06.final Thesis

Chapter-1: Introduction
1.1: Introduction
Small and medium enterprises (SMEs) all over the world have been playing a crucial role in
promoting economic development as well as industrial production (Akterujjaman, 2010). In
particular, SMEs provide the necessary foundations for sustained growth and rising income in
the less developed and transitional economies. SME financing is a topic of significant
research interest to academics and an issue of great importance to the policymakers of
Bangladesh and around the world (Ahmed, M. U. 2000). Economic as well as technical and
social arguments warrant the promotion of SMEs as they create large scale, low-cost
employment opportunities, use locally available inputs and technologies, mobilize small and
scattered private savings, develop entrepreneurship, and correct the regional imbalance in
development that exists in developing countries (Akterujjaman, 2010). Despite all these
potentials, SMEs are disappearing, abandoning the potential role they could have played in
economic development. Several studies have identified the major obstacles that include, but
not limited to financing, infrastructure facilities, taxes and regulations, and stability in
policies. Access to financing continues to be one of the most significant challenges for the
growth and survival of SMEs especially innovative ones (OECD, 2004). This paper focuses
on the financial constraints that SMEs face in BRAC Bank. In Bangladesh, commercial banks
are not interested to finance SMEs because of the high risk and high supervision cost
associated with this type of financing. Absence of sound collateral puts SMEs at a relative
disadvantage. It is generally recognized that SMEs have a significant role in employment
generation, poverty reduction and overall economic growth, especially for a developing
economy like Bangladesh. SMEs are typically labor-intensive industries with relatively low
capital intensity.
1.2: Origin of the Research:
As a mandatory part of the MBA program, all the students of Business faculty of
Jahangirnagar University have to undergo a research program with an objective to gain
practical knowledge about business world. After this program, the students have to submit a
thesis paper.
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1.3: Objectives of the Study

The main objective of the study is to find out the major problems and prospects of SME loan
management of BRAC Bank Ltd. However, the specific objectives are as follows:
1. To find out the problems and prospects in designing proper financial products for the
SMEs.
2. To find out the banks reasons for reluctance to providing loans to the SMEs.
3. To suggest recommendations to overcome the problems related to SME loan
management.
1.4: Scope of the research:
Scope of the study is quite clear. SME Department is dealing with all types of Small and
Medium loan activities in the bank, opportunities are there to learn other aspects of SME
matters.
Concept of SME and its impact in overall economy of Bangladesh

Entrepreneurship development situation through SME banking
Importance of SME banking in the context of Bangladesh
Small entrepreneurs of rural-urban spectrum are enjoying the BRAC Bank loan
facility.
Virtual banking concept through SME banking
1.5: Limitations:
I have faced the following barriers while preparing the report.
1. Data from BRAC Bank Ltd., Head Office is highly confidential for the outside people
and I had no authority to use the core banking software (Finacle).
2. BRAC Bank Ltd. has very recently migrated from Millennium Banking System to
Finacle. Thats why all the employees are very busy with their works; sometimes I
had to wait more than one week for a piece of information.
3. I could get few more time to spend in collecting data for preparing my thesis paper.
Chapter-2: Methodology
2.1 Methodology of the Study
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Methodology describes working procedure of the study in a systematic manner. The study is
a qualitative one supported by quantitative data wherever necessary. The quality of the
research depends on a well designed methodology to achieve goals and objectives easily. A
dictionary of Social Science defined, "Methodology is the systematic and logical study of the
principles guiding scientific investigation" (Hamid, 1998). This research comprises four
major stages of work:
Conceptualization
Collection of Primary and secondary data from different source
Analysis of the collected data
Recommendation and conclusion
The methodology of the study is given below.

2.2: Conceptualization
SMEs in Bangladesh are defined for purposes of industrial policies by the Ministry of
Industries (MOI). Historically, this definition has been in terms of fixed-investment brackets,
and a dual-mode definition is in place, separate for manufacturing establishments, and service
establishments. For manufacturing enterprises, for manufacturing industries, the Taskforce
defines:
(a)
An enterprise would be treated as small if, in todays market prices, the

replacement cost of plant, machinery, building, structures, and other
parts/components, fixtures, support utility, and associated technical services (such
as turn-key consultancy), etc, were to up to Tk. 10 million;
(b)
An enterprise would be treated as medium if, in todays market prices, the

replacement cost of plant, machinery, building, structures, and other
parts/components, fixtures, support utility, and associated technical services (such
as turn-key consultancy), etc, were to up to Tk. 100 million;
(c)
From both definitions above, land is excluded. (Kashfia , 2009).
For non-manufacturing activities (such as trading or other services), the Taskforce defines:
(d)
An enterprise would be treated as small if it has less than 25 workers, in full-time

equivalents;
(e)
An enterprise would be treated as medium if it has between 25 and 100

employees;
From both definitions above, land, once again, is excluded.

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Having said that, an alternative, albeit informal, definition, of SMEs is used by the
Bangladesh Bureau of Statistics, using head-count for its basis. Enterprises with up to 9
employees are treated as micro; with between 10 and 49, as small; with between 50 and 99,
as medium, and all the rest, as large. For statistical purposes, this is the definition that we use
in this paper.
Bangladesh accounts for some 60% of units and 76% of employment overall in the privatesector enterprise sector, with rural Bangladesh accounting for the rest. Ninety-three point six
(93.6%) of all units in Bangladesh belong in the SME category, i.e.; have between 20 and 99
employees. However, SMEs account for only 44% of the total employment of the enterprise
sector (Hoassain, 1998).
And different articles on newspaper also inspired to conduct the study. These are the main
belongings behind the development of concept of this study.
2.3: Developing Theoretical Framework
The term Theoretical Framework means studying various reports, books and various local
and international journals and it helps to define the goal and objectives of the study. In
literature review part, various reports, several books, journals and various unpublished and
published thesis related to SME to make a clear concept on various related issues and also to
understand the relationship between the SME loan and management procedure.
2.4: Defining Goal and objectives of the research
Defining the Goal and Objectives is another important stage of the methodology. In this step,
goal and objectives are formulated. A well define goal and objective can make the
researcher's work easy and simple.
2.5: Data Analysis Methods
A five-point Likert type scale statements and open ended question were used to measure the
variables where 1 stands for strongly agree/very high and 5 stands for strongly disagree/very
low effect on the statements. Following methods were applied for data collection:
1. Observation: Data were also collected through observation during interview.
2. Data were collected in February-March 2013. Analysis was done based on qualitative
research method.
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2.6: Sources of Data

2.6.1: Primary Data collection
This study is based on both primary and secondary data. Primary data were collected through
personal interview (sample size-150) with a structured questionnaire and direct observations.
The respondents and the sample units were drawn through convenience sampling method.
Questionnaire was pre-tested and further improvement was done before conducting the
survey. Respondents were assured of anonymity by asking them not to reveal their identity
anywhere in the survey instrument. They were also told that neither their immediate
supervisors nor their headquarters officials will have access to the individual questionnaire.
2.6.2: Secondary Data collection
Secondary data including chart were collected from different sources like BRAC Bank Head
office, SME Loan branches, and web site of BRAC Bank, different books, articles, journals
and the base map itself acted as a secondary data source, annual reports of concerned bank.
And other supporting information is collected to enrich the report from Statistical Year book,
different reports and websites etc.
2.6.3: Final Thesis submission
At the end, the thesis is arranged in different chapters in a coherent way and finally the final
Thesis is submitted to the Thesis board.
Chapter-3: Literature Review

3.1: Literature Review
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The Daily Star in its editorial (2010) mentioned that many SME owners are to face
difficulties when they require bank loans. In fact, SME financing has recently been identified
by experts as one of the major problems faced by SMEs in Bangladesh.
Mahmud (2011) said that the SMEs have very limited bank finance, which is only around 10
percent, while self-finance remains the major source of their finance contributing 76.5
percent of fixed capital and 51.8 percent of working capital.
A World Bank survey (2002) on Bangladeshs SMEs identified lack of finance as the major
issue, with 55% SMEs reporting it. Bribes (21%), orders/marketing of product (28%), lack of
knowledge (12%), and license for work (8%), along with new technology (8%) were also
considered as major issues. Without the much vital capital, they have little chance of growth
or even sustenance in this mobile world. This study has tried to pinpoint, through empirical
research, the major, problems faced by SMEs and banks in Bangladesh in relation to
financing and has provided recommendations based on the findings to improve the situation.
Rosen (2003) mentioned that SMEs make up the largest portion of the employment base in
many developing countries and, indeed, are often the foundation of the local private sector.
The entrepreneurs behind them could and should play a much larger role in development, but
too often are held back by a lack of ready access to financing from local formal sector
financial institutions. IFC (2004) Annual Review report mentioned that in almost every part
of the world limited access to finance is one of the biggest obstacles to private sector growth.
This is especially true for smaller firms that have minimum influence on policy reform.
Bhattacharya and Chowdhury (2011) mentioned that Bangladesh Bank encourages banks to
give loans to projects for diversified industrial development. From the point of view of
limiting the credit risk exposures of the banks having a higher level of classified loan, the
new rule is justified. However, to consider large loans as risky loans (by the new rule) is not
reasonable. Moreover, for increasing the volume of lending to the SME sector, this sort of
supply-side policy is not adequate. In fact, under both directed lending (before 1990) and
deregulated lending (after 1990) regimes, the demand-side factors were not considered;
consequently, resource allocation suffered.
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3.2: Overview of the SMEs in the country

There is great interest in small and medium enterprises (SMEs) as a major plank of poverty
reduction in Bangladesh. Government of Bangladesh formulated a comprehensive Industrial
Policy-2005 by putting special emphasis for developing Small and Medium Enterprises
(SMEs) as a thrust sector for balanced and sustainable industrial development in the country
to help deal with the challenges of free market economy and globalization (Alam, M. S.,
2006).
A number of donors are working in Bangladesh in the interest of fostering SMEs. Some, like
the GTZ, are working not with entrepreneurs but with the chambers and industry associations
building their capacities to deliver needed services. Some, like the Catalyst, are putting
together a comprehensive base of knowledge and insights about living production clusters,
not all of them in manufacturing, namely, plastics, agricultural tools, textiles, pond culture,
and vegetable-raising (Berger, A. N. and G. E. Udell. 2005). Yet others such as the SEDF are
building enterprise-level capacities through training programs, efforts to upgrade project
management skills, enhancing the appraisal and evaluation capacities of financial institutions
concerned with SMEs.
Industrializations link to poverty reduction is through
a)
b)
c)
d)
Haring-up the growth rate of the country;

Enhancement of the productivity of the worker(s) in employment;
Providing employment to the unemployed;
Expanding consumer spending (and thus the confidence level) by sharing lower costs
from scale economies via lower prices.
3.3: SMEs Defined

According to the European Union (2003) SMEs are defined as enterprises which have at most
250 employees and an annual turnover not exceeding 50 million Euros. Further there is the
distinction of small enterprises-they have fewer than 50 staff members and less than 10
million Euros turnover -and micro-enterprises (less than 10 persons and 2 million Euros
turnover).
According to the World Bank (2006) medium enterprises are defined as enterprises which
have at most 300 employees and an annual turnover not exceeding 15 million US dollars.
Further there is the distinction of small enterprises they have fewer than 50 staff members and
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up to 3 million US dollars turnover -and micro-enterprises have up to 10 persons and

$100,000 turnover.
In the UK, sections 382 and 465 of the Companies Act 2006 define a SME for the purpose of
accounting requirements.
According to this a small company is one that has a turnover of not more than 5.6 million, a
balance sheet total of not more than 2.8 million and not more than 50 employees. A
medium-sized company has a turnover of not more than 22.8 million, a balance sheet total
of not more than 11.4 million and not more than 250 employees. It is worth noting that even
within the UK this definition is not universally applied.
In the USA, the definition of small business is set by a government department called the
Small Business Administration (SBA) Size Standards Office. The SBA uses the term size
standards to indicate the largest a concern can be in order to still be considered a small
business, and therefore able to benefit from small business targeted funding. The concern
cannot be dominant in its field, on a national basis. It must also be independently owned and
operated. Unlike the UK and the European Union which have simple definitions applied to all
industries, the US has chosen to set size standards for each individual NAICS coded industry.
This variation is intended to reflect industry differences in a better way. The most common
size standards are 500 employees for most manufacturing and mining industries 100
employees for wholesale trade industries $6 million of annual receipts for most retail and
service industries $28.5 million of annual receipts for most general & heavy construction
industries $12 million of receipts for all special trade contractors $0.75 million of receipts for
most agricultural industries Breaking down the SME definition, Industry Canada defines a
small business as one that has fewer than 100 employees (if the business is a goodsproducing business) or fewer than 50 employees (if the business is a service-based business).
A firm that has more employees than these cut-offs but fewer than 500 employees is
classified as a medium-sized business. (www.about.com)
In India the Small Scale Industries (SSIs) are industrial undertaking in which the investment
in fixed assets in plant and machinery, whether held on ownership terms or on lease or by hire
purchase does not exceed Rs. 10 million. The Small Scale Service And Business (Industry
related) Enterprises (SSSBEs) are industry related service and business enterprises with
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investment in fixed assets, excluding land and building up to Ps. 1 million. (Ministry of trade
and Industry, Government of India)
3.4: SME in Bangladesh
Different countries and organizations define SME differently. The Government of Bangladesh
has categorized SME into two broad classes
1. Manufacturing enterprise
2. Non Manufacturing activities
3. Manufacturing enterprise
3.4.1 Manufacturing enterprises can be divided into two categories;
Small enterprise:
An enterprise would be treated as small if, in current market prices, the replacement cost of
plant, machinery and other parts/components, fixtures, support utility, and associated
technical services by way of capitalized costs (of turn-key consultancy services, for example),
etc, excluding land and building, were to up to Tk. 10 million.
Medium enterprise:
An enterprise would be treated as medium if, in current market prices, the replacement cost
of plant, machinery and other parts/components, fixtures, support utility, and associated
technical services by way of capitalized costs (of turn-key consultancy services, for example),
etc, excluding land and building, were to up to Tk. 100 million;
3.4.2 Non-manufacturing activities (such as trading or other services)
Non-manufacturing activities can be divided into two categories;
Small enterprise:
An enterprise should be treated as small if it has less than 25 workers, in full-time

equivalents;
Medium enterprise:
An enterprise should be treated as small if it has between 25 and 100 employees.

According to Bangladesh Bureau of Statistics different enterprises are defined as;
No. of employees
Micro 0-9
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Small 10-49
Medium 50-99
Large Above 99
The Ministry of Industries, Government of Bangladesh has been identified following booster
sectors;
1. Electronics and electrical
2. Software-development
3. Light engineering and metal-working
4. Agro-processing/agro-business/plantation agriculture/specialist farming/tissue-culture
5. Leather-making and leather goods
6. Knitwear and ready-made garments
7. Plastics and other synthetics
8. Healthcare & diagnostics
9. Educational services
10. Pharmaceuticals/cosmetics/toiletries
11. Fashion-rich personal effects, wear and consumption goods (Kashfia, 2009).
Chapter-4: BRAC BANK Limited at a Glance

4.1: Corporate Information
Registered Office: 1, Gulshan Avenue, Gulshan-1, Dhaka-1212
Company registration Number: C-37782(2082) of 1999
Inauguration of Banking Operations: 4th July 2001
First SME Unit Office: 1st January2002
Signing with Shore Cap as investor: 29th December 2003
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Signing with IFC as investor: 8th May 2004

First ATM installed: 3rd April 2005
Preferential share issued: 31st January 2006
Signing with Infosys and 3i InfoTech for changing Banks IT platform: 1st August 2006
Listing with CSE: 24th January 2007
Listing with DSE: 28th January 2007
Commencement of share trading in DSE and CSE: 31st January 2007
Auditor S.F Ahmed & Co (Chartered Accountants, House # 25, Road # 13A, Block # D,
Banani, Dhaka-1213.
Legal Advisor, Law Valley, Shajan Tower, Commercial Block, Suit-202 (First Floor). 4
Shegun Bagicha, Dhaka-1000 (brac bank.com).
4.2: Background of BRAC BANK Ltd:
BRAC Bank is a scheduled commercial bank established under the Banking Companies Act,
1991 and incorporated as a public company limited by shares on 20 May, 1999 under the
Companies Act, 1994 in Bangladesh. The primary objective of the Bank is to carry on all
kinds of banking business. The Bank could not start its operation till 03 June, 2001 since the
activity of the Bank was suspended by the High Court of Bangladesh. Subsequently, the
judgment of the High Court was set aside and dismissed by the Appellate Division of
Supreme Court on 04 June, 2001 and accordingly, the Bank has started operations from 04
July, 2001. A fully operational Commercial Bank, BRAC Bank focuses on pursuing
unexplored market niches in the Small and Medium Enterprise Business, which hitherto has
remained largely untapped within the country. Almost 40% of BRAC Banks clients had no
prior experience with formal banking. The Bank has 313 regional marketing unit offices
offering services in the heart of rural and urban communities and employs about 1,200
business loan officers around 70% of total staff. The reason BRAC Bank is in business is to
build a profitable and socially responsible financial institution focused on markets and
businesses with growth potential, thereby assisting BRAC and stakeholders to build a "just,
enlightened, healthy, democratic and poverty free Bangladesh." Which means to help make
communities and economy of the country stronger and to help people achieve their dreams?
We fulfill the purpose by reaching for high standards in everything we do: For our customers,
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our shareholders, our associates and our communities, upon which the future prosperity of
our company rests. (bracbank.com)
4.3: Corporate Vision:
BRAC Bank will be a unique organization in Bangladesh. It will be a knowledge-based
organization where the BRAC Bank professionals will learn continuously from their
customers and colleagues worldwide to add value. They will work as a team, stretch
themselves, innovate and break barriers to serve customers and create customer loyalty
through a value chain of responsive and professional service delivery. (bracbank.com)
Continuous improvement, problem solution, excellence in service, business prudence,
efficiency and adding value will be the operative words of the organization. BRAC Bank will
serve its customers with respect and will work very hard to instill a strong customer service
culture throughout the bank. It will treat its employees with dignity and will build a company
of highly qualified professionals who have integrity and believe in the Banks vision and who
are committed to its success. BRAC Bank will be a socially responsible institution that will
not lend to businesses that have a detrimental impact on the environment and people. So
BRAC Bank operates following a specific vision like: (bracbank.com). Building a profitable
and socially responsible financial institution focused on Markets and Business with growth
potential, thereby assisting BRAC and stakeholders build a "just, enlightened, healthy,
democratic and poverty free Bangladesh" (bracbank.com).
4.4: Corporate Mission:
1. Sustained growth in 'Small & Medium Enterprise' sector
2. Continuous low cost deposit growth with controlled growth in Retained Assets
3. Corporate Assets to be funded through self-liability mobilization. Growth in Assets
through Syndications and Investment in faster growing sectors
4. Continuous endeavor to increase fee based income
5. Keep our Debt Charges at 2% to maintain a steady profitable growth
6. Achieve efficient synergies between the bank's Branches, SME Unit Offices and
BRAC field offices for delivery of Remittance and Bank's other products and services
7. Manage various lines of business in a fully controlled environment with no
compromise on service quality
8. Keep a diverse, far flung team fully motivated and driven towards materializing the
bank's vision into reality (bracbank.com)
4.5: Corporate Values:
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1. Our Strength emanates from our owner - BRAC. This means, we will hold the
following values and will be guided by them as we do our jobs.
2. Value the fact that we are a member of the BRAC family
3. Creating an honest, open and enabling environment
4. Have a strong customer focus and build relationships based on integrity, superior
5.
6.
7.
8.
9.
service and mutual benefit

Strive for profit & sound growth
Work as a team to serve the best interest of our owners
Relentless in pursuit of business innovation and improvement
Value and respect people and make decisions based on merit
Base recognition and reward on performance (bracbank.com).
4.6: Corporate Objectives:

The objective of BRAC Bank Limited is specific and targeted to its vision and to position
itself in the mindset of the people as a bank with difference. The objectives of BRAC Bank
Limited are as follows:
1. Building a strong customer focus and relationship based on integrity, superior service.
2. To creating an honest, open and enabling environment
3. To value and respect people and make decisions based on merit
4. To strive for profit & sound growth
5. To value the fact that they are a member of the BRAC family- committed to the
creation of employment opportunities across Bangladesh.
6. To work as a team to serve the best interest of our owners
7. To base recognition and reward on performance
8. To responsible, trustworthy and law-abiding in all that we do
9. To finance the international trade both in import and export.
10. To develop the standard of living of the limited income group by providing Consumer
Credit. (bracbank.com)
4.7: Location of Branches, SME Centers & ATM
Currently, BRAC Bank has 100 Branches, 60 SME Service Centers, 3 SME/Krishi Branches,
more than 300 ATMs and 424 SME Unit offices across the country. It has disbursed over
BDT10, 000 crores of SME loan and has over 500,000 individual customers who access
online banking facilities. Its services cuts across all strata of clientele are it corporate, retail or
SME. (bracbank.com)
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4.8: Shareholding Structure:

Table-1: Shareholding Structure
Shareholding Structure: Name
Shareholding
of Shareholder
BRAC
International Finance Corporation
ShoreCap Limited
Non-Resident Bangladeshi
Mutual Funds
Institutions and General Public
43.77%
5.36%
0.86%
0.43%
3.22%
46.36%
Fig-1: Shareholding Structure
Shareholding
Shareholding
46.36%
43.77%
5.36%
3.22%
0.43%
lF
un
ua
ut
M
Sh
o
re
Ca
p
BR
A
Li
mi
te
ds
0.86%
Sour
ce: (bracbank.com)
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4.9: Management of BRAC Bank Limited:

Boards of directors are the sole authority to take decision about the affairs of the business.
Now there are 6 directors in the management of the bank. All the directors have good
academic background and have huge experience in business. Sir Fazle Hasan Abed is the
Founder of the bank. The board of directors holds meetings on a regular basis. The current
management teams and board of directors name are given in the following table:
Table-2: Management of BRAC Bank Limited
The Board of Directors of BRAC
Chairman
Bank Limited includes:

Mr. Muhammad A (Rumee) Ali
Mr. Quazi Md. Shariful Ala
Mr. Mark A.Coffey (Nominated By
Director
Director
ShoreCap International Limited)

Ms. Nihad Kabir
Ms. Tamara Hasan Abed
Mr. Shib Narayan Kairy
Dr. Hafiz G.A.Siddi
Syed Mahbubur Rahman
Director
Director
Director
Director
Managing Director & CEO
Source: Annual Report BRAC Bank (2011)
4.10: Division of BRAC Bank Ltd:

There are five different business units generating business BRAC BANK Limited:
I. Small & Medium Enterprise (SME)
II. Corporate Banking
III. Retail Banking
IV. Treasury
V. Remittance Services
4.11: Currently offered Product & Service of BRAC Bank Ltd
4.10.1: Products and services
The bank has wide range of Product line to suit the need of the people of all strata. In addition
to convention product both Asset and liability sides the Bank offers special credit products for
its customer. These are:
Consumer financing
Lease Financing
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Small Loan
Festival Loan
Housing Loan
Long-term & Short term loan financing
Real Estate and Civil Constriction
SME and Agro Based. (bracbank.com).
4.10.2: Ancillary services
Brokerage House service under the central depository with membership of bourse
Foreign Currency Remittance over 100 outlets, 300 ATMs and over 500,000 plastics in the
market, BRAC Bank offers a wide range of financial solutions to meet everyday need.
Be it home loan, car loan, or simply a quick loan (bracbank.com).
4.10.3: Deposit Products
Prapti Current Account
Table-3: Deposit Products

Deposit Products
Campus Account
Savings Account
Term Deposits
Triple Benefit Savings Account
DPS
Savings Classic Account
Fixed Deposit
Aporajita Account
Flexi DPS
Current Accounts
Interest First Fixed Deposit
Current Classic Account
Freedom Fixed Deposit (FFD)
Current Plus
Abiram Fixed Deposit
EZee Account
Salary Account
4.10.4: Non-Stop Banking
1
Nonstop banking from 10 a.m. to 8 p.m.
Online banking facility in all of the sections

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Up to 5 p.m. for the fixed branches
More Information
4.10.5: Wholesale Banking

BRAC Bank offers a full array of Financial Services to Corporations and Institutions. Having
access to the deepest end of the country, BRAC Bank is there to assist businesses in
Bangladesh. (bracbank.com)
4.10.6: Corporate Banking
1
Corporate Loan Products
Overdraft
Short Term Loan
Lease Finance
Loan against Trust Receipt
Work Order Finance
Emerging Business
Syndication
Term Loan
10 Project Finance
11 Bill Purchase
12 Bank Guarantees
13 Trade Finance
14 Letter of Credit (LC)
15 Letter of Guarantee (LG)
4.10.7: Cash Management
Cash & Trade Overview
Liability Products
Securities Services
4.10.8: Custodial Service
Probashi Biniyog
4.10.9 Probashi Banking
When any one send his/her hard-earned money from abroad to dear ones at the farthest end of
Bangladesh, ask them to collect it from over 3,500 pay out locations of BRAC Bank.
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Every month, Probashi Banking executes around 150,000 transactions; which has made
BRAC Bank one of the largest players among private commercial banks in channelizing
inward remittance in the country. (bracbank.com).
4.10.10: Accounts & Deposits
Probashi Current Account
Probashi Savings Account
Probashi Fixed Deposit
Probashi Abiram
Probashi DPS
4.10.11: Investments
Probashi Wage Earners' Bond
US Dollar Premium & Investment Bond
Probashi Biniyog
4.10.12: Remittance Info
Western Union Money Transfer
Exchange Houses
4.10.13: SWOT Analysis of BRAC BANK:

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. (brac bank Annual report)
40.10. 13.1: Strengths:
Goodwill: BRAC bank LTD has already established a favorable reputation in the
banking industry of the country particularly among the new comers. Within a period
of 5 years, BBL has already established a firm footing in the banking sector having
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tremendous growth in the profits and deposits. All these have leaded them to earn a
reputation in the banking field (brac bank Annual report).
Sponsors: BBL has been founded by a group of eminent entrepreneurs of the country
having adequate financial strength. The sponsor directors belong to prominent
resources persons of the country. The Board of Directors headed by its Chairman Sir.
F. H. Abed. Therefore, BBL has a strong financial strength and it built upon a strong
foundation.
Efficient Management: The top management of the bank is also major strength for
the BBL has contributed heavily towards the growth and development of the bank.
The top management officials have all worked in reputed banks and their years of
banking experience, skills, expertise will continue to contribute towards further
expansion of the bank. At BBL, the top management is the driving force and the think
tank of the organization where policies are crafted and often cascaded down.
Facilities and equipment: BBL has sufficient physical facilities and equipments to
provide better services to the customers. The bank has computerized and online
banking operations under the software called Finacle banking operations. Counting
machines in the teller counters have been installed for speedy service ant the cash
counters. Computerized statements for the customers as well as for the internal use of
the banks are also available (brac bank Annual report).
40.10. 13.2 Weaknesses:
Lack of advertising and promotion of SME loan: This is a major setback for BBL
and one of its weakest areas. BBLs adverting and promotional activities are
satisfactory but it SME loan is not advertised well. It does not expose its SME product
to general public and are not in lime light. As a result large numbers of people are not
aware of the existence of this bank.
NGO name (BRAC): BRAC is one of the largest NGO of the world and it is
operating its activities in Bangladesh. BRAC bank is not a NGO bank but many
19 | P a g e
people of them country consider it as a NGO bank like Grameen bank which is not
correct.
Remuneration: The remuneration package for the entry and the mid level
management is considerably low. The compensation package for BBL entry level
positions is even lower than the contemporary banks. Under the existing low payment
structure, it will be difficult to attract and retain higher educated employees in BBL.
Especially CROs are not satisfied with compensation package provided to them (brac
bank Annual report).
40.10. 13.3 Opportunities:
ATM: BBL always tries to provide excellent services to its customers. By considering
this thing BBL provides ATM card to its customers and also provide available ATM
booth in different locations in whole country.
Diversification: BBL 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, BBL
can reduce their business risk.
Product line proliferation: In this competitive environment BBL must expand its
product line to enhance its sustainable competitive advantage.
Available Branches: With its proper and useful operational network, there is an
opportunity for IFIC to further expand its branches in many remote and new location
of the country which will deliver services to customer and earn a healthy profit for the
bank (brac bank Annual report-2011).
40.10. 13.4 Threats
Competition: Competition is the threat of any business. At the age of modern business
the competition is increasing. Every bank has an intention to provide better services
compared to others for capturing the customers.
20 | P a g e
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 existing foreign bank such as Standard Chartered is now
pursuing an aggressive branch expansion strategy. This bank is establishing more
branches countrywide and already launched is SME operation.
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.
Contemporary banks: The contemporary banks of BBL such as Dhaka bank, prime
bank and Dutch Bangla Ltd. are its major rivals. Prime bank and other banks are
carrying out aggressive campaign to attract lucrative clients as well as big time
depositors.
Leasing companies: Leasing companies like IDLC and others are also competitor for
BRAC Bank (brac bank Annual report-2011)
Chapter-5 SME Banking Division

5.1: SME Banking Division
In our country the most valuable resource is our people. After independence the main goal of
our country is to become economically stable country. Commercial Bank of our country is
only working for larger industries and trading organizations and NGO or other Micro lenders
are working here in the financial field, providing very small amount. But the small and
medium entrepreneurs were ignored. As a socially responsible bank, BRAC Bank wants to
see the release of grass-roots level to their economic height and also to make profit by serving
the interest of missing middle groups. 50% of its total portfolio usually collected from urban
areas, are channeled to support these entrepreneurs who in future will become the potential
strength of our economy. BRAC Bank is the market leader in giving loans to Small and
Medium Entrepreneurs (brac bank Annual report-2011).
21 | P a g e
The division has captured 5.87% market share within SME Banking arena of
Bangladesh.
Till date BRAC Bank has served 369,246 borrowers, amounting BDT 176,740 million
through its 550 customer touch points (SME Unit offices, SME Sales and Service
Centers, SME Krishi Branches).
Customer deposit grew by 47% in 2011copared to 2010.current level of deposit stands

at BDT 13,193 million.
Customer asset grew by 17% in 2011 compared to 2010. Current level of asset stands
at BDT 43,529 million.
Record breaking asset disbursement of BDT 463 corer was seen in October 2011, with
a net asset growth of BDT BDT 212 corer in the Month alone. ((brac bank Annual
report-2011)
5.2: SME Banking

BRAC Bank, being the youngest bank, took a step to break away from usual tradition and
tapped into the true suburb entrepreneurial initiatives. Today, with over 10,000 corers of loans
disbursed till date, BRAC Bank is countrys largest SME financier that has made more than
265,000 dreams come true. ((brac bank Annual report-2011)
5.3: Procedure of BRAC bank SME loan

Customer Relations Officer (CRO) helps a customer choose the scheme which best meets his
financial requirements and fits his business size and nature. The CRO then collects all the
requisite documents from the customer, consolidates the information, and after ensuring that
all the required documentation are in place, he prepares the Loan Application Proposal (LAP)
and passes it on to his Zonal Manager. The Zonal Manager visits the business, gives the file a
final check and forwards it to the Credit Risk Management department of bank (brac
bank.com).
The Credit Analyst in the SME Credit wing visits the business location and analyzes the loan
proposal by making an assessment of the customers ability to repay based on his business
profile and matching customers proposal with his credit assessment to determine whether the
customer can be financed. Its credit officers are always proactive in identifying and managing
22 | P a g e
any risks/gaps in the credit file and communicating them to the respective CROs so they can
correct the discrepancies and provide the required information. In areas where there is no
centralized credit assessment department, the bank has audit team that visits the business
location and assesses the file (brac bank.com).
The Origination department verifies the documentation and opens the loan accounts of the
customers. In addition, they help obtain the CIB of the customer, a mandatory requirement of
Bangladesh Bank. The loan is then disbursed to the customer. SME Business and CRM
jointly manage the collection responsibility across the country based on overdue aging. SME
Repayment Unit performs the functions of loan repayment and the Closing Unit does the loan
closure. The CRO obtains the deposit slip from the customers for the monthly installments;
he sends a mobile text to Head Office for realization of the installment. The slips are
collected at the repayment unit for reconciliation. As the loan matures, the closing and
clearing units handle the necessary paperwork and forward the clearance certificate and
redemption authority of mortgage property to the respective CRO/ZM, who then hand them
over to customer (brac bank.com).
5.3.1
Enterprise Selection Criteria: The success of SME will largely depend on the
selection of a business and man behind it. In terms of the business (Enterprise), the
following attributes should be sought:
Business Age: The age of business must be one year. If the business is older than they
got more preference and facility.
Registration: The business should be legally registered, i.e., valid trade license,
income tax or VAT registration, wherever applicable.
Environment friendly: The business should be environment friendly, no narcotics or

tobacco business.
Define Market: The business must have a defined market with a clear potential
growth
Location of business: 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 manpowers that are required
23 | P a g e
Riskiness of business: Any risk assessed by the management in turn will become a
credit risk for the bank. So effort should make to understand the risk faced by the
business.
5.3.2: Entrepreneur Selection Criteria:

In order to understand the capability of the management behind the business, the following
should be assessed:
1. The entrepreneur should be physically able and in good health, preferably between the
age of 25-50. If he/she is an elderly person closer to 50, it should be seen what the
succession process will be and whether it is clearly defined or not
2. The entrepreneur must have the necessary technical skill to run the business, i.e.
academic background or vocational training, relevant work experience in another
institution or years of experience in this line of business
3. The entrepreneur must have and acceptable social standing in the community (People
should speak highly of him), he should possess a high level of integrity (Does not
cheat anyone, generally helps people), and morally sound (Participates in community
building)
4. The entrepreneur must possess a high level of enthusiasm and should demonstrate that
he is in control of his business (Confidently replies to all queries) and has the ability
to take up new and fresh challenges to take the business forward
5. Suppliers or creditors should corroborate that he pays on time and is general in nature
6. Clear-cut indication of source of income and reasonable ability to save (Rabbani,
Mehnaz & Munshi, 2005).
5.3.3: Guarantor Selection Criteria:
Equally important is the selection of a guarantor. The same attribute applicable for an
entrepreneur is applicable to a guarantor. In addition he should posses the followings:
1. The guarantor must have the ability to repay the entire loan and is economically
solvent (Check his net worth)
2. The guarantor should be aware about all the aspect of SEDF loan and his
responsibility
3. Govt. and semi-govt. officials can be selected as a Guarantor such as schoolteacher,
college teacher, doctor etc
24 | P a g e
4. Police, BDR and Army persons, political leaders and workers, and Imam of mosque
cannot be selected as a guarantor
5. The guarantor should know the entrepreneur reasonable well and should preferably
live in the same community (Rabbani, Mehnaz & Munshi 2005).
5.3.4: Type of Securities taken against Loan:
1. The following listed securities may be obtained from borrower against loan to
enterprises, either individually or in a combination.
2. It is really up to the bank what they would like to accept as security from the borrower
as not all the securities stated below are suitable:
3. Mortgage of loan and other immovable property with power of attorney to sell
4. Lien of Fixed Deposits receipts with banks and other non-banking financial
institutions, lined, these have to confirm by the issuer
5. Lien of Pratirakshay sanchay patra, Bangladesh sanchay patra, ICB unit certificates
and wage earner development bond, all considered Quasi or Near cash items
6. Lien of shares quoted in the stock exchange (This is rarely accepted)
7. Pledge of goods (Banks are akin to stay away from such securities now a days)
8. Hypothecation of Goods, Book Debt & Receivables, Plant & Machineries
9. Charge on fixed assets of a manufacturing enterprise
10. Lien of cheque, Drafts and order
11. Lien of work orders, payment to be routed through the bank and confirmed by the
issuer
12. Shipping documents of imported goods (brac bank.com)
5.4: 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 CRO to know the borrowers activities after the loan
disbursement. This also facilitates the buildup of an information base for future reference.
Importance of Monitoring:
Through monitoring a CRO can see whether the enterprise invested the sanctioned amount in
the pre-specified area of his business, how well the business is running, the attitude of the
entrepreneur, cash credit sales and purchase, inventory position, work in process and finished
25 | P a g e
goods etc, This information will help the CRO/BRAC Bank to recover the loan accruing to
the schedule and to take the necessary decisions for repeat loans.
Business Condition
The most important task of the CRO to monitor the business frequently, it will help him to
understand whether the business is running well or not, and accordingly advice the borrower,
whenever necessary. The frequency of monitoring should be at least once month if all things
are in order.
Production
The CRO will monitor the production activities of the business and if there is any problem in
the production process, the CRO will try to help the entrepreneur to solve the problem. On
the other hand the CRO can also stop the misuse of the loan other than for the purpose for
which the loan was disbursed.
Sales
Monitoring sales proceed is another important task of the CRO it will help him to forecast the
monthly sales revenue, credit sales etc. which will ensure the recovery of the monthly loan
repayments from the enterprise as well as to take necessary steps for future loans.
Investment
It is very important to ensure that the entire loan has been invested in the manner invented. If
the money is utilized in other areas, then it may not be possible to recover the loan.
Target Market:
1. Trading of grocery item
2. Hardware
3. Chemical products
4. Sanitary ware
5. Building materials (rod, cement, brick, paint, and others)
6. Electrical and electronic items
7. Imported foods (biscuits, cheese, juice, and such items)
8. Light machinery
9. Large tailoring business
26 | P a g e
10. Weaving mills

11. Bakery
12. Printing house
13. Feed mill
14. Poultry
15. Dairy farm
16. Fisheries
17. Manual/auto rice mill
18. Boutiques and parlors
19. Restaurant
20. Distributor of FMCG products/others
21. Fish wholesaler
22. Food grain wholesaler
23. Wood processing/saw mills
24. Many more
5.5: Reasons of SME Banking
The main focus of BRAC Bank is to develop human and economic position of the country. Its
function is not limited only to providing and recovering of loan. But also try to develop
economy of a country.
5.6: Support Small and Medium Enterprise
The main aim of SME in our country is to support small and medium enterprise. In our
country small and medium entrepreneurs do not have easy access to get loans from the
commercial banks/ financial institutions. But BRAC Bank Ltd. Provides loans to such
entrepreneur without any kind of mortgage.
Create Employment: To create employment opportunities in the market. By

providing loan to the small enterprises entrepreneur got success on their business who
cannot start or expand their business because of lack of fund.
27 | P a g e
Economic Development: Economic development of a country largely depends on the

small and medium sized enterprises. If the missing middle become successful than our
country economically developed.
Profit Making: SME program is a new dimensional banking system in the banking
world. Most of the CROs are providing door-to-door services to the entrepreneurs.
Entrepreneurs are satisfied by the service of the bank and making profit with guidance
of the bank.
Encourage Manufacturing: The focus of BRAC Bank Ltd. is to encourage

manufacturing by the entrepreneurs who produce by purchasing various types of
materials. CROs try to educate them to produce material if possible because if they
can produce in line of purchase profits will be high.
Map-1: SME Network of BRAC Bank
28 | P a g e
Source: Annual report 2011
SME Network of BRAC Bank
Chapter-6 SME Product Details of BRAC Bank

29 | P a g e
6.1: Anonno Rin

A business loan scheme for the purpose of working capital finance and/or fixed assets
purchase to the small and medium sized trading, manufacturing, service, agriculture, nonfarm activities, agro-based industries etc. all over Bangladesh through marketing and
distribution offices (called unit offices) across the country. The loan, under this scheme,
would be secured by hypothecation on the inventory, receivables, advance payments, plant &
machineries, charge on immovable properties, third party personal guarantee,
equitable/registered mortgage of landed property, full or partial cash cover (in the form of
readily en cashable government bonds, mutual fund unit certificates and deposits/fixed
deposits in our Bank or in other Banks if the entrepreneur(s)/owner(s) offers/agrees to offer)
Table-4: Anonno Rin
INTERE
NAME
LOAN
FEATURES
AMOUNT
(BDT)
ST RATE
&
TENURE
Loan
Mortgage,
without 3 lac to 10 lac

Easy Excellent Borrowers
installment
Anonno
Rin
CRITERIA
18 60 years of age
might get reduced

interest
rates
for
Discounted rates for repeat loans. 22% 24% p.a

Excellent Borrowers
ELIGIBILITY
p.a. for the first time
Quick,
quality and 20% p.a. for the
banking throughout second time.
the country
Minimum
experience
2
in
years
the
same line of business

Business must be
going concern for at
least 3 or more years.
Source: operation manual, SME BRAC Bank (2011)
6.2: Apurbo Rin

A business loan scheme for the purpose of working capital finance and/or fixed assets
purchase to the small and medium sized trading, manufacturing, service, agriculture, nonfarm activities, agro-based industries etc. all over Bangladesh through SME unit offices
across the country. The loan, under this scheme, would be secured by hypothecation on the
inventory, receivables, advance payments, plant & machineries, charge on immovable
properties, third party personal guarantee, equitable/registered mortgage of landed property,
30 | P a g e
full or partial cash cover (in the form of readily encashable government bonds, mutual fund
unit certificates and deposits/fixed deposits in our Bank or in other Banks if the
entrepreneur(s)/owner(s) offers/agrees to offer)
Table-5: Apurbo Rin
NAME
FEATURES
LOAN
INTEREST
AMOUNT
RATE
(BDT)
TENURE
& ELIGIBILITY
CRITERIA
25 60 years of age,
Without mortgage for
Those
who
have
loan below 10 lac.
property/land/buildin
g
17%
Apurbo
Simple
loan
processing
for
expanding
your
10 Lac to 1
Crore Loans
business
p.a.
at
monthly rest for

loans
between Minimum 3 years of
8.50 lac to 15 some sort of business

lac.
activities
Quick disbursement,
Business must be a
Easy installment and
going
overdraft facility
more than 3 years
concern
for
6.3: Digoon Rin

Digoon Rin is a loan facility for small and medium sized trading, manufacturing, service,
agriculture, non-farm activities, agro-based industries etc. spread all over Bangladesh through
our unit offices across the country. The product offers terminating loan facilities for the
purpose of working capital finance and/or fixed assets purchase under Equated Monthly
Installment loan facility or Single Installment Loan facility. To avail Digoon Loan facility
the enterprise has to give 50% cash security (Fixed deposited of BRAC Bank) of the loan
amount.
Table-6: Digoon Rin
NAM
E
FEATURES
LOAN
INTEREST
AMOUNT
RATE
ELIGIBILITY
& CRITERIA
31 | P a g e
(BDT
TENURE
Equated Monthly 18 55 years of
Double amount of loan on
Installment
your deposit
loan age
facility: 17 %
Must
Digoo
n
at
least 2 years of
Attractive return against

the deposit
have
business
5 lac to 30 lac
Single Installment experience

Loan facility: 18
Business must
%
Flexible repayment plan
be
going
in monthly installment
concern
for
and single installments
more
than
years
6.4: Prothoma Rin

Prothoma Rin is a loan facility for small and medium sized trading, manufacturing,
service, agriculture, non-farm activities, agro-based industries etc. which are operated by
women entrepreneurs, spread all over Bangladesh through our unit offices across the country.
The product offers terminating loan facilities for the purpose of working capital finance
and/or fixed assets purchase. Currently only a small percentage of our existing clients are
women. This new loan product will help us to penetrate the women entrepreneurs who want
to avail loan facility.
Table-7: Prothoma Rin

NAME
FEATURES
LOAN
INTEREST
AMOUNT
RATE
(BDT)
TENURE
ELIGIBILITY
&
CRITERIA
32 | P a g e
In case
the
tenant
borrower
cannot
obtain trade license

showing her name as
18 55 years of age
owner of the business,

loan can be sanctioned
in the personal name
of the borrower
Any kind of business

Discounted rates for
excellent borrowers
Prothoma
having
Maximum
BDT 1 million
Repay the loan in the
is
method
meet
and
time
period that suits you
offered
needs.
the best
to
business
As low as 10%
interest
monthly
rate
at
valid
trade
license, which is at
least 2 years of old.
Minimum of one year
of
continuous
business history
Borrower availed any

loan in the name of
his/her sister concern
business loan may be
approved if the loan is
regularly repaid from
the
sister
concern
The business should

be
located
surrounding the unit

offices of BRAC bank
across the country
business
6.5: Pathshala Rin

The product offers term loan facilities for the purpose of fixed assets purchase under Equated
Monthly Installment. The loan would be secured by hypothecation on the inventory,
receivables, advance payments, equipments, furniture & fixtures, charge on immovable
properties, equitable/registered mortgage of landed property, partial or full cash cover (in the
33 | P a g e
form of readily encashable mutual fund unit certificates and deposits/fixed deposits in our
Bank or in other Banks).
Table-8: Pathshala Rin
NAME
LOAN
FEATURES
AMOUNT
(BDT)
INTEREST
RATE
&
TENURE
ELIGIBILITY
CRITERIA
The
24%
p.a.
at
Without mortgage for
monthly rest for
loan below 10 lac
loan amounting
3 lac to 10 lac
institution
should be sole
proprietorship,
partnership,
Private Limited
Company,
or
Society
17%
p.a.
at
Loan for fixed assets
monthly rest for
purchase
loan amounting
&
civil
construction
above 10 lac to
Pathshala
3 lac to 10 lac
15 lac
The educational
institute must be
a profit making
concern
Loan repayment can be

spread up to 4 years
A
Minimum
documentation
16%
p.a.
small
&
at medium
monthly rest for educational

Monthly
repayment
plan
loan amounting institution that is

above 15 lac up in operation for
to 30 lac
Quick disbursement
minimum
years
Flexible interest rate

based on security
34 | P a g e
6.6: Supplier Finance

Supplier Finance is a loan facility for the enlisted suppliers of various corporate houses.
Under this product, respective Suppliers will get loan limit maximum 80% of their last 1(one)
year average monthly bills or work orders of particular corporate house. The product offers
terminating loan facilities for the purpose of working capital finance under Equated Monthly
Installment loan facility or Revolving Loan facility with multiple drawdown options and
Single Installment based repayment plan. To avail this loan facility; BRAC Bank, particular
corporate house and the enlisted supplier of particular corporate house have to sign a tripartite
agreement.
Table-9: Supplier Finance
NAME
LOAN
FEATURES
AMOUNT
(BDT)
INTEREST
RATE
&
TENURE
ELIGIBILITY
CRITERIA
If you are an
Equal
monthly
installment
and
revolving
loan
3 lac to 9.5 lac22%
p.a
at
monthly rest
facility
enlisted supplier
of a corporate
house
with
which
BRAC
Bank
has
corporate tie- up
Have 1 year
Supplier
3 lac to 30 lac
Finance
10 lac to 15 lac - continuous

17%
p.a
at relationship with
monthly rest
1%
of
loan
the
purchasing
firm
amount as the
processing fee
Above 15 lac to
30 lac - 15% p.a
at monthly rest
Have minimum 3
years
continuous
operation
35 | P a g e
of
6.7: Aroggo Rin

The main objective of launching Aroggo loan is to finance private clinics and diagnostic
centers to further broaden our SME customer base. Through Aroggo loan, health centers will
get the opportunity to upgrade their medical facilities or expand business. This will contribute
to the overall enhancement of health facilities available in Bangladesh.
Table-10: Aroggo Rin
NAME
FEATURES
LOAN
INTEREST RATE ELIGIBILITY
AMOUNT
& TENURE
CRITERIA
(BDT)
Doctors having 5 years of
Loan without
mortgage
3 lac to 8 lac 20% experience

p.a. at monthly rest
A profit making concern
up
to 8 lac
Easy
Above 8 lac to 15
loan
lac - 17% p.a at
processing
Aroggo
monthly rest
Loan
3 lac to 10
repayment
lac
schedule
is
spread up to 3
years
1%
loan
processing fee
Institutions with at least 2

Above 15 lac to 30
years in operation
lac - 16% p.a at

monthly rest
Flexible interest
rate
based
on
security
6.8: Cash Secured Loan

Cash Secured Loan is a loan facility for small and medium size trading, manufacturing,
service, agriculture, non-farm activities, agro-based industries etc. spread all over Bangladesh
36 | P a g e
through our branches or unit offices across the country. The product offers terminating loan
facilities for any purpose related to business. There are two types of loan facility in the
product i.e. Secured Loan and Secured Overdraft. These facilities are fully secured by fixed
deposit of BRAC Bank.
Table-11: Cash Secured Loan
INTEREST
NAME
LOAN
AMOUNT
(BDT)
INTEREST
RATE
RATE
&TENURE
& ELIGIBILITY
TENURE(Secure
(Secured
d Overdraft)
Loan)
Type-
D:
Loan
95% of the face

value
Type- A: Loan
100%
the
face value of
Cash Secured
Loan
of
3 lac to 30 lac
CRITERIA
Fixed Deposit
of
Fixed
Deposit 3% p.a.
Spread over Fixed
Deposits
interest
rate.
The
entrepreneur
must
have
minimum
(Six)
months
experience
in
the same line of

business.
3% p.a. spread
Fixed Type- E:
Loan 80% of the To
Deposits
face value of Fixed determined
interest rate
over
be
by
Deposit. 2% p.a. Trade license (if

spread over Fixed available)
Deposits
interest
rate.
6.9: Bizness Account

Bizness Account is an interest bearing account only for business Enterprise for SME and
Retail Banking. This product has been set in a way to encourage small & medium
entrepreneur to enter into the wide range of modern banking facilities of BRAC Bank
Limited.
Table-12: Bizness Account
37 | P a g e
BBL SME Banking Products
NAME
LOAN
FEATURES
AMOUNT
(BDT)
INTEREST
RATE
&
TENURE
ELIGIBILITY
CRITERIA
Smart Business
Entrepreneurs
Card
aged between 18
24 hour Access
to ATMs/ POS
No
4% interest on
daily balance
Minimum 50,000
Balance,
Opening balance
No withdrawing
-BDT-10,000.00
Ledger Fees, No facility (per day)

Bizness Account
hidden cost
from ATM &
No bar for using
100, 000 from
POS
POS
Phone-Banking,
Online Banking,
SMS
Banking,
Internet Banking
facility
to 60 years
Small
and
medium
sized
Interest paid to business

account twice a entrepreneur of
year
sole
proprietorship
business
38 | P a g e
Chapter-7 Data Analysis

7.1: Data Analysis
An analysis is generated from the questionnaire to fulfill the objectives of the study. The
respondents were employees of BRAC Bank Limited and customer, sample size was 150 and
simple random sample was applied. For the convenience of analysis the researcher has
calculated the percentage of the responses. For the ease of better understanding, the
researcher has presented the information of percentage under three headings (Agree/High,
Neither Agree nor Disagree/Moderate, and Disagree/Low). Several judgments are being made
from the responses of the employees of BRAC Bank Ltd. to validate the objectives of the
study. The results are presented below. The study finds that SMEs are not preparing proper
financial statement which creates problem for the bank in judging financial standings. It is
also observed that SMEs are not maintaining proper licensing (Figure 7).
BRAC Bank started its journey in 2001 with a mandate to serve the SMEs of Bangladesh &
to realize dreams and aspirations of SMEs especially in remote areas of the country.
In-line with the mandate BRAC Bank continued to grow its SME portfolio, which is 53% of
Banks total portfolio.
Fig-2: Growth of BRAC Banks Portfolio
39 | P a g e
Growth of BRAC Banks Portfolio

600
500
400
Amount in US$
300
200
100
1
Source: Internal Data, SME Banking Operation of BBL
Fig-3: Growth of BRAC Banks Portfolio type

Portfolio Type
State Owned Banks; 28%
NBSIs; 4%
Spcializeed Banks; 6%
Foreign Banks; 3%
Private Banks; 59%
BRAC Bank Holds 9% SME Portfolio of Private Banks

5.29% SME Portfolio of Entire Industry
Fig-4: Growth of BRAC Bank SME Deposits Portfolio
40 | P a g e
Growth of BRAC Bank SME Deposits Portfolio

$160
$140
$120
$100
SME Deposit
$80
$60
$40
$20
$0
40156
40522
40888
Fig-5: Growth of BRAC Bank SME Deposits Portfolio

$600
$500
$519
$441
$430
$400
$300
$200
$100
$0
$155
$106
$65
15%
40156
30%
24%
40522
40888
SME Asset
SME Deposit
Self-Funding of SME Assets by SME Deposit
Unsecured
Partially
Secured
Secured
Shokti
Apurbo
Shaomriddhi Shompod
Shohoj
Shokti
Apurbo
Shaomriddhi Shohoj
Above
$32k
Nill
$12k to
$32k
Durjoy
$32k to
$12k
Anonno
Shaomriddhi Shohoj
Prothoma
Shamolima
Fig-6: Loan type of SME Banking
Need Based Product offering

(Variation in loan amount and
security arrangement)
Statement based/non statement
41 | P a g e
based financial assessment
Segment driven product offering

(Small business, women entrepreneur,
agriculture sector, importer-exporter)
Repayment tailored to cash flow
pattern (cash cycle based payment/long
term)
Product
Source: Major Economic Indicators: Monthly

Update Status as on 30 September 2011
Fig-7: Sourcing flow diagram of SME

lone
Anonno
Prothoma
Durjoy
Apurbo
Shakti
Shampad
Shamriddi
Shohoj
Shamolima
Loan Type
Term
Loan
Single
Payment
Over
Draft
Source: Major Economic Indicators: Monthly Update Status as on 30 September 2011
Fig-8: Credit Approval Process of SME Loan

Source: Major Economic Indicators: Monthly Update Status as on 30 September 2011
42 | P a g e
Fig-9: SMEs prepare proper financial statement

SMEs prepare proper financial statement
20
18
16
14
12
10
8
6
4
2
0
Di
sa
gr
ee
ly
ng
St
ro
Ne
ith
er
A
gr
ee
No
r
St
ro
ng
Di
sa
ly
gr
ee
gr
ee
Frequency
Point
Fig-10: SMEs maintain proper licensing
43 | P a g e
SMEs maintain proper licensing

25
20
15
10
5
0
Di
sa
gr
ee
Ne
ith
er
A
St
ro
ng
gr
ee
ly
No
r
St
ro
ng
Di
sa
ly
gr
ee
gr
ee
Frequency
Point
Fig-11: BRAC Bank Limited grant large loan for the SMEs
BRAC Bank Limited grant large loan for the SMEs
25
20
15
10
5
0
Di
sa
gr
ee
ly
ng
St
ro
Ne
ith
er
A
gr
ee
No
r
St
ro
ng
Di
sa
ly
gr
ee
gr
ee
Frequency
Point
44 | P a g e
Fig-12: Responses on granting loan as cluster wise

Responses on granting loan as cluster wise
25
20
15
10
5
0
Di
sa
gr
ee
ly
ng
St
ro
Ne
ith
er
A
gr
ee
No
r
St
ro
ng
Di
sa
ly
gr
ee
gr
ee
Frequency
Point
Fig-13: Responses on consideration of BBL for promotion of the products
45 | P a g e
Responses on consideration of BBL for promotion of the products

6
5
4
Over Draft
Time Loan
Term Loan
3
2
1
0
Very High
High
Moderate
Low
Very Low
Fig-14: Responses on the ability to design appropriate financial products for SME
segment
Responses on the ability to design appropriate financial
products for SME segment
5
4.5
4
3.5
Lack of Experience
Lack of importance
Regulation and formality
Lack of Trust
Lack of Feedback
3
2.5
2
1.5
1
0.5
0
Very High
High
Moderate
Low
Very Low
46 | P a g e
Fig-15: Responses on factors that can improve the quality of SME loan offering
Responses on factors that can improve the quality of SME loan offering
5
4.5
4
Offering short-Term Loan

Offering lower interest rates
Inter-connection
Greater SME market
research
Accurate credit information
3.5
3
2.5
2
1.5
1
0.5
0
Very High
High
Moderate
Low
Very Low
7.2: Amount of SME Loan disbursed in 2011

BRAC bank Ltd. Is the market leader in SME financing over the last few years. The scope of
business is growing. Disbursement in SME financing has been increasing significantly in
2011; the total amount of disbursement was BDT 40147.95 millions. Table-1 shows that
89.06% of total loan amount was disbursed to Anonno borrowers. The position belongs to
others which are 4.05%. In case of Apurbo, Aroggo, Diggon, Prothoma, the disbursement is
3.13%, 0.14%, 0.62%, 2.99% respectively.
Table-13: Amount of SME Loan disbursed in 2011
SME Loan
Amount of Loan
Percentage (%)
Disbursed(BDT in
Anonno
Apurbo
Aroggo
Digoon rin
Prothoma
Others
Total
millions)
35757.32
1258.3
56.34
250.65
1200.15
1625.19
40147.95
89.06
3.13
0.14
0.62
2.99
4.05
100.00
47 | P a g e
Fig-16: Amount of Loan Disbursed (BDT in millions)

Amount of Loan Disbursed(BDT in millions)
3% 0% 16%
17%
6%
58%
Anonno
Apurbo
Aroggo
Digoon rin
Prothoma
Others
7.3: Amount of SME loan Repaid

In 2012 the total amount of repaid was BDT 9362.34 millions. Table-4 shows 85.06% of total
amount was repaid by Anonno borrowers. Apurbo borrowers contributed 2.76%. In case of
Aroggo, Diggon, Prothoma, the repayment is 2.76%, 0.16%, 0.54%, 8.01% respectively.
Only 3.47% of total amount was repaid by others SME loan borrowers.
48 | P a g e
Table-14: Amount of SME loan Repaid

Fig-17: Amount of SME loan Repaid

SME Loan
Anonno
Apurbo
Aroggo
Digoon rin
Prothoma
Others
Total
Amount of Loan Repaid

(BDT in millions)
Percentage (%)
7963.30
258.3
15.12
50.15
750.35
325.12
9362.34
85.06
2.76
0.16
0.54
8.01
3.47
100.00
Amount of Loan Repaid(BDT in millions)
Prothoma; 3% Others; 0%
Digoon rin ; 17%
Aroggo; 6%
Anonno; 16%
Apurbo; 58%
49 | P a g e
7.4: Amount of Loan Overdue

In 2012 the total amount of loan overdue was BDT 1749.35 million. From the table its crearly
seen that 87.07% of total amount of loan was overdue to Anonno borrowers.Apurbo
borrowers contributed to 10.41%. In case of Aroggo, Diggon, Prothoma, the repayment is
0.03%, 1.58%, 0.55% respectively. Only 0.35% of total amount was overdue by others SME
loan borrowers.
Table-15: Amount of Loan Overdue
SME Loan
Amount of Loan Overdue
Anonno
Apurbo
Aroggo
Digoon rin
Prothoma
Others
Total
(BDT in millions)
1523.21
182.16
0.58
27.64
9.58
6.18
1749.35
Percentage (%)
87.07
10.41
0.03
1.58
0.55
0.35
100.00
Fig-18: Amount of Loan Overdue

Amount of Loan Overdue(BDT in millions)
Prothoma; 3% Others; 0%
Digoon rin ; 17%
Anonno; 16%
Aroggo; 6%
Apurbo; 58%
7.5: No. of borrowers & defaulters of SME loan

The demand for SME loan has been increased over the years. Small and medium
entrepreneurs are eager to expand their business by taking loan from banks or other financial
50 | P a g e
institutions. In 2012 99,389 entrepreneurs took: SME loan from BRAC Bank and out of them
3,801 entrepreneurs default the loan.
Table-16: No. of borrowers & defaulters of SME loan
SME Loan
Anonno
Apurbo
Aroggo
Digoon rin
Prothoma
Others
Total
No. of Borrowers
93,518
1326
315
257
2349
1624
99,389
No. of Defaulters
3568
78
19
21
59
56
3801
7.6: Reason behind SME loan defaulting in 2012

Among the defaulters 16.17% were abscond. 58.46% default the load overdue due to business
closed. 5.78% ware deceased. Case file was field to 16.87% of defaulters. Finally, 2.73% of
defaulters defaulting the loan due to others reasons.
Table-17: Reason behind SME loan defaulting in 2012
Frequency(f)
350
1265
125
365
59
2,164
Fig-19: Reason behind SME loan defaulting
51 | P a g e
Reason Behind loan Defaulting

Others; 3%
Case file ; 17%
Deceased ; 6%
Abscond ; 16%
Business Closed; 58%
7.7: Nature of Business of SME Loan borrowers

Most of the respondents (44.59%) are involved in trading business. 33.11 % borrowers are
manufacturing in production and 14.19% entrepreneurs provide service. Only 8.11% of
respondents have others type of business.
Table-18: Nature of Business of SME Loan borrowers
Frequency(f)
66
49
21
12
148
Source: Survey Data 2013
Fig-20: Nature of Business of SME Loan borrowers

Nature of Business
Others; 8%
Service; 14%
Trading; 45%
Manufacturing ; 33%
52 | P a g e
7.8: Purpose of SME Loan Taken

Among the respondents 57.35% borrowers took SME loan for purchasing, fixed assets.
Majority Of the respondent took loan for Purchase fixed asset
and only 23.53% took loan
for other purpose.

Table-19: Purpose of SME Loan Taken
Purpose of SME Loan
Frequency(f
Percentage
Taken
Purchase fixed asset
Gain working capital
Others
Total
)
78
26
32
136
(%)
57.35
19.12
23.53
100.00
Fig-21: Purpose of SME Loan Taken

Purpose of SME Loan Taken
Others; 24%
Gain working capital; 19%
Purchase fixed asset; 57%
7.9: Amount of SME loan taken

53 | P a g e
Most of the respondents 52.82% took SME loan ranging from BDT 2.00 to 5.00 lac. 30.28%
took loan from BDT 5.00 to 8.00 lac. 10.56% of total borrowers surveyed took loan from
BDT 8.00 to 11.00 lac. Only 6.34%took SME loan ranging from BDT 11.00 to 30.00 lac.
Table-20: Amount of SME loan taken
Amount of Loan (BDT in Lac)
2.00-5.00
5.00-8.00
8.00-11.00
11.00-30.00
Total
Frequency(f)
75
43
15
9
142
Percentage (%)
52.82
30.28
10.56
6.34
100.00
Fig-22: Amount of SME loan taken

Amount of SME Loan Take n
12.00-30.00; 6%
9.00-12.00; 11%
6.00-9.00; 30%
2.00-6.00; 53%
7.10: Term of SME loan Taken

Among the respondents 4.17% took SME loan for the period less than 7 months. 8.33% of
customer surveyed took loan for the period ranging from 7 to 14 months. Most of the
54 | P a g e
respondents 40.97 % took loan for 14 to 21 months. Only 6.25% took SME loan for the long
period 35 or more months.
Table-21: Term of SME loan Taken
Frequency(f)
6
12
59
46
12
9
144
Fig-23: Term of SME loan Taken

Term of SME loan Take n
60
50
40
30
Frequency(f)
Percentage(%)
20
10
on
th
s
21
-2
8M
on
th
s
28
-3
5M
on
th
s
35
or
M
or
e
th
14
-2
1M
on
714
M
Be
lo
7M
on
th
7.11: Problem Faced by SME Loan Borrowers

Out of 150 respondents 59 made responses to the question regarding problem faced.
According to the most of the respondents (25.42%), higher interest rate is the main problem.
55 | P a g e
15.26% said that they faced problem when the loan was disbursed. 23.73% faced complex
documentation process while applying for the loan. Finally 10.17% faced other problems.
Table-22: Problem Faced by SME Loan Borrowers
Problem
Frequency(f)
Percentage
9
8
15
7
14
6
59
(%)
15.26
13.56
25.42
11.86
23.73
10.17
100
Late Disbursement
CRO's Misconduct
Higher Interest rate
Additional Charges
Complex Documentation
Others
Total
7.12: Age of SME Loan Borrowers

Out of 150 respondents 125 made response to the question regarding age. Table 11 shows that
age group is maximum frequency is 30-40 years. This group contributes to 36.00% of total
respondent. The second large age is the 40-50years that contribute to 28.8%. It clearly shows
that most of the SME loan provided to people who are aged and experienced but there are
few borrowers who are above 50 or more years.
Table-23: Age of SME Loan Borrowers
Age Group
Frequency(f
Percentage
Below 20 years
20-30 years
30-40 years
40-50 years
50 years or More
Total
)
0
23
45
36
21
125
(%)
0
18.4
36
28.8
16.8
100
Fig-24: Age of SME Loan Borrowers
56 | P a g e
Age of Borrowers
50 years or More; 17% 20-30 years; 18%

40-50 years; 29%
30-40 years ; 36%
7.13: Education qualification of SME Loan Borrowers

124 out 150 respondents made response to the question regarding educational qualification.
Table-12 shows that the educational qualification of most of the borrowers 42.74% surveyed
is below SSC and 9.68% are educated up to SSC and 15.32% are educated up to HSC
level.20.97% have completed graduation. Only 11.29% of respondent have post graduation
degree.
Table-24: Education qualification of SME Loan Borrowers
Education
Below SSC
SSC
HSC
Bachelor
Masters
Total
Frequency(f)
53
12
19
26
14
124
Percentage (%)
42.74
9.68
15.32
20.97
11.29
100.00
Fig-25: Education qualification of SME Loan Borrowers
57 | P a g e
Education Qualification
60
50
40
Frequency(f)
Percentage(%)
30
20
10
0
Below SSC
SSC
HSC
Bachelor
Masters
7.14: Monthly income of SME Loan Borrowers

Out of 150 respondents 107 made response to the question regarding Monthly income of
SME Loan Borrowers. Most of the respondent 24.30% belongs to the income level of BDT
20,000-30,000. 27.10% of customer surveyed earns more than BDT 50,000monthly.the
monthly income of only 10.28%is less than BDT 10,000.
Table-25: Monthly income of SME Loan Borrowers
Monthly Income (BDT)
Below 10,000
10,000-20,000
20,000-30,000
30,000-40,000
40,000-50,000
50,000 or More
Total
Frequency(f)
11
13
26
18
10
29
107
Percentage (%)
10.28
12.15
24.30
16.82
9.35
27.10
100.00
Fig-26: Monthly income of SME Loan Borrowers
58 | P a g e
Monthly Income
50,000 or More; 27%
Below 10,000; 10%

10,000-20,000; 12%
40,000-50,000; 9%
20,000-30,000; 24%
30,000-40,000; 17%
7.15: Business Experience of SME loan borrowers

Business experience is one of the important criteria for the eligibility of being a borrower.
From the table-14 it is clearly seen that most of the respondent 27.89% have business
experience ranging from the 5 to 10 years.26.53% have experience for less than 5
years.17.69% have business experience for 10-15 years. Only 13.93% have experience for
more than 20 years.
Table-26: Business Experience of SME loan borrowers
Experience
Below 5 Years
5-10 Years
10-15 Years
15-20 Years
20 Years or More
Total
Frequency(f)
39
41
26
22
19
147
Percentage (%)
26.53
27.89
17.69
14.97
12.93
100.00
Fig-27: Business Experience of SME loan borrowers
59 | P a g e
Business Experience
45
40
35
30
25
20
15
10
5
or
e
rM
20
Ye
ar
so
15
-2
0Y
ea
rs
10
-1
5Y
ea
rs
510
Ye
ar
s
Be
lo
5Y
ea
rs
7.16: Business asset of SME loan borrowers

Out of 150 respondents 107 made response to the question regarding Business asset of SME
loan borrowers Table -15shows that most of the respondent 55.97% have business asset of
BDT 5 lac to 10 lac. 17.16 % of respondent have business asset less than BDT 5 lac. Only
8.21% of total borrowers surveyed have business asset more than BDT 20.00lac.
Table-27: Business asset of SME loan borrowers
Business Assets (BDT in lac)
Frequency(f)
Percentage (%)
Below 5 lac
5.00-10.00
10.00-15.00
15.00-20.00
20.00 or More
23
75
16
9
11
17.16
55.97
11.94
6.72
8.21
Total
134
100.00
Fig-28: Business asset of SME loan borrowers
60 | P a g e
Business Assets
80
70
60
50
40
30
20
10
0
Below 5 lac
5.00-10.00
10.00-15.00
15.00-20.00
20.00 or More
7.17: Prospect of SME loan
Prapti Current Account
BRAC Bank is offering current account named PRAPTI. Anyone can deposit and withdraw
money through any branches, SME sales & service centers during banking hours and through
ATM and CDM 24 hours. Besides, he/she will get interest daily on balance.
Eligibility
Any kind of organization (such as sole proprietorship, partnership, private limited company,
educational institution, NGO/Project, Co-operative society and so forth)
Specialty of PRAPTI Current account
It is a current account in which interest is paid on daily balance. You can open up this account
in any branches across the nation with only BDT 2000. For withdrawal need it will have debit
card (only for sole proprietorship) with opening the account. And make their transactions
through 21 SME sales and service centre, 48 agri branch and 86 branches, over 300 ATMs
and 30 cash deposit machines without hassle.
Rate of Interest
The following is the rate of interest applicable daily on ones balance.

61 | P a g e
Amount of Balance
Specific Interest Rate
0 - Below 5,000
0%
5,000 - Below 100,000
1%
100,000 - Below 250,000
2%
250,000 Below 500,000
3%
500,000 & Above
4%
Miscellaneous Fee
Relationship
Fee Free (If average balance is BDT 100,000 or above). BDT
(Half yearly)
500+15%VAT will be charged if average balance is below than BDT

100,000.
Debit Card/ ATM BDT 600 + 15% VAT

Card Fee (Yearly)
Cheque Book Fee
First cheque book is free (25 leaf). From 2nd cheque book (Maximum
100 Leaf) BDT 8 + 15% VAT (per leaf) will be charged if average
balance is below than BDT 1,00,000.
Excise Duty
As per Government rules.
Inter / Intra City As per schedule of charges

Online Banking Fee
"Prachurjo" is a lucrative fixed deposit for small and medium businesses. With a minimum
50,000 TK, any business enterprise having valid trade license can open this account.
Specialties
1.
2.
3.
4.
Tenure: Minimum 1 month and maximum 36 months

No fees except govt excise / duty on interest earned,
Interest is applicable on maturity
No pre-encashment fees
7.18: Problems for financing SMEs:

SME sector faces a number of problems to facilitate institutional credit. These problems were
looked into from the perspective of both borrower and lenders.
62 | P a g e
7.18.1 Problems from Borrowers perspective:

(a) Access to loan: SMEs encounter great difficulties while rising fixed and working capital
because of the reluctance of banks to provide loans to SMEs. Banks are shy to lend to SMEs
because of high processing and monitoring costs of loans to SMEs.
(b) Collateral: The banks have some regulation of taking a minimum amount of collateral
against credit, but many small and medium entrepreneurs cannot fulfill the requirement.
(c) Complexity increases cost of loan: Many entrepreneurs is having problem because of high
interest rate. Banks, in many cases maintain high spread as a result there remains reckless
competition of making more profit from the Banks perspective. And, sufferers are general
entrepreneurs who borrow from the Bank (Quader, and Ahmed 2005).
(d) Extremely short grace period: In our country, grace period of repaying any credit is very
low. According to the SME entrepreneurs, almost all the Banks structured the loan in such a
way that entrepreneurs have to start the repayment of credit within a very short time after
disbursement of credit. This is really a big problem for the entrepreneurs because the
entrepreneurs are bound to generate profit instantly to fulfill the Banks requirement.
(e) Absence of comprehensive guidelines: Another problem is that, there is an absence of
comprehensive guidelines in the SME sector. Most of the SMEs do not have any guidelines
for controlling their business. They do not maintain any deliberate procedure in managing the
enterprise; rather they go on with the time-to-time changes in the business operation. As a
result they cannot generate expected profit from the business and fail to payback credit to the
banks.
(f) Longer loan processing time and associate cost of uncertainty: Credit in this sector
requires longer processing time. Though it is small and medium enterprise Sector, processing
time for loan is not short. As a result banks are unwilling to enter in this sector.
(g) Lack of basic infrastructure, inputs, managerial efficiency and inadequate sanction: Most
of the SMEs do not have basic infrastructure of their own i.e. there is a lack of planned
infrastructure in this sector.
63 | P a g e
7.18.2 Problems from lenders perspective:

(a) Lack of information on loan application requirement among the SME loan seekers:
As credit application requires availability of adequate information, most of the SMEs do not
have adequate information.
(b) Absence of an appropriate and clear-cut legal framework for enforcing quick recovery:
Even Banks do not have appropriate legal framework in order to recover their disbursed
credit. Their recovery framework is not clear-cut as a result they fail to control the servicing
of loan.
Others problems:
High employee turnover
Due to limited growth of SME most of the skilled employees leave SMEs. Its observed that
SMEs are knowledge creators but poor at knowledge retention.
Absence of modern technology
One of the main barriers for the development of SME in Bangladesh is inadequate
technologies. Many SMEs have failed to adopt modern technology.
Poor physical infrastructure
Inadequate supply of necessary utilities like electricity, water, roads and highways hinder the
growth of SME sector. Moreover unfavorable geographical conditions increase the
transportation cost.
Financial constraints
Availability of finance hinders the growth of SMEs in Bangladesh. Bangladeshi bank

considers SMEs as high risk borrowers because of their inability to comply with the banks
collateral requirements. Only about 15-20% of the owners of SMEs own any immovable
property. Bankers issue loan on the basis of ownership of immovable property as collateral
risk. As a result it automatically excludes rest 80% SMEs from the list of privileged clients
of the banks.
64 | P a g e
Lack of uniform definition
In Bangladesh the definition of SME has changed overtime in different industrial policy
announced by the government in different year. Absence of uniform definition makes the
formulation and implementation of SME policy difficult.
Lack of information
Miah (2006) has observed that SMEs have very limited use of information technology (IT).
Accounting package is used by 1-2% of the SMEs. The use of computers is revealed by say
15% of the SMEs, while the use of the Internet for business purposes applies to say 8-10% of
SMEs.
Lack of entrepreneurship skills
Conservative attitude towards risk, lack of vision, ability to make plan and implementing
those hinder the growth of SME in Bangladesh.
Participation of women entrepreneurs
Equality of opportunity is a major problem for SME. Female entrepreneurs are treated
discriminately. They are not well represented in business organization. Government does not
provide adequate institutional assistance for women entrepreneurs.
Access to Market and lack of awareness regarding the importance of marketing

tool
For SME, owing a retail space is very expensive in the major cities in Bangladesh. As a result
many customers are not interested to buy products and services from SMEs. Because they
cant judge the quality until they physically examined the product. Most of the cases SMEs in
Bangladesh are not able to use the Integrated Marketing Communication (IMC) tools. But
these tools play the role of important stimulus to motivate the customers and retain them. The
country does not have enough marketing capability and resources to invest in marketing.
Bureaucracy
Its observed that the inadequate government supports are top ranking constraints for SMEs.
Unnecessary layers of Bureaucracy and red-taps reduce the competitiveness of SME and
raising the cost of transactions and operations.
65 | P a g e
Absence of transparent legal system
The absence of an effective and transparent legal system discourages SMEs in exploring into
risky ventures of business. There are a number of unnecessary formal requirements to start
and run business that create high compliance costs and become barriers to SME development,
growth and market entry.
Lack of commitment to innovation and customer satisfaction
Ernesto (2005) stated that to keep in pace with international competition, firms of all size are
challenged to improve and innovate their products processes constantly. But in Bangladesh
SMEs are still not relating the importance of satisfying and retaining customers by offering
novel and desired benefits.
Lack of quality assurance
Govt. has failed to frame a national quality policy, provide adequate support systems and
establish a national quality certification authority. As a consequence SME of Bangladesh has
failed to ensure the quality of their products and services both in local and international
market.
Lack of research and development facilities
It is observed that investment in R&D is still negligible in.
Chapter-10: Research Findings, Recommendation and Conclusion

Research Findings
There are various problems and prospects that are associated with SME loan management of
BRAC Bank. The findings of the analysis and interpretations are as follows:
1. SMEs are not preparing proper financial statement which creates problem for the bank
judging financial standings, profitability and credibility.
2. SMEs are not maintaining proper licensing which makes SMEs difficult to trace,
create problem for the bank maintaining records, and decrease SMEs credibility to the
bankers.
3. Upgraded technology affects SMEs ability to repay loans.
4. BBL considers promotion for the product like Over Draft, Time Loan, and Term Loan
to be adequate in SMEs sector.
66 | P a g e
5. Bank is not yet able to design appropriate financial products for SME segment due to
6.
7.
8.
9.
lack of importance and lack of feedback from SME owners.

Payback period suggested by banker is 1-3 years.
Bank does not consider informal loan providers as its competitors.
Bank is ready to grant loan to SMEs as a cluster.
Banks can trace SMEs better, can lower their cost of capital, and can give efficient
service if they grant loan cluster wise.

10. Shorter-term loans and lower interest rates will improve the quality of SME loan
offering.
11. Bank improves current SME offering through interconnection between individual and
SME loans so that higher amounts can be extracted.
12. Accurate credit rating information will improve the quality of SME loan offering.
Recommendations
In order to overcome the above mentioned problems the following suggestions are
recommended;
1.
2.
3.
4.
It should be maintain proper financial statement for SMEs loan borrowers.

Maintaining proper licensing is necessary to SME loan takers for the future security.
Technology must be easier and understandable to the SME loan borrowers.
Financial products design should be appropriate for SME segment for feedback from
SME owners.
5. Interest rate is higher for SME loan. The interest rate as well as additional charges
such as loan processing fee should be reduced.
6. The documentation process must be easier because most of the borrowers are not well
educated.
7. The first step for BRAC Bank Limited would be to minimize this gap by relaxing
bank procedures of SMEs loan management.
8. Customer Relationship Officers (CRO) should be well-trained to provide better
service to SME loan borrowers.
9. Due to the absence of uniform definition the policy formulation and implementations
are not possible. Bank should take initiative to develop a uniform definition of each
category of SMEs.
10. To encourage manufacturing, BRAC bank should provide more SME loan to
entrepreneurs involved in production.
11. Effective monitoring system should be implemented for the whole recovery process.
12. In this era of intense competition continuous planning and quality improvement act as
a prerequisite for the survival of SMEs. In order to improve the quality SMEs can
follow the Just in Time (JIT) philosophy and use Total Quality Management (TQM)
and can ensure the improvement of quality and productivity at a time.
67 | P a g e
13. The bank should develop an official credit-rating system in easier way, even if in a
limited manner, as soon as possible so that they can have some idea about the
reliability of their SME clients.
Conclusions
The SME sector in many developing countries has usually been neglected and discriminated
against in terms of access to government attention, access to finance, management and
marketing expertise and technology, as compared with large enterprises. SMEs in Bangladesh
contribute significantly to manufacturing growth and employment creation. There are around
27,000 medium sized enterprises and around 150,000 small-scale enterprises in the country.
At present, 80 percent of manufacturing establishments are SMEs, accounting for 80 percent
of the labor force, 50 percent of the output of the sector and 5 percent of GDP. SMEs provide
vital linkages to larger enterprises, particularly in the high-growth export sector, and also
form part of the core business activities in both rural and urban areas. The objectives of the
study are fulfilled despite some limitations. The problems are identified in this paper through
detailed analysis of collected data. On the other hand the problems that BBL faced in
designing proper financial products for SMEs are also identified. At the end, this study has
tried to offer some suggestions to overcome those problems. If the problems can be solved
the transaction between SMEs and BRAC Bank Limited will be increased.
68 | P a g e
Appendix- A
Definition of SMEs by different institutions/ agencies
Source
Small enterprise
Medium enterprise
Industrial
Policy 1991
Manufacturing and services activities with fixed total investment not

exceeding Tk.30 million (excluding cost of land, establishment, and transport
cost of assets, tax and duty).
No distinction was made between small and medium enterprises.
Industrial
Policy 1999
Industrial
Policy 2005
Enterprises employing fewer than

50 workers and/or with a fixed
capital investment of less than Tk.
100 million.
Enterprises employing between 50

and 99 workers and/of with a fixed
capital investment between Tk.100
million and Tk.300 million.
Manufacturing sector: industries

having fixed assets below Tk.15
million.
Manufacturing sector: industries

having fixed assets between Tk. 15
million and Tk.100 million.
Non-manufacturing sector: enter-

Non-manufacturing
sector:
prises which employ less than 25 enterprises employing between 25
laborers.
and 100 laborers.
69 | P a g e
Bangladesh
Bank
Services: Total fixed asset (TFA)

Tk.50 thousand to Tk. 5 million
(excluding land and building). No. of
employee: less than 25 persons.
Services: TFA: Tk. 5 million to 100

million (excluding land and building).
No. of employee: less than 50
persons.
Trading: TFA: Tk. 50 thousand to

Tk.5 million (excluding land and
building). No. of employee: less than
25 persons.
Trading: TFA: Tk.5 million to 100

million (excluding land and building).
No. of employee: less than 50
persons.
Manufacturing: TFA: Tk.50,000 to

Tk.15 million (excluding land and
50 persons.
Manufacturing: TFA: Tk.15 million

to 200 million (excluding land and
150 persons.
BBS
Establishments which have fewer

than 10 workers.
Establishments which have more

than 9 workers and less than 50
workers.
World Bank
Up to 50 employees, total assets of

up to USD 3 million and total sales
of up to USD 3 million.
Up to 300 employees, total assets of

up to USD 15 million and total sales
of up to USD 15 million.
Appendix- B
Definition of SME in different countries
World Bank
Micro-enterprise: up to 10 employees, total
assets of up to $100,000 and total annual
sales of up to $100,000; small enterprise-up
to 50 employees, total assets of up to $3
million and total sales of up to $3 million;
medium enterprise-up to 300 employees,
total assets of up to $15 million, and total
annual sales of up to $15 million.
Albania
Micro-enterprises: < 10 employees;
Small enterprises: 10-40 employees.
Medium-sizedenterprises:50-250 employees.
Azerbaijan
Small enterprises:
< 50 employees in industry;
< 15 employees in transport;
< 25 employees in construction; and
EU
Micro-enterprises: < 10 employees;
Small enterprises: 10-49 employees with
maximum turnover up to 7 million euro.
Medium-sized
enterprises:
50-250
employees with maximum turnover up to 40
million Euro. Maximum balance sheet total
is 5 million for small euro and 27 million for
medium size enterprises.
Latvia
Small enterprises: < 25 employees; max.
turnover < Lats 200,000; and max. balance
sheet total < Lats 70,000.
Lithuania
Small enterprises:
< 50 employees and max. turnover < litas
500,000.
70 | P a g e
< 10 employees in retail trade and servicing.

Medium-sized enterprises:
51-250 employees in industry;
16-75 employees in transport;
26-150 employees in construction; and
11-50 employees in retail trade and
servicing.
Bulgaria
Small enterprises:
< 50 employees and max. Assets in balance
sheet BGL 20 million.
Moldova
Micro-enterprises: with employees < 20;
Small enterprises: with employees between
20 and 75 persons.
Medium-sized enterprises: No definition
exists.
Belarus
Romania
Small enterprises: < 200 employees in Small enterprises: 1-20 employees and
industry with maximum annual turnover
turnover between LEI 10 million and 2
< Rbl 20 million;
billion.
< 100 employees in innovation with Medium-sized
enterprises:
21-200
maximum turnover
employees and turnover between LEI 10
< Rbl 5 million;
million and 2 billion
< 50 employees in construction and other
production
spheres with max. turnover < Rbl 5 million;
< 50 employees in catering and public
services with max. turnover < Rbl 2 million;
< 25 employees in retail trade; and
< 25 employees in other non-production
spheres with max. turnover < Rbl 1.5
million.
exists.
Hungary
Russian Federation
Small enterprises: 11-50 employees; Small enterprises:
maximum turnover < HUF 500 million and < 100 employees in industry and
maximum balance sheet total < HUF 200 construction:
million.
< 60 employees in agriculture;
Medium-enterprises: 51-250 employees; < 60 employees in science;
maximum turnover < HUF 2 billion and < 50 employees in wholesale trade;
maximum balance sheet total < HUF 1.25 < 30 employees in retail trade and household
billion.
services; and
< 50 employees in other production and nonproduction spheres.
exists.
71 | P a g e
REFERENCES
Ahmed, M. U. (2000). Development Potentials of Microenterprise in Bangladesh: An
Analysis of Issues and Constraint. Bangladesh Journal of Political Economy, vol. 15, no. 1,
pp.141-174.
Alam, M. S. and M. A.Ullah. 2006. SMEs in Bangladesh and Their Financing: An Analysis
and Some Recommendations. The Cost and Management, 34(3):57-72.
BRAC Bank Limited. A Handbook of Operational Guidelines for Small Enterprise Loan
Scheme BRAC Bank Limited.
BRAC Bank Limited Annual Report of 2011.
Berger, A. N. and G. E. Udell. 2005. A More Complete Conceptual Framework for
Financing of Small and Medium Enterprises. Policy Research Working Paper- 4481. The
World Bank, pp. 1-30.
Hamid, M., 1998. Methods and Techniques of Social Research University Press Limited,
Dhaka.
Kashfia A.2009. Performance Evaluation of SMEs of Bangladesh, international Journal of
business and management.
72 | P a g e
OECD. 2009. The Impact of the Global Crisis on SME and Entrepreneurship Financing and
Policy Responses. Centre for Entrepreneurship, SMEs and Local Development, p.5
Quader, M. S. and R. I. Ahmed. 2005. The Strategic Implication of Electronic Commerce for
Small and Medium Sized Enterprises (SMEs). BRAC University Journal, II (2): 73-92.
Rabbani, Mehnaz & Munshi, Solaiman (2005). Financing SMEs and its Effect on
Employment Generation: A Study of Brac Banks SME Lending.
S. M. AKTERUJJAMAN. 2010. Problems and Prospects of SMEs Loan Management: A
Study on Mercantile Bank Limited, Khulna Branch, Volume V, Issue 02, July-December, 2010
www.bracbank.com
73 | P a g e

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Chapter-1: Introduction

1.3: Objectives of the Study

Concept of SME and its impact in overall economy of Bangladesh

The methodology of the study is given below.

An enterprise would be treated as small if, in todays market prices, the

An enterprise would be treated as medium if, in todays market prices, the

From both definitions above, land is excluded. (Kashfia , 2009).

An enterprise would be treated as small if it has less than 25 workers, in full-time

An enterprise would be treated as medium if it has between 25 and 100

From both definitions above, land, once again, is excluded.

2.6: Sources of Data

Chapter-3: Literature Review

3.2: Overview of the SMEs in the country

Haring-up the growth rate of the country;

3.3: SMEs Defined

up to 3 million US dollars turnover -and micro-enterprises have up to 10 persons and

An enterprise should be treated as small if it has less than 25 workers, in full-time

An enterprise should be treated as small if it has between 25 and 100 employees.

Chapter-4: BRAC BANK Limited at a Glance

Signing with IFC as investor: 8th May 2004

service and mutual benefit

4.6: Corporate Objectives:

4.8: Shareholding Structure:

Fig-1: Shareholding Structure

4.9: Management of BRAC Bank Limited:

Bank Limited includes:

ShoreCap International Limited)

Source: Annual Report BRAC Bank (2011)

4.10: Division of BRAC Bank Ltd:

Table-3: Deposit Products

Triple Benefit Savings Account

Savings Classic Account

Interest First Fixed Deposit

Current Classic Account

Freedom Fixed Deposit (FFD)

Abiram Fixed Deposit

Nonstop banking from 10 a.m. to 8 p.m.

Online banking facility in all of the sections

Up to 5 p.m. for the fixed branches

4.10.5: Wholesale Banking

Corporate Loan Products

Short Term Loan

Loan against Trust Receipt

Work Order Finance

Probashi Current Account

Probashi Savings Account

Probashi Fixed Deposit

Probashi Wage Earners' Bond

US Dollar Premium & Investment Bond

4.10.12: Remittance Info

Western Union Money Transfer

4.10.13: SWOT Analysis of BRAC BANK:

40.10. 13.2 Weaknesses:

40.10. 13.3 Opportunities:

Diversification: BBL can pursue a diversification strategy in expanding its current

40.10. 13.4 Threats

Multinational banks: The emergence of multinational banks and their rapid

Chapter-5 SME Banking Division

Customer deposit grew by 47% in 2011copared to 2010.current level of deposit stands

5.2: SME Banking

5.3: Procedure of BRAC bank SME loan

Environment friendly: The business should be environment friendly, no narcotics or

5.3.2: Entrepreneur Selection Criteria: