of the government. Moreover, for small business ranging from grocery stores to

automobile dealers, banks are often the major source of credit to stock the shelves with

merchandise or to fill dealer’s showroom with new goods. When the business and consumers

need financial information and financial planning, it is the bankers to whom they turn most

frequently for advice and council.

Worldwide, banks grant more installments loans to consumers than any other financial

institution. Banks are among the most important source of short term working capital for

business and have become increasingly active in recent years in making long term business

loans for new plant and equipment.

Bank is financial intermediaries that offers the widest range of financial services- especially

credit, savings and payment services and perform the widest range of financial function of

any business firm in the economy. The multiplicity of bank services and function has led to

banks being labeled “financial department stores”.


Origin of the Word

The name bank derives from the Italian word banco "desk/bench", used during the new

beginning by Florentine bankers, who used to make their transactions above a desk covered

by a green tablecloth. However, traces of banking activity can found even in ancient times.

In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders

would set up their stalls in the middle of enclosed courtyards called macella on a long bench

called a bancu, from which the words banco and bank are derived.

What Is the Economic Function of a Bank?

Commercial banks play an important role in the financial system and the economy. As a key

component of the financial system, banks allocate funds from savers to borrowers in an

efficient manner. They provide specialized financial services, which reduce the cost of

obtaining information about both savings and borrowing opportunities. These financial

services help to make the overall economy more efficient.

How Banks Work

Banks operate by borrowing funds-usually by accepting deposits or by borrowing in the

money markets. Banks borrow from individuals, businesses, financial institutions, and

governments with surplus funds (savings). They then use those deposits and borrowed funds

(liabilities of the bank) to make loans or to purchase securities (assets of the bank). Banks

make these loans to businesses, other financial institutions, individuals, and governments

(that need the funds for investments or other purposes). Interest rates provide the price signals

for borrowers, lenders, and banks.

Through the process of taking deposits, making loans, and responding to interest rate signals,

the banking system helps channel funds from savers to borrowers in an efficient manner.

Savers range from an individual with a $1,000 certificate of deposit to a corporation with

millions of dollars in temporary savings. Banks also service a wide array of borrowers, from


an individual who takes a loan of $100 on a credit card to a major corporation financing a

billion-dollar corporate merger.

The table below provides a June 2001 snapshot of the balance sheet for the entire U.S.

commercial banking industry. It shows that the bulk of banks' sources of funds comes from

deposits - checking, savings, money market deposit accounts, and time certificates. The most

common uses of these funds are to make real estate and commercial and industrial loans.

Individual banks' asset and liability composition may vary widely from the industry figures,

because some institutions provide specialized or limited banking services.

Functions of a Bank

1. Recognition of Right to Credit:

The view thus given of bank credit in general furnishes the key to the view which should be

taken of the bank itself. It is, as we have already seen, a credit institution - an institution for

the investigation, discussion, and recording of credits. It is not, in this aspect, what some have

described it, an enterprise for "manufacturing" credit. The "manufacture" of credit, as clearly

appears from what has already been said, is impossible. A basis of credit is automatically

created whenever real buying' power or value is in process of being brought into existence.

Such power is created during the expenditure of labor and capital, but the real worth or value

is often intimately associated with the other elements that appear in the general operations of

his concern. The basis only appears when it is dissociated from the other elements in the

aggregate of goods and expert means are needed to recognize it. The first function of a bank,

then, is that of recognizing through scientific analysis the real nature and amount of the

values which are presented. Fundamentally, therefore, the credit department of a bank is the

basic element in its organization. It is true that in the past many banks have been able to do

without credit departments and that at the present time there are not a few of them - chiefly

the smaller and less advanced types of institution - which have no credit departments, or only

very rudimentary organizations of the sort. These, however, usually accept the work of credit


departments operated by their city correspondents. The true work of a bank credit department

is done whenever any loan is made. It may be that the work of credit analysis is incidentally

performed by the president or a vice-president of the bank or by some other officer who

happens to have charge of the work of lending, but the function is there.

2. Guaranteeing of Values:

Secondly, the bank, after recognizing or analyzing credit, guarantees it. It does this by

substituting its own credit for that of the "borrower" or owner of wealth. If A, for example, is

producing steel from pig iron, the bank ascertains the value of the products which he has in

process, which, we may say, is $25 per ton. It undertakes to loan, say, $10 per ton, and in

order to carry out its part of the agreement it obligates itself to pay $10 on demand to anyone

who may be designated by the owner of the plant. The owner leaves with the bank his own

note, which may be secured or may be simply a claim upon his general assets. In either case,

however, the loan is made on the strength of existing value. It represents that part of the value

of the product which the bank is willing to guarantee. The bank does not expect to be called

upon to meet this obligation for $10 per ton. On the contrary, it expects to offset the

obligation against other claims, and as a net result it believes that it will not be called upon to

reduce its holding of specie. That, however, is to be determined at a later time. The bargain

which the bank makes when it enters into relationships with the borrower involves the

substitution of its own obligation for that of the owner of the goods, and this is the essential

point in the whole operation.

3. Transferring of Titles:

Thirdly, the bank not only undertakes to put its obligation in place of that of the borrower, but

it undertakes to keep this obligation steadily redeemable on demand in money, or in lieu of

such redemption, to shift the "credit" from A to B and from B to any other that the latter may

indicate, through a process of bookkeeping which involves the receiving, recording, and

paying of claims drawn against the total credit which has been allowed. Closely connected

with this function are the subordinate duties of exchange and remittance, which, as will be

seen at a later point, are variants of the same general function.

Overview of Banking Environment in Bangladesh:


The banking industry in Bangladesh is more than 600 years old. In Bangladesh 1970’s

banking sector in Bangladesh entered into new era when the entire commercial banks and

financial institution were nationalized after the emergence of Bangladesh as an independent

nation in 1970’s (except foreign banks) with fixed landing and deposit rates .

History of Banking Sector of Bangladesh:

The banking system at independence consisted of two branch offices of the former State

Bank of Pakistan and seventeen large commercial banks, two of which were controlled by

Bangladeshi interests and three by foreigners other than West Pakistanis. There were fourteen

smaller commercial banks. Virtually all banking services were concentrated in urban areas.

The newly independent government immediately designated the Dhaka branch of the State

Bank of Pakistan as the central bank and renamed it the Bangladesh Bank. The bank was

responsible for regulating currency, controlling credit and monetary policy, and administering

exchange control and the official foreign exchange reserves. The Bangladesh government

initially nationalized the entire domestic banking system and proceeded to reorganize and

rename the various banks. Foreign-owned banks were permitted to continue doing business in

Bangladesh. The insurance business was also nationalized and became a source of potential

investment funds. Cooperative credit systems and postal savings offices handled service to

small individual and rural accounts. The new banking system succeeded in establishing

reasonably efficient procedures for managing credit and foreign exchange. The primary

function of the credit system throughout the 1970s was to finance trade and the public sector,

which together absorbed 75 percent of total advances.

The government's encouragement during the late 1970s and early 1980s of

agricultural development and private industry brought changes in lending strategies.

Managed by the Bangladesh Krishi Bank, a specialized agricultural banking

institution, lending to farmers and fishermen dramatically expanded. The number of

rural bank branches doubled between 1977 and 1985, to more than 3,330.

Denationalization and private industrial growth led the Bangladesh Bank and the

World Bank to focus their lending on the emerging private manufacturing sector.

Scheduled bank advances to private agriculture, as a percentage of sectored GDP, rose


from 2 percent in FY 1979 to 11 percent in FY 1987, while advances to private

manufacturing rose from 13 percent to 53 percent.

The transformation of finance priorities has brought with it problems in

administration. No sound project-appraisal system was in place to identify viable

borrowers and projects. Lending institutions did not have adequate autonomy to

choose borrowers and projects and were often instructed by the political authorities.

In addition, the incentive system for the banks stressed disbursements rather than

recoveries, and the accounting and debt collection systems were inadequate to deal

with the problems of loan recovery. It became more common for borrowers to default

on loans than to repay them; the lending system was simply disbursing grant

assistance to private individuals who qualified for loans more for political than for

economic reasons. The rate of recovery on agricultural loans was only 27 percent in

FY 1986, and the rate on industrial loans was even worse. As a result of this poor

showing, major donors applied pressure to induce the government and banks to take

firmer action to strengthen internal bank management and credit discipline. As a

consequence, recovery rates began to improve in 1987. The National Commission on

Money, Credit, and Banking recommended broad structural changes in Bangladesh's

system of financial intermediation early in 1987, many of which were built into a

three-year compensatory financing facility signed by Bangladesh with the IMF in

February 1987.

One major exception to the management problems of Bangladeshi banks was the

Grameen Bank, begun as a government project in 1976 and established in 1983 as an

independent bank. In the late 1980s, the bank continued to provide financial resources

to the poor on reasonable terms and to generate productive self-employment without

external assistance. Its customers were landless persons who took small loans for all

types of economic activities, including housing. About 70 percent of the borrowers

were women, who were otherwise not much represented in institutional finance.

Collective rural enterprises also could borrow from the Grameen Bank for

investments in tube wells, rice and oil mills, and power looms and for leasing land for

joint cultivation. The average loan by the Grameen Bank in the mid-1980s was around

Tk2,000 (US$65), and the maximum was just Tk18,000 (for construction of a tin-roof

house). Repayment terms were 4 percent for rural housing and 8.5 percent for normal

lending operations.


The Grameen Bank extended collateral-free loans to 200,000 landless people in its

first 10 years. Most of its customers had never dealt with formal lending institutions

before. The most remarkable accomplishment was the phenomenal recovery rate;

amid the prevailing pattern of bad debts throughout the Bangladeshi banking system,

only 4 percent of Grameen Bank loans were overdue. The bank had from the outset

applied a specialized system of intensive credit supervision that set it apart from

others. Its success, though still on a rather small scale, provided hope that it could

continue to grow and that it could be replicated or adapted to other development-

related priorities. The Grameen Bank was expanding rapidly, planning to have 500

branches throughout the country by the late 1980s.

Beginning in late 1985, the government pursued a tight monetary policy aimed at

limiting the growth of domestic private credit and government borrowing from the

banking system. The policy was largely successful in reducing the growth of the

money supply and total domestic credit. Net credit to the government actually

declined in FY 1986. The problem of credit recovery remained a threat to monetary

stability, responsible for serious resource misallocation and harsh inequities. Although

the government had begun effective measures to improve financial discipline, the

draconian contraction of credit availability contained the risk of inadvertently

discouraging new economic activity.

Foreign exchange reserves at the end of FY 1986 were US$476 million, equivalent to

slightly more than 2 months’ worth of imports. This represented a 20-percent increase

of reserves over the previous year, largely the result of higher remittances by

Bangladeshi workers abroad. The country also reduced imports by about 10 percent to

US$2.4 billion. Because of Bangladesh's status as a least developed country receiving

concessional loans, private creditors accounted for only about 6 percent of

outstanding public debt. The external public debt was US$6.4 billion, and annual debt

service payments were US$467 million at the end of FY 1986.

Various Banks in Bangladesh

The commercial banking system dominates Bangladesh's financial sector. Bangladesh Bank

is the Central Bank of Bangladesh and the chief regulatory authority in the sector. The


banking system is composed of four state-owned commercial banks, five specialized

development banks, thirty private commercial Banks and nine foreign commercial banks. The

Nobel-prize winning Grameen Bank is a specialized micro-finance institution, which

revolutionized the concept of micro-credit and contributed greatly towards poverty reduction

and the empowerment of women in Bangladesh. There are basically four types of Banks:-

Bangladesh Bank

Bangladesh Bank

Headquarters Dhaka, Bangladesh

Established 16 December 1971

Governor Dr. Atiur Rahman

Central Bank of Bangladesh

Currency Taka

ISO 4217 Code BDT

Reserves 10 Billion US $

Website http://www.bangladeshbank.org.bd

Bangladesh Bank is the Central bank of Bangladesh. It is the monetary authority of the country.

It came into existence under the Bangladesh Bank Order 1972 (Presidential Order No. 127 of

1972) which took effect on 16 December 1971. Through this order, the entire operation of the

former State Bank of Pakistan in the eastern wing was transferred to Bangladesh Bank.

Bangladesh Bank has 9 branch offices, two in Dhaka city (sadarghat and Motijheel), and one

each in Chittagong, Khulna, Rajshahi, Sylhet, Bogra, Rangpur and Barisal. The head office

discharges its duties with 28 departments.

History

After the liberation war, and the eventual independence of Bangladesh, the Government of

Bangladesh reorganized the Dhaka branch of the State Bank of Pakistan as the central bank of

the country, and named it Bangladesh Bank. This reorganization was done pursuant to

Bangladesh Bank Order, 1972, and the Bangladesh Bank came into existence with retrospective

effect from 16 December 1971.


http://www.bangladeshbank.org.bd/

Objectives

As the central Bank of Bangladesh, the broad objectives of the Bank are :

To regulate currency issuance and to keep foreign exchange reserves.

To manage the monetary and credit system of Bangladesh with a view to stabilizing

domestic monetary value.

To preserve the par value of the Bangladeshi Taka.

To promote and maintain a high level of production, employment and real income in

Bangladesh; and to foster growth and development of the country's productive

resources.

To reserve all the rights of the bank.

Functions

Bangladesh Bank performs all the functions that a central bank of any country is expected to

perform, and such functions include maintaining the price stability through economic and

monetary policy measures, managing the country’s foreign exchange and the gold reserve

and regulating the banking sector of the country. Like all other central banks across the globe,

Bangladesh Bank is both the Government’s banker and the banker’s bank, a “Lender of the

Last Resort”. Bangladesh Bank, like most of the central banks of different countries,

exercises monopoly over the issue of currency and the banknotes. Except for the 1 and 2 taka

notes, it issues all other denominations of Bangladeshi Taka.

Bangladesh Bank is empowered to act as the watchdog of the country's banking system, and

all scheduled banks are accountable to Bangladesh Bank, which has extensive powers to

ensure soundness of the banking system. No bank can commence banking business in

Bangladesh and no existing bank can open a new branch in or outside the country or shift any

branch from one place to another without obtaining a license/permission from the Bangladesh

Bank.

Organization

The highest official in the bank is the Governor (currently Dr. Atiur Rahman). The Governor

chairs the Board of Director. The Executive Staff, also headed by the Governor, are

responsible for the day to day affairs.


Current Board of Directors

Chairman

Dr. Atiur Rahman

Director

Md. Nazrul Huda

Dr. Wahid Uddin Mahmud

Dr.Momtaz Uddin Ahmed

Dr.Sufia Ahmed

Dr. Hossain Zillur Rahman

Dr.Mohammad Tareque

Mr.Jafar Ahmad Chowdhury

Mr. Muhammad Abdul Mazid

Current Executive Staff

Governor

Dr. Atiur Rahman

Deputy Governor

Md. Nazrul Huda

Ziaul Hasan Siddiqui

Md. Murshid Kuli Khan

Economic Advisor

Habib Ullah Bahar

Executive Director

Khandakar Muzharul Haque

Md. Abul Quasem


A.T.M. Nasiruddin

Chowdhury Mohidul Haque

Mir Abdur Rahim

Md. Harunur Rashid Chowdhury

Md. Mofiz Uddin Chowdhury

Nazneen Sultana

Md. Mofizuddin Chowdhury

Devaki Kumar Saha

A. H. M. Kai Khasru

Former Governors

A.N.M. Hamidullah 1972-1974

A.K.N. Ahmed 1974-1976

M. Nurul Islam 1976-1987

Shegufta Bakht Chaudhuri 1987-1992

Khorshed Alam 1992-1996

Lutfar Rahman Sarkar 1996-1998

Dr. Mohammed Farashuddin 1998-2001

Dr. Fakhruddin Ahmed 2001-2005

Dr. Salehuddin Ahmed 2005-2009

Dr. Atiur Rahman 2009-Present

The new governor of Bangladesh Bank will be Kamrul Hasan Zoardar.

Commercial BanksState-owned Commercial Banks

The banking system of Bangladesh is dominated by the 4 Nationalized Commercial Banks,

which together controlled more than 54% of deposits and operated 3388 branches (54% of

the total) as of December 31, 2004 The nationalized commercial banks are:

Sonali Bank

Janata Bank

Agrani Bank

Rupali Bank


Private Commercial Banks

Private Banks are the highest growth sector due to the dismal performances of government

banks (above). They tend to offer better service and products.

AB Bank Ltd

BRAC Bank Limited

Eastern Bank Limited

Dutch Bangla Bank Limited

Dhaka Bank Limited

Islami Bank Bangladesh Ltd

Pubali Bank Limited

Uttara Bank Limited

IFIC Bank Limited

National Bank Limited

The City Bank Limited

United Commercial Bank Limited

NCC Bank Limited

Prime Bank Limited

SouthEast Bank Limited

Al-Arafah Islami Bank Limited

Social Islami Bank Limited

Standard Bank Limited

One Bank Limited

Exim Bank Limited

Mercantile Bank Limited

Bangladesh Commerce Bank Limited

Mutual Trust Bank Limited

First Security Islami Bank Limited

The Premier Bank Limited

Bank Asia Limited

Trust Bank Limited

Shahjalal Islami Bank Limited

Jamuna Bank Limited


ICB Islami Bank

Moon Bank Limited

United Bank Limited

Foreign Commercial Banks

Citibank

HSBC

Standard Chartered Bank

Commercial Bank of Ceylon

State Bank of India

Habib Bank

National Bank of Pakistan

Wori Bank

Bank Alfalah

Specialized Banks and Credit Agencies

Out of the specialized banks, two (Bangladesh Krishi Bank and Rajshahi Krishi Unnayan

Bank) were created to meet the credit needs of the agricultural sector while the other two

( Bangladesh Shilpa Bank (BSB) & Bangladesh Shilpa Rin Sangtha (BSRS) are for extending

term loans to the industrial sector. The Specialized banks are:

Grameen Bank

Bangladesh Krishi Bank

Bangladesh Development Bank Ltd

Rajshahi Krishi Unnayan Bank

Basic Bank Ltd (Bank of Small Industries and Commerce)

Ansar VDP Unnyan Bank

Various Schemes and Banking Products of Formal Banking

Product & Services: Deposit Products:

1. Current A/C


2. Savings Bank Deposit A/C

3. Short Term Deposit A/C

4. Term Deposit A/C

5. Premium Term Deposit A/C

6. Instant Earnings Term Deposit A/C

7. Special Savings Scheme

8. Special Fixed Deposit Scheme

9. NFCD

10. RFCD

11. Money Double Program

Loans and Advance Products

Working Capital Financing

Commercial and Trade Financing

Long Term (Capital) Financing

House Building Financing

Retail and Consumer Financing

SME Financing

Agricultural Financing

Import and Export Financing

Cards

ATM Card

Credit Card (Local, International and Dual)

Remittance Products

Special Interest rate on Savings and Term Deposits

Wage Earners Welfare Deposit Pension Scheme

Loans for Real Estate (Land purchase and House construction/renovation)

Advance against Regular Remittance


Services Brokerage House

Member, Dhaka Stock Exchange Ltd.

Full Service Depository Participant

Treasury Service

Primary Dealer of Govt. Approved Securities

Remittance Service

Correspondence arrangement with more than 330 Financial Institutions all over the

World

For Wage Earners Remittance we have Agency arrangement with 12 reputed

Exchange Houses covering major Locations of our Expatriate

Categories of Overall Banking Activities:Banks activities can be divided into three categories. These are as follows:-

General Banking Activities

Credit or loan activities

Foreign exchange activities

What is General banking Activities?General Banking (GB): It is the starting point of all the banking operation. It does the most

important and basic works of the bank. It also plays a vital role in deposit mobilization. A

bank starts its operation providing services to the customers by its general banking activities.

The efficiency of general banking activity that provided by each bank reflects the whole

service given by that bank. With the increasing competition customers are mostly impressed

by the efficiency of this department. The whole general banking activity is consisted of

receiving deposit, remitting fund, and meeting the demand of customers.


General Banking Section:

1. To maintain different types of deposit account

2. Local Remittance

3. To operate clearing house activities

4. To maintains safety deposit lockers

5. Cash Section

6. Capital Market operation

7. Online Banking

8. ATM and Credit Card Services

Account Opening Section:

The relationship between banker and customer begins with the opening of an account by the

customer. Opening of an account binds the customer into a contractual relationship under a

legal framework of the “Contract Act -1872”. But selection of a customer for opening an

account is very crucial for a bank. So Banks takes the highest caution in this regard.

Banks opens the following accounts for its customers

Current Account:

A current deposit account may be operated in several times during a working day. There is

no restriction on the number and the amount of withdraws from a current account and the

banker does not allow any interest on the current account. There are two facilities for the

people who open a current account. They are:-

Over draft facility

Collection of check transfer of money rendering agency, general utility service.

A person can open a current a/c or any entity. The entity can be a partnership firm, limited

company, proprietorship firm, association, clubs etc. For opening a current account of the

above, the requirements and steps, which are followed by this branch, are like: -

For a person:

There is an individual application form for opening personal current a/c. The person, who

wants to open this type of a/c, is said to fulfill the following requirement:


a) Name/ Father’s Name/ Husband’s Name:

b) Present and Permanent Address:

c) Occupation:

d) Mandate in Writing:

e) Declaration of Nominee:

f) Letter of Introduction:

g) Specimen Signature:

h) Passport Size Photograph:

i) Initial deposit.

For Join Stock Companies, Association, Clubs etc:

In case of opening a current a/c of join stock companies, association, clubs etc. the following

requirements are said to fulfill:

a) True copies of certificate of incorporation or registration (in case of companies and

registered bodies).

b) True copies of certificate of commencement of business (in case of limited company).

c) True copies of memorandum and articles of association (in case of limited company). The

rules of regulation by laws (in case of associations, clubs etc.)

d) True copy of resolution of the Board of Directors of Managing committee / Governing

Body, regarding conduct of account.

e) Certificate list containing names and signature of the Board of Directors/ Officer Bearers.

For Partnership / Proprietorship Company:

To open a current a/c on the name of any partnership or proprietorship company, the

following document are required:

a) Filled up application form stating about the name and address of the firm.

b) Partnership deed.

c) Trade License.

d) Two copies of photographs.

e) Endorsement of an a/c holder of the same branch. (for partnership companies).


f) Undertaking / declaration about the partnership is taken by the bank in a white paper (for

proprietorship firm)

For Private & Public Limited Company:

The document are required by the bank to open a current a/c be:

a) Copy of the certificate of incorporation or registration.

b) Copy of the certificate of business.

c) True copy of memorandum of association and articles of association abide by laws.

d) True copy of resolution of the Board of Directors / Managing Committee /Governing

Body regarding conduct of the account.

In order to open an account, the customer is first of all asked to fill up the application form

given from the bank. The bank requires few documents of the client due to the producers,

such as proposal for opening an a/c, name and full address (both present and permanent).

Savings Account:

A saving a/c is meant for the person of the lower and middle classes who wishes to

save a part of their income to meet their future needs and intend to earn an income

from their saving.

All the feature are like CD a/c except some restrictions imposed by the bank.

The bank offers a reasonable rate of interest.

The number of withdrawals over period of times is limited. Only two withdrawals

are permitted per week. But more than that no interest will be paid on rest of the

amount for that month.

The total amount of one or more withdrawals on any date should not exceed 25%

of the balance in the a/c unless 7 days advance notice is given.

Short-term Deposit Account:

Entries Passed

A deposit slip shall be prepared crediting the STD a/c with the amount of the deposit.

Cash-------------Dr.

STD a/c (Party)---------Cr.

If the amount shall be deposited by check or transfer of a/c, the following entries shall be

passed—


Party C/D, S/D a/c----------Dr.

STD a/c--------------------------------Cr.

The a/c opening form shall be pasted in the passing file in numerical order. The credit

voucher shall be passed in the STD a/c of the party. In case of letter of authority to debit the

STD a/c of the customer, voucher will be prepared and the following entries shall be passed:-

STD a/c (Party)---------------Dr.

C/D (Party)------------------------Cr.

Minimum 7 days notice period is required for withdrawal of any sum of money from STD

a/c. Banker is not legally liable to the customer, if the check is dishonored under the

following conditions, although the check is properly drawn:

If the fund is insufficient.

If the payment is stopped by the drawer.

If payment is stopped by the court by issuing garnishee order.

Any competent authority issues Attached order.

Check is presented after the death of the customer.

Notice of assignment.

Check presented after the business/banking hour as declared earlier.

Letter of Introduction

This is a letter of certification, from a person, who is a valid customer of that particular

branch and maintaining any kind of a/c. usually a customer from other branch is not allowed

to be the introducer, but it is permitted. The process of introducing a new client can be done

on the form itself. There is a space in the application where the introducer will write his/her

a/c no. and sign his/her specimen signature. It always advisable on the part of the banker to

allow the prospective customer to open an a/c only with a proper introduction from a

responsible person, known to both the parties.

A letter of introduction always protects a banker in the following ways


Protection against fraud

Protection against invariant overdraft

Protection against undiscouraged bankrupt

Protection against negligence under sec. 131 of NI Act

Protection against giving incorrect information follow the banker

Declaration of Nominee

The person who wants to open an a/c can mention one or two nominee. The application will

give a declaration in the space given on the a/c opening form, stating the name and father’s

name, age address, relation and percentage of share (if more than one). The a/c holder can

change the nominee any time and it will be valid, only after the of the a/c holder.

Specimen Signature

The applicant will sign on the application and he will be provided with an extra paper where

he will sign three or more signatures, which he has to maintain all through the duration of the

account.

Interview

At the time of the opening of a new a/c, this concerned branched always takes an interview

with prospective customer so as to obviate the chances of preparation of any fraud at the

letter stage.

Initial Deposit

It is always a common practice among the bankers to allow a new customer to open an a/c

only in cash.

Operation Instruction

If any party wants his/her a/c to be operated by some body else, s/he will provide the banker

in writing statement about the operator.

Verification of Document

The banker should verify some of the important documents, like the Memorandum of

Association, Article Association by laws Copy etc. In verification of certain other documents

like, trust Deed Probate, Letter of Administration etc. may be needed. Conversant with the


provision of special acts, since a banker is to deal with different classes of customers, s/he has

to be thoroughly conversant with certain laws.

Pay in Slip, Check Book and Pass Book

The customer is supplied with a pay in slip book to use for depositing cash or check of bill

into a/c. The customer is also supplied with a checkbook for drawing money as and when the

customer wishes, which normally contains 10 to 50 bank forms. If the customer does not like

to have a checkbook, then s/he can make use of withdrawal form for withdrawing money. But

there is no use of such kind of form in this branch. In addition to the above, a customer is

given a passbook, which reflects the customer’s a/c in the banker’s ledger. It usually contains

the rules and regulations of the bank and terms and conditions of deposits.

Fixed Deposit Account:

A fixed deposit a/c is repayable after the expiry of a predetermined period fixed by the

customer himself. The period varies from three months to five years. The customer may open

his/her a/c for different time periods, which may be for three months, six months, one year,

two years, three years, four years, five years.

Though FDR is an a/c, it is something different from other a/c. FDR is a long-term deposit.

Usually customers are allowed to open this a/c for a certain period. The rate of interest varies

in accordance with the terms of deposit.

The amount of FDR is payable once at a time. After the term for which the a/c was opened,

the FDR gets its maturity. Paying the principle amount plus interest less income tax then

fulfills the claim.

Monthly Savings Deposit Account:

It is a new project, which is a scheme like DPS. The installment payment is to be made to the

bank within the first 10 days of each month. It can be opened for 5years and 10 years

maturity for Tk. 500 and 10000.

Special Fixed Deposit Scheme:

Any amount of TK. 1,00,000/= or multiple may be deposited under this scheme.

Duration of the scheme is 3 (Three) years.

Monthly interest will be given to the depositor against the deposited amount.


Like ‘Deposit Pension Scheme’ this scheme includes the following features for the

convenience of clients.

The monthly installments of TK. 500.00 to 2,500.00 may be deposited every month

during the entire period of scheme.

The duration of the scheme is 5 years or 10 years.

Local Remittance:

Cash handling from one place to another is risky. So, bank remits funds on behalf of the

customers to save them from any mishaps through the network of their branches. There are

four modes of remitting money from one place to another. These are –

Pay order (PO)

Demand Draft (DD)

Telegraphic Transfer (TT)

Mail Transfer (MT)

Clearing Activities:

Outward Bill for Collection:

The instrument of the Bank includes checks; pay order, demand draft etc. The Bank collects its own instrument

from other banks through Clearing House as the clients with no charges or commissions required to perform

this service submit them in different locations.

Inward Bill for Collection:

The Bank provides the instruments to other banks through Clearing House, which have been

collected from different clients. It performs this kind of service for its clients without

requiring any charges or commission.

Locker Service:

Locker services are available for the clients in exchange of fees. In this context the client gets

a locker in Bank with a key and the permission to keep goods or documents with the consent

of the Bank.

Online Banking:

Coputerization of the Branches and Head Office as well is underway with a view to providing

guality and prompt service to the customers. Now the Bank starts, On Line Banking.


ATM Service & Credit Card:

The Bank to extend modern banking faciliy to the customers allowing 24 hrs accesses to any

ATM dispenser situated . The network will be expanded phase by phase in other parts of the

country. Recently they also established alots of ATM BOOTH as well.

Types of loans granted by commercial banks:

1. Secured loan

A secured loan is a loan in which the borrower pledges some asset (e.g., a car or property) as

collateral (i.e., security) for the loan.

2. Mortgage loan

A mortgage loan is a very common type of debt instrument, used to purchase real estate.

Under this arrangement, the money is used to purchase the property. Commercial banks,

however, are given security - a lien on the title to the house - until the mortgage is paid off in

full. If the borrower defaults on the loan, the bank would have the legal right to repossess the

house and sell it, to recover sums owing to it.

In the past, commercial banks have not been greatly interested in real estate loans and have

placed only a relatively small percentage of their assets in mortgages. As their name implies,

such financial institutions secured their earning primarily from commercial and consumer

loans and left the major task of home financing to others. However, due to changes in

banking laws and policies, commercial banks are increasingly active in home financing.

Changes in banking laws now allow commercial banks to make home mortgage loans on a

more liberal basis than ever before. In acquiring mortgages on real estate, these institutions

follow two main practices. First, some of the banks maintain active and well-organized

departments whose primary function is to compete actively for real estate loans. In areas

lacking specialized real estate financial institutions, these banks become the source for

residential and farm mortgage loans. Second, the banks acquire mortgages by simply

purchasing them from mortgage bankers or dealers.

In addition, dealer service companies, which were originally used to obtain car loans for

permanent lenders such as commercial banks, wanted to broaden their activity beyond their


local area. In recent years, however, such companies have concentrated on acquiring mobile

home loans in volume for both commercial banks and savings and loan associations. Service

companies obtain these loans from retail dealers, usually on a no recourse basis. Almost all

bank/service company agreements contain a credit insurance policy that protects the lender if

the consumer defaults.

3. Unsecured loan

Unsecured loans are monetary loans that are not secured against the borrowers assets (i.e., no

collateral is involved). These may be available from financial institutions under many

different guises or marketing packages:

Bank Overdrafts

Corporate Bonds

Credit card Debt

Credit Facilities or Lines of Credit

Personal loans


Chapter – V1. Some Selected Banks in Bangladesh who provides SME

banking services.


There are so many banks in Bangladesh providing SME banking services. But I choose 5 well

reputed banks. They are also providing SME banking service. Not only this, they are doing

this from the very beginning of the SME banking.

The Banks are:

AB Bank

BRAC Bank

Dutch Bangla Bank Limited

AB Bank


Company ProfileBackground of AB Bank LimitedAB Bank Limited, the first private sector bank was incorporated in Bangladesh on 31st

December 1981 as Arab Bangladesh Bank Limited and started its operation with effect from

April 12, 1982.

AB Bank is known as one of leading bank of the country since its commencement 29 years

ago. It continues to remain updated with the latest products and services, considering

consumer and client perspectives. AB Bank has thus been able to keep their consumer’s and

client’s trust while upholding their reliability, across time.

During the last 29 years, AB Bank Limited has opened 82 Branches in different Business

Centers of the country, one foreign Branch in Mumbai, India and also established a wholly

owned Subsidiary Finance Company in Hong Kong in the name of AB International Finance

Limited. To facilitate cross border trade and payment related services, the Bank has

correspondent relationship with over 220 international banks of repute across 58 countries of

the World.

In spite of adverse market conditions, AB Bank Limited which turned 28 this year, concluded

the 2008 financial year with good results. The Bank’s consolidated profit after taxes

amounted to Taka 230 cr which is 21% higher than that of 2007. The asset base of AB grew

by 32% from 2007 to stand at over Tk 8,400 cr as at the end of 2008.

The Bank showed strong growth in loans and deposits. Deposit of the Bank rose by Tk. 1518

cr ie., 28.45% while the diversified Loan Portfolio grew by over 30% during the year and

recorded a Tk 1579 cr increase. Foreign Trade Business handled was Tk 9,898 cr indicating a

growth of over 40% in 2008.

The Bank maintained its sound credit rating in 2008 to that of the previous year. The Credit

Rating Agency of Bangladesh Limited (CRAB) awarded the Bank an A1 rating in the long

term and ST-2 rating in the short Term.

AB Bank believes in modernization. The bank took a conscious decision to rejuvenate its past

identity – an identity that the bank carried as Arab Bangladesh Bank Limited for twenty five

long years. As a result of this decision, the bank chose to rename itself as AB Bank Limited

and the Bangladesh Bank put its affirmative stamp on November 14, 2007.

The Bank decided to change its traditional color and logo to bring about a fresh approach in

the financial world; an approach, which like its new logo is based on bonding, and trust. The


bank has developed its logo considering the contemporary time. The new logo represents our

cultural “Sheetal pati” as it reflects the bonding with its clientele and fulfilling their every

need. Thus the new spirit of AB is “Bonding”. The Logo of the bank is primarily “red”, as

red represents velocity of speed and purity. Our new logo innovates, bonding of affiliates that

generate changes considering its customer demand. AB Bank launched the new Logo on its

25th Anniversary year.

AB Bank commits to nation to take a lead in the Banking sector through not only its strong

financial position, but also through innovation of products and services. It also ensures

creating higher value for its respected customers and shareholders. The bank has focused to

bring services at the doorstep of its customers, and to bring millions into banking channels

those who are outside the mainstream banking arena. Innovative products and services were

introduced in the field of Small and Medium Enterprise (SME) credit, Women’s

Entrepreneur, Consumer Loans, Debit and Credit Cards (Local & International), ATMs,

Internet and SMS Banking, Remittance Services, Treasury Products and Services, Structured

Finance for Corporate, strengthening and expanding its Islamic Banking activities,

Investment Banking, specialized products and services for NRBs, Priority Banking, and

Customer Care. The Bank has successfully completed its automation project in mid-2008. It

envisages enabling customers to get banking services within the comfort of their homes and

offices.

AB Bank has continuously invests into its biggest asset, the human resource to drive forward

with its mission “to be the best performing bank in the country.” The bank has introduced

Dress Code for its employees. Male employees wear designed ties and females wear Sharee

or Salwar Kamiz, all the dresses are consisted with the unique AB Bank logo.

AB is recognized as the people’s choice, catering to the satisfaction of its cliental. Their

satisfaction is AB’s success.


Corporate Information of AB Bank LimitedName of the Company : AB Bank Ltd

Legal Form: A public limited company incorporated on 31st December, 1981 under the

Companies Act, 1913 and listed in the Dhaka Stock Exchange Ltd and Chittagong Stock

Exchange Ltd.

Vision & Mission Vision Statement

"To be the trendsetter for innovative banking with excellence & perfection"

Mission Statement

"To be the best performing bank in the country"

Core Values

Our Compliances

We consider adherence to national policies and objectives a priority for giving our customers

the best financial support with corporate integrity, meaning a fully compliant bank along with

involvement in social development.

Our Customers

We give the best priority on our customer demand and through our endless effort we assure

the best satisfaction to our customers.

Our Shareholders

We assure the best return to our shareholders' by commenced performance over a rolling

year.

Our Team Members

We provide secure, satisfying employment, ensuring the contribution of each individual to

the success of ABBL.

Products & Services 1. Retail Banking


Personal Banking Loan Products

Product

Name

Personal Loan

Purpose Personal loan may be availed for any purpose deemed appropriate for lifestyle

and personal exigencies including purchase of household items, marriage,

travel, medical treatment, CNG conversion, Festival, renovation etc.

Loan Limit MinimumTk.50,000/-

Maximum Tk. 5,00,000/- ( upto Tk. Ten lac covered by tangible security

acceptable to the bank.)

Charges Applicationfee: Tk.500/-

Processing fee: 1% on the approved loan amount or Tk. 2000/- whichever is

higher

Tenor Min 12 months

Max 36 months

Max 60 months (for house/office renovation loan)

Rate of

Interest

14.50% p.a. - 17.50% p.a.

Security Hypothecation of the product to be purchased.

Guarantee Personal guarantee of spouse/parents only.

Product

Name

Auto Loan

Purpose 1. Purchase of Brand new cars

2. Purchase of Re-conditioned cars

Loan Limit 80% of the value of the brand new car or reconditioned car but not exceeding

BDT 20,00,000/-

Charges Application fee: Tk. 500/-

Processing fee: 1% on the approved loan amount or Tk. 5000.00 whichever is

higher

Tenor Reconditioned Car: Max 60 months

Brand new Car: Max 72 months


Rate of

Interest

14.50% p.a. - 17.50% p.a.

Security Hypothecation of the vehicle to be purchased.

Guarantee Personal guarantee of spouse/ parents only.

Product

Name

Education Loan (disbursed to parents/guardian)

Purpose To assist Parents/guardians for Admission/Education Fees, Semester Fees,

Study abroad for their children/wards

Loan Limit Minimum Tk. 50,000/-

Maximum Tk. 5,00,000/- (upto Tk.Ten lac covered by tangible security

acceptable to the bank)


Processing fee: 1% on the approved loan amount or Tk. 1000.00 whichever is

higher

Tenor Min 12 months

Max 48 months

Rate of

Interest

14.50% p.a. - 17.50% p.a.

Guarantee Personal guarantee of spouse/parents only

Product

Name

Education Loan (for executive)

Purpose To assist Executives pursue Higher Studies/professional qualification at

local/overseas institutions

Loan

Amount

Minimum Tk. 50,000/-

Maximum Tk. 5,00,000/- (upto Tk.Ten lac covered by tangible security

acceptable to the bank)


Processing fee: 1% on the approved loan amount or Tk. 1000.00 whichever

is higher

Tenor Min 12 months


Max 48 months

Rate of

Interest

14.50% p.a. - 17.50% p.a.

Guarantee Personal guarantee of spouse/parents

Product

Name

Home Loan

Purpose 1. Purchase of apartment/house within the Municipal areas of town/cities in

Bangladesh.

2. Purchase of independent house not more than 5 years old.

3. Completion of construction of a new house.

Loan Limit Minimum BDT 500,000/-

Maximum 80% of the value of the flat or construction cost for completion

but not more than Tk. 1,00,000,00/-


Processing fee: 1% on the approved loan amount

Tenor Minimum 3 Years

Maximum 15 Years

Rate of

Interest

13.00% p.a.

Security Registered mortgage of property supported by a registered irrevocable

general power of attorney

Guarantee Personal guarantee of spouse/ parents/legal heir

Secured Loan

Product Name Personal Loan

Purpose To meet personal requirement of fund

Loan Amount Maximum 95% of the present value of the security


Charges Processing fee: Tk. 1000/-

Tenor Min 12 months

Max 36 months

Rate of

Interest

For ABBL FDR, 3% higher than the rate of deposit

12.00 % p.a. -15.00 % p.a. (for other Bank FDR)

Security Lien over FDR, ICB Unit Certificate, RFCD, NFCD, CD account(s) etc.

One personal guarantee in case of third party cash collateral

Product Name Personal Overdraft

Purpose To meet personal requirement of fund

Loan Amount Maximum 95% of the present value of the security

Charges Processing fee: Tk. 1000/-

Tenor Revolving with annual review

Rate of

Interest

For ABBL FDR, 3% higher than the rate of deposit

12.00 % p.a. -15.00 % p.a. (for other Bank FDR)

Security Lien over FDR, ICB Unit Certificate, RFCD, NFCD, CD account(s) etc.

One personal guarantee in case of third party cash collateral

2. Corporate Banking

Corporate Lending

Our specialist teams offers a comprehensive service providing finance to large and medium-

sized business based in Bangladesh. For more information as to how we might best meet your

corporate debt needs, please contact us at our Corporate Head Office.

Structure Finance

We have a specialist Structured Finance Team who arrange and underwrite finance solutions

including Debt and Equity Syndication for financial sponsors, management teams and

corporates. Also we provide corporate advisory services. We aim to provide tailored

financing solution with a dedicated team who can rapidly respond to client needs.

Following are some of the products and financial tools of Corporate Banking:

Project Finance

Working Capital Finance

Trade Finance


Cash Management

Syndicated Finance, both onshore & off-shore

Equity Finance, both onshore & off-shore

Corporate Advisory Services

3. SME Banking

SME Loan

Considering the volume, role and contribution of the SMEs, in the last two decades AB Bank has been patronizing this sector by extending credit facilities of different types and tenor. As of now 54% of the bank’s total loan portfolio is segmented to the SMEs which deserve all out attention in our plans, projections and forecasting.

As such the bank has emphasized on the following issues: To provide the best services to the SME sector To increase the SME portfolio of ABBL significantly

To improve the quality of ABBL’s portfolio

SME Sectors in which AB Bank has participated so far:

Agro machinery

Poultry

Animal Feed

Dairy Product

Fruit Preservation

Hotel & Restaurants

Garments Accessories

Leather products

Plastic product

Furniture : Wooden & Metal

Ink

Paint

Printing & Packaging

Wire & Cable

Aluminum

Cement and Lime Plaster

Clinics and Hospitals


Engineering & Scientific Instruments

4. Large Loan & Project Finance

In order to cater the demand of client AB Bank has segmented its portfolio in terms of

loan size. As per this segmentation any loan over Tk. 10.00 Crore falls under the

purview of Large Loan Unit.

In AB Bank, there is also a separate Project Finance unit who evaluate the business.

The unit is entrusted to handle the portfolio in a focused manner. AB Bank is always

in fore front to support establishment of new projects of diverse nature which will

help to broaden the manufacturing arena vis-à-vis to generate to employment.

At the moment AB Bank ‘s exposure in Large Loan & Project Finance portfolio is

distributed in the following sectors:

SL Sector ABBL Exposure

(Limit)

(Fig. in Lac Tk.)

1 Agro- Business 12,717.56

2 Cement Power, Glass 38,691.92

3 Consumer Products 21,855.00

4 Edible Oil 36,057.53

5 Engineering & Construction 18,106.42

6 Financial Institution 1,414.70

7 Food & Beverage 27,044.24

8 Hotel 2,505.26

9 Health Care 3,928.62

10 Printing & Packaging 11,867.61

11 Real Estate 10,451.49

12 Micro-finance 5,763.15

13 Export 9,441.63

14 RMG & Backward Linkage 94,826.13

15 Ship Breaking 18,029.20


16 Steel 42,824.97

17 Telecom & Computer Accessories 11,479.89

18 Trading 77,579.89

Total ( including syndicated exposure) 444,585.21

Less Syndicated Exposure 51,560.29

Total Large Loan & Project Finance portfolio without

syndicated exposure

3930,24.92

5. Loan Syndication

Syndication or club financing is a growing concept in Banking Arena of Bangladesh.

Syndicated finance diversifies the risk of one bank on a single borrower and increases

the quality of loan through consensus or cumulative judgment and monitoring of

different banks / financial institutions.

AB Bank, the first bank in the private sector also took initiative to adapt to this

growing concept.

In 1997, AB Bank for the first time arranged a club financing with Dhaka Bank Ltd to

raise Tk. 6700 lac - out of which ABBL financed Tk. 5700 Lac and Dhaka bank

financed Tk. 1000 Lac.

In 1999, AB Bank arranged its second syndicated credit facility with IPDC to raise Tk

3563 Lac.

Since then AB Bank did not look back.

Since 1997 to 2007 (till date), AB Bank has raised total Tk. 25989.56 Lac as Lead

Arranger. The following banks from time to time have been our partners in these

syndications : Dhaka Bank, IPDC, EXIM Bank, Bank Asia, Oriental Bank, NCC

Bank, The City Bank, Trust Bank, Bank Asia.

AB Bank has also participated in different syndications arranged by other Banks, out

of which till date 6 (six) syndication has successfully been completed. AB Bank

exposure in these completed syndications was Tk. 4700 Lac.

At the moment AB has participation in 19 (nineteen) syndicated facilities. AB Bank’s

exposure in the ongoing syndication is Tk. 51560.29 Lac which is diversified in the

following ten sectors:

SL Sector ABBL Participation


(Fig. in Lac Tk.)

1 Textile 9,533.57

2 Micro-finance 3,000.00

3 Cement 7,990.00

4 Energy & Power 11,997.00

5 Telephone (PSTN) 5,500.00

6 Glass 900.00

7 Sugar 900.00

8 Steel Mills 9081.72

9 Paper 1158.00

10 Chemical 1,500.00

Total 51,560.29

6. Lending Rates

Products Mid Rate

Interest Rate

W.E.F

September 19,

2011

1) Agriculture (As per Bangladesh Bank Directives) 13.00% 13.00%

2) Large and medium scale industries (Term) (As per

Bangladesh Bank Directives) 13.00% 13.00%

3) Small Industries (Term Loan) (As per Bangladesh

Bank Directives)13.00% 13.00%

4) Working Capital

a) Large and medium scale industries 15.50% 14.00%-17.00%

b) Small Industries 16.50% 15.00%-18.00%

5) Export (As per Bangladesh Bank Directives) 7.00% 7.00%


6) Commercial Lending 15.50% 14.00%-17.00%

7) Housing Loans 15.50% 14.00%-17.00%

8) Consumer Credit 18.50% 17.00%-20.00%

9) Credit Card 2.00% per

month

2.00% per

month

10) Finance to NBFI's 14.50% 13.00%-16.00%

11) Others

i) Cash Collateral - ABBL FDR 16.50% 15.00%-18.00%

ii) Cash Collateral - Other Banks FDR or WDB 16.75% 15.25%-18.25%

iii) Women Enterpreneur upto Tk 50.00 lac (As per

Bangladesh Bank Directives)10.00% 10.00%

iv) Special Scheme Loans - SME 16.50% 15.00%-18.00%

v) Import Finance against essential items (Rice, wheat,

edible oil (refined & crude), lentils, peas, onion, dates

and sugar) (As per Bangladesh Bank Directives)

12.00% 12.00%

vi) Import Finance against chemical fertilizer(As per

Bangladesh Bank Directives)14.00% 14.00%

Notes:

1. For lending against ABBL FDR, the rate is minimum 3.00% above the rate of the

instrument or minimum 15.00% p.a.

2. Exposure under cash collateral of other banks requires clearance from FI & Treasury.

3. For taking exposure on "Digun Loan" under Special Scheme, the rate will be 8%

above the instruments' rate; subject to maximum 18% p.a.

4. For Women Entrepreneur (above Tk. 50.00 lac) under Special Scheme, the rate will

be 14.00%-17.00%.

7. Deposit Rates

Interest Rates with effect from August 08, 2011

Products Interest Rate


Savings Deposits 6.00%

FSP (Family Savings Plan) 8.00%

SND (Special Notice Deposit)

Upto 1,00,00,000 4.00%

1,00,00,001 to 25,00,00,000 5.00%

25,00,00,001 to 50,00,00,000 6.00%

50,00,00,001 to 100,00,00,000 7.00%

Above 100,00,00,000 8.00%

Security Deposit Receipts(SDR)/Call

Deposit

3.00%

NFCD Rate as per Daily FX rate

FC & RFCD (Minimum balance USD 1000

or GBP 500 or its equivalent for other

currency & minimum tenor one month)

Rate as per Daily FX rate

Fixed Deposit (Time Deposits)

1 (One) Month 12.00%

3 (Three) Months 12.00%

6 (Six) Months 12.00%

1 (One) Year 12.00%

2 (Two) Years 12.00%

MSDS (Monthly Savings Deposit Scheme) Rate of Return on Maturity

3 (Three) Years 11.79%

5 (Five) Years 11.84%

7 (Seven) Years 11.30%

10 (Ten) Years 11.87%

MIDS (Monthly Income Deposit Scheme) Interest Rate

1 (One) Year 10.20%

3 (Three) Years 11.00%


5 (Five) Years 12.00%

DDS (Deposit Double Scheme) Tenor

Deposit Doubles After 6 years

8. Foreign Exchange Rates

THE FOLLOWING FOREIGN EXCHANGE RATES IN TAKA ARE EFFECTIVE FOR TRANSACTIONS

WITH PUBLIC PER ONE UNIT OF FOREIGN CURRENCY

CURRENCY BUYING RATES SELLING RATES

T.T. CLEAN T.T. Doc. O.D.SIGHT O.D. CASH CASH T.T. & O.D. B.C.

EXPORT TRANSFER

76.2500 76.1800 76.0500 75.6427 76.1500 USD 78.1500 77.2000 77.2500

118.1297 117.9097 117.8989 117.2633 114.9210 GBP 123.1097 122.8769 122.9769

101.3898 101.2398 101.2018 100.6055 98.0310 EURO 105.7526 106.0141 106.1641

0.9825 -- 0.9802 0.9735 -- JPY -- 1.0239 1.0249

18.5515 -- 18.4762 18.3662 -- AED -- 21.7797 21.9297

LIBOR INDICATIVE FORWARD RATES

TENOR TENOR USD GBP EUR USD/BDT

DAYS BUY SELL 1 MONTH 0.25656 0.72938 1.13813

30 DYS 76.3506 78.0060 2 MONTHS 0.36883 0.83969 1.25000

60 DYS 76.7004 78.8763 3 MONTHS 0.48778 1.01869 1.41500

90 DYS 77.0980 79.6664 4 MONTHS 0.56139 1.10800 1.48813

180 DYS 78.7049 81.8780 6 MONTHS 0.69861 1.30544 1.65063

12 MONTHS 1.01811 1.79625 2.00313

NOTE: FORWARD RATES TO BE OBTAINED FROM DEALING ROOM, TREASURY, HEAD OFFICE, DHAKA.

USANCE EXPORT BILLS BUYING RATES

TENOR 30 DAYS 60 DAYS 90 DAYS 120 DAYS 180 DAYS

USD 75.3828 74.9380 74.4932 74.0485 73.1589

EUR 100.5118 99.9203 99.3289 98.7375 97.5546

ALL THESE RATES ARE INDICATIVE ONLY. IN CASE OF TRANSACTIONS OVER USD10,000.00 AND/OR IN EQUIVALENT OTHER CURRENCIES,

BRANCHES ARE ADVISED TO INTIMATE ABBL,DEALING ROOM, HEAD OFFICE.

TEL: 880-2-9564169,PABX 9560312-6, EXT :148, 256, FAX: 9566265

DAILY MARKET COMMENTARY

In the call money market the rate was 7.00%-9.00% on Sunday


and we forecast that it may range between 7.00% to 09.00% today.

In the local FX market Dollar was traded at Tk 76.55 - Tk 76.58 on Sunday

and we forecast that it will be traded at Tk 76.57 -Tk 76.60 today.

NFCD FC & RFCD

TENOR USD GBP EUR USD GBP EUR

1 MONTH 0.14 0.44 0.78 0.06 0.29 0.40

2 MONTH 0.25 0.55 0.89

3 MONTH 0.36 0.72 1.04

6 MONTH 0.56 0.99 1.27

12 MONTH 0.87 1.46 1.60

As a Primary Dealer, we Sell/Buy T-Bills and T-Bonds to customers. Cut-off Yields for T-Bills and T-Bonds of last Auction is given above for

reference only. For customer transactions, rates to be obtained from Dealing Room, Treasury, Head Office, Dhaka.

BD Govt. T-Bonds

TENOR YIELD BD Govt. T-Bills

TENOR YIELD 5 YEARS 8.50

91 DAYS 8.60 10 YEARS 9.55

182 DAYS 8.90 15 YEARS 11.00

364 DAYS 9.00 20 YEARS 11.50

9. Non-Resident Bangladeshi (NRB) Banking

Facilities offered to NRBs

Opening of Foreign Currency A/C: We open Foreign Currency Account in

USD/GBP/EUR/JPY for NRBs. Foreign Currency can be remitted by the Nationals of

Bangladesh living Abroad earned by them as wage earners or from other sources. The deposit

amount can also be used for remittance to other countries as per their requirement. Nominee

of Account holder can also able to operate this Account.

NFCD: We issued Foreign Currency Fixed Term Deposit in USD/GBP/EUR with different

tenure. Interest is paid in respective Foreign Currency. Rates of Interest are published in our

daily Exchange Rate.

Wage Earners Development Bond: These Bonds can be issued from the balance of the FC

account with tenure for five years. Rate of interest is 12% p.a. in BDT.

USD Premium Bond: These Bonds can be issued from the balance of the FC account with a

tenure for Three years. Rate of interest is 7.5% p.a. in BDT.

USD Investment Bond: These Bonds can be issued from the balance of the FC account with


a tenure for Three years. Rate of interest is 6.5% p.a. in USD.

In addition to the above, we also have Drawing Arrangements with 20 (Twenty)

Exchange/Money Transfer Remittance Houses all over the globe to facilitate fast, reliable and

hassle-free inward remittance to the expatriate Bangladeshis around the world. We also have

special arrangements to credit Beneficiary's account maintained with us on the same day

through our extensive real time on-line network.

List of Exchange / Money Transfer Remittance Houses are as follows:

Foreign Remittance through Exchange House

For Inward Remittance, AB Bank established extensive drawing arrangement network with

Banks and Exchange Companies located in the important countries of the world.

Name of the Exchange Companies

Zenj Exchange Co.

P.O. Box 236

Manama

Kingdom of Bahrain

Oman Exchange Company

Ltd. W.L.L

Post Box # 26057

13211 Safat

Kuwait

Security Exchange Co.

WLL

Post Box # 29760

Safat

Kuwait

International Financial

Line

P.O Box 2171

Safat

Kuwait

Al Hanifa Exchange Co.

Exchange Market

Dahala building

P. O. Box 548, Code 15256

Kuwait

Remit Master Sdn. Bhd

No. 21 Lebuh Pudu

50050 Kuala Lumpur

Malaysia

Oman United Exchange Co.

L.L.C.

Near Ruwi Police Station

P.O. Box 889

Muscat

Postal Code 100

Sultanate of Oman

Majan Exchange L. L.c,

C R. NO. 104446

P.O. BOX No. 583

Postal Code 117

Sultanate of Oman

Puroshottam Kanji

Exchange Co. LLC

Post Box # 41

Postal Code – 113

Muscat

Sultanate of Oman

Al-Fardan Exchange Co. Gulf Overseas Exchange Co. Modern Exchange Co. LLC


LLC

Post Pox # 339

Mushrib Street

Doha

Qatar

L.L.C

P.O. Box No. 3931

Ruwi 112

Sultanate of Oman

Post Box # 3401 PC 112

Ruwi

Sultanate of Oman

Al-Ansari Exchange Co.

Head Office

Amin Tower

Liwa Street

Post box-325

Abu Dhabi

U.A.E.

Habib Qatar International

Finance & Investment Ltd

Post Box # 1188

Mushirib Street

Doha

Qatar

Habib Exchange Co. LLC

Central Office,

Sheikh hamdan street.

P.O Box-2370

Abu Dhabi

U.A.E

Emirates India

International Exchange

P. O Box 7190

Dubai

United Arab Emirates

Wall Street Exchange

Centre LLC

1103,1104-Twin Towers

Baniyans Road

P.O. Box 3014

Dubai

U.A.E

U.A.E. Exchange Centre

LLC

Post Box # 170,

Sh. Hamdan Street

Abu Dhabi


K.S. Enterprise Ltd.

134, Cannon Street Road

London El 2LH

UK

Continental Exchange

Solutions

(Ria Financial Services)

13825 Cerritos Corporate

Drive

Suite “C'' Cerritos

California

USA

MoneyGram Payment

Systems Inc

1550 Utica Avenue South

Minneapolish, MN 55416

USA

10. Money Transfer


Foreign Remittance through Exchange House

For Inward Remittance, AB Bank established extensive drawing arrangement network with

Banks and Exchange Companies located in the important countries of the world.

Name of the Exchange Companies

Zenj Exchange Co.

P.O. Box 236

Manama

Kingdom of Bahrain

Oman Exchange Company

Ltd. W.L.L

Post Box # 26057

13211 Safat

Kuwait

Security Exchange Co.

WLL

Post Box # 29760

Safat

Kuwait

International Financial

Line

P.O Box 2171

Safat

Kuwait

Al Hanifa Exchange Co.

Exchange Market

Dahala building

P. O. Box 548, Code 15256

Kuwait

Remit Master Sdn. Bhd

No. 21 Lebuh Pudu

50050 Kuala Lumpur

Malaysia

Oman United Exchange Co.

L.L.C.

Near Ruwi Police Station

P.O. Box 889

Muscat

Postal Code 100

Sultanate of Oman

Majan Exchange L. L.c,

C R. NO. 104446

P.O. BOX No. 583

Postal Code 117

Sultanate of Oman

Puroshottam Kanji

Exchange Co. LLC

Post Box # 41

Postal Code – 113

Muscat

Sultanate of Oman

Al-Fardan Exchange Co.

LLC

Post Pox # 339

Mushrib Street

Doha

Qatar

Gulf Overseas Exchange Co.

L.L.C

P.O. Box No. 3931

Ruwi 112

Sultanate of Oman

Modern Exchange Co. LLC

Post Box # 3401 PC 112

Ruwi

Sultanate of Oman

Al-Ansari Exchange Co.

Head Office

Amin Tower

Liwa Street

Habib Qatar International

Finance & Investment Ltd

Post Box # 1188

Mushirib Street

Habib Exchange Co. LLC

Central Office,

Sheikh hamdan street.

P.O Box-2370


Post box-325

Abu Dhabi

U.A.E.

Doha

Qatar

Abu Dhabi

U.A.E

Emirates India

International Exchange

P. O Box 7190

Dubai


Wall Street Exchange Centre

LLC

1103,1104-Twin Towers

Baniyans Road

P.O. Box 3014

Dubai

U.A.E

U.A.E. Exchange Centre

LLC

Post Box # 170,

Sh. Hamdan Street

Abu Dhabi


K.S. Enterprise Ltd.

134, Cannon Street Road

London El 2LH

UK

Continental Exchange

Solutions

(Ria Financial Services)

13825 Cerritos Corporate

Drive

Suite “C'' Cerritos

California

USA

MoneyGram Payment

Systems Inc

1550 Utica Avenue South

Minneapolish, MN 55416

USA

11. Islami Banking

To provide the Islamic banking services in accordance with the principles of Islamic Shariah,

AB Bank has established Islamic Banking Wing and started its functioning by opening full-

fledged Islamic banking branch on 23.12.2004. The branch is known as AB Bank Islami

Banking Branch, Kakrail, and is situated at 82, Kakrail, Ramna, Dhaka. Prominent Islami

Banker Mr. M. Azizul Huq has joined the Bank as its Islamic Banking Consultant. A

dedicated team of experienced Islamic bankers is working under his active guidance both at

head office and branch level. A competent Shariah Council consisting of Islamic scholars,

Ulema, Fukaha and Islamic bankers headed by Mr. Shah Abdul Hannan, a prominent

Islamic scholar and former Secretary, Government of Bangladesh has also been formed to

guide the Islamic banking affairs. Board of directors as well as management of the bank are

very much interested to promote Islamic banking system in the bank aiming at opening more


Islamic branches in the near future. AB Bank has already obtained membership of Islamic

Banks Consultative Forum (IBCF) and Central Shariah Board for Islamic Banks of

Bangladesh.

The goals and objectives of Islamic banking Wing are as under:

To facilitate the Islamic banking system in the country

To create new entrepreneurs and to arrange required finance for them

To play effective role for socio economic development of the country

To give assistance in launching welfare oriented economic system under Islamic

values

Under this wing AB Bank extends the following Islamic banking services:

Deposit services

Investment services

Under Deposit services the following services are being rendered:

Mudaraba Savings Account

Mudaraba Short Noticed Account

Mudaraba Term Deposit Account (with different terms)

Mudaraba Monthly Profit Account

Al-Wadiah Current Deposit Account

Mudaraba Deposit Pension Scheme

Besides Mudaraba Hajj Deposit Scheme and some other schemes are under process.

Investment Services

AB Bank Islmic Banking Wing provides investment facilities for project finance, working

capital finance, SME finance, consumer / retail baking finance etc. under following modes:

Hire-Purchase under Shirkatul Melk (HPSM): Under this mode the Bank and the

client procure asset such as machinery, land , car etc. on equity participation basis.

The Bank rents out its portion of assets to the client for a certain period. The client


pays the rental with a part of principal amount on monthly / quarterly basis. The client

gets its proportionate ownership with the payment of monthly / quarterly installments.

On maturity, total ownership of the assets automatically goes to the client as and

when final payment of the account is made.

Ijara or Leasing: It is more or less like the HPSM. In this case equity participation

may or may not exist. Ownership of the asset is not automatically transferred to the

client with the payments of installments. On maturity, the bank transfers the

ownership to the client on payment of certain transfer fees.

Bai-Muajjal / Bai-Murabaha: These modes are applicable for working capital

finance. Under these schemes bank purchases goods / raw materials as per

requirement of the client. In case of Bai-Muajjal bank receives the sales proceed on

deferred payment basis. On the other hand in case of Bai-Murabaha Bank receives the

sale price at the time of delivery of the goods / raw materials. Before handing over the

goods / raw materials the bank generally keeps the same in its custody under pledge.

Musharaka : Under this mode the Bank and clients jointly participate in a project, in

a scheme or project. Profit is shared between the Bank & the concerned client as per

pre-agreed ratio. On the other hand loss is shared according to capital ratio.

Mudaraba: Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner

of the capital). Profit is shared between the two sides as per pre-agreed ratio.

Sector of Investment:

Islamic Banking Wing of the bank finances in all sectors i.e., Industry, business, Agriculture,

Real Estate etc. if purpose of the investment is permissible under Islamic Shariah.

Limit of Investment:

Investment is offered to the extent of single borrower exposure limit as fixed by the

Bangladesh Bank from time to time.

Foreign Trade:

Islamic Banking Wing provides the following services at its foreign trade desks:

Opening of LCs

Post -Import Finance


Export bill purchase and negotiation

Pre-shipment financing etc.

AB Bank Islamic Banking Wing has been continuously trying to expand it’s service horizon

keeping the necessity of valued clients in view and upholding the principle of Islamic

Shariah.

12. Investment Banking

12.1.AB Investment Limited (ABIL)

AB Investment Limited, a subsidiary of AB Bank Limited incorporated under the

Companies Act 1994 and running its Merchant Banking operations being licensed by the

Securities and Exchange Commission.

ABIL's Head Office is located at WW Tower (Level-7), 68, Motijheel C/A, Dhaka-1000.

ABIL has two branch offices at Agrabad, Chittagong and Chowhatta, Sylhet.

12.2.Custodial Service

Customers:

Investors who are interested to invest in the Bangladesh Capital Market

• Non Resident Bangladeshi (NRBs)

• Foreign Institutional and individual clients

• Local Institutions

• Sponsors' group and High net worth client

Services:

• Safe custody of client securities

• Foreign Trade Execution and Settlement

• Share transfer in the name of client

• Complete the Dematerialization process as per client request

• IPO, Private Placement & Right share subscription as per client instruction

• All types of corporate action that includes cash dividend, bonus share and right share


collection

• Open BO account and facilitate opening of Trading Account

• Instant information regarding client securities position as per their request

• Quarterly reporting to the client by Custodial Department

Account Opening Procedure

Criteria for opening an account:

o The non-resident investor shall open a NITA(Non-resident investors’ taka

account) with any commercial bank in Bangladesh, with freely convertible

foreign currency remitted from abroad through normal banking channel or by

transfer of funds from the non-resident investor's foreign currency account, if

any, in Bangladesh;

o Any two Bangladeshi national and Non Resident Bangladeshi of sound mind

having a minimum age of 18 years may open two accounts on each in their

single name and the other in their joint names.

o Account opening absolutely depends upon the management of AB Bank Ltd.

o Proper documents should be submitted at the time of account opening.

o Foreign investor has to open FC account along with NITA account at the time

of custodial account opening.

Account opening formalities

Foreign Currency Account & Non-resident Taka Account (NITA) Opening:

o Duly signed account opening form

o Submit Name, signature and photograph of the Nominee

o Transaction profile

o Signature of an introducer must be incorporated

o Supporting Documents:

Copy of the passport

Bank statement/ Work permit (in case of NRB)

Custodial Account Opening:

o Duly Signed account opening form of Custodial

o Duly signed custodial agreement (must be signed on all pages)

o Duly signed Power of Attorney (POA) in non-judicial stamp of Tk. 150/-



Copy of the passport

Bank statement/ Work permit (in case of NRB)

Beneficiary Owner (BO) Account Opening:

o Duly signed BO account opening form

o Duly signed BO agreement (must be signed on all pages)

Brokerage Account Opening:

o Duly signed account opening form with AB Securities Limited

o Nomination Form duly signed

o Agreement with AB Securities Limited


o Copy of the passport

o Bank statement/ Work permit (in case of NRB)

12.3.Brokerage Service

Introduction:

AB Securities Limited (ABSL) is a subsidiary company of AB Bank Limited having holding

99.60% shares of the ABSL. Earlier, AB Bank Limited provided stock broking services

through Arab Bangladesh Bank Foundation (ABBF) since 2006. Incompliance with

Bangladesh Bank’s directives, AB Bank Limited formed separate subsidiary company under

Company Act 1994 in name of AB Securities Limited (ABSL) and shifted its stock broking

services from ABBF to ABSL. ABSL started its new journey on 2nd August, 2010 with

improved customer service, highly skilled professionals and state of art technologies.

Memberships of both Dhaka Stock Exchange Limited and Chittagong Stock Exchange

Limited has been transferred in name of ABSL to provide more efficient and professional

broking services to the capital market investors.

Services of ABSL:

AB Securities Limited (ABSL) is one of the country’s leading securities broker houses of

Dhaka Stock Exchange (member # 201) and Chittagong Stock Exchange (member # 101).

ABSL has started its operation on 2nd August 2010. We have already started our operation in


full swing through our corporate head office and Chittagong Branch Office and Chowhatta

(Sylhet) Branch Office. We are planning to establish nationwide branch network as well as

step into international arena.

Services:

1. Brokerage Services: AB Bank's subsidiary, AB Securities Limited, which has

corporate memberships on the Dhaka and Chittagong Stock Exchanges, can act as

brokers on behalf of local and foreign individual and institutional client to trade in the

local capital market.

We provide broking services under following categories:

a) Individual & Joint Account (Local, NRB & Foreign)

b) Institution Investment Account (Local and Foreign)

2. Margin Loan Facilities: We also provide margin loan facility to our valued clients as

per desecration of management of ABSL.

3. Stock Dealer Service: ABSL also has the stock dealer license to manage own

portfolio as well as can manage reputed institution’s portfolio accounts.

4. CDBL Services as full service Depository Participant (DP): As a full service

depository participant, ABSL provides following services:

a) BO (Beneficial Owner) accounts opening and maintenance.

b) Dematerialization & c) Rematerialization

c) Freeze (freeze request and release request) and suspensions

d) Pledging, unpledging and confiscation

e) BO ISIN balances and master maintenance enquiry

12.4. Future Products

Expansion

to extend our Merchant Banking services across the country, MBW has already launched its


operation in Agrabad (Chittagong). We are going to open 3 new service networks in

Mohakhali (Dhaka), Uttara (Dhaka) and Sylhet soon.

New Business

In addition, AB Bank will also expand its operations in the investment banking in the

following areas:

Business Area Status

Islamic Capital Market Products Processing

Derivatives Products Supporting infrastructure going to be

prepared

Asset Management / Mutual Fund We are planning to launch and manage

Mutual Fund in future.

13. AB Bank Visa Electron Debit Card

“The most perfect accompaniment to life”

Makes your life comfortable

Smart way of payment

No need to carry cash

Large ATM and POS network

lower annual fees

No hidden charge

Who can apply for a card?

If you are maintaining an account with any of the branches of ABBL, you are able to have

ABBL Visa Debit Card. Only thing you need to do is, visit your branch and fill up the

Application form and submit it. You will receive your card within 7 working days.

Tips for usage


Card Activation

• After receiving the card, sign the acknowledgement slip and send it to Card Division or

any branch of

ABBL or call Card Division for activation.

• Put your signature on the signature panel at the back of your card.

Caution during making transactions

• Please do not let your card be taken out of your sight at any merchant outlet to prevent

possible

Misuse

• After using your card at a merchant outlet, please ensure that the card returned to you is

yours

• Before signing the Sales Slip check at the amount charged

• Retain your copy of the Sales Slip of all transactions until they appear in your Card

Account Statement

for your future reference

PIN Maintenance

• Destroy the PIN mailer after memorizing your PIN

• Do not write the PIN on the card or keep the PIN inside your wallet

• Change the PIN every month


For Lost/Stolen Card

If the card is lost or stolen, simply call AB Bank’s Help Desk at 9558510. You also can re-

port the loss by fax to ABBL, Card Division immediately.

Lost Debit/ Credit Card

For lost Debit / Credit Card please email to the following address: [email protected]

or call our Card Division at 9558510. Your card will be replaced within 4-5 working days,

and will be couriered to your mailing address you provided in your card application form.

Note: Please find Lost/ stolen Card Application Form in the “Forms Center”

Address Change

For address change in your Card please email to the following address:

[email protected] or call our Card Division at 9558510. Your new address will be

updated in the Card Management System.

Note: Please find Card address change Application Form in the “Forms Center”

14. Safe Deposit Locker

Looking for a safe storage place for your valuables?

A Safe Deposit Locker with AB Bank is the solution to your concern. Located at select

branches in cities all over the country, our lockers ensure the safe keeping of your valuables.

Advantages / Key Benefits:

Wide Availability.

Lockers available in various sizes. i.e. Small, Medium and Large with varying rents.

Lockers are rented out for a minimum period of one year. Rent is payable in advance.

The rent may be conveniently paid from your deposit account with us.

Direct debits for locker rentals from your account rid you of the hassles in writing out

cheques.


http://www.abbank.com.bd/forms-center.html

mailto:[email protected]

http://www.abbank.com.bd/forms-center.html

mailto:[email protected]

Eligibility:

An individual (not minor), firms, limited company, associations, clubs, trusts, societies, etc

may hire a locker.

Nomination for Safe Deposit Locker:

The Lockers and their contents can be nominated to people near and dear to you.

Nomination facility is available to individual hirer of Safe Deposit Locker.

In the case of a sole hirer of a safe deposit locker, nomination can be made in favour

of only one individual.

Where the safe deposit locker is hired in the name of a minor, the nomination shall be

made by a person lawfully entitled to act on behalf of the minor.

Terms & Conditions:

For obtaining a Locker at AB Bank you must be an account holder with our Bank.

Lockers can be allotted individually as well as jointly.

The Locker holder is permitted to add or delete names from the list of persons who

can operate the Locker and can have access to it.

Loss of Key is to be immediately informed to the concerned Branch.

For Schedule of Rentals, please contact the branch nearest to you.

15. Schedule of Charges & Commissions

Schedule of Charges & Commissions

General

This guide is intended to give you a clear picture of the fees that we charge for your outmost

commonly used services. We hope that the simple tables as stated in this guide will help you

manage your money more effectively. If you have any queries about the charges listed in the

guide, kindly visit or contact any of our Branch Offices for the exact details or seek your own

professional help.

N. B.


1.VAT is applicable @15% on all fees and commissions effective from 1st July 2002, as per

Government circular no. SRO 117-Law/ 2002/342-VAT, dated 6 June 2002 and SRO#171-

Law/2004/ 417-VAT dated June 10, 2004.

2.VAT is not applicable for Commission, Fees or Charges for back to back LC against

Master LC, Local back to back LC and Export related all LC’s including Cash LC.

3.Any Government Taxes, Duties or other charges will be recovered in addition to the

foregoing and as per Government Regulations.

4. Stamp charges are levied where applicable.

5.Correspondent/Other Bank charges, if any, will be additionally recovered from customers.

6.The Bank reserves the right to assess charges on transaction which are not covered by this

schedule and to amend without prior notice the terms, conditions or rate stated in this

schedule.

7.Any service, which is not mentioned above, will be charged separately as per the charges.

8.If the Bank provides services to its clients at reduced rate to encourage their clients, VAT to

be collected as per Standard Charge i.e. as per Schedule of Charges.

SME BankingConsidering the volume, role and contribution of the SMEs, AB Bank has been patronizing

this sector by extending credit facility of different types and tenor. As of now 54% of the

bank’s total loan portfolio is segmented to the SMEs which deserves all out attention in plans,

projection and forecasting.

As such the bank has emphasized on the following issues:

To provide the best services to the SME sector.

To increase the SME portfolio of ABBL significantly

To improve the quality of ABBL’S portfolio.

SME Sector in which AB Bank has participated so far:

Agro machinery


Poultry

Animal Feed

Dairy Product

Fruit Preservation

Hotel & Restaurants

Garments Accessories

Leather Products

Plastic Product

Furniture : Wooden & Metal

Ink

Paint

Printing & Packaging

Wire & Cable

Aluminum

Cement & Lime Plaster

Clinics and Hospitals

Engineering & Scientific Instruments.

ABBL offers the following SME loan products:

I. Uddog loan.

II. Goti loan.

III. Aparajita loan.

IV. Proshar loan.

V. Choto puji loan.

VI. Digun loan.

Large Loan & Project Finance In order to cater the demand of client of AB Bank has segmented its loan size. As per

this segmentation any loan over TK 10.00 core falls under the preview of large loan

unit.

In AB Bank, there is also a separate Project Finance unit who evaluate the business.

The unit is entrusted to handle the portfolio in a focused manner. AB Bank is always

in front to support establishment of new projects of diverse nature which will help to

broaden the manufacturing arena to generate to employment.


At the moment AB has participation in 19 syndicated facilities. AB Bank’s exposure

in the ongoing syndication is TK51560.29 lac which is diversified in the following ten

sectors.

SL Sector ABBL Participation

(fig in Lac TK)

1.Textile 9,533.57

2. Micro Finance 3,000.00

3. Cement 7,990.00

4.Energy & Power 11,997.00

5.Telephone (PSTN) 5,500.00

6.Glass 900.00

7.Sugar 900.00

8.Steel Mills 9081.72

9.Paper 1158.00

10.Chemichal 1,500.00

Total 51,560.29


BRAC BANKCompany Profile

BRAC Bank is a fully operational Commercial Bank. Since inception in July 2001, the

Bank's footprint has grown to 56 branches, 30 SME Service Centers, 427 SME unit offices

and 112 ATM sites across the country services are :

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

Corporate Vision

Building profitable and socially responsible financial institution focused on Market and

Business with Growth potential, thereby assisting BRAC and stakeholders to build a just,

enlightened, healthy democratic and poverty free Bangladesh.

Corporate Mission

Sustained growth in Small & 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 sectors.

Continuous endeavor to increase non-funded income

Keep our debt charges at 2% to maintain a steady profitable growth


Achieve efficient synergies between the bank’s branches, SME unit offices and BRAC field

offices for delivery of remittance and Bank’s other products and services

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

service quality

Keep a divers, far flung team fully controlled environment with no compromise on service

quality

Keep a diverse, far flung team fully motivated and driven towards materializing the bank’s

vision into reality.

Core Values Our Strength emanates from our owner - BRAC. This means, we will hold the following

values and will be guided by BRAC as we do our work.

Value the fact that one is a member of the BRAC family

Creating an honest, open and enabling environment

Have a strong customer focus and build relationships based on integrity, superior service and

mutual benefit

Strive for profit & sound growth

Work as team to serve the best interest of our owners

Relentless in pursuit of business innovation and improvement

Value and respect people and make decisions based on merit

Base recognition and reward on performance


Responsible, trustworthy and law-abiding in all that

we do.


Retail Banking » Deposit Products

Retail Banking » Cards

Savings Accounts

Triple Benefit Savings Account

Savings Classic Account

Aporajita Account

Future Star Account

Current Accounts

Current Classic Account

Current Plus

EZee Account

Salary Account

Campus Account

Term Deposits

DPS

Fixed Deposit General

Flexi DPS

InterestFirst Fixed Deposit

Freedom Fixed Deposit (FFD)

Abiram Fixed Deposit

Loan Products

Salary Loan

Quick Loan

Auto Loan

Home Loan

Secured Loan/Overdraft

Credit Card

Platinum Card

VISA Classic

VISA Gold

Universal Card

Retail Banking » Loan Products

http://www.bracbank.com/VISA-Gold-Card.php

http://www.bracbank.com/VISA-Classic-Card.php

http://www.bracbank.com/platinum_card.php

http://www.bracbank.com/Secured.php

http://www.bracbank.com/Home-Loan.php

http://www.bracbank.com/Auto-Loan.php

http://www.bracbank.com/Quick-Loan.php

http://www.bracbank.com/Salary-Loan.php

http://www.bracbank.com/Abiram-Fixed-Deposit.php

http://www.bracbank.com/Freedom-Fixed-Deposit.php

http://www.bracbank.com/Interest-First-Fixed-Deposit.php

http://www.bracbank.com/Flexi-DPS.php

http://www.bracbank.com/Fixed-Deposit.php

http://www.bracbank.com/DPS.php

http://www.bracbank.com/Campus.php

http://www.bracbank.com/Salary-Account.php

http://www.bracbank.com/EZee-Account.php

http://www.bracbank.com/Current-Plus.php

http://www.bracbank.com/Current-Classic-Account.php

http://www.bracbank.com/Future-Star-Account.php

http://www.bracbank.com/Aporajita-Account.php

http://www.bracbank.com/Savings-classic-Account.php

http://www.bracbank.com/Triple-Benefit-Savings.php

SME Banking

BRAC Bank, being the youngest bank, took a step to break away from usual tradition and

tapped into the true suburb entrepreneurial initiatives.

Today, with over 14,500 crorers of loans disbursed till date, BRAC Bank is country's largest

SME financier that has made more than 320,000 dreams come true!

If you have a dream on which you trust, let us make it true together.

1. Loan Products

Anonno Rin

Apurbo Rin

Prothoma Rin

Durjoy

Shomriddhi Rin

Shompod Rin

Shokti Rin

2. Deposit Product

Prapti Current Account

Prachurjo Fixed Account

ANONNO SME LOAN

What is ANONNO SME Loan?


Credit Card

Platinum Card

VISA Classic

VISA Gold

Universal Card

http://www.bracbank.com/discount_Hotels.php#Jamuna

http://www.bracbank.com/discount_Hotels.php#Seagull

http://www.bracbank.com/discount_Hotels.php

http://www.bracbank.com/discount.php

http://www.bracbank.com/Discount-CNG.php

http://www.bracbank.com/Hospitals.php

http://www.bracbank.com/Fuel.php

http://www.bracbank.com/PayFlex-Program.php

http://www.bracbank.com/Partners-Outlet-Card.php

http://www.bracbank.com/Check-Redeem-Rewards-Card.php

http://www.bracbank.com/Travel-Card.php

http://www.bracbank.com/Hajj-Prepaid-Card.php

http://www.bracbank.com/debit-card.php

http://www.bracbank.com/Payment-of-Credit-Card-bills.php

http://www.bracbank.com/schedule_of_charges/Credit%20Card%20Schedule%20of%20Charges.pdf

http://www.bracbank.com/ICDDRB-Card.php

http://www.bracbank.com/Universal-Visa-Gold.php

http://www.bracbank.com/Universal-Visa-Classic.php

ANONNO is a business loan to meet any kind of business needs, which starts from BDT 3

Lac to10 Lac.

No security required

Overdraft facility

Easy installment

Easy loan processing.

Eligibility

Any kind of business having valid trade license, which has been operating at least 2 or more years.

Sole proprietorship, Partnership or Private Limited company

Small & mid-sized businesses (Production, Trading, Service, Agro based products and others)

APURBO SME LOAN

What is APURBO SME Loan?

APURBO is a loan facility for Small & Medium Entrepreneurs. To meet any kinds of

business needs, APURBO is offering BDT 1 million to BDT 5 million loans against

registered mortgages.

Specialty of this loan

Term loan and overdraft based on your business needs.

Limited documents

10 to 50 Lac Loan


Easy installment and overdraft facility

Eligibility

Any kind of business having valid trade license, which has been operating at least 3 or more years.

Those who have property/land/building

PROTHOMA SME LOAN

What is PROTHOMA SME Loan?

Prothoma is a term loan for small scaled business operated by women entrepreneur,

Maximum BDT 1 million is offered to meet business needs.

No security required

As low as 10% interest rate

Tenure from 1 to 4 years

Easy loan processing

Eligibility

Any kind of business having valid trade license, which is at least 2 years of old.

Sole proprietorship, Partnership or Private Limited Company

Small & mid-sized business (Production, Trading, Service and others)

DURJOY SME LOAN


What is DURJOY SME Loan?

To meet your business needs DURJOY is offering BDT 3 Lac to BDT 2.5 million Loan

without any security.


Up to BDT 25 Lac loan in the name of business

Easy installment up to 5 years

Convenient interest rate

Overdraft facility

Eligibility

Any kind of business having valid trade license, which has been operating for at least 3 years.

Sole proprietorship, Partnership or Private Limited Company

1 year bank statement

SHOMRIDDHI SME LOAN

What is SHOMRIDDHI SME Loan?

To meet import-export related expenses, post import expenses, tax/duty payment, local bill

purchase and working capital, SHOMRIDDHI loan is offering BDT 1 Lac to BDT 10

million.

LC and LATR facility

Revolving loan, overdraft


Local bill discounting facility

Letter of Credit (LC)/Loan against trust receipt (LATR)

LC opening facility: from BDT 1 Lac to BDT 10 million

Up to 90% loan against LC

Revolving Loan

Import duty payment or goods purchase facility

Loan up to BDT 10 million

Local Bill Purchase

Loan up to BDT 10 million in export


Easy loan processing


Loan payment facility up to 180 days.

Eligibility

Any kinds of businesses having valid trade license and which has been operating for at least 3 years.

Sole proprietorship, Partnership or Private Limited Company.

SHOMPOD SME LOAN


What is SHOMPOD SME Loan?

SHOMPOD is a loan facility starting from BDT1 million to BDT 35 million against home or

business premise mortgage.


With overdraft facility which will help you to meet your working capital need.

Loan against home or business premise mortgage to meet business needs.

Loan is also available to purchase business premise

Up to BDT 35 million loan facility

Installment facility up to 10 years


Eligibility

Small & mid-sized of business having valid trade license, which has been operating for at least 3

years in Dhaka & Chittagong.

SHOKTI SME LOAN

What is SHOKTI SME Loan?

Business loan under which you can avail BDT 1 million to BDT 7 million to meet your any

kind of business needs.

Loan against partial security or fixed deposit

At least 1 year bank statement

PRACHURJO SME LOAN


"Prachurjo" is a lucrative fixed deposit for small and medium businesses. With a minimum

1,00,000 TK, any business enterprise having valid trade license can open this account.

Specialties

Tenure: Minimum 3 months and maximum 36 months

No fees except govt excise / duty on interest earned,

Interest is applicable on maturity

No pre-encashment fees

Who are eligible for this deposit?

Everyone involving in sole proprietorship, partnership and private limited companies

Small and medium typed businesses (Educational institution, NGO and Co-operative society and

others)

Accounting Talks Till date, BRAC Bank has served 3,20,000 entrepreneurs, with SME loans valued at

BDT 144,330 million through its 424 SME Unit Offices.

A concerted effort from the largest business division of the country has ensured

balance sheet growth alongside economy.

BDT 37,400 million asset disbursement was supplemented by BDT 8,970 million

deposits. Fit-for-purpose strategies and strong drives towards both asset and liability

made these successes possible. The year came to an end with a net positive growth in

both asset and liability. 10% asset growth has been made by our own liability.


SME banking division has strengthened its foothold in Bangladesh more than ever

before. As the core business of BRAC Bank Limited, SME Banking refined its

widespread network by bringing all the unit offices under the Bank’s server network,

thereby enabling faster communication with the Head Office.

The Medium Business unit was launched with a dedicated team for mid-tier customer.

Dutch Bangla Bank Ltd (DBBL)

Company ProfileHistorical Background

Dutch-Bangla Bank Limited is a scheduled commercial bank. The Bank was established

under the Bank Companies Act 1991 and incorporated as a public limited company under the

Companies Act 1994 in Bangladesh with the primary objective to carry on all kinds of

banking business in Bangladesh. The Bank is listed with Dhaka Stock Exchange Limited and

Chittagong Stock Exchange Limited. DBBL- a Bangladesh European private joint venture

scheduled commercial bank commenced formal operation from June 3, 1996. The head office

of the Bank is located at Senakalyan Bhaban (4th floor), 195, Motijheel C/A, Dhaka,

Bangladesh. The Bank commenced its banking business with one branch on 4 July 1996.

Dutch Bangla Bank Limited (DBBL) a public company limited by shares, incorporated in

Bangladesh in the year 1995 under companies Act 1994. With 30% equity holding, the

Netherlands Development Finance company (FMO) of the Netherlands is the international

cosponsor of the Bank. Out of the rest 70%, 60% equity has been provided by prominent

local entrepreneurs and industrialists & the rest 10% shares is the public issue. During the

initial operating year (1996-1997) the bank received skill augmentation technical assistance

from ABN Amro Bank of the Netherlands.

DBBL’s focus is to provide one counter service to clients covering: Commercial Banking

(Deposit Accounts), Consumer Banking (Retail Baking) - Traveler Cheques- Foreign &

Inland

Remittances, Financial Services, Corporate Banking, Asset & liability management,

Liquidity &

capital Resources Management, Information technology, Human Resources. DBBL Internet


banking enables customer to access his/her personal or business accounts anytime anywhere

from home, office or when traveling. Internet Banking gives customer the freedom to choose

his/her own banking hours. It can save time, money and effort. It's fast, easy, secure and best

of all.

DBBL, since its inception was active in various social activities, which increased manifold

over

The period of time and its growth. It is one of the fast growing leading online banks in private

sector. The emergence of Dutch-Bangla Bank Ltd. in the private sector is an important event

in

The banking area of Bangladesh. The Netherlands Development Finance Company (FMO) of

the

Netherlands is the international sponsor of the Bank. The FMO is the Dutch development

bank of the Netherlands specialized in the financing of private enterprises in Asia, Africa,

Latin America and Eastern Europe. Dutch-Bangla Bank Ltd. came into existence with joint

venture as a public limited company incorporated in Bangladesh on June 26, 1995 with the

primary objectives to carry on all kinds of banking business in and outside of Bangladesh.

DBBL has started its business with foreign bank. DBBL commenced its business as

scheduled bank with effect from July 04, 1995 with one branch-Motijheel Branch, Dhaka,

with a motto to grow as a leader in the banking arena of Bangladesh through better

counseling and effect service to clients and thus to revitalize the economy of the country. All

the branches are currently providing truly On-Line banking facility. DBBL resumed its

operational activities initially with an authorized capital of Tk.400 million and paid up capital

of Tk.202.14 million.

An over view of DBBLDutch-Bangla Bank is a second generation commercial private Bank. During the period of its

operation, this bank creates a milestone of success in banking sector. This bank holds an

experienced team of banking professional. They achieve this success because of their

experienced banking professional team, proper management & so on. Dutch-Bangla Bank

Limited is a Bangladesh–Netherlands joint venture scheduled commercial bank established in

Bangladesh with the primary objective to carry on all kinds of banking business in and

outside of Bangladesh. Starting with one Branch in 1996, DBBL has expanded to thirty nine

(39) branches including nine Branches outside of the capital. To provide client services all


over Bangladesh it has established a wide correspondent banking relationship with a number

of local banks. To facilitate international trade transactions, it has arranged correspondent

relationship with large number of international banks which are active across the globe.

In addition to its banking activities, Dutch-Bangla Bank Limited takes part in different

national

activities promoting sports, culture, social awareness, etc. Participation in these activities as

sponsors is part of its business development policy.

Philosophy of DBBLThe objectives of Dutch-Bangla Bank Limited remains to offer modern & innovative

products &

services to its clients in Bangladesh the partnership with FMO is optimistically scene to offer

scopes opportunities to draw on modern tools & techniques of Banking from western world

which could be blended with the currently prevalent local customs & practice. The Bank is

committed to being a sophisticated prominent and professional institution, providing a one

window service to its customers. During the first five years Dutch Bangla Bank’s strategy

was focused on continuing in provident of internal procedures and operating structures, to

have a greater control on the quality of our business and to provide better management

direction. After five years of working on the Banks structure, its culture and controls, the

management is confident that the Bank can move forward on a rapid growth path. The

DBBL’s corporate philosophy is to build its nonfunded fees and commission income stream,

thus reducing its reliance on interest income alone.

Core objective of DBBL

Dutch-Bangla Bank believes in its uncompromising commitment to fulfill its customer needs

and

satisfaction and to become their first choice in banking. Taking cue from its pool esteemed

clientele, Dutch-Bangla Bank intends to pave the way for a new era in banking that uphold

and

epitomize its vaunted marquees “Your Trusted Partner”

Focus of DBBL


DBBL’s focus is to provide one counter service to our clients covering:

Commercial Banking (Deposit Accounts)

Consumer Banking (Retail Baking)-

a. Traveler Cheques

b. Foreign & Inland Remittances

c. Financial Services

d. Corporate Banking

e. Asset & liability management

f. Liquidity & capital Resources Management

g. Information technology

h. Human Resources

Mission

Each business unit needs to define its specific mission within the broader company mission.

Dutch-Bangla Bank engineers enterprise and creativity in business and industry with a

commitment to social responsibility. "Profits alone" do not hold a central focus in the Bank's

operation; because "man does not live by bread and butter alone”. Mission statements are at

their

best when they are guided by a vision.

Vision

“To become a leading banking institution and play a pivotal role in the development of the

country”

Vision, a compelling view of a future yet to be, creates meaning and purpose which catapults

both individuals and organizations to high levels of achievement. Dutch-Bangla Bank dreams

of better Bangladesh, where arts and letters, sports and athletics, music and entertainment,

science and education, health and hygiene, clean and pollution free environment and above

all a society based on morality and ethics make all our lives worth living. DBBL's essence

and ethos rest on a

cosmos of creativity and the marvel-magic of a charmed life that abounds with spirit of life

and

adventures that contributes towards human development.


Strategies of DBBL

The strategies are as follows:

To manage and operate the Bank in the most efficient manner to enhance financial

performance and to control cost of fund

To strive for customer satisfaction through quality control and delivery of timely

services

To identify customers' credit and other banking needs and monitor their perception

towards our performance in meeting those requirements.

To review and update policies, procedures and practices to enhance the ability to

extend better service to customers.

To train and develop all employees and provide them adequate resources so that

customers' need can be reasonably addressed.

To promote organizational effectiveness by openly communicating company plans,

policies, practices and procedures to employees in a timely fashion

To diversify portfolio both in the retail and wholesale market

To increase direct contact with customers in order to cultivate a closer relationship

between the bank and its customers.

Objectives of DBBL

To earn and maintain CAMEL Rating 'Strong'

To establish relationship banking and improve service quality through development of

Strategic Marketing Plans.

To remain one of the best banks in Bangladesh in terms of profitability and assets

quality.

To introduce fully automated systems through integration of information technology.

To ensure an adequate rate of return on investment

To keep risk position at an acceptable range (including any off balance sheet risk)

Departments of DBBL

Human Resources Department


Success of any organization largely depends on the efficiency & competence of its

manpower.

The organization provides a comprehensive range of human resources services to staff and

managers and all prospective employees. A full list of staff and their relevant areas of

responsibility are conduct here. This includes Senior Management, Operations group -

including

HR Advisors, Staff Development, and Job Evaluation & Systems & Management

Information

group.

Our vision is to be a department that leads on and delivers the University's Staff Experience

Strategy, works as a business partner within the organization and leads by example in relation

to

university values.

Services provided under this department:

We provide the following range of services:-

Strategic planning and organizational development

faculty and departmental operational advice, support and services

staff development

projects and information management

Equality and Diversity

The organization is committed to the support and implementation of the equality and

diversity

agenda as laid out in our policy.

Corporate governance

Board of directors

Board of Directors Designation

1 Mr. Abul Hasnat Md. Rashidul Islam Chairman


2 Mr. Zaheed Hossain Khan Director

3 Mr. Bernhard Frey Director

4 Mr. Shahabuddin Ahmed Director

5 Mr. Md. Shahidur Rahman Director

6 Mr. Md. Yeasin Ali Managing Director

International Division

Internal trade means foreign currency and includes all deposits, credit and balances payable

in foreign currency as well as all foreign currency instruments, such as, Drafts, Travelers

Cheques, Bills of Exchange, and Promissory Notes payable in any foreign country. Anything

that conveys a right to wealth in another country is Foreign Exchange.

DBBL provides premium quality service for repatriation and collection of remittance with the

help of its first class correspondents and trained personnel. By introducing on-line banking

service and becoming a SWIFT Alliance Access Member, which enable its branches to send

and receive payment instruction directly, which helps provide premium services.

Credit department

Risk is an integral part of business & the main role of our risk management principle is to

find the optimal balance of risk & return. Bangladesh bank has undertaken a project to install

a core risk management system in every bank. DBBL Bank Ltd installing the same system in

respect to Asset liability management, Foreign exchange management, internal control &

compliance, Anti money laundering. The bank prudently controls asset allocation through

limiting exposure to industry sector & setting client limit. Moreover, the bank approved a

new organization structure to accommodate core risk management perspective.

Loans and Advances

Loans and advances Interest Rate

Agriculture 8.00% ---11.00%

11.50% ---14.50%

Working Capital for Industry 12.50% ---15.50%

Small Shop Finance and SME 13.00% ---16.00%


Transport Loan 13.50% ---16.50%

Consumer Credit 13.50% --- 16.50%

IT department

Dutch-Bangla Bank Limited (DBBL) undertook a project with BASIS (Bangladesh

Association of Software and Information Services) to award the best IT uses by Bangladeshi

companies. DBBL and BASIS organized IT award-giving ceremony in this regard. The

award Ceremony was held on 30th November 2005, which was the day before last day of

BASIS SOFfEXP02005 (November 27-December 01, 2005). This was a gala evening (with

dinner and cultural program) attended by around 700 dignitaries including government high

officials & policy makers, corporate heads, representatives from development agencies, IT

policy makers, academicians and the IT industry members. In this regards, DBBL's

contribution in supporting this event was 50% of the estimated cost with Tk.6.25 Lac.

PRODUCTS AND SERVICES

1. Products and services offered by DBBL

Retail Banking

Remittance and collection

Import and export handling and financing

Corporate Banking

Project Finance

Investment Banking

Consumer credit

Agriculture Loan

Real time any branch banking

24 Hours Banking through ATM

o DBBL-NEXUS ATM & Debit card

o DBBL-Maestro/Cirrus ATM & Debit card

o DBBL Credit card


Internet Banking

SMS Banking

On line Banking through all Branches

Banking Products

Various deposits:

Savings Deposit Account

Current Deposit Account

Short Term Deposit Account

Resident Foreign Currency Deposit

Foreign Currency Deposit

Convertible Taka Account

Non-Convertible Taka Account

Exporter's FC Deposit(FBPAR)

Current Deposit Account-Bank

Short Term Deposit Account-Bank

Term Deposit

Term Deposit 3 Months





Term Deposit 24 Months 1 Year Payout


Term Deposit 36 Months 6 Months Payout

Term Deposit 36 Months 1 Year Payout

Term Deposit above 36 Months

Monthly Term Deposit Banks

Term Deposit 3 Months Banks




Loan & Advances

Loan against Trust Receipt

Transport Loan

Consumer Credit Scheme

Real Estate Loan (Res. & Comm.)

Loan Against Accepted Bill

Industrial Term Loan

Agricultural Term Loan

Lease Finance

Other Term Loan

FMO Local currency Loan for SME

FMO Foreign currency Loan

Cash Credit (Hypothecation)

Small Shop Financing Scheme

ATM Services

We can find DBBL ATMs beside our home, in our office premise, nearby market, university,

college & school premises, Airport, Railway stations etc., throughout the country. Using any

of

the DBBL ATM pools any where in the country, you can perform the following:

Account balance enquiry

Cash withdrawal – 24 hours a day, 7 days a week, 365 days a year

Cash deposit to a certain number of ATMs any time

Mini statement printing

PIN (Personal Identification Number) change

All the ATMs can accept DBBL-NEXUS ATM / POS card, DBBL-Maestro/Cirrus Debit

card and DBBL Credit card

PRODUCTS NAME CUSTOMER CHARGE


ATM NEXUS Debit card All a/c Holders Yes

ATM Maestro Debit card All a/c Holders Yes

ATM Maestro Debit card All a/c Holders Yes

ATM DBBL Credit card Limited Yes

Internet Banking All a/c Holders Yes

SMS Banking All a/c Holders Yes

Treasury

DBBL is well equipped for treasury operation through subscribing Reuters's terminal and

operating in SWIFT network. It is also well equipped with competent human resources for

efficient dealing.

DBBL’s treasury quotes competitive exchange rate for major currencies:

Spot Sale/Purchase

Forward Sale/Purchase

Money market Inter bank & Corporate

SWAPS

Account Service

DBBL provides all the accounts services as prescribed by the guidelines of Central Bank

(Bangladesh Bank). DBBL offers competitive interest rate and provides premium quality

services for the accounts. Account services are:

Foreign Currency Account

Non-Resident Foreign Currency Deposit Account (NFCD)

Resident Foreign Currency Deposit Account (RFCD)

Convertible and Non-Convertible Taka Account

Foreign Trade

DBBL extends finance to the importers in the form of:

Opening of L/C (Foreign/Local)

Credit against Trust Receipt for retirement of import bills.

Short term & medium term loans for installation of imported.


Import Finance

DBBL extends finance to the importers in the form of:

1. Opening of L/C

2. Credit against Trust Receipt for retirement of import bills.

Export Finance

1. Pre-Shipment Finance

Pre-Shipment finance in the form of:

I) Opening of Back-to-Back L/C

II) Export Cash Credit

2. Post-Shipment Finance

Post-Shipment finance in the form of:

I) Foreign/Local Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance with the

help of its first class correspondents and trained personnel. By introducing on-line banking

service and becoming a SWIFT Alliance Access Member, which enable its branches to send

and receive payment instruction directly, which helps provide premium services. Remittance

services

provided by DBBL are:

Inward Remittance: Draft, TT

Outward Remittance: FDD, TT, TC and Cash (FC)

Western Union

Western Union Financial Services Inc. U.S.A. is the number one and reliable money transfer

company in the world. This modern Electronic Technology based money transfer company

has

earned world wide reputation in transferring money from one country to another country

within

the shortest possible time. Dutch-Bangla Bank Limited has set up a Representation

Agreement


with Western Union Financial Services Inc. U.S.A. as on 14th February 2006.

DBBL Internet Banking

DBBL Internet banking enables customer to access his/her personal or business accounts

anytime

anywhere from home, office or when traveling. Internet Banking gives customer the freedom

to

choose his/her own banking hours. It can save time, money and effort. It's fast, easy, secure

and

best of all.

Using any of the DBBL ATM pools any where in the country, you can perform the

following:

Securities with DBBL Internet Banking

A/c Opening & Accessing Internet Banking

Internet Banking Features

Terms & Conditions of Internet Banking

SME Banking

SME cash credit

Purpose To meet up working capital requirement of

Business

Small or Medium Entrepreneur like : an

entity, ideally not a public limited company,

does not employ more than 150 persons (if it

is manufacturing concern) and 25 persons (if

it is a trading concern) and 25 persons (if it is

a service concern) and also fulfils the

following criteria :

A service concern with total assets at

cost excluding land and building from


Target Customers Tk. 50,000/- to Tk. 10 crore

A trading concern with total assets at


Tk. 50,000/- to Tk. 10 crore

A manufacturing concern with total

assets at cost excluding land and

building from Tk. 50,000/- to Tk. 20

crore

Loan Amount

Minimum : TK. 100,000/-

Maximum : TK. 5,000,000/-

Clean : Up to Tk. 500,000/-

Collateralized : Up to Tk. 5,000,000/-

Interest Rate (Floating)

Clean : @17.00%

Collateralized : @16.00%

Collateralized with ≥30% Cash Security :

@15.00%

100% cash security : @TD+2% spread

(considering DBBL TD) and @14% p.a.

(considering other cash security/ other bank

TD)

Processing Fee 1% of the Sanctioned Limit.

Renewal/ Enhancement Fee 0.50% of the Sanctioned Limit.

Tenure 1 year Renewable (if total credit turnover is

at least 4 times of existing limit)

Overdue charge Additional 3% p.a.

No EOL to be allowed without approval of

the Head Office.

Stamp charges & VAT All relevant Stamp charges & VAT (as per

Govt. rules)


Eligible Entrepreneur /Owner

Nationality: Bangladeshi by birth

Experience: As an entrepreneur must have

experience at least 2 (Two) years

Age: Minimum 21 years to maximum 65

years

For renewal purposes maximum age may be

considered up to 70 years

SME term loan

Purpose To meet up working capital requirement of

Business

Target Customers

Small or Medium Entrepreneur like : an

entity, ideally not a public limited company,

does not employ more than 150 persons (if it

is manufacturing concern) and 25 persons (if

it is a trading concern) and 25 persons (if it is

a service concern) and also fulfils the

following criteria :

A service concern with total assets at


Tk. 50,000/- to Tk. 10 crore

A trading concern with total assets at


Tk. 50,000/- to Tk. 10 crore

A manufacturing concern with total

assets at cost excluding land and

building from Tk. 50,000/- to Tk. 20

crore

Loan Amount

Minimum : TK. 100,000/-

Maximum : TK. 5,000,000/-

Clean : Up to Tk. 500,000/-


Collateralized : Up to Tk. 5,000,000/-

Interest Rate (Floating) Clean : @17.00%

Collateralized : @16.00%

Collateralized with ≥30% Cash Security :

@15.00%

100% cash security : @TD+2% spread

(considering DBBL TD) and @14% p.a.

(considering other cash security/ other bank

TD)

Processing Fee 1% of the Sanctioned Limit.

Renewal/ Enhancement Fee 0.50% of the Sanctioned Limit.

Tenure 1 year Renewable (if total credit turnover is

at least 4 times of existing limit)

Overdue charge

Additional 3% p.a.

No EOL to be allowed without approval of

the Head Office.

Stamp charges & VAT All relevant Stamp charges & VAT (as per

Govt. rules)

Eligible Entrepreneur /Owner

Nationality: Bangladeshi by birth

Experience: As an entrepreneur must have

experience at least 2 (Two) years

Age: Minimum 21 years to maximum 65

years

For renewal purposes maximum age may be

considered up to 70 years

Small shop financing scheme

Purpose

The purpose of the loan may be Seasonal

Financing of inventory or Trade Receivable

or both to the business entity

Wholesalers, Manufacturers / Assemblers


Nature of Business and Retailers of machinery, accessories,

agriculture items, etc

Loan Amount Maximum TK. 500,000/-

Interest Rate @ 17% p.a. with quarterly rests

Processing Fee @ 0.5% of the loan amount but not less than

Tk. 1,000/-

Tenure 1 year Renewable

Primary security Secured by marketable stocks

Establishment Must have Shop Establishment

Lease Agreement Minimum three years of unexpired lease

agreement of the shop

Location Within the command area of the branch of

DBBL

Govt. Recognition Trade License and TIN

Account relationship with DBBL/other

Bank(s), if any

Satisfactory deposit account with DBBL for

minimum 06 months or account with any

other bank for one year or more

Business Experience At least 03 years of experience in this line of

trade

Average Inventory/stock Value should be at least twice the proposed

loan amount.

Tripartite Agreement

Landlord has to be agreeable to sign tripartite

agreement & comply other required

formalities in case of leased property /

position holding


Chapter – VI

This chapter will cover:

1. Findings

2. Recommendations

3. Conclusions


FindingsSME service in our country became more attractive to all kind of business owners. All kind

of banks are already started providing the SME services to the small and medium business

owners. They are creating new facilities to make it more helpful for the business owners.

They are trying to help poor people and family by providing this service to the women. The

government of Bangladesh also paying attention in this service, so the small and medium

business owners can get more benefits from the banks and others who provide this service to

them.

Ratio of Banks SME loan

Fig: 1.0


Return from SME

Fig: 2.0

Total Asset

Fig: 3.0


Recommendations1. Seed Money, Leasing, Venture Capital and Investment Funding:

There is a need for improving different aspects of financial services of SMEs, such as seed

money, leasing, venture capital and investment funding. There is a lack of long-term loans;

interest rates are high, Guarantee/Security issues, exchange risks etc. All these limit the

development of SMEs. Finance, both short and long term, should be provided at market cost

of capital. Fund should be made available through encouragement for setting up ‘Venture

Capital’ organization in Bangladesh. The concept of venture capital (VC) has successfully

Operating in the USA, EU countries, and Canada.

2. Establishment of Small Business Investment and Lending Corporation (SBILC):

We should start with ‘something effective’ for industrial development in general and the

SMEs sector in particular. Such a step, for example, could be the establishment of a separate

corporate body. That means a separate financing institution could be developed, with joint

ownership of the public and private sector. To make the proposed initiative effective in

achieving its goals, government may set up a Small Business Investment and Lending

Corporation (SBILC).

The SBILC can be formed under Small Business Investment and Lending Act passed through

the Parliament. Under SBILC there may have external and Internal Financing policies. Taken

from the different countries experiences the different types of financing policies and program

that can be introduced through SBILC, is enumerated below:

Low Doc Loan Program, which may allows small business to use a simple one-page

application for loans up to Tk.50, 000; loans between Tk.50, 000 andTk.1, 00,000

may require the one-page application plus personal tax returns for three years and a

personal financial statement from entrepreneur.


Direct loans, this type of loan may be provided directly to the small business with

public funds and no participation. The interest rate charged on direct loans depends on

the cost of money to the government and it changes as general interest rates fluctuate.

It can be limited to a fixed ceiling.

Immediate participation loan can be made from a pool of public funds and private

loans.

Guaranteed loan. When private lenders extend loans to small businesses, SBILCin

those cases can provide guarantee for repayment in case the borrower defaultson the

loan, which may be given for a defined amount of loan and up to certain percentage

e.g., 80% or 75% of loans.

Seasonal line of credit programme, may be offered for short-term capital to growing

companies needing to finance seasonal buildups of inventory or accounts receivable.

The maturity period cannot be exceeding 12 months and the company must repay it

form cash flow. Accounts receivables and inventory can be collateral for the loan.

Contract loan programme, is another short-term loan guarantee, but it is designed to

finance the cost of labour and materials needed to perform a contract. Maturity times

are up to 18 months.

Export working capital programme. Under this prgramme the SBILC may give

guarantee 90 percent of bank credit line up to a certain limit. In such case Loan

proceeds must be used to finance\e small business exports.

Disaster Loans. As their name implies, disaster loans can be provided to small

businesses devastated by some king of financial or physical losses (such as

tremendous flood, earthquakes). Disaster loan may carry below-market interest rates.

Greenline revolving line of credit programme. Greenline programme can be designed

to increase small companies’ access to working capital by providing them with

revolving lines of credit. It can be different than traditional loans, which may require

fixed monthly payments; the Greenline programme may employ highly flexible

revolving loans, in which cash-hungry small businesses able to draw on a credit line

only when they need the money. This loan programme can be designed to provide

short-term credit to allow small businesses to finance the sale of their products and

services until they can collect payment for them.

3. Periodical Professional Training Courses for SMEs & for Entrepreneurship

Development:


Periodical professional training courses should be arranged for technical staff of SMEs.

Moreover training in management of small enterprises and efficient marketing can also

provide. Islamic Chamber regularly organizes training workshops on management,

marketing, procurement of technologies, quality control system and financing of SMEs, for

the benefit of representatives of private enterprises and staff of member chambers indifferent

regions of the Islamic World. Training programme / workshop should be organized for the

development of SMEs capabilities to acquire enhanced knowledge and skills about how to

choose, use and improve technology. At present, no such institution exists except a project of

the BSCIC called ‘SCITI (Small and Cottage Industries Training Institute). Training on

different aspects of SMEs activities for entrepreneurs is crucial for the development of an

entrepreneurial.

4. Establishment of R&D Institute for Enterprise and Entrepreneurship Development,

Training and Research Institute:

In a country like Bangladesh, where entrepreneurial initiative is rare and shy, a separate

institute for enterprise and entrepreneurship development, training and research should be

developed. To make it a ‘center of excellence’ in SMEs development, it should be designed,

involving educational institutions, business associations, relevant government bodies, private

research agencies, and individual consultants having experience in SMEs development.

5. Establishment of a separate bank for women entrepreneurs:

Establishment of a separate bank for women entrepreneurs will accelerate the development of

women SME through their increased access to formal financial institutions.

6. Minimum quota for women entrepreneurs:

Maintaining a minimum quota for loan disbursement to women entrepreneurs and

proactively seek out female clients.

7. Training program for women entrepreneurs:

Increase the capacity of women entrepreneurs through training and awareness raising

activities on financial management, business procedures and other regulatory process such as

trade license, tax and VAT, etc. At the same time, initiatives should be undertaken to

sensitize the people working with respective regulatory institutions so that women SME can

easily arrange necessary documents for loan application and other procedures.

8. Implementation and Monitoring of Policy Measures for SMEs:

Only policy prescription is not the end, if it is not implemented through different measures

timely and properly. How far policy measures are implemented, along with, what effect -

desired or not - such policy measures has had on the development of SMEs should also be


monitored from time to time. This monitoring will provide feedback for taking corrective

actions, if necessary, to ensure desired effect of the policy adopted.

Conclusions

As the experiences of SME finance in Bangladesh suggest, there is critical need for putting in

place a credit delivery system that evaluates the credit worthiness of borrowers, on a basis

other than fixed asset ownership. The evaluation may require examining transaction records

of the borrowers, assessing the value of movable assets etc. There will also be the need for

enhanced post disbursement monitoring. An effective SME finance policy will have to cover

such enhanced cost of credit administration. In addition to credit guarantee or refinancing

facility there will have to be adequate rediscount facility for the primary lender to

accommodate these costs. The financing scheme should also include special provisions for

women entrepreneurs. Indeed, the Implementation of appropriate policies and strategies is a

prerequisite to harness sustainable competitiveness of SMEs around the country. Suggestive

remarks have been stipulated in this write up. With that paradigm, proactive policy is

essential to enact them. The first step this regard is to make firm’s filly aware of the

competitive challenges they have to face. The next step is to help SMEs prepare to meet the

challenge by understanding their strengths and weaknesses and providing the inputs they

need to help them upgrade. The main inputs are finance, market information, training,

infrastructure development, R&D, management tools, technology, skills and links with

institutions for support services. SMEs are considered to be the seedbed for the development

of entrepreneurial skills and innovation. Small capital requirement makes easy entry and exit

possible and private sector entrepreneurial activities have many important spillover and

positive externality effects. However, liberalization of the economy along with rapid

globalization has posed severe challenges to SMEs not only in international markets but also

in the domestic economy. Since SMEs are based on relatively small investment, their survival

depends on readily available markets with easy access. In today’s world, market development

is a much more challenging task, which requires coordinated efforts by individual business

enterprises and the Government. Bangladesh has failed to maximize the benefits derived from

the SME sector, which promises and needs to play a pivotal role in promoting and sustaining

the industrial as well as overall economic growth. The failure can be attributed to various


reforms and trade liberalization measures that have squeezed the sphere of Government’s

activity in business. Consequently, the private sector has to lead the economy in a dynamic

growth path. The role of SMEs in providing productive employment and earning

opportunities has emerged as an important concern among policy makers, donor agencies and

researchers. Regardless of the correct magnitude, SMEs undoubtedly play a very important

role in the economy of Bangladesh in terms of output, employment, and private sector

activities. They are quite predominant in the industrial structure of Bangladesh comprising

over 90% of all industrial units. Together, the various categories of SMEs are reported to

contribute between 80-85% of industrial employment and 23% of total civilian employment

(SEDF, 2003). However, serious controversies surround their relative contribution to

Bangladesh’s industrial output due to paucity of reliable information and different methods

used to estimate the magnitude. The most commonly quoted figure by different sources

(ADB, World Bank, Planning Commission and BIDS) relating to value-added contributions

of the SMEs is seen to vary between 45-50% of the total manufacturing value added.

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