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Welcome to

My Presentation

Presented ByAyesha Sultana

ID: 12102373Program: BBA

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SME Loan Lending Activities&

Reconciliation Processof IDLC Finance Limited

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Aim

The aim of my presentation is to give you a clear idea about how IDLC Finance Limited is leading their SME Loan & how they run their Reconciliation Process.

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Body Part

Organization Part

Actual Task Part

Project Analysis Part

Presentation Outline

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Body Part

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Introduction

Non-Bank Financial Institutions (NBFIs) play a significant role in meeting the diverse financial needs of various sectors of an economy.

According to Goldsmith (1969), financial development in a country starts with the development of banking institutions.

As the development process proceeds, NBFIs become prominent device in the banking sector.

IDLC Finance Ltd, a leading financial institution of the country achieved significant growth in all areas of business up to 2nd quarter of the year 2015.

IDLC began its operation in 1985 as the first leasing company in Bangladesh. The company offering wide range of products, among them current SME products are

Small Enterprise Financing (SEF), Medium Enterprise Financing (MEF), Supplier Finance, IDLC Purnata (For Women), Commercial Vehicle Loan, JICA-SME Loan etc.

The company also strengthened its presence in the country's growing stock market with launching a subsidiary-IDLC Securities Limited-which is offering full-fledged brokerage service for retail and institutional clients.

The main focus on this report is to analyze SME Loan Lending Activities & Reconciliation Process of IDLC Finance LTD.

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The main objective of the study is to determine the loan lending activities & reconciliation process of IDLC Finance Ltd, Uttara Branch and to gather practical knowledge regarding financing system and its operations.

Broad Objective

To know SME loan lending activities & study of the reconciliation process.

Objectives of the Study

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Scope of the Report

In my report, I will try to explain the “SME Loan Lending Activities & Reconciliation Process of IDLC Finance LTD” So; my presentation will give a clear picture about the total process on loan lending activities & reconciliation process of IDLC Finance Ltd, Uttara Branch. The scope of the study is limited to organizational set up, functions & performance.

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Limitation of Study In spite of related peoples willingness I could not avail the full concentration as I

supposed to have. The officers are extremely busy with their assigned jobs. On the way of my report, I have faced the following problems that may be termed

as the limitations of the study. The main limitations encountered in producing this report are:

The main constrain of the study is insufficiency of information, which will require for the study. There are various information the company’s employee can’t provide due to security and other corporate obligations.

Due to the time limit, the scope and dimension of the study has been shortened.

Sometimes it was very difficult to get sufficient help from the employees of IDLC Finance Ltd, Uttara Branch due to their limited executive hours. They did not give me more information for maintaining their secrecy.

Sufficient records, publications were not available. The constraints narrowed the scope of real analysis.

Lack of opportunity to have conversation with higher authority. Due to lack of experience, there may have been faults in the report though

maximum interviewees have been given to avoid any kind of slip-up.

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Methodology

Primary

Sources of Data

• Face to face conversation of the officers.

• Face to face conversation of the client.

• Direct Observations.

Secondary Sources of Data

• www.idlc.com

• The annual reports of IDLC Finance Ltd. – 2014

• Monthly Business Review published by IDLC Finance Ltd.

Data collection

To make the report more meaningful and presentable, two sources of data and information were used widely. For the secondary data collected from internet and primary data collected from interviewer.

The information for the loan lending activities & reconciliation process of IDLC collected from primary and secondary sources. For gathering information, I discussed the customers and employee who are working on SME activities. For hypothesis development and hypothesis testing- interview with the customers and employee and practical case observation was done.

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Organization overview(IDLC Finance Ltd.)

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Registered Name IDLC Finance Limited

Type of Organization Non-Banking Financial Institution

Ownership Public Limited Company

Governing Act Financial Institution Act 1993

Subsidiaries1. IDLC Securities Limited (Since September 18, 2006) and

2. IDLC Investments Limited (Since August 16, 2011)

Regulatory AuthorityBangladesh Bank &

Capital Market Operations are regulated by the Securities Exchange Commission

Branches 31 Branches

Human Resources 1200 Permanent employees

Registered AddressBay’s Galleria

57, Gulshan Avenue, Gulshan 1, Dhaka-1212

Country Bangladesh

Phone +880 (2) 893 2340, 891 9036

Facsimile +880 (2) 895 9190

E-mail idlcuttara@idlc.com

Products/Services Corporate Division, Consumer Division, SME Division & Capital Market

SinceIt was incorporated on May 23, 1985 and commenced its operation on February 22,

1986.

Website www.idlc.com

Organization Profile at a glance (IDLC Finance LTD.)

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Corporate Division

Consumer Division

SME Division Capital Market

1. Corporate Finance

2. Structured Finance

1. Deposit Schemes2. Home Loan3. Car Loan4. Personal Loan5. Online Account Service

1. Small Enterprise Finance - Abashan Loan - Business Loan2. Medium Enterprise Finance3. Supplier Finance4. IDLC Purnata5. SME Advantage Card6. Commercial Vehicle Loan7. JICA-SME Loan

1. Portfolio Management 2. Investment Banking3. Research4. Brokerage Service5. Internet Trading6. Fund Deposit & Withdrawal by BEFTN

Table : Products & Services of IDLC Finance Ltd.

Products & Services of IDLC Finance Ltd.

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Corporate Philosophy: “Discharge functions with proper accountability for all actions and results and bind to the highest ethical standard.”

Goals: “Long-term maximization of stakeholders’ value.”

Strategic Objectives of IDLC Finance Ltd: Grow and develop our talent pool Fully leverage the new core banking

platform Optimize distribution points Grow and diversify funding sources Grow sales and service capabilities in

the Consumer Division Aggressively grow the SME portfolio Focus on top-tier clients in the

corporate segment Embrace internationally-accepted

corporate governance and sustainable business practices

Strategy

Smart

Goals

Objectives

Vision

Strategic Posture of IDLC

Figure : Strategic Posture of IDLC Finance Ltd.

Vision: “IDLC Finance Limited will be the best financial brand in the country”.

Mission: “IDLC Finance Limited will focus on quality growth, superior customer experience and sustainable Business practices”.

Organization Analysis

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Financing Happiness: By actively financing quality business growth and consumer finance in our developing economy, the IDLC Group is helping to improve the quality of life of people & communities across Bangladesh.

Our focus is on financing those businesses and households which will, in turn, add value to our society.

Figure : Core Values of IDLC Figure : Logo of IDLC

Core Values & Logo of IDLC Finance Ltd.

IDLC Code of Conduct and Ethics In accordance with approved and agreed Code of Conduct of IDLC, IDLC employees conduct:

Act with integrity, competence, dignity and in an ethical manner when dealing with customers, prospects, colleagues, agencies and public.

Use reasonable care and exercise independent professional judgment. Not restrain others from performing their professional obligations. Maintain knowledge of and comply with all applicable laws, rules and regulations. Deliver professional services in accordance with IDLC policies and relevant technical and

professional standards. Respect the confidentiality and privacy of customers, people and others with whom they do business.

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At IDLC, their strategy is focused on three core divisions: SME, Corporate and Consumer. IDLC’s two wholly-owned subsidiaries, IDLC Securities Limited and IDLC Investments Limited are engaged in providing a wide range of brokerage and capital market solutions. Their overall strategic objectives include:

Key Performance Indicator

Description Progress

Drive sustainable

profits

They focus on businesses and activities that enable to generate recurring and sustainable cash flows and profits

Operating profit and cash flow from operations increased. Strong growth in SME sector while decent growth in the Corporate and Consumer businesses.

Build client franchisee

IDLC develop and maintain strong customer facing relationships that deliver repeat business and recurring income.

Loan advances increased 14.97% in 2014 for the sixth consecutive year with continued high repeat business. Concurrently, the deposit base enhanced 21.23% in 2014, reporting growth for the sixth successive year.

Strengthen prudence in

decisions and

efficiency in operations

They maintain strong funding, capital and liquidity positions at all times and are committed to maintaining loan book/ portfolio quality.

Maintained a strong capital position while efficiently employing capital for loan book growth, a diverse and relatively low-cost funding position with prudent maturity profile & a good level of high quality liquidity while improving Balance Sheet efficiency.

Deliver shareholder

returns

They aim to generate sustainable long-term growth in dividends and shareholder returns.

Maintained respectable return on equity despite a challenging year particularly in capital market. Proposed full year dividend: 25% stock and 10% cash dividend.

Strategies of IDLC Finance Ltd.

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Grow SME ,Consumer portfolios and selectively grow Corporate business

Widen focus on newer areas including women entrepreneurship and green banking

Execute capital market mandates including listings and IPOs

Widen geographic spread by establishing 5 new branches

Focus on recruiting sales professionals and for reinforcing mid management team

Increasingly recognize the responsibility to the communities

Continue to embrace strategies that are consistent with growing shareholder value

Advertisement is the most important factors to introduce any organization, goods products or information to the people, but IDLC is not eager to advertisement that can show their activities in the society. However IDLC is posting bill boards in Dhaka city and posting video commercial on YouTube.

In every branch should have women interpreter, who will deal with women customer and understand them about their activities.

In each branch there should have extra space for Intern, because Inters are the potential employees, customers and can be rival of IDLC finance Ltd in future.

IDLC should spread their services all over the Bangladesh.

IDLC can create new investment mode to increase their investment mode by huge research & study.

As it is a very price competitive market IDLC should try to provide quick, fast and quality customer service. The company should finds out the unique selling point of its products to counter competition.

RecommendationFuture Prospectusof IDLC Finance Ltd.

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IDLC SME Review

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SME REVIEW

Definition of SME in Bangladesh

• There is no universally accepted definition of SME; in fact it is not possible. Because it depends not only on investment level and number of workers but also on technologies and technical complexities of production, degrees of skills demanded from workers and managers, end use of products and so on, which varies from country to country.

• The definition of SME given by Government of Bangladesh in its Industrial Policy 2010 in terms of size of capital and employment of labor has been followed.

Definition of Small Enterprise

• In case of manufacturing, small industries/enterprises are those that have assets worth Tk 5.0 million (50 lac) to Tk 100 million (10 core) (excluding land and factory building, but including replacement value) and/or employ 25 to 99 workers.

• In services industry and business, small enterprises are defined as those that employ 10 to 25 workers and have assets worth Tk 0.5 million (5.0 lac) to Tk 10 million (1.0 core).

Definition of Medium Enterprise

• In the manufacturing sector, industry/enterprises are considered as of medium size if they have assets worth Tk 100 million (10 core) to Tk 300 million (30 core) (excluding land and factory building, but including replacement value) or employ 100 to 250 workers.

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IDLC have introduced several innovative and customized products based on demand assessment, economic indicators and in compliance with prevalent rules and regulations. IDLC offer an arsenal of products like: Revolving short term loans (RSTL) that helps SMEs meet their short term cash-flow gaps SME seasonal loans with customized repayment facilities that addresses the need for customizing

repayment modalities and timing due to business seasonality Women entrepreneur loans offer the most attractive terms and conditions for women to embrace

entrepreneurship Commercial vehicle loans and agro loans are supports for logistics and agro-based industries IDLC supplier financing provides an array of financial products for suppliers by providing collateral free

pre/ post-delivery (of supplies) financing SME Shurokkha, a new and novel product introduced recently, is a life insurance coverage facility that

takes care of the outstanding debt that a policyholder leaves behind and protects his/ her family from the loan liability in case of his/ her sudden demise

SME Division Review  

Status within company : Largest

Services : Lease finance, term loans and capital expenditure

loans, deposits among others

Disbursements, 2014 : Taka 12,053 million (2013: Taka 10,392 million)

Disbursements CAGR over the past five years : 45.19%

Total number of relationships : 7,619

SME of IDLC Finance Ltd.

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IDLC SME Products Overview

• Eligibility: • Entrepreneurs need to have minimum 2 years of

experience in the same line of business.• The Business must be a going concern with minimum

operational experience of 2 years• Loan Limit: Minimum Taka 5 lac to maximum Taka 1.5

crore• Key Features:

• IDLC Offer loan without any collateral for up to Taka 15 Lac

• Offer partial cash-secured loan up to Taka 70 Lac• Borrowers having loan facilities with other financial

institutions can also avail this facility• Bring fast and quality service at your doorstep

SME Loan

• Eligibility: • Entrepreneurs with minimum 1 year experience in the

same line of business • Business must be a going concern with at least 1 year in

operation• Monthly income from rental and other sources must be

minimum Taka 60,000• Loan Limit: Minimum Taka 3 lac to maximum Taka 40 Lac• Key Features:

• IDLC offer loan without any collateral for up to Taka 15 Lac

• Borrowers having loan with other financial institutions can also avail Abashan Loan

• Borrowers enjoy a convenient repayment system through Equated Monthly Installments (EMI)

• Bring fast and quality service at your doorstep

ABASHAN Loan

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Lease Financing

• IDLC offer Asset backed financing against industrial machineries, commercial equipments, office equipments, generators, vehicles, vessels, engines, etc. IDLC is offering flexible terms in case of security/collateral against the facility. Usually financing terms are between 2 to 5 years. Repayment can be made through Equal or Structured rentals payable every month. Legal ownership remains in the name of IDLC throughout lease period, and is transferred back to the client at the end of the term.

Term Loan Financing

• IDLC offer Term Financing to meet regular capital/fixed expenditures such as balancing of production line, modernization of manufacturing process, expansion of capacity and space, etc. Financial offered usually for a term of 1½ to 5 years. Repayment is made through monthly payment of Equal or Structured installments. Flexible terms are offered regarding security/collateral against the facility.

Project Financing

• IDLC offer Project Financing facilities to clients for setting up a new unit in addition to their existing product line and capacity, starting a new concern as part of an existing group, starting a new Joint Venture project with an existing company, etc. The financing terms varies based on the product type. For Fixed-cost financing, the term may be extended up to 6 years. Different repayment structure can be designed depending on the financial product.

Supplier Finance

• Supplier Finance is a revolving financing facility offered against receivables created due to supply of goods or delivery of services on credit.

Medium Enterprise Finance (MEF)

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• Be it a new or an old business, small or medium, IDLC Purnata will provide a comprehensive solution that will provide women owned businesses the necessary acceleration that it requires. • Working Capital and Long term Financing Facility for Women

Owned Businesses• Minimum Loan Amount – BDT 3 lac• Maximum Loan Amount – Contingent on the Nature and

Condition of the Business, Unsecured Loan – Up to BDT 25 lac• Determination of Payment Structure Based on Cash Flow• 10% Interest for Loans up to BDT 50 lac under Bangladesh Bank

Refinancing Scheme• Grace period: 3-6 months for New Ventures in Manufacturing or

Service Sector• Eligibility

• Must have Minimum 1 year of Business Experience (Supported by Trade License)

• Age of the Applicant – 20 to 60 years

IDLC Purnata

• SME Loan by JICA is a loan facility under the two-step fund, provided by Japan International Cooperation Agency (JICA) offered to small and medium business enterprises of Bangladesh. This Term Loan facility is offered for the purpose of meeting Working Capital requirements and/or purchasing fixed assets.

• Eligibility:• Entrepreneurs having a minimum of 1 year experience in the

same line of business• The Business must be a going concern with minimum operational

experience of 1 year• Eligible Projects:

• Fixed assets (including machinery, equipment, factory buildings and related civil works)

• Technical know-how, consultancy services and training• Working capital (including initial stocks or increase in stocks of

raw materials, spare parts and components)• Leasing of industrial and business equipment

• Loan Limit: Minimum BDT 0.50 million to maximum BDT 50.00 million

• Loan Term: • Fixed Assets Financing: 2 to 5 years• Working Capital Financing: 1 year, annually renewable up to 5

years

JICA-SME Loan

Other SME Loans Of IDLC Finance Ltd.

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IDLC SME LOAN DISBURSEMENT SUMMARIES

IDLC finance limited is growing its SME loan disbursement amount continuously with growing demand. Growth in SME loan demand states that the entrepreneurs are growing, hence the disbursement amount are growing. The following graph shows SME loan disbursement summary from 2010-2014.

SME Disbursement Growth Rate Table

Year Growth Rate

2014 15.98%

2013 38.60

2012 67.18

2011 65.38%

Figure : SME Loan Disbursement Summary

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Type of Securities:The following listed securities may be obtained from borrower against loan to enterprises, either individually or in a combination. It is really up to the IDLC what they would like to accept as security from the borrower as not all the securities stated below are suitable:

Mortgage Security Classification

Registered Mortgage to IDLC Finance - Fully Secured

Cash Deposit/FDR Deposit - Partial Secured

Memorandum of Deposit of Title Deed - In-secured

Sanction Letter: Once a loan is approved, the borrower is advised by a “Sanction letter” which states the terms and conditions under which all credit facilities are offered and which forms an integral part of their security documentation.

Refinancing of a Loan:Refinancing of Loan depends on track record of previous loan. Usually, repayment behavior and expansion of business of the borrower are the main considerations for renewal and enhancement of the loan amount.

Time Frame for Approval: The time frame for approving/ declining a credit proposal shall maximum 21 working days at SME Branch.

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My Actual Task Partin IDLC Finance Limited

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Activities Learned During Internship

A glance view of my works done during the Internship period is as:

Writing booklet and cover with envelop.Making Security envelop with Mortgage like registered land

document, rental deed, mutation record, land tax receipt, duplicate carbon receipt and non encumbrance certificate.

Giving entry of insurance and renew these after maturity.Writing the Sanction letter and sending these on Tongi and

Gazipur Branch.Updating cheque. Preparing incomplete documentation list.Attaching stamps.Document Stamp Cancellation.

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Target group

The target groups for SME financing of IDLC Finance Ltd. are Entrepreneurs who are running small business units and willing to expand the business, Entrepreneurs who are willing to set up small scale manufacturing units/ service oriented units, Entrepreneurs who are involved in agro-based & agro-processing activities in small scale, Small scale contractors who execute work orders, supply orders and are required to be financed for execution of contracts; Women Entrepreneurs shall be given preferences.

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SME Loan Lending Activities of IDLC Finance Ltd.

Selection of Potential Enterprise for SME

• The business must be in operation for at least one year

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

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

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

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

• The business must be located ideally close to the market and the source of its raw materials/suppliers. It should have access to all the utilities, skilled manpower’s that are required

Entrepreneur Selection Criteria• The entrepreneur should

be physically able and in good health, preferably between the age of 25-50.

• The entrepreneur must have the necessary technical skill to run the business.

• The entrepreneur must have and acceptable social standing in the community.

• Suppliers or creditors should corroborate that he pays on time and is general in nature

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

Guarantor Selection Criteria

• The guarantor must have the ability to repay the entire loan and is economically solvent (Check his net worth)

• The guarantor should be aware about all the aspect of loan.

• Govt. and semi-govt. officials can be selected as a Guarantor such as school teacher, college teacher, doctor etc

• Police, BDR and Army persons, political leaders and workers, and Imam of mosque cannot be selected as a guarantor

• The guarantor should know the entrepreneur reasonable well.

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The loan amount is between Tk. 3 laces to 5 cores (50 million)

SME will impose loan processing fees for processing a loan proposal

Loan can be repaid in two ways1. In equal monthly loan installment with monthly interest payment

Loan may have various validates, such as, 3/6/9/12/15/18 /24 /30 /36 months

Loan that approved will be disbursed to the client through that account by account payee cheque in the following manner: Borrower name, Account name, Banks and Branch’s name

The loan will be realized by 1st each months, starting from the very next month’s & the date of disbursement, through account payee cheque 2. The borrower has to issue an account payable blank cheque in favor of IDLC Finance Limited before any loan disbursement along with all other security

Terms and Conditionsof SME Loan

Interest Rateson SME loan

Interest rates are determined based on the security of loan. IDLC SME loan interest rate is fixed with each loan agreement form 17-19.5%.

First IDLC determine the depth of mortgage security and the lower interest rate fixed with fully secured mortgage and vice versa.

10% percent interest rate is applicable for women entrepreneurs and for agro based business.

Male entrepreneurs will get this 10% facility if his business is agro based like Furniture shop, Bakery, Restaurant, Fisheries, chicken or dairy firms.

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Credit Administration’s Activities

Documentation: SME Branches shall ensure that all security documentation complies with the terms of approval.

Legal Vetting: Mortgage documents shall be properly vetted by the Bank’s Legal Counsel. Lawyer’s Satisfaction Certificate shall have to be obtained regarding documentation where there are securities other than Personal Guarantee and Financial Obligation.

File Maintenance: Separate and independent file(s) for each customer shall be maintained by the Branch.

Disbursement: SME departments shall ensure that the disbursement of loan is made only after all terms and conditions of approval have been met and all security documentation is in place.

Monitoring: The success of the SME financing depends on the extensive and intensive post disbursement supervision, follow-up and monitoring.

Compliance: SME Branches shall ensure timely submission of returns on SE financing as per requirement of any regulatory authority.

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SME loan Procedures of IDLC Finance Ltd.Loan Sanction activities

1.Select Potential Enterprise• To initiate for

SME loans, in this step the CRO conduct a survey in a certain area and identify potential enterprises. Then they communicate with entrepreneurs and discuss the SME program.

2.Loan Presentation• The function of

CRO is to prepare loan presentation based on the information collected and provided by the entrepreneur about their business, land property.

3.Collect Confidential Information• Another

important function of a CRO is to collect confidential information about the client from various sources. The sources of information are suppliers regarding the client’s payment, customers regarding the delivery of goods of services according to order, various banks where the client has account, which shows the banks transactions nature of the client.

4.Open Clients Accounts in any Bank• When the CRO

decided to provide loan to the client then he/she help the client to open a bank account if he or she have no bank account.

5.Fill Up CIB Form• CRO give a CIB

(Credit Information Bureau) form to the client and the client fill and sign in it. In some case if the client is unable to write then the CRO fill the form on behalf of the client, Then CRO sends the filled same department.

6.Sending CIB to Bangladesh Bank• SME department

collects all information and sends the CIB form to Bangladesh Bank for clearance. Bangladesh Bank return this CIB form within 10-12 days with reference no.

7.Loan decision considering CIB report• Considering CIB

report, IDLC Finance Ltd. decide whether it will provide loan the client or not. If the bank decides to provide loan then the SME of head office keep all information and send all papers to the respective unit office to apply with all necessary charge documents.

8.Loan Sanction • The respective

unit office sanctions loan to the client if it is 3 to 5core.The head of SME sanctions the loan and sends the sanction letter including all documents to the operation division for disbursement and informs the respective unit office regarding sanction of the loan.

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Disbursement of SME loan by Operation Division

Pre Disbursement Manual Activities- • Prepare loan file: Receiving all documents,

operation Division prepare a loan file with all documents received from the unit office.

• Charge documents checking: The operation division checks all charge documents.

• Documents deficiency and problem resolving: If there is any error found then it informed to the respective CRO. If the application form is not filled properly then the file send to the CRO to fill the application properly.

• Prepare disbursement list: The operation division lists all new sanctioned client’s details and send a request to the SME division through internal mail.

• Disbursement of the amount: Sending the list to the SME division of IDLC for disburse the amount, the SME division disburse the amount to the client through the mother account of the clients bank. But SME division first makes a Bangladesh Electronic Fund Transfer Network (BEFTN) Request from clients.

Post Disbursement Manual Activities-

• Sent Sanction Letter to the Customer: After disbursement of the loan, IDLC sent Sanction Letter (Customer Copy) to the customer and keeps the Office copy.

• Write the Account No. & Agreement Date: Before loans disburse, Relationship Manager completes booklet with basic information. When loans disburse, Operation Department makes an account number. After making Loan Account No. and Agreement date, SME division fills up this necessary information.

• Take Signature from Branch in Charge: After writing of all booklets, SME department takes signature from branch in charge. Without his signature booklets are invaluable.

• Collect stamps: Collects stamps from Bangladesh Bank to attach in booklets.

• Document stamp cancellation: After attaching stamps, these are cancelled in booklet.

• Collect Original Insurance & entry it: Original insurances are collected from customers and entry these in private software of IDLC. After sometimes they had to be renewed.

• Rechecking and Rearranging of all the booklets: Rechecking of Land Documents, Title Deeds, Mutation Records, land TAX Receipts, Duplicate Carbon Receipts, Non- Encumbrance Certificates and Insurances. At last rearranging of all the booklets.

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SME Loan Recovery Procedures

Receive SMS/Fax for installment deposits: When the borrower repays any installment of the loan then he/she informs it to the CRO. Then the CRO sends an SMS through mobile phone or a Fax to the SME division informing the repayment. A SME division collects these SMS /Fax and takes a paper print of these SMS.

Entry the installment information: SME division entries the repayment installment information to the banking software.

Check SMS/Fax and solve problems (If any): The SME division is responsible for all entry. If there is any error found in future then the respective officer who is entering this information will be liable for it. User ID will easily identify it. So they are always aware of to ensure the correct entry.

Repayment voucher check and posting: If it confirmed that all entering information is correct and there is no error, then the responsible officer of the SME division posts it. If one time posted, it is not rectifiable without permission of the higher authority. So the SME department is always aware of regarding the recovery procedures of SME loan.

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Closing procedures of SME loan

Pre-closing manual activities -

• Receive SMS/Fax requesting for closing: The borrowers repay the loan as per repayment schedule. When the repayment is being complete the borrower request the CRO to close his loan account. CRO sends a SMS/Fax the operation division requesting to close the loan account of the respective borrower.

• Print the SMS/Fax: Receiving the request from the respective CRO, the SME divisions print the paper and takes necessary steps to close the account.

• Bring the loan file from archive: The loan account file of the respective borrower is brought from the archive. And the documents of file are checked with previous record.

• Obtained approval from the concern authority: It is require the permission of concerned authority to close the loan.

• Checking: The SME division checks the loan status. If there is any difference found with the SMS/Fax from unit office and previous record then deposits sleeps are re-checked. Then the operation division calculates the total balance of the loan account.

• SMS sent to concerned CRO: SME division sent an SMS to the concerned CRO informing the current balance of the requested loan account.

• Receive and print closing SMS/Fax checking & freezing: The concerned CRO send a final SMS to SME division informing that the respective borrower cleared all his liabilities regarding the loan. The SME division takes paper print of the SMS, check it and finally close the loan account.

• Entries for loan closing • Pre closing data entry: Completing the manual

activities, the SME division enters some information for future requirement.

• Activate account closing: Completing above mentioned tasks, the SME division finally close the requested loan account.

Post Closing Manual Activities -

• Re-checking with deposit slip: Completing all activities, the SME division re-checks all deposit sleeps of the loan account. If there is any error found then it is immediately resolved, otherwise the file sends to the archive for future requirements. If the client asks to return security then the SME division releases security completing following tasks: • Documents photocopy before security release • Closing certificate issuing and security release

• Daily Management Information System (MIS) updating for loan closing: Finally the authorized officers of the SME division update the software by closing the respective loan account.

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SME Loan Reconciliation Process of IDLC Finance Ltd.

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Project Analysis Part

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Survey Research on SME loan lending Activities & Reconciliation Process Of IDLC Finance Limited

Problem Statement

During my internship I was working with the SME department under Operations Division of IDLC Finance Ltd. From my observation and experience I have found some problem in SME Loan Lending Activities & Reconciliation. That’s why I wanted to find the reasons behind the problem and I have found some, and now I would like to suggest some solutions of them. For this reason I am doing this research.

Summary of the Research

In this report I have discussed about the how the organization is lending their SME loan and reconciled. On the other hand I have focused on some most important aspect which would be most effective to develop SME Loan Lending Activities and Reconciliation Process.

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Research Objective To identify the causes of problem. To identify how they face this types of problem. To identify possible solution for this problem.  

Research Methodology◦ Population Definition

Type of Research: Descriptive Population: All customers of IDLC Finance Limited, Uttara Branch(Approximate

Size 290, August to November’15) Unit: The population unit has been defined both male and female. Extent: IDLC Finance Limited, Uttara Branch. Duration : 25 August,2015 – 25 November, 2015

◦ Sampling Plan Sampling Unit: Customers of IDLC Finance Ltd. Uttara Branch. Sample Frame: Total employees are consisting of IDLC Finance Ltd, Uttara

Branch. Sample Size: 29 customers. Sampling Procedure: Simple Random Sampling ( Because each number of a population has an equal

chance included in the sample)

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Research Design ◦ Research Approach – Survey◦ Research Instrument –

Questionnaires with Structure question. 5 Point Likert Scale Questions t-test (Because we know that if there are being less than 30 of sample size where my sample

size is 29, t-test is accepted) Source of Data Collection

◦ Primary Sources: The primary data has been collected from field survey through the questionnaire structure (Appendix-Survey Questionnaire). The questionnaire structure has been solved face to face interview with the selected sample.

◦ Secondary Sources: For this survey I do not use any secondary data. But I have used some statistical tools for analyzing the result.

Data Analysis◦ Result Findings: MS Excel◦ For analysis of data Microsoft Word, Microsoft Excel, different tables and graphs were used to

make the data meaningful. Hypotheses Test: t-test

◦ As my sample size is less than 30, I have used t-test for the study. The following formula has been followed:

t-test =

µ = mean valuen = sample sizes = Standard deviation = Average

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1. HA : Giving low interest rate for taking SME loan will be positively effective for IDLC Finance Limited.

2. HA : Giving the priority on fresh entrepreneur who have no experience will be positively effective for IDLC Finance Limited.

3. HA : Reducing time for loan lending activities will be positively effective for IDLC Finance Limited.

4. HA : Reducing pending documents for starting loan lending activities will be positively effective for IDLC Finance Limited.

5. HA : More co-operative employees of SME department will be positively effective for reconciliation process for IDLC Finance Limited.

6. HA : Effective communication system will help IDLC Finance Limited to get back money on time.

Hypothesis Development

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H1 H2 H3 H4 H5 H6

1=Strongly disagree 3 2 2 2 0 0

2=Disagree 3 7 0 2 3 0

3=Neither agree nor disagree 4 4 0 6 5 4

4=Agree 12 10 14 14 9 10

5=Strongly agree 7 6 13 5 12 15

Total 104 98 123 105 117 127

Average ( ) 3.586 3.379 4.241 3.621 4.034 4.379Standard Deviation(s) 1.255 1.265 1.023 1.083 1.017 0.728

t-test value 4.661 3.740 9.212 5.577 8.116 13.919

Hypothesis Testing

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Graphical Representation & Interpretation

H0: Giving low interest rate for taking SME loan will not be positively effective for IDLC.HA: Giving low interest rate for taking SME loan will be positively effective for IDLC.

I want to test the null hypothesis.

HO: μ = 2.5

HA: μ ≠ 2.5

n = 29 ( n < 30 so, I may use t – test)

Here = 3.586

s = 1.255

tcal = ( – μ)/ (s/√n) = 4.661, with df = n-1

The critical value of t with df 28 at α = 0.05

level of significance is

t0.025, 28 = 2.048 (for two tailed test)

Since tcal > t0.025, 28. So, the null hypothesis is rejected or not accepted. So at 5% level of significance, it can be said that Giving low interest rate for taking SME loan will be positively effective for IDLC.

Hypothesis – 1

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H0: Give the priority on fresh entrepreneur who have no experience will not be positively effective for IDLC Finance Limited.HA: Giving the priority on fresh entrepreneur who have no experience will be positively effective for IDLC Finance Limited.

I want to test the null hypothesis.HO: μ = 2.5

HA: μ ≠ 2.5

n = 29 ( n < 30 so, I may use t – test)Here = 3.379 s = 1.265 tcal = ( – μ)/ (s/√n) = 3.740, with df = n-1

The critical value of t with df 28 at α = 0.05 level of significance is t0.025, 28 = 2.048 (for two tailed test)

Since tcal > t0.025, 28. So, the null hypothesis is rejected or not accepted. So at 5% level of significance, it can be said that Giving the priority on fresh entrepreneur who have no experience will be positively effective for IDLC Finance Limited.

Hypothesis – 2

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H0: Reducing time for loan lending activities will not be positively effective for IDLC Finance Limited.HA: Reducing time for loan lending activities will be positively effective for IDLC Finance Limited.

I want to test the null hypothesis.

HO: μ = 2.5

HA: μ ≠ 2.5

n = 29 ( n < 30 so, I may use t – test)Here = 4.241 s = 1.023

tcal = ( – μ)/ (s/√n) = 9.212, with df = n-1

The critical value of t with df 28 at α = 0.05 level of significance is

t0.025, 28 = 2.048 (for two tailed test)

Since tcal > t0.025, 28. So, the null hypothesis is rejected or not accepted. So at 5% level of significance, it can be said that Reducing time for loan lending activities will be positively effective for IDLC Finance Limited.

Hypothesis – 3

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H0: Reducing pending documents for starting loan lending activities will not be positively effective for IDLC Finance Limited.HA: Reducing pending documents for starting loan lending activities will be positively effective for IDLC Finance Limited.

I want to test the null hypothesis.

HO: μ = 2.5

HA: μ ≠ 2.5

n = 29 ( n < 30 so, I may use t – test)Here = 3.621 s = 1.083

tcal = ( – μ)/ (s/√n) = 5.577, with df = n-1

The critical value of t with df 28 at α = 0.05 level of significance is

t0.025, 28 = 2.048 (for two tailed test)

Since tcal > t0.025, 28. So, the null hypothesis is rejected or not accepted. So at 5% level of significance, it can be said that Reducing pending documents for starting loan lending activities will be positively effective for IDLC Finance Limited.

Hypothesis – 4

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H0: More co-operative employees of SME department will not be positively effective for reconciliation process for IDLC Finance Limited.HA: More co-operative employees of SME department will be positively effective for reconciliation process for IDLC Finance Limited.

I want to test the null hypothesis.

HO: μ = 2.5

HA: μ ≠ 2.5

n = 29 ( n < 30 so, I may use t – test)Here = 4.034 s = 1.017

tcal = ( – μ)/ (s/√n) = 8.116, with df = n-1

The critical value of t with df 28 at α = 0.05 level of significance is

t0.025, 28 = 2.048 (for two tailed test)

Since tcal > t0.025, 28. So, the null hypothesis is rejected or not accepted. So at 5% level of significance, it can be said that More co-operative employees of SME department will be positively effective for reconciliation process for IDLC Finance Limited.

Hypothesis – 5

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H0: Effective communication system will not help IDLC Finance Limited to get back money on time.HA: Effective communication system will help IDLC Finance Limited to get back money on time.

I want to test the null hypothesis.

HO: μ = 2.5

HA: μ ≠ 2.5

n = 29 ( n < 30 so, I may use t – test)Here = 4.379 s = 0.728

tcal = ( – μ)/ (s/√n) = 13.919, with df = n-1

The critical value of t with df 28 at α = 0.05 level of significance is

t0.025, 28 = 2.048 (for two tailed test)

Since tcal > t0.025, 28. So, the null hypothesis is rejected or not accepted. So at 5% level of significance, it can be said that Effective communication system will help IDLC Finance Limited to get back money on time.

Hypothesis – 6

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H1 – Around 24% respondents had strongly agreed that need to give low interest rate for taking SME loan, 42% agreed and 14% neither agree nor disagree.

H2 – With the statement that giving the priority on fresh entrepreneur who have no experience, around 21% respondents had strongly agreed, 34% agreed and 14% neither agree nor disagree.

H3 –Around 45% respondents had strongly agreed, 48% agreed and 0% neither agree nor disagree with the statement that reducing disbursement time for starting loan lending activities.

H4 –With the statement that reducing pending time for starting loan lending activities around 17% respondents had strongly agreed, 48% agreed and 21% neither agree nor disagree.

H5 –Around 42% respondents had strongly agreed, 31% agreed and 17% neither agree nor disagree with the statement that Employees of SME department are co-operative for reconciliation process.

H6 –With the statement that communication system is more effective to get back money on reconciliation system around 52% respondents had strongly agreed, where 34% agreed and 14% neither agree nor disagree.

Research Findings

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IDLC Finance Limited is well-established financial and leasing company. Therefore, it is very tough to recommend on any aspect of the financial and leasing company. However, as it is the requirement of the report so I have come up with few recommendations, after conducting the research. Although every hypothesis have accept alternative hypothesis, some of customer do not agree. So based on my experience, I would like to put my some recommendations:

1. IDLC Finance Ltd. should reduce their interest rate on SME loan example Abashan and Business loan.

2. IDLC Finance Ltd. should identify its successful entrepreneurs and should spread it out to encourage being an entrepreneur who has no experience. Because IDLC Finance Ltd. do not give loan without 1-2years experience.

3. IDLC Finance Ltd. should minimize their documents for giving loan and try to reduce disbursement time.

4. They should update their software and systems that help to reduce pending documents file for starting loan lending activities.

5. IDLC Finance Ltd. should focus on the employee’s satisfaction and be more flexible for reconciliation process.

6. IDLC Finance Ltd. should communicate their customer for get back money on reconciliation process.

Recommendation

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Have You Any Question?

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Conclusion

IDLC is the number one leading financial institutions in our country and it is operating successfully. The beauty of IDLC’s business is that although it calls itself an SME focused organization, its revenue stream is not fully dependent on SME lending. Investment has remained virtually stagnant at between 25% and 26% of the GDP over the past several years, as a result most of the players of the financial markets have suffered over the last few years and IDLC was no different. 2014 was a fairly stable political year whereas 2015 started with uncertainty and unstable political situation. If the situation worsens, IDLC’s business may hamper again like other businesses. But things may not go bad as 2015.

So far, as per 2014 accounts, the company’s business was good compared to previous year. Considering the performance, the Company is expected to show significant growth in earnings and will continue with good dividend.

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Thank You