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Part-1

Credit rating

Credit Rating & Industry Analysis of Bangladesh Page 1


1.1 What is Credit Rating?

A credit rating evaluates the credit worthiness of a debtor, especially a business (company)
or a government. It is an evaluation made by a credit rating agency of the debtor's ability to
pay back the debt and the likelihood of default.

Credit ratings are determined by credit ratings agencies. The credit rating represents the credit
rating agency's evaluation of qualitative and quantitative information for a company or
government; including non-public information obtained by the credit rating agencies analysts.

Credit ratings are not based on mathematical formulas. Instead, credit rating agencies use
their judgment and experience in determining what public and private information should be
considered in giving a rating to a particular company or government. The credit rating is used
by individuals and entities that purchase the bonds issued by companies and governments to
determine the likelihood that the government will pay its bond obligations.

A poor credit rating indicates a credit rating agency's opinion that the company or
government has a high risk of defaulting, based on the agency's analysis of the entity's history
and analysis of long term economic prospects.

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1.2 History of Credit Rating
The three renowned rating companies of today‘s world are Fitch Ratings, Moody‘s and
Standard & Poor (S&P). The history of credit rating is similar to the history of forming and
adopting credit rating services by these companies.

John Knowles Fitch founded the Fitch Publishing Company in 1913. Fitch published
financial statistics for use in the investment industry via "The Fitch Stock and Bond Manual"
and "The Fitch Bond Book." In 1924, Fitch introduced the AAA through D rating system that
has become the basis for ratings throughout the industry. With plans to become a full-service
global rating agency, in the late 1990s Fitch merged with IBCA of London, subsidiary of
Fimalac, S.A., a French holding company. Fitch also acquired market competitors Thomson
BankWatch and Duff & Phelps Credit Ratings Co. Beginning in 2004, Fitch Ratings began to
develop operating subsidiaries specializing in enterprise risk management, data services and
finance industry training with the acquisition of Canadian company, Algorithmic, and the
creation of Fitch Solutions and Fitch Training. (For information bond ratings systems
see Bond Ratings Agencies: Can You Trust Them.)

John Moody and Company first published "Moody's Manual" in 1900. The manual published
basic statistics and general information about stocks and bonds of various industries. From
1903 until the stock market crash of 1907, "Moody's Manual" was a national publication. In
1909 Moody began publishing "Moody's Analyses of Railroad Investments", which added
analytical information about the value of securities. Expanding this idea led to the 1914
creation of Moody‘s Investors Service, which, in the following 10 years, would provide
ratings for nearly all of the government bond markets at the time. By the 1970s Moody's
began rating commercial paper and bank deposits, becoming the full-scale rating agency.
Moody's ratings represent the opinion of Moody's Investors Service as to the relative
creditworthiness of securities. As such, they should be used in conjunction with the
descriptions and statistics appearing in Moody's publications. Reference should be made to
these statements for information regarding the issuer. Moody's ratings are not commercial
credit ratings. In no case is default or receivership to be imputed unless expressly stated.
Henry Varnum Poor first published the "History of Railroads and Canals in the United
States" in 1860, the forerunner of securities analysis and reporting to be developed over the
next century. Standard Statistics formed in 1906, which published corporate bond, sovereign

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debt and municipal bond ratings. Standard Statistics merged with Poor's Publishing in 1941
to form Standard and Poor's Corporation, which was acquired by The McGraw-Hill
Companies, Inc. in 1966. Standard and Poor's has become best known by indexes such as the
S&P 500, a stock market index that is both a tool for investor analysis and decision making,
and a U.S. economic indicator. (See A Trip through Index History to learn more about
Standard & Poor's Indexes.

1.3 Credit Rating in Bangladesh


Bangladesh credit rating industry started its journey with the mandatory requirement of
having credit rating for all public debt instruments, right offer issues and shares issued at a
premium before the same were offered to the public. In the year of 2002, Credit Rating
Information & Service Limited (CRISL) started its operation as the first registered credit
rating agency of Bangladesh. The second rating agency, Credit Rating Agency of Bangladesh
Limited (CRAB) went to its operation on 2004, thus, making the sustainability more difficult
for two rating agencies.

Credit Risk Grading Manual of Bangladesh Bank was circulated by Bangladesh Bank vide
BRPD Circular No. 18 dated December 11, 2005 on Implementation of Credit Risk Grading
Manual which is primarily in use for assessing the credit risk grading before a bank lend to its
borrowing clients. By that time CRISL rating reports were appearing to be very useful for the
users; specially CRISL rating report on the then Al Baraka Bank convinced the Bangladesh
Bank of the need of credit rating and it took the initiative to make mandatory for all banks to
have credit rating before it goes for public offering. The banking regulator further decided to
make it mandatory for all banks to submit credit rating reports to the regulator within six
months after the finalization of accounts.
Following the example of the central bank, the insurance regulator also came up with the
requirement to make rating mandatory for all general insurance companies every year and for
the life insurance companies bi-annually. The Dhaka Stock Exchange, while issuing the
direct listing regulations, made the credit rating mandatory before a company apply for direct
listing. The above regulations created an enabling environment for credit rating in the
country‘s capital and financial markets.

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The concept of client rating by the rating agencies to support capital adequacy of the banks
came up in view of the need for implementation of Basel II capital adequacy framework by
Bangladesh Bank. According to Basel II framework, BB adopted a standardized approach for
credit risk in which the services of rating agencies were required under certain strict terms
and conditions. Bank client rating is a very sensitive issue in view of the fact that most of the
private sector companies, enjoying banking facilities, are not maintaining standard financials
for appropriate evaluation. Unless and until all the above factors are properly evaluated
through sector wise studies, the ratings are bound to give wrong signals. Security and
Exchange Commission of Bangladesh (SECB) allows 2% default rate of the credit rating
agencies. There are certain penalties in case default rate of more than 2% including
cancellation of license of the defaulter rating agency as the highest penalty by SECB.
Other credit rating companies National Credit Ratings Ltd and Emerging Credit Rating Ltd
started their journey on 2010. ARGUS Credit Rating Services Ltd. is on operation since
2011. Lastly, new four credit rating companies have come to operation on 2012 which are
WASO Credit Rating Company (BD) Limited, Alpha Credit Rating Limited, The Bangladesh
Rating Agency Limited and WASO Credit Rating Company (BD) Limited. A list of credit
rating companies operating in Bangladesh is attached with the report as Appendix.

According to Association of Credit Rating Agencies of Asia, Bangladesh has the highest
number of credit rating companies. India; one of the largest economy of Asia has only two
credit rating companies. On the other hand China, another largest economy is continuing its
economic growth with a single credit rating company.
The rating industry In Bangladesh is now considered to be a parentless industry. The
behavior of the regulators towards nourishing this industry does not appear to be rational. The
rating agencies are still defined by the SEC rules as an investment advisory company. This
has not changed over a long time. The paid-up capital still remains at Tk. 5.0 million (50
lakh), to start a rating agency by any group of sponsors.

1.4 Sovereign credit ratings


A sovereign credit rating is the credit rating of a sovereign entity, i.e., a national
government. The sovereign credit rating indicates the risk level of the investing environment
of a country and is used by investors looking to invest abroad. It takes political risk into
account

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Source: Euromoney country risk

Country risk rankings (January 2013)


Least risky countries, Score out of 100 Previous Country Overall score
Rank

1 1 Norway 89.87

2 3 Luxembourg 87.29

3 4 Singapore 86.81

4 5 Sweden 86.81

5 2 Switzerland 86.78

6 6 Finland 84.54

7 7 Denmark 82.64

8 9 Hong Kong 82.43

9 8 Netherlands 81.82

10 8 Canada 81.82

The table shows the ten least-risky countries for investment as of January 2013. Ratings are
further broken down into components including political risk, economic risk. Euromoney's
bi-annual country risk index monitors the political and economic stability of 185 sovereign
countries. Results focus foremost on economics, specifically sovereign default risk and/or
payment default risk for exporters (a.k.a. "trade credit" risk).

A. M. Best defines "country risk" as the risk that country-specific factors could adversely
affect an insurer's ability to meet its financial obligations.

1.5 Short-term rating


A short-term rating is a probability factor of an individual going into default within a year.
This is in contrast to long-term rating which is evaluated over a long timeframe. In the past
institutional investors preferred to consider long-term ratings. Nowadays, short-term ratings
are commonly used.
First, the Basel II agreement requires banks to report their one-year probability if they applied
internal-ratings-based approach for capital requirements. Second, many institutional investors

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can easily manage their credit/bond portfolios with derivatives on monthly or quarterly basis.
Therefore, some rating agencies simply report short-term ratings.

1.6 Corporate credit ratings


Before you decide whether to invest into a debt security from a company or foreign country,
you must determine whether the prospective entity will be able to meet its obligations. A
ratings company can help you do this. Providing independent objective assessments of the
credit worthiness of companies and countries, a credit ratings company helps investors decide
how risky it is to invest money in a certain country and/or security.

1.7 Credit in the Investment World


As investment opportunities become more global and diverse, it is difficult to decide not only
which companies but also which countries are good investment opportunities. There are
advantages to investing in foreign markets, but the risks associated with sending money
abroad are considerably higher than those associated with investing in your own domestic
market. (For more insight, see Pros and Cons of Offshore Investing.)It is important to gain
insight into different investment environments but also to understand the risks and advantages
these environments pose. Measuring the ability and willingness of an entity - which could be
a person, a corporation, a security or a country - to keep its financial commitments or its debt,
credit ratings are essential tools for helping you make some investment decisions.

1.8 The Raters


There are three top agencies that deal in credit ratings for the investment world. These are:
Moody's, Standard and Poor's (S&P's) and Fitch IBCA. Each of these agencies aim to provide
a rating system to help investors determine the risk associated with investing in a specific
company, investing instrument or market.
Ratings can be assigned to short-term and long-term debt obligations as well as securities,
loans, preferred stock and insurance companies. Long-term credit ratings tend to be more
indicative of a country's investment surroundings and/or a company's ability to honor its debt
responsibilities.
For a government or company it is sometimes easier to pay back local-currency obligations
than it is to pay foreign-currency obligations. The ratings therefore assess an entity's ability to
pay debts in both foreign and local currencies. A lack of foreign reserves, for example, may
warrant a lower rating for those obligations a country made in foreign currency.

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It is important to note that ratings are not equal to or the same as buy, sell or hold
recommendations. Ratings are rather a measure of an entity's ability and willingness to repay
debt.
The ratings lie on a spectrum ranging between highest credit quality on one end and default
or "junk" on the other. Long–term credit ratings are denoted with a letter: a triple A (AAA) is
the highest credit quality, and C or D (depending on the agency issuing the rating) is the
lowest or junk quality. Within this spectrum there are different degrees of each rating, which
are, depending on the agency, sometimes denoted by a plus or negative sign or a number.
Thus, for Fitch IBCA, a "AAA" rating signifies the highest investment grade and means that
there is very low credit risk. "AA" represents very high credit quality; "A" means high credit
quality, and "BBB" is good credit quality. These ratings are considered to be investment
grade, which means that the security or the entity being rated carries a level of quality that
many institutions require when considering overseas investments.
Ratings that fall under "BBB" are considered to be speculative or junk. Thus for Moody's a
Ba2 would be a speculative grade rating while for S&P's, a "D" denotes default of junk bond
status.

1.9 Credit Rating Agencies


I have just added, SR Ratings (Brazil), who are long established, but whom I've only recently
learned of.

At 76 credit rating agencies worldwide, this list is growing. As documentation of this growth,
see:

 The historical list, which was frozen Feb-2006,


 The names dropped from that historical list when this page's list was initiated, and
 The dates of new additions noted below.

Credit Rating Agencies have received heavy criticism for their contributions to the economic
crisis that started in 2007 and continues currently. Indeed, the Dodd-Frank Act now mandates
tighter supervision of CRAs in the US. Separately, new efforts (such as Wikirating.com)
seek to bypass traditional CRAs altogether.

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SL No Company Name Country
1. A.M. Best Company, Inc. US – NRSRO
Insurance industry emphasis.
2. Agusto & Co. Ltd. Nigeria
3. Ahbor Rating Uzbekistan
4. Apoyo & Asociados Internacionales S.A.C. Peru -- Fitch Associate
5. Bank Watch Ratings S.A. Ecuador -- Fitch Affiliate
6. BRC Investor Services S.A. Colombia
7. Capital Standards Rating (CSR) Kuwait
Added: Apr-2011
8. Calificadora de Riesgo, PCA Uruguay
9. Capital Intelligence, Ltd. Cyprus
10. Caribbean Information & Credit Rating Services Caribbean
Ltd. (CariCRIS)
11. Central European Rating Agency (CERA) Poland
a/k/a: Fitch Polska, S.A.
12. Chengxin International Credit Rating Co., Ltd. China -- Moody's Affiliate
13. China Lianhe Credit Rating, Co. Ltd. China
14. Clasificadora de Riesgo Humphreys, Ltda. Chile -- Moody's Affiliate
15. Class y Asociados S.A. Clasificadora de Riesgo Peru
16. CMC International, Ltd. Nigeria
17. Companhia Portuguesa de Rating, SA (CPR) Portugal
18. Credit Analysis & Research Ltd (CARE) India
19. "Credit-Rating": A Ukrainian rating agency Ukraine
Added: Mar-2010
20. Credit Rating Agency of Bangladesh, Ltd. Bangladesh
(CRAB)
21. Credit Rating Information and Services, Ltd. Bangladesh
(CRISL)
22. CRISIL, Ltd. India -- S&P Affiliate
f/k/a: Credit Rating Information Services of India
23. Dagong Global Credit Rating Co., Ltd. China
24. Demotech, Inc. US -- Added: Apr-10
Insurance industry emphasis.
25. Dominion Bond Rating Service (DBRS) Canada – NRSRO
26. Duff & Phelps de Colombia, S.A., S.C.V Colombia -- Fitch Affiliate
27. Ecuability, SA Ecuador
28. Egan-Jones Rating Company US – NRSRO
29. Emerging Credit Rating Ltd (ECRL) Bangladesh -- Collaboration
Added: Apr-2011 with MARC
30. Equilibrium Clasificadora de Riesgo Peru -- Moody's Affiliate
31. European Rating Agency (ERA) UK

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32. Feller Rate Clasificadora de Riesgo Chile -- S&P Affiliate
33. Fitch Ratings, Ltd. US/UK – NRSRO
34. Global Credit Rating Co. S.Africa
35. HR Ratings de Mexico, S.A. de C.V. Mexico
Added: Jan-2009
36. Interfax Rating Agency (IRA) Russia
37. Investment Information and Credit Rating Agency India
(ICRA)
38. Islamic International Rating Agency, B.S.C. (IIRA) Bahrain
39. Istanbul International Rating Services, Inc. Turkey
a/k/a: TurkRating
Added: Oct-09
40. Japan Credit Rating Agency, Ltd. (JCR) Japan – NRSRO
41. JCR Avrasya Derecelendime A.S. Turkey -- JCR Affiliate
a/k/a: JCR Eurasia Rating
Added: Oct-09
42. JCR-VIS Credit Rating Co. Ltd. Pakistan -- JCR Affiliate
43. Kobirate Uluslararası Kredi Derecelendirme ve Turkey
Kurumsal Yönetim Hizmetleri A.Ş .
a/k/a/ Kobirate
Added Oct-09
44. Korea Investors Service, Inc. (KIS) Korea -- Moody's Affiliate
45. Korea Ratings Corporation Korea -- Fitch Affiliate
f/k/a: Korea Management Consulting and Credit
Rating Corp. (KMCC)
46. Kroll Bond Rating Agency, Inc. US – NRSRO
Wholly acquiring LACE Financial Corp. in Aug-
2010
47. Lanka Rating Agency, Ltd. (LRA) Sri Lanka -- Subsidiary of
RAM
48. Malaysian Rating Corporation Berhad (MARC) Malaysia -- Fitch Affiliate
49. Mikuni & Co., Ltd. Japan
50. Moody's Investors Service US -- NRSRO
51. National Information & Credit Evaluation, Inc. Korea
(NICE)
52. ONICRA Credit Rating Agency of India, Ltd. India
53. P.T. Kasnic Credit Rating Indonesia Indonesia -- Moody's
Affiliate
54. P.T. PEFINDO Credit Rating Indonesia Indonesia
a/k/a: PT Pemeringkat Efek Indonesia
55. Pacific Credit Rating (PCR) Peru
a/k/a: Clasificadora de Riesgo Pacific Credit Rating
S.A.C.

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56. Pakistan Credit Rating Agency, Ltd. (PACRA) Pakistan -- Fitch former
affiliate
57. Philippine Rating Services, Corp. (PhilRatings) Philippines
58. RAM Rating Services Berhad (RAM) Malaysia -- S&P Affiliate
f/k/a: Rating Agency Malaysia Berhad
59. Rapid Ratings International, Inc. Australia/NZ
60. Rating and Investment Information, Inc. (R&I) Japan -- NRSRO
61. Realpoint, LLC US -- NRSRO
Added: Jan-2009
62. Rus Rating Russia
63. Saha Kurumsal Yönetim ve Kredi Derecelendirme Turkey
Hizmetleri A.Ş
Added: Oct-2009
64. Seoul Credit Rating & Information, Inc. Korea -- JCR Affiliate
65. Shanghai Credit Information Services Co., Ltd. China
66. Shanghai Far East Credit Rating Co., Ltd. China
a/k/a: Xinhua Far East Credit Ratings
67. Slovak Rating Agency, a.s. (SRA) Balkans -- ERA Affiliate
a/k/a: Slovenská ratingová agentúra, a.s.
68. SME Rating Agency of India Limited (SMERA) India
Added: Apr-2008
69. Sociedad Calificadora de Riesgo Centroamericana, Costa Rica
S.A. (SCRiesgo)
70. SR Rating Prestação de Serviços Ltda. Brazil
Added: Oct-2011
71. Standard and Poors (S&P) US -- NRSRO
72. Taiwan Ratings, Corp. (TCR) Taiwan -- S&P Affiliate
73. Thai Rating and Information Services Co., Ltd. Thailand
(TRIS)
74. TheStreet.com Ratings, Inc. US
f/k/a: Weiss Ratings, Inc.
75. TCR Kurumsal Yonetim ve Kredi Derecelendirme Turkey
Hizmetleri A.S.
a/k/a: Türk KrediRating (TCRating)
76. Veribanc, Inc. US

Names dropped from historical list:

There were ten changes in Feb-2006:

These differences are listed below. Six were absorbed by the "big three" credit rating
agencies. Two were determined to distribute business information that might support a rating

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decision, but did not actually include a rating analyst's opinion. Two were redundant (i.e.,
being the same entities known by different names).

1. Agence d'Évaluation Financière (ADEF)


France -- Absorbed by S&P
2. CRA Rating Agency
f/k/a: Czech Rating Agency
Czech Republic -- Absorbed by Moody's
3. Credit Information Bureau Ltd. (CIB)
India -- Determined to distribute information without a rating.
4. Duff & Phelps Credit Rating Co.
US -- Absorbed by Fitch
5. Humphreys Argentina Calificadora de Riesgo S.A.
f/k/a: Ratto-Humphreys, Calificadora de Riesgo S.A.
Argentina -- Absorbed by Moody's
6. Humphreys Clasificadora de Riesgo
a/k/a: Clasificadora de Riesgo Humphreys, Ltda.
Chile -- Redundant
7. SKATE
Russia -- Became an equity/info shop
8. Thompson BankWatch
US -- Absorbed by Fitch
9. VALUE Calificadora de Riesgo, S.A.
Argentina -- Absorbed by Moody's
10. Xinhua Far East China Ratings
a/k/a: Shanghai Far East Credit Rating Co., Ltd.
China -- Redundant

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1.10 Top 10 Credit Rating Agencies of the world
Here is the list of Top 10 Credit Rating Agencies of the world. These agencies are Nationally
Recognized Statistical Rating Organizations by the U.S. Securities and Exchange
Commission.

A. MOODY’S

Moody‘s is the oldest credit rating agency. It is also the first rating agency to be recognized
by NRSRO in 1975. The company became public in 2000. It has been earning huge profits.
Average profit margin was 53% from 2000 to 2007. Structured finance products were its top
source of revenue by 2000.

B. Standard & Poor’s

The agency is owned by Mc Graw-Hill Inc. It has been published any stock indices of the
world, most famous being S&P 500 index which is the most watched index in the world.
McGraw-Hill reported a net profit margin of 12.6 percent for 2008.

C. Fitch

Fitch is smallest among the top three agencies. It is a part of Fitch Group, a subsidiary of
Fimalac S.A FIM.PA. Was the third agency to become an NRSRO in 1975. From 1975 to

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1992, four other agencies were recognized as NRSROs and all subsequently merged with
Fitch.

D. DBRS

DBRS is privately owned Canadian ratings agency. Has been the top ratings agency in
Canada for 30 years. It became the fourth NRSRO in 2003. DBRS believes that it can
compete with the big three but is not favored by authorities.

E. Egan-Jones

Egan-Jones is a Philadelphia-based agency founded in 1995. It was granted NRSRO status in


December 2007 after a nine-year process. Although they are paid by investor-subscribers,
Egan-Jones will give out their ratings to anyone who asks.

F. A.M Best

A.M Best was founded in 1899 in New York City and became an NRSRO in 2005. It
specializes exclusively on the insurance marketplace and so not a competitor with the others
per se. But has recently begun issuing debt and financial-strange ratings for small and mid-
sized commercial banks.

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G. Japan Credit Rating Agency Limited

Japan Credit rating Agency was established in 1985 and based in Tokyo and it became an
NRSRO in 2007. It is a small agency when compared to competitors. it has a staff of just 90.

H. Rating and Investment Information Inc

The second Japanese credit ratings agency to become an NRSRO in 2007. It was set up in
1975, now based in Nihonbashi. New York office was set up in 2005.

I. LACE Financial

It was founded in 1984, and became a NRSRO in 2008. The second NRSRO after Egan-
Jones to operate on investor-paid business model.

J. Realpoint LLC

Realpoint LLC became a NRSRO in 2008. It is one of the smallest NRSROs and is paid by
issuers. Obtained an exemption in 2008 from the SEC regulation that an NRSRO is
prohibited from rating an issuer that contributes 10 percent or more of its revenue.

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1.11 Rating Companies in Bangladesh

List of Credit Rating Companies

SL. Name of the Company Date of Issuance of


No. Registration Certificate
01. Credit Rating Information and Services Ltd (CRISL) 21 August, 2002
02. Credit Rating Agency of Bangladesh Ltd (CRAB) 24 October, 2004
03 National Credit Ratings Ltd 22 June, 2010
04 Emerging Credit Rating Ltd 22 June, 2012
‘05. ARGUS Credit Rating Services Ltd. 21 July, 2011

06. WASO Credit Rating Company (BD) Limited 15 February, 2012

07. Alpha Credit Rating Limited 20 February, 2012

08. The Bangladesh Rating Agency Limited 7 March, 2012

1.12 Rating Grades


Each rating agency has developed its own system of rating sovereign and corporate
borrowers. Fitch Ratings developed a rating system in 1924 that was adopted by Standard &
Poor's. Moody's grading is slightly different. Moody's sometimes argues that their ratings
embed a conceptually superior approach that directly considers not only the likelihood of
default but also the severity of loss in the event of default.

1.13 Recent developments


Since the beginning of the credit crunch in early 2007 rating agencies have come under fire
for their high ratings of mortgage backed securities (MBS) that did not reflect the financial
stability of the borrowers. This has also reopened a discussion whether rating agencies, who
get paid by borrowers for their rating, are not in a conflict of interest.

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Description Moody's S&P Fitch

Maximum Safety Aaa AAA AAA

High grade Aa1 AA+ AA+

High grade Aa2 AA AA

High grade Aa3 AA- AA-

Higher medium Grade A1 A+ A+

Higher medium Grade A2 A A

Higher medium Grade A3 A- A-

Lower medium Grade Baa1 BBB+ BBB+

Lower medium Grade Baa2 BBB BBB

Lower medium Grade Baa3 BBB- BBB-

Speculative Ba1 BB+ BB+

Speculative Ba2 BB BB

Speculative Ba3 BB- BB-

Highly Speculative B1 B+

Highly Speculative B2 B B

Highly Speculative B3 B-

Substantially risky CCC+ CCC+

Substantially risky Caa CCC CCC

May be in default Ca CC CC

Extremely Speculative C C C

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Income bonds - not paying interest CI

Default DDD

Default DD

Default D D

1.14 The Importance of Credit Rating Agencies


Credit rating agencies provide investors and debtors with important information regarding the
creditworthiness of an individual, corporation, agency or even a sovereign government. The
credit rating agencies help measure the quantitative and qualitative risks of these entities and
allow investors to make wiser decisions by benefiting from the skills of professional risk
assessment carried out by these agencies. The quantitative risk analysis carried out by credit
rating agencies include comparison of certain financial ratios with chosen benchmarks and
the qualitative analysis focuses on the management character, legal, political and economic
environment in a jurisdiction.

1.15 Development of Financial Markets


Credit rating agencies help provide risk measures for various entities and make it easier for
financial market participants to assess and understand the credit risk of the parties involved in
the investing process. Individuals can get a credit score in order to be eligible for easy access
to credit cards and other loans. Institutions can borrow money easily from banks without
having to go through lengthy evaluations from each individual lender separately. Also
corporations and governments can issue debt in the form of corporate bonds and treasuries to
attract investors based on the credit ratings.

1.16 Credit Rating Agencies Help Regulate Financial Markets


The credit ratings provided by popular rating agencies including Moody‘s, Standard & Poor‘s
and Fitch, have become a benchmark for regulation of financial markets. Legal policies
require certain institutions to hold investment graded bonds. Bonds are classified to be
investment graded based on their ratings by these agencies, any corporate bond with a rating
higher than BBB is considered to be investment graded bond.

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1.17 Estimation of Risk Premiums
The credit ratings provided by these agencies are used by various banks and financial
institutions in determining the risk premium they will charge on loans and corporate bonds. A
poor credit rating implies a higher risk premium with an increase in the interest rate charged
to corporations and individuals with a poor credit rating. Issuers with a good credit rating are
able to raise funds at a lower interest rate.

1.18 Enhanced Transparency in the Credit Markets


The credit rating agencies provide improved efficiency in the credit markets and allow for
more transparency in dealings. The ratings help monitor the credit soundness of various
borrowers through a set of well-defined rules.

1.19 Standardization of the Evaluation Process


Most credit agencies use their own methodology for determining credit ratings, but since only
a handful of popular credit rating providers exist, this adds a great deal of standardization in
the rating process. The credit ratings of different borrowers can be easily compared using
ratings provided by a credit rating company and the applications can be easily sorted.

1.20 Limitations of Credit Rating


Some limitations of credit rating are-
 Rating could be biased depending on the relationship between the credit rating agency
and rated company. The "Big Three" global credit rating agencies--U.S.-
based Standard and Poor's, Moody's, and Fitch Ratings--have been under intense
scrutiny since the 2007-2009 global financial crises. They were initially criticized for
their favorable pre-crisis ratings of insolvent financial institutions like Lehman
Brothers, as well as risky mortgage-related securities that contributed to the collapse
of the U.S economy.
 Credit rating requires a fine knowledge about the rated company. Analyst needs to
know about the company, its operation properly which is time consuming and
requires a very good effort. Several meetings and conversations over phone are done
to ensure that. Once a company is rated by a financial analyst of a credit rating agency
and after that if that financial analyst switches his/ her job, new analyst faces a lot of
troubles while performing surveillance of the company.

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 As ratings are designed exclusively for the purpose of grading obligations according
to their credit quality, they should not be used alone as a basis for investment
operations. For example, they have no value in forecasting the direction of future
trends of market price. Market price movements in bonds are influenced not only by
the credit quality of individual issues but also by changes in money rates and general
economic trends, as well as by the length of maturity, etc.

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Part-2

CRAB

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2.1 About CRAB:

Credit Rating Agency of Bangladesh Limited (CRAB) was established in 2003 at the
initiative of some leading personalities in private sector and institutions of the country with
the commitment to contribute to the development of the capital market by providing quality
ratings and comprehensive research services. CRAB was incorporated as a public limited
company in 2003 and received its Certificate for Commencement of Business in the same
year.
In 2004, CRAB was granted license by the Securities & Exchange Commission (SEC) of
Bangladesh (under the Credit Rating Companies Rules 1996) for operating as a Credit Rating
Company. In 2009 CRAB has been accredited as an External Credit Assessment Institution
(ECAI) by Bangladesh Bank, to provide rating of Bank Clients under Basel II regime. CRAB
has established its reputation as a reliable source of independent opinion on risks based on
systematic and standardized analysis done by professionals.

2.2 Mission & Objectives

Mission
CRAB‘s mission is to Effect significant contribution towards qualitative development of the
money and capital markets and enhancement of transparency of financial information and
credibility of the corporate sector in Bangladesh for helping in the growth of investment.

Objectives
 To perform the credit rating of various debt instruments as Commercial papers, Bonds
and Debentures, Islamic bonds, Preference shares, Equity instruments, Rights issue,
Mutual fund units etc.
 To perform grading of various institutions as banks, non-banking financial
institutions, insurance companies, corporations, non-corporations, societies, trusts or
individuals or their clients for purposes requested clients or required by authorities.
 To accumulate, process and offer information services in broad areas for the use of
organization and clients at different levels.

Credit Rating & Industry Analysis of Bangladesh Page 22


 To provide consultancy and advisory services in broad areas to their clients at
different levels.
 To act as trustees of any debentures, bonds, securities, commercial papers or any other
obligations and to exercise the powers of executor, administrator, receiver, treasurer,
custodian in respect of such debts and securities.

2.3 CRAB Profile:

2.3.1 ACRAA Membership


CRAB is a member of the Association of Credit Rating Agencies in Asia (ACRAA).
ACRAA, established in 2001, is a federation of domestic rating agencies of the Asian
Continent- including those of Japan, Philippines, Uzbekistan, Sri Lanka, Malaysia, Indonesia,
Korea, India, Pakistan, Taiwan, China, Thailand and Bangladesh, formed with support and
cooperation of the Asian Development Bank (ADB). As a member, CRAB participates in all
the activities of this Association. As of April 2009, membership has increased to 25 members
from 14 countries. (Web: www.acraa.com).
The Association of Credit Rating Agencies in Asia is organized for the following purposes:

 To develop and maintain cooperative efforts that promote interaction and exchange of
ideas, experiences, information, knowledge and skills among credit rating agencies in
Asia that would enhance their capabilities and their role of providing reliable market
information.

 To undertake activities aimed at promoting the adoption of best practices and


common standards that ensure high quality and comparability of credit ratings
throughout the region, following the highest norms of ethics and professional conduct.

 To undertake activities aimed at promoting the development of Asia's bond markets


and cross-border investment throughout the region.

Credit Rating & Industry Analysis of Bangladesh Page 23


2.3.2 Technical Collaboration with ICRA (an Associate of Moody's)
CRAB has a Technical Collaboration Agreement with ICRA Ltd. of India, one of the leading
credit rating agencies of the region. This collaboration has provided CRAB with facility for
development of rating methodologies, for performing rating assignments and for training of
its professionals. ICRA-CRAB collaboration facilitates sharing of resources and information
base and professional expertise between the two organizations, much to the advantage of
CRAB. ICRA Limited (an Associate of Moody's Investors Service, USA) was incorporated
in 1991 as an independent and professional company. ICRA is a leading provider of
investment information and credit rating services in India. ICRA's major shareholders include
Moody's Investors Service and leading Indian financial institutions and banks. With the
growth and globalization of the Indian capital markets leading to an exponential surge in
demand for professional credit risk analysis, ICRA has been proactive in widening its service
offerings, executing assignments including credit ratings, equity grading, specialized
performance grading and mandated studies spanning diverse industrial sectors. In addition to
being a leading credit rating agency with expertise in virtually every sector of the Indian
economy, ICRA has broad-based its services for the corporate and financial sectors, both in
India and overseas. (Web: icra.in)

2.3.3 Rating Service of CRAB:


Code of Conduct:
The Board of Directors of CRAB on 02 April 2006 adopted the Code of Ethics prescribed by
Association of Credit Rating Agencies in Asia (ACRAA) and Code of Conduct for Credit
Rating Agencies prescribed by International Organization for Securities Commission
(IOSCO). CRAB complies with the Code of Conduct as prescribed under the Credit Rating
Agencies Rules of Securities & Exchange Commission. This Code of conduct focus on the
followings:
1. Responsibility & Trust: CRAB deems the Credit Rating as a function of serious
responsibility and the persons exercising the function view it as a matter of great trust.
2. Integrity & Competence: Rating Committee members and professionals apply
highest degree of integrity, competence, objectivity and thoroughness.
3. Quality of Rating: CRAB uses standardized methodologies following international
standard considering local context. The methodologies are regularly fine-tuned
through rigorous validity tests.

Credit Rating & Industry Analysis of Bangladesh Page 24


4. Confidentiality: CRAB and its staff presume the confidentiality of the information
received from clients.
5. Independence: CRAB's ratings are assigned by independent Rating Committee
Members.
6. Avoidance of Conflict of Interest: Rating Committee members and professionals
disclose conflict of interest in the internal process and refrain from participating in
any manner in such assignments.
7. Transparency and Timeliness of Rating Disclosure: Disclosures given through
website and information to regulators.

2.4 Requirement for Rating in Bangladesh

1) The Credit Rating Agencies Rules 1996 issued by the Securities & Exchange
Commission requires that the following instruments be rated prior to making issuance
and that the information on rating be incorporated in the prospectus of offer
documents:

a. Public offering of all debt instruments: bond, debenture, commercial paper, structured
finance (asset/mortgage backed securities) and preference shares.
b. Public issue of shares at a premium.
2) Securities & Exchange Commission through its Securities and Exchange (Rights
Issue) Rules, 2006 requires rating of the followings:
a. All rights issue at premium
3) The SEC rules 2004 (asset backed security issue) requires the credit rating of asset
pools to be securitized with optional requirements of credit rating of the originator.
4) Bangladesh Bank through its circulars require mandatory credit rating for the
followings:
a. All scheduled Banks on an annual basis
b. All financial institutes in case of IPO
c. Bank exposures
5) Chief Controller of Insurance through its circulars require mandatory credit rating for
the followings:
a. All general insurance companies on an annual basis
b. All life insurance companies on biennial basis

Credit Rating & Industry Analysis of Bangladesh Page 25


2.5 Rating Process:
CRAB's Rating process is initiated on receipt of a formal request (or mandate) from the
Client. A Rating team consisting of Financial Analysts is engaged for conducting Rating
assignment. Analysts collect information from the client through documents, data, meeting,
site visits etc. CRAB also draws on secondary sources of information, including its own
research division.
After completing the analysis, Analysts prepare a Draft Rating Report, which is discussed in
the Internal Committee. A draft report is provided to the client also to ensure that there is no
factual mistake or misrepresentation in the report. The report is then presented to the CRAB
Rating Committee. The Rating Committee is the final authority for assigning Ratings. The
assigned Rating, along with the key issues, is communicated to the issuer's top management
for acceptance. If the client does not find the Rating acceptable, it has a right to appeal for a
review.
Such reviews are usually taken up only if the issuer provides certain fresh inputs. During a
review, the issuer's response is presented to the Rating Committee. If the inputs and/or fresh
clarifications so warrant, the Rating Committee would revise the initial Rating decision. As
part of a mandatory surveillance process, CRAB monitors the accepted Ratings over the
tenure of the contract period. The Ratings generally reviewed once every year, unless the
circumstances of the case warrant an earlier review. The Rating outstanding may be retained
or revised (that is, upgraded or downgraded) on surveillance.

2.6 Rating Methodology:


CRAB has developed highly standardized rating methodologies for different instruments and
entities. The methodologies have been developed considering all the relevant factors affecting
the future cash generation capacity of the issuers. These factors include industry
characteristics, competitive position of the issuer, operational efficiency, management
quality, commitment to new projects and other associate companies, and future funding
policies of the issuer.
A detailed analysis of the past financial statements is made to assess the actual business
performance. Analysis considers the estimated future earnings under various sensitivity
scenarios are drawn up and evaluated against the future obligations that require servicing
over the tenure of the instrument being rated. CRAB rating methodology intends to assess the
relative comfort level of the issuers to service the obligations and this is reflected in the rating

Credit Rating & Industry Analysis of Bangladesh Page 26


of a debt instrument. In case of equity instruments, the rating reflects the future earning
capabilities with reference to the resilience to perform in adverse situations.

2.7 Banks and Financial Institutions:


CRAB's ratings assess the creditworthiness of financial institutions, i.e. commercial and
merchant banks, non-bank finance companies, housing finance companies etc. While each of
these entities has the same function, i.e. leveraging on own funds and lending to others on a
cost plus basis, there are significant differences in terms of scale of operations, products and
services offered, product delivery, regulatory obligation, and their internal control system.
Ratings of financial institutions focus on the risks that can possibly affect the operations of
such a company - operating risks, financial risks and management risks.

2.7.1Banking Sector of Bangladesh


Banks are the financial institutions which work as intermediaries between the two parties one
is the party has surplus of money and the other party is in a need of money. After
independence of Bangladesh, there were only six nationalized banks and one specialized
bank. The first private commercial bank came into being in 1982. Before the private banks
entered the scene, the people of Bangladesh, who were directly or loosely related with the
banking sector, were not in a position to realize the benefits offered by real banking. As AB
Bank Limited, the first-ever private commercial bank in Bangladesh, began operating in the
market, the banking scenario took a new shape. The nationalized commercial banks (NCBs)
witnessed a new era of competition in course of time.

Now, banks in Bangladesh are primarily of two types:

 Scheduled Banks: The banks which get license to operate under Bank Company Act,
1991 (Amended in 2003) are termed as Scheduled Banks.
 Non-Scheduled Banks: The banks which are established for special and definite
objective and operate under the acts that are enacted for meeting up those objectives,
are termed as Non-Scheduled Banks. These banks cannot perform all functions of
scheduled banks.

There are 47 scheduled banks in Bangladesh who operate under full control and supervision
of Bangladesh Bank which is empowered to do so through Bangladesh Bank Order, 1972 and
Bank Company Act, 1991. Scheduled Banks include 4 State Owned Commercial Banks

Credit Rating & Industry Analysis of Bangladesh Page 27


(SOCBs), 4 Specialized Banks (SDBs), 30 Private Commercial Banks (PCBs), 23
Conventional PCBs, 7 Islami Shariah based PCBs and 9 Foreign Commercial Banks (FCBs).

There are now 4 non-scheduled banks in Bangladesh which are Ansar VDP Unnayan Bank,
Karmashangosthan Bank, Probashi Kollyan Bank and Jubilee Bank.

2.7.2 Governing Body of Banks


The central bank took initiatives to streamline the assets of the banks according to their
quality through issuing Banking Regulation and Policy Department (BRPD) circular No-14
regarding loan classifications and provisioning. It was the first fruitful initiative taken by the
Bangladesh Bank (BB). If the central bank of Bangladesh had not taken this remarkable
initiative, the banking sector would have been affected by repeated volatilities.

While banks have benefited from an overall good economic growth over the last decade,
strong supervisory role by Bangladesh Bank (BB), setting up of credit information bureaus,
internal improvements such as upgrade of technology infrastructure, tightening of the
appraisal and monitoring process and strengthening of the risk management platform have
also contributed to the improvement.

2.7.3 Current situation of Banking Sector


Banks in Bangladesh, the dominant financial intermediaries, have made good progress over
the last seven years, as is evident from several parameters, including annual credit growth,
profitability and trend in gross non-performing loans (NPLs).

An extensive expansion has been achieved in the capital base of the country‘s banking sector
in the last four years, according a Bangladesh Bank release. According to Basel II accord,
banks had to maintain risk based capital adequacy up to 2008. As per this accord, the total
amount of actual capital maintained by banks was tk 20, 578 crore at the end of 2008. The
figure has gone up to Tk. 56, 201 crore over the last four years (upto June 2012). In other
words banking sector as a whole has witnessed a gross increase of Tk. 35,623 crore in capital
base. That means, overall growth of capital has been 173 percent over the last four years with
yearly growth of about 49 percent.

The capital base has increased due mainly to response to risk sensitive Basel II accord and
due to the transfer of a larger proportion of profit of banks into capital. As a result, the base
of banking system becomes stronger, according to the central bank.

Credit Rating & Industry Analysis of Bangladesh Page 28


This is why for strengthening of the capital base of banks, Basel II accord relating to capital
adequacy has been fully implemented by the central bank following the international best
practices rules and regulation.

The BB also said necessary steps have been taken for implementing the Basel III accord in
near future. According to Basel II, banks are required to maintain capital at 10 percent of risk
weighted assets, but in reality the banks have been able to maintain more than the required
level which is now 11.31 percent.

Risk management systems are expected to be centralized, thereby ensuring uniform credit
evaluation standards across the bank. It will also help banks better manage their growing
consumer credit business, where the current delinquency levels at a few banks are sometimes
significantly higher than the best in the Bangladeshi industry. The introduction of improved
technology, including interconnectivity among branches, and ‗core banking‘ software, is
expected to drive such changes. Other aspects include a reappraisal of the existing credit risk
measurement parameters, tempering the weights of the qualitative factors, and appropriately
valuing collaterals. Introducing specialized loan monitoring groups and early warning
systems are proactive measures to control delinquencies. These steps will also help banks
meet some of the requirements of the internal ratings-based (IRB) approach of the new Basel
capital accord.

Most Bangladeshi banks have recently focused on improving their risk management systems,
and a few of the ‗new‘ private sector banks are ahead in terms of technology and skill levels
compared with the public sector and the old private sector banks. Most banks will, however,
need to upgrade their existing technology and skill levels before they can be considered
compliant with the IRB approach of the new Basel capital accord.

2.7.4 Challenges for Banking Sector


Currently banks face several challenges such as increase in interest rates on saving deposits, a
tighter monetary policy, a large government deficit, increased stress in some sectors such as
utilities, real estates, restructures loan accounts, increasing infrastructure loans (power sector)
and implementation of Basel II and looking forward for Basel III.

Over the last two years the Bangladesh financial markets have witnessed wide ranging
changes a fast pace. Intense competition for business involving both the assets and liabilities,
together with increasing volatility in the domestic interest rates, foreign exchange rates as

Credit Rating & Industry Analysis of Bangladesh Page 29


well as capital market, has brought pressure on the management of banks to maintain a good
balance among spreads, profitability and long term viability. These pressure call for
structured and comprehensive measures and not just ad hoc action. The management of banks
has to base their business decisions on a dynamic and integrated risk management system and
process, driven by corporate strategy. Banks are exposed to several major risks in the course
of their business- credit risk, interest rate risk, foreign exchange risk, equity/ commodity price
risk, liquidity risk and operational risks.

2.7.5 Factors in Bank Rating by CRAB

Profitability Earning

Diversification

Earning & Corporate

Volatility Governance

Bank
Asset
Rating Controls & Risk
Quality
Management

Capital Asset Quality &

Adequacy Provisioning

Liquidity & Sectoral Investment

Funding Adjustment Quality

Credit Rating & Industry Analysis of Bangladesh Page 30


2.7.6 Impact of Credit Rating on Banking Sector
Bangladesh Bank has made credit rating mandatory to all scheduled banks and insurance
companies on an annual basis. With a view to managing various risks in a prudent manner,
scheduled banks are hereby instructed to follow the attached risk management guidelines.
The document should be treated as Supplement to, and not a substitute for, existing core risks
guidelines.

Banks have to prepare a risk management paper and must place the same in the monthly
meeting of the Risk Management Unit. The minutes of the meetings should contain specific
decisions based on the analyses/recommendations made in the risk management paper. Banks
have to submit risk management papers (hard & soft copies for successive months of each
quarter) along with the minutes of the meetings within 10 days of each quarter end to the
Department of Off-site Supervision of Bangladesh bank.
In case of banks clients who have loan exposure of 10 million or above are required to be
rated. The eight credit rating companies are involved in the process. Banks can be rated by
more than one credit rating Company. In that situation lowest rating should be considered as
per rule of BB.

CRAB‘s ratings assess the creditworthiness of financial institutions, i.e. commercial and
merchant banks, non-bank finance companies, housing finance companies etc. CRAB
focuses on the factors while rating a bank are- Profitability, Earnings & Volatility, Asset
Quality, Capital Adequacy, Liquidity & Funding, Investment Quality, Asset Quality &
Provisioning, Controls & Risk Management, Corporate Governance, and Earning
Diversification. Rating definition and rating methodology for banks practiced by CRAB is
presented in the Appendix part of the report.

Credit Rating has 2 types of impact on Banks which are:


 When Banks themselves are rated and how they are using these ratings- Bank as
borrower.
 The ratings of banks‘ clients and how banks are using those ratings- Bank as lender.

Credit Rating & Industry Analysis of Bangladesh Page 31


2.7.7 Impact while Bank is a Borrower
According to a very general thought banks are here to lend money. But banks sometimes
need to borrow money to meet its monetary necessity. Banks borrows this money either from
other banks or from other financial institutions. When bank is a borrower bank is rated by
credit rating agencies and bank can use that rating to get loans for its operation. The impact of
credit rating on a bank while it is a borrower are-
 The main advantage of a credit rating is being rewarded for managing budget and
finances responsibly. This qualifies a bank for the best credit offers, including low
interest. Good credit ratings allow borrowers to easily borrow money from financial
institutions or public debt markets.
 A better rated company gets priority while applying for a loan to a bank or a financial
institution.
 Pricing of fresh loans supposed to be effected by the rating of the borrower. Higher
rated companies in particular will benefit from this.
 Good credit rating qualifies for insurance at preferred rates
 Good credit rating makes an organization look more attractive to employers as well.
 Risk grading would also be relevant for surveillance and monitoring, internal MIS and
assessing the aggregate risk profile. It is also relevant for portfolio level analysis.

2.7.8 Impact while Bank is a Lender


 At the pre-sanction stage, credit rating helps the banks to decide whether to lend or
not to lend, what should be the pricing for a particular exposure, what should be the
extent of exposure, what should be the appropriate credit facility and the various risk
mitigation tools.
 At the post-sanction stage, the bank can decide about the depth of the review or
renewal, frequency of review, periodicity of the grading, and other precautions to be
taken.
 Banks enjoy a facility while maintain capital reserve requirement of Bangladesh.
Basel II accord allows banks to maintain capital reserve requirement according to the
risk weight which saves capital of the bank and increase capital base of overall
banking sector.
An illustration of capital-saving potential by banks on a loan of Tk. 1000 million is as
following

Credit Rating & Industry Analysis of Bangladesh Page 32


Table 2: illustration of capital-saving potential by banks on a loan of Tk. 1000 million
Rating Risk Capital Capital Saved
Weight Required
(in million BDT)
(in million BDT)

AAA, AA1, AA2, AA3 20% 20 80

A1, A2, A3 50% 50 50

BBB1, BBB2, BBB3, BB1, BB2, 100% 100 0


BB3

B1, B2, B3, CCC1, CCC2, CCC3 150% 150 -50

Unrated 125% 125 -25

Source: Basel II: New Capital Adequacy Framework, Credit Rating Agency of Bangladesh
Ltd.

2.8 General and Life Insurance


CRAB ratings of Insurance Companies assess the ability of the insurers concerned to honor
policy holder claims and obligations on time. Rating provides an opinion on the financial
strength of the insurer from a policy- holder's perspective, which may act as important input
influencing the consumer's choice of insurance companies and products. The analysis also
includes an assessment of company's ownership strength, profitability, liquidity, operational
and financial leverage, capital adequacy, and asset/Liability management method.

Credit Rating & Industry Analysis of Bangladesh Page 33


2.9 Corporate
CRAB's corporate rating methodology is developed for analysis of nonfinancial organizations
operating in manufacturing, assembling, service sector etc. The generic factors are common
for all entities/issuers, while criterion specific for different industries are used for rating.
There are separate rating criterions for rating of entities in different industries.

2.9.1 Corporate Sector of Bangladesh


Corporate sector includes business entities which are Public Limited Companies and obtained
consent from the Commission to raise paid up capital of more than 1.00 crore. Bangladesh
corporate sectors are still in its initial stage. Most of the companies depend on the banks as
their major source of financing. Capital market in Bangladesh is still at an emerging stage
with market capitalization amounting to only 6.5% of GDP with low investor confidence on
corporate governance and financial disclosure practices in many companies listed in the stock
exchanges. The neighboring countries are well ahead vis-à-vis Bangladesh in terms of depth
of capital market. For example, in India, Pakistan and Sri Lanka, the market capitalization is
56%, 30% and 18% of their GDP respectively. However, Awareness of the importance of
corporate governance in Bangladesh is growing.

Securities and Exchange Commission of Bangladesh (SECB) issued a notification on


Corporate Governance Guidelines (CG Guidelines) for the publicly listed companies of
Bangladesh under the power vested on the Commission by Section 2CC of the Securities and
Exchange Ordinance, 1969.

2.9.2 Corporate ownership structures


All corporate governance (CG) systems revolve around four core principles: Fairness,
accountability, responsibility and transparency. The specific challenges of upholding these
principles depend on the ownership structure of the corporate sector. However, in
Bangladesh, general practice is that the corporate structure is dominated by family members.
Such practice hinders the level of fairness, accountability and transparency. Inadequate
Bankruptcy Laws: Bankruptcy laws and processes are inadequate in terms of provisions and
not strong in terms of enforcement in Bangladesh. No country can have good CG standards
with poor bankruptcy laws and processes. Besides, inefficient

Foreclosures and securitization processes have compounded the problems in Bangladesh.


Lack of initiatives to drive for CG from the International Investor Community; most

Credit Rating & Industry Analysis of Bangladesh Page 34


companies in Bangladesh have a pessimist approach in attracting foreign investment. As a
result, there is a lack of drive from the international investor community for better corporate
governance.

2.9.3 Accounting standards, audit and disclosure

The scenario of internal audit; accounting standards and disclosure and its impacts on CG and
management practices in Bangladesh are mixed. There are now elements of both positive
scopes and new challenges and risk for the corporations in these areas. Bangladesh
accounting standards rely on Generally Accepted Accounting Principles (GAAP) developed
by accounting profession. These principles are primarily shareholder oriented and are
independent of tax considerations. In Bangladesh the companies have to make disclosure of
information required by law. Disclosure requirements for Initial Public Offerings are defined
by the Companies Act and the orders under the Securities and Exchange Ordinance, 1969.

2.9.4 Categories of Corporate Sector

Bangladesh has a thriving industrial sector with a diverse range of sectors outperforming
global growth rates. The abundant natural resources of the country combined with
competitive high quality labor and a business friendly environment, make Bangladesh a
compelling proposition for companies investing in the region.

Below are five broad business categories of special opportunity:

 Quality garment design and production


 ICT and business services
 Pharmaceuticals and life sciences
 Agribusiness
 Leather products

2.9.5 Quality garment design and production

From spinning to weaving, from knitwear to leisurewear and high street fashions, the textiles
and clothing industry is Bangladesh‘s biggest export earner with over USD 9.3bn of exports
in 2007. Their factories design and produce for the world‘s leading brands and retailers. A
good number of reasons are mentionable behind the growth of this sector are lower cost but

Credit Rating & Industry Analysis of Bangladesh Page 35


quality products, on time delivery, skilled labor, training and technical development facilities
that support the industry etc.

2.9.6 ICT and business services

Businesses ranging from inbound call centers to the latest in Web 2.0 software development
can be successfully operated in Bangladesh. Widespread use of English helps to make
Bangladesh a fast emerging option for the global business services industry.

2.9.7 Pharmaceuticals and life sciences

Pharmaceutical companies worldwide can benefit from setting up a facility in Bangladesh.


The country has tremendous potential to build a pharmaceuticals and life sciences workforce
for international companies. Bangladesh is developing a strong manufacturing and
technically experienced industrial base with growth in excess of 10% most years.

Thanks to the country‘s quality of its tertiary education, the scientific talent pool is not only
plentiful but also offers excellent cost/quality opportunities. Bangladesh also offers
significant potential for R&D, contract research outsourcing (CRO) and clinical trials
development.

2.9.8 Agribusiness

Over 90 varieties of vegetable are grown in Bangladesh, yet for such a fertile land there are
huge gaps in local resources and under-utilization of the country‘s agricultural capacity. This
presents many opportunities for investors seeking to export agricultural products, or to meet
the rapidly growing local demand.

2.9.9 Leather products

Bangladesh has a long established tanning industry that already produces around 2-3% of the
world‘s leather from a ready supply of raw materials. Bangladesh is therefore an established
and attractive location to source and outsource the manufacture of finished leather products.
Three key enabling business factors are:

 Attractive export incentives


 Tariff and quota free access to major markets such as the EU
 A skills pool and rural/industrial locations to support foreign investors

Credit Rating & Industry Analysis of Bangladesh Page 36


2.9.10 Rating Methodology of CRAB for Corporate

Industry Risk Industry Risk

Analysis Analysis

Business Risk Business Risk

Analysis Analysis

Corporate

Operating Rating Operating

Environment Environment

Strategy and Strategy and

Financial Policies Financial Policies

Security Risk Generic Rating Security Risk

Analysis Factors Analysis

2.9.11 Impact of Credit Rating on Corporate Sector

Rating assesses the level to which an organization accepts and follows the codes and
guidelines of corporate governance practices. It is evaluated from the system of distribution
of rights and responsibilities among different participants in the organization such as the
board, management, shareholders and other financial stakeholders, and the rules and
procedures have lay down and followed for making decisions on corporate affairs. Credit
rating is not mandatory under Basel II. However banks are likely to save capital if they get
their counterparties/ loan portfolios rated. If a bank chooses to keep some of its clients/ loans
unrated, it may have to provide a risk weighted of 125% for credit risk on such loans. That is
why banks push their clients to be rated by credit rating agencies. For the same reason credit
rating agencies reach corporations or other business organizations through their banks.

Credit Rating & Industry Analysis of Bangladesh Page 37


CRAB‘s corporate rating methodology is developed for analysis of non-financial
organizations operating in manufacturing, assembling, service sector etc. The generic factors
are common for all entities/ issuers, while criterion specific for different industries are used
for rating. The criterions used for corporate rating are Industry Risk Analysis, Business Risk
Analysis, Operating Environment, Strategy & Financial Policies, Security Risk Analysis,
Management Evaluation, Corporate Governance, Operating Performance, Financial Strength
and Relationship Risk Analysis. Among these Security Risk Analysis and Relationship Risk
Analysis are considered as generic risk factors, others are considers as corporate rating
factors. A chart of corporate rating factors and rating definition are presented in the appendix
part of the report.

Impact on Bangladesh Bank has made credit rating mandatory to all the business entities who
have bank loan exposure of BDT 10 million or more. The impacts of credit rating on the
corporate sector of our country are as following-

 Credit rating work as a reward for managing budget and finances responsibly. This
qualifies a company for the best credit offers, including low interest. Good credit
ratings allow the companies to easily borrow money from financial institutions or
public debt markets.
 Credit rating may help in stabilizing issuers; access to the market even when the
market price of listed equities is relatively unfavorable in the prevailing market
conditions.
 Credit ratings of Entities would grant upon the companies a greater confidence of the
market and enhance a greater access to the financing sources.
 Rating opinion would facilitate the investors to decide their portfolios by choosing
investment options in the market according to their profiles and preferences which
gradually help a corporation to raise capital from shareholders.
 A better rated company gets priority while applying for a loan to a bank or a financial
institution.
 Pricing of fresh loans supposed to be effected by the rating of the borrower. Higher
rated companies in particular will benefit from this.
 Good credit rating qualifies for insurance at preferred rates.
 Good credit rating makes an organization look more attractive to employers as well.

Credit Rating & Industry Analysis of Bangladesh Page 38


 Credit rating would also be relevant for surveillance and monitoring, internal MIS and
assessing the aggregate risk profile. It is also relevant for portfolio level analysis.
 Credit ratings may facilitate the process of issuing and purchasing bonds and other
debt issues by providing an efficient, widely recognized, and long-standing measure
of relative credit risk. Investors
 Other market participants may use the ratings as a screening device to match the
relative credit risk of an issuer or individual debt issue with their own risk tolerance or
credit risk guidelines in making investment and business decisions.

2.10 Debt Instrument


CRAB ratings of debt instruments assess the likelihood of timely repayment of principal and
payment of interest over the term to maturity of such debts, as per terms of a contract with
specific reference to the instrument being rated. A missed or delayed payment by an issuer in
breach of the agreed terms of the issue is considered as default. The rating is based on an
objective analysis of the information and clarifications obtained from the Issuer, as also other
sources considered reliable.
2.11 Structured Finance Rating
Structured Finance Rating inducted under this category will be asset backed securitization,
mortgage backed securitization, future flow transaction etc. Structured Finance ratings are
opinions on the likelihood of the concerned structured instrument servicing its debt
obligations in accordance with the terms. An SFR, which is generally different from the
corporate credit rating of the originator, is based on the risk assessment of the individual
components of the structured instrument:
 Assessment of issuer and/or originator/servicer
 Legal issues and documentation
 Originations, underwriting criteria and portfolio servicing
 Historical portfolio performance
 Portfolio characteristics and concentrations
 Obligor characteristics and concentrations
 Loan and lease features
 Manufacturer/vendor concentration
 Derivation of credit enhancement
 Cash flow analysis

Credit Rating & Industry Analysis of Bangladesh Page 39


2.12 Services under BASEL II
Bangladesh Bank (BB) issued new guidelines on capital adequacy for Banks under the
implementation process of Basel II framework. Under the guidelines, Banks require to link
the minimum size of their capital to the credit risk in their portfolios. So far Banks were
calculating required capital as proportion of the entire loan portfolio, regardless of the degree
of credit risk. To determine credit risk in their loan portfolios, banks will need to use credit
ratings assigned by approved External Credit Assessment Institutions (ECAIs) such as
CRAB.

2.12.1 What is Basel II


Basel II is recommendatory framework for banking supervision, issued by the Basel
Committee on Banking Supervision in 2004. The objective of Basel II is to bring about
international convergence of capital measurement and standards in the banking system. BB,
in December 2008, issued guidelines on the New Capital Adequacy Framework (BRPD
Circular 09, dated 31.12.08) to banks operating in Bangladesh, based on the Basel II
framework. These guidelines inform that BB suggests implementation of Basel II with the
following approaches:
i. Standardized approach for calculating RWA against credit risk
ii. Standardized approach for calculating RWA against Market Risk; and
iii. Basic indicator approach for calculating RWA against Operational Risk
Under standardized approach for measuring credit risks, the risk grades are determined on the
basis of ratings assigned by ECAIs.
2.12.2 Basel II Accord

Understanding Basel II accord

The world financial market is an extremely complex system that involves many different
participants from local banks to the central banks of each nation and even the investor. Due to
its importance on the global economy and our everyday lives it is vital that it is functioning
properly.
One tool that helps the financial markets run smoothly is a set of international banking
agreements called the Basel Accords. These accords coordinate the regulation of global
banks, and are "an international framework for internationally active banks". The accords are
obscure to people outside banking, but they are the backbone of the financial system; the

Credit Rating & Industry Analysis of Bangladesh Page 40


Basel Accords were created to guard against financial shocks, which is when a faltering
capital market hurts the real economy, as opposed to a mere disturbance.

Basel II is recommendatory framework for banking supervision, issued by the Basel


Committee on Banking Supervision in June 2004. The objective of Basel II is to bring about
international convergence of capital measurement and standards in the banking system. The
Basel Committee members who finalized the provisions are primarily representatives from
the G10 countries, but several countries that are not represented on the committee have also
stated their intend to adopt this framework.
Basel II is the second accord of the Basel Committee on Bank Supervision's
recommendations, and unlike the first accord, Basel I, where focus was mainly on credit risk,
the purpose of Basel II was to create standards and regulations on how much capital financial
institutions must have put aside. Banks need to put aside capital to reduce the risks associated
with its investing and lending practices
2.12.3 Basel Committee

The Basel Committee on Banking Supervision (BCBS) is a committee of banking


supervisory authorities that was established by the central bank governors of the Group of
Ten countries in 1974. It provides a forum for regular cooperation on banking supervisory
matters. Its objective is to enhance understanding of key supervisory issues and improve the
quality of banking supervision worldwide. The Committee also frames guidelines and
standards in different areas - some of the better known among them are the international
standards on capital adequacy, the Core Principles for Effective Banking Supervision and the
Concordat on cross-border banking supervision. The Basel Committee formulates broad
supervisory standards and guidelines and recommends statements of best practice in banking
supervision (see bank regulation or "Basel III Accord", for example) in the expectation that
member authorities and other nations' authorities will take steps to implement them through
their own national systems, whether in statutory form or otherwise.
2.12.4 Basel II in Bangladesh
Bangladesh Bank in December 2008, issued guidelines on the New Capital Adequacy
Framework (BRPD Circular 09) for banks operating in Bangladesh, based on the Basel II
framework. These guidelines inform that BB suggests implementation of Basel II with the
following approaches

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 Standardized approach for calculating Risk Weighted Amount (RWA) against credit
risk
 Standardized approach for calculating RWA against Market Risk

Basic indicator approach for calculating RWA against Operational Risk

Basel II is implemented from January 2009. In this regard a quantitative impact study (QIS)
to assess the preparedness for implementing Basel II as well as the bank‘s view on the
optional approaches for calculating Minimum Capital Requirement (MCR) as stated in Basel
II was carried out in April-May 2007. Study & subsequent discussion with few related banks
revealed that bankers should be more acquainted with the New Capital Accord (Basel-II). To
address this challenge capacity building of concerned implementing & supervisory officials
were given first priority in the Action Plan/Roadmap.
Under standardized approach for measuring credit risks, the risk grades are determined on the
basis of ratings assigned by External Credit Assessment Institutions (ECAIs).

Table 1: Risk weights of Corporate Claims under Basel II

Bangladesh Equivalent CRAB Rating Risk


Bank Rating Weight (%)
Claims on Grade
Corporate 1 AAA 20
(Excluding equity 2 50
exposure) 3, 4 , 100
5, 6 150
CC, C, D
Unrated 125
Source: CRAB brochure. Credit Rating Agency of Bangladesh Limited (CRAB)

2.13 Bank Loan Rating


CRAB offers Bank Loan Ratings to various types of facilities provided by banks, such as
working capital demand loans, cash credit, project loans, loans for general corporate
purposes, and non-fund-based facilities. Bank loan ratings indicate the degree of risk with
regard to timely payment of interest and principal on the facility being rated.

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The Bank Loan Rating service from CRAB entails evaluating the capability of an issuer
(borrower of a bank) to timely meet its debt obligations against a specific line of credit, in the
light of the relevant terms, conditions and covenants. CRAB considers all relevant factors
that have a bearing on the future cash generation and debt servicing ability of the issuer. The
rating methodology and scale used are similar to that used for Debt Instrument Rating.

2.14 Bank Client Rating


CRAB also offers entity ratings of different companies. CRAB has conducted ratings of
companies of different industries, including textile, telecom, engineering, agro processing,
power, manufacturing, and service sector. The rating methodology and scale used are similar
to that used for Corporate Rating.
2.15 Special Offer for Corporate needing this service
CRAB offer that Corporate would reach an arrangement with CRAB for rating of the
companies and their bank exposures. Under such arrangement Corporate will have the
following privileges.
 Assist Corporate in selecting the Companies under the Group for rating
 CRAB would offer special rates for rating of more than one Company and/or
exposure
 CRAB would arrange programs for the officials of Companies for familiarization of
rating
 CRAB would offer special privileges to all future rating requirements of the
Corporate, i.e. IPO, Debenture, Bonds etc.
 CRAB professionals would assist Corporate in providing information

2.16 Other Rating Services


2.16.1 Mutual Funds Schemes Rating
Mutual Funds Schemes Rating is designed to provide investors, intermediaries and Fund
Sponsors/Asset Management Companies with an Independent opinion on the performance
record and risks associated with various Mutual Fund Schemes. Funds ratings incorporate
various qualitative and quantitative factors affecting a fund's portfolio. Such analyses focus
on the resilience of portfolio companies to economic changes, assessing asset quality,
portfolio diversification and performance, and liquidity management.

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2.16.2 Corporate Governance and Stakeholder Value Addition Rating
Such rating assesses the level to which an organization accepts and follows the codes and
guidelines of corporate governance practices. It is evaluated from the system of distribution
of rights and responsibilities among different participants in the organization such as the
board, management, shareholders and other financial stakeholders, and the rules and
procedures lay down and followed for making decisions on corporate affairs.

2.16.3 Micro Finance Capacity Rating


Micro Finance Capacity Assessment rating is intended as a service to lenders by providing
informed opinion on the credit worthiness of the MFIs, This would facilitate flow of funds to
MFIs by providing detailed information and analysis on the programs and performance of the
organization. The rating would also provide suggestions for improvements in MFIs'
performance strength facilitating the ability of more efficient utilization of funds.

2.16.4 Entity Rating


Entity ratings are a measure of a company's intrinsic ability and overall capacity for timely
repayment of its financial obligations. These ratings may be required for any regulatory
compliance or sought by companies to enhance credit, corporate governance, and
transparency. These ratings are useful for benchmarking a company against its peers,
enhancing investors' confidence, market profiling, reducing time for future debt ratings,
enhancing a company's standing for counter party risk purposes and facilitating credit
evaluation for Bank borrowings and Bank credit lines.
2.16.5 Project Finance
Credit rating of Project Finance provides opinion on the types of risks associated with the
project and the relative ability of the project and its sponsors/executing agency to service the
financial obligations. These ratings are useful for the project sponsors in raising funds, and
for the lenders in designing and pricing their funds.

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2.17 Other Services
2.17.1 Grading Service
CRAB is equipped to offer specialized evaluation methodologies addressing exclusive and
area specific requirements under the umbrella of Grading services. The services are meant for
evaluation of different activities and entities belonging to multifaceted industries. CRAB's
grading service is designed to provide an objective, credible and independent opinion on the
quality of entities being examined with specific reference to parameters and issues unique to
the sector/sub-sector. Construction and real-estate development activities, hospitals and
diagnostic services are examples of such sector/subsectors. CRAB intends to establish
strategic association with reputable and specialized bodies associated with the sector/sub-
sector to develop and offer specialized grading products. The services include:
A. Corporate Governance & Stakeholders Value Addition Grading
B. Real Estate Developers Grading
C. Health Care Institutions Grading
D. NGO Social Impacts Grading
E. Educational Institutions Quality Grading
F. Other Grading Services

2.17.2 Advisory Service


The Advisory & Consultancy Services will offer wide-ranging management advisory
services, which include client specific need-based service in the following areas for banks,
financial institutions, corporate and other core sectors:
A. strategic counseling
B. restructuring solutions
C. financial feasibility
D. financial structuring/modeling
E. studies in different areas
F. credit risk management services for banks and other lenders
G. Project design and feasibility reports etc.
CRAB also offers advisory/consulting services to clients who are seeking to be more
competitive in their operating spheres. Such advisory services will be useful for a variety of
clients - corporate entities, regulatory authorities, banks/financial service organizations,

Credit Rating & Industry Analysis of Bangladesh Page 45


industry associations, local governments, government organizations, and multi-lateral
agencies, through selective tie-ups with reputed organizations having expertise in specific
sectors.

2.17.3 Information Service


CRAB Information Service focuses on providing authentic data and value-added products
used by intermediaries, financial institutions, banks, asset managers, institutional and
individual investors, and others. The service includes sector/industry specific
studies/publications and mandate-based studies (customized research).

Credit Rating & Industry Analysis of Bangladesh Page 46


Part-3
Rating Process of CRAB

Credit Rating & Industry Analysis of Bangladesh Page 47


Rating Process of CRAB

Rating is an interactive process with a prospective approach. It involves a series of steps. The
main steps are described as follows:

A) Rating Request: Ratings in CRAB are usually initiated on formal request (or Mandate)
from the prospective Issuer. An undertaking is also obtained on a Taka 150 non-judicial
Stamp Paper before commencement of a Rating assignment; which spells out the terms
and conditions of the engagement of credit rating agency.
B) Team: The Rating team usually comprises two members. The composition of the team
is based on the expertise and skills required for evaluating the business of the Issuer. The
team is usually led by the lead analyst with adequate knowledge of the relevant
instrument to be Rated.

C) Role of the Lead Analyst: The lead analyst shall arrange to finalize the Rating report
and send the same to the Rating Committee members. The lead analyst shall arrange to
make a presentation before the Rating Committee. The lead analyst will make sure that all
the relevant and material issues that may have an impact on the credit quality of the issuer
(including, but not limited to those which are related to the program being Rated) are
presented before the Rating Committee for discussion. The lead analyst will ensure
communication of the Rating decision to the Issuer and initiate all the necessary actions
consequent to the reaction of the issuer depending on the circumstances.

D) Information Requirements: Issuers are provided with a list of information requirements


and broad framework for discussions. These requirements are derived from the
experience of the Issuers business and broadly conform to all the aspects, which have a
bearing on the Rating.

E) Secondary Information: CRAB draws on the secondary sources of information


including its own in-house research and information obtained through meetings with the
Issuers‘ bankers, auditors, customers and suppliers among many other relevant market
participants. CRAB also has a panel of industry experts who provide guidance on
specific issues to the Rating team. The secondary sources generally provide data and

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trends including changes in industry structure, sector outlook, global trends and
government policies, etc. for the industry.

F) Management Meetings and plant visits: Rating involves assessment of number of


qualitative factors with a view to estimate the future earnings prospects of the Issuer. This
requires intensive interactions with the Issuers‘ management specifically with a view to
understanding the business plans, future outlook, competitive position and funding
policies, etc.

G) Other Meetings: The CRAB analyst team may also decide to meet the auditors
(accounting policies followed, quality of internal controls, standard of disclosures, etc.),
bankers / lenders (relationship, reputation, dealings in the past in respect of timeliness of
servicing obligations) lawyers (if there are major litigations pending which may have
serious impact on credit quality), trade union leaders (if industrial relations is a sensitive
issue), key functional executives as well as a few investors, customers and suppliers,
depending upon the circumstances to get a direct feedback from different stakeholder.

H) Meeting with the Issuers’ CEO /CFO: This would be a very important meeting
(usually, the last meeting) when the Rating team would discuss all the critical issues /
findings that may impact the Rating decision with the CEO / CFO of the Issuer (in the
absence of CEO / CFO, with a senior executive nominated by the Issuer for this purpose).

I) Internal Review Committee Meeting: Once the draft report is prepared by the Analysts
team, it is placed before the Internal Review Committee Meeting. The committee
comprise of senior analysts. The committee reviews the draft rating report and analysis
made by the analysts. Committee also reviews the due diligence, documents, meetings,
site visits etc.

J) Rating Committee Meeting: The authority for assigning Ratings is vested in the Rating
Committee of CRAB. The Rating reports are sent by the analyst team in advance to the
Rating Committee members. A presentation about the Issuers business and the
management is made by the Rating team to the Rating Committee at the meeting. All the
key issues are identified and discussed at length during the meetings and all relevant
issues, which influence the Rating, are considered. The differences if any arise during the

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discussion are taken note of. Finally, a Rating is assigned either by a consensus or by
majority votes.

K) Surveillance: It is obligatory on the part of CRAB to monitor Accepted Ratings (including


the Ratings treated as Deemed Acceptance) over the tenure of the Rated instrument or till
any amount is outstanding under the program(s) Rated. The Issuer is bound by the
agreement to provide information to CRAB to facilitate such monitoring. In case the Issuer
do not co-operate by way of providing information, etc, for the purpose of surveillance,
CRAB may on its own carry out the surveillance on best efforts basis based on the available
information and possible interactions after giving the Issuer adequate notice requesting him
to co-operate. The Ratings are generally reviewed every year, unless the circumstances of
the case warrant an earlier review due to changes in circumstances or major developments
that were not anticipated / factored in the Rating decision. The Ratings may be Upgraded,
Downgraded or retained after the surveillance. The CEO, at his sole discretion, may give
one opportunity to the Issuer to represent his case if he is not satisfied with the Rating
decision after the surveillance process. However, the Issuer would not have any option of
not accepting the Rating after the surveillance.

Issuer mandate rating Analysis & evaluation by Appeal by issuer &


assignment to CRAB CRAB analysts reappraisal (if appropriate)

Primary discussion between Rating team presents Announcement of rating


issuer & rating team of CRAB primary rating report to
internal committee.

Issuer prepares & submits Publication of Credit analysis


required data requested by Rating Committee meeting report
rating team

Additional information Ongoing surveillance/ formal


Notification to issuer annual reviews
gathering, visits & meetings
with issuer & management

Figure 1: Rating Process of CRAB

Source: CRAB brochure, Credit Rating Agency of Bangladesh Limited (CRAB)

Credit Rating & Industry Analysis of Bangladesh Page 50


Part – 4
Industry Analysis According to CRAB & CRISL Rating

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Industry Analysis According to CRAB & CRISL Rating:
I have done a comprehensive analysis on 30 industries in Bangladesh. As we have already
known that credit rating gives us an overall idea of the company and also the credit
worthiness. So, I have considered all valid rating of companies from CRAB & CRISL.
4.1 Analysis Methodology:
I have distinguished these companies into 30 different industries. Then I have compared their
rating according to weighted average methodology. As CRAB & CRISL has different rating
criteria, so I have given weight to each of the rating. This weight helped me compare
CRAB‘s and CRISL‘s ratings. The weights are as follows:

CRAB CRISL
Rating Definition Value Rating Definition Value
Extremely Strong Capacity &
AAA
Highest Quality 10 AAA Highest Safety 10
Very Strong Capacity & Very High
AA1, AA2, AA3
Quality 9 AA+, AA, AA- High Safety 9
A1, A2, A3 Strong Capacity & High Quality 8 A+, A, A- Adequate Safety 8
Adequate Capacity & Medium
BBB1, BBB2, BBB3
Quality 7 BBB+, BBB, BBB- Moderate Safety 7
Inadequate Capacity &
BB1, BB2, BB3
Substantial Credit Risk 6 BB+, BB, BB- Inadequate Safety 6
B1, B2, B3 Weak Capacity & High Credit Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
As AAA is the highest rating for both CRAB & CRISL, so I have given 10 weight to this
rating notch. Then I have given 9 weight to AA rating category for both rating company.
Actually these weights are representing each of the rating. As I have done the analysis on MS
Excel, I must need the numerical value for each of the rating to compare the ratings. Thus 4
indicates CCC category and so on you can see.
I have counted the long-term credit ratings, and distributed to each category. The number of
ratings were totaled and matched with the number of ratings done by the rating companies.
For CRISL there are some ratings for small and medium enterprise (i.e: CRISL-SME 1,
CRISL-SME 2, CRISL-SME 3 etc.) which are not considered in my analysis part. Rest of all
long-term rating has been considered in my analysis. After counting and distributing each of
rating, I have done the weighted average for these ratings for both of the rating companies.
Then I have compared the weighted average for each of the industry for my analysis.
Now a comprehensive analysis part will be described for all the industries I have analyzed.

Credit Rating & Industry Analysis of Bangladesh Page 52


4.2 Industries:
I have analyzed 30 industries in Bangladesh. I have excluded over 80 industries from my
analysis, as there were lack of information. There were some industries, in which CRAB has
done some ratings but CRISL didn‘t and vice versa. There were also some industries where
the rated companies were very few. So, I have excluded all of these industries from my
analysis. Then finally I got 30 industries. The industries are as follows:
S/L ALPHABET
No: WISE Industries
1 A Accessories
2 Agro Inputs & Agriculture
3 Automobiles & Automotives
4 B Banks
5 Bricks
6 C Cement
7 E Electronics
8 Engineering & Construction
9 F Financial Institutions
10 Fishery
11 Food & Allied
12 Fuel & Power
13 H Hospital & Healthcare
14 Hotel & Hospitality
15 J Jute
16 Life Insurance
17 M Miscellaneous
18 N Non-Life Insurance
19 P Packaging
20 Paper & Printing
21 Pharmaceuticals
22 Plastic
23 Polymers
24 R Real Estate
25 RMG
26 S Ship Breaking
27 Steel
28 T Telecommunication
29 Textile
30 Trading

Credit Rating & Industry Analysis of Bangladesh Page 53


4.3 Industry Analysis:
Here I will describe each of the 30 industries according to my analysis. There should be 5
major parts of my industry analysis. Each of this industry analysis will include:
a. Overall Industry Scenario in Bangladesh
b. Comparison Graphs
c. My Findings
d. Interpretation According to My Analysis
e. Recommendations

Credit Rating & Industry Analysis of Bangladesh Page 54


1. ACCESSORIES
Garments accessories here in after referred as accessories business has a wide business
opportunity in Bangladesh. As Garments industry is one of the leading industries in
Bangladesh. A lion share of foreign currency is earned from this sector. Garments industry is
nothing without these accessories companies. The products of these companies are:
1. Button
2. Zipper
3. Ribbon
4. Polybag & Packaging
5. Label or Tag etc.

These companies sale products to the garments factories and also export globally. So, their
market opportunity and customer range is huge. In Bangladesh the labor cost is lower, so they
can produces these goods at a low cost than other countries. The major buyers are USA,
Canada, and other European countries.
Analysis:
According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 1.1: Rating Acquired

Graph 1.2: Rating Average

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In above two graphs we can see that, according to CRAB rating 1 company has got A, 2
companies has got BBB, 3 companies has got BB and 1 company got B.

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 6.43 AA+, AA, AA- High Safety 9 7.33
Strong Capacity & High Adequate
A1, A2, A3
Quality 8 1 A+, A, A-
Safety 8 2
Adequate Capacity & Moderate
BBB1, BBB2, BBB3
Medium Quality 7 2 BBB+, BBB, BBB-
Safety 7 4
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 3 BB+, BB, BB-
Safety 6
Weak Capacity & High Credit
B1, B2, B3
Risk 5 1 B+, B, B- Risky 5
Very Weak Capacity & Very
CCC1, CCC2, CCC3
High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total Total
7 6

According to CRISL rating 2 companies has got A and 4 companies has got BBB. If we sum
up all the ratings of CRAB & CRISL, then we can find that:
3 companies got A, 6 Companies got BBB, 3 companies got BB and 1 company got B rating
range. By using weighted average method we can get 6.43 from CRAB and 7.33 average
rates from CRISL. According to my industry ranking analysis this industry in on 26 (twenty
sixth) rank. From these averages we can say that most of these industries have adequate
financial capacity with adequate safety of their return. Though accessories industry position
is now above average, but it has a huge opportunity for growth. The main obstacles for this
market are:

1. Dollar rate fluctuation


2. Increased price of raw materials
3. Labor strike
4. Failure to meet the buyer‘s lead time
These are the major problems faced by the industry. If the companies can overcome these
problems, I believe accessories business can grow and have a better bright future in
Bangladesh.

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2. AGRO INPUTS & AGRICULTURE

Bangladesh has a primarily agrarian economy. Agriculture is the single largest producing
sector of the economy since it comprises about 18.6% (data released on November, 2010) of
the country's GDP and employs around 45% of the total labor force. The performance of this
sector has an overwhelming impact on major macroeconomic objectives like employment
generation, poverty alleviation, human resources development and food security.

The main products of this industry are:

1. Crops
2. Poultry
3. Meat Products

On the basis of this industry huge number of companies has been grown up. They are
meeting national demand as well as international.

A plurality of Bangladeshis earns their living from agriculture. Although rice and jute are the
primary crops, wheat is assuming greater importance. Tea is grown in the northeast. Because
of Bangladesh's fertile soil and normally ample water supply, rice can be grown and
harvested three times a year in many areas. Due to a number of factors, Bangladesh's labor-
intensive agriculture has achieved steady increases in food grain production despite the often
unfavorable weather conditions. These include better flood control and irrigation, a generally
more efficient use of fertilizers, and the establishment of better distribution and rural credit
networks.

Analysis:
According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 2.1: Rating Acquired

Credit Rating & Industry Analysis of Bangladesh Page 57


Graph 2.2: Rating Average

In above two graphs we can see that, according to CRAB rating 1 company has got AA, 13
companies has got A, 26 companies has got BBB, 26 companies has got BB and 3 companies
got B.

According to CRISL rating 1 company has got AA, 2 companies has got A and 3 companies
has got BBB. If we sum up all the ratings of CRAB & CRISL, then we can find that:

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity CRAB CRISL
AAA
& Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 1 6.75 AA+, AA, AA- High Safety 9 1 7.67
Strong Capacity & High Adequate
A1, A2, A3
Quality 8 13 A+, A, A-
Safety 8 2
Adequate Capacity & Moderate
BBB1, BBB2, BBB3
Medium Quality 7 26 BBB+, BBB, BBB-
Safety 7 3
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 26 BB+, BB, BB-
Safety 6
Weak Capacity & High
B1, B2, B3
Credit Risk 5 3 B+, B, B- Risky 5
Very Weak Capacity & Very
CCC1, CCC2, CCC3
High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 69 Total 6

2 companies got AA, 15 companies got A, 29 Companies got BBB, 26 companies got BB
and 3 companies got B rating range. By using weighted average method we can get 6.75 from
CRAB and 7.67 average rates from CRISL. According to my industry ranking analysis this
industry in on 21 (twenty first) rank. From these averages we can say that most the
companies of this industry have adequate financial capacity with adequate safety of their
return. But these averages say us that, the financial & business position is average not

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outstanding. According to our geographical position and climate our agriculture business
should be very good. But according to the current position the industry averages are not up to
the mark.

There are also some problems faced by the companies in this industry. Those are:

1. Population pressure continues to place a severe burden on productive capacity


2. Creating a food deficit, foreign assistance and commercial imports fill the gap.
3. Natural Disaster
4. Increased price of Fertilizer, Insecticides & Chemicals.

Underemployment remains a serious problem, and a growing concern for Bangladesh's


agricultural sector will be its ability to absorb additional manpower. Finding alternative
sources of employment will continue to be a daunting problem for future governments,
particularly with the increasing numbers of landless peasants who already account for about
half the rural labor force. So, our government should focus on this industry, because it can be
the main source of earning foreign currency as well as meet the local demand.

Credit Rating & Industry Analysis of Bangladesh Page 59


3. AUTOMOBILES & AUTOMOTIVES

The automobile industry is the selling of cars as a whole; the automotive industry produces
the cars and parts, and then fixes them when they are broken.

The automotive industry in Bangladesh currently manufactures auto rickshaws and a


locally designed three-wheeler motor vehicle, Mishuk, utilizing an engine from Honda. The
country has a few large car plants which assemble the Mitsubishi Pajero, Hino bus, and also
the Tata bus and motorcycles.

In 2009, the Malaysian Agate group proposed to build a car manufacturing plant in
Bangladesh in cooperation with Walton, which itself is preparing to produce motorcycles. In
the same year, car manufacturing company TagAZ announced that they would build their
third factory in Bangladesh, aiming for exporting. The plant is to be completed by 2012. In
February 2010, Japanese car manufacturer Mitsubishi officially proposed to the Bangladesh
government to manufacture the Pajero in collaboration with Pragoti Industries, with a goal of
production in 2011.

Mitsubishi is in talks to start producing the Pajero in Bangladesh. So, we can see that the
numbers are very few of companies in this industry. But the future is very bright because of
our:

1. Labor Force
2. Labor Skills
3. Land Availability

Credit Rating & Industry Analysis of Bangladesh Page 60


Analysis:
According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 3.1: Rating Acquired

Graph 3.2: Rating Average

In above two graphs we can see that, according to CRAB rating 1 company has got A and 1
company has got BBB.

According to CRISL rating 1 company has got AA and 3 companies have got BBB. If we
sum up all the ratings of CRAB & CRISL, then we can find that:

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 7.5 AA+, AA, AA- High Safety 9 1 7.5
Strong Capacity & High Adequate
A1, A2, A3
Quality 8 1 A+, A, A-
Safety 8
Adequate Capacity & Moderate
BBB1, BBB2, BBB3
Medium Quality 7 1 BBB+, BBB, BBB-
Safety 7 3
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 BB+, BB, BB-
Safety 6
Weak Capacity & High Credit
B1, B2, B3
Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very
CCC1, CCC2, CCC3
High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 2 Total 4

Credit Rating & Industry Analysis of Bangladesh Page 61


1 company got AA, 1 company got A and 4 Companies got BBB rating range. By using
weighted average method we can get 7.5 from CRAB and 7.5 average rates from CRISL.
According to my industry ranking analysis this industry in on 13 (thirteenth) rank.

The number of companies in this industry is very few. So, I didn‘t get enough population for
the analysis. Hence I have analyzed according to these companies and find out:

1. According to the number of companies, this industry has strong financial capacity
2. Market players are very few
3. Production cost is low and customer demand is huge
4. So the chances of future profitability and growth for this industry is huge

Bangladesh automobile industry is not a big industry and maximum automobile parts are
imported from other countries. Japan largest automobile corporation TOYOTA capture the
Bangladeshi automobile markets by their car and made by Japan, auto vehicle are more
popular in here. But recent time Bangladesh automobile industry is turning around, as a result
local and foreign investor are interest about this sector for investment.

Progoti is the only state own automobile company in Bangladesh and they made & repair
only government related automation product. Bangladesh machine tools Factory (BMTF) was
establish in February 11, 1979 and it is the commercial automobile assembly plant, maintain
by Bangladesh Army, especially for defense industry.
Walton & Aftab is the largest Bangladeshi private automobile company in Bangladesh.
Walton Company establish a large plant for motorcycle production, on the other hand Aftab
automobile is famous for bus accessories assembling.

Mitsubishi Pajero, Hino Bus, Tata bus/Truck, Proton automobile manufacturer company
already buildup their production assemble plant in Bangladesh and here is the important
news, near Dhaka, location name is Dolaikhal, is the largest automobile market in
Bangladesh for expire & new automobile parts.

We can say that this industry has been doing profit from years. But it is overlooked by our
government till now. Our government should allocate more budgets in this sector. This can be
one of the domestic economy changing industries in our country.

Credit Rating & Industry Analysis of Bangladesh Page 62


4. BANKS
Bangladesh is a third world country with an under developed banking system, particularly in
terms of the services and customer care provided by the government run banks. Recently the
private banks are trying to imitate the banking structure of the more developed countries, but
this attempt is often foiled by inexpert or politically motivated government policies executed
by the central bank of Bangladesh, Bangladesh Bank. The outcome is a banking system
fostering corruption and illegal monetary activities/laundering etc. by the politically powerful
and criminals, while at the same time making the attainment of services or the performance of
international transactions difficult for the ordinary citizens, students studying abroad or
through distance learning, general customers etc.
The banking industry in Bangladesh has flourished over the years, making double-digit profit
percentages, sustaining growth and surviving cut-throat competition while providing
attractive returns to shareholders. However, the greed for more without befitting platform and
fundamentals brings its own challenges and questions in people's minds.
Services of Bangladeshi banks are:
1. Deposits
2. Loans
3. Credit Cards
4. Internet Banking
5. Mobile Banking etc.
Analysis:
According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 4.1: Rating Acquired

Credit Rating & Industry Analysis of Bangladesh Page 63


Graph 4.2: Rating Average

In above two graphs we can see that, according to CRAB rating 1 Bank has got AAA, 17
Banks have got AA, 5 Banks have got A and 1 Bank has got BBB.

According to CRISL rating 3 Banks have got AAA, 7 Banks have got AA and 1 Bank have
got A. Sonali Bank Limited and Agrani Bank Limited also got Additional A. If we sum up all
the ratings of CRAB & CRISL, then we can find that:

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & CRAB CRISL
AAA 10 AAA Highest Safety 10
Highest Quality 1 Average 3 Average
Very Strong Capacity & Very High
AA1, AA2, AA3
Quality 9 17 8.75 AA+, AA, AA- High Safety 9 7 9
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 5 A+, A, A-
Safety 8 3
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 1 BBB+, BBB, BBB-
Safety 7
Inadequate Capacity & Substantial Inadequate
BB1, BB2, BB3
Credit Risk 6 BB+, BB, BB-
Safety 6
B1, B2, B3 Weak Capacity & High Credit Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 24 Total 13

4 Banks have got AAA, 24 Banks got AA, 8 Banks got A and 1 Bank got BBB rating range.
By using weighted average method we can get 8.75 from CRAB and 9 average rates from
CRISL. According to my industry ranking analysis this industry in on 2 (second) rank. These
weighted averages are very satisfactory. We can see that most of the banks are very financial
sound. These banks have very strong capacity to meet financial commitments, maintains very
high quality, with very low credit risk. My analysis appropriately matched with the current
scenario of Bangladesh. We can see that this sector has consistently grown up. Now banks
are doing huge profit.

Credit Rating & Industry Analysis of Bangladesh Page 64


Banking sector of Bangladesh is one of the major sectors, which contributes significantly to
the national economy. The sector comprises a number of banks in various categories.
Considering ownership the sector can be classified in to four major categories - such as
Nationalized Commercial Banks (NCBs), Specialized Banks (SPBs), Private Commercial
Banks (PCBs), and Trans-National Banks (TNBs).
Economic development - of the country is executed by the contribution of various economic
sectors. Banking sector also has a contribution to the economic growth. In mid 80s Banking
and Insurance contributed 1.69% of GDP and gradually the figure was increasing. The
maximum contribution was 2.09% of GDP in the year 1993 and it was 2.00% in 1996-97
Average growth rate of this contribution was 1.51% of GDP, which shows a positive trend.
In case of profitability, i.e. amount of profit per Tk. 100 of asset. The ratio indicates the
effective utilization of assets. Performance of the organization can be expressed by this ratio.
Average profitability ratios for the various categories of banks during 1980 to 1995 were
exhibited in the table below:
Table 1: Profit Ratio for Various Banks
Banks Profit Ratio (%)
NCBs 0.08
SPBs -0.32
PCBs 0.13
TNBs 0.71
Over all 0.09
Source: Adopted from Internet
The performance of the banking sector in terms of net profit varies in various groups of bank.
The study revealed that in every aspect, TNBs had a commendable performance. But
comparing among other groups of banks (NCBs, SPBs, and PCBs), PCBs had preferred
achievement aiming profit. On the other hand Specialized Banks in Bangladesh had a very
poor performance. This meager activity affected the overall banking sector's performance.

Credit Rating & Industry Analysis of Bangladesh Page 65


5. BRICKS
In Bangladesh, bricks are the predominant building material in urban areas.
They have also become a significant building material in the rural areas. High prices
and/or scarcity of alternative building materials, such as stones, iron sheets,
wood, bamboo, and straw are very rapidly increasing the demand for bricks.
To meet the increasing demand, brickfields are mushrooming all over the
country with heavy concentrations on the outskirts of urban area. In
our c o u n t r y , there is 4500 brick manufacturing company
p r o d u c i n g a b o u t 9 billion bricks per year. The brickfields are situated all over the
Bangladesh (fig: 1.1)

Figure 5.1: Major concentrations of brick-fields in Bangladesh

Bangladesh has started making bricks using new technology, which cuts carbon emission
almost by half and creates scope for earning huge foreign currencies. Entrepreneurs and
financiers said Bangladesh will be able to sell per ton of saved carbon at $15 after June 2010.
Diamond Auto Bricks at Aduria Saughat in Narayanganj has set up such a brick kiln.

So, there will be also another opportunity for making more profits for the bricks companies.

Media reports that the Asian Development Bank (ADB) will provide $50 million in loan to
help improve the environment by financing more energy-efficient brick kilns in Bangladesh.
ADB approved the "Financing Brick Kiln Efficiency Improvement Project" on May 10, 2012.
Within the scope of the project, ADB will provide $50 million in local currency to the
Bangladesh Bank which will re-lend the funds through local financial institutions. These

Credit Rating & Industry Analysis of Bangladesh Page 66


financial institutions will subsequently provide loans to brick makers in order to upgrade their
existing kilns to less polluting and comparatively energy efficient kilns.

The local brick industries will appreciate the financial assistance as the demand for bricks are
increasing and the industry requires new technology and investment. The cost for production
of brick has been growing steadily due to increased prices of inputs for production. Brick
making has been dominated so far mainly by the 'seasonal' brick kilns in Bangladesh. Brick
burning technology in Bangladesh used to be based on so-called 'Bull's Trench Kiln' (BTK)
technology or some variation of it. This type of technology is over 150 years old and
exceedingly inefficient in terms of fuel usage. Although there are Fixed Chimney kilns
(FCK), Zigzag kilns, gas fired Hoffman kilns (HK) and Hybrid Hoffman kilns (HHK) to
produce bricks. One study reveals that in 2006, market share for different brick kilns in
Bangladesh was FCK-75.4 per cent, BTK-19.2 per cent, Zigzag kiln-4.8 per cent and HK-0.6
per cent.

Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 5.1: Rating Acquired

Graph 5.2: Rating Average

Credit Rating & Industry Analysis of Bangladesh Page 67


In above two graphs we can see that, according to CRAB rating 2 companies have got BBB.

According to CRISL rating 3 companies have got BBB. If we sum up all the ratings of CRAB
& CRISL, then we can find that:

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 7 AA+, AA, AA- High Safety 9 7
Strong Capacity & High
A1, A2, A3
Quality 8 A+, A, A- Adequate Safety 8
Adequate Capacity &
BBB1, BBB2, BBB3
Medium Quality 7 2 BBB+, BBB, BBB- Moderate Safety 7 3
Inadequate Capacity &
BB1, BB2, BB3
Substantial Credit Risk 6 BB+, BB, BB- Inadequate Safety 6
Weak Capacity & High Credit
B1, B2, B3
Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very
CCC1, CCC2, CCC3
High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 2 Total 3

5 companies have got BBB rating range. By using weighted average method we can get 7
from CRAB and 7 average rates from CRISL. BBB indicates that companies have adequate
financial capacity with moderate safety. We can also say that the qualitative factors for these
companies are quite satisfactory. According to my industry ranking analysis this industry in
on 22 (twenty second) rank.

Bangladesh is still grappling with problems like illegal brick kilns, use of firewood for brick
baking, brickfields on cropland and the loss of top soil and cutting of hills blamed on brick
manufacturing. The brick industries contribute in three major problems:

1. It is a major source of urban and now increasingly rural air pollution.


2. It contributes to the land degradation. and
3. It is a significant cause of deforestation.

As the companies are going to adopt eco-friendly technology, they‘ll be able to save more
energy and sell the carbons to other companies. It helps them to reduce cost and enhance the
profit. As the weighted average is 7 out of 10, we can say that this industry is doing well
enough in our country. But there are also so many scope of improving this sector.

Credit Rating & Industry Analysis of Bangladesh Page 68


6. CEMENT
Bangladesh cement industry is the 40th largest market in the world. Currently capacity of the
industry is about 20 mn tonnes (MT). Top 13 players are alone controlling over 78% of the
total industry capacity. However, the balance capacity still remains quite fragmented.
Currently, Heidelberg, Holcim and Lafarge are the leaders among multinational cement
manufacturers and Shah and Meghna are the leading domestic manufacturers. Shah cement is
the market leader with close to 14.20% of the market share, followed by Heidelberg with
about 9.30% of the market share. During the 2010, many small local manufacturers like
Premier, Seven Circle, Crown, Fresh and King cement increased their sales drastically riding
on their benefits of economies of scale, backward linkage and aggressive marketing effort.

In Bangladesh, cement consumers are categorized as follows:


1. Individual home makers (25%)
2. Real estate developers (35%)
3. Govt. organizations, i.e., LGED, RHW etc. (40%)

Graph 6.1: Consumption Per Capita

Cement consumption has steadily been rising. It is expected that cement companies will
enjoy a good growth of margin over the next 3 years. Because, in next couple of years when
large capacities are expected to come on-stream, pass through of input cost will be easier and
clinker (main raw material of cement) price is expected to remain stable at $53-$58.

Credit Rating & Industry Analysis of Bangladesh Page 69


Considering the Life cycle of the industry, currently cement industry of Bangladesh is in the
growth stage. Sales of cement are increasing due to an enormous demand for cement in both
the local and foreign markets. The industry realized about 30% and 21% growth in 2009 and
2010 respectively after suppressed demand from previous years.

Figure 6.1: Industry Stage

Industry expected demand growth is 20%-25% for the next three years.
Analysis:
According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 6.2: Rating Acquired

Graph 6.3: Rating Average

In above two graphs we can see that, according to CRAB rating 1 company has got AA and 3
companies has got A.

Credit Rating & Industry Analysis of Bangladesh Page 70


According to CRISL rating 2 companies have got A. If we sum up all the ratings of CRAB &
CRISL, then we can find that:

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very High
AA1, AA2, AA3
Quality 9 1 8.25 AA+, AA, AA- High Safety 9 8
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 3 A+, A, A-
Safety 8 2
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 BBB+, BBB, BBB-
Safety 7
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 BB+, BB, BB-
Safety 6
B1, B2, B3 Weak Capacity & High Credit Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 4 Total 2

1 company has got AA rating range and 5 companies have got A. By using weighted average
method we can get 8.25 from CRAB and 8 average rates from CRISL. According to my
industry ranking analysis this industry in on 3 (third) rank.

From these averages we can say that, current position of this industry is very good. As
Bangladesh is a developing country, lots of structures are under construction. So, the demand
of cement is very high. Bangladesh also has enough number of cement manufacturing
companies to meet this demand. Their production capacity is also huge.

Graph 6.4: Industry Demand & Production Scenario

As we have seen that this industry is in growth stage, there are lots of opportunities for this
industry to grow further. The cement industry is likely to maintain its current growth
momentum and continue growing at around 20% to 25% in the medium to long term.

Credit Rating & Industry Analysis of Bangladesh Page 71


Government initiatives in the infrastructure sector and the housing sector are likely to be the
main growth drivers. Hence it needs government support.
If the import duty structure of various cement products, e.g. finished cement, semi-finished
cement and basic raw materials for cement (25%, 12% and 7% respectively) continues i.e.
import duties is on favor of the local manufacturers and the construction sector remains
booming with smooth power supply than nothing to be surprised that cement industry will be
the most evolving industry in the next three to five years.

Credit Rating & Industry Analysis of Bangladesh Page 72


7. ELECTRONICS
The electronics industry in Bangladesh mostly produces consumer items. Home appliances
includes televisions, radios, DVDs and CD players, refrigerators, air conditioners, ovens,
electronic fans, blenders etc. are being assembled to a large extent. To ensure the
performance reliability, the key challenges in this sector are technical assistance and proper
technology orientation of the industry. Developing the significant capacity and skill in
assembly and manufacture of a wide range of electronic components and parts is crucial.
Bangladesh's experience in basic electronics spans over two decades. In recent years,
European and Asian electronic firms have established technical collaboration with their
Bangladeshi counterparts to produce some electronic goods at competitive prices. This has
tremendous potentiality for expansion.

 Manufacturing of semiconductors could be established as a standalone industry.


 Bangladesh is going to be one of the largest cell-phone markets in South Asia.
 The home appliance market in Bangladesh is growing rapidly.
 The labor-intensive nature of the electronic industry matches the ability of
Bangladesh to provide a high skilled labor source.

It is time that the government would introduce tax incentive for electronic industry of the
country. Bangladesh has gained the reputation of an exporting country of refrigerators and
motorcycles thanks to companies like Walton. Walton has given Bangladesh the name of an
exporting country as like Toyota and Tata helped branding Japan and India respectively in the
field of electronics. The government should impose high import duty on electronics products
which are now manufactured in Bangladesh and should reduce import duty on raw materials
to help local companies to sustain and compete in international market.
It indeed augurs well that after meeting the local demand Walton has begun going beyond
borders. The company has already exported its products to Asian, Middle East and African

Credit Rating & Industry Analysis of Bangladesh Page 73


countries. It also wants to export its products to France, Italy, Germany, Spain and other
European countries. Electronics industry has been included in the export item list and Walton
has made Bangladesh known to the world through exporting its products to different
countries. Walton brand televisions, fridges and motorcycles are being exported to Qatar,
Dubai, Abu Dhabi and Kuwait of Middle East, Ghana of Africa and India, Nepal and Bhutan
of South Asia. It has also formally launched the marketing activities of its products to the
USA and UK. Walton is going to manufacture some other electronics products at its own
factory in the country very soon.

Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 7.1: Rating Acquired

Graph 7.2: Rating Average

In above two graphs we can see that, according to CRAB rating 2 companies have got AA
and 1 company has got BBB.

According to CRISL rating 3 companies have got BBB. If we sum up all the ratings of CRAB
& CRISL, then we can find that:

Credit Rating & Industry Analysis of Bangladesh Page 74


Rating Definition Value Acquired Rating Definition Value Acquired
Extremely Strong Capacity & Highest CRAB CRISL
AAA
Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very High
AA1, AA2, AA3
Quality 9 2 8.33 AA+, AA, AA- High Safety 9 7
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 A+, A, A-
Safety 8
Moderate
BBB1, BBB2, BBB3 Adequate Capacity & Medium Quality 7 1 BBB+, BBB, BBB-
Safety 7 3
Inadequate Capacity & Substantial Inadequate
BB1, BB2, BB3
Credit Risk 6 BB+, BB, BB-
Safety 6
B1, B2, B3 Weak Capacity & High Credit Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 3 Total 3

2 companies have got AA rating range and 4 companies have got BBB. By using weighted
average method we can get 8.33 from CRAB and 7 average rates from CRISL. According to
my industry ranking analysis this industry in on 11 (eleventh) rank.

We can say from these averages that, electronic industry has strong growth future. The
companies of this industry have strong financial capacity and adequate safety. Their product
demand is huge and these companies are eligible to meet them. They have skilled labor force
and the quality of product is European standard.

Skilled, easily trainable and low-cost human resources are the main cost advantage of setting
up electronic industry in Bangladesh. Growing domestic demand and international market
access are some key attractive issues to the investors. In the economies like Malaysia,
Singapore, Korea and Thailand, electronics contribute a major portion in the GDP. They are
encouraging electronic industry to shift from low-end assembly operations with high import
content of inputs to upstream higher value-added activities.

The export item list should be diversified for the development of country‘s economy. The
electronics industry will go ahead side-by-side the export-oriented garment sector through
earning huge amount of foreign currency, contributing to national economy and creating
employment opportunity in the country. The government should consider restructuring the
current tariff regime. It is quite extraordinary that the existing duties are in favor of the
importers.

Credit Rating & Industry Analysis of Bangladesh Page 75


8. ENGINEERING & CONSTRUCTION

The construction industry of Bangladesh has improved substantially during the last twenty
years. About 10% of GDP of the country comes from this sector alone. It absorbs a very big
labor force as well as enhances big job opportunities for engineers, architects, managers,
foremen, supervisors, technicians, electricians, machine operators, drivers etc. At present this
is a booming industry and people engaged in this sector are earning a reasonable salary and
other benefits. And this is surprising to note that there is a dearth of trained personnel in this
sector, in our country.

Construction includes buildings of all types‘ i.e. high rise and low rise for accommodation of
people or providing space for commerce and industry, jetties in river or sea, bridges, air ports,
roads, highways etc. All structures are supposed to be built following designs and drawings
prepared by architects and foundation engineers, structural engineers, sanitary engineers,
mechanical, electrical and electronic engineers etc.

The design and drawings in the country are generally based on Code of Practice of USA, UK,
EU and BANGLADESH named as Bangladesh National Building Code (BNBC). The
construction activities are carried out as per specifications of the contract presently based on
Federation Internationale Des lngenieurs Conseils (FIDIC). Engineers of all advanced
countries of the world prepare design and drawings following relevant Codes of Practice and
these are being checked thoroughly before sending to sites for execution. During construction

Credit Rating & Industry Analysis of Bangladesh Page 76


I execution stage, drawings are followed thoroughly. Execution of the works is carried out by
the contractors under constant supervision of the engineers I architects of the owner
(employer) and the consultant. As all these stages are implemented under strict management;
accidents during construction are rear. Structures rarely collapse during construction or after
construction works are completed or at a later stage due to natural calamities e.g. earthquake,
tsunami, severe storm etc.

Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 8.1: Rating Acquired

Graph 8.2: Rating Average

In above two graphs we can see that, according to CRAB rating 2 companies have got AA, 3
companies got A, 10 companies got BBB and 5 companies has got BB.

According to CRISL rating 2 companies have got A and 2 companies have got BBB. If we
sum up all the ratings of CRAB & CRISL, then we can find that:

Credit Rating & Industry Analysis of Bangladesh Page 77


Rating Definition Value Acquired Rating Definition Value Acquired
Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very High
AA1, AA2, AA3
Quality 9 2 7.1 AA+, AA, AA- High Safety 9 7.5
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 3 A+, A, A-
Safety 8 2
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 10 BBB+, BBB, BBB-
Safety 7 2
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 5 BB+, BB, BB-
Safety 6
B1, B2, B3 Weak Capacity & High Credit Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 20 Total 4

2 companies have got AA rating range, 5 companies have got A, 12 companies have got BBB
and 5 companies got BB. By using weighted average method we can get 7.1 from CRAB and
7.5 average rates from CRISL. According to my industry ranking analysis this industry in on
18 (eighteenth) rank.
Most of the companies under this industry have adequate financial capacity but more
susceptible to adverse economic conditions or changing circumstances and has moderate
credit risk. Possess certain speculative characteristics.
So, we can say that this industry is growing in this country and have a very good future
prospect. Hence it needs government support to increase its profitability. Government should
decrease tax on importing high technology construction equipment and machineries. These
machineries can help the companies do their construction more easily and effectively. Our
structures can also be high technology supported and strong. The possibility of collapse for
earthquake will be reduced. Foreign investment will be increased.
There are also some major issues for which this industry is facing problems.

In our country various stages as explained above are not implemented properly. The
consultant or employer's engineers responsible for preparing designs and drawings do not
generally send drawings in time, there by delaying the project implementation. After
drawings are sent to sites, various mistakes are found on the drawings which are to be
corrected. Sometimes, drawings prepared by consultants I owner's representatives do not
match the real condition on site. These defects are being addressed subsequently causing
delay in implementation of the project. In many cases, decisions of the owners (employers)
are not received in time causing delays and pave ways to contractor's claims.

Credit Rating & Industry Analysis of Bangladesh Page 78


The contractors in our country generally do not like to work properly and interested to have
maximum profit neglecting maintenance of the quality of works. However, big contractors do
not come under this point. Good Real Estate Developers are also careful in maintaining
quality of works in building construction. Bangladesh Association of Construction Industry
(BAd), Real Estate & Housing Association of Bangladesh (REHAB) and Society for
Technological and Economic Advancement of Bangladesh (STEAB) trying to help the
Government in formulating laws in relation to construction sector improvement, preparation
of contract documents etc.

There have been many incidents/ accidents in our country during execution of construction
works or after completion of these works causing loss of life of the people and their property.
These occurred due to negligence of representatives of the contractor or engineers of other
associated agencies and come under human right violation. But a few people are punished for
their negligence. Various structures have collapsed due to construction defects and/ or design
defects or fire caused due to short circuit, killing many poor people and injuring a lot. But
very few people responsible were punished for their negligence of duties. We recently have
seen such a huge collapse of Rana Plaza at Savar. Over 1500 people had died there.

To solve these problems both companies and government should take some actions:

1. Design of foundations, shore protection, support etc. should be done properly through
mathematical analysis as well as following relevant Code of Practice.
2. Proper prop support should be provided by the contractor before concrete casting.
3. There should be training program for engineers and other technical personnel whether
in Government Departments, Semi-Government or Autonomous organizations or
private organizations, NGO's etc.
4. For accidents due to negligence, Government should be very strict and try those
people responsible and punish them through courts. However, harassment by police or
any other authority should be strictly controlled.

Engineering & construction industry will be growing very soon, if government can solve the
problems by taking actions. Now accidents have been the main obstacle for this industry. So
engineers must design faultless structure so that accidents can be reduced. Engineers also
should maintain good quality for everything in their structure.

Credit Rating & Industry Analysis of Bangladesh Page 79


9. FINANCIAL INSTITUTIONS

Non-banking financial institutions are governed by Bangladesh Bank (BB) in terms of the
provisions of the Financial institutions Act 1993. This Act delimits the scope of activities of
non-banking financial institutions. It provides for the regulatory steps which may be taken by
Bangladesh Bank, including powers to license and give directions to such companies in the
public interest, in the interest of monetary policy, in order to prevent the affairs of such
companies being conducted in a manner detrimental to the interest of the companies or
depositors, and to ensure their proper management.

There are some big Financial Institutions in our country:

1. Uttara Finance and Investment Limited


2. Delta Brac Housing Limited

3. Union Capital Limited


4. United Leasing Company
5. Prime Finance & Investment Limited
6. Premier Leasing & Finance Limited
7. National Housing Finance & Investments Limited
8. People‘s Leasing and Financial Services Limited
9. Midas Financing Limited Bangladesh
10. Lanka Bangla Finance Limited

There are some common operations of financial institutions:

1. Gives loans or advances for industry, commerce, agriculture or housing, or


2. Carries on business of the underwriting or acquisition of, or the investment or re-
investment in, shares, stock, bonds, debentures or debenture stock or securities or
marketable other securities issued by the Government or any statutory body, or
3. Carries business of hire purchase transactions including leasing of machinery or
equipment, or

Credit Rating & Industry Analysis of Bangladesh Page 80


4. Finances venture capital, and includes merchant bank, Investment Company, mutual
association, mutual company, leasing company or building society.

Non-bank financial institutions represent one of the most important parts of a financial
system. In Bangladesh, NBFIs are new in the financial system as compared to banking
financial institutions (BFIs). A total of 25 NBFIs are now working in the country. The NBFIs
sector in Bangladesh consisting primarily of the development financial institutions, leasing
enterprises, investment companies, merchant bankers etc. The financing modes of the NBFIs
are long term in nature. Traditionally, our banking financial institutions are involved in term
lending activities, which are mostly unfamiliar products for them. Inefficiency of BFIs in
long-term loan management has already leaded an enormous volume of outstanding loan in
our country. At this backdrop, in order to ensure flow of term loans and to meet the credit
gap, NBFIs have immense importance in the economy. In addition, non-bank financial sector
is important to increase the mobilization of term savings and for the sake of providing
support services to the capital market.

Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 9.1: Rating Acquired

Graph 9.2: Rating Average

Credit Rating & Industry Analysis of Bangladesh Page 81


In above two graphs we can see that, according to CRAB rating 1 company has got AAA, 1
company has got AA, 3 companies got A and 2 companies got BBB.

According to CRISL rating 7 companies have got A and 2 companies have got BBB. If we
sum up all the ratings of CRAB & CRISL, then we can find that:

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & CRAB CRISL
AAA 10 AAA Highest Safety 10
Highest Quality 1 Average Average
Very Strong Capacity & Very High
AA1, AA2, AA3
Quality 9 1 8.14 AA+, AA, AA- High Safety 9 7.78
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 3 A+, A, A-
Safety 8 7
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 2 BBB+, BBB, BBB-
Safety 7 2
Inadequate Capacity & Substantial Inadequate
BB1, BB2, BB3
Credit Risk 6 BB+, BB, BB-
Safety 6
B1, B2, B3 Weak Capacity & High Credit Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 7 Total 9

1 company has got AAA, 1 company has got AA rating range, 10 companies have got A and
4 companies have got BBB. By using weighted average method we can get 8.14 from CRAB
and 7.78 average rates from CRISL. According to my industry ranking analysis this industry
in on 5 (fifth) rank. Here I want to mention that Delta Brac Housing (DBH) achieved AAA,
and they have retained this highest rating for 10 years. By this kind of performance and
observing the averages we can undoubtedly conclude that Financial Institutions are
performing very well in this country. In the time of global economy fall in 2008, these
institutions in our country have performed very well. We can see that none of these company
got below BBB rating notch. It usually means that, maximum of the company has very strong
financial capacity, maintains very high quality, with very low credit risk. To run a country‘s
economic cycle properly Non-Banking Financial Institutions play a vital role. They give
loans for various purposes to individual or company. So their role is also very important for
developing a country‘s financial position.

Credit Rating & Industry Analysis of Bangladesh Page 82


10. Fishery
Bangladesh being a first line littoral state of the Indian Ocean has a very good source of
marine resources in the Bay of Bengal. The country has an exclusive economic zone of
41,000 square miles (110,000 km2), which is 73% of the country's land area. On the other
hand, Bangladesh is a small and developing country overloaded with almost unbearable
pressure of human population. In the past, people of Bangladesh were mostly dependent upon
land-based proteins. But, the continuous process of industrialization and urbanization
consumes the limited land area. Now there is no other way than to harvest the vast under
water protein from the Bay of Bengal, which can meet the country's demand.
The role of Fisheries and Livestock sectors in the development of agro-based economy of
Bangladesh is very important and promising. They contribute around 8% to national income,
which also is 32% of the total agricultural income. About 90% of animal protein in our diet
comes from fish and livestock.

Almost every person in Bangladesh has a connection with the country‘s fisheries resources,
whether catching or producing fish, supplying markets or services, or as a consumer. A
growing export sector is also contributing substantially to the national economy. This review
sets out to provide a strategy for fisheries, to enable priorities to be established, and to explain
how investment can be placed to best effect.
These are very real challenges, and there is a clear possibility for declining output and
negative economic and social impacts. However, with well-considered strategies, good
management and well-targeted investment, the outlook for the fisheries sector over the next
decade can be very positive. Linked in turn with initiatives and mechanisms which recognize
the needs and potential opportunities of poorer groups, there is also a very real prospect of
harnessing the sector‘s potential for wider social and economic development.

 There is scope for progress in most subsectors

 The private sector will play an increasingly important role in development; it requires

Credit Rating & Industry Analysis of Bangladesh Page 83


a positive environment

 Social development objectives need to be understood and linked with production and
market opportunities

 Capture fisheries sectors will require careful support to ensure sustained benefits;
alternative livelihoods for fishing communities will be important

 Sector and resource knowledge is critical and needs to be efficiently developed and
used.

Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 10.1: Rating Acquired

Graph 10.2: Rating Average

In above two graphs we can see that, according to CRAB rating 6 companies have got BB.

According to CRISL rating 2 companies have got BBB. If we sum up all the ratings of CRAB
& CRISL, then we can find that:

Credit Rating & Industry Analysis of Bangladesh Page 84


Rating Definition Value Acquired Rating Definition Value Acquired
Extremely Strong Capacity & Highest CRAB CRISL
AAA
Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very High
AA1, AA2, AA3
Quality 9 6 AA+, AA, AA- High Safety 9 7
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 A+, A, A-
Safety 8
Moderate
BBB1, BBB2, BBB3 Adequate Capacity & Medium Quality 7 BBB+, BBB, BBB-
Safety 7 2
Inadequate Capacity & Substantial Inadequate
BB1, BB2, BB3
Credit Risk 6 6 BB+, BB, BB-
Safety 6
B1, B2, B3 Weak Capacity & High Credit Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very High Credit
CCC1, CCC2, CCC3
Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity & Extremely
CC
High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 6 Total 2

2 companies have got BBB and 6 companies have got BB rating range. By using weighted
average method we can get 6 from CRAB and 7 average rates from CRISL. According to my
industry ranking analysis this industry in on 30 (thirtieth) rank.

From these averages we can say that, fisheries and livestock business is not that much
established in our country. But we have seen that there are lots of opportunities for this
industry to do much better.

There are also some obstacles for which fisheries business is not doing as expected:

 The laws, rules and regulations as they currently stand are adequate in most areas, but the
enforcement structure is inadequate
 There is a total absence of regular law review and updating mechanism. By-law
formulation is also isolated and slow
 The legal system is unable to keep pace with the policy environment
 The prevailing practice of regulation by memos and circulars from MoL is ineffective in
meeting constitutional obligations and in promoting judicious resource use
 Restrictive laws and management systems may contradict with customary rights that will
only widen the gap between the public, public agencies and public property
 The needs and welfare of the most disadvantaged in society are largely unmet
 Access to due process is difficult for the most vulnerable groups in society
 The importance of global processes and Bangladesh‘s position in the global market
cannot be ignored: at the moment it is ‗reactive‘ to the global market‘s demands for
change – to survive it will have to become more proactive in its approach.

Credit Rating & Industry Analysis of Bangladesh Page 85


Some Recommendations for this industry:

 A Natural Resources Management Council (NRMC) should be set up to promote


sectorial objectives in production, social development and natural resource
management and the needs to co-ordinate and implement fishery sector development

 Donor funds for renewable natural resources programmes should be coordinated via
the NRMC

 A Fisheries Development Executive Committee (FDEC) should be established to


enact decisions made by the NRMC. The FDEC will coordinate commercial
development (aquaculture and commercial trawling) and conservation/protection of
CPR pro-poor national assets (capture fisheries).

 Effective linkages might be made between natural resource policies.


 A Commercial/private sector development strategy to be implemented that allows for
the development of a sustainable aquaculture and commercial fishing industry.

Credit Rating & Industry Analysis of Bangladesh Page 86


11. FOOD & ALLIED
The food industry is a complex, global collective of diverse
businesses that supply much of the food energy consumed by the
world population. Food products are sold in Bangladesh in
different forms, like- canned, packed, baked, raw etc. This
business is very good in our country. There are number of
organizations doing business here in Bangladesh. Domestic
companies are performing outstanding as well as multinationals.
160 million people lives in our country. Food is a product which is
consumed by all of them. So these companies have a very wide range of customers. Now a
day they are not only selling in our country but also beyond borders. Most of the companies
exporting quality full product outside Bangladesh. Especially tin can and packed foods are
very popular to the customers, but some of the companies now adding preservatives in food
which is very harmful for health. So, they should be aware of this crime. This is also a great
threat to this industry. These companies should maintain proper nutrient in their food
products. Otherwise they‘ll lose their buyers.

In Bangladesh there are lots of food & allied companies. Some are:

 PRAN Foods Limited

 BD Foods Limited

 Square Food Products


 ACI Food Products
 Laila Food Products Ltd
 Samannaz Condensed Milk Ltd
 S. A. Salt Industries Ltd
 Farzana Oil Refineries Ltd
 Samannaz Dairy Foods & Products Ltd
 City Dal Mills Ltd
 City Seed Crushing Industries Ltd etc.

Credit Rating & Industry Analysis of Bangladesh Page 87


Analysis:
According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 11.1: Rating Acquired

Graph 11.2: Rating Average

In above two graphs we can see that, according to CRAB rating 10 companies have got AA,
11 companies have got A, 17 companies have got BBB and 7 companies have got BB.

According to CRISL rating 9 companies have got A and 3 companies have got BBB. If we
sum up all the ratings of CRAB & CRISL, then we can find that:

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 10 7.53 AA+, AA, AA- High Safety 9 7.75
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 11 A+, A, A-
Safety 8 9
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 17 BBB+, BBB, BBB-
Safety 7 3
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 7 BB+, BB, BB-
Safety 6
Weak Capacity & High Credit
B1, B2, B3
Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 45 Total 12

Credit Rating & Industry Analysis of Bangladesh Page 88


10 companies have got AA, 20 companies have got A, 20 companies got BBB and 7
companies have got BB rating range. By using weighted average method we can get 7.53
from CRAB and 7.75 average rates from CRISL. According to my industry ranking analysis
this industry in on 12 (twelfth) rank.

From these averages we can easily conclude that, most of the companies of this industry have
adequate capacity to meet financial commitments but more susceptible to adverse economic
conditions or changing circumstances, subject to moderate credit risk and possess certain
speculative characteristics. But these risks can be overthrow by implementing some
compliance.

1. Maintain the quality of food products


2. Assure the perfect nutrient supplements
3. Avoid adding preservatives
4. Use better technology for production
5. Choose healthy and hygienic factory area for production

Apart from these recommendations this industry also need proper care of the government.
Otherwise this industry will fall down.

Credit Rating & Industry Analysis of Bangladesh Page 89


12. FUEL & POWER
Natural Gas is the most important source of energy in our country as it accounts for about
75% of the total commercial energy of the country. At present, about 37% of natural gas
production is used as fuel for electricity generation. Overdependence on the natural gas must
be reduced as the present reserve is not sufficient enough to support the country for long term
economic growth.
Bangladesh, with a very low reserve of petroleum, has
become a net petroleum import country. Because of the
recent liquid oil based power plants, petroleum
requirements have increased by 28% in 2011. Because of
the unrest in Middle-East region, petroleum price is going
up which will increase import bill of Bangladesh Petroleum Corporation (BPC).
Aside from natural gas and petroleum, coal resource of the country is still underutilized
because of lack of proper guideline. Coal policy, which will ensure proper guideline
regarding the usage of this resource for the economic development of the country, is yet to be
finalized.
Lack of investment in power generation in the last decade has created electricity shortage.
With a view to combat this, the Government of Bangladesh (GOB) has taken initiative to set
up power plants so that the country has sufficient electricity within 2016.
Successful implementation of this is highly dependable on the supply of fuel. Over
dependency on gas for electricity generation must be reduced, while coal and renewable
energy based power plants must be introduced for sustainable electricity generation. Overall,
in long term, an intelligent mix of the different available energy
sources can enable Bangladesh to ensure a sustainable
economic growth of the country. Right conditions and
framework at policy and regulatory level is a must.
Energy is the driving force behind all economic activities and most importantly the economy
can be seen as a system of energy flows, as a sequence of energy conversion that culminate in
the production of goods and services. Hence economic growth of a country is directly linked
to energy growth of the country.
Analysis:
According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Credit Rating & Industry Analysis of Bangladesh Page 90


Graph 12.1: Rating Acquired

Graph 12.2: Rating Average

In above two graphs we can see that, according to CRAB rating 2 companies have got AA, 2
companies have got A and 1 company has got BB.

According to CRISL rating 4 companies have got AA, 6 companies have got A and 7
companies have got BBB rating notch. If we sum up all the ratings of CRAB & CRISL, then
we can find that:

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 2 8 AA+, AA, AA- High Safety 9 4 7.82
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 2 A+, A, A-
Safety 8 6
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 BBB+, BBB, BBB-
Safety 7 7
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 1 BB+, BB, BB-
Safety 6
Weak Capacity & High Credit
B1, B2, B3
Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 5 Total 17

Credit Rating & Industry Analysis of Bangladesh Page 91


6 companies have got AA, 8 companies have got A, 7 companies have got BBB and 1
company have got BB rating range. By using weighted average method we can get 8 from
CRAB and 7.82 average rates from CRISL. According to my industry ranking analysis this
industry in on 8 (eighth) rank.

From these averages we can easily assume that, this industry is doing very good in our
country. It has also many future prospects. We have seen that recently Bangladesh
government designed some fruitful plan for electricity industry which really very positive
side for this industry.

 Bangladesh has initiated a Power and Energy Sector Development Roadmap (2010-2021)
which targeted to produce 8,500 MW by 2013, 11,500 MW by 2015 and 20,000 MW by
2021.
 Only 47% of the total population of Bangladesh is enjoying the electric facilities.
 Per capita generation is 220 KW hr which is comparatively lower than other developed
countries in the world
 Public and private sector produces 63% and 37% of electricity respectively.
 Govt. encourages Foreign Investors in this sector with different incentives.

Fiscal incentives for private power companies

A number of fiscal incentives are provided to the private power companies. Some of them are

as follows:

 Exemption from corporate income tax for a period of 15 years.

 Allowed to import plant and equipment and spare parts up to a maximum of ten percent

(10%) of the original value of total plant and equipment within a period of twelve (12)

years of commercial operation without payment of customs duties, VAT and any other

surcharges as well as import permit fee except for indigenously produced equipment

manufactured according to international standards.

 Repatriation of equity along with dividends allowed freely.

 Exemption from income tax for foreign lenders to such companies.

Credit Rating & Industry Analysis of Bangladesh Page 92


 The foreign investors will be free to enter into joint ventures but this is optional and not

mandatory.

Source: Private Sector Power generation Policy of Bangladesh, Ministry of Power, Energy and Mineral Resources

Facilities and incentives for foreign investors


There are number of facilities and incentives would be provided to the foreign investors.
Some of them as follow:

 Tax exemption on royalties, technical know-how and technical assistance fees, and
facilities for their repatriation.
 Tax exemption on interest on foreign loans.
 Tax exemption on capital gains from transfer of shares by the investing company.
 Avoidance of double taxation case of foreign investors on the basis of bilateral
agreements.
 Exemption of income tax for up to three years for the expatriate personnel employed
under the approved industry.
 Remittance of up to 50% of salary of the foreigners employed in Bangladesh and
facilities for repatriation of their savings and retirement benefits at the time of their
return.
 No restrictions on issuance of work permits to project related foreign nationals and
employees.
 Facilities for repatriation of invested capital, profits and dividends.

Source: Private Sector Power generation Policy of Bangladesh, Ministry of Power, Energy and Mineral Resources

Power industry development plan

In order to realize the government‘s vision to provide electricity to most of the population at a
reasonable price and to achieve overall socio-economic development of the country, the
government of Bangladesh has initiated a Power and Energy Sector Development Roadmap
(2010-2021) which targeted to produce 8,500 MW by 2013, 11,500 MW by 2015 and 20,000
MW by 2021. However, to ensure overall and balanced development of this sector
government has taken immediate plan (2010), short-term plan (2011), medium-term plan
(2012-2015) and a long-term development plan (2016-2021). The plans have been developed
based on a techno-economic analysis and a least-cost option. These plans include balanced

Credit Rating & Industry Analysis of Bangladesh Page 93


development in generation, transmission and the distribution system to achieve a desired
level of reliability of supply. A summary of the development plan is given as follows:

Immediate plan (2010)

According to the immediate plan, short term implementable (six to twelve months) liquid fuel
based quick rental power stations will be established through private sector. In the first phase,
3 power plants with a capacity of 360 MW each are implementing in different places of the
country and are expected to initiate by 2010. However, capacity of 1,000-1,200 MW quick
rental power stations will be expected to establish by 2010 and by early 2011. Meanwhile,
power plant with a capacity of 432 MW is implementing privately.

Short term plan (2011)

According to the short-term plan, liquid fuel based 12-24 months of implementable power
stations will be established. However, government has initiated to implement a power station
with a capacity of 920 MW.

Midterm plan (2012-2015)

Under this plan, government has taken into account to establish 3 to 5 years of implementable
coil based power stations with a capacity of 2,600 MW to the total capacity of 7,714 MW.

Long term plan

As of the Power and Energy Development Roadmap (2010-2021), government expects to


meet the desire destination (20,000 MW by the year 2021) through the increment of 10%
production per year towards reaching the per capita consumption to 600 Kw.
Bangladesh is steadily climbing up the development ladder. Energy and power needs to act as
a key catalyst in helping Bangladesh in this endeavor. Industries are being automated and the
country is gradually moving from a labor-intensive economy to a capital intensive one.
Electricity and power are vital to the nation at such a stage. Bangladesh has a vast market as
far as power and electricity is concerned and good prospects for constructing power
generation plants exist in the country in terms of resources available and government policies.

There are many positive future plans which will help this industry to increase their growth.

Credit Rating & Industry Analysis of Bangladesh Page 94


13. HOSPITAL & HEALTHCARE

Large segments of the population in developing countries are deprived of a fundamental


right: access to basic health care. Without an appropriate and adequate health support and
delivery system in place, its adverse effects will be felt in all other sectors of the economy.
The government's policy objectives in the health care sector were to provide a minimum level
of health care services for all, primarily through the construction of health facilities in rural
areas and the training of health care workers. The strategy of universal health care by the year
2000 had become accepted, and government efforts toward infrastructure development
included the widespread construction of rural hospitals, dispensaries, and clinics for
outpatient care. Program implementation, however, was limited by severe financial
constraints, insufficient program management and supervision, personnel shortages,
inadequate staff performance, and insufficient numbers of buildings, equipment, and supplies.

Private hospitals are perceived as more responsive than public hospitals. Similarly, on
communication and discipline, private hospitals obtained a significantly higher rating than
public hospitals. Some of the Hospitals & Healthcare Centre names:

 STS Holdings Ltd


 Renaissance Hospital & Research Institute Ltd
 Eastern Medical College & Hospital Ltd
 Jalalabad Ragib-Rabeya Medical College and Hospital
 Mirpur Diagnostic Centre Ltd
 Medinova Medical Services Ltd

Health services in urban areas also were inadequate, and their coverage seemed to be
deteriorating. In many urban areas, nongovernment organizations provide the bulk of urban
health care services. Programming and priorities of the nongovernment organizations were at
best loosely coordinated.

Credit Rating & Industry Analysis of Bangladesh Page 95


Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 13.1: Rating Acquired

Graph 13.2: Rating Average

In above two graphs we can see that, according to CRAB rating 2 companies has got A, 2
companies has got BBB and 2 companies has got BB rating range.

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very High
AA1, AA2, AA3
Quality 9 7 AA+, AA, AA- High Safety 9 7.8
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 2 A+, A, A-
Safety 8 4
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 2 BBB+, BBB, BBB-
Safety 7 1
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 2 BB+, BB, BB-
Safety 6
Weak Capacity & High Credit
B1, B2, B3
Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 6 Total 5

According to CRISL rating 4 companies has got A and 1 company has BBB. If we sum up all
the ratings of CRAB & CRISL, then we can find that:

Credit Rating & Industry Analysis of Bangladesh Page 96


6 companies has got A & 3 Companies has got BBB & 2 companies got BB rating range. By
using weighted average method we can get 7 from CRAB and 7.8 average rates from CRISL.
According to my industry ranking analysis this industry in on 15 (fifteenth) rank. From these
averages we can say that a financial capacity of the companies in this industry is normal &
above average. We can also see that this industry position is now above average. But still it
requires further development to maintain its growth. Our country healthcare facilities should
be improved to provide better services. It is important, especially for public hospitals and
regulatory agencies, to understand how market incentives work. With better understanding
and over time, public hospitals may be gradually weaned from their present survival
guarantees that do not seem to motivate them to enhance service quality; such guarantees are
also not available to private hospitals.

It is apparent that private hospitals are playing a meaningful role in Bangladesh, justifying
their existence, continuation and growth. However, before unleashing the forces of
privatization in this sector more widely, it must be noted that private hospitals have been
known to reduce quality by reducing inputs, to disregard social pricing considerations or,
worse, to try to increase their profi ts by providing services that are unnecessary or even
harmful. This therefore needs careful consideration.

Credit Rating & Industry Analysis of Bangladesh Page 97


14. HOTEL & HOSPITALITY

Not so long ago, the highly capital intensive hospitality industry in Bangladesh was
dependent on public sector investment as the private sector was very shy. This resulted in
building major properties like now defunct Shahbagh Hotel - the first international standard
hotel in Dhaka in 1 950s, Inter-continental - now Ruposhi Bangla in 1960s and Pan Pacific
Sonargaon Hotel in 1980s, by the public sector. Only two notable hotels - Purbani in Dhaka
and Agrabad in Chittagong represented private sector for quite some time those days.

But now, the situation has been reversed.


Now, the hospitality industry of the country is
dominated by a vibrant private sector. In the
span of little over two decades, private sector
has greatly enriched hospitality industry of the
country in general and the capital Dhaka in
particular. Apart from upscale hotels in
different parts of the country, the private
sector has made a great contribution in
enriching the country in another sector of hospitality industry -the holiday resorts. For
upscale accommodation, for many years Dhaka was dependent on Pan Pacific Sonargaon and
Dhaka Sheraton (now Ruposhi Bangla). Now the Westin Dhaka, Radisson Blue Water
Garden Hotel, Dhaka Regency Hotel & Resort and Hotel Sarina have enriched Dhaka's
hospitality industry. And together they are offering about 1400 five-star quality rooms. There
are about seven other hotels including Hotel Orchard Plaza, Hotel Washington, Best Western
La Vinci, Lake Shore Hotel &
Apartments, Platinum Suites, Royal Park
Residence, Ascott the Residence offering
about 500 three to four-star quality rooms.

The hotel and hospitality sector is growing


steadily in Bangladesh thanks to the
political stability, growth in export earnings and high turn-up of tourists and corporate and
business clients, sources said. The hotel industry is growing by at least 10 percent as the
economy of Bangladesh is posting 6-7 percent growth per annum, said Azeem Shah, General
Manager of the Westin Dhaka.

Credit Rating & Industry Analysis of Bangladesh Page 98


Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 14.1: Rating Acquired

Graph 14.2: Rating Average

In above two graphs we can see that, according to CRAB rating 1 company has got AA, 1
company has got A and 1 company has got BBB rating range.

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 1 8 AA+, AA, AA- High Safety 9 7.67
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 1 A+, A, A-
Safety 8 2
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 1 BBB+, BBB, BBB-
Safety 7 1
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 BB+, BB, BB-
Safety 6
Weak Capacity & High Credit
B1, B2, B3
Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very
CCC1, CCC2, CCC3
High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 3 Total 3

According to CRISL rating 2 companies has got A and 1 company has BBB. If we sum up all
the ratings of CRAB & CRISL, then we can find that:

Credit Rating & Industry Analysis of Bangladesh Page 99


1 company has got AA & 3 Companies has got A & 2 companies got BBB rating range. By
using weighted average method we can get 8 from CRAB and 7.67 average rates from
CRISL. According to my industry ranking analysis this industry in on 9 (ninth) rank. From
these averages we can say that a financial capacity of the companies in this industry is strong
& outstanding. There is a vibrant possibility in hotel and hospitality industry in Bangladesh.
We have the longest sea beach Cox's Bazar and the largest mangrove forest Sundarban.
Religion tourism and eco-tourism can take an important role here. If we can brand our
tourism sector, it will take a place after garment sector in earning foreign currency. So,
further development is essential to maintain its growth.

Right now we have government certified 7 five star hotels, 4 four star hotels, and 12 three
star hotels in the country. Besides, Ocean Paradise Hotel and Resort in Cox's Bazar is
keeping all facilities of five-star hotel.

There are 11 hotels with brand like Hilton, Hotel Sheraton, two Le Meridiens (one in Airport
Road and the other in Banani), and two Westins (one more in Dhaka and one in Chittagong).
six Seasons, Platinum Suites 2, Heritage Hotel (Doreen Suites & Hotels and FARS Hotel),
ASCOT, Marriot Court Yard are in the pipeline and are expected to start operation by 2016
offering over 1700 rooms. If projects like Hotel Intercontinental and Holiday Inn at Hazrat
Shahjalal International Airport are taken into account, as they are also in the pipeline, the
situation will look even better.

It is encouraging to note that initial contracts have already been signed with Best Western,
Move & Pick, Marriot, Holiday Inn, Novotel, Radisson, and Swiss Hotels in various parts of
the country including Chittagong, Coxs' Bazaar and Sylhet. These hotels are likely to be
opened in 4 to 6 years period.

Public sector or in other words the government is no more required to invest in building
hotels. But that does not mean that government now has nothing to do. In fact, government
now has great responsibility as facilitator and regulator in guiding the sector in a planned
growth.

Credit Rating & Industry Analysis of Bangladesh Page 100


15. JUTE
Jute manufacturing sector is one of the oldest traditional manufacturing sectors of
Bangladesh, which emerged in erstwhile East Pakistan in the early 1950s. During the 1960s
and 1970s major share of the manufacturing sector in national income and manufacturing
employment was accounted for by this sector. Exports of jute and jute goods were the two
most important sources of foreign exchange of Pakistan during the 1960s. However, both
share and importance of jute and jute goods in manufacturing, export and overall foreign
exchange earnings, and the Gross Domestic Product (GDP) have gradually declined over
time. The sector currently accounts for a more 3.9 per cent of the country‘s total export,
which is of extremely low significance when compared to its contribution in the overall
export observed during the1970s (89.9 per cent in 1973). The ascendancy of the export-
oriented readymade garments (RMG) was a major reason. However, this was also the result
of successive policies pursued by Bangladesh alongside decline in the demand for jute goods
in both domestic and international markets over time.

Various stakeholders and civil society organizations have expressed concerns with regard to
the economic judgment which led the government to close down the jute mills and retrench
workers at a time when it was widely believed that resurgence of jute was emerging in both
global and domestic markets.

Graph 15.1: Sale in Domestic and International Market (%)

Credit Rating & Industry Analysis of Bangladesh Page 101


A total of 72 jute mills were operated by the public sector in 1982, immediately before the
initiative of denationalization. Since 1982-83, government started to denationalize the public
sector jute mills — out of 72 public sector jute mills, the government denationalized 34 jute
mills between 1982 and 1985 (Table 2). Out of these 34 privatized jute mills, 6 were
composite, 21 were conventional and 7 were CBC jute mills. A total of another 22 jute mills
were privatized during the last two decades. Besides, a number of new jute mills (mostly of
spinning type) were established under the private sector initiative. Currently a total of 129
jute mills are in operation, of which 18 mills operated under the public sector and the
remaining 111 mills operated under the private sector (Table 3). Of the 111 private mills, 61
mills were owned by the BJMA members while the remaining 50 mills were owned by the
BJSA members.
Analysis:
According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 15.2: Rating Aquired

Graph 15.3: Rating Average

In above two graphs we can see that, according to CRAB rating 1 company has got BBB and
5 companies have got BB rating range.

Credit Rating & Industry Analysis of Bangladesh Page 102


According to CRISL rating 1 company has got A, 7 companies got BBB and 1 company has
B. If we sum up all the ratings of CRAB & CRISL, then we can find that:

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & Highest CRAB CRISL
AAA
Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very High
AA1, AA2, AA3
Quality 9 6.17 AA+, AA, AA- High Safety 9 6.89
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 A+, A, A-
Safety 8 1
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 1 BBB+, BBB, BBB-
Safety 7 7
Inadequate Capacity & Substantial Inadequate
BB1, BB2, BB3
Credit Risk 6 5 BB+, BB, BB-
Safety 6
B1, B2, B3 Weak Capacity & High Credit Risk 5 B+, B, B- Risky 5 1
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 6 Total 9

1 company has got A, 8 Companies has got BBB, 5 companies have got BB & 1 company got
B rating range. By using weighted average method we can get 6.17 from CRAB and 6.89
average rates from CRISL. According to my industry ranking analysis this industry in on 29
(twenty ninth) rank. From these averages we can say that most of the companies of this
industry have inadequate capacity to meet financial commitments and have major ongoing
uncertainties and exposure to adverse business, financial, or economic conditions. They have
speculative elements, subject to substantial credit risk.

According to my analysis we can also match this situation with current scenario of Jute
industry. Maximum of the companies have shutdown. Remaining companies cannot run their
organization frequently because of inadequate capital. Once upon a time it was one of the
major sources of earning foreign currency. But now the scenario is completely adverse.

Most of the jute mills have been experiencing poor financial conditions for a large part of the
time since Bangladesh‘s independence in 1971. According to the World Bank (1986), jute
mills were profitably operated by the pre-independence regime, when financial profit per unit
of manufacturing hessian product was Tk. 4,977; however, when considering the other
economic costs such as subsidy and fiscal incentives, overall economic profit can be
considered to be negative (-Tk. 1,545) (Table 4). In the following years, both financial and
economic profits of jute mills have continued to decrease. According to the BJMA, private
jute mills suffered a loss of Tk. 7,420 for manufacturing one MT of hessian in 1988, which

Credit Rating & Industry Analysis of Bangladesh Page 103


marginally declined to Tk. 6,640 during 1996-97. Similarly, BJMC mills had a negative
profit of Tk. 5,184 from manufacturing of one MT of hessian product in 1988, while the loss
further increased to reach Tk. 11,075 during 1994-95.
Some Recommendations to save Jute Industry:
First, there is no reason to close any jute mill based on the argument that Bangladesh‘s jute
sector had no prospect. However, global demand is not rising at a fast pace. A slow, steady
and guided growth mechanism needs to be designed. This would require a sound medium
term strategy.
Second, a thorough review and revision of the financial account of BJMC jute mills is
required before any kind of reform and restructuring is undertaken. The financial account
maintained at the mill level needs to be examined by taking into cognizance current stock of
all assets including both operating and non-operating machineries, land, buildings, liabilities
to all parties including financial institutions for current loans, cumulated loans and overdue
credit borrowed from suppliers, workers‘ arrears, and other liabilities. This will help
policymakers to understand where the public sector jute mill stands and how these mills
could be operated in a vibrant manner. It is also important to take necessary actions against
allegations of corruption in public sector jute mills.
Third, the huge past debt burden, for both public and private sector jute mills, has created a
dead-weight burden on their current operation and overall sustainability. In order to make
operation of jute mills financially viable, the debt burden needs to be restructured and written
off where necessary. An appropriate mechanism has to be found in this regard.
Fourth, a rationalization of the size of jute mills, especially for those in the public sector, is
urgently required. In view of the relatively slow pace of growth in the demand of jute goods,
operation of jute mills on a large scale would be risky in terms of mobilizing the necessary
working capital, selling products in time with minimum inventory, amount of fixed costs
required, etc. The survey found that when firms were operating on a small scale, they were
likely to make more profits. An optimum size appeared to be small and medium size, and not
a large one.
Fifth, rationalization of size of the workforce in BJMC mills is urgently required. In the case
of retrenchment, BJMC must ensure required level of funds for paying workers‘ overdue
amount was available. It was found in the course of the survey that not all the 14,000
retrenched workers received their arrears, and those that had, did not receive it to the fullest
amount. This is unacceptable, and the government should find the resources to pay all arrears
of workers on an urgent basis.

Credit Rating & Industry Analysis of Bangladesh Page 104


16. LIFE INSURANCE

Insurance is the equitable transfer of the risk of a loss, from one entity to another in
exchange for payment. It is a form of risk
management primarily used to hedge against the risk of a
contingent, uncertain loss. Life insurance provides a
monetary benefit to a decedent's family or other
designated beneficiary, and may specifically provide for
income to an insured person's family, burial, funeral and
other final expenses. Life insurance policies often allow
the option of having the proceeds paid to the beneficiary
either in a lump sum cash payment or an annuity. In most states, a person cannot purchase a
policy on another person without their knowledge. Annuities provide a stream of payments
and are generally classified as insurance because they are issued by insurance companies, are
regulated as insurance, and require the same kinds of actuarial and investment management
expertise that life insurance requires. Annuities and pensions that pay a benefit for life are
sometimes regarded as insurance against the possibility that a retiree will outlive his or her
financial resources. In that sense, they are the
complement of life insurance and, from an
underwriting perspective, are the mirror image of life
insurance. Certain life insurance contracts
accumulate cash values, which may be taken by the
insured if the policy is surrendered or which may be
borrowed against. Some policies, such as annuities
and endowment policies, are financial instruments to accumulate or liquidate wealth when it
is needed. Bangladesh Life Insurance is prospecting now-a-days. Some of the Life Insurance
Companies name is given below:

 Sunflower Life Insurance Company Ltd


 American Life Insurance Company, Bangladesh
 Organization
 Pragati Life Insurance Limited
 Fareast Islami Life Insurance Company Limited

Credit Rating & Industry Analysis of Bangladesh Page 105


Every sorts of business consists of risks. These risks are more hazardous in Bangladesh.
Insurance companies minimize these risks by giving privileges on loss.

Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 16.1: Rating Acquired

Graph 16.2: Rating Average

In above two graphs we can see that, according to CRAB rating 1 company has got AAA and
1 company has got BB.
According to CRISL rating 2 companies have got A. If we sum up all the ratings of CRAB &
CRISL, then we can find that:
Rating Definition Value Acquired Rating Definition Value Acquired
Extremely Strong Capacity & CRAB CRISL
AAA 10 AAA Highest Safety 10
Highest Quality 1 Average Average
Very Strong Capacity & Very High
AA1, AA2, AA3
Quality 9 8 AA+, AA, AA- High Safety 9 8
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 A+, A, A-
Safety 8 2
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 BBB+, BBB, BBB-
Safety 7
Inadequate Capacity & Substantial Inadequate
BB1, BB2, BB3
Credit Risk 6 1 BB+, BB, BB-
Safety 6
B1, B2, B3 Weak Capacity & High Credit Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 2 Total 2

Credit Rating & Industry Analysis of Bangladesh Page 106


1 company has got AAA & 2 Companies have got A & 1 company got BB rating range. By
using weighted average method we can get 8 from CRAB and 8 average rates from CRISL.
According to my industry ranking analysis this industry in on 4 (fourth) rank. From these
averages we can say that financial capacities of the companies in this industry are strong &
outstanding also because the rate is above average. As the maximum people of our country
are illiterate so they have not much knowledge about the future life and what will do to
enhance the living standard. Different types of advertisement, publicity and others awareness
activities of life insurance company can increase the awareness of general people of country.

Problems faced by this industry are:

1. LOW PER CAPITAL INCOME: Poor economic condition is considered to be the


main reason for poor life insurance penetration in Bangladesh. The country has a very
low per capital income and over 50% of our total population lives below the poverty
line. Inability to save or negligible savings by a vast majority of population kept them
away from the horizon of life insurance.

2. POOR KNOWLEDGE OF AGENTS: The marketing of insurance is greatly


hampered in the remote village of Bangladesh where the agents are appointed from
respected locality. This is because; educated young people are seemed to be reluctant
to become insurance agents. Such agents cannot play efficient role in convincing a
prospective policyholder.

3. ILLETERACY: Mass illiteracy is another factor that adversely affects the marketing
of Life insurance. About 70% of the population is floating in the sea of ignorance.
Illiteracy leads one to think that the insurance is deception; it is no value in life. They
cannot think rationality because they do not know what is insurance and what its
importance as security for future.

4. RELIGIOUS SUPERSTITION: Religious attitude of the people also stands against


efficient insurance. The religious people believe that the future is uncertain, it is in the
hand of Allah and they do not think it necessary to buy life insurance policy for them.

5. LOW AWARENESS: Insurance awareness is poor. Agents are not skilled enough.
These agents cannot perform their job properly to make the people aware of life
insurance.

Credit Rating & Industry Analysis of Bangladesh Page 107


6. LOW SAVINGS: People of Bangladesh have a very small saving potentially and
thus have less or no disposable income. Almost the whole of the income is exhausted
in the process of maintaining the day-to-day life. Thus they are left with little amount,
which may not deemed to sufficient for the payment of premiums. This factor
discourages many to buy life insurance policy.

7. SHORTAGE OF FUND: Most of the policyholders cannot continue their policies


owing to price spiral and shortage of fund.

In Bangladesh, insurance industry has, no doubt, been growing in terms of premium income.
But it does not mean that this industry has developed in terms of quality. Till date Bangladesh
is a grossly underinsured nation. Therefore, in order to build a healthy insurance industry, a
set of measures should be adopted. The present situation of the insurance industry and
suggestions seek remedial measures. So, the problems of Life Insurance Industry should be
solved as soon as possible to increase its growth.

Credit Rating & Industry Analysis of Bangladesh Page 108


17. MISCELLANEOUS

Miscellaneous refers to things that have different or varying qualities. Miscellaneous


Products are:

 Bags And Wraps


 Gloves
 Napkins
 Paper Towels
 Tissue
 Canned Heating
 Napkins

Miscellaneous companies name:

 Max Automobile Products Ltd


 Fabian Thread Ltd
 M/S Md. Noor Hossain
 Hamdard Laboratories (Waqf) Bangladesh
 Air Trip International Ltd
 Siraj Cycle Industries Ltd
 C.P. Bangladesh Co. Ltd

Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 17.1: Rating Acquired

Credit Rating & Industry Analysis of Bangladesh Page 109


Graph 17.2: Rating Average

In above two graphs we can see that, according to CRAB rating 3 companies have got AA, 7
companies have got A, 12 companies have got BBB, 5 companies have got BB and 1
company has got B. According to CRISL rating 1 company has got AA, 10 companies have
got A, 5 companies have got BBB & 1 company got BB. If we sum up all the ratings of
CRAB & CRISL, then we can find that:

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 3 7.21 AA+, AA, AA- High Safety 9 1 7.65
Strong Capacity & High Adequate
A1, A2, A3
Quality 8 7 A+, A, A-
Safety 8 10
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 12 BBB+, BBB, BBB-
Safety 7 5
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 5 BB+, BB, BB-
Safety 6 1
Weak Capacity & High Credit
B1, B2, B3
Risk 5 1 B+, B, B- Risky 5
Very Weak Capacity & Very
CCC1, CCC2, CCC3
High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 28 Total 17

4 companies has got AA & 17 Companies has got A & 17 companies got BBB, 6 companies
has got BB and 1 company got B rating range. By using weighted average method we can get
7.21 from CRAB and 7.65 average rates from CRISL. According to my industry ranking
analysis this industry in on 14 (fourteenth) rank. From these averages we can say that
financial capacities of the companies in this industry are normal but not outstanding.
Miscellaneous industry has a great impact in our country. The Government should try to
develop this industry as like other industry. Miscellaneous products can generate more
revenue. The present situation of the miscellaneous industry seeks remedial measures because
this industry facing some obstacles. So, the problems of this Industry should be solved as
soon as possible to increase its growth.

Credit Rating & Industry Analysis of Bangladesh Page 110


18. NON-LIFE INSURANCE

Non-life insurance, also called property and casualty insurance, is a type of coverage that is
very common and covers businesses and individuals. It protects them, monetarily, from
disaster by providing money in the event of a financial loss. In a developing country like
Bangladesh, different insurance companies are playing a very crucial role in the economic
growth. Though insurance industry has significant prospects in the economy but for some
reasons it has failed to achieve its goal to some extent. There are 62 insurance companies in
Bangladesh. Among them, Peoples Insurance Company Limited is the second private
insurance company and it has been doing insurance
business in the country over 27 years since 1985.
The company was established and had been
operated under the Insurance Act 1938 since its
inception until 2010. However, as the need of time,
the parliament of Bangladesh passed a new
Insurance Act 2010 in March, 2010 in order to
reform & modernize the insurance sector in Bangladesh. Since just after passing a new act to
replace the old one, the previous Insurance Act 1938 became inactive due to pass Insurance
Act 2010.

A great advantage of insurance is that it spreads the risk of a few people over a large group of
people exposed to risk of similar type and the re-insurance system makes the total risk at zero
level in the long run. On the one hand, insurance can increase fraud; on the other it can help
societies and individuals in preparing catastrophes and in mitigating the effects of
catastrophes on households, business operations and societies.

Insurance has various effects on society through the way that it changes who bears the cost of
losses and damage of the insured according to the insurance contract.

The Insurance business has been introduced & developed in proportion to the development of
the economic growth in Bangladesh. There are 62 insurance companies in the country,
including two state-owned enterprises, the Jiwan Bima Corporation (JBC) for life insurance,
and the Sadharan Bima Corporation (SBC) for general insurance. Peoples Insurance
Company Limited is doing non-life insurance business in Bangladesh since 1958. It was
established under the Insurance Act 1938 and was operated under the same act until 2010.

Credit Rating & Industry Analysis of Bangladesh Page 111


Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 18.1: Rating Acquired

Graph 18.2: Rating Average

In above two graphs we can see that, according to CRAB rating 2 companies has got AA, 4
companies has got A, 7 companies has got BBB.

According to CRISL rating 2 companies has got AA, 4 companies has got A & 1 company
got BB. If we sum up all the ratings of CRAB & CRISL, then we can find that:

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 2 7.62 AA+, AA, AA- High Safety 9 2 8
Strong Capacity & High Adequate
A1, A2, A3
Quality 8 4 A+, A, A-
Safety 8 4
Adequate Capacity & Moderate
BBB1, BBB2, BBB3
Medium Quality 7 7 BBB+, BBB, BBB-
Safety 7
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 BB+, BB, BB-
Safety 6 1
Weak Capacity & High Credit
B1, B2, B3
Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very
CCC1, CCC2, CCC3
High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 13 Total 7

Credit Rating & Industry Analysis of Bangladesh Page 112


4 companies have got AA, 8 Companies have got A, 7 companies got BBB and 1 company
has got BB rating range. By using weighted average method we can get 7.62 from CRAB and
8 average rates from CRISL. According to my industry ranking analysis this industry in on 10
(tenth) rank. From these averages we can say that financial capacities of the companies in this
industry are normal. If we consider CRAB average then financial capacity of this industry is
sound. But according to CRISL average financial capacity of this industry is strong &
outstanding. All the insurance companies in the insurance industry need to be responsive
equally and very actively. So, the concerned insurance authority should focus on spreading
necessary awareness among the insurance companies as well. To make it possible, regular
seminars, meetings with the business authorities and proper auditing must be conducted by
insurance companies.

The company should raise awareness among all the employees and staffs about the
implementation of the new law to make the implementation process much smoother. In order
to do so, regular weekly/monthly meetings and seminars can be arranged after the office
hours. As one of the most important tasks, client awareness needs to be increased in the
insurance sector in Bangladesh.

In this purpose, insurance companies should take the necessary steps through its large sales
and business development force to ensure a level of awareness among their clients throughout
the country. Even though it is quite difficult, the companies should try its best to reduce the
management expenses as well as commission expenses to cope up with the rules regarding
these issues under the new Insurance Act 2010. In this regard, each & every employee should
work as cost saver. At the end it will certainly be beneficial for them.

The company should consider the rules and regulations for the non-life insurance companies
in Bangladesh under the Insurance Act 2010 before and during setting any future plan
regarding operation and expansion of its business, so that there doesn‗t arise any conflicting
situation. It will make their way of business operations much smoother as well as easier and
less problematic.

Credit Rating & Industry Analysis of Bangladesh Page 113


19. PACKAGING

Packaging is effective tool for preservation, provision; protection of product information,


marketing & distribution of goods plays an important role in local & international trade.
Packaging also performs other functions such as meeting logistic & safety requirements &
convenience. In recent times there has been a
growing realizing of the importance of packaging in
Bangladesh. Many manufacturers are there for
investing in good quality packaging to enhance the
quantity of their products. With export growth
particularly ready-made garments & frozen food
products export growth, the country will have better
opportunity for deem export of packaging goods.
Although import restriction corrugated carton has
been lifted for quite some time but reportedly there
has been no import of corrugated cartons in Bangladesh, mainly due to locally available
exportable corrugated cartons. Increase in demand for goods both for local & export markets
will have a proportionate growth for packaging & will see a growth in the employment
generation too. The total printing & packaging sector is one of the largest employers in
Bangladesh like RMG sector, where about 2 million people are employed & 80% are women.
Some of the packaging companies name:

 Mirza Jute Mills Ltd


 Mirza Woven Bag (Pvt.) Ltd
 Lodestar Packaging

Packaging sector plays an important role for the development of industry & export sector as
well as local consumption. Now it has become integral part of human necessities. Different
types of packaging are:

 Paper Packaging
 Glass Packaging
 Plastic Packaging
 Poly Packaging
 Metal Packaging

Credit Rating & Industry Analysis of Bangladesh Page 114


Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 19.1: Rating Acquired

Graph 19.2: Rating Average

In above two graphs we can see that, according to CRAB rating 1 company has got A, 2
companies have got BBB and 6 companies have got BB.

According to CRISL rating 1 company has got A and 2 companies have BBB. If we sum up
all the ratings of CRAB & CRISL, then we can find that:

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong
CRAB CRISL
AAA Capacity & Highest 10 AAA Highest Safety 10
Quality Average Average
Very Strong Capacity &
AA1, AA2, AA3
Very High Quality 9 6.44 AA+, AA, AA- High Safety 9 7.33
Strong Capacity & High Adequate
A1, A2, A3
Quality 8 1 A+, A, A-
Safety 8 1
Adequate Capacity & Moderate
BBB1, BBB2, BBB3
Medium Quality 7 2 BBB+, BBB, BBB-
Safety 7 2
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 6 BB+, BB, BB-
Safety 6
Weak Capacity & High
B1, B2, B3
Credit Risk 5 B+, B, B- Risky 5
Very Weak Capacity &
CCC1, CCC2, CCC3
Very High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak
CC Capacity & Extremely 3 CC+, CC, CC- High Vulnerable 3
High Credit Risk
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 9 Total 3

Credit Rating & Industry Analysis of Bangladesh Page 115


2 companies have got A & 4 Companies have got BBB & 6 companies got BB rating range.
By using weighted average method we can get 6.44 from CRAB and 7.33 average rates from
CRISL. According to my industry ranking analysis this industry in on 25 (twenty fifth) rank.
From these averages we can say that a financial capacity of the companies in this industry is
not strong enough but it is above average. The demand for packaging for exports industries
are increasing every year. Apart from that because of the rapid increase of local demand,
packaging industries would continue to expand in the coming years too.

There is no packaging institute in Bangladesh. Actually it is a long cherished demand of


BCCAMEA for development of packaging sector & set up a packaging institute in
Bangladesh. Our neighboring countries have got packaging institute in every states. We
pursue the matter with different donor‘s agencies. Without setting up packaging institute it
will be impossible on our part to compete with other countries in this competitive world
market. So, we have to set up full-fledged packaging institute in Bangladesh.

Credit Rating & Industry Analysis of Bangladesh Page 116


20. PAPER & PRINTING

Printing and Packaging in Bangladesh is comparatively a young industry by world standards.


However, from a very modest beginning the packaging industry has come of age now and has
really taken off during the last two decades or so. Today it can be said with pride that all
types of packaging products specially based on paper and paper board, plastic film, aluminum
foil are manufactured locally. Quality of locally produced packaging material is excellent and
comparable to international standard. Packaging industries are fully capable to meet the local
requirements. There is also sufficient technical manpower to run these industries. The local
industries are regularly updating their technical know-how keeping in line with the
technological advancement of this sector. The pre-press facilities available here are also up to
the highest standard of the present age. Paper provides the means of recording, storage and
dissemination of information; virtually all writing and printing are done on paper. It is the
most widely used wrapping and packaging material, and is important for structural
applications.

As a user of paper and board, the printing industry can be seen as an important downstream
component in the 'wood cluster', which comprises the forest industry, paper-making, printing,
packaging, graphical communication and publishing industries.

However, the printing industry is also an important representative of the media and
information industries. It has changed over the past decade, in particular by moving from
analogue processes to digital workflows in which content is received and processed in
electronic form. Offering variable and personalized print is becoming a crucial part of many
businesses, and an increasing number of printers today possess digital printing equipment.

Credit Rating & Industry Analysis of Bangladesh Page 117


Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 20.1: Rating Acquired

Graph 20.2: Rating Average

In above two graphs we can see that, according to CRAB rating 4 companies have got AA, 2
companies have got A and 1 company got BBB rating range.

According to CRISL rating 1 company has got A and 1 company has got BBB. If we sum up
all the ratings of CRAB & CRISL, then we can find that:

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 4 8.43 AA+, AA, AA- High Safety 9 7.5
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 2 A+, A, A-
Safety 8 1
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 1 BBB+, BBB, BBB-
Safety 7 1
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 BB+, BB, BB-
Safety 6
Weak Capacity & High Credit
B1, B2, B3
Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very
CCC1, CCC2, CCC3
High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 7 Total 2

Credit Rating & Industry Analysis of Bangladesh Page 118


4 companies have got AA, 3 Companies have got A & 2 companies got BBB rating range. By
using weighted average method we can get 8.43 from CRAB and 7.5 average rates from
CRISL. According to my industry ranking analysis this industry in on 6 (sixth) rank. From
these averages we can say that a financial capacity of the companies in this industry is strong
enough. If we consider CRAB average then financial capacity of this industry is sound &
outstanding. But if we consider CRISL then this industry financial commitment is normal &
above average.

All paper mills in Bangladesh are producing around 600000 MT paper and board/yr. The
demand of paper and board is around 600000-700000 MT/yr. If we grow up to Asia level, our
consumption will increase to 10 times of current consumption. The per capita paper
consumption as well as total paper consumption is increasing all over the developing
countries and also in Bangladesh. It will increase further in future. So, there will be huge
demand of paper and board in near future.

Credit Rating & Industry Analysis of Bangladesh Page 119


21. PHARMACEUTICALS

In Bangladesh Pharmaceutical sector is one of the most developed hi tech sector which is
contributing in the country's economy. After the promulgation of Drug Control Ordinance -
1982, the development of this sector was accelerated. The professional knowledge, thoughts
and innovative ideas of the pharmacists working in this sector are the key factors for this
development. The major product of these companies is medicine. Top 5 pharmaceutical
companies in Bangladesh are:

 Square Pharmaceuticals Ltd.


 Incepta Pharmaceuticals Ltd.
 Beximco Pharma ltd.
 Bio-pharma Ltd.
 Opsonin Pharma Ltd.

Due to recent development of this sector Bangladesh is exporting medicines to global market
including European market. This sector is also providing 95% of the total medicine
requirement of the local market. Leading Pharmaceutical Companies are expanding their
business with the aim to expand export market. Recently few new industries have been
established with hi tech equipment‘s and professionals which will enhance the strength of this
sector. Bangladesh Pharmaceutical Industry is successfully exporting Active Pharmaceutical
ingredients (APIs) and a wide range of pharmaceutical products covering all major
therapeutic classes and dosage forms to 79 countries. Beside regular forms like; Tablets,
Capsules & Syrups, Bangladesh is also exporting high-tech specialized products like HFA
Inhalers, CFC Inhalers, Suppositories, Nasal Sprays, Injectable, IV Infusions, etc. are also
being exported from Bangladesh, and have been well accepted by the Medical Practitioners,
Chemists, Patients and the Regulatory Bodies of all the importing nations.

Credit Rating & Industry Analysis of Bangladesh Page 120


Analysis:
According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 21.1: Rating Acquired

Graph 21.2: Rating Average

In above two graphs we can see that, according to CRAB rating 2 companies have got AA, 2
companies have got A & 1 company has got BBB.
According to CRISL rating 1 company has got AA & 2 companies have got BBB. If we sum
up all the ratings of CRAB & CRISL, then we can find that:
Rating Definition Value Acquired Rating Definition Value Acquired
Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 2 8.2 AA+, AA, AA- High Safety 9 1 7.67
Strong Capacity & High Adequate
A1, A2, A3
Quality 8 2 A+, A, A-
Safety 8
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 1 BBB+, BBB, BBB-
Safety 7 2
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 BB+, BB, BB-
Safety 6
Weak Capacity & High Credit
B1, B2, B3
Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very
CCC1, CCC2, CCC3
High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 5 Total 3

3 companies have got AA, 2 companies have got A & 3 Companies got BBB rating range. By
using weighted average method we can get 8.20 from CRAB and 7.67 average rates from
CRISL. According to my industry ranking analysis this industry in on 7 (seventh) rank. From

Credit Rating & Industry Analysis of Bangladesh Page 121


these averages we can say that most of the companies in this industry have strong financial
capacity with adequate safety of their return. We can also see that this industry position is
now above average. But still it requires further development because there is a huge
opportunity for growth in this industry. The main obstacles for this market are:
1. Foreign competitors have more equipment, technology and plant facilities than that of
locally owned firms.
2. Foreign competitors have their own local market so that they can absorb some losses
here.
3. Foreign competitors get government help in some cases.
4. Unstable political situation is one of the vital reasons for not achieving the
expectation in export.
5. Problems of port (both sea and air) hinder the timely export.
6. One main problem is in producing rare drugs foreign companies are ahead of us in
terms of quality, experience and market share.
7. Like other industries, there is a crucial problem faced by the
8. Pharmaceutical industries that is power generation problem. They are not getting
power according to their demand.

These are the major problems faced by the industry. The local pharmaceutical companies
should produce quality product by using the updated equipment and raw materials, which can
help them to acquire the market share. Pharmaceutical companies should produce world class
medicine which may increase the demand for Bangladeshi drug in the world market. Healthy
growth is likely to encourage the pharmaceutical companies to introduce newer drugs and
newer research products, while at the same time maintaining a healthy competitiveness in
respect of most essential drugs.

Credit Rating & Industry Analysis of Bangladesh Page 122


22. PLASTIC

Plastic products are used in a wide array of commercial activities from leisure and nutrition to
communication and transport. Plastics are also particularly important due to their role in
recycling as governments and consumers look for
ways to lessen the burden on the environment.
Bangladesh could emerge as a global player in
plastic industry by hiking its turnover to $2 billion
by 2015 and $4 billion by 2020 cited a case study
on Bangladesh's plastic sector conducted by the
Economic and Social Commission for Asia and the
Pacific (ESCAP) of the United Nations. Plastic
Industries of Bangladesh are mainly engaged in
manufacture of different products like–
 PVC pipe
 Garments accessories
 Hanger
 poly bag
 Polythene bag
 leather
 plastic household products
 Jute and Textile spares Toys
 plastic waste recycling
 computer Accessories

This industry has grown up vastly. Plastic pipes are cheaper and last longer than iron pipes,
which get rusty after some years. For export government provides duty free import of raw
materials. Plastic goods are mainly exporting to USA, CANADA, UK, JAPAN,
AUSTRALIA, FRANCE etc. At present there are 3000 plastic manufacturing units, 98% of
which belong to the Small-Medium Enterprises (SMEs). The plastic sector constitutes 1.0 of
GDP and provides employment for half a million people. Some of the plastic companies
name are Joty Plastic, Concern Bengal Windsor Thermoplastics Ltd, Mercury Packaging &
Accessories Ltd , Quest Accessories (BD) Ltd ,Q N Queue Accessories (BD) Ltd .

Credit Rating & Industry Analysis of Bangladesh Page 123


Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 22.1: Rating Acquired

Graph 22.2: Rating Average

In above two graphs we can see that, according to CRAB rating 1 company has got AA, 1
company has got A, 6 companies have got BBB, 1 company has got BB and 1 company has
got B.
According to CRISL rating 3 companies have got A & 2 companies have got BBB. If we sum
up all the ratings of CRAB & CRISL, then we can find that:
Rating Definition Value Acquired Rating Definition Value Acquired
Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very High
AA1, AA2, AA3
Quality 9 1 7 AA+, AA, AA- High Safety 9 7.6
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 1 A+, A, A-
Safety 8 3
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 6 BBB+, BBB, BBB-
Safety 7 2
Inadequate Capacity & Substantial Inadequate
BB1, BB2, BB3
Credit Risk 6 1 BB+, BB, BB-
Safety 6
B1, B2, B3 Weak Capacity & High Credit Risk 5 1 B+, B, B- Risky 5
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 10 Total 5

Credit Rating & Industry Analysis of Bangladesh Page 124


1 company has got AA, 4 companies have got A & 8 Companies got BBB, 1 company got
BB & 1 company has got B rating range. By using weighted average method we can get 7
from CRAB and 7.6 average rates from CRISL. According to my industry ranking analysis
this industry in on 19 (nineteenth) rank. From these averages we can say that most the
companies of this industry have adequate financial capacity with adequate safety of their
return. But these averages say us that, the financial & business position is above average but
not outstanding. So, this industry requires much more improvement for the coming years.

The main obstacles for this market are:

1. Major constraint in the plastic sector is the lack of an institutional arrangement


dedicated to this sector, in order to provide supporting services such as skilled
manpower, testing facilities for quality control, innovative technology and
consultancy services.
2. The availability of cheap labor and the fast developing plastic wastes recycling
industry due to rising cost of petroleum (raw material of polymers) provide
Bangladesh potential advantage of competitiveness in the global market.

An expert (BUET, BCSIR, BITAC, BPGMEA) consultation meeting held on the plastic
sector organized by the SME Foundation in 2008, has recommended setting up Bangladesh
Institute of Plastic Engineering and Technology (BIPET). Aims and activities of this institute
are given in this paper. This proposal is in the light of Indian experience. The entrepreneurs in
the plastic sector have developed the plastic industries with their own initiative and finance.
Now, considering huge potential of this sector and the multi-dimensional nature of the
constraints, the government must provide supportive policy and institutional arrangements.

Credit Rating & Industry Analysis of Bangladesh Page 125


23. POLYMERS

A polymer is a large molecule that is made up of repeating subunits connected to each other
by chemical bonds. The Polymer industry of Bangladesh is extremely dynamic, being subject
to many changes and opportunities arising from
technological change, development of new materials and
processing technology; not least, the development of new
products and changes in consumer requirements. The
Polymer Industry comprises four discrete processing
areas: Plastics Processing, Rubber Processing, Polymer
Composites Processing and Sign making. Products made
from polymer are: coatings with Teflon, discs, bags,
thermal insulators with polystyrene, bottles for liquids, laboratory ware, kitchen ware,
clothes, shoes, components for electronics, electro technics and mechanics, and many others.

The industries require innovators, technologists, designers and highly skilled processing
technicians to remain at the forefront of developments and changes in the world demand for
more versatile, lightweight, low-cost and energy-saving products and applications. Products
and component parts developed using polymers, are used in many applications. Each year the
demand steadily grows.

Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 23.1: Rating Acquired

Credit Rating & Industry Analysis of Bangladesh Page 126


Graph 23.2: Rating Average

In above two graphs we can see that, according to CRAB rating 1 company has got A, 1
company has got BB & 1 company has got B.
According to CRISL rating 2 companies have got A & 1 company has got BBB. If we sum
up all the ratings of CRAB & CRISL, then we can find that:
Rating Definition Value Acquired Rating Definition Value Acquired

Extremely Strong Capacity & CRAB CRISL


AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 6.33 AA+, AA, AA- High Safety 9 7.67
Strong Capacity & High Adequate
A1, A2, A3
Quality 8 1 A+, A, A-
Safety 8 2
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 BBB+, BBB, BBB-
Safety 7 1
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 1 BB+, BB, BB-
Safety 6
Weak Capacity & High Credit
B1, B2, B3
Risk 5 1 B+, B, B- Risky 5
Very Weak Capacity & Very
CCC1, CCC2, CCC3
High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 3 Total 3

3 companies have got A, 1 Company has got BBB, 1 Company got BB & 1 company has got
B rating range. By using weighted average method we can get 6.33 from CRAB and 7.67
average rates from CRISL. According to my industry ranking analysis this industry in on 23
(twenty third) rank. From these averages we can say that most the companies of this industry
have adequate financial capacity with adequate safety of their return. But these averages say
us that, the financial & business position is above average but not outstanding. So, this
industry requires further development for the coming years.

Credit Rating & Industry Analysis of Bangladesh Page 127


24. REAL ESTATE

Like any other country in the world, the housing sector plays vital roles both in the context of
the economy of Bangladesh and serving the fundamental human right of shelter. Apart from
providing physical shelter, housing may have significant impact on the lives of the dwellers
in terms of skills enhancement, income generation, increased security, health, self-confidence
and human dignity. With a rising population and increasing housing demand, apartment
culture has grown up in Dhaka sharply. Apartments were first introduced by the formal
private developers in early 80s to the housing history of Dhaka. It first appeared in Dhaka
near Central Road and subsequently the city experienced a boom in apartment development
in all residential areas including Paribagh, Maghbazar, Siddeshwari, Shantinagar,
Dhanmondi, Mirpur, Banani, old DOHS, new DOHS, Gulshan and Baridhara, to name just a
few.
The growth in this industry also facilitated a fast growth in many linkage industries like glass
and glass products industry, brick industry, cement industry, ceramic industry, iron and steel
industry etc. over the last decade. Such consistent growth in the real estate sector is mainly
due to a consistent demand at the consumer end. Some Real Estate companies name:

 Advanced Development Technologies Ltd.


 Asset Developments Ltd.
 Amin Mohammad Foundation Ltd.
 Navana Real Estate Ltd.
 Concord Real Estate & Building Products Ltd

Major market players in the Bangladesh real estate market has been historically Eastern
Housing Limited, Shinepukur Holdings Limited, Bashundhara, BTI and Sheltech. This
market share has not changed much during the last few years.

Credit Rating & Industry Analysis of Bangladesh Page 128


Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 24.1: Rating Acquired

Graph 24.2: Rating Average

In above two graphs we can see that, according to CRAB rating 1 company has got AA, 1
company has got A, 7 companies have got BBB, 4 companies have got BB and 1 company
has got B.
According to CRISL rating 2 companies have got A, 9 companies have got BBB and 1
company got B. If we sum up all the ratings of CRAB & CRISL, then we can find that:
Rating Definition Value Acquired Rating Definition Value Acquired
Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very High
AA1, AA2, AA3
Quality 9 1 6.79 AA+, AA, AA- High Safety 9 7.08
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 1 A+, A, A-
Safety 8 2
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 7 BBB+, BBB, BBB-
Safety 7 9
Inadequate Capacity & Substantial Inadequate
BB1, BB2, BB3
Credit Risk 6 4 BB+, BB, BB-
Safety 6 1
B1, B2, B3 Weak Capacity & High Credit Risk 5 1 B+, B, B- Risky 5
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 14 Total 12

Credit Rating & Industry Analysis of Bangladesh Page 129


1 company has got AA, 3 Companies have got A, 16 companies got BBB, 5 companies have
got BB rating range and 1 company has got B. By using weighted average method we can get
6.79 from CRAB and 7.08 average rates from CRISL. According to my industry ranking
analysis this industry in on 24 (twenty fourth) rank. From these averages we can say that
most the companies of this industry have financial capacity is not strong. These averages say
us also that, the financial & business position is above average but not outstanding. So, this
industry requires further development for the coming periods. There are some obstacles of
this Industry:

1. Housing affordability is being eroded by poor land administration policies, which


have resulted in very high land prices that make urban housing prohibitive for lower-
income groups.
2. There is no active secondary market for real estate, mainly because of the high
transfer taxes and an uninterrupted long-term increase in land prices.

The growth of private Real Estate Sector is hindered due to the incredible increase in land
price. In fact, there is no control of the govt. over the price increase of land within Dhaka
City. While negotiating with the govt., this can be argued that, to support the private Real
Estate sector, govt. should take appropriate steps in fixing land prices and introduce price
ceiling of per katha lands in different regions of Dhaka City.

Credit Rating & Industry Analysis of Bangladesh Page 130


25. RMG

The economy of Bangladesh is largely dependent


on agriculture. However, in recent years, the Ready–
Made Garments (RMG) sector has emerged as the biggest
earner of foreign currency. The ready-made garment
(RMG) sector has experienced an exponential growth
since the 1980s. The sector contributes significantly to
the GDP. It also provides employment to around 4.2
million Bangladeshis, mainly women from low income
families which affect their social status.

Ready-made garments manufactured in Bangladesh are divided mainly into two broad
categories: woven and knit products. Shirts, T-shirts and trousers are the main woven
products and undergarments, socks, stockings, T-
shirts, sweaters and other casual and soft garments
are the main knit products. Woven garment
products still dominate the garment export earnings
of the country. The share of knit garment products
has been increasing since the early 1990s; such
products currently account for more than 40 per
cent of the country‘s total RMG export earnings
(BGMEA website). Although various types of
garments are manufactured in the country, only a
few categories, such as shirts, T-shirts, trousers, jackets and sweaters, constitute the major
production-share (BGMEA website; and Nath, 2001). At present there are more than two
thousand one hundred garment factories in the country employing more than 12 lack labors.
85 percent of the labor force is women.

Labor cost and duty advantage, raw materials and real estate costs are cheaper in Bangladesh.
There is also no doubt that Bangladesh is benefitting from various preferential trade
agreements providing tax free entry into several dozen countries .

Credit Rating & Industry Analysis of Bangladesh Page 131


Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 25.1: Rating Acquired

Graph 25.2: Rating Average

In above two graphs we can see that, according to CRAB rating 8 companies have got AA, 2
companies have got A, 9 companies have got BBB and 7 companies have got BB.
According to CRISL rating 6 companies have got A, 11 companies have got BBB and 1
company got B. If we sum up all the ratings of CRAB & CRISL, then we can find that:
Rating Definition Value Acquired Rating Definition Value Acquired
Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 8 7.42 AA+, AA, AA- High Safety 9 7.28
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 2 A+, A, A-
Safety 8 6
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 9 BBB+, BBB, BBB-
Safety 7 11
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 7 BB+, BB, BB-
Safety 6 1
Weak Capacity & High Credit
B1, B2, B3
Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very
CCC1, CCC2, CCC3
High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 26 Total 18

8 companies have got AA, 8 Companies has got A, 20 companies got BBB & 8 companies
has got BB rating range. By using weighted average method we can get 7.42 from CRAB and

Credit Rating & Industry Analysis of Bangladesh Page 132


7.28 average rates from CRISL. According to my industry ranking analysis this industry in on
17 (seventeenth) rank. From these averages we can say that most the companies of this
industry have adequate financial capacity with adequate safety of their return. But these
averages say us that, the financial & business position is above average but not outstanding.
But Bangladesh has its own challenges to overcome. Impediments to investment include
unreliable power supply, high real interest rates, corruption, and weaknesses in law and order.
So, this industry requires further development for the coming years.

There are some obstacles of this Industry:

First, inefficient infrastructure, including transportation and energy supply, is the single
largest bottleneck hampering our RMG industry. This issue will become even more important
in the future, since buyers want to source more fashionable products with shorter lead times.
The government needs to prioritize improvement in this area and start to upgrade power
systems.

Second, although labor and social-compliance standards have improved over the past few
years, suppliers vary greatly in their degree of compliance. Environmental compliance is just
beginning to get attention.

Third, the suppliers' productivity must improve not only to mitigate the impact of rising
wages but also to close gaps with other sourcing countries, such as India and Cambodia, by
satisfying new customer needs for more sophisticated products. Lack of investment in new
machinery and technologies and the insufficient size of the skilled workforce, particularly in
middle management, is also hampering growth in this industry.

Fourth, access to raw material is crucial for clothing exporters. Lack of backward linkages
and Bangladesh's dependence on imports creates sourcing risks and lengthen lead times.
Compounding the problem is the volatility of raw-material prices in recent years. The
development of a local sector could improve lead times.

Fifth, political stability is a prerequisite for attracting foreign investors. Political unrest,
strikes, and the absence of ease of doing business are major concerns of foreign investors.

The three main stakeholders the government, suppliers and buyers must work together to
realize the potential of Bangladesh's ready-made-garment market. The government's top

Credit Rating & Industry Analysis of Bangladesh Page 133


priorities for investment should be developing infrastructure, maintaining political stability,
reducing corruption, and providing education and trade support.

Buyers should help to increase the supply chain's efficiency and transparency and increase
their support for lean operations and electronic data exchange. They should also build closer
relationships with suppliers and improve their own operational execution. Their long
response times, the complexity of internal procedures involving the merchandising and
sourcing functions, and a large number of last-minute changes slow down the overall
process.

While Bangladesh has some very promising advantages in certain dimensions in the garments
industry, a number of challenges remain. Only if these challenges can be overcome will
Bangladesh's RMG industry continue to prosper.

Credit Rating & Industry Analysis of Bangladesh Page 134


26. SHIP BREAKING

Ship breaking or ship demolition is a type of ship disposal involving the breaking up
of ships for scrap recycling. Most ships have a lifespan of a few decades before there is so
much wears that refitting and repair become uneconomical. Ship breaking allows materials
from the ship, especially steel, to be recycled. Equipment on board the vessel can also be
reused.

The ship breaking task is difficult, and dangerous, but Bangladesh is a poor country and ship
breaking is steady work that knows no off-season, unlike farming. The salvaged metal from
the ships is melted down at mills and recycled into construction materials. As already noted, a
significant proportion of new building construction in Bangladeshi cities and towns uses
metal cut from the ships that sailed the oceans of the world. Below is the list of some of
world's largest ship breaking yards:

 Bangladesh- Chittagong Ship Breaking yard


 China- Changjiang Ship Breaking yard, located in Jiangyin, China
 India- Alang Ship Breaking Yard

The scrapping of ships provides the country‘s main source of steel and in doing so saves
substantial amount of money in foreign exchange by reducing the need to import steel
materials.

At present Bangladesh has a demand for 50,00,00 tons of metal / steels, but Bangladesh has
no iron ore sources or mines, which make ship scrapping is the inevitable and important
source of raw materials. More than 350 re-rolling mills have been using ship scraps as their
raw materials. The industry is currently supplying more than 60 per cent of the raw materials
for local steel industry. Besides, local shipbuilding industry also largely depends on this as
raw materials mostly are being used from scrap steel. A good number of local industries

Credit Rating & Industry Analysis of Bangladesh Page 135


including heavy and light engineering already been developed depending on ship breaking
industry

Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 26.1: Rating Acquired

Graph 26.2: Rating Average

In above two graphs we can see that, according to CRAB rating 1 company has got A, 2
companies have got BBB & 2 companies have got BB.
According to CRISL rating 3 companies have got BBB and 1 company got BB. If we sum up
all the ratings of CRAB & CRISL, then we can find that:
Rating Definition Value Acquired Rating Definition Value Acquired
Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 6.8 AA+, AA, AA- High Safety 9 6.75
Strong Capacity & High Adequate
A1, A2, A3
Quality 8 1 A+, A, A-
Safety 8
Adequate Capacity & Moderate
BBB1, BBB2, BBB3
Medium Quality 7 2 BBB+, BBB, BBB-
Safety 7 3
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 2 BB+, BB, BB-
Safety 6 1
Weak Capacity & High Credit
B1, B2, B3
Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very
CCC1, CCC2, CCC3
High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 5 Total 4

Credit Rating & Industry Analysis of Bangladesh Page 136


1 company has got A, 5 Companies have got BBB & 3 companies got BB rating range. By
using weighted average method we can get 6.8 from CRAB and 6.75 average rates from
CRISL. According to my industry ranking analysis this industry in on 28 (twenty eighth)
rank. From these averages we can say that most the companies of this industry financial
capacity are not so strong. But these averages say us that, the financial & business position is
above average but not outstanding. Ship breaking industry can increase revenue of our
country. So, this industry requires further development for the coming years.

There are some obstacles of this Industry:

1. A considerable amount of hazardous materials has already accumulated in Bangladesh


as a result of SBRI activities. Some hazardous materials are exposed during
dismantling and are managed (or spilled and spread) locally, but a considerable
amount is carried with equipment off the yards. This material may re-enter society in
disguise.
2. Hazardous materials that remain on beaches can be well managed locally with
improved housekeeping practices and with adequate handling and storage. The lack of
hazardous waste disposal and treatment facilities in Bangladesh means that wastes
produced must nevertheless be disposed of somewhere. And informal disposal may
occur on the beaches, on adjacent unused plots, or on other land in the vicinity.

Considerable efforts are needed in Bangladesh to achieve adequate institutional capacity and
provide ground level enforcement of protection of workers and environment in the ship
breaking industry. Infrastructure improvement regarding the capacity and safety of the main
road for transport of all waste and reusable materials generated in the ship breaking yards
should be initiated. Significant infrastructure and capacity development in the hazardous
waste management sector is required to achieve proper storage and disposal levels in the long
term in order to comply with the HKC and other relevant international agreements.

Credit Rating & Industry Analysis of Bangladesh Page 137


27. STEEL

The steel industry in Bangladesh has a good future


because it had grown steadily in the last 15 years. The
steel industry's growth is highly correlated with that of
the economy, and therefore when the economy does
well, the industry will also do well. For the industry to
grow, he says, the government needs to ensure basic
infrastructure, power, gas and an educated workforce --
without which, industrial growth will sputter. In the
industry, "mild steel" rebar (known as "MS rod") is
central, providing the bones inside the concrete muscle that holds buildings together. Steel
production in the country is fairly efficient when in automated plants; but he explains that this
isn't enough.

Bangladesh steel industry is efficient but not in


operations, but in costs. Our cost of labor, power and gas
is among the lowest in the world, which gives us a
competitive advantage. However, due to our port
restrictions, all raw materials that we import cost us more
in freight compared to our neighboring countries, and this
makes us not as cost-efficient for exports, which overrides
the benefits of low-cost utilities.

Some of the steel companies‘ names are given below:

 Cosmic Steel Buildings


 Habib Steel Corporation
 Kingfisher & Woodpecker Co.
 Quantam Builders and Engineering
 Design Den Limited
 HK Metal
 Elegant Ltd.
 Shima Corporation

Credit Rating & Industry Analysis of Bangladesh Page 138


Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 27.1: Rating Acquired

Graph 27.2: Rating Average

In above two graphs we can see that, according to CRAB rating 6 companies have got AA, 1
company has got A, 17 companies have got BBB & 2 companies have got BB.
According to CRISL rating 2 companies have got AA, 3 companies got A, 7 companies have
got BBB & 2 companies have got BB.
If we sum up all the ratings of CRAB & CRISL, then we can find that:
Rating Definition Value Acquired Rating Definition Value Acquired
Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very High
AA1, AA2, AA3
Quality 9 6 7.42 AA+, AA, AA- High Safety 9 2 7.36
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 1 A+, A, A-
Safety 8 3
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 17 BBB+, BBB, BBB-
Safety 7 7
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 2 BB+, BB, BB-
Safety 6 2
Weak Capacity & High Credit
B1, B2, B3
Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 26 Total 14

Credit Rating & Industry Analysis of Bangladesh Page 139


8 companies have got AA, 4 Companies have got A, 24 companies got BBB and 4 companies
have got BB rating range. By using weighted average method we can get 7.42 from CRAB
and 7.36 average rates from CRISL. According to my industry ranking analysis this industry
in on 16 (sixteenth) rank. From these averages we can say that most the companies of this
industry have adequate financial capacity with adequate safety of their return or we can say
that it have normal financial growth. These averages say us also that, the financial & business
position is above average but not outstanding. More stability is required to increase its
growth.

There are some obstacles of this Industry:

1. Steel making requires a lot of energy, good infrastructure and qualified human
resources. As a nation, we are lacking in all these.
2. State intervention is infrequent, whenever the government does intervene, it distorts in
the market. For example, the caretaker government saw global and local steel prices
were very high in 2008, so it forced steel makers to keep lower prices.

3. There are so many steel manufacturers that it is impossible for them to raise market
prices with a syndicate, hoarding, etc. "The steel market operates in the most
competitive environment at all times. There is no need for government to intervene at
any point in time and create disequilibrium."

Bangladesh is adopting new technologies but still has long way to go to improve as an
industry. As our economy keeps growing and size of the industry grows, more and more
companies will be able to afford newer technologies. The future of local steel is to become
greener as well as automated.

Credit Rating & Industry Analysis of Bangladesh Page 140


28. TELECOMMUNICATION

The liberalization of Bangladesh‘s telecommunications sector began with small steps in 1989
with the issuance of a license to a private operator for the provision of inter alia cellular
mobile services to compete with the previous monopoly provider of telecommunications
services the Bangladesh Telegraph and Telephone Board (BTTB). Significant changes in the
number of fixed and mobile services deployed in Bangladesh occurred in the late 1990s and
the number of services in operation has subsequently grown exponentially in the past five
years.

The incentives both from government and public sectors have helped to grow this sector. It is
now one of the biggest sectors of Bangladesh. As a populous country, its huge market has
attracted many foreign investors to invest in this sector.

Many foreign investors are now interested to do business in telecom sector in Bangladesh
which reveals that Bangladesh has become a significant hub for telecoms. It has been
forecasted that the average revenue from telecoms sector will be Tk1500 crore a year.
Bangladesh is a country which is densely populated and also is a flat and easily extends able
coverage. The infrastructure and Tele-density is low which on the other hand made the
market a perfect place for telecom business. The demand is very high and the consumer base
is very large but the investment is low because of the topographic layout. The government
has a receptive foreign investment policy with no restrictions on repatriation of profit. Even
though the current infrastructure is not much developed but it is suitable for foreign
investment. Bangladesh has a huge potential in WiMax and submarine cable which is a new
technology in the country and has attracted the foreign telecom operators. Many foreign
telecom operators are coming to Bangladesh to explore the potentiality of the technology.

Credit Rating & Industry Analysis of Bangladesh Page 141


Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 28.1: Rating Acquired

Graph 28.2: Rating Average

In above two graphs we can see that, according to CRAB rating 2 companies have got A.
According to CRISL rating 1 company has got AAA. If we sum up all the ratings of CRAB
& CRISL, then we can find that:

Rating Definition Value Acquired Rating Definition Value Acquired


Extremely Strong Capacity & CRAB CRISL
AAA 10 AAA Highest Safety 10
Highest Quality Average 1 Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 8 AA+, AA, AA- High Safety 9 10
Strong Capacity & High Adequate
A1, A2, A3
Quality 8 2 A+, A, A-
Safety 8
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 BBB+, BBB, BBB-
Safety 7
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 BB+, BB, BB-
Safety 6
Weak Capacity & High Credit
B1, B2, B3
Risk 5 B+, B, B- Risky 5
Very Weak Capacity & Very
CCC1, CCC2, CCC3
High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 2 Total 1

Credit Rating & Industry Analysis of Bangladesh Page 142


1 company has got AAA & 2 Companies have got A rating range. By using weighted average
method we can get 8 from CRAB and 10 average rates from CRISL. According to my
industry ranking analysis this industry in on 1 (first) rank. From these averages we can say
that most of the companies in this industry have strong financial capacity with adequate
safety of their return. We can also see that this industry position is now above average. But
still it requires further development to maintain its growth .

Bangladesh has cheap skilled and willing to be skilled labor. Communication infrastructure is
in good condition and has the ability to serve the international entrants. Customer demand for
telecom product is very high due to the high growth rate of the market. As the industry is
becoming bigger, availability of supporting industries are increasing and already there are
lots of supporting companies in the market. And finally the government policies are very
welcoming and liberal.

From the above discussion we can comment that the mobile telecommunication of
Bangladesh is very competitive & the rivals are facing huge competition in the market.
Therefore we observe that the mobile companies are changing their strategies day to day to
survive in the market. So it will be difficult for any new company to enter in this market. But
we can simply say that the mobile telecom market of Bangladesh is a well-balanced & fully
competitive.

Credit Rating & Industry Analysis of Bangladesh Page 143


29. TEXTILE

The textile and clothing (T&C) industries provide the single source of economic growth in
Bangladesh's rapidly developing economy. Exports of textiles and garments are the principal
source of foreign exchange earnings. Agriculture for domestic consumption
is Bangladesh‘s largest employment sector. Today, the textile industry of Bangladesh can be
divided into the three main categories: the public sector, handloom sector, and the organized
private sector.

By 2002 exports of textiles, clothing, and ready-made garments (RMG) accounted for 77% of
Bangladesh‘s total merchandise exports. By 2013, about 4 million people, mostly women,
worked in Bangladesh's $19 billion-a-year industry, export-oriented ready-made garment
(RMG) industry. Bangladesh is second only to China, the world's second-largest apparel
exporter of western brands. Sixty percent of the export contracts of western brands are with
European buyers and about forty percent with American buyers. Only 5% of textile factories
are owned by foreign investors, with most of the production being controlled by local
investors. Some Textile companies name:

 Sirina Garments & Textiles Ltd


 Rupali Garments
 Unifill Textile Mills Ltd
 Goldstar Garments Ltd
 Tusuka Jeans Ltd
 Turjo Apparels Ltd
 Swiss Tex Ltd
 Southern Clothings Ltd

Credit Rating & Industry Analysis of Bangladesh Page 144


Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 29.1: Rating Acquired

Graph 29.2: Rating Average

In above two graphs we can see that, according to CRAB rating 4 companies have got AA,
36 companies have got A, 56 companies have got BBB, 39 companies have got BB, 2
companies have got B and 1 company has got C.
According to CRISL rating 6 companies have got AA, 30 companies got A & 32 companies
have got BBB. If we sum up all the ratings of CRAB & CRISL, then we can find that:
Rating Definition Value Acquired Rating Definition Value Acquired
Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very
AA1, AA2, AA3
High Quality 9 4 6.97 AA+, AA, AA- High Safety 9 6 7.62
Strong Capacity & High Adequate
A1, A2, A3
Quality 8 36 A+, A, A-
Safety 8 30
Adequate Capacity & Moderate
BBB1, BBB2, BBB3
Medium Quality 7 56 BBB+, BBB, BBB-
Safety 7 32
Inadequate Capacity & Inadequate
BB1, BB2, BB3
Substantial Credit Risk 6 39 BB+, BB, BB-
Safety 6
Weak Capacity & High Credit
B1, B2, B3
Risk 5 2 B+, B, B- Risky 5
Very Weak Capacity & Very
CCC1, CCC2, CCC3
High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 1 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 138 Total 68

Credit Rating & Industry Analysis of Bangladesh Page 145


10 companies have got AA, 66 Companies have got A, 88 companies got BBB, 39 companies
have got BB, 2 companies got B and 1 company got C rating range. By using weighted
average method we can get 6.97 from CRAB and 7.62 average rates from CRISL. According
to my industry ranking analysis this industry in on 20 (twentieth) rank. From these averages
we can say that financial capacities of the companies in this industry are not strong enough &
also not outstanding. Textile industry is not growing rapidly. So, reduction of problems can
ensure the development of this industry.

Some of the problems faced by this industry:

All sectors of the textile industry face many of the same challenges. These main problems
include the following:

1. Lack of power
2. Obsolete technology
3. Low capacity utilization
4. Lack of machinery maintenance
5. A workforce that is not adequately trained
6. Problems with labor unrest and militancy
7. Political unrest causing disruption such as strikes and a lack of working capital

As the population is growing and the standard of living is increasing in Bangladesh, the
demand for textiles is increasing rapidly. The weaving and knitting sub-sectors will also need
to expand at a rapid rate, as there is a large demand-supply gap in the country. With increased
investment in the sub-sectors and modernized machinery, Bangladesh could profit greatly
from larger and more competitive weaving and knitting sectors.

As the current dyeing facilities are mostly dependent on imported fabrics, they are expanding
at a rate which is not dependent on any of the other sectors. However, as local grey becomes
more competitive, and its production is increased, the dyeing, printing, and finishing sub-
sector will also need to expand to accommodate for the increased supply.

The reduction of such problems will automatically improve the market position resulting in
improved opportunities for the expansion of the Bangladeshi textile industry.

Credit Rating & Industry Analysis of Bangladesh Page 146


30. TRADING

Trading companies are businesses working with different kinds of products which are sold
for consumer, business or government purposes. Trading companies buy a specialized range
of products, maintain a stock or a shop, and deliver products to customers.

Different kinds of practical conditions make for many kinds of business. Usually two kinds of
businesses are defined in trading. Importers or wholesalers maintain a stock and deliver
products to shops or large end customers. They work in a large geographical area, while their
customers, the shops, work in smaller areas and
often in just a small neighborhood. When talking
about "trading companies", today we refer
mainly to global B2B traders, highly specialized
in one goods category and with a strong logistic
organization. ―Trading Company‖ means any
company, except a railway or telegraph
company, carrying on business similar to that
carried on by apothecaries, auctioneers, bankers,
brokers, brick makers, builders, carpenters, carriers, cattle or sheep salesmen, coach
proprietors, dyers, fullers, keepers of inns, taverns, hotels, saloons or coffee houses, lime
burners, livery stable keepers, market gardeners, millers, miners, packers, printers,
quarrymen, share brokers, ship-owners, shipwrights, stockbrokers, stock-jobbers etc.

Since the independence quite extensive development cooperation has dominated the bilateral
relations between Bangladesh and Sweden. At the same time, however, trade has developed
in a positive way albeit from a low level. At the moment trade with Bangladesh accounts for
0.06 % of Sweden‘s total exports and 0.18 % of our total imports.

The economic, political, and social significance of our trade industry has been theorized in
the Industrial Age. The rise in the trade industry is essential for the growth of globalization. It
had helped our country to increase revenue by trading with other countries. Some trading
companies name is given below:

 Nipa Oil and Flour Mill


 Hossain International
 Goldstar Steel House

Credit Rating & Industry Analysis of Bangladesh Page 147


Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the
current position of this industry.

Graph 30.1: Rating Acquired

Graph 30.2: Rating Average

In above two graphs we can see that, according to CRAB rating 1 company has got AA, 10
companies have got A, 49 companies have got BBB 51 companies have got BB & 3
companies have got B.
According to CRISL rating 4 companies have got A, 50 companies have got BBB, 3
companies have got BB & 1 company got B. If we sum up all the ratings of CRAB & CRISL,
then we can find that:
Rating Definition Value Acquired Rating Definition Value Acquired
Extremely Strong Capacity & CRAB CRISL
AAA
Highest Quality 10 AAA Highest Safety 10
Average Average
Very Strong Capacity & Very High
AA1, AA2, AA3
Quality 9 1 6.61 AA+, AA, AA- High Safety 9 6.98
Adequate
A1, A2, A3 Strong Capacity & High Quality 8 10 A+, A, A-
Safety 8 4
Adequate Capacity & Medium Moderate
BBB1, BBB2, BBB3
Quality 7 49 BBB+, BBB, BBB-
Safety 7 50
Inadequate Capacity & Substantial Inadequate
BB1, BB2, BB3
Credit Risk 6 51 BB+, BB, BB-
Safety 6 3
B1, B2, B3 Weak Capacity & High Credit Risk 5 3 B+, B, B- Risky 5 1
Very Weak Capacity & Very High
CCC1, CCC2, CCC3
Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4
Extremely Weak Capacity &
CC
Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3
C Near To Default 2 C+, C, C- Near To Default 2
D Default 1 D Default 1
Total 114 Total 58

Credit Rating & Industry Analysis of Bangladesh Page 148


1 company has got AA, 14 Companies have got A, 99 companies got BBB, 54 companies
have got BB and 4 companies got B rating range. By using weighted average method we can
get 6.61 from CRAB and 6.98 average rates from CRISL. According to my industry ranking
analysis this industry in on 27 (twenty seventh) rank. From these averages we can say that
financial capacities of the companies in this industry are not strong enough. As trading
industry playing a vital role in our country further development is required for its future
growth.

Benefits of trading industry are dependent on the opportunity cost of production. The
opportunity cost of production of goods is the amount of production of one good reduced, to
increase production of another good by one unit. A country with no absolute advantage in any
product, i.e. the country is not the most competent producer for any goods, can still be
benefited from focusing on export of goods for which it has the least opportunity cost of
production.

Credit Rating & Industry Analysis of Bangladesh Page 149


4.4 Industry Ranking:
After analyzing all of these 30 industries I have ranked these industries from 1 to 30
according to their industry average. First I have compared both CRAB‘s and CRISL‘s
weighted average of an industry. Then I have also used average method to calculate the
industry average. Thus I have calculated all the 30 industries industry average. Then I have
ranked these industries according to their industry averages.
According to my analysis here is the ranking of industries in Bangladesh:

RANKS INDUSTRIES INDUSTRY AVERAGE


1 Telecommunication 9.00
2 Banks 8.88
3 Cement 8.13
4 Life Insurance 8.00
5 Financial Institutions 7.96
6 Paper & Printing 7.96
7 Pharmaceuticals 7.93
8 Fuel & Power 7.91
9 Hotel & Hospitality 7.83
10 Non-Life Insurance 7.81
11 Electronics 7.67
12 Food & Allied 7.64
13 Automobiles & Automotives 7.50
14 Miscellaneous 7.43
15 Hospital & Healthcare 7.40
16 Steel 7.39
17 RMG 7.35
18 Engineering & Construction 7.30
19 Plastic 7.30
20 Textile 7.29
21 Agro Inputs & Agriculture 7.21
22 Bricks 7.00
23 Polymers 7.00
24 Real Estate 6.93
25 Packaging 6.89
26 Accessories 6.88
27 Trading 6.79
28 Ship Breaking 6.78
29 Jute 6.53
30 Fishery 6.50

Credit Rating & Industry Analysis of Bangladesh Page 150


These industries are ranked on the basis of their industry averages. The highest average
industry has got rank1 (one), then the second highest got rank 2 (two). Thus all the 30
industries have been ranked.
From this analysis we can easily identify that, Telecommunication industry is now at the top
most position in Bangladesh. Not in only my analysis but also in the real scenario we can see
that telecommunication sector is now at leading position. Second highest industry is Bank
sector. These industry also making enormous profit in our country, in fact they are running
the cycle of our whole economy. As Bangladesh is a developing country, so of course there
should be lots of construction work. Thus the demand of cement is also should be high. So
we can see Cement industry holds the third highest position in Bangladesh. RMG and Textile
should come in the next, but unfortunately they are holding seventeenth & twentieth position
consecutively, because of some disastrous occurrences since last few years. The position of
this industry was very good, in fact lion portion of foreign currencies were earned from this
sector in Bangladesh. But the current scenario is completely different. There were some
occurrences like: Fire on Tazrin Fashions, Collapse of Rana Plaza, Workers Strike and lots
more. These disastrous occurrences and some previous issues have changed this industry.
Most of the big buyers have been moved from Bangladesh like: Walmart, GAP, Walt Disney
etc. Now this industry must turn around. Otherwise there will be big economic crisis in
Bangladesh.
This analysis will also help investors to choose their priority of industry to invest. I have tried
my level best to do this analysis. The purpose of this report will be served if this paper helps
you evaluate industries.

Credit Rating & Industry Analysis of Bangladesh Page 151


Conclusion:
This is a comprehensive analysis on 30 different industries. The main purpose of this analysis
is to understand the current position of industries in Bangladesh. This report also includes a
detail idea about credit rating, its history, its impact on the economy of Bangladesh, different
rating company and Credit Rating Agency of Bangladesh Limited (CRAB).

I have successfully done my internship in CRAB. It was really a great experience of working
with financial analysts of CRAB. Collecting information, assisting financial analysts,
learning corporate culture, learning rating process, analyzing financial statements etc. were
some of my major duties and responsibilities.

During Internship program a student undergoes practical learning process in an organization.


It is a good blend of theoretical and practical knowledge. This Internship Program gives the
students an opportunity to get ourselves introduced to the corporate world. It works as an
ice-breaking before they step into their working life. So, I can say that I really had the best
orientation in my corporate life.

Credit Rating Agency of Bangladesh is one of the leading rating agencies in Bangladesh. A
credit rating estimates the credit worthiness of an individual, corporation, or even a country.
Credit ratings are determined by credit ratings agencies. The credit rating represents the credit
rating agency's evaluation of qualitative and quantitative information for a company or
government; including non-public information obtained by the credit rating agencies analysts.

I am very glad to start my career at rating company like CRAB. After working here I have
learned many financial terminologies. I have done this analysis with the supervision of my
honorable faculty member Mrs. Farhana Rashid and CRAB‘s senior financial analyst and
manager of SME Corporation Mr. Mavin Ahmed. Without their proper support this report
preparing would this much successful.

I believe my internship report will not only serve the investors and analysts, this report will
serve the whole nation to evaluate our industries in Bangladesh.

Credit Rating & Industry Analysis of Bangladesh Page 152


References:

 Risk Management Guidelines for Banks, DOS circular no. 2, February 15, 2012.
Bangladesh Bank
 Strengthening Banking Sector in Bangladesh, Dr. Atiur Rahman, December 26 2012, The
Daily Sun
 The Bangladesh Economy: Prospects for Future; Ishraq Ahmed, June 6, 2012, The
Financial Express

 Basel II: New Capital Adequacy Framework, CRAB‘s Services for Bank Clients; Credit
Rating Agency of Bangladesh Limited

Websites:

 Credit Rating & Information Services Ltd.: www.crislbd.com


 Credit Rating Agency of Bangladesh Ltd. (2010).: http://www.crab.com.bd
 Major Sectors of Economy, retrieved on December 15, 2012 from
http://www.economywatch.com/world_economy/bangladesh

 Ratings Definitions, retrieved on December 20, 2012 from www.moodys.com


 http://www.wikipedia.org
 http://www.investopedia.com/terms/w/weightedaverage.asp
 http://finance.yahoo.com
 http://www.google.ca/finance
 http://www.mof.gov.bd/en
 http://www.idlc.com/research.php

Credit Rating & Industry Analysis of Bangladesh Page 153