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Organizational Overview
In the recent years, Banking Industry in Bangladesh has seen a considerable growth. Significant numbers of investors are becoming interested to invest their money in this sector. Banks are aggressively pursuing different strategies to take hold of new segments with purpose to discover new opportunities. Among various products and services offered by the Banks, SME is one of popular items. In the recent year every Bank emphasis to expand their SME sector enormously. Bank increase their SME budget and camping to capture the small and medium entrepreneur concentration. Bangladesh Bank motivated to the commercial Bank to increase their SME sector and give them loan on their SME Banking budget in low interest rate. As a student of faculty of Business Administration I think it will motivate someone to do his/her own business and also help to find job in Bank and financial SME sector. If we get wonderful feedback from the Bank then the fresh Graduates will be encouraged to operate their own business. And this will hugely help to decrease the job crisis in the job market. And our University can have some information on the SME banking which can contribute to improve our study on the SME Banking. For this I have done my internship report on the SME Banking activities of the MUTUAL TRUST BANK.
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Aspire to be one of the most admired banks in the nation and be recognized as an innovative and client-focused company, enabled by cutting-edge technology, a dynamic workforce and a wide array of financial products and services.
authorized Capital of Tk. 38,00,000,000 divided into 38,000,000 ordinary shares of Tk.100 each.
1.14 Memberships
i) Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI, D) ii) The Institute of Bankers Bangladesh (IBB) iii) Bangladesh Foreign Exchange Dealers Association (BAFEDA) iv) Bangladesh Institute of Bank Management (BIBM) v) International Chamber of Commerce Bangladesh Limited (ICCB) vi) Association of Bankers Bangladesh Limited (ABB) vii) Bangladesh Association of Publicly Listed Companies (BAPLC)
1.16 Objectives
The broad objective of this project: To study SME Banking Activities of MUTUAL TRUST BANK Ltd. 4|Page
The specific objectives are: i) To find out Structure of SME division. ii) To know SME Product details. iii) To determine Operation Process of SME Loan Disbursement. iv) To know History of MTB Bank SME.
Chapter - 2
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The report has three parts. First part is the organization part where I covered briefly about the organization. Second part is the activities where I covered what I did in the office. I worked in general Banking, foreign exchange and SME department. In the third part, this is assign by supervisor, SME Banking Activities of Mutual Trust Bank. In this part I covered how Mutual Trust Bank operates SME Banking in the country. I mainly worked under different department of the bank for 3 weeks or more.
2.0 Works-Related
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General Banking General Banking consists of the main sections in the Branch. I worked ini) Fill up Account Opening/Closing From. ii) Fill up Payment order Issue Book iii) Cash Entry on Cash department reg. Book. iv) Fill up KYC From. v) Account Transfer. Foreign Exchange Service: i) Express Money. ii) Fill up Money Gram From and prepare all documents. iii) Fill up Western Union from and prepare all documents. iv) Fill up L/C Opening from and prepare customer documents. SME Department: i) Fill up SME loan Application from. ii) Help the SME officer to process the Loan Disbursement. iii) Fill up the Closing SME loan from.
Service Concern: The owner of the business must have 25 employees as permanent workers and its credit amount will start from 50 thousand to 50 lac except the owner land property and building. Trade Concern: Its also like service sector which will have 25 persons employees as permanent workers and its credit amount will start from 50 thousand to 50 lac except the owner land property and building. Manufacturing Concern: It is deferent from above two. The Manufacturing concern will have 50 employees as permanent workers and its credit amount will start from 50 thousand to 150 lac except the owner permanent building and land. Medium Enterprise (ME): An organization which would not be Public Limited Company and that will fill up the following criteria: Service Concern: An entrepreneur will have 50 employees as permanent workers and its credit loan will be started from 50 lac to 1000 lac except the fixed land and building of the entrepreneur. Trade Concern: An entrepreneur will have 50 employees as permanent workers and its credit loan will be started from 50 lac to 1000 lac except the fixed land and building of the entrepreneur. Manufacturing Concern: An entrepreneur must have 150 employees as permanent or that organization must have asset of TK 2000 lac without owner fixed land or building. We duly note here that BB has lately asked us to submit our SME portfolio status as per Industrial Policy , although BB is yet to provide a formal circular stating or confirming that entities falling within the category as defined pursuant to Industrial Policy 2005 to be regarded as SME. It has, however, provided Guidelines for SE financing that govern our portion of SME lending operations and based on which we avail various refinancing facilities from BB. Furthermore, because of our arrangement with USAID for partial credit guarantee of US$1.1 million, which covers up to 50% of the lost principal amount for eligible SME investment, at Prime Bank we used slightly wider parameters (USAID did provide a definition of SME, which is broader than that of Bangladesh Banks SE definition) to conduct our SME lending operations.
Enterprise
Criteria Number of Staff (Not More than) Fixed Asset (Except Land & building)
Small Enterprise
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Medium Enterprise
50
150
2.1.2 DIFFERENT SME LOAN PRODUCTS OF MUTUAL TRUST BANK LTD. MTB Bhagyobati MTB Bhagyobati loan is only for the SMEs owned by the women entrepreneurs. Features and Benefits: Features and Benefits: Loan amount range BDT 1.00 lac to BDT 50.00 lac Loan tenure up to 3 years Rate of interest 10% p.a (only in case of re-finance from BB) Up to BDT 5.00 lac is collateral free Easy repayment schedule No service charge or hidden charge Easy processing At least one year of business experience
MTB Krishi MTB Krishi is designed for direct lending in the agriculture sector. Only eligible farmers and agri SMEs may apply for the loan. Crops cultivation, fisheries, livestock & poultry are the priority sector of lending. Features and Benefits: Loan amount up to BDT 3.00 crore Loan tenure up to 5 years 9|Page
Rate of interest 10% p.a (only in case of re-finance from BB) Up to BDT 5.00 lac is collateral free Easy repayment schedule No service charge or hidden charge Easy processing Timely disbursement
MTB Mousumi SME customers needs additional fund in some occasions, festivals and seasons. MTB Mousumi enables those SMEs which has seasonal type of business. Features and Benefits: Loan amount up to BDT 10.00 lac Loan period range 01 to 12 months Attractive Rate of interest Up to BDT 5.00 lac is collateral free Easy repayment schedule 1% service charge and no other hidden charge Minimum 02 years of business experience Easy processing
MTB Revolving Loan Any SME, manufacturing, service, trading or farming, requires working capital for smooth operation of the business. This loan product enables those SMEs to meet their working capital requirements to support their operations and future growth. Features and Benefits: It is CC (H) and revolving type loan Loan amount up to BDT 50.00 lac 10 | P a g e
Loan period 01 year and annually renewable Attractive rate of interest Minimum 02 years of business experience At least 02 years of bank account transactions Account turnover to be 03 times of the loan amount Easy processing No service charge or hidden charge Requires collateral support
MTB Small Business Loan Enables the SMEs to expand their business. Features and Benefits: Loan amount up to BDT 50.00 lac Loan period up to 5 years Attractive rate of interest Easy repayment schedule Minimum 02 years of business experience 1.00% service charge Up to BDT 5.00 lac is collateral free Easy processing
MTB Digoon Enables the SMEs to get loan double amount of their deposit. Features and Benefits: Loan amount range BDT 5.00 lac to BDT 20.00 lac Loan tenure up to 05 years 11 | P a g e
Attractive rate of interest Monthly repayment Security 50% Fixed Deposit (FDR) of loan amount Easy processing
MTB Green Energy Loan MTB Green Energy Loan is an environment friendly loan enables the prospective customers to set up renewable energy projects such as solar, biogas, wind, hydro and any other potential renewable plant. Any individual, business entrepreneurs, NGO, institutions having capacity to repay may apply for the loan. Features and Benefits: Loan amount up to BDT 3.00 crore Loan tenure up to 10 years Rate of interest 9% p.a (only in case of re-finance from BB) Easy repayment schedule Wholesale lending to eligible NGOs/service provide in case of home scale plant No service charge or hidden charge Easy processing
2.1.3 Sme Position : Product wise (summarized) as on January 2009 to February 2012
(BDT in Core)
MTB Green Energy MTB krishi MTB Microfinance MTB Mousumi MTB Revolving MTB Bhagyaobati MTB Gunabati Total
Small business Loan MTB Digoon MTB Green Energy MTB krishi MTB Microfinance MTB Mousumi 40.91 MTB Revolving MTB Bhagyaobati MTB Gunabati
0 0 0
Figure: None Performing Loan of MTBL as on 2009 to 2012. Here we the total amount of outstanding loan is tk 280.21 crore and out of them non performing loan tk 1.94 crore that means 0.69% is NPL if we see the small business loan project then we will find total amount of loan of this project is 49. 07 tk and from this amount non performing loan is 2.89%. MTB Digoon its NPL is 40.91% and it has been provided total loan amount is tk 0.666 core. MTB Green Energys total outstanding loan is 25.25 and it has no non performing loan . MTB krishi also has no non performing loan and it s total outstanding loan is tk 12.28crore. MTB Microfinance loan project has no NPL. MTB Mousumi has total outstanding loan is tk o.42 crore and it has npl 14.29% of it is total loan. MTB Revolving loan project did not recognize any non performing loan . MTB Bhagyaobati loan project has 3.89% NPL & total amount of loan from the project is tk 4.88 crore. MTB Gunabati is a brilliant project because it has no NPL.
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STRENGTHS
Company Reputation: MUTUAL TRUST BANK has already established a favorable reputation in the banking industry of the country particularly among the new comers. 14 | P a g e
Within a period of 5 years, MTB has already established a firm footing in the banking sector having tremendous growth in the profits and deposits. All these have led them to earn a reputation in the banking field. Investors: MTB has been founded by a group of eminent entrepreneurs of the country having adequate financial strength. The shareholders of the bank are all institutions themselves, which adds to the financial strength of the bank. This is one of the main reasons why MTB has been able to overcome the huge setup cost of the SME loan distribution channel and also the huge running cost of the SME Department. Facilities and Equipment: MTB 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, MTB can utilize the distribution channel of its major investor to operate in the rural regions of the country. Advertising and Promotion of SME Loan: This is a major set back for MTB and one of its weakest areas. MTBs 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. MTB 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. Unsatisfactory Remuneration Package: The CROs are not entirely satisfied with the compensation package they receive. There is no target-based bonus system in the bank, although the CROs have to meet targets. Although the CROs are provided with motorcycles and mobile phones, it is not enough to motivate them. 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. Diversification: MTB can pursue a diversification strategy in expanding its current line of business. The management can consider options of starting merchant banking or diversify in to leasing and insurance. By expanding their business portfolio, MTB can reduce their business risk. Product Line Proliferation: In this competitive environment MTB must expand its product line to enhance its sustainable competitive advantage. As a part of its product line proliferation, MTB can introduce new, more segment-oriented products in the SME sector. 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. Multinational Banks: The emergence of multinational banks and their rapid expansion poses a potential threat to the new growing private banks. Due to the booming energy sector, more foreign banks are expected to arrive in Bangladesh. Moreover, the already 15 | P a g e
WEAKNESSES
OPPORTUNITIES
THREATS
existing foreign banks such as Standard Chartered are now pursuing an aggressive branch expansion strategy. This bank is establishing more branches countrywide and has already launched its SME operations. Since the foreign banks have tremendous financial strength, it will pose a threat to local banks. Upcoming Banks: The upcoming private local banks can also pose a threat to the existing private commercial banks like MTB. 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 MTB 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 MTBs prime competitors.
Trading, 35%
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With recommendation Branch send the loan application to the head office
Then Disburse the loan Figure: Mutual Trust Bank Loan Disbursement Process
2.2 Monitoring
Monitoring is a system by which a bank can keep track of its clients and their operations. So monitoring is an essential task for a Bank to know the borrowers activities after the loan disbursement. The monitoring purpose is to know the entire business condition and all aspects of the borrowers so that mishap can be avoided. MTB monitor their clients under the followings. i) Business Condition: Bank monitors the business frequently to understand whether the business is running well or not. MTB monitor their client business at least once a month. ii) Production: Bank also monitors the production activities of the business and if they find any problem in the production process, Bank will try to help the entrepreneur to solve the problem. 18 | P a g e
iii) Sales: Bank Monitor sales proceed to forecast the monthly sales revenue, credit sales etc. which ensure the recovery of the monthly loan repayments from the enterprise as well as to take necessary steps for future loans. iv) Investment: Bank also investigates the entire loan has been invested in to the business or not. If the money is utilized in another area Bank tries to know the reason. v) Management of raw materials: In case of a manufacturing enterprise Bank also investigates the raw materials of the company.
iv) Gradient can maintain their account for the child. Duration of the scheme: i) This account is duration time is 1 year to 25 year. ii) 12 monthly schemes within one year. The way of the payment: i) Scheme must pay at 25 dates every month if this date is holiday at that time it will pay at next working day. ii) If scheme pay in cheque at that time cheque clearing must at 25 date every month. iii) If the accountholder is give the permanent paying order at that time charge 50 taka and per scheme is 5 taka.
Chapter - 3
At that time entrepreneurs were not educated enough. They do not have sufficient skills about the different types of paper requirement. It hampers the loan processing time. 3.0.4 Employee Skills At that time employees do not have sufficient knowledge about SME. It was costly to train all the employees. So lack of proper training to employees was another obstacle for SME growth. 3.0.5 Lack of Information At that time SME just got a new shape in our country. So no one has clear idea about it. So vague and wrong information were passed among the people. 3.0.6 Natural Effect If the loan taker fall on a natural calamites as like if crops may destroy due to rain and that is why farmer may fall in great troubles and this SME loan are not efficient enough to provide additional financial aid to farmer. 3.0.7 Globalization We can say that globally SME loan is not spreading enough.
Entrepreneurship Development and Bank fund courses, which will help the student in future when they will do their own business.
Chapter - 4
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iii) Encourage fresh Graduate to do own business by knowing SME. iv) Arrange a study tour to visit the rural area SME activities.
Chapter - 5
Conclusion
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5.0 Recommendation
For better improvement of SME Banking activities MTB can consider the following recommendation: i) The Bank should Reduce the interest rate when Bangladesh Bank refinance on SME. ii) The Bank should Increase their marketing activities in the urban area because other competitive Banks are given huge advertisement to increase their customer. iii) The Bank should give proper training to the SME employee. iv) The Bank should Increase amount of SME loan. v) The Bank should Increase amount up to 10 lacs without collateral security for providing loans. vi) The Bank Should Frequently check clients are they perform all the terms and condition of SME loan. vii) The Bank should provide loans to the leather and jewelers industry. And the following recommendation for AIUB i) Add SME Banking topic in our course broadly. ii) Identify the borrower business present situation to give assignment. 26 | P a g e
iii) Arrange a study tour to visit the rural area SME activities.
5.1 Conclusion
It is a great pleasure for me to have practical experience in Mutual Trust Bank Ltd. Without practical experience it couldnt be possible for me to complete my internship report. There are numbers of commercial banks operating their activities in Bangladesh. The Mutual Trust Bank Ltd. is a promising one of them. For the future planning and the successful operation in achieving its prime goal in this current competitive environment this report can be a guideline. And if anyone wants to do their internship report on SME Banking they can find some guideline from this report and carry on his/her report after this internship report. SME is the most rising sector to expand and Mutual Trust Bank has every potentiality to explore the SME business throughout the country. This report presents some significant ways to meet the future challenges in SME business. Nevertheless, the success of SME banking depends on the expertise and dedication of the SME department officers. That is why continuous training and motivation is very much relevant to run the SME banking successfully.
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References
1. Ayyagari, M., Beck, T., and Demirg-Kunt, A., 2007. Small and Medium Enterprises across the Globe. Small Business Economics 29, Pg. 415-416. 2. De la Torre, A., Martinez Peria, M.S. and Schmukler, S., 2008. Bank Involvement with SMEs: Beyond Relationship Lending. World Bank. Mimeo. 3. Websites of Mutual Trust Bank: http://www.mutualtrustbank.comAnnual report of Mutual Trust Bank Ltd. 2010. 4. Bhargava, A., (2000), SME Banking, found in www.scrib.com . 5. Newspaper: The Daily Star (Today business) SME Banking in Bangladesh. Arthur, Md. Shaiful.
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