Académique Documents
Professionnel Documents
Culture Documents
On
Bangladesh Finance and investment Company ltd
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A Term Paper
ON
PREPARED TO
PREPARED BY
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Letter of Transmittal
Dear Sir,
We are highly delighted to submit our report on, “Bangladesh Finance and investment
company ltd” to you, as a requirement for the fulfillment of B.B.A. program. It is a great
achievement to work under your active supervision and guidance.
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We sincerely hope that this report will get your approval and its appraisal would
demonstrate our ability to prepare a formal report. We would be glad to furnish you with
clarifications, if required.
Thank you
Sincerely yours,
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ACKNOWLEDGEMENT
At the very outset we acknowledge our deep gratitude to our honorable teacher for
assigning us to such a practical and interesting report and imparting his valuable time for
preparing the paper. Our course teacher Mr. Md. Amdadul Hoque supervised this paper.
His close supervision made it possible to prepare the paper. We are very much grateful to
him for his time, advice and guidance. We like to express our thanks and gratitude to our
entire teacher in the department of management.
And finally, we would show our gratitude to all the individuals who helped me to prepare
this report during the one month. As being a human, it is natural to forgot few names may
not be mentioned forgetfully. We would like to apologize for our forgetfulness
We also convey our heartfelt thanks to those non-mentioned names that helped us in
various ways in completion of the report.
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Executive Summary
The report which we have done, as a requirement of BBA program .This report is done
based on Bangladesh Finance and Investment Company LTd.
This is an orientation report that contains the real life day to day working experience of
different tasks in Credit Department and also include financial statement analysis of
BFIC pioneer and leading finance company in Bangladesh. With institutional
shareholding structure, educated & motivated human resources, friendly working
environment & dynamic corporate culture has enabled LBFL to be a diversified financial
services providing institution of the country. 2009 was as successfully year for
BFIC.THEY are closed to profit before tax of tk11.55core posting a 37% growth and
profit after tax of tk 8.05 corer posting a growth of 25%.Revenue earned from cpital
market was tk6.52 Crore a growth of 1005 as compared to the year2008.This was achieve
due to the bullish market which prevailed in 2009.
BFIC collects funds different sources to meet investment requirements. Main sources of
fund of BFIC are term loan from banks deposits from individuals and institutions. During
the year 2009 BFIC borrowed loan from banks rate between 12% and 14%
From our part, we would like to suggest, BFIC should strictly follow the principles of
sound lending and they should make strong their credit monitoring department and also
financial statement analysis. Among the most important of these are honesty, reliability,
thoroughness and willingness to always be open to new ideas and new ways of meeting
customer needs.
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Part: 01
Introduction
1.2 Significance
This report is an important partial requirement of four years BBA graduation program.
This is because knowledge and learning become perfect when it is associated with theory
and practice. By this program we can establish contacts and networking. Contacts may
help to get a job in practical life.
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1.4. Objectives of the Report
1.4.1. General objective
The prime objective of this report is to analyze the “Credit Management and financial
performance of BFIC.”
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1.5.2.1. Primary sources of data:
In the preparation of this report, data was collected from different primary sources. The
techniques were used to collect data are:
Observation
Informal Discussion
1.5.2.2. Secondary sources of data
Secondary sources of data are of two kinds:
o Internal: Annual Reports of BFIC finance, Other published documents of the
finance company, BFIC Website.
o External: Books, Articles, Journals, Newspaper, Web browsing.
1.6. Limitations
Though I have given utmost effort to prepare this paper but there are some limitations of
the study. Such are as follows-
The main constrain of the study was insufficiency of information,
which was required for the study. There are various information
the finance employee can’t provide due to security and other
corporate obligations.
Since the finance company personnel were very busy, they could
not provide enough time to me. Lack of opportunity to visit more
than one branch.
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The functions and activities BFIC are too vast, so they change their
strategy day by day. As a result I can’t collect update information
& strategy
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Part: 02
Company Profile
Legal form: A public limited company incorporated in Bangladesh on May 10, 1999
under the Companies Act 1994 listed in Dhaka Stock Exchange on August28, 2007 and
licensed as financial institution on December 22, 1999 under Financial Institutions Act
1993
Registered Office Baitul hossain building 2nd floor 27, dilkusha C/A,Dhaka-
1000,Bangladesh
Telephone 7114489
Telefax 88-02-9566493
E-mail www.bficltd.com
Managing Director G.M.Salehuddin Ahmed
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2.2 Background of Bangladesh Finance and Investment Company Ltd:
To be seen as an innovator in the financial industry with a passion for change and creat
good value for stakeholders.
2.4 Company Mission
Serve customers with trust & reliability.
Offer full range of customized solution.
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Take products and services to the door step of the customer.
Win the mind of the customer for a rewarding and loyal relationship.
2.5 Values
Integrity: we are committed to conduct that reflects the highest standards of integrity in
everything we do.
Teamwork: it is the essence of our ability to succeed as a trusted and preferred provider
of financial solutions to our clients. Our overriding loyalty is to the good of the whole
organization. We learn from each other and share our skills and resources across
organizational boundaries for our clients benefit and our own.
Respect:
We respect every individual. We draw strength from equal opportunity at the same time
supporting personal growth and development. We value and we all benefit from the
entrepreneurial spirit of each individual.
Professionalism:
We are committed to the highest standards of professionalism, we pursue innovation, we
continually quest for quality at each level, we are open to new ideas and we act decisively
and consistently. We are determined to deliver outstanding quality so that our
relationships with our clients will be long-lasting.
Value creation:
We offer what creates and maximizes value to the stakeholders
2.6 Goal:
To lead by example through a commitment that empowers the organization at every level
to strive for the highest levels of quality, customer care and stakeholder value. To be the
most sought after facilitator in creating wealth. To optimize the value of being our
Customer, Shareholder or Employee. To establish strong regional presence.
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2.7 Strategic Objective
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1. Corporate product:
Lease finance:
Term finance
Project finance
Working capital
Factoring
SME finance
Equity investment
Bridhge finance
Realstaet finance
Transport finance
Syndication
Structured finance
2. Retail products:
Car loan
Home loan
Doctor’s loan
Toplnvent loan
Home appliance lone
Profit earner
Money dabble
Money triple
Millionaire
Small Saver Dps
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Source: Annual Report Bangladesh finance and investment company ltd (Year2009)
Deposit Scheme
BFIC’s fixed deposit scheme offers lucrative and attractive interest rate of individuals and
institutional depositors.
With Effect From: February 01, 2010
Plain TDR
For Individuals For Institutions
Term Int. Rate Int. Rate
6 Months - 10.25%
9 Months - 10.50%
1 Year 11.50% 10.50%
2 Years 11.75%** 10.75%**
3 Years and above12.00%** 11.00%**
** annual interest will not be compounded
Profit Earner
Monthly Quarterly Half-yearly
Term Interest Rate Interest Rate Interest Rate
1 Year 10.25% 11.00% 11.25%
2 Years 10.50% 11.25% 11.50%
3 Years and above11.25% 11.50% 11.75%
Millionaire Plan
Term Installment Interest Rate Maturity Value
4 Years 17,000 10.10% 1,000,000
6 Years 10,200 10.15% 1,000,000
8 Years 6,900 10.04% 1,000,000
10 Years 4,950 10.04% 1,000,000
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8 Years 1,000 10.00% 1,44,664
10 Years 1,000 10.50% 2,07,036
Part: 03
About Credit
4.1 Credit
The word credit comes from the Latin word “Credo” meaning “I believe”. It is a lender’s
trust in a person’s or firms or company’s ability or potential ability and intention to repay.
Credit is a contractual Agreement, in which a borrower receives something of value now,
with the agreement to repay the lender at some date in the future.
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The objective of the credit management is to maximize the performing asset and the
minimization of the non-performing asset as well as ensuring the optimal point of loans
and advances and their efficient management.
Risk
Time
Interest Rate
Security or Collateral
Operating Expense
Legal Considerations
Inflation
Finance Charge
III. Credit controls almost all kinds of production activities of the country
VI. Business cycle can run well only by the help of lending system
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4.4 Credit Management
Credit management is a dynamic field where a certain standard of long-range planning is
needed to allocate the fund in diverse field and to minimize the risk and maximizing the
return on the invested fund. Continuous supervision, monitoring and follow-up are highly
required for ensuring the timely repayment and minimizing the default.
4.7 Principles of Sound Lending
It should be clearly understood that the criteria/principles are not inflexible laws & are
given as guidelines for protecting credit. In a practical competitive world, risks are
defined, accepted and credit is often granted even though a proposal does not strictly with
some of the criteria described below:
The basic lending criteria can be considered as eight main headings, as follows:
Principle of Safety
Principle of Liquidity
Principle of Purpose
Character and ability of the borrower
Principle of Security
Principle of profitability
Source of repayment
Principle of National Interest
Each of the headings will now be discussed further in the following paragraph:
Principle of Safety
The first lending Principle of sound lending is safety. Safety should not be sacrificed for
profitability. So utmost care should be exercised to ensure that the funds go to the right
type of borrower, are utilized in such a way that they remain safe and the repayment
comes in the normal course.
Principle of Liquidity
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Liquidity means the availability of funds on short notice. The liquidity of an advance
means it repayment on demand on due date or after a short notice. Therefore, the banks
must have to maintain sufficient liquidity to repay its depositors and trade off between
the liquidity and profitability is must.
Principle of Purpose
The bank should not lend money for any purposes for which a borrower may be free from
all risks but if the funds borrower are employed for unproductive. Purpose like marriage
ceremony, pleasure trip etc or speculative activities, the repayment in the normal course
will become uncertain. Banks therefore discourage advances from boarding stocks and
refuse advances for speculative activities.
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Principle of Security
The security offered by a borrower for an advance is insurance to the banker. It serves as
the safety value for an unforeseen emergency. So another principle of sound lending is
the security of lending. The security accepted by a banker to cover a bank advance must
be adequate, readily marketable, easy to handle and free from any encumbrance.
Principle of Profitability
Financing is essentially a business, which aims at earning of a good profit. Finance
company has also to meet their establishment charges and other expenses. Interest earned
by a finance company on its advance is the main source of its income.
Source of Repayment
After the branch manager has ensured that the credit will be a profitable propositioning
for the company, he should then turn his attention to the cash flow situation of the
borrower. The credit can be classified into three main categories, as follows:
A very short-term advance will be liquidated by funds received in the very near
future, such as advances against foreign or local bills or bridge functioning where
evidence of credit sanction from another financial institution is available.
Provision for current assets; this type facility is needed for trading and /or
manufacturing activities.
Long term loans, generally over 5 years; example of such facilities as investment
in plant and machinery, a farm or a shop, generally, a long term is repaid out
profits generated by the business.
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Interest Rate Structure
BFIC offers various Deposit Schemes with attractive rate of return. You are entitled to
select any of these schemes as per your requirement. The general interest rate structure
for any amount is given below:
The Branch manager of Bangladesh finance and Investment try to judge the possible
client based on some criteria. These criteria are called the C’s of good and bad loans.
These C’s are described below:
Character
The outcome of analyzing the character is to have overall idea about the integrity,
experience, and business sense of the borrower. Two variables; Interaction/interview, and
Market Research are used to analyze the character of the borrower.
1. Interaction/interview: the indicators are:
a) Prompt and consistent information supply, information given has not been found false
(Willingness to give information).
b) CIB also reveals business character.
c) Willingness to give owns stake/equity & collateral to cover.
d) Tax payer.
2. Market Research:
a) Information on business is verified.
b) Dealing with supplier and or customer as supplier is also a kind of lender; the payment
character can also be verified.
Capital
For identifying the capital invested in the business can be disclosed using the following
indicators:
a) Financial Statements
b) Receivable, Payable, statements to practically assess the business positions. Net worth
through financial statements or from declaration of Assets & Liability statement.
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Capacity (Competence)
Capability of the borrower in running the business is highly emphasized in the time of
selecting a good borrower. As the management of the business is the sole authority to run
the business that is use the fund efficiently, effectively and profitably. The indicators
help to identify the capacity of the borrower.
a) Entrepreneurship skills i.e. risk taking attitude shown by equity mobilization.
b) Management competencies both marketing and products detail, ability to take
decision.
c) Resilience or shock absorption: Connection, Back up (if first time falls second
lines come to help.
Collateral
Make sure that there is a “second way out” of a credit, but do not allow that to drive the
credit decision.
Cash Flow
Cash flow is the vital factor that is used to identify whether the borrower will have
enough cash to repay the loan or advance. Cash keeps the liquidity to ensure repayment.
The relationship manager tries to identify the annual cash flow from the submitted
statements.
Credit risk
Credit risk encompasses potential losses arising from the failure of counterparty to
perform according to contractual arrangement with the company. This is very difficult to
prescribe full proof mechanism for efficient management of credit risk. Considering the
rapid globalization, liberalization and competition, it is essential that institution has tough
risk management policies and processes.
Celling for sector company, company and group exposure
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Clean credit report(CIB) for every client
In addition the credit committee regularly meets to review the performed of each client
and takes decisions regarding any default.
Liquidity risk
Liquidity risk is the possibility that an institution will be unable to meet its
obligations as they fall due because of inability to liquidate assets or obtain adequate
funding or that it cannot easily unwind or offset specific exposures without
significantly lowering market prices because of inadequate market depth or market
disruptions. This arises from undesirable variance between maturities of assets and
liabilities.
Market risk
Market risk can be defined as the probable changes in the earning due to fluctuation in a
variety of market factors such as rate of interest, forign exchange in equity prices.
The treasury department reviews the trend analysis of market interest rate movement and
carry out assets liability gap analysis, forwards this to the asset liability management
committee regularly for their reviews and to assess the changes, as a result re-pricing the
interest rates of product to minimized and control the interest rate risk.
Operational risk
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Operational risk is the risk of losses which arises due to lack of systems, procedures and
internal control, fraud, unauthorized activities, error, omission, inefficiency, ignorance of
compliance requirements, non-compliance of corporate governance practices, or failure
of internal process and external events. The main cause that leads to operational risk is as
under:
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A. Party’s application
At first borrower had to submit an application to the respective branch for loan, where
he/she has to clearly specify the reason for loan. After receiving the application form the
borrower finance company verifies all the information carefully. They also checks the
account maintains by the borrower with the Bank. If the official becomes satisfied then
he gives form-A (prescribed application form of Bank) to the prospective borrower.
B. Filling Form -A
After satisfying with party’s application the applicant need to fill Form-A. It is the
prescribed form provides by the respective branch that contains information of the
borrower. It contains- Name with its factory location, Official address and telephone
number, details of past and present business, its achievement and failures, type of loan
needed etc.
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Stock Companies (RJSC) and attested by the managing director and
accompanied by an up-to-date list of directors.
b. Copy of board resolution of the company for availing credit facilities and
authorizing managing director/chairman/director for execution of
documents and operation of the accounts.
c. An undertaking not to change the management of the company and the
memorandum and article of the company without prior permission
d. Copy of last audited financial statement up to last 3 years.
e. Personal guarantee of the directors including the chairman and managing
director.
f. Certificate of registration of charges over the fixed and floating assets of
the company duly issued by RJSC.
g. Certificate of registration of amendment of charges over the fixed and
floating assets of the company duly issued by RJSC in case of repeat loan
or change in terms and conditions of sanction advice regarding loan
amount and securities etc.
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E. Project Appraisal
It is the pre-investment analysis. Project appraisal in the Banking sector is important for
the following reasons:
To achieve organizational goals,
To recommend if the project is not designed properly.
To justify the soundness of an investment,
To ensure repayment.
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Part: 04
Analysis
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Shareholdersequity
Shareholdersequity
551.82
471.35
422.22
292.62
247.6
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:
Sourcesof fund
milliontaka
1400
1200
1000
800
600
T
tleA
x
is
400
200
0
Tearmloan Term deposit Scheme deposit Other deposit
2009 905 902 84 64
2008 1199.28 1031.25 0 51.45
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Major Findings, Recommendations, Conclusion
6.2 Conclusion
Proper financial system in our country can contribute towards the development of the
country’s economy. In our country finance companies are leading in the financial system
and BFIC take a important role to countrys progress.
Despite stiff competition among finance companies operating in Bangladesh both foreign
and local, BFIChas achieved satisfactory progress in areas of its operations and earned an
impressive operating income over the previous years. It hopes to achieve a satisfactory
level of progress in all areas of its operations including target of profitability.
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In achieving the aforesaid objectives of the finance companies, credit operation is of
paramount importance as the greatest share of total revenue of the company is generated
from it, maximum risk is centered in it and even the very existence of finance company
depends on prudent management of its credit portfolio.
From my part, I would like to suggest, a finance company requires some special personal
traits that not every company possesses. Among the most important of these are honesty,
reliability, thoroughness and willingness to always be open to new ideas and new ways of
meeting customer needs.
7.3 Recommendations
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As BFIC is providing loan to experienced clients so there is less possibility to
default the loan and company should maintain it. There is a tendency in young
businessman not to repay the loan.
The officers of this department to make a remarkable standard should follow
advance procedure.
BFIC should maintain a written guideline for credit management. If all
documents are available than it will help to analyze their client.
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Appendix
Books
Websites:
• www.dhakabankltd.com
• www.bangladesh-bank.org.bd
• www.mblbd.com
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