1.

INTRODUCTION:
After Liberation of Bangladesh, intensive efforts were undertaken to accelerate the rate of industrialization in the country. At the beginning, import substitution and subsequently exportled economic growth strategy was pursued for industrialization. In order to attain this objective, large amount of industrial credit was funneled to the industrial sector. But the whole exercise of industrialization came to a halt with the massive diversion of resources to other non priority sectors. Policy makers, of late, have come to recognize the contribution of SME sector towards economic development in the country. Small and medium enterprises have been recognized as one of the most important means for providing better economic opportunities for the people of least developing countries like Bangladesh. A developing economy like that of ours suffers from many peculiar problems such as disproportionate pressure of population on agriculture due to lack of rural industrialization, unemployment and underemployment of human and material resources, unbalanced regional development etc. Small and medium enterprises are particularly suitable for densely populated countries like Bangladesh where SME sector can provide employment with much lower investment per job provided. Development of small industries facilitates the effective mobilization of capital and labor resources. They also help in raising standards of living of people in rural areas. Contribution of SME sector to GDP remained above 4% during the period from 1985-86 to 1999-00. Moreover, the present contribution of SME sector to GDP is approximately 5% and SME sector employs 25% of the total labor forces, thus this sector is the present available sector for creation of jobs (Saha, Sujit R. 2007). In recent times, small and medium Enterprises (SMEs) have come into the forefront of development agenda due to the recognition of their contribution in fostering growth, sustaining global economic recovery, generating employment and reducing poverty report identifies a number of channels through which SMEs can have positive impact on poverty reduction. Growth of SMEs can reduce poverty through acceleration of economic growth, removal of biases against labor-intensive production, creation of employment opportunities for the low-skilled workers and formation of linkages with small suppliers.

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2. OBJECTIVE OF THE TERM PAPER:

2.1: Broad Objective:
The prime objective to make term paper is to gain practical experience and thus relate theoretical knowledge with reality.

2.2: Specific Objectives:

To know the SME loan activities in BRAC Bank To find out basic appraisal of SME loan To know the enterprise selection criteria to provide SME loan To know the terms and conditions of SME loans To analyze the SME sector in Bangladesh To analyze the Marketing Procedure of SME loans of BRAC Bank To know the expectations of customers of BRAC Bank To know the internal strength of SME related services of BRAC Bank Ltd. To know the disbursement and recovery procedures of SME loans To make some recommendations and conclusion to further the development of SME loan products of BRAC Bank Ltd.

2.3: Scope of the Study:

The study will provide the scopes of knowing the following: The total concept SME loan. BRAC Bank specially focusing on SME loan to promote small entrepreneurs all over the country Characteristic of SME loan as a sophisticated area of finance. Performance level of the BRAC Bank SME loan in the country. Entry of commercial banks into SME banking industry in Bangladesh Small entrepreneurs of rural urban field are enjoying the BRAC Bank loan facility without coming in the bank 2|Page

 Entrepreneurship development situation through SME banking Importance of SME banking in context of Bangladesh Virtual banking concept through SME banking.

2.4: Limitations:
The presented study was not out of limitations. Some limitations are presented as follows: The study was influenced by insufficient information. Up- to date information was not available. They did not disclose much information for the sake of the confidentiality of the organization. The clients were very busy to provide me much time for interview. Time is also a big constraint for us research. We have to submit a broader deal in a shorter form of outcome. We had to go under our day to day class responsibility that we were supposed to do.

2.5: Methodology:
The study uses both primary data and secondary data. The report is divided into two parts. One is the Organization Part and the other is the Project Part. The parts are virtually separate from one another. The information for the Organization part of the report was collected from secondary sources like books, published reports and web site of the BRAC Bank Limited (www.bracbank.com). For general concept development about the bank short interviews and discussion session were taken as primary source. The information for the Project Analysis of SME loan in BRAC Bank Limited both were collected from primary and secondary sources. For gathering concept of SME loan, the Product Program Guideline (PPG) thoroughly analyzed. Beside this observation, discussion with the employee of the SME department and loan administration division they said bank was also conducted. To identify the implementation, supervision, monitoring and repayment practice- interview with the employee and extensive study of the existing file was and practical case observation was done. 3|Page

2.5.1: Data requirements:

In fact, our aim was to collect as much information as it can be possible for us to make an overview of the bank, its mission and vision, its departments and its functions. Of course we had to collect enough information so that we can make an analysis of SME loan and the specific behavior of its borrowers. The data collected allowed us to make an analysis regarding SME loan, its process starting from sanction of loan to closing of loan and especially regarding SME loan borrowers behaviors that is whether they are paying dully or lately or they have any default tendency

2.5.2: Sources of data:

For collecting the required data, I have used different sources or methods like the following: Primary data sources: Interviews of Customer relationship officers(CROs) Direct observation Secondary data sources: Operational manual Official Website Banking journals BBL newsletters Research paper

2.5.3: Techniques of analysis:

Quantitative and qualitative data were collected and analyzed according to acceptable standards of practice. Different tables used to make the data meaningful and comparable. Qualitative data were analyzed rationally and in comparison with current market condition Necessary percentages and averages were calculated and the analyzed results were described step by step. 4|Page

3. : COMPANY PROFILE:
3.1: Historical Background:
BRAC Bank is a scheduled commercial bank established under the Banking Companies Act, 1991 and incorporated as a public company limited by shares on 20 May, 1999 under the Companies Act, 1994 in Bangladesh. The primary objective of the Bank is to carry on all kinds of banking business. The Bank could not start its operation till 03 June, 2001 since the activity of the Bank was suspended by the High Court of Bangladesh. Subsequently, the judgment of the High Court was set aside and dismissed by the Appellate Division of Supreme Court on 04 June, 2001 and accordingly, the Bank has started operations from 04 July, 2001. BRAC Bank has a unique institutional shareholding between BRAC, the largest DFO in the world, the International Finance Corporation (IFC), the commercial arm of the World Bank Group, and Shore Cap International. A fully operational Commercial Bank, BRAC Bank focuses on pursuing unexplored market niches in the Small and Medium Enterprise Business, which hitherto has remained largely untapped within the country. Almost 40% of BRAC Banks clients had no prior experience with formal banking. The Bank has 313 regional marketing unit offices offering services in the heart of rural and urban communities and employs about 1,200 business loan officers around 70% of total staff BRAC Bank has been striving to provide "Best-in-the-class" services to its diverse range of customers spread across the country under an on-line banking platform. The reason BRAC Bank is in business is to build a profitable and socially responsible financial institution focused on markets and businesses with growth potential, thereby assisting BRAC and stakeholders to build a "just, enlightened, healthy, democratic and poverty free Bangladesh." As such a career in the BRAC Bank Limited requires one to be versatile, to have genuine love and understanding towards others and to be able to take on different roles. The management of the Bank believes that this sector of the economy can contribute the most to the rapid generation of employment in Bangladesh. The Bank operates under a "double bottom line" agenda where profit and social responsibility go hand in hand as it strives towards a poverty-free, enlightened Bangladesh. 5|Page

Remarkably, BRAC Bank, despite being one of the newest Banks in the country, has attained a reputation for being in the forefront of the industry. Their retail business and corporate business have gained new ground over the last two years and today BRAC Bank can claim itself to be among the top financial service providers. BRAC Bank began its operations with a mind to provide formal banking services to all levels of people in the urban, semi-urban and rural spectrum, and through the nearly 300 unit offices across the country, the Bank has seen that goal a long way through - providing Bangladesh with a degree of service and professionalism that the traditionally underserved class could ever dream of.

3.2: BRAC Bank: At a Glance

3.2.1. Name of the Organization BRAC Bank Limited (BBL). 3.2.2. Location Head Office BRAC Bank Limited 1 Gulshan Avenue, Gulshan -1 Dhaka 1212 Web: www.bracbank.com 3.2.3. Logo of BRAC Bank

3.3 Corporate Information

Inauguration of Banking Operations: 4th July 2001 First SME Unit Office: 1st January2002 First ATM installed: 3rd April 2005 Preferential share issued: 31St January 2006 Phone Banking Opening:9th September 2006

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3.4: Corporate Vision:

BRAC Bank will be a unique organization in Bangladesh. It will be a knowledge-based organization where the BRAC Bank professionals will learn continuously from their customers and colleagues worldwide to add value. They will work as a team, stretch themselves, innovate and break barriers to serve customers and create customer loyalty through a value chain of responsive and professional service delivery. Continuous improvement, problem solution, excellence in service, business prudence, efficiency and adding value will be the operative words of the organization. So BRAC Bank operates following a specific vision like: Building profitable and socially responsible financial institution focused on Market and Business with Growth potential, thereby assisting BRAC and stakeholders to build a just, enlightened, healthy democratic and poverty free Bangladesh.

3.4 : Corporate Mission:

Sustained growth in 'small & Medium Enterprise' sector Continuous low cost deposit growth with controlled growth in Retained Assets Corporate Assets to be funded through self-liability mobilization. Growth in Assets through Syndications and Investment in faster growing sectors Continuous endeavor to increase fee based income Keep our Debt Charges at 2% to maintain a steady profitable growth Achieve efficient synergies between the bank's Branches, SME Unit Offices and BRAC field offices for delivery of Remittance and Bank's other products and services Manage various lines of business in a fully controlled environment with no compromise on service quality Keep a diverse, far flung team fully motivated and driven towards materializing the bank's vision into reality". 7|Page

3.5: Corporate Values:

The Banks Strength emanates from its owner - BRAC. This means, it will hold the following values and will be guided by them as it does its jobs. Value the fact that we are a member of the BRAC family Creating an honest, open and enabling environment Have a strong customer focus and build relationships based on integrity, superior service and mutual benefit Strive for profit & sound growth Work as a team to serve the best interest of our owners Relentless in pursuit of business innovation and improvement Value and respect people and make decisions based on merit base recognition and reward on performance. Responsible, trustworthy and law-abiding in all that we do.

3.6: Banks Culture Bank has adopted trust as a corporate value which is acronym for team work, respect for all people, unquestionable integrity, excellence in everything BRAC Bank of SME do, Sense of urgency in getting things done and total commitment. All employees are expected to conduct themselves in accordance with the rules and regulations of the bank.

3.7: Location of Branches, SME Centers & ATM

BRAC Bank Ltd is now going on with 81 Branches, 240 ATM Booths, 30 Cash Deposit Machines(CDM), 1558 POS ternminals,19 Utility service bill payment booths & also 1900 Remittance delivery points.

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3.8: Currently offered SME Product & Service of Brac Bank Ltd:
3.8.1: SME Banking

BRAC Bank, being the youngest bank, took a step to break away from usual tradition and tapped into the true suburb entrepreneurial initiatives. Today, with over 10,000 crores of loans disbursed till date, BRAC Bank is countrys largest SME financier that has made more than 265,000 dreams come true! 3.8.2: Loan Products: 1. Anonno Rin 2. Apurbo Rin 3. Prothoma Rin 4. Durjoy 5. Shomriddhi Rin 6. Shompod Rin 7. Shokti Rin 3.8.3: Deposit Products 1. Prapti Current Account 2. Prachurjo Fixed Deposit

3.8.3.1: Prapti Current Account

With a view to ease your busy life, BRAC Bank is offering you current account named PRAPTI. You can deposit and withdraw money through any branches, SME sales & service centers during banking hours and through ATM and CDM 24 hours. Besides, you will get interest daily on your balance. Eligibility: Any kind of organization (such as sole proprietorship, partnership, private limited company, educational institution, NGO/Project, Co-operative society and so forth)

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Specialty of PRAPTI Current account It is a current account in which interest is paid on daily balance. You can open up this account in our any branches across the nation with only BDT 5000. For your withdrawal need you will have ATM card which comes free with opening the account. There will be no charge if average balance remains BDT 25,000. You can make your transactions through their 22 SME sales and service centre, 46 agri branch and 81 branches, 240 ATMs and 30 cash deposit machines at absolutely no cost and without hassle. How can you get statement? Statement will be sent to your address on every six months Rate of Interest: The following is the rate of interest applicable daily on your balance. Amount of Balance 0 - Below 5,000 5,000 - Below 100,000 100,000 - Below 250,000 250,000 Below 500,000 500,000 & Above Annual Fee Charges Relationship fee ATM Fee If average balance is If average balance is less than BDT 25,000 or above 25,000 Nil Nil BDT 500+ VAT (on every six month) Nil First cheque book is free and BDT 200 + VAT for second cheque book Specific Interest Rate 0% 1% 2% 3% 4%

Cheque book Nil fee Excise duty

As per guideline of Bangladesh Bank

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3.8.3.2: Prachurjo Fixed Deposit:

"Prachurjo" is a lucrative fixed deposit for small and medium businesses. With a minimum 1,00,000 TK, any business enterprise having valid trade license can open this account.

Specialties:
Tenure: Minimum 3 months and maximum 36 months No fees except govt excise / duty on interest earned, Interest is applicable on maturity No pre-encashment fees

Who are eligible for this deposit?

Everyone involving in sole proprietorship, partnership and private limited companies Small and medium typed businesses (Educational institution, NGO and Cooperative society and others)

3.8.2.1: ANONNO SME Loan:

What is ANONNO SME Loan? ANONNO is a business loan to meet any kind of business needs, which starts from BDT 3 Lac to10 Lac.

Specialty of this loan:

No security required Overdraft facility Easy installment Easy loan processing. 11 | P a g e

Eligibility
Any kind of business having valid trade license, which has been operating at least 2 or more years. Sole proprietorship, Partnership or Private Limited company Small & mid-sized businesses (Production, Trading, Service, Agro based products and others)

3.8.2.2: APURBO SME Loan:

What is APURBO SME Loan? APURBO is a loan facility for Small & Medium Entrepreneurs. To meet any kinds of business needs, APURBO is offering BDT 1 million to BDT 5 million loans against registered mortgages.

Specialty of this loan:

Term loan and overdraft based on your business needs. Limited documents 10 to 50 Lac Loan Easy installment and overdraft facility

Eligibility:
Any kind of business having valid trade license, which has been operating at least 3 or more years. Those who have property/land/building

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3.8.2.3: PROTHOMA SME Loan :

What is PROTHOMA SME Loan? Prothoma is a term loan for small scaled business operated by women entrepreneur, Maximum BDT 1 million is offered to meet business needs.

Specialty of this loan:

No security required As low as 10% interest rate Tenure from 1 to 4 years Easy loan processing

Eligibility:
Any kind of business having valid trade license, which is at least 2 years of old. Sole proprietorship, Partnership or Private Limited Company Small & mid-sized business (Production, Trading, Service and others)

3.8.2.4: DURJOY SME Loan:

What is DURJOY SME Loan? To meet your business needs DURJOY is offering BDT 3 Lac to BDT 2.5 million Loan without any security.

Specialty of this loan

Up to BDT 25 Lac loan in the name of business Easy installment up to 5 years Convenient interest rate Overdraft facility 13 | P a g e

Eligibility
Any kind of business having valid trade license, which has been operating for at least 3 years. Sole proprietorship, Partnership or Private Limited Company 1 year bank statement

3.8.2.5: SHOMRIDDHI SME Loan:

What is SHOMRIDDHI SME Loan? To meet import-export related expenses, post import expenses, tax/duty payment, local bill purchase and working capital, SHOMRIDDHI loan is offering BDT 1 Lac to BDT 10 million. LC and LATR facility Revolving loan, overdraft Local bill discounting facility Letter of Credit (LC)/Loan against trust receipt (LATR) LC opening facility: from BDT 1 Lac to BDT 10 million Up to 90% loan against LC

Revolving Loan
Import duty payment or goods purchase facility Loan up to BDT 10 million

Local Bill Purchase

Loan up to BDT 10 million in export

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Specialty of this loan

Easy loan processing Convenient interest rate Loan payment facility up to 180 days.

Eligibility
Any kinds of businesses having valid trade license and which has been operating for at least 3 years. Sole proprietorship, Partnership or Private Limited Company.

3.8.2.6: SHOMPOD SME Loan:

What is SHOMPOD SME Loan? SHOMPOD is a loan facility starting from BDT1 million to BDT 35 million against home or business premise mortgage.

Specialty of this loan

With overdraft facility which will help you to meet your working capital need. Loan against home or business premise mortgage to meet business needs. Loan is also available to purchase business premise Up to BDT 35 million loan facility Installment facility up to 10 years Convenient interest rate

Eligibility:
Small & mid-sized of business having valid trade license, which has been operating for at least 3 years in Dhaka & Chittagong. 15 | P a g e

3.8.2.7: SHOKTI SME Loan:

What is SHOKTI SME Loan? Business loan under which you can avail BDT 1 million to BDT 7 million to meet your any kind of business needs. Loan against partial security or fixed deposit At least 1 year bank statement.

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ABSTRACT
This term paper aims at providing an overall analysis of SME Banking and the repayment behavior of the SME loan borrowers of BRAC Bank Limited. Before going to the analysis, it is mandatory to know something about the organization, its core products that it offers to its customers; about the SME loan, its classifications and the whole of its process starting from loan sanction to recovery and closing of the loan. Thats why we said something about the methodology of the report. How the data have been collected, how the study has been conducted. weve made an overview of the organization, BRAC bank Limited, Here we tried to focus the banks history of origination, its mission and vision, major segments and business units and major products and services. Next, the module of SME is the most vital Chapter if this report, where we gave our concentration. Here we focused on SME products, the terms and conditions of giving SME loan, enterprise selection criteria and documentation. Then talked about the procedure of SME loan in where we delineated the sanction, disbursement, repayment and closing of SME loan. After talking about the whole process of SME loan, we made an attempt to analyze the repayment behavior of SME loan borrowers. For this end in view, we have collected information about one SME borrower. Finally we got some findings from the analysis of the repayment behavior of SME loan borrowers.

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