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1.1 ORIGIN
OF THE
REPORT
1.2 OBJECTIVE
OF THE
REPORT
The objective of the report is to study and evaluate the prospects of BBL in the SME
sector of Bangladesh. In the process of doing so, I have assessed the
1.3 SCOPE
OF THE
STUDY
BBLs special focus on SME loan to promote small entrepreneurs all over the
country
1.4 METHODOLOGY
The study uses both primary data and secondary data. The report is divided into two
parts. One is the Organization Part and the other is the Project Part. The parts are virtually
separate from one another.
1.4.1 PRIMARY SOURCES
For general concept development about the bank short interviews and discussion sessions
were taken as primary source. More over a market survey was conducted with a specific
questioner. To identify the implementation, supervision, monitoring and repayment
practice- interview with the employee and extensive study of the existing file was and
practical case observation was done.
Manufacturing Businesses
Trading Businesses
Agro-based Businesses
Service Businesses
Within the clusters, random sampling was conducted according to advantage of the
surveyor and also considering the time factor. The sample frame was the list of existing
clients of BBL SME loan facilities and the sample unit was the individual entrepreneur.
The sample size for each cluster was determined as per the ratio of the total populations
of the clusters. The total sample size was limited to 200.
1.5 LIMITATIONS
Despite my earnest efforts, there were some limitations that hindered the progress of this
report.
The sample size of the survey conducted was 200 only due to time considerations.
However, the diversified nature of the respondents will hopefully make up for this
lacking.
Banks policy does not permit to disclose various data and information related to
Credit portfolio.
Most recent data and information were not available. Therefore the timeframe for
the report had to be limited to December 2005.
October lows. By late November, equity and bond prices had returned
to their end-September highs and had generally reached record levels
by early January 2006. Equity markets have, however, weakened
overseas thereafter mainly on account of renewed firmness in global
crude oil prices. Corporate credit default swap rates and bond spreads
remained more or less unchanged in October although they have
widened significantly since November. While long-term interest rates
rose in many markets in September and October, they retreated
slightly in November, and at the end of December it was still unclear
whether the recent rise in yields would prove as ephemeral as previous
increases. The increase in longer-term yields mainly reflected upward
revisions to interest rate expectations over the near term. Further, the
potential for rising energy costs to add to inflationary pressures was a
key focus of investors attention. The rise in implied volatility also
reflected growing uncertainty about the economic outlook. During
December 27-30, 2005 yields on 10-year US Treasuries fell briefly
below those on two-year notes for the first time since December 2000,
inverting in intra-day trading and signaling expectations that interest
rates could fall in future that is generally associated with weak growth.
This inversion came as analysts were finally anticipating an end to the
current tightening cycle and a lower long-term risk premium than in
the past. In January 2006, however, the spread has turned positive
again. The US dollar appreciated by 3.5% in trade-weighted terms
during 2005 and a similar trend continued in January 2006.
Of the major central banks, the US Federal Reserve has raised its policy
rate by 25 basis points each on thirteen occasions from 1.0% in June
2004 to 4.25% by December 2005 while recently providing indications
of nearing the end of the cycle of measured rise in the policy rate. The
Bank of England has kept its rate unchanged at 4.50% since August
2005 in response to slowing domestic growth. The European Central
5
Bank (ECB) has raised its policy rate by 25 basis points in response to
rising inflationary expectations, after holding it unchanged at 2.0%
since June 2003. Monetary policy has been tightened in several
economies in emerging Asia, primarily in response to higher fuel prices
and to the measured pace of policy tightening in the US. Bank
Indonesia raised its policy rate by 50 basis points to 12.75% on
December 6, 2005 which was the tenth successive increase during the
year. In Thailand, the 14-day repurchase rate was increased for the
seventh time since January 2005 from 2.00% to 4.25% on January 18,
2006. Monetary authorities in Singapore and Hong Kong raised their
policy rates by 187 basis points and 200 basis points, respectively,
during the year up to December. In Malaysia, the policy rate was hiked
to 3.0% in end-November, 2005. In emerging market economies in
general, the direction of policy change has been towards either
tightening or withdrawal of the accommodative stance.
Economic growth in developing Asia and the Pacific surprised on the
upside in 2005. In September last year, the Asian Development
Outlook (ADO) 2005 Update forecast aggregate regional growth of
6.6%. The ADO 2006s estimate of growth is now 7.4%, well above the
average rate of growth in the region since 2000. If purchasing power
parity weights, rather than weights based on market exchange rates,
are used to aggregate over countries, regional growth in 2005 is
estimated to have been even faster, at 8.0%. With the release of
revised gross domestic product estimates for 2004 in a number of
countries, growth in 2004 has now been raised to 7.8%, from 7.4% in
the ADO 2005 Update.
On the basis of a broadly favorable outlook for the international
economy,
the
continuing
trend
toward
improved
economic
prices, the ADO 2006 revises up its aggregate growth projection for
2006, and, to a lesser extent, for 2007 (Figure 1.1.1). Aggregate
regional growth of 7.2% is now expected in 2006, easing to 7.0% in
2007. But risks remain, and could yet unsettle a generally positive
outlook. These risks include the possibility of a disorderly unraveling of
global payments imbalances (which are still widening), heightened
protectionist trade pressures, yet higher oil prices, and the possibility
of an antigen shift of the avian flu virus into the human population.
OVER VIEW
at
Tk.35031.91
crore,
recording
an
increase
of
remittances:
During
IN
BANGLADESH
of
GDP
dominates
the
financial
system,
which
is
10
Access to banking services for the population has improved during the
last three decades. While population per branch was 57,700 in 1972, it
was 19,800 in 1991. In 2001 it again rose to 21,300, due to winding up
of a number of branches and growth in population. Compared to Indias
15,000 persons per branch in 2000, Bangladesh is not far behind in
this regard. This indicates that access to the banking system in the
country is not a significant problem.
The finance sector remains predominantly bank-based, accounting for
96% of the sectors resources. While there are sound banks, based on
IAS, the banking sub-sector as a whole is technically insolvent.
Consolidated data reported tend to have significantly understated
provisions. Adjusting partly for the understatements, the financials of
the banking sub-sector are characterized by about 32% NPL ratio,
US$720 million shortfall in provisions, US$1,106 million shortfall in
provisions and capital combined, and losses of US$685 million after
adjusting for the shortfall in provisions in mid 2001. The adjustments
would possibly be larger if provisioning as followed by major
international auditors were applied. National Commercialized Banks
(NCBs) also have disproportionately large and unexplained Other
Assets that include, in particular, jute and other subsidized credits,
suspense accounts and various receivables. To what extent these
questionable assets have been provisioned remains unclear.
The banking sector of Bangladesh comprises four categories of
scheduled banks. As of June 2005, 49 scheduled banks are operating in
Bangladesh with a network of 6318 branches. The structure of the
banking system in Bangladesh is categorized in the following table.
TABLE 1: STRUCTURE
11
OF THE
BANKING SYSTEM
IN
BANGLADESH
Type of
Bank
NCB
NSB
PCB
FCB
Total
No.
4
5
30
10
49
(MARCH 2005 )
No. of
% of Total
Branches
3388
1334
1557
39
6318
Asset
40.14
7.13
42.67
9.46
100
% of Total
Deposit
39.78
7.22
47.18
5.82
100
12
classification
of
loans
following
the
international
13
14
AND
EQUITY PARTNERS
BRAC Bank has started with an initial capital of amount BDT 250 million, while the
authorized capital is BDT 1,000 million. Over time the bank has increased it capital base
because of its steady growth and within three years of operations, it has doubled its
capital base to BDT 500 million. The Bank has planned to go public by the last quarter of
this year (2006) and raise its paid up capital to BDT 1000 million. BRAC Bank
originated with Local and International Institutional shareholding including BRAC as
promoter with IFC and ShoreCap International, UK. Here is the break-up of BRAC
Banks shareholdings positions.
3.4 BRANCHES
AND
NETWORKS
The expansion of BRAC Bank is growing very fast. Now, in total there are 13 operating
branches and more branches will open up in the coming year. To provide a strong
network across the country BRAC Bank has 260 unit offices for SME purpose. Market
Research Executive (MRE) a position has been created to capture the stronger market
share, which will work closely with the Direct Sales Executive. BRAC Bank will open up
three Sales Booths in the major area of the city and Kiosk in the shopping malls, which
will cater the needs of the customers where branches are not in close areas. These will
serve in terms of opening and closing accounts and selling products. In addition, BRAC
Bank has also set up three ATM machines in three main areas of the city, keeping a target
in mind that within the mid of next year the Bank will set up some more ATM machines.
3.5 HIGHLIGHTS
OF
15
Actual (2005)
Projected (2009)
14
60
Actual (2005)
Projected (2009)
100
Unit Office
287
450
Staff
1200
4100
21(crore)
232(crore)
ATM
50
POs
50
500
No. Of Booth
16
titled to be the fastest growing bank in 2004 & 2005, and it had a profit of 14 crore taka.
The profitability of the bank came mostly from the SME sector. SME division is enriched
with more than 700 staffs and it has almost 300 unit offices all over the country.
4.1.1 STRUCTURE
17
OF
SME
DIVISION
Field Level: In the field level there are three types of designated BRAC Bank
staff operates. They are Customer Relation Officer (CRO), Zonal Officer (ZO)
and Territory Officer (TM).
Credit:
18
Retail Banking is known as general banking where the individual customers get services
time to time from the local branches of the larger commercial banks. In BRAC Bank
Retail section has been divided into two parts
They both are interdependent and work closely with each other. Retail offers different
types of competitive banking products to the customers. The retail division of the BRAC
19
Bank also offers some special types of deposits and loan scheme for the customer
attention.
4.2.1 RETAIL DEPOSIT PRODUCTS
Current Account.
Normal FDR.
Salary Loan
Teachers Loan
20
Quality of service
Customer knowledge
Corporate clients can access a wide range of financial services offered by corporate
banking division including:
Debt Capital
Equity Capital
Financial Markets
Corporate Finance
o Loan Syndication
o Project Finance: Short and Medium term
21
Finance/Credit Extension
Overdrafts
Demand Finance
Receivable Discounting
Trade
o Letter of credit: Sight, Unsance etc.
o Guarantee: Performance, Security, Advance Payment etc.
Lease financing
Target Market:
o Pharmaceuticals, Toiletries, Chemicals and Pesticides
o Power Generation, oil exploration, Industrial and household gases
(Liquid, Petroleum Gases etc.)
o Edible oil, Bulk Trading Essential Commodities, Industrial Raw
Materials, Agricultural Inputs, Cement.
o Garments, Textiles and related backward linkages industries including
spinning, Knitting, Yarn, Garment accessories etc.
o Food Processing and Beverage Industries.
o Cable and Cable wire, Information Technology.
o Leasing Companies/Non Banking Financial Institutions.
o Health service Industry, Non Governmental Organizations.
o Importers/dealers of machinery, Industrial, Electrical equipment
o Education Institutions, Bone china, Ceramics, Melamine, plastic
products.
o Manufacturing
and
Trading
of
Consumer
Durables,
22
o Ship Breaking, Re-rolling Corrugated Iron (CI) Sheet Mfg and related
business.
o Air Lines, Shipping Lines, Freight Forwarders, Testing Inspection
agencies, Footwear and Leather.
o Tobacco products and Tea.
23
Current Account
Fixed Deposit
Convertible Account
FC Account
TRS division also has Priority Service System for their Corporate Customer, which
manages their business finance and cash resources very conveniently. Priority Service
Banking includes the following special services:
Express Payment
4.4 TREASURY
Treasury division at BBL deals with the fund position. This division calculates and
projects the fund requirement to meet day-to-day operation. It has also two wings, one is
front office and the other is back office. Front office deals with directly to the money
market of the country. Their main job is to lend money to other financial institution on
call or short-term basis, if the bank has additional money idle. Or if the bank falls short in
liquidity, this division borrows money from other financial institution on the same basis.
On the other hand the back office keeps records of the fund position of the bank.
4.4.1OBJECTIVE
24
4.4.3 FUNCTIONS
Money Market:
o Maintenance of Statutory Reserve
o Meeting Branch/ Division fund requirements
o Call Loan taking and placing
o Term taking and placement
o Market analysis
AT A
GLANCE
TABLE 3: PERFORMANCE
Particulars
OF
BBL
2005
2004
2003
Paid up capital
500,00
500,000
405,020
0
988891
650,294
424,327
25
Capital Surplus/deficit
Total Assets
Total Deposits
Total Loan & Advances
Credit Deposit Ratio
Classified loans against total loans and
40753
73,684
16876009 10,015,936
13409010 8,168,979
11719312 5,819,792
87.94%
71.24%
2.25%
1.97%
157,178
4,542,043
3,497,303
2,870,107
82.07%
1.06%
advances (%)
Profit after taxes & provisions
Amount of classified loans during current year
Provision kept against classified loans
Provisions surplus/deficit
Cost of fund
Interest earning assets
Non interest earning assets
Return on Investment (ROI)
Return on Assets (ROA)
Incomes from investments
Earnings per share
192680
265179
134061
26862
7.58
16278383
597626
8.54
1.14
292067
38.54
30,281
30,542
8,183
173
7.50%
4,475,543
66,501
3.73%
0.67%
94,790
12.09
99,303
114,414
84,432
40,841
7.23%
9,735,349
280,587
8.57%
0.99%
166,967
23.16
During the year, BBL has expanded their business rapidly and undertook significant
operations in trade finance business (i.e. 750% growth in the year 2004 over last year)
along with the same upward trend in SME, commercial and retail lending activities.
Propelled by strong growth in both loans and deposits, the Banks operating income
increased substantially in 2005.
BBL has a 164% growth rate on its deposits in the financial year 2005 comparing to its
previous years (2004) and the same time it also has a 201% growth arte over its loans
and advances. Though the advance to deposit ratio i.e. 71.24% comparatively comedown
in 2004 from 2003, it again picked up in 2005 (87%). These upward trends in both
deposit and loans, helps the bank to increase its assets by 168% over its previous years
(2004) assets. BBL has also enjoyed higher growth rate on its fixed and other assets.
26
5.2.1 PROFITABILITY
In the year 2005 the bank has earned an operating profit of BDT 586 million compared to
BDT 320 million in the previous year with a stunning growth rate of 183%. This was
possible, as BBL has earned a 165% growth on its interest income where as its interest
expense growth was 93% from the year 2003. This difference has basically occurred
because the cost of fund did not increase to extent of increase in return on loan.
The growth rate of operating expenses has also gone up by 103%, but this trend is
acceptable because the bank has earned growth rate of over 100% in all aspects. More
over a growth of amount 193% in its profit after tax supports the rationality of such hike
in operating expenses earned.
All this upward trends help BBL to increase the Earnings Per Share by almost 165%
(from 23.16 to 38.54).
Capital Adequacy: Capital adequacy focuses on the total risk weighted capital
intended to protect the depositors from the potential shocks of losses that a bank
might incur. In the year 2005 BBL has maintained capital adequacy ratio of
10.15% against standard of minimum 9.00% set by Bangladesh Bank. This keeps
more options to absorb default loan amount.
Asset Quality: The asset composition of BBL shows a high proportion of loans
and advances (87%) in total assets. A high proportion of loans and advances
indicate vulnerability of assets to credit risk, since the portion of non-performing
assets is significant in our country. But the classified loans against total loans and
advances of BBL are only 2.25%. Though this ratio gone up from the year 2004,
27
but compare to 103% increase in loans and advances this upward trend is still in
acceptable level.
28
business. According to the location BRAC Bank SME unit offices already has reached in
every cities around the country for providing door to door facilities. Some key factors of
demographic environment are- urbanization, education, living standard etc. For exampleIn terms of urbanization, lots of new business and enterprises are growing rapidly in the
city or town. So more banks can be aggressive for providing loans in newly developing
areas. For having new banks in the city, the standard of living will increase for the
people. Education is another major factor for developing a nation. Without literacy
standard of living could not come for individuals. So each and every factor is interrelated
to each other.
6.1.2 ECONOMIC ENVIRONMENT
Factors that affect consumer buying power and spending patterns. SME is very careful
regarding economic issues in the country. Customer relation office is always keen to
check purchasing materials and leading lifestyle of the client. Because if the economic
condition of a client become bad then he/she might not repay the loan. On the other hand
if war occurs between the two countries then price of the products will increase and
people will loss purchasing power. In this way, organization might affect economically.
On the other hand, A steady growth rate with continues market oriented reforms will
contribute positively by expanding the volume of business and profitability of the bank.
In an economy, a steady growth means there will be more investment, savings, and
consumption in the economy. As a result, bank also get more deposit and more projects
for credit disbursement.
After disbursing the loan, if the economic condition of the business is being poor then
BRAC Bank regenerate the repayment schedule of the client to repay the loan. On the
other hand if the economic condition rise up then client repay the whole amount in favor
of BRAC Bank Limited.
30
Bangladesh Bank. The emergence of SME of BBL and other contemporary banks and the
arrival of the foreign banks are all due to the on going reforms in the financial sector of
Bangladesh. BBL is restricted to provide loans for the political leaders. Customer
services officers of BRAC bank always avoid the political leaders who carry out
business. But if any pressure occurs from the political sides to have the loan the top
management handles the situation but never give the loan to them.
6.1.5 TECHNOLOGICAL ENVIRONMENT
BRAC bank of SME division has a strong network in the whole country. The main head
office is in the capital city from which it operates with all the unit offices by means of
mobile telephone. In the near future, SME might handed over the palmtop computer to all
customer services offices to provide accurate and quick service to the clients.
6.1.6 ECOLOGICAL ENVIRONMENT
Sometimes ecological environment can turnout the business of the clients. Foods,
disasters can affect the business after having the BRAC bank loans or fire can burn out
the whole business. To protect from these disasters BRAC bank do the insurance policy
with the joint names of the client. So that client can get feedback from the insurance
policy to run again his business. If client do not get support from the insurance company
then BRAC bank give time or generate the client repayment schedule
32
group is only Small and Medium Enterprise client. The CRO closely monitor and try to
build good report with clients. On the other hand corporate clients are different to have
the loan. Each market type has special characteristics that call for careful study by the
marketer.
In terms of SME, most clients are carrying out trading business rather than manufacturing
business. Few clients are attached with service business like pharmaceutical, hospital,
homeopath etc. In the trading business clients want loans to meet their working capital
requirement. On the other hand, clients want 10-15 for purchasing fixed assets. In our
country mostly 35-40 years old clients are carrying out loans regarding the type of their
business. The clients who interested to take the loan of SME then they have maintained at
least one year running business. It is a policy of this bank because in the mean while
client can understand his business and can set a future plan.
The educational qualification of our clients is very poor. Clients are under-graduate but
carry out good business. SME support their clients who are carrying out good business
and also give suggestions and guidelines to develop their business. If any client has
maintained loans with other banks then SME is restricted to provide loans for that clients.
The client to have a clearance certificate to get the loan from the BRAC bank.
It has been found out that in our country most clients need small loans to develop their
own business. The world is being globalized and modernized. So by think of it client take
risks to enhance and develop their business and BRAC bank is a good helping hand to
help them.
In our country, clients want more time to repay the loan. BRAC bank gives adequate time
for the client to repay the loan whether they can get benefit from it. Clients are very
happy to repay the loan by equal monthly installment. Clients know the right time to
repay the loan at the right place. But in the pick season, most client wants short fund
requirement to carry out good business. Regarding interest rates, clients are not talk about
more because clients get the loan at the right time from the BRAC bank. Clients are also
33
happy by the issuance of security preferences because they do not have to provide any
collateral security for hypothecation or unsecured loans.
SME of BRAC bank networks has every where in Bangladesh. So clients can have the
SME loans wherever his business exists in the country. Also clients get the fast service
from the BRAC bank.
The purpose of this loan is the economic development in our country, which might divert
the clients mind after having the loans for expansion. Many clients have ambition to
expand from trading to manufacturing business to generate more profit.
When a CRO would visit a business, the client must provide the proper and right
information and show the right documents for justifying a good client. If any CRO feel
bad smell in the business then the CRO reject that client without concerning the
management. So clients should be feel comfortable to provide proper information to have
the loan.
Regarding the service by the CRO, almost all clients are satisfied by get these quick
facilities from them. Though it is pioneer division of this bank, so client should be fully
satisfied by having this facility.
OF
FACILITY OF
NEW ENTRANT
In every industry, there is a threat of new entry, which varies according to industry.
Similarly, the banking sector of Bangladesh also faces the threat of new entrants.
However, the threat comes from two directions. The first threat comes from the arrival of
the multinational banks and their branch expansion particularly due to the booming
energy sector. For example, Standard Chartered Bank already inaugurate the SME loan.
Another threats comes from the emergence of new private commercial banks. For
34
example, Southeast Bank, Dhaka Bank & others, the countries traditional banks are
facing the treat of further competition and better quality service. Similarly, the potential
banks that may emerge in the next few years will further enhance the intensity of
competition and may pose further threat to the existing banks. At the same time, arrival
of the foreign banks is posing threat and pressure on the existing banks. At the same time,
arrival of the foreign banks is posing threat and pressure on the existing banks. Already
Standard Chartered Bank and Hongking Sanghai Bangking Corporation (HSBC) has
started to provide small loans to clients and they are also going to start door to door
services to clients.
6.3.2 GROWTH
IN THE INDUSTRY
The rivalry among the competitors and the growth in the industry depends upon
the intensity of competition. If the industry has a high intensity of competition then
the industry will have a high growth rate, as all the firms will try to beat the others
in order to grab the market share. Similarly, the banking sector of Bangladesh is
growing considerably and at the same time competition is increasing. Currently
BRAC bank SME division is a pioneer one and carrying out Digital Technology
Management Systems.
6.3.3 COMPETITORS
Identifying the banks competitors: In terms of world bank advice, most of the
private banks are now ready to provide small or micro credit loan facility to the
clients because small loans are less risky than the corporate loan. At the recent
trend, many banks like Standard Chartered, Islami bank of Bangladesh, Southeast
Bank, Datch Bangla Bank Limited etc are going to take many aggressive steps in
terms of small loan to clients.
35
credit lending in terms of small and medium enterprise buniness. The objective of
the competitors is to capture in the market by providing small loans regarding and
manufacturing business. But everyones common objective is economic
development of this country.
36
The SME division of BBL basically provides micro credit loans to small and medium
enterprises. Because of its unique nature, the demand for SME loans is different in nature
to the demand for corporate or retail loans. A huge portion of the target market has
traditionally been neglected by the banking sector and hence, is ignorant about banking
activities. Thus, awareness building has been, and still is, a vital activity of the demand
management process of SME loans. The process flow of demand creation is as follows:
Market
Customer
Identification
Needs
Identification
Product
Development
Relationship
Building
37
Awareness
Creation
The CROs play a vital role in all the stages of demand creation apart from market
identification and product development. They provide door-to-door services for the
clients and at the same time are always in search for potential new clients. Because
clients are ignorant about banking products that may satisfy their needs, the CROs
identify their needs, evaluate their requirements and determine which products are most
suitable for them.
The major security of the SME products is building relationship between clients and
banks. Demand basically comes from two groups: new customers and repeat customers.
Because banks are facing new marketing realities like changing demographics, slow
growth economy, more sophisticated competitors etc., BBL cannot afford to lose clients.
The key to customer retention is superior value and satisfaction. As BBL recognizes this
fact, repeat borrowers of SME products enjoy lots of extra benefits.
Target Market
or more
38
BBL
Corporate
Enterprise
OF
Retail
purposes
By segmenting its consumers into these categories, BBL is trying to serve niche markets
where there is ample opportunity for growth.
Within SME, the market is further segmented on the basis of the nature of the business as
follows:
Small
Small &
& Medium
Medium Enterprise
Enterprise
Trading
Trading
Wholesale
Wholesale
Retail
Retail
General
General
Stores
Stores
Manufacturin
Manufacturin
gg
Agriculture
Agriculture
Mills
Mills
Food
Food
Bakery
Bakery
Beverage
Beverage
Press
Press
Poultry
Poultry
Factory
Factory
Dairy
Dairy
Service
Service
Pathology
Pathology
Hospital
Hospital
Schools
Schools&
&
Colleges
Colleges
39
limited companies are rarely seen in this category. The survey that I had conducted
brought up the following results as common characteristics of the respondents:
The mean age of the respondents was 38.71 years and mode was 33 years.
71.50% of the respondents did not pursue education after completing their HSC.
44.50% of the respondents did not complete HSC.
The average working capital requirement of the respondents per month was
almost Tk. 28,000.
Thus the target customers can be classified as the entrepreneurs who have little or no
formal education, between the age group of 30-40 years and having working capital
requirement of around Tk. 30,000.
Every product must have a unique proposition that will enable it to fulfill the customers
needs. In case of loans, there are four factors that might influence the clients decisions
regarding the selection of a loan from a bank:
Interest Rate
Collateral
Not all factors influence every segment of the market. In the survey conducted, the
following findings were revealed when the respondents were asked about their prime
reason for obtaining SME loans from BBL:
40
From this response, it can be concluded that BBL has been successful in positioning its
SME loans as collateral-free and quick to get. In the segment that it operates, these
features are the pre-dominant influencing factors in the minds of the clients. This position
has enabled BBL to attain the astounding growth that it has already achieved in such a
short time.
FOR
SME LOANS
7.5.1 PRODUCT
In order to serve the market more efficiently, BBL has designed various products that will
be able to satisfy the needs of the clients. The summary of all the SME loan products of
BBL can be found in Appendix III. However, a few important factors are worth
mentioning here.
41
Purpose
Loan Size
Repayment
Anonno
Apurbo
Fixed
Fixed
Asset,
Asset,
Fixed
Working
Working
Asset
Capital
Capital
2-8 lacs
8-30 lacs
OF
BBL
Digun
Supplier
Rin
Fixed
Finance
Fixed
Asset,
Working
Asset
Working
Capital
Pathshala Aroggo
Capital
2-3 lacs
2-3 lacs
5-30 lacs
3-30 lacs
Scheme
BBL has various SME products to satisfy the needs of the different types of clients in the
SME market. The different loan sizes are set to attract enterprises of different sizes.
Loans are approved on the basis of inventory and total receivables. Usually, up to 75% of
the average inventory and receivables is granted as loan.
7.5.2 PRICE
The price of loans is actually the interest paid for it and the charges,
fees or commissions associated with it. In case of BBL, the pricing for
SME products are as follows:
TABLE 6: PRICING
OF
Interest
Anonno
Apurbo
Aroggo
42
OF
BBL
TABLE 6: PRICING
OF
Interest
OF
BBL
lac
16% p.a for loan Tk. 15.00-30 lac
24% p.a. for loan Tk. 2.00-10.00
lac
Pathsha
la
Digun
Rin
loan
amount
43
Territory
Zonal
Office
Zonal
Office
Unit Office
Unit Office
Unit Office
Unit Office
The country is divided into 7 territories. There are 65 Zonal Offices and 319 Unit Offices
in the country. Zonal Officers have the authority to approve loans up to Tk. 8 lacs.
7.5.4 PROMOTION
Due to the nature of clients, direct marketing techniques are very effective for the
promotion of SME loans of BBL. BBL has two main types of promotional activities:
Door-to-Door Service: The CROs identify potential clients and reach them with
loan offerings. Most of these clients are illiterate and do not maintain any
financial documents. The CROs help them prepare documents required by the
bank for them and provide them with necessary support in activities like account
opening, transaction, etc. The CROs also promote the SME loan products to
potential clients. Because they have a target to achieve, they do this willingly.
Flyers & Brochures: For the more educated clients, BBL provides flyers and
brochures in the unit offices as well as in the branches. These flyers contain
specific features of the product they advertise. However, as this type of promotion
44
is handled by the Marketing Department, it would not be within the scope of this
report to discuss more elaborately on this promotional tool.
7.6 SWOT
ANALYSIS
SWOT analysis is an important tool for evaluating the companys Strengths, Weaknesses,
Opportunities and Threats. It helps the organization to identify how to evaluate its
performance and scan the macro environment, which in turn would help organization to
navigate in the turbulent ocean of competition.
7.6.1 STRENGTHS
Facilities and Equipment: BBL has adequate physical facilities and equipments
to provide better services to the customers. The bank has computerized and online
banking operations under the software called MBS banking operations. This has
shortened the loan processing time considerable. At the same time, BBL can
utilize the distribution channel of its major investor, BRAC to operate in the rural
regions of the country.
45
7.6.3 WEAKNESSES
Advertising and Promotion of SME Loan: This is a major set back for BBL
and one of its weakest areas. BBLs adverting and promotional activities are
satisfactory but its SME loans are not advertised well. It does not expose its SME
product to general public and are not in lime light. BBL does not have neon signs
or any other type of advertisement for SME loans in the city. As a result people
are not aware of the existence of this bank.
Huge Operating Cost: Because of the current structure, the operational cost of
SME loans is high. This has reduced considerably the profit from this business
unit.
7.6.3 OPPORTUNITIES
46
Use of ATM in Disbursement Process: ATMs and POS machines can be used to
disburse with loans more efficiently. If each unit office is provided with a POS
machine, it would be easier for clients to repay loans. Also, it would reduce the
pressure on the CROs.
7.6.4 THREATS
Upcoming Banks: The upcoming private local banks can also pose a threat to the
existing private commercial banks like BBL. It is expected that in the next few
years more local private banks may emerge. If that happens the intensity of
competition will rise further and banks will have to develop strategies to compete
against an on slaughter of foreign banks.
National Specialized Banks: NSBs pose the major threat to BBL in the SME
sector. At present, they hold the major portion of the SME market. If these banks
begin to think aggressively about financing the SME sector, they may prove to be
BBLs prime competitors.
47
OF
SME
There are a lot of confusions regarding the definition of SME within the banking sectors.
For example, BBL defines SME as enterprises with loan requirements of Tk 2-30 lacs. In
Standard Chartered Bank, however, SME starts from Tk. 50 lacs. Again in the NCBs,
SME includes even smaller enterprises with loan requirements of Tk. 50,000 or less.
However, for the context of this report, SME will be counted as enterprises with loan
requirements of Tk. 2-30 lacs.
8.2 INVESTMENTS
IN
THE
SME SECTOR
BY
THE
BANKING
INDUSTRY
48
Volume
Percentage
NCB
23,294
53.37%
PCB
11,125
25.49%
FCB
2,450
5.61%
NSB
6,778
15.53%
Total
43,647
100.00%
The top ten market players in the SME banking sector and their market share are shown
below:
THE
DOMINANCE
OF
NCBS
There are various reasons behind the dominance of NCBs in the SME sector.
Unfortunately, NSBs, which are supposed to support the SME sector, could not make
such a dominant presence in the industry. The reasons behind the dominance of NCBs in
the SME sector are discussed below:
The lowest interest rate is in Agrani Bank which has an average interest rate of 7.50%
only. The highest interest rate is in BBL, which is 17.05%.
Network: The NCBs have a much better network in terms of branches established
throughout the country. As a result, their contact is also far-reaching. The nature
of SME clients is such that in order to reach them, a bank must have access to
50
rural areas. As all transactions must be done through branches, it gives the NCBs
a distinct advantage in the SME sector. The average branch size of the different
banks in Bangladesh (category-wise) is shown in the following table:
OF
BANKS
Category
No. of Branches
Average Branch
Size
NCB
2904
968
PCB
2077
67
FCB
18
18
NSB
1335
267
8.2.3 GROWTH
51
IN
SME FINANCING
BY THE
BANKING INDUSTRY
curve in the last three years. From Figure 4 we can see that the NSBs have
actually suffered negative growth in the year 2005. The growth rate for the PCBs is the
highest at 83.61% over the period. The volume of loans in the NCBs increased at 13.20%
and in the FCBs at 60%.
8.2.4 COMPARISON
OF THE
GROWTH RATE
OF THE
MAJOR PLAYERS
The trend for the top ten market share holders is as follows:
52
This figure depicts the rather poor condition of the NSBs. The NCBs have experienced
stagnant or negative growth during these three years. BBL and IFIC Bank have grown at
a consistent rate during this period. Standard Chartered Bank has also made remarkable
progress during this period. Janata Bank and RKUB have experienced negative growth in
one year during this period while BSB had a constantly negative growth rate.
The growth rate in 2004 and 2005 of the top ten SME investing banks are as follows:
53
2004
2005
Agrani Bank
5.84%
0.23%
Sonali Bank
38.36%
15.63%
Janata Bank
-15.06%
10.31%
IFIC Bank
38.85%
26.49%
BRAC Bank
81.75%
48.62%
BSRS
12.31%
15.85%
3542.86%
60.13%
RKUB
12.12%
-0.25%
Eastern Bank
328.65%
16.83%
BSB
-10.51%
-63.38%
SCB
In both 2004 and, the highest growth rate was achieved by Standard Chartered Bank3542.86% and 60.13% respectively. However, as the bank has started SME banking only
in 2004, this growth rate is expected. Same is the case for Eastern Bank Limited, which
has experienced a growth of 328.65% in 2003. The growth rates for the NCBs are less
because of the following reasons:
Huge Volume: The NCBs are the market leaders in the SME banking segment.
Because of the huge volume of SME loans they have already achieved, it is
impossible for them to sustain the same growth rate.
Existence for a Longer Period: The NCBs have started SME banking in the
1990s. It is impossible to maintain a high growth rate for such a long time. The
SME market has almost reached the maturity stage for the NCBs.
Aggressive Marketing by the PCBs: After their emergence in the SME sector in
the early 2000s, the PCBs have adopted an aggressive strategy in marketing their
54
SME products. This has enabled them to snatch away a considerable portion of
the SME market from the NCBs. As they could not compete with the interest
rates, they provided other facilities like minimum collateral and shorter
processing time.
5.3.1 CONTRIBUTION
OF THE
As is shown from Figure 2, BBL is one of the major investors in the SME segment of
Bangladeshs economy with a market share of 7.78%. Even within the bank, SME
consists of a major portion of the total loan portfolio. The bank policy requires that at
least 50% of the total loan portfolio should be allocated to SME. The contribution of
SME loans in BBLs loan portfolio is shown in Figure 6.
The contribution of SME in the overall loan portfolio was highest in 2003 at 61.14%.
However, in 2005, the contribution has decreased to 42.45%. This is mainly due to the
managements concentration on retail loan products, the share of which has increased
from 17.55% in 2002 to 31.19% in 2006.
55
The total loan portfolio of BBL in the years 2002, 2003 and 2004 is shown in the
following table:
OF
BBL
2002
2003
2004
2005
SME
331
1,890
3,435
331
Retail
110
578
1,229
110
Corporate
184
623
1,405
184
Total
625
3,091
6,069
12,027
8.3.2 GROWTH
56
IN THE
BUSINESS DIVISIONS
OF
BBL
IN THE
OF
BUSINESS DIVISIONS
BBL
2003
2004
2005
SME
470.72%
81.76%
48.61%
Retail
426.41%
112.72%
205.10%
Corporate
237.95%
125.33%
125.76%
The year 2003 brought about huge growth in all the divisions of BBL. As the bank began
its operations in late 2001, this was expected. Although the growth rate declined in the
subsequent years, the bank still managed to sustain at least a 100% growth rate in the
retail and corporate division. But the growth in the SME division continued to decline
drastically through the years 2004 and 2005. This scenario is clearly depicted in the trend
analysis of the loan volumes in the different business divisions of BBL.
57
Figure7 shows that SME has maintained a steady slope over the years, whereas the slope
for retail and corporate has begun to become steeper after 2005. This indicates that retail
and corporate are experiencing a greater growth than SME from 2004.
OF
The first product introduced in SME banking by BBL in 2001 was Anonno loan, which
was an any-purpose loan with a range of Tk. 2-8 lacs. This loan still remains the most
dominant product with a share of almost 85% of the SME loan portfolio. After the
success of Anonno, Apurba was introduced with a range of Tk. 8-30 lacs. This product
also became quite popular and now has a share of 12%. Aroggo and Pathshala were
introduced in 2004 to capture specific segments of the SME market, namely the healthcare and education sector. These loans have a combined portfolio share of 2.5%. The
most recent loans, Digun Rin and Supplier Finance, have not made significant progress
yet, and have a combined portfolio share of 0.5%.
OF
SME PRODUCTS
OF
BBL
Based on investment sector, BBL has segmented the SME market into 4 categories:
Trade, Manufacturing, Agriculture and Services. The portfolio share in each of the
segments is shown in Figure 9 and 10.
58
Although trading companies have an 87.43% share and service companies 1.57%,
number-wise, the volume-wise share is 83.48% and 1.07% respectively. On the other
hand, manufacturing and agro-based companies have a larger share in volume than in
number of loans. This signifies the fact that the average loan size of trading companies is
actually smaller than that of manufacturing and agriculture companies.
59
60
8.4 PERFORMANCE
OF
The performance of a loan is determined by the repayment status of that loan. A loan has
two statuses which determine its performance:
Irregular Loan: A loan becomes irregular when the installments are not paid on
time or when installments are missed. The number of irregular accounts reflects
the overall credit quality of a loan portfolio because it is the point from where
loan accounts tend to move towards being defaulted. Therefore the actual
recovery efforts by the bank start here.
8.4.1 PERFORMANCE
IN
COMPARISON
TO
61
OF
LOANS
IN
BBL
Retail
SME
Corporate
4,094,181
4,806,200
2,875,300
17,110
29,812
2,116
10,355
29,495
1,645
17,153
33,609
5,801
29,592
36,609
2,693
106,382
58,981
97,676
287,690
79,733
150,854
Total Overdue
468,282
268,239
260,785
PAR
11.44%
5.58%
9.07%
Arrear-Outstanding Ratio
0.0085
0.0497
0.0385
An analysis of the above table will reveal that in case of retail and corporate
loans, most loans are irregular for one or two installments. The case is different
with SME, though. In SME, the CROs pursue clients for repayment right from the
first installment date. Therefore, the chances of irregularity are minimal.
However, in case of larger SME loans, irregularity exists because the installment
amounts sometimes become too big for the clients and they find it difficult to pay.
In comparison with retail loans and corporate loans, the PAR is very low for SME
loans.
62
table shows that the arrear-outstanding ratio of SME loans is higher than that of
both retail and corporate loans. This can be explained by the following factors:
o In both retail and corporate loans, the volume of irregular loans in the 11.99 installments category is proportionately much higher than that of the
other categories. In retail loans, this consists of 61.44% of the overdue
volume, and in corporate loans this figure is 57.85%. As a consequence,
the total arrear amount is also very low. Also, in case of SME loans, there
is a uniformity of overdue volume in each category, where as in the other
two divisions, the volume gradually goes down as the installments
increase. This fact is better reflected in Figure 13.
63
o The loan size of SME and Corporate loans are larger than that of Retail
loans. As the tenure is more or less the same for all types of loans, the
installment size in retail is much smaller than those of SME and corporate.
Hence, the arrear amount is also smaller.
8.4.2 PERFORMANCE
OF
If we consider the PAR over the last three years, as is shown in Figure 14, we can see that
the PAR of SME and Corporate loans has decreased in 2005, whereas that of retail loan
depicts a reversal. The sudden increase in PAR of retail loans is due to the introduction
and irregularity of one product- the Salary Loan, which makes up a bulk of the retail
portfolio. The decreasing trend of PAR of SME loans is a reflection of their better
performance. The trend for corporate loans is also decreasing. However, it has always
been more than that of SME loans.
Figure 15 shows the arrear ratio of the BBL loans over the last three years. The ratio for
retail loans and corporate loans is declining steadily, whereas that of SME loans is
increasing steadily. In 2003, the ratio for corporate loans was much higher than those of
64
SME and retail loans, which were almost identical. In 2004, the ratios for SME and
corporate loans respectively were almost the same. This goes to show that in the SME
sector, higher number of installments are becoming overdue, which is a cause for
concern.
65
66
9.1 FINDINGS
The scenario in the SME sector is quite complex. The data analyzed did not indicate any
specific trend in the market. However, the situation can be termed fairly prospective if the
market can be properly exploited. Based on my analysis I have presented my findings
below.
9.1.1 OPPORTUNITY
OF GROWTH
At present the market leaders in the SME industry are the NCBs. However, their market
share has declined gradually in the last three years. The market share of the different
categories of banks over the previous three years is shown in the following table.
2003
2004
2005
NCB
54.48%
50.59%
51.03%
PCB
16.11%
20.90%
24.37%
FCB
NSB
0.11%
23.96%
3.61%
20.17%
53.67%
14.85%
In 2003, the market share of the NCBs in the SME sector was 54.48% which declined to
51.03% in 2005. Again, the market share of PCBs has increased from 16.11% in 2003 to
24.37% in 2005. As the PCBs are penetrating the market in the SME sector, the growth
potential for BBL in the SME sector is increasing year by year.
67
Amongst the PCBs investing in the SME sector, BBL has a market share of 45.89%. It is
the second largest PCB behind IFIC Bank in this sector. As the PCBs have a market share
that is gradually increasing, BBL has a tremendous potential to be the market leaders in
the SME sector in the near future. The growth rate of SME loans of BBL from 2003 to
2005 was 172.12%. A comparison of the growth rate of the major banks in the SME
sector is shown in the following table:
OF THE
MAJOR BANKS IN
SME SECTOR
Bank
Growth Rate
Agrani Bank
6.08%
Sonali Bank
59.98%
IFIC Bank
75.64%
BRAC Bank
172.12%
RATE OF
SME LOANS
From Table 9 it can be gathered that the growth rate of SME Banking of BBL has
declined from 470.72% in 2003 to 48.61% in 2005. This may seem perfectly natural as
the business moves on. However, the key issue of any successful business is whether it
can sustain its growth. BBL has failed to do so for the following reasons.
Loan Range: BBL has defined its SME sector as enterprises with loan
requirements of Taka 2-30 lacs. In such a definition, enterprises with lesser loan
requirements miss out. In the survey conducted, the required loan amount of the
clients was asked. Figure 17 is a summary of the answers found.
68
26% of the respondents wanted a loan of below Tk. 2 lacs. Due to the policy of
BBL, they were forced to take a Taka 2 lac loan, even though they did not require
the amount. Many more such clients might not have been able to avail BBL loans
due to their low loan requirements.
Interest Rate: The interest rate of BBL is the highest among its competitors.
Although BBL provides other facilities to its clients, the high interest rate
discourages many clients to approach the bank for loans. During the survey,
38.50% of the respondents appeared to be neutral about the interest rate of SME
loans of BBL. 35% of the respondents were not satisfied with the interest rate
while 26.50% were happy with it. This indicates that many more potential clients
were put off by the high interest rates.
69
OF
RETAIL
AND
CORPORATE
In 2002 retail loans had a portfolio share of 18.70%. In 2005 its share had increased to
31.19%. During the same period, the portfolio share of SME decreased from 61.14% to
42.45% and that of corporate loans increased from 20.17% to 26.37%.
There are two main factors that contributed to the growth of retail in 2004. They are:
Segmented Market Approach: Retail loans are designed to cater to the needs of
the clients of different segments. These loans are tailor-made according to the
need requirements of the different segments. For example, salary loans are only
for employees and not businessmen, teachers loan and doctors loan for teachers
and doctors respectively, and high-flyer loans for airlines personnel. This
segmented approach is new for SME loans, and there are only three such
segmentation-oriented products- Pathshala loan, Aroggo loan and Supplier
Finance.
The growth in corporate loans can be accredited to the inclusion of a new corporate loan
product, the CommerZ Loan. This is a product to attract medium enterprises. The loan
range of this product is from Taka 30 lacs to Taka 2 crore.
9.1.4 PORTFOLIO STRUCTURE
OF
SME LOANS
Figures 8, 9 and 10 portray the portfolio structure of SME loans product-wise and sectorwise. Anonno loans are the most dominant loan products in the SME portfolio. Aroggo
and Pathshala, being new products, havent yet been able to penetrate the market
70
significantly. However, the huge volume of Anonno loans indicates that the average loan
requirement of the clients is in between Taka 2-8 lacs.
In the sector-wise portfolio, trading companies dominate the market both volume-wise
and number-wise. Although trading companies have an 87.43% share and service
companies 1.57%, number-wise, the volume-wise share is 83.48% and 1.07%
respectively. On the other hand, manufacturing and agro-based companies have a larger
share in volume than in number of loans. This signifies the fact that the average loan size
of trading companies is actually smaller than that of manufacturing and agriculture
companies.
Figure 11 and 12 portray the growth in each investment sector. All the sectors have grown
steadily from 2002 to 2005. However, apart from the service sector, all the sectors have
experienced declining growth rates from 2003. The manufacturing sector has started an
increasing trend again from 2004, but the agriculture and trading sector is on a steady
decline. However, the portfolio share of trading sector has increased from 80.43% in
2002 to 87.43% in 2005. The portfolio share of the segments from 2002 to 2005 is given
in the following table.
OF
SME LOANS
Trade
Manufacturing
Agriculture
Service
2002
80.43%
14.51%
3.82%
1.24%
2003
85.41%
11.27%
2.84%
0.47%
2004
82.91%
11.53%
4.53%
1.51%
2005
87.43%
4.85%
6.15%
1.57%
The portfolio share of trade sector has gradually increased over the period, while that of
the manufacturing sector has gradually decreased. However, both the agriculture and
service sector have increased their contribution in the SME loan portfolio. Although the
71
dependence on the trading sector is still very high, BBL is trying to diversify into other
sectors of the economy as well.
The reason for the gradual decrease in the portfolio share of manufacturing companies is
that entrepreneurs tend to change quickly from manufacturing companies to trading
companies. In the survey conducted, 34% of the respondents revealed that they were
engaged in other businesses before their present endeavor. Out of this 34%, 36.76% were
engaged in manufacturing business before turning to trading concerns.
9.1.5 PERFORMANCE
OF
SME LOANS
In 2005, the PAR of SME loans was the lowest amongst retail, SME and corporate loans.
However, the Arrear Ratio was the highest. In both retail and corporate loans, the volume
of irregular loans in the 1-1.99 installments category is proportionately much higher than
that of the other categories. In retail loans, this consists of 61.44% of the overdue volume,
and in corporate loans this figure is 57.85%. As a consequence, the total arrear amount is
also very low. Also, in case of SME loans, there is a uniformity of overdue volume in
each category, which is shown in Table 10 and Figure 13. In the other two divisions, the
volume gradually goes down as the installments increase.
The PAR of SME and Corporate loans has improved from 2003 to 2005 while that of
retail has deteriorated as shown in Figure 14. The arrear ratio, however, has been on an
increasing trend for the SMEs. This states the fact that the performance of SME loans
have begun to deteriorate.
From Figure 16 we can see that the PAR for manufacturing and agriculture sector is
increasing. Both these sectors require immense capital investment, and hence, the loan
size is also high. Thus the installment sizes are also big, which makes it difficult for the
client to repay the loan on time. Trading and service sectors, on the other hand, mostly
require working capital financing, and thus their loan size is also small. This leads to
better performance of these sectors in terms of PAR.
72
9.2 RECOMMENDATIONS
On the basis of the above findings, I have made the following recommendations that BBL
may take into considerations in order to exploit the potential SME market.
6.2.1 INCREASE
THE
As the survey and analysis have revealed, many SMEs require a smaller loan size. The
current loan floor of Taka 2 lacs is actually an excess of funds for them. Thus BBL can
consider dropping the floor to Taka 1 lac. This will increase the market size as well as the
prospect for faster growth.
9.2.2 SEGMENT-ORIENTED APPROACH
As is the case for retail products, SME can pursue a more segment oriented approach to
capture a larger portion of the market. BBL can introduce new tailor-made products for
the different sectors. New product with slight modifications in price can be introduced for
the following segments:
Clothes and footwear industry, which captures about 19% of the total portfolio.
Grocery and household items, which captures about 15% of the total portfolio.
The service sector, which has the highest growth rate among the four sectors.
9.2.3 DIVERSIFICATION
INTO
OTHER SECTORS
At present, the SME division is overly dependent on the trading sector, which has more
than an 80% portfolio share. If this sector begins to under-perform, it will be reflected in
the performance of the whole division. Thus BBL needs to diversify into other sectors to
minimize risk. More focus should be put on the other sectors, specially the service sector.
Promotional campaigns can be held to create market awareness in these sectors. New and
modified products can be introduced to these sectors. A more diversified portfolio will
reduce the risk associated with SME loans.
73
INTO THE
SME SECTOR
Overdraft facilities can be introduced to the SME sector for clients with small loan
requirements. This facility will enhance the prospect of working capital financing. The
size of the facility may be smaller than the existing loan sizes, but the interest rate will be
higher. As the size of the facility will be small and the tenure very short, the higher
interest rate will not affect the client much.
9.2.5
PROPER MONITORING
OF
LOANS
There is an existing recovery team for the SME division to monitor the performance of
SME loans, yet, the performance is declining. Therefore, BBL has to be more careful on
this issue. In order to improve the performance of SME loans the following steps can be
taken.
An Early Alert System can be introduced. This will keep track of the probability
of loans going bad. The system will consist of a detailed database of all loans
outstanding and will be updated daily. It will also signal the repayment date,
amount and client particulars of a loan ahead of time so that the CROs can then
pursue the client to repay on time. A team can be allocated to constantly monitor
the database. The existing system identifies non-performing loans only after
installments become overdue. The database is updated monthly, which makes the
recovery process slow.
Whenever more than one consecutive installment is missed, the loan should be
reviewed for rescheduling. This will increase the probability of repayment for the
client. If more than six consecutive installments are missed, the rescheduling can
be forced on the client with a rescheduling charge debited from his account.
9.3 CONCLUSION
74
BRAC Bank is an SME focused bank. The prospects of the SME market are great, and
the market size is also huge. Research in this field has only begun recently, and the
specifics of the market are still not clearly outlined. At the same time, this market is a
risky market, as it involves dealing with entities which are prone to default. However,
because of its tremendous potential, it is worth taking the risk. But in the process, BBL
has to take care to minimize the risk involved in investing in this sector. As the SME
sector is relatively new, the performance of the loans in this segment cannot be evaluated
conclusively yet. A cautious approach to the SME market will enable BBL to exploit the
prospects of this segment.
75