Sme 002

SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 1.
1 Background of the study:

Enterprises and financial institutions in Bangladesh face an insuperable obstacle to efficient credit transactions. Specially Small and Medium Enterprises (SME) are one of the potential sector of a developing country like us. It is now recognized that the small and medium enterprises (SMEs) are playing an increasingly important role as engines for economic growth and employment in many regions of our country. SME
development, as instruments of employment and income generation, human development and poverty alleviation, export promotion, stimulation of private ownership, competition and entrepreneurship and hence the driving forces behind the growth of a vibrant industrial market economy, has generated considerable interest among the policymakers, academics, business circle and the international donor agencies in recent times. So we have selected specialized bank for SME financing like BASIC Bank Ltd. Moreover, other private commercial bank like BRAC Bank Ltd, Mercantile Bank Ltd, are taking SME financing not for their business expansion but also for as a competitive market for emerging market. The term Green Banking is now popular worldwide now-a-days. It is for stopping the environmental degradation and making this planet habitable. Bankers are the important professional group who has interaction with the other groups of people and also with general masses. They can adopt different green activities within their in-house environment and also can initiate the protection of the air pollution, water pollution by their clients. Bankers can finance the green projects, which are environmental friendly and discourage the projects that damage the environment.
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SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 1.2 Objectives of the Report
General objective: The general objective of the study is to draw a comparative picture of SME loan of BASIC Bank Limited with other banks as well as view the current status of SME loan. This report also presents an elementary study about the new concept of Green Banking directed by Bangladesh Bank for inspiring the environment friendly projects.
Specific objectives: The specific focuses of the study are: To depict the procedures they follow for lending credit to the customers. To critically analyze the performance of Asset Product and Liability product of BASIC Bank Ltd. To describe the detailed operational procedure of SME Loan along with their associated benefits. To know how Green banking operates to encourage the small and medium enterprises (SME).
1.3 Methodology
Type of research: I want to classify my research report into Analytical Research as I will use facts or information already available and analyze these to make critical evaluation about the performance of BASIC Bank Limited in comparison to other three commercial banks. Research approach: According to the above research type I basically will use both quantitative approach and qualitative approach. Under quantitative approach I will collect information related research and use database from which to infer characteristics or relationships of population. 2|Page
SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.
Data Collection:
Data
Primary Sources
Secondary Source
Internal Sources
External Sources
a. Primary Sources: Discussion with the respective organization's officials about

the small and medium enterprises financing activities, their monitoring, classification and maintaining a long-term relationship with these firms.
b. Secondary Source: For the completion of the present study, secondary data
will be collected. The main sources of secondary data are:
i. Internal Sources:
Annual Report of BASIC Bank Ltd, BRAC Bank Ltd, Dhaka Bank Limited and Mercantile Bank Ltd. Manuals, and brochures of BASIC Bank limited and different publications of Bangladesh Bank.
ii. External Sources:

Credit Manual of BASIC Bank Ltd and other three banks. Internet Guideline of Bangladesh Bank. Green Banking Policy Guideline of Bangladesh Bank & BASIC Bank Ltd.
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Informal discussion with customers and observation while working in different desks.
Method employed:
Some specific methods are being used for making this report. Some of the decisions are made based on the interpretation of the analysis. In my report I use the following statistical tools:
Correlation Multiple regressions. Analysis of variance.
Data analysis and interpretation:

I have made graphical analysis of various variables of SME Financing. The tables of the respective graphs are presented in appendices part. I interpret the variables according to their trend.
Sequence of the Report:
Chapter 01: Introduction Chapter02: Textual Knowledge of SME Chapter03: Review of the literature Chapter04: SME Contribution in Bangladesh Chapter05: Organizational overview of BASIC Bank Ltd. Chapter06: SME financing in BASIC Bank Ltd. Chapter07: SME Financing Performance of BASIC Bank Ltd Chapter08: Comparative Analysis among BASIC, BRAC & Mercantile bank Ltd. Chapter09: Green Banking in BASIC Bank Ltd. Chapter10; Indentification of Problems Chapter11: Policy Suggestions Chapter12: Conclusions 4|Page
1.4
Rationale of the study
The report covers the over view of SME loan, identification of problems regarding SME loan, types of SME and sector of SME credit allocation of different thrust sectors of BASIC Bank Ltd, Mercantile Bank Ltd, and BRAC Bank Ltd. The report also includes the new concepts of Green Banking that would create a competitive advantage of banking sector to finance environment friendly SMEs.
1.5
Scope of the study
Internship is the part of BBA course and it is an opportunity to any fresh graduate gain practical experience in corporate world. I am having opportunity to work with BASIC Bank Limited. With this bank I am trying to implement educational experience in this bank. Bangladesh is one of the underdeveloped countries in the world. The economy of the country has a lot left to be desired and there are lots of scopes for massive improvement. In an economy like this, banking sector can play a vital role to improve the overall social-economic condition of the country. The banks by playing the role of an intermediary can mobilize the excess fund of surplus sectors to provide necessary finance, to those sectors, which are needed to promote for the sound development of the economy.
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1.6 Limitation of the study

Though I will have given utmost effort to prepare this paper but there will be some limitations of the study. They are as follows-
Since the report has to be made parallel to office work within three months, time might be a major constraint in accumulating all sorts of information. I will get only one month to prepare this report. Due to time limitation many aspects could not be discussed in the present study because SME is a vast subject. Confidentiality of data might be another important barrier that might be faced during the conduct of this study. Every organization has their own secrecy that is not revealed to others. While collecting data on different banks, it is obvious that employees would not disclose enough information for the sake of confidentiality of their respective organization. This paper has focused on the most sensitive part of the organization i.e. loan and advance. So the bank authority hesitated to disclose important information to maintain business secrecy.
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2.1 Definition of SME:

Small & Medium Enterprises SMEs are recognized as engine of economic growth and employment generation for sustainable industrialization in both developed and developing countries of the world. In context of Bangladesh, there is no alternative of small and medium enterprises for rapid industrialization and national economic growth through lower capital investment and employment generation. Small & medium enterprises are those industrial and business concerns having fixed asset not more than taka10 million. A variety of definitions concerning small and medium enterprises exists in Bangladesh. Some of the definitions that are used in Bangladesh are given below: BANGLADESH BANK defines Small & Medium Enterprise sector: 1. Small Enterprises Small enterprises refer to those enterprises which are not any Public Limited Companies and which fulfill the following criteriaService Concern Having an investment of Tk. 50,000 to Tk. 50, 00,000 excluding land & building and / or employing up to 25 workers. Business Concern Having an investment of Tk. 50,000 to Tk. 50, 00,000 excluding land & building and / or employing up to 25 workers. Manufacturing Concern Having an investment of Tk. 50,000 to Tk. 1,50,00,000 excluding land & building and / or employing up to 50 workers. 2. Medium Enterprises Medium enterprises refer to those enterprises which are not any Public Limited Companies and which fulfill the following criteriaService Concern Having an investment of Tk. 50,00,000 to Tk. 10,00,00,000excluding land & building and / or employing up to 50 workers. Business Concern Having an investment of Tk. 50,00,000 to Tk. 10,00,00,000excluding land & building and / or employing up to 50 workers. Manufacturing Concern Having an investment of Tk. 1,50,00,000 to Tk.20,00,00,000 excluding land & building and / or employing up to 150 workers. Source: Bangladesh Bank. 7|Page
Bangladesh Bureau Statistics (BBS) definition: BBS uses a definition of size based on employment size. Establishments employing between 10 and 49 workers are called small; those employing between 50 and 99 workers are called medium; and, finally, those employing between 100 or more workers are called large Source: BBS
Bangladesh Better Business Forum (BBBF) definition in 2008: Enterprise Sector Asset size No. of employees Small Service Total fixed asset excluding land & building Tk. 50000-Tk. 5 Million Trade Total asset worth Tk. 50000-Tk. 5 Million excluding the value of fixed asset Manufacturing Total fixed asset excluding land & building Tk. 50000-Tk. 5 Million Medium Service Total fixed asset excluding land & building Tk. 5 Million -Tk. 10 Million Trade Total asset worth Tk. 5 Million -Tk. 10 Million excluding the value of fixed asset Manufacturing Source: BBBF Total fixed asset excluding land & building Tk. 15 Million -Tk. 20 Million Less than 150 Less than 50 Less than 50 Less than 25 Less than 25 Less than 25
Table: A
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Ministry of Industries definition: Enterprise Small Sector Trade Manufacturing Asset size No position taken Total fixed asset excluding land & building of up to Tk. Tk. 15 Million No position taken Total fixed asset excluding land & building of between Tk. 15 Million -Tk. 10 Million No. of employees Less than 25 No position taken
Medium
Trade Manufacturing
more than 25 No position taken
Table: B Source: SME Policy Strategies-2005
2.2 Developing Country SME

There are many countries which are developing giving concentration on the SME sector. Here some of the country positions in SME are given below to have an overview about the contribution of SME in GDP, employment generation and export. SME in China: SME are a vital force for the sustained development of the Chinese economy. SMEs account for 99% of all enterprises in China. SMEs are already making contributions to the growth of GDP, Fiscal revenue, employment creation and export. The contribution of SMEs in Chinese economy is shown below according to the year of 2006:
Ratio SMEs/ Total enterprise SMEs total asset/ All Enterprises SMEs production/ All Production SMEs jobs/ Total jobs New Jobs Export earning Table: C; Source: Internet Contribution in % 98.98% 55.15% 68.7% 74.53% 71.88% 69.20%
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SME in Europe: SMEs account for a dominant proportion of EUs economic activities. More than 10 % of one-person European SMEs would recruit new employees. Since these enterprises make up more than 50% of all businesses in the EU, this could translate into 1. 5 million new jobs in the Union.
SME in India: The small and medium enterprises today constitute a very important segment of the Indian economy. SMEs sector has emerged as a dynamic and vibrant sector of the economy. Today, it accounts for nearly 35% of the gross value of output in the manufacturing sector and over 40% of the total exports from the country. In terms of value added this sector accounts for about 40% of the value added in the manufacturing sector. The sector's contribution to employment is second highest next to agriculture. SMEs Sector plays a major role in India's present export performance. 45%-50% of the Indian Exports is contributed by the sector. Direct exports from the sector account for nearly 35% of total exports. Besides direct exports, it is estimated that small-scale industrial units contribute around 15% to exports indirectly. This takes place through merchant exporters, trading houses and export houses. They may also be in the form of export orders from large units or the production of parts and components for use for finished exportable goods. The exports from SMEs sector have shown excellent growth rates in this decade. The product groups which dominate the exports from SMEs sector include sports goods, readymade garments, woolen garments and knitwear, plastic products, processed food and leather products.
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Small and Medium Enterprises (SMEs) play a major role in economic development, particularly in emerging countries. Small and medium-sized businesses are a major part of the economy and the effective financing of such businesses makes a significant contribution to economic growth and performance generally. A study on SME activities of BRAC Bank Ltd by Khondhokar Mamnun Ahmed shows that BRAC Bank is one of the leading banks to foster the growth of SME in Bangladesh. BRAC Bank Ltd also presents attractive interest rate to its valued clients in order to support their business. A study by Dr. Srinivas on Banks Finance to SME sectors- Issues & Prospects illustrates the present scenario of SME financing position in India. Though most of the banks in India were reluctant to give financial support to SME sector in the past, they are now becoming eager to help the SME as SME contributes greatly in their economy. The concept of Green Banking developed in the western countries, which has been replicated by many developing countries. It means the eco-friendly or environmentfriendly banking and it also refers to ethical banking or sustainable banking. Study on SME and economic development in Europe by Dr. Andrzej Byrt defines Small is beautiful. This research found out that SMEs account for a dominant proportion of EUs economic activities. In practice 75 million jobs, i.e. two thirds of all private sector jobs in the EU are in SMEs which make them all in all a giant on the EU Single Market, although the average firm in the EU employs only 7 people. In certain sectors such as textiles, furniture and construction, sectors which play also an important role in the European fair business within tradition SMEs account for more than 80 p.c. of employment.
Research papers developed by Bakht, Zaid (1998) and Ahmad, Salahuddin et al. (1998) described that the policy environment within which SMEs in Bangladesh operateaccom panies legal, regulatory and administrative constraints to employment creation by SMEs. The robustness of SME contributions to employment generation is a common phenomenon in most developing countries in that the magnitude varies between 70% to95% in Africa and 40% to 70% in the countries of the Asia-Pacific region.
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Study by Patrick Meagher on Secured Finance for SMEs in Bangladesh describes enterprises and financial institutions in Bangladesh face an insuperable obstacle to efficient credit transactions. Policies and legal institutions prevent these parties from reaping the potentially huge gains that are available on the basis of secured finance transactions. The transactions make up an estimated 80 percent of finance for small and medium enterprises in the U.S., and are critically important to other industrial economies. Modern secured finance mechanisms offer a powerful means of mobilizing the value of a broad range of capital as a loan security, and thereby creating profitable opportunities for a wide spectrum of potential users and providers of financial services.
Study on Global cash management: Going Green shows that Green banking is a win-win situation for all participants, and banks would be well served in their efforts to bring these benefits to the attention of the corporate clients in an increasingly
competitive marketplace. By adopting greener banking practices, businesses will not only be helping the environment, but will also benefit from greater operational efficiencies, a lower vulnerability to manual errors and fraud, and cost reductions. Project report on Green Banking: An Innovative Initiative for Sustainable Development by Mridul Dharwal, Assistant Professor (Economics and Business Studies), , School of Business Studies, Sharda University, Greater Noida shows how green banking reduces the firms risk position, increases the efficiency of the bank and profitability. This report also illustrates different strategies of green banking and the performances of Indian banks implication of green banking.
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4.1 Overview of the SMEs in the economy of Bangladesh:

There is a great interest in small and medium enterprises (SME) as a major plank of poverty reduction in Bangladesh. The government has formulated a comprehensivein dustrial policy 2005 by putting special emphasis for developing SMEs as a thrust sector for balanced and sustainable industrial development in the country to help deal with the challenges of free Market economy and globalization. There are some 78,440 private sector establishments of various sizes in Bangladesh with some 3.5 million workers employed in them. The urban Bangladesh accounts for some 60% of units and 76% of employment in the private-sector enterprises. Rural Bangladesh accounts for the rest. 93% of all units in Bangladesh belong in the SME category have between 20 and 99 employees. However, SMEs account for only 44% of the total employment of the enterprise sector. Private companies limited by liability account for strictly a very small proportion of the total number of SMEs in Bangladesh.
4.2 Thrust Sector of SME in Bangladesh
As Bangladesh is a developing country small and medium enterprises play a vital role in economic development and profit generation. There are some thrust sectors
identified by the government as likely to have both better growth prospects as well as some comparative or competitive advantage for Bangladesh. The Industrial Policy 1999 had identified the following 16 thrust sectors: Agro-based industries Artificial flower making Computer technology Electronics Frozen foods Oil and gas Sericulture and the silk industry 13 | P a g e software and Jute goods Jewellery and diamond cutting and polishing information Leather
Floriculture Gift items Infrastructure Table: D: Source: SME Foundation Stuffed toys Textiles Tourism
4.3 Contribution of SMEs in the Economy:

In view of present economic development effort in Bangladesh the SME sector plays an important role. These are reflected in the following performance /activities of this sector:
Contribution of SME sector to GDP remained above 4.5% during the period from2004-2005 to 2007-2008 despite decline in the amount of advances by the banking sector to this sector.
SME sector employs 25% of the total labor force. As a result, this sector is the present available sector for creation jobs. A total of 0.35 million jobs were created against the target of 0.4 million.
SME sector help alleviate poverty, increase income level of rural people and promote agro-industrial linkage in Bangladesh.
SME sector requires lower energy supply, lower infrastructure facilities and this sector imposes less environmental risk. They contribute towards better utilization of local resources and skills that might otherwise remain unutilized.
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4.4 SME Contribution in GDP of Bangladesh:

The small and medium enterprises as the most cost-effective and advisable means of providing employment and injecting dynamism into industrial growth, both for poverty alleviation and for contribution to the GDP. The contribution of SME sectors in our countrys GDP is given below:
Sectors Small & Medium Enterprises Table: E, Source: Internet
2005 4.78%
2006 5.23%
2007 5.86%
2008 6.47%
2009 7.09%
2010 7.26%
Small & Medium Enterprises

8.00% 6.00% 4.00% 2.00% 0.00% 2005 2006 2007 2008 2009 2010
From 2005 the SME contribution to our economy is increasing which shows a good sign to our country. Our SME industry is also flourishing year after year.
4.5 SME Credit-Distribution Package in Bangladesh:

A credit-distribution package shall be worked out by the Ministry of Industries. An innovative scheme---rather like a two-stage screening mechanism---that can really probe for the bone fide of the applicants as entrepreneur material will be deployed.
Donor financial resources made available specifically to help
with
implementation of SME policy being enunciated here would only be allocated to
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competitively-selected enterprises within the booster industries here being prescribed.
Of the total resources available, no more than 20% may be earmarked for medium enterprises, while the remainder, 80%, will be earmarked for small enterprises. Within each division, the resources will be divided up into a publicsector venture-capital fund (10%), approximately on the lines of the currentlyimplemented EEF at the Bangladesh Bank. The remainder will be allocated to a credit fund. (This does not have anything to do with debt-equity ratio relevant in discussions of enterprise financing.)
In the short run, the distribution of the credit fund and venture-capital fund will be the task of the BASIC Bank, which is here being recommended as the lead bank, it being borne in mind that BASIC Bank will closely work with the Advisory Panel. (Over the medium term, this responsibility will devolve to the SME Foundation.) The Ministry of Industry and the SME Advisory Panel/Foundation, as the case may be, will determine modalities of how to implement both the credit-fund and the venture-capital fund.
A publicly-mandated venture-capital scheme will be created in deference to the rationale cited in the main text. It will also give a stimulus to the morale of entrepreneurs who commit in-house capital to projects with novel and potentially innovative processes and technologies with demonstrable potential for commercial success. Such projects have a-typically high risk and high returns. This recommendation is rationalized in terms of the private underinvestment based on extensive, even potentially crippling, negative pecuniary externalities in certain among the booster industries prescribed here, with regard to the leaching of shareholders value outward from the enterprise.
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Within the purview of the Advisory Panel, projects to be funded from the venture-capital fund will be evaluated by a team of experts which will be constituted as a part of the implementation of SME Policy.
The Advisory Panel working together with the Lead Bank in the short-term, and the SME Foundation in the medium- and long-term would implement a transparent and meritocratic arrangement for steering public equity and debt resources into a genuinely deserving selection of enterprises.
The development of human resources in both the BASIC Bank and the SME Foundation with regard to effective targeting of resources made available under public equity funding would remain imperative.
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5.1 Historical Background of BASIC Bank Ltd:

BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited) registered under the Companies Act 1913 on the 2nd of August, 1988, started its operations from the 21st of January, 1989. It is governed by the Banking Companies Act 1991. The Bank was established as the policy makers of the country felt the urgency for a bank in the private sector for financing small scale Industries (SSIs). At the outset, the Bank started as a joint venture enterprise of the BCC Foundation with 70 percent shares and the Government of Bangladesh (GOB) with the remaining 30 percent shares. The BCC Foundation being nonfunctional following the closure of the BCCI, the Government of Bangladesh took over 100 percent ownership of the bank on 4th June 1992. Thus the Bank is state-owned. However, the Bank is not nationalized; it operates like a private bank as before. BASIC Bank Limited is unique in its objectives. It is a blend of development and commercial banks. The Memorandum and Articles of Association of the Bank stipulate that 50 percent of loanable funds shall be invested in small and cottage industries sector.
5.2 Objectives of BASIC Bank Ltd:

Adjudged as one of the soundest banks in Bangladesh, BASIC Bank is unique in its objectives. It is a blend of development and commercial banking functions. Their objectives are: Steady growth in client base and their high retention rate since Banks inception testify to the immense confidence they repose on its services. Diversified products in both liability and assets sides particularly a wide range of lending products related to development of small industries and micro enterprises, and commercial and trading activities attract entrepreneurs from varied economic fields. Special importance is given to individual clients through providing personalized services. 18 | P a g e
5.3 Motto of BASIC Bank Ltd:

Development of clientele as well as human resources of the Bank.
5.4 Functions of BASIC Bank Ltd:

As a blend of development and commercial banking the bank provide clients with a full range of service to help them grow their assets and net worth. They place particular emphasis on small balance sheet size composed of quality assets and steady and sustainable growth. The Bank is particularly eager to the following facts: Offer term loans to clients, especially to develop small scale enterprises. Provide full-fledged commercial banking services like collection of deposits, short term trade finance, working capital finance in processing and manufacturing units and financing and facilitating international trade. Attach special importance to technical and advisory support to small scale industries in order to enabling them to run their enterprises successfully. Micro Credit to the urban poor through linkage with NGOs with a view to facilitating their access to the formal financial market for the mobilization of resources is another diversification of our services. Provide an environment in which our staff members feel they can exercise their initiative and judgment within a clearly established framework. Coping with the competitive and rapidly changing financial market of the country, BASIC Bank maintains close connections with its clients, the regulatory authorities, the shareholders (the Government of Bangladesh), other banks and financial institutions.
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5.5 Corporate Strategy of BASIC Bank Ltd:

Financing establishment of small units of industries and business and facilitate their growth Small Balance Sheet size composed of quality assets. Their corporate strategies are: Steady and sustainable growth. Investment in a cautious way. Adoption of new banking technology. To employ funds for profitable emphasis on small scale industries. To undertake project promotion on identify profitable areas of investment. To search for newer avenues for investment and develop new products to suit such needs. To establish linkage with other institutions which are engaged in financing micro enterprises. To cooperate and collaborate with institutions entrusted with the responsibility of promoting and aiding SSI sector. purposes in various fields with special
5.6 Corporate Information:

Head Office Sena Kalyan Bhaban (5th Floor),195 Motijheel C/A, Dhaka-1000 Main Branch Bana Shilpa Bhaban (Ground floor) 73 Motijheel C/A, Dhaka-1000 Credit Rating Report Credit Rating Agency Auditor AA2 (Long Term), ST-2 (Short term) CRAB Syful Shamsul Alam & Co. Chartered Accountants
Table: F, Source: Annual Report
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5.7 Departments of BASIC Bank Ltd:

It would be hazardous if all of the activities like deposit collection, export and import, remittance collection, account opening, human resource management etc are done in one department. So departmentalization is necessary in doing all works in an orderly manner. BASIC Bank Ltd also has different department to accomplish all the works in an efficient manner. These are the following departments of BASIC Bank Ltds head office and branch office.
BASIC Bank Ltd.
Corporate Office Credit Department Foreign Exchange Department Human Resources Department Treasury IT (Information Technology) Industrial Credit Division Commercial Credit Division Micro Credit & Special Finance Division Small Enterprise Finance Division Establishment Division Research &Development Division Finance & Accounts Division Green Banking Policy Implementation Unit
Branch Office

General Banking Department Credit Department Export import Division
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5.8 Financial Highlights:

Particulars Authorized Capital Paid up Capital Deposits Loans and Advances Import Export Net Profit 2010 2000.00 1964.65 49259.60 46341.51 42205.90 42205.90 660.93 2009 2000.00 1455.30 34501.69 29261.53 33976.60 19887.70 648.85 2008 2000.00 1309.77 38368.23 27269.13 27359.77 22270.87 549.86 2007 2000.00 1247.40 31947.98 22263.35 22270.87 16794.96 282.96 (Amount in millions) 2006 2005 2000.00 945.00 24084.65 22263.35 17804.27 15463.74 554.14 2000.00 810.00 22325.58 15339.35 14094.96 11,097.23 285.49
Table: G, Source: Annual Report
From the table, it is clear that year by year the performance of deposit collection, loan & advance & net profit generation is well. We all know that banks are the intermediaries to collect deposit from customer through different bank account with attractive interest rate ant make investment and credit facility that are profitable to the bank in order to generate enough interest income for interest payment and profit generation.
5.9 Products and services:

5.9.1 General Banking:
The general banking department does the most important and basic works of the bank. All other departments are linked with this department. It also pays a vital role in deposit mobilization of the branch. BASIC Bank Ltd provides different types of accounts, locker facilities and special types of saving scheme under general banking.
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For proper functioning and excellent customer service this department is divided into various sections namely as follows-
Deposit section Account opening section General Banking Bills and clearing section Cash section FDR section Accounts section Remittance section
5.9.2 Functions of General Banking Division:
Functions of General Banking Division 1. Account opening 3. Cheque book issuing 5. Signature Scanning 7. Demand draft issue 9. Solvency certificate issuing 11. Account closing 2. Pay order issue 4. Telephonic Transfer 6. Account enquiry 8. Providing Accounts Statements 10. Account transfer 12. Dispatch
13. Return of Bangladesh Bank and Head office statements

Table: H, Source: BASIC Bank Ltd.
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5.9.3 Foreign Exchange Department: Foreign Exchange department facilitate the inflow and outflow of foreign currency exchange by opening export-import L/C. This department also facilitates local L/C. The foreign exchange department of BASIC Bank Ltd includes the following activities:
Import: Foreign Exchange Department Opening of letter of credit Advance bills Bills for collection Import loans and guarantees
Export: Pre-shipment advances Purchase of foreign bills Negotiating of foreign bills Export guarantees Advising/ conforming letters of credit Advance for deferred payment export Advance against bills for collection
Remittance: Issue of D.D, T.T & M.T. Payment of D.D, T.T, M.T Issues and encashment travelers Cheque Sale and encashment of foreign currency notes Non-residence accounts
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5.9.4 Different Deposit Accounts:
Like all other commercial banks, BASIC bank Ltd also offers current deposit account, savings deposit accounts, special noticed deposit scheme & fixed deposit accounts with attractive interest rate and loan available facility. But there are some special bank accounts that provide the customers with special benefits like high interest rate, doubling the monetary benefit etc. Some of the special accounts are:
a. BASIC Double Benefit Scheme: Under this scheme, one can deposit a certain amount of money for a period of 6 years and will get back the double amount that he/she deposited.
b. BASIC Monthly Benefit Scheme: The depositor of this account will get the regular benefit of savings account. The special feature of this account is if the customer deposit taka one lac (Multiples), he/ she will get one thousand (multiples) monthly.
c. BASIC Premium plus Current Account: This is a special current account. Though current account does not contain interest, this BASIC Premium plus Current account offers customer interest. Moreover there are no remittance charges for this account.
5.9.5 Loans and advances: BASIC Bank Ltd mainly deals with small and medium enterprises. So their loan and advances are for the small and medium scale industries. They offer long term loan, working capital loan, loan against trust receipt, secured overdraft etc to its customer. An overview of loan and advances will be given in SME financing and BASIC Bank section.
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SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 6.1 Objectives of SME Financing:
BASIC Bank Ltd started its journey as a specialized bank to provide project loan and working capital support to small & cottage industries. With the pace of time and redefinition of scale of industries the bank is now focused on small and medium sector industries (SMI) to accelerate the pace of development to small and medium industry of Bangladesh. Besides the bank is rendering all kinds of banking services like commercial banks. It is mandated in the Article of Association of bank to provide credit a minimum of 50% of its loanable fund to the small and medium industry sectors. As a broad policy objective in respect of small and medium industry sector financing the bank undertakes the following tasks: Extending financial assistance to small & medium industries in private sector in the form of short term working capital loan, medium term and ling term capital finance to new projects and BMRE of SSI & MSI. Extending financial assistance to micro enterprises and collaborate with other institutions engaged in financing and developing such enterprises. Co-operate and collaborate with institutions entrusted with the responsibilities of promoting and aiding SMI sector.
6.2 Main principles of BASIC Bank Ltd for SME Financing:

At the time of extending credit BASIC bank limited follows certain principles. Main principles of lending operations in BASIC Bank are as follows: 50% of total credit will be invested to small and medium industry. BASIC Bank gives importance to finance export oriented industry or import substitute industry. BASIC Bank always welcomes any new type of projects rather than conventional industry. 26 | P a g e
Projects, fixed costs within 20 crore (excluding land& building) is defined as SMI. So BASIC Bank expects the proposed projects are within 20 crore. There should be debt to equity ratio as determined by the bank on individual case basis. Common practice of debt ratio is 70:30. All lending will adequately be secured with acceptable collateral security and margin requirements. End use of term loan and working capital facilities will be closely monitored to ensure that the funds are used for the purpose of which those were advanced. Bank maintains credit deposit ratio nearly 80% to maintain liquidity and not to be in crisis of fund. Bank does not fall short of short term temporary funds o0r borrowings from other banks or through short term money market operations. Bank offers premium interest rate to high credit rating borrowers. In BASIC bank, most of the deposit chunk is in fixed deposit. Thus the bank can easily go for term lending.
6.3 Loan product of BASIC for SME financing:
BASIC Bank Ltd has been offering a wide range of credit facilities to meet the financial needs of its customers. Grossly the products are of the following two types:
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Term loan Funded Credit Working Capital Trade Finance SME Credit Facilities Letter of Credit Bank Guarantee
Non-Funded Credit
6.3.1 Funded credit facilities:

a. Term loan:
Term loan is allowed for procuring fixed assets of the project. The loan is sanctioned at a debt to equity ratio. To increase the stake of the sponsors, BASIC Bank always emphasizes on equity participation. There are many instances that due to poor equity participation projects have become sick. Right now BASIC Bank is in practice to finance term loan at the rate of 70:30 debt to equity ratio. Term loan is secured by registered mortgage of immovable property such as land, building, and hypothecation of machinery. Repayment of term loan is generally made in some installments. Generally 6 month grace period is allowed before commencement of repayment of installments. Repayment pattern is made as per nature and momentum of cash inflow of the projects. The term loan is categorized according to its tenure. Following are the types of term loan: Mid term loan: the tenure of mid term loan is greater than one year up to 3 years. Generally mid term loan is allowed where the bank thinks the project has a higher rate of return (IRR). The bank is very analytical to allow the period of the loan because if insufficient period for repayment is allowed, the project will be in trouble. 28 | P a g e
Long term loan: Long term loan is allowed for 5 years. Most of the cases the bank sanctions this sort of loans. For a new project where substantial machinery is to be financed by a bank and IRR is not too much high to repay the loan within less than 5 years.
b. Working capital:
Working capital is needed by a concern for its current operational purposes. It is regarded as life blood of the concern. Several factors to be considered while assessing the working capital requirement of a concern like operational cycle, growth and expansion, price hike etc. all current asset requirement is summed up and 30%margin is deducted. The rest amount is maximum permissible portion of bank to finance. There are following forms of working capital:
Secured overdraft (SOD): This is an overdraft facility secured by encashable securities like FDR, Government bond, wage earner bond etc. It represents permission to overdraw its current account up to sanctioned limit. The loan is allowed keeping some margin generally 5%. Proper turnover in an overdraft limit is a must. Cash credit: Like overdraft, cash credit is a continuous credit which is generally sanctioned for one year which is further renewable as per requirement of the borrower. After assessing the working capital requirement and keeping proper margin a limit is sanctioned though the client is entitled to overdraw within the sanctioned limit, the banker keeps watch on each and every transaction. There are two types of cash credit: Cash credit (Hypothecation): when cash credit is sanctioned under hypothecation of stock of goods it is called CC (Hypo). In this case of hypothecation, the stock remains under the possession and ownership of the borrower. Only the right belongs to the bank through creating the charge of hypothecation. In this case the client has to submit stock report regularly which is to be verified by the bankers time to time. 29 | P a g e
Cash credit (Pledge): in case of cash credit pledge, only the ownership belongs to the borrower. The possession, control and right remain with bank. The nature of operation in CC (Pledge) account is different than that of CC (hypo).
c. Trade finance:
International trade dealings are one of the major business activities undertaken by BASIC Bank Ltd. To facilitate international trade transactions, it has arranged correspondent relationship with large number of international banks, which are active across the globe. A. D. branch are staffed by personnel experienced in International Trade Finance for processing import and export transaction. BASIC Bank offers a complete range of Trade Finance services. It offers following services: Issuing advising and confirming of documentary credits. Pre-shipment and post shipment finance. Negotiation and purchase of export bills. Discounting of bill of exchange. Collection of bills.
The bank provides finance related to L/C and post import finance like loan against imported merchandise and loan against trust receipt to the importers. The bank provides back to back L/C and pre-shipment finance facilities like packing credit and post shipment finance like foreign bill purchase to exporters.
i. Import finance: Loan is given to importers for buying imported items. Each loan be related to one specific import transaction and the term of the financing can vary depending on the type of products imported on the need of the importer. BASIC Bank extends finance to the importers in the form of: Payment against documents (PAD): After establishing the letter of credit, the bank is bound to honor its commitment pay for import bills when these are presented for payment. The foreign correspondent, who negotiates the documents, gets payment as 30 | P a g e
per stipulated reimbursement terms of the L/C to the debit of the account of L/C opening bank, F.C account. The opening bank lodges the shipping documents in their books and responds debit advice originated by foreign correspondent to the debit of payment against document account. Loan against imported merchandise (LIM): it is allowed against imported merchandise storing the same in banks custody. The merchandise is cleared by the bank through its approved clearing agents. If the party has the storage of money to clear the goods from the airport, then he wants bank loan. The advance is adjusted by delivering the goods against payment by importer. The documents remain with the bank. Loan against trust receipt for retirement of import bills (LTR): It is post import finance. Depending on the relationship with the client, Bank allows LTR facilities for retirement of import documents instead of LIM. Documents are given to the party adjusts the LTR. LTR facilities are usually allowed for 90 days for each case. In case of manufacturing concern, production and operation cycle must be taken into consideration for allowing the tenure of LTR.
ii.
Export finance:
Pre-shipment finance: loan given by BASIC Bank to the exporter to provide liquidity for buying or processing goods to be exported. Pre-shipment finance in the form of: Packing credit (PC): Pre-shipment finance under the name of packing credit , is essentially a very short term advance granted by the bank to an exported to enable him to produce, process, manufacture pack and ship the goods to the buyers abroad in conformity with the terms & condition of export L/C contract. Post shipment finance: Loan provided to the exporters against their export receivables, post shipment finance in the form of: Foreign bill purchase (FBP)/ local bill purchase (LBP): The foreign or local bill purchased or discounted is a facility granted by the bank to its customer whereby the bank purchases or discounts the customers sight export documents. 31 | P a g e
Loan against documentary bill (LADB): In some cases when we get local currency instead of foreign currency (in case of sight bill), the bank does not purchase or discount the bill rather the bank makes short term advances to the extent to the extent of a certain percentage (say 90%) of a bill amount. Local general against cash incentive: In case of fund shortage of exporter, BASIC Bank allow loan against lien of pending claimed cash incentive. Loan is adjusted from receivable cash incentive proceeds. Cash incentive payment is a time consuming procedure and there is always uncertainty.
6.3.2 Non-funded credit facilities:

Non funded credit facilities are those where bank doesnt have to outlay cash, rather than merely giving a commitment or promise to pay. Two types of credit facilities are:
a. 3.2.1 Letter of credit:
A letter of credit is a document issued by a bank stating its commitment to pay someone (supplier/ exporter/seller) a stated amount of money on behalf of a buyer as long as the seller meets very specific terms and conditions. Letter of credit is more formally called documentary letter of credit because the banks handling the transaction deal in documents as opposed to goods. Documentary letter of credit is subject to the Uniform Custom & Practice for Documentary Credit (UCPDC), Brochure no. 600, of the International Chamber of Commerce (ICC) in Paris.
b.
Bank Guarantee:
A bank guarantee is a written irrevocable obligation by the bank to pay a agreed sum of money to the beneficiary in the event of default by a third party in fulfilling their obligations under the terms of the bank guarantee. This is issued by the bank at the request of contractors, wholesalers, companies involved in transaction etc. for the purpose of handling the guarantee request they receive in their operation. According to the purpose of guarantee, bank guarantee can be classified in following ways: 32 | P a g e
Bid Bond: Bid Bond or tender guarantee is a surety bond issued by the bank upon the request by the bidder/ tenderer expressing the banks commitment to meeting the claim of the beneficiary (the party who invites tender) in case of the bidder withdraws from the bid during the bid period or fails to accept the award when he/ she becomes the winner. Performance bond/ guarantee: Performance bond is a n undertaking issued by the bank in favor of the buyer/ employee at the request of the supplier/ service provider, whereby the bank undertakes to make payment to the beneficiary in the event of default by the principle (Supplier/ service provider) in due performance of the terms of the contract. Advance payment guarantee: This is issued by the bank in favor of a buyer and at the request of the seller/ contractor (who receives in advance) representing the banks commitment to repay the sum in the event that the seller fails to honor the contract terms in their entirely or in part. Suppliers credit guarantee: Such guarantee is issued by the bank to meet any claims to be made by the local or foreign supplier in case of the debtor fails to repay in accordance with the terms and conditions of the contract. Retention guarantee: A guarantee issued at the request of contractor to secure repayment of the retention money held by the employer during different phases of the project.
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6.4 SME Credit operation of BASIC Bank:

BASIC Bank Ltd is a banking company registered under the Companies Act 1913. The bank operates as scheduled bank undertaking all types of banking transactions. It is blend of development finance and commercial banking. The bank by its memorandum and Article of Association is entrusted with the responsibility of providing medium and long term loans and other financial assistance for promotion of small scale industries sector. It is stipulated in its MA & AA that at least 50% of the banks loanable fund shall be used for financing SSI.
6.4.1 Credit Policy of BASIC Bank Ltd: To supplement the effort of the government for the economic uplift of the country through industrialization, the bank has developed its own credit policy keeping in view the government policy in this respect and provisions contained in the Banking Companies Act 1991 and other related rules and regulations. The entrepreneur of small industry concern/ project requiring financial assistance from BASIC need to fulfill the following criteria:
Appraisal criteria: Standard loan application form is issued only after the promoter is found credit worthy and acceptable after evaluation of information submitted in First Information Sheet. Viability of each and every project recommended for financing is subjected to thorough scrutiny and detailed appraisal. The report must cover the basic areas of project viability. Project should be designed with appropriate machinery. Project should have necessary infrastructural facilities and environment aspect shall be carefully examined. Market prospect and potential should be ensured at competitive prices.
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Debt service coverage ratio should be at least 2.5 times at the optimum level of production. The project should have satisfactory breakeven point and margin of safety. The period of loan should be determined based on cash flow potential and payback period and shall not normally exceed 5 years. Security criteria: Registered mortgage by way of creating first charge/ mortgage on the land, building/structure of the project. Hypothecation/ pledge of machinery, equipment and other inventories and floating charge on all other assets. For leasehold land or rented premises the security coverage should be available in the form of acceptable collateral of urban properties. Comprehensive insurance coverage on the project assets and goods. Life insurance on the life of the promoter/sponsor of the project to the extent of 20% of individual shareholding Deposit of share certificate of sponsor equity.
Maximum investment & assistance: Aggregate loans and advances shall not exceed 10 times the banks net worth or 65% of customer deposits whichever is lower. Of this generally 50% shall be deployed in financing small industries both as term loam against foxed assets and working capital. The growth in the number and amount of loans and advances should not exceed the capability of the banks manpower in terms of close monitoring and supervision. No credit shall be extended to customer entity which exceeds in total commitment more than 10% of the Banks capital and free reserve except with the approval of the board of directors. All credit extension tone customer or group exceeding tk. 3.00 crore or equivalent shall require the prior approval of the board. 35 | P a g e
Loan should be dispersed to cover wide sector of industries. However loans to a particular sector shall not exceed 25% of its total loan at any given time.
6.4.2 Project appraisal by BASIC Bank Ltd:

When a firm approaches for loan to BASIC Bank Ltd it has to make a project profile consisting of project details, product, profitability, management aspects, forecast about future marketability of the product, risk involved. After getting the project the bank analyses the projects viability from the following perspective: 6.4.2.1 Management aspect: Managerial feasibility refers to the assessment of ability of management personnel in managing a project efficiently. The management personnel should have: Technical skill to use knowledge, method and technique (acquired from experience, education and training) to perform the job. Human skill to maintain interpersonal relationship within or outside of the organization. Conceptual skill to understand the complexities in overall organization.
Entrepreneur/promoter has to be creditworthy and competent enough to run the proposed industry. Besides the management of the proposed project, manpower planning, bio data of key personnel and organogram are analyzed to apprai8se the management feasibility.
6.5.2.2 Marketing viability: Marketing aspect is very crucial part of project appraisal. BASIC Bank ltd considers the following points for assessing marketing feasibility: Product mix Demand supply gap Market prospect for the product at competitive price Distributional channel, promotional activities.
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6.5.2.3 Technical viability: BASIC Bank has been practicing the concept of project based lending rather than traditional security based lending approach. Technical team is essential in assessing technical aspect of a project. Most of the projects are typically capital intensive and engineering supervision prior to approval of credit is a prerequisite. Head office is having a technical team under industrial credit division whose exclusive job is to assess the technical matters. The project submitted by the borrower is judged from technical point of view effectively. Following items are considered to assess technical viability: Location of the project Land, land development and civil construction Availability of required machinery and its technology Rated capacity and attainable capacity of machinery Installation of machinery Raw material requirement, raw material availability, sources of raw materials. Manufacturing process and its flow diagram Safety provision Project completion schedule Availability of infrastructural facilities such as road and transport Availability of utilities such as gas, electricity, water etc. Climatic position in the project area. Availability of required labor. Political factors such as government patronage, industrial [policy of government. Proximity to complementary project.
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6.5.2.4 Financial viability: Various financial tools and techniques are used in testing financial viability of project such as:
a. Capital budgeting:
Under capital budgeting technique there are two methods- non discounted method and discounted method. Under non discounted method bank use the following method: Payback period: the period within which the volume of investment is expected to be returned from the project. Payback period must be less than the tenure of the term loan. Generally BASIC Bank Ltd prefers projects having payback period less than 5 years. Under discounted method time value of money is considered. Here the following calculations are being used: Net present value: It is the difference between present value of expected inflow or benefit and that of outflow or investment. Under this method expected future benefits are being converted into present value using reasonable rate of discount. A positive NPV at the rate 25% discount rate is a must. Internal Rate of Return (IRR): It is a rate at which the present value of inflow equates the present value of outflows. IRR tells the minimum required rate of return from an investment. Acceptable IRR is being determined by considering the opportunity cost, cost of capital, the prevailing maximum return in the economy etc. IRR should preferably be not less than 25%. Profitability Index: It is calculated by dividing present value of inflow with the present value of outflow. A project can be accepted if PI>1.
b. Breakeven analysis:
Break even analysis is commonly known as the Cost- Volume- Profit (CVP) analysis. Breakeven analysis shows the relationship between cost and revenue with output or sales that is required to equate the cost. Moreover, break even analysis provides a clear 38 | P a g e
idea about the required volume of sales to earn a target profit. Thus break even analysis helps the decision criteria. Break even analysis is done to check whether the project is capable to generate profit using the attainable capacity. c. Sensitivity analysis:
Sensitivity analysis provides the picture of relative changes in overall profitability due to change in any one variable. Usually changes in material and other variable cost or change in selling price are being taken into consideration for making sensitivity analysis in BASIC Bank ltd.
d. Ratio analysis: The common ratios that are being practiced in BASIC Bank ltd is current ratio (not less than 1), Debt to Equity ratio (70:30), debt service coverage ratio (not less than 2), interest coverage ratio (not less than 2), operating profit margin (not less than 5%).
6.4.2. 5. Socio economic aspect: The observation of this aspect is to see whether the project is socially. As a part of socio economic feasibility study BASIC Bank studies following parameters:
Employment generation Foreign exchange earning Environment impact Economic linkage impact Contribution to GDP
6.4. 3 Sanction procedure: The term loan application for small industries will preliminary by scrutinized taking into account personal credibility of the sponsors, availability of owners equity, account/ deposit relationship with transaction etc. the bank, past history of activity, other banks
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If prima facia of the project appears viable and acceptable to the bank then full dressed appraisal report shall be carried out taking into account the management, technical, marketing and financial aspects. Formal application in standard form of the bank shall be obtained along with required project examination fee tk. 5000.00 for project having investment cost below tk. 50.00 lac and tk.10000.00 for the project having cost above tk. 50.00 lac. In order to build up sponsor, stake is to have ready to liquid asset for investment in the project and as practiced by other DFIs of the country BASIC may also continue to ask for equity deposit as under: 20% and 30% of the proposed equity along with loan application form to be deposited. Balanced equity amount as per terms of sanction to be realized after sanction of loan. Equity deposit so realized will be kept in STD A/C carrying interest at STD rate. The said equity deposit will be realized as per need of the project to be determined after assessing investment needs of the project. 6.4.4 Procedure for valuation of land & building: In choosing the right location suitable site should be inspected from technical viewpoint like availability of utilities, means of transport, availability of manpower, etc, Price of land should be determined based on present forced sale value of the land. In case, if felt so, value of land may be determined through spot survey of the land by a surveyor registered at Registrar of Land during past 3 years. The covered area of the factory to be determined on the basis of actual requirement for production process, storage facilities and other necessary structure. Clearance from environment pollution control authority to be taken when necessary. 6.4.5 Risk Faced in SME credit & its management: The risk of BASIC Bank Limited is defined as the possibility of losses, financial or otherwise. The risk management of the Bank covers core risk areas of banking viz. credit risk, liquidity risk, market risk that includes foreign exchange risk, interest rate 40 | P a g e
risk, equity risk, operational risk and reputation risk arising from money laundering incidences. The prime objective of the risk management is that the Bank evaluates and takes well calculative business risks and thereby safeguards the Banks capital, its financial resources and profitability from various business risks through its own measures and through implementing Bangladesh Bank's guidelines and following some of the best practices as under:
Credit risk:
It arises mainly from lending, trade finance, leasing and treasury businesses. This can be described as potential loss arising from the failure of a counter party to perform as per contractual agreement with the Bank. The failure may result from unwillingness of the counter party or decline in his / her financial condition. Therefore, the Banks credit risk management activities have been designed to address all these issues.
Credit Risk management:
The Bank has segregated duties of the officers / executives involved in credit related activities. A separate Corporate Division has been formed at Head Office which is entrusted with the duties of maintaining effective relationship with the customers, marketing of credit products, exploring new business opportunities, etc. Moreover, credit approval, administration, monitoring and recovery functions have been segregated. Another division naming Credit Administration Division (CAD) has also been established to oversee mainly documentation facilities. In line with Bangladesh Bank guidelines the Bank has segregated marketing, approval and monitoring/recovery functions. The credit risk management includes borrower risk analysis, financial statement analysis, industrial analysis, historical performance of the customer, security of the proposed credit facility and market reputation of the borrower etc. The Bank takes its lending decision based on the credit risk assessment report by appraisal team. In determining Single borrower / Large loan limit, the instructions of Bangladesh Bank are strictly followed. Internal audit is conducted at periodical intervals to ensure compliance of Banks and Regulatory policies. Loans are classified as per Bangladesh
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Banks guidelines. Concentration of single borrower / large loan limit is shown in the notes to the financial statements.
Interest rate risk:
Interest rate risk may arise either from trading portfolio or non-trading portfolio. Interest rate risk of non-trading business arises from mismatches between the future yield of an asset and its funding cost.
Interest rate risk Management:
Asset Liability Committee (ALCO) monitors the interest rate movement on a regular basis.
Foreign exchange risk
Foreign exchange risk is defined as the potential change in earnings due to change in market prices. The foreign exchange risk of the Bank is minimal as all the transactions are carried out on behalf of the customers against underlying L/C commitments and other remittance requirements.
Foreign exchange risk Management:
Treasury Department independently conducts the transactions and the back office of treasury is responsible for verification of the deals and passing of their entries in the books of account. All foreign exchange transactions are revalued at Mark-to-Market rate as determined by Bangladesh Bank at the month-end. All Nostro accounts are reconciled on a monthly basis and outstanding entry beyond 30 days is reviewed by the management for its settlement. The position maintained by the bank at the end of day was within the stipulated limit prescribed by the Bangladesh Bank.
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6.4.6 Credit pricing: BASIC Bank Ltd. follows the credit policy of the bank and instruction of Bangladesh Bank and Banks Head Office time to time. The first step of credit proceedings is the request for credit from the clients. Then scrutinizing and collection of information from primary and secondary sources take place. Credit appraisal is the core part of credit operation. On the basis of appraisal, approval is given by the higher authority. Flow chart for processing SME loan is given below: Rate of Interest on Lending Category Small Industry / Enterprise: a. Small Industry / Enterprise: Service and Manufacturing Term Lending Working Capital b. Small Enterprise: Business / Commercial / Trading Term Lending Working Capital Medium Industry / Enterprise: a. Medium Industry / Enterprise: Service and Manufacturing Term Lending Working Capital b. Medium Enterprise: Business / Commercial / Trading Term Lending Working Capital
Table: I, Source: WWW.basicbanklimited.com
Interest Rate
15.00%p.a 16.00%p.a
16.00% p.a 17.00% p.a
15.00%p.a 16.00%p.a
17.00%p.a 18.00%p.a
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6.4.7 Credit approval process of BASIC Bank ltd: Borrower approaches the branch for credit Interview with relationship officer, credit in-charge, and Branch in- Charge Borrower submits Loan Application in prescribed format along with relevant paper CRO applies for CIB enquiry CRO visits the business again to assess sales, stocks, go-down, sister concern (if any) Customers come to unit office with Guarantor & fills LAF & A/C opening form CRO visits customer residence Appraisal at branch level by branch credit committee, same time CIB report from Bangladesh Bank is obtained, legal opinion from Legal Advisors & Valuation report from enlisted surveyors are collected Credit Line Proposal (CLP) is sent to Head office Credit & Loan Administration Loan Admin checks the docs and sends them to credit committee for appraisal Appraisal at Head office by Head Office Credit Committee Approval by Board of Director (if necessary) Sanction letter to the Borrower mentioning the terms & conditions Completion of documentary requirement Disbursement of loan after getting all the required original docs including CIB Clearance from Bangladesh Bank Loan supervision, Monitoring & control
Figure: Flow chart of credit operation system of BASIC Bank Ltd.
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6.5 Supervision and follow up of credit BASIC Bank Ltd:

The basic objective of monitoring and follow up is to ensure that the credit granted by the bank are safe as the fund lent by the banks belong to the depositors and bank management has tremendous responsibility in safeguarding the interest of depositors. The supervision of projects includes adequate control procedures in disbursement of loan and the continuous monitoring of project operations during its period of construction and implementation through report requirement as well as plant visits. A project under implementation is visited every month and progress report is submitted to the management. Bank official on project supervision keeps watch over the estimation made and notes the deviation for taking quick remedial measures. BASIC Bank tries to ensure that money lent is properly used for generation of income through increased economic activities and money is repaid in time. All these are ensured through as effective supervision and follow up system. The bank has been following a series of measures, both in Head Office and branch level, to follow up and supervision of loan and advances to avoid and minimize non performing loan of the bank. The two terms supervision and follow up are closely related. Supervision gives more emphasis on proper end use of fund lent. It includes adequate arrangements by bank for maintaining close contact with the borrower and its activities in order to remain well informed about the position and progress of the purpose financed and to offer appropriate guidance to the borrower, where necessary. Follow up includes effort to ensure that the terms and conditions are complied with and money lent is repaid as per schedule of repayment. It also includes effort to regularize the irregular advances. Recovery of advances largely depends on effective follow-up. In conducting supervision and follow up, BASIC Bank follows the undernoted methods: Keeping watch over the accounts to ensure that operations are regular and as per procedure. Particular care is taken when the balance in the account remains very near or goes beyond the drawing limit or there is no good turnover. 45 | P a g e
Ensuring the inputs/ materials are purchased/ procured as per procedures/ terms of sanction and are used properly and outputs are sold properly. Keeping watch over the inflow and outflow of fund. Collecting periodical reports, returns and information about the borrower and examine the activities of the project/ enterprise financed. Ensuring that security/ collaterals have been obtained as per terms of sanction and valuation has been assessed correctly and security is maintained properly. Ensuring that property has been properly insured where required as per policy, procedures and practice. Ensuring that the documents have been obtained as per terms of sanction and as per procedure for such type of advance. If not get the documents regularized. Keeping regular contact with the borrower both formally and informally and pay regular visit to the projects/ enterprise financed. Keep watch over the repayment trend and see that the advance does not turn up as irregular or stuck up and becomes time barred. Ensure that appropriate actions are taken in time to regularize the irregularities and recover the loan as per schedule. Obtaining periodical balance confirmation from the borrower and necessary fresh document is obtained (in case of renewal/ enhancement of loan). To check whether there is any adverse trends in market, economic and political conditions which may endanger the reliability of the facility. To check that borrowers business is being satisfactorily conducted as reflected through a review and analysis of the financial and operating statement. To make sure Compliance of term of approval. To check satisfactory conduct (turnover, regularity of repayment etc.) of the borrowing accounts. 46 | P a g e
To assess the adequacy of collateral value. In order to ensure an effective supervision BASIC Bank ensures end use of fund. To see that the fund lent to the borrower are used for the purpose for which they have been given. In order to ensure end use of term loan funds, it is practice to disburse the money directly to the supplier who has supplied the fixed assets and not to the borrower directly. On the other hand in case of working capital advance the objective to acquire current assets, supervision of end use of fund is comparatively hard and possibility of diversion in case of cash credit (hypothecation) is more. The working capital utilization is checked to great extent by ensuring that the borrower computes his working capital requirements and furnishes a statement regarding inventory and book debts as shown in monthly statements. Bankers frequently visit the business house to verify the actual position of current assets. Moreover, the borrower is required to maintain the proper current ratio.
6.6 Recovery of nonperforming loan (NPL):

BASIC Bank Limited has been following a series of measures to recover the default amount of loan and advances both in Branch and Head Office level. Branches have been given yearly target to recover dues from the existing default borrower to reduce the classified loans and advances up to minimum level. BASIC bank takes the following steps to recover the stuck up credit: Exerting moral pressure: The bankers visit the borrowers place of business again and again and find out the cases of nonpayment of the banks dues. The banker may also request some influential customers of the area to exert pressure on the borrower to clear banks dues. If there is a guarantor, he is also called upon to adjust the account or have it adjusted by the principal.
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Legal procedure: In case the borrower does not adjust the default loan, the only course left open to the bank is to sent a legal notice stating the undesirable character of the credit and recall and ask the party to liquidate it within a stipulated time falling which the securities will have to be disposed off without further reference to him at the best possible market rate either in public auction or by private negotiation according to the convenience of the bank. After the securities have been sold and the bank will resort a legal auction to recover the dues. If no favorable response is made by the borrower guarantor after sending notice, the bank disposes of the securities and adjusts the account. Presently banks are empowered to dispose of the securities without intervention of the court under the Artha Rin Adalat Act 2003. If the credit is not fully secured and where there is a shortfall to adjust the advance after disposal of securities, bank file a suit against the borrower and guarantor for recovery of banks dues.
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7.1 SWOT Analysis of BASIC Bank Ltd:

The comparison of Strengths, Weaknesses, Opportunities and Threats is normally referred to as a SWOT analysis. Its central purpose is to identify the strategies that will create a firmspecific business model that will best align, fit, or match a companys resources and capabilities to the demands of the environment in which it operates. It helps the organization to identify how to evaluate its performance and scan the macro environment, which in turn would help organization to navigate in the turbulent ocean of competition.
Strength: BASIC Bank Ltd has a vast line of services, which can attract people of different segment of the society. Low lending interest rate compared to other PCBs & FCBs interest rate. Lower interest in term loan than other working capital loan which is very exceptional in financial market. Team work at mid level and lower level Interactive corporate culture Customization and flexibility in credit products. No loan processing fees No commitment fees Substantial grace period in term loan as per cash flow of the project. Bank offers supplementary service such as financial advisory services and technical advisory services by dint of its divergent and resourceful pool of human resources. Loyal and strong customer base. Sufficient repayment period (up to 5 years).
Weakness: BASIC Bank Limited currently dont have any strong Marketing Activities through mass media e.g. Television. Deposit product is not well diversified 49 | P a g e
Conservative approaches in lending operations. Loan processing time is a bit longer Opportunities: Huge untapped sub-urban and rural SME market. As SME concept is getting popular day by day in the country, so there will be more opportunities to explore new customer. Apart from government low cost deposit, BASIC Bank receives low cost fund from Bangladesh Bank, various international development banks and development agency for relatively longer period. Threats: The main threat for BASIC Bank Limited is a wide range of competitors. About ten of them are multinational. The multinational banks came to our country with vast resources, like financial and marketing skill. Also new invented business tools and techniques are channeled to them from their parent organization. Economic recession that results in industrial depression. There are some upcoming banks that are joining in our banking industry and create a great challenge for BASIC Bank Limited in customer attraction and retention with attractive interest rate. Matching of Strength and Opportunities with Weaknesses and Threats: In the credit policy I have found everything all right except the techniques used for screening the client. BASIC bank has some very efficient and highly educated professionals who can easily solve the problem if they concentrate on the issue. So the weakness can be eliminated easily through its strength. The credit policy of BASIC has been perfectly designed depending on the government funds and assistance. But as it is sure that, government will sell its share in near future BASIC has to revise its credit policy by considering alternative source of fund. International funds can be alternatives for government source if BASIC can continuously reduce its classification rate. 50 | P a g e
Alike other bank BASIC can enforce its marketing operation to grab the small savings of the middle class. And a small change is enough to do so as the strength of the present credit policy is capable to take any pressure. So from the SWOT analysis of the credit policy of the bank I have found that, the credit policy of BASIC Bank is sound with some exception. And small revise of the policy can be the best policy that can lead a bank to the peak of success.
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SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 7.2 Individual Company Analysis Loan to deposit liabilities & SMI loan to total loan ratio
Interpretation: Banks main activities are deposit
collection and giving loan in different

0.85 0.80 0.75 0.70 0.65 0.60 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Loan to deposit liabilities
profitable sectors. Through this bank can made proper balance in spread generation which is the difference between interest earned on loan and interest given in deposit. If the bank cannot make successful balance between deposits utilization bank will run short in interest payment to its depositors. Loan to deposit liabilities ratio show how much amount of deposit collection is being utilized in credit making. From the chart and graph we can see that BASIC Bank Ltd
Graph: 01 Ref: Appendix: Table 1
Interpretation:
is performing well in deposit utilization as the ratio is in increasing trend.

SMI/SSI Loan to Total Loan 70 60 50 40 30 20 10 0
BASIC Bank Ltd is a specialized bank. This bank does both commercial lending and lending to Small and Medium
enterprises. Though it is engaged in commercial lending its maximum amount of deposit collection goes to support the small industries. From SMI& SSI loan to total loan ratio we see that almost 50% to 69% loans goes to SME sectors. Almost all of the year the percentage is high and equal with each other.
Graph: 02
Ref: Appendix Table 2 52 | P a g e
Industrial credit disbursement Deposit and Loan and Advances Growth
Industrial Credit
80% 60% 40% 20% 0%
Interpretation: BASIC Bank Ltd gives loan to three partiesloans to directors, loans to customers and loans to industrial sectors. The maximum amount of loan goes to industrial sector in the form of term loan, working capital loan. Bank
Graph: 03 Ref: Appendix: Table 3
is encouraging new small industries and women entrepreneur giving their financial support and technical knowledge. Here, 10
Interpretation:
years industrial credit disbursements are
Deposit growth shows the deposit mobilization shown graphically. In 2010 BASIC Bank Ltd of the bank offering different attractive has made the highest industrial loan to accounts. The deposit growth is in fluctuating different trend. Deposit mobilization is low in 2006 but industry. it is in higher trend in the following years. The loan and advance growth rate measures the year to year performance of loan and advances increment. In this Bank the loan growth rate in 2010 is remarkable. This indicates that the bank is performing well making investment of its fund in profitable sectors. Except 2003 & 2006, all the years are more consistent with one another. As the bank is basically concentrated on small and medium enterprises, in 2010 more new SMEs are interested to take loan from this bank for their attractive interest rate and grace period consideration. 53 | P a g e Graph: 04 Ref: Appendix Table 4
70% 60% 50% 40% 30% 20% 10% 0% Deposit Growth rate Loan & advance growth rate
industries especially in
textile
7.3 Correlation analysis:
Determining correlation between the credit risk grading and actual performance of loan: Through this analysis the efficiency of some Small and Medium Enterprises performance in loan utilization and repayment in due time. Based on the customer profitability condition, leverage status, liquidity position, operational risk, management efficiency etc. the customer is given a score by the bank that is regarded as credit risk grading. Moreover regulatory body also defines the performance of these firms depending on their evaluation and judgment. In my analysis I tried to find out the performance of some of the borrowers of BASIC Bank Ltd which borrowed from the bank. What is the recovery performance of these 20 borrowers is being analyzed finding the correlation between CRG grading by bank and regulatory defined score.
Average Standard Deviation Coefficient of Correlation (Ref: Appendix Table 5)
72.7 8.43
72 9.47 0.82
In this part I tried to make an illustration about the performance of BASIC Bank Limited comparing the SMEs credit grading by the bank with their grading given by external regulatory body. Here I have used data of 20 small and medium enterprises of BASIC Bank Ltd Main Branch, Dhaka. For making analysis I have selected 20 small and medium enterprises that are doing business with the bank. The average value of both of the grading is same. But there is little bit fluctuation in standard deviation of both of the grading. Correlation coefficient measures the degree of relationship between two set of figures. The correlation coefficient of 82% shows that the present loan performance represents the actual performance. There is highly positive correlation between banks defined risk grading and actual grading by regulatory body. This 54 | P a g e
interprets that if the regulatory defined value is higher than the banks grading will be higher. The firm will perform well in their loan repayment timely.
7.4 Regression analysis:

How much change is occurred in dependent variable in response to the change of independent variable is shown by regression analysis. There are two types of regression analysis. One is linear regression and another is multiple regressions. In this report multiple regressions is used to demonstrate the following relationships: 7.4.1 Multiple regression equation of Interest Income on SME credit and Credit other than SME: For this analysis I have taken interest income as dependent variable and SME credit & credit other than SME as independent variables. Interest income is the main source of banks profitability. BASIC Bank Ltd gives priority to the SME financing and this has brought the line share of interest income. The regression equation is: Interest Income = 2365 + 0.132 SME Credit + 0.190 Loans other than SME (Ref: Appendix table 6) R-Sq = 93.9% Interpretation:
For analyzing I have used interest income as response variable, SME Credit and Loan other than SME as predictor variables. Here the R square denotes what percentage of change in response variable due to the change of predictor variables. The value R-square of 93.9% is representing that 93.7% change in Interest income occurs for the change in SME credit and Loans other than SME. Rest of the change may be due to the change of other independent variables.
The constant value of 2365 represents that if there is no SME credit and other loans, the interest income is 2365. This interest comes from interest on
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depositing balance with other banks and Bangladesh Bank. the equation looks like the following: Interest Income = 2365 + 0.132(0) SME Credit + 0.190(0) Loans other than SME = 2365
The coefficient of SME credit and Loans other than SME are 0.132 and 0.190. If the value of SME credit changes by taka 1 (holding loans other than SME constant) then the interest income will be changed by taka 0.132 for SME credit variation and 2365.132 in total. The equation will be: Interest Income = 2365 + 0.132(1) SME Credit + 0.190(0) Loans other than SME = 2365.132
The coefficient of loans other than SME is 0.190 implicating that change in loan other than SME of taka 1, has altered the Interest income by 0.190 holding constant the SME credit. Interest Income = 2365 + 0.132(0) SME Credit + 0.190(1) Loans other than SME = 2365.190
Significance of the coefficient: To analyze whether the coefficients of SME credit and loan other than SME are significant I have made two hypotheses. One is null hypothesis (H0) and another one is alternative hypothesis (H1) for the coefficients. H0: B1(Coefficient of SME credit) =0, B2(Coefficient of loans other than SME credit) =0 H1: B1 = 0, B2 = 0 Predictor SME Credit Loans other than SME Coefficient 0.13218 0.19045 T 5.77 2.30 P 0.010 0.03
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The t- statistic of 5.77 (Table value of 5 degrees of freedom 2.015) for SME credit variable and its small p value of 0.010 (less than table value of 0.05) indicate the coefficient of SME credit is significantly different from zero. Thats why we can reject the H0: coefficient (B1) = 0. Similarly the large t- statistic of 2.30 (Table value of 5 degrees of freedom 2.015) for loans other than SME variable and its small p value of 0.03 indicate the coefficient of loans other than SME variable is significantly different from zero. So, the H0: coefficient (B2) = 0 can also be rejected. In summary the coefficient of both predictor variables are significantly different from zero. This tells us that the equation is representative to predict the interest income. 7.4.2 Analysis of variance for regression significance: The analysis of variance (ANOVA) examines the significance of all the coefficients collectively. ANOVA table based on the decomposition of the total variation in dependent variable (SST) into its explained (SSR) and unexplained (SSE) parts. Let, H0: coefficient (B1) = coefficient (B2) = 0. This hypothesis means that response variable interest income is not related to any of the predictor variables, SME credit and loans other than SME. H1: At least one coefficient = 0 If the regression model assumptions are appropriate and H0 is true, the ratio F = MSR (Mean square of regression) MSE (Mean square of error) has an F distribution with df = k, n-k-1. Source Regression Residual Error Total DF 2 3 5 SS 10733599 692830 11426429 MS 5366799 230943 F P
23.24
0.015
The computed F value (48.39) is used to test the significance of the regression as a whole considering both of the coefficients collectively. The table value of F ratio at 5% significance level with 2 and 3 degrees of freedom is F0.05 = 9.55. The large F ratio and 57 | P a g e
its small p value show the regression is significant. So, H0: coefficient (B1) =
coefficient (B2) = 0 is rejected. The regression function explains a significant amount of variability in interest income. The SME credit and loans other than SME credit has significant control over interest income.
7.4.3. Multiple regression equation of Provision for loans & advances versus Substandard, Doubtful & loss: The regression equation is provision for loan and advances = 167 + 0.883 Substandard + 0.153 Doubtful & loss (Ref: Appendix table 7) R-Sq = 97.0% Interpretation: Provision for loan and advances is kept as safety of the classified loans. Provision is kept for both classified and unclassified loans. Through this regression equation I want to find out the substandard and doubtful & loss loans influence in the provision kept from the profit. Here the response variable is provision for loans and advances that is related to the independent (Predictor) variables substandard and doubtful & loss loans. The value 167 is constant and intercept of provision for loans and advances. This means if there is no substandard or doubtful & loss loans, the provision amount would be equal of 167 because of other provision maintained for unclassified loans. Provision for loan and advances = 167 + 0.883 (0) Substandard + 0.153 (0) Doubtful & loss = 167 The coefficients 0.883 and 0.153 measure the average change in provision per unit change in the relevant independent variables. Here coefficient value of 0.883 indicates that each increase of 1 taka in substandard loan when doubtful and loss loans are held constant increases the provision for loan loss by an average of 0.883 taka. Provision for loan and advances = 167 + 0.883 (1) Substandard + 0.153 (0) Doubtful & loss = 167.883 58 | P a g e
Similarly the coefficient value of 0.153 means that provision for loan loss increasing to 167.153 due to 1 taka change in doubtful and loan loss holding constant the value of substandard. Provision for loan and advances = 167 + 0.883 (0) Substandard + 0.153 (1) Doubtful & loss = 167.153
Here the R- square is 97.0% means that the regression equation explains 97% of the variation of provision for loan loss.
Significance of the coefficient: To determine the significance of the coefficient we firstly consider two hypotheses: H0 : coefficient (B1) = coefficient (B2) = 0. This hypothesis means that response
variable provision is not related to any of the predictor variables, substandard and doubtful loans. H1: at least one coefficient = 0 Whether the hypothesis is accepted or rejected it can be determined from t value and p value. For multiple regressions the t-test:
Predictor Substandard Doubtful & loss
Coefficient 0.88347 0.15268
T 9.36 7.70
P 0.003 0.005
(Ref: Appendix Table: 7) The t- statistic of 9.36 (Table value of 5 degrees of freedom 2.015) for substandard variable and its small p value of 0.003 (less than table value of 0.05) indicate the coefficient of substandard loan is significantly different from zero. Thats why we can reject the H0: coefficient (B1) = 0. Similarly the large t- statistic of 7.70 (Table value of 5 degrees of freedom 2.015) for Doubtful and loss variable and its small p value of 0.005 indicate the coefficient of
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Doubtful and loss loan variable is significantly different from zero. So, the H0: coefficient (B2) = 0 can also be rejected. In summary the coefficient of both predictor variables are significantly different from zero.
7.4.4 Analysis of variance for regression significance: Let, H0: coefficient (B1) = coefficient (B2) = 0. This hypothesis means that response variable provision is not related to any of the predictor variables, substandard and doubtful loans. H1: at least one coefficient = 0 If the regression model assumptions are appropriate and H0 is true, the ratio F = MSR (Mean square of regression) MSE (Mean square of error) has an F distribution with df = k, n-k-1. Source Regression Residual Error Total DF 2 3 5 SS 37505 1162 38667 MS 18752 387 F 48.39 P 0.005
The computed F value (48.39) is used to test the significance of the regression. The table value of F ratio at 5% significance level with 2 and 3 degrees of freedom is F0.05 = 9.55. The large F ratio and its small p value show the regression is significant. So, H0: coefficient (B1) = coefficient (B2) = 0 is rejected. The regression function explains a significant amount of variability in provision for loan loss.
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SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 8.1 Sector wise disbursement comparison:
BRAC Bank Ltd and Mercantile Bank Ltd are also two leading banks in our country. These banks are also contributing in our small and medium enterprise sector development. So to compare the performance of BASIC Bank Ltd with the two private sector banks as BASIC Bank Ltd is specialized for SME sector financing. Here based on the following two points comparison among these three banks will be made:
Sector wise loan Disbursement
Interpretation Food and allied industries are one of the leading industries in our economy. As Bangladesh is
Food & allied ind.

BASIC Bank Ltd. Mercantile Bank Ltd. 5% BRAC Bank Ltd.
small country with large population, the demand of food is always increasing. So, food and allied industries are promising industrial sectors. From the graph we see that BASIC Bank Ltd has made great contribution to the
35% 60%
food industries through giving loan facilities than other two banks- BRAC Bank Ltd & Mercantile Bank Ltd. BASIC Bank ltd made 60% contribution to the food industries while
Graph: 05 Ref: Appendix table: 8
BRAC Bank Ltd had 35% and Mercantile Bank Ltd Had only 5% contribution.
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Interpretation: Textile industry is the leading

BASIC Bank Ltd. BRAC Bank Ltd. Mercantile Bank Ltd.
Textile
1%
industry in Bangladesh. This industry has great contribution in our GDP. This industry has market outside Bangladesh. Among the three banks BASIC Bank Ltd has made the best contribution in this industry. BASIC Bank Ltd has 52% loan to this industries. BRAC Bank Ltd has also doing well having 47% contribution. The performance of Mercantile Bank is greatly low on this sector.
47%
52%
Interpretation:
RMG(Ready Made Garment)
20% BASIC Bank Ltd. BRAC Bank Ltd. Mercantile Percentage 35% of classified loan Bank Ltd. 45%
From the graph it can be seen that BASIB Bank Ltd has made 45% loan investment in readymade garments sector among these three banks. BRAC Bank Ltd has 35% contribution and Mercantile Bank Ltd has 20% loan contribution in this sector. BASIC Bank Ltd has concentrated small sector industries in this sector for
Z Graph: 07 Ref: Appendix table: 8
loan disbursing.
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8.2 Comparison based on percentage of classified loan & rate of recovery:
Interpretation: According to BRPD Circular by
Percentage of classified loan
Bangladesh Bank loan and advances are divided in two forms- classified loans and unclassified loans. Classified loans
8% 5% 10% BASIC Bank Ltd. BRAC Bank Ltd. Mercantile Bank Ltd.
consist of substandard, doubtful and bad & loss. The higher the percentage of classified loan the worst the performance of the bank. Here the BASIC Banks classified loans amount is low at 5%. But the percentage is high for Mercantile Bank Ltd.
Graph: 08 Ref: Appendix table: 9 Interpretation:
Rate of recovery
BASIC Bank Ltd. BRAC Bank Ltd.
From the above analysis we came to know from the analysis that BASIC Bank is the most dominant player in the market. Its recovery rate is quite
76% 82%
87%
Mercantile Bank Ltd.
satisfactory. Actually the employees who are dealing with customer are vigilant to recover the outstanding loan. The recovery percentage of BASIC
Bank is 87%. The disbursement amount is tk. 560.78 core. But the recovery of BRAC Bank Ltd is 82% while their disbursement is tk. 476.79 crore.
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8.3 Comparison based on Mode of SME Finance:

BASIC Bank Ltd Term loan and working capital loan & BASIC Kollaniya for women Entrepreneur Only Term loan Only Term loan BRAC Bank Ltd. Mercantile Bank Ltd.
Interpretation:
Here we see that BASIC Bank Ltd is providing both term loan and working capital loan for SME financing. They also have a special package for women entrepreneur. But both BRAC Bank and Mercantile Bank provide only term loan for financing SME sector.
From the above chart and illustration it is clear that BASIC Bank is performing well that BRAC Bank Ltd and Mercantile Bank Ltd. As the bank is specialized in Small and Medium sector and its business area in more concentrated the bank is performing well. This can be the banks competitive advantage than other commercial bank operating in Bangladesh.
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SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 9.1 Green Bank and Green Banking:
Banks play an intermediary role in the economy. Because of this the possibility for banks to contribute to sustainable development is potentially profound. Banks have extensive and efficient credit approval systems, which gives them a comparative advantage in knowledge. Banks are well seasoned and well equipped to weigh risks and attach a price to these risks. When depositors allow a bank to invest for them they are able to assume that the bank will know which investments will maximize their returns. Conventional banks are legally bound to maximize return for their clients. If clients are concerned with more than simple return then they may need to turn to an ethical bank to find ways in which they can garner return while keeping to their own moral concerns. Through their intermediary role, banks may be able to prop up progress toward sustainability of society. Banks can charge more interest on those companies which are indifferent to environmental safety issues. Banks can also widen more sustainable products, such as environmental, social, or ethical investment funds.
Green Bank means an ethical bank which is socially responsible for making sustainable development of environment. Green banking provides support to innovative green products and the activities that are not hazardous to the environment and helps to conserving the environment. Green banking takes responsibility safeguarding the planet from the unusual weather pattern, rising green house gas and declining air quality. Green banking makes great contribution to the transition to resource efficient and low carbon industries such as green industry and green economy in general.
9.2 Green Banking as a part of economic assumption:

The environmental dreadful conditions and rectifying measures are related with the economic theory of market failure externalities and public goods. Business firms and consumers are the main players accountable for negative externalities in the form of air pollution, water pollution etc. Green banking is a component of the global initiative by a group of stakeholders to save environment. The efforts are expected to bring positive changes in the environment, which are mostly non-excludable and non-rival in nature. 65 | P a g e
Thus, as a whole, the ongoing green banking initiatives by different banks is an effort where the society as a whole is the target beneficiary. Green products help to create favorable impact on environment have positive externalities.
9.3 Way of doing Green Banking:

At present the term Green Banking is now popular globally. It is for bringing to an end of the environmental squalor and making this planet fit for human habitation. The concept of Green Banking developed in the western countries, which has been replicated by many developing countries. We all know that the peoples of the whole world are fretful about the environmental degradation, especially the rising of global high temperature and thereby melting of glaciers and ice-berg in the Antarctic region and consequently rising of sea level, which will directly affect the low lying countries of the world.
Bankers are the important specialized group who has dealings with the other groups of people and also with general masses. They can adopt different green activities within their in-house environment and also can make the first move the protection of the air pollution, water pollution by their clients. Bankers can finance the green projects, which are environmental welcoming and discourage the projects that spoil the environment. To implement the green banking, bank can initiate the following measures: Online banking & mobile banking: Green banking can be done by using online banking instead of branch banking, paying bills online instead of mailing them. Customers can also get their account information through mobile phone instead of going physically to the banks and get the account documents in paper form.
Waste Management: A green banker must be vigilant about wastage and waste management. They would try to control the wastage of resources like water, gas, electricity, paper, foods etc. Use of computer saves papers which ultimately saves trees. Moreover, recycling of materials also creates benefit for the environment.
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Reduction of sound pollution: Within the bank all the employees and customer should maintain low voices in conversing with one another. It will create healthy working environment. This is not only beneficial for the clients but also for the employees.
Financing Green Projects: Being aware of the environmental issues banks must go for financing the projects that do not pollute the environment. The industries that are financed by the banks must have effluent treatment plant (ETP), recycling facilities and smoke and gas arresting unit. The industries must not release any kind of effluents, chemicals or smoke to the environment. Banks must not finance any grubby project that pollutes the environment.
Green Bank is socially responsible, environmentally mindful and follows a path of sustainability with automation and efficiency. Green banking clearly has a direct, positive effect on the environment, but the benefits go much further reaching into security and cost.
9.4 Green Banking Guidelines of Bangladesh Bank:

The state of environment in Bangladesh is deteriorating significantly. The key areas of deterioration include land degradation, water pollution and scarcity, air pollution, biodiversity resources and impacts of natural disasters. Rapid population growth, improper use of land, poor resource management and uncontrolled discharge of pollutants are the major causes. As the banker of all the banks in Bangladesh,
Bangladesh Bank play as important role in implementing green banking policy in banks. Bangladesh Bank instructs for the banks to: Facilitate their clients with utmost care in opening L/C for installation of Effluent Treatment Plant (ETP) in the industrial units. Finance in solar energy, Bio gas and ETP. Comply with the guidelines on corporate social responsibility(CSR) To concentrate on linking CSR at the highest corporate level. 67 | P a g e
For engraining environmentally and socially responsible practices. Engaging with borrowers in scrutiny of the environment and social impacts. Banks have been brought under the purview of E- commerce with a view to providing the customers with online banking facilities covering: Payments of utility bills Money transfer Transaction in local currency through internet. Bangladesh Bank has launched a refinance program of tk. 2.00 billion for Bio Gas plan, Solar Plant, ETP and hybrid Hoffman Kiln (HHK) in brick field. Bangladesh Bank advises banks to Be cautious about the adverse impact of natural calamities. Encourage the farmers to cultivate salinity resistant crops in the salty areas, water resistant crops in the water locked areas and flood prone areas, drought resistant crops in drought prone areas. Use surface water instead of underground water for irrigation. Use organic fertilizer, insecticides by natural means instead of using chemical fertilizers and pesticides. An indicative Green Banking policy and strategy framework has been developed. Implementation of green banking policy into three phases.
Green Banking Policy
Implementation Deadline
Phase I December 31, 2011
Phase II December 31, 2011
Phase III December 31, 2011

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9.5 Green Banking Policy of BASIC Bank Ltd

A High-Powered Committee comprising of the director(s) from the Board of the Directors of the bank shall review environmental policies, strategies and programs of the bank. The bank allocates considerable fund in their annual budget for implementing & practicing green banking. The other policies are: The bank has established a separate Green Banking Policy
Implementation Unit (GBPIU) which has been assigned responsibility for designing, evaluating and administering related Green Banking issues of the bank. A senior executive has been assigned with the responsibility of heading the unit and a permanent position playing the role of coordinator of the unit shall be created. The unit will report to the high powered committee time to time. This policy ensures that services to be provided by all of the credit delivery points of the bank shall comply Green Banking Policy and activities to be designed within the Green Banking Policy implementation strategy. The stakeholders of the bank are encouraged to reduce their consumption & wastage of physical resources like raw materials, water and energy to make sure that the best value is received from the resources they use through formulating effective strategies with the boundaries of the policy.
Introducing Green Finance: Financing in eco friendly and environmentally sustainable business activities and energy efficient industries shall be extended through preference by all the credit delivery points. Environmental infrastructures such as renewable energy project, clean water supply project, waste water treatment plant, solid and hazardous waste disposal plant, bio-gas plant, bio-fertilizer plant are encouraged those will be financed by the bank. Viability of environmental infrastructures for financing shall be assessed in line 69 | P a g e
with the environmental issues i.e. how the purpose of the project/ business & to what extent this/these is/are rewarding to the environment. Most viable project/business/ sector shall be prioritized for financing to position the bank gradually as a Carbon Neutral Bank first & then as a Climate Positive Bank. Creation of Climate Risk Fund The bank addresses environmental issues & assesses environmental risks (high/ moderate/low) of projects/businesses of different sectors in different areas those are financed by the bank and create climate risk fund. A comprehensive risk exposure matrix shall be developed for assessing environmental risks and reported to different credit committees of the bank by the branches in the risk exposure matrix. The fund to be allocated/created for Green Banking may be used as a part of CSR activities at the time of emergency. Introducing Green Marketing Green Marketing incorporates a broad range of activities, including products/services design, engineering, modification, new product innovation, changes to the production process & packaging encouraging the potential clients for designing Green Project as well as modifying advertising. Besides, bank effectively uses green marketing channels more for widening target markets of usual products. Bank takes steps that will help building awareness among common people for promoting products/services which cause least harm to the environment. R&D Division shall plan for developing & marketing Green Banking products for offer. Ensuring all out Online Banking practices As the bank has already adopted on-line banking practices to operate its regular transactions, it wont be difficult to adopt paperless banking practices. As such, the GBPIU shall accentuate the process of commencing e-banking related to processing of proposals avoiding the use of physical resources like paper, printer cartridge etc. with the help of ICT & MIS Division of the bank. MIS Division is responsible for preparing effective communication strategy while ICT Division provides software support &
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necessary training to the employees of the bank in a manner that all of employees are trained in Online Banking practices. Use of appropriate technologies The bank addresses the use of appropriate technologies through installation of energy efficient machinery/equipments that will upgrade & expand its ATM services and introduce SMS services & e-mail to its customers for providing better and paperless services to its customers. Supporting employee training, Consumer Awareness and Green Event Exclusive training programs or specialized/befitting classes in foundation or other credit related courses for incorporating Green Banking Policy Guidelines as a part of awareness building among the employees of the Bank are arranged in consultation with GBPIU by the Training Cell. Training programs on environmental and social risk and employee awareness development should have to be implemented by the training cell as a continuous process.
Sector specific Environmental Policies The bank shall formulate strategies to design specific policies for different environmentally sensitive sectors such as agriculture, agri-business (poultry and dairy), agro farming etc. The bank shall make the provision for installing water treatment and effluent treatment plants mandatory for clients having textile, spinning, dyeing, leather processing factories to qualify themselves for receiving financial support from the Bank. The environmentally sensitive sectors may be listed as follows: i) ii) iii) iv) v) Agriculture Agri-Business (Poultry & Dairy) Agro Farming Leather (Tannery) Fisheries 71 | P a g e
vi) vii) viii) ix) x) xi) xii) xiii) xiv) xv) xvi) xvii) Textile & Apparels Renewable Energy Pulp & Paper Sugar & Distilleries Construction & Housing Light Engineering & Basic metal Chemicals (Fertilizers, Pesticides & Pharmaceuticals) Rubber & Plastic Industry Hospital/Clinic Chemical Trading Brick Manufacturing Ship Breaking etc.
Pricing Strategy The bank shall formulate its pricing strategy for its products in line with the global green banking issues. The clients complying green policy of the bank and adopting appropriate technology for addressing ERM issues from their part shall be eligible for receiving facilities at a reduced rate than the usual rate of the bank. Premium pricing strategy shall be adopted and practices for the clients to reduce carbon/heat emission, waste materials, energy utilization, hazardous by-products and increase productivity, efficient use of materials, preservation of natural water stream & water resources. Green strategic planning The bank shall determine green targets to be attained through specific planning. It shall determine a set of achievable targets and strategies, and disclose these in their annual reports and web sites for green financing and in-house environment management as well. ICT Division shall time to time up-date the Website of the bank with new and easy navigation slots or publish a separate webpage for the purpose of marketing/advertising green banking products of the bank.
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Setting up Green Branches The bank shall set up Green Branches which will be featured by the provision of using natural light, renewable energy and surface & recycled water to the highest possible extent and implementing energy efficient lighting & cross ventilation air movement system and replacing gradually the less energy efficient machinery/equipments by higher energy efficient machinery/equipments. The branches shall be decorated in such a manner that will promote the activities of Environmental/Green Banking issues to the people. Incorporation of Environmental Risk Management plan and guidelines The bank incorporates Environmental Risk Management (ERM) section in the Credit Risk Management guidelines of the bank for evaluating/sanctioning new as well existing loan proposals through Assessment of Environmental Impact (EIA) of those projects/businesses. As such, the bank shall follow the Environmental Risk Management manual, provided by Bangladesh Bank, for assessing project/business proposals and monitoring of project/business & working capital loans until it develops an ERM manual or guidelines of its own. Environmental Risk Management (ERM) Guidelines, issued by Bangladesh Bank, shall be handy for use as a reference manual. However, this policy keeps the provision for all future regulatory directives, to be issued by different authorities of the Government of Bangladesh, to be taken into cognizance for addressing concurrent Environmental risk issues and incorporating those issues in the policy matters without any change in the policy. Initiation of Programs for educating clients The bank formulates effective strategies for introducing programs to educate existing & potential clients (both personal/corporate level) so that they are and/or will be equipped to comply environmental regulations, imposed or to be imposed time to time by the regulatory authorities.
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Disclosure and reporting of Green Banking activities The bank shall start publishing independent Green Banking and sustainability reports showing past performances, current activities and future initiatives.
Designing and introducing innovative products The bank shall introduce environment friendly innovative green products addressing the core national/global environmental challenges. Research & Development (R&D) Division of the bank shall formulate plan for developing & marketing Green Banking products to offer for public. Eco Landscaping The bank shall prepare eco landscaping of its branches/sales offices for encouraging environmental infrastructures such as renewable energy project(s), clean water supply project(s), waste water treatment plant(s), solid and hazardous waste disposal plant(s), bio-gas plant(s), bio-fertilizer plant(s) and implement the Green Banking Policy effectively. Reporting in Standard Format with External verification Bank has to publish independent Green Annual Report following internationally accepted format like Global Reporting Initiative (GRI) targeting their stakeholders. Bank shall report its initiatives/activities under the said program to the department of off-site supervision of Bangladesh Bank on quarterly basis as instructed by Bangladesh Bank within the next 15 days of the respective quarter end.
Provision for co-opting intermediary regulations/guidelines There will be provision for co-opting intermediary guidelines and/or restrictions on financing in a specific sector/industry, to be dictated by organizations of Government of 74 | P a g e
Bangladesh and regulatory bodies, related to Green Banking issues without changing any of the clauses of the policy just by initiating note within the discretion of the Management when the guidelines and/or restrictions will be considered befitting for the environment. Monitoring and follow up: Establishment Division will monitor and follow up the activities for implementing above noted issues at Head Office level. All Branch In-charges are entrusted with the responsibilities for materializing the preceding directives of In-House Environment Management. Branch Control and Marketing Division will monitor and guide all branches regarding implementation of in-house environment management issues such as preparation of an inventory of the consumption of water, paper, stationery, electricity, fuel etc by its office. Green Banking policy implementation unit (GBPIU) will formulate and adopt broad environmental or Green Banking policy and strategy which has to be approved by the Board of Directors of the Bank. A monthly progress report shall be submitted by Branch Control and Marketing Division and Establishment Division separately to GBPIU for overall progress of green banking activities of the bank.
Segregation of Green banking Activities among different departments:

Apart from policy formulation and governance, green banking activities are divided among different department of the banks Head office to properly implement and monitor the green banking activities. The activities are given below:
Name of divisions/units
Green Banking Activities
Incorporation of Environmental Risk Industrial Credit Division Management in Credit Risk Management Commercial Credit Division (CRM). Micro Credit & Special Finance Division Trade Finance Division Small Enterprise Finance Division Consumer Credit Division Introducing Green Finance. All Credit Related Divisions mentioned above. Research &Development Division 75 | P a g e
Research &Development Division Introducing Green Marketing. Consumer Awareness and Green Event. Creation of Climate Risk Fund. Online Banking, development of robust Management Information System (MIS), establishing

Establishment Division Finance & Accounts Division ICT Division MIS Division
full
fledged
e-
communication system. Human Resource Division Training Cell

Green Banking Policy Implementation Unit ICT Division
Supporting
Employee
Training
and
awareness building.
Disclosure and reporting of Green Banking Activities
9.6 Green Banking implementation in BASIC Bank Ltd.

According to Bangladesh Bank BRPD Circular No. 02 dated February 27, 2011 on policy guidelines for Green Banking BASIC Bank Ltd. has adopted a comprehensive Green Banking Policy in a formal and structured manner in line with global norms so as to protect environmental degradation and ensure sustainable banking practices. Now, as a part of implementing one of the policy issues of Phase-I i.e. In-house Environment Management immediately, following action plans are taken by branches and Head Office Divisions of the Bank: Take measures to save electricity, energy, water, paper and stationery consumption. As such progress report of the consumption pattern of paper, stationery, electricity, energy, water etc. is required to be prepared and reviewed periodically (at least monthly ) by the branches and Head Office divisions for taking necessary appropriate measures for improving efficiency i.e. utilization of resources. In place of relying on printed documents, on line communication should be extensively used (wherever possible) for office management to save papers. 76 | P a g e
Installation of energy efficient electronic equipments and automatic shutdown of computers, fans, lights, Air Coolers etc shall be implemented in consultation with concerned division of Head Office gradually for reducing electricity consumption. Replacement of normal bulbs in branches/offices of the banks with energy saving bulbs may be taken as an immediate step in this regard. Making use of solar energy at the premises as an alternative source of electricity may be initiated in consultation with and approval from concerned authority of the Bank. Preserve maintenance schedule of Generator and Air Conditioner and other major electrical and electronic equipments for monitoring its performance as well as fuel/energy efficiency. All officials of the bank are advised to ensure that their PC, Fan and other office equipment is turned off whenever those equipments are not in use for prolonged period of time. Office schedule should be maintained properly so that unnecessary stay in Branch/office could be avoided and as such office period should be utilized effectively. In procurement of vehicle and other electrical and electronic equipments, fuel/energy efficiency should be considered with priority. Take steps to save fuel from corporate business travel. Create awareness among the employees for efficient use of electricity, paper, stationery, water, fuel and reuse of equipments and paper. Officials are encouraged to print both side of a page for draft copy. All divisions should focus on minimizing resources at every possible aspects of work. All officials of the bank are advised to discharge their duties in environmentally responsible ways.
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The bank conforms the instructions stipulated in the detailed guidelines on Environment Risk Management (ERM) of Bangladesh Bank in consideration of a part of the Green Banking policy.
Green Banking Policy of BASIC Bank Ltd ensures necessary measures to protect environmental pollution while providing service or financing customers as well as to improve in-house environment management through efficient use of various resources. The Green Banking Policy also encompasses the Environmental Risk Management Policy and covers the overall environmental concerns arising out of both external or internal sources and the respective measures to manage it.
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After analyzing all the parts of the report, to determine some important points and recommendation are required. Pointing out momentous finding about the SME financing prospects of BASIC Bank Ltd in comparing to other two private commercial banks and based on the findings recommending what development is made. The significant findings found out while making the report are:
Important points for SME Financing:

Head Office of the bank is monitoring all kind of loans and advances: The Head office of the bank perfectly monitors the banking operation and execution of the credit policy. When I have examined the credit extension procedure of the bank I have found that, every proposal are forwarded to the Head office for granting the loan and Head office has the full authority to reject any kind of proposal. Thus any kind of ill practices at the branch level are restricted. Along with that, some power has also been forwarded to the branch manager most of whom also are well conversant about the credit policy of the bank. Approximately 75% of the loans and advances have been given to small and cottage industries: In the credit policy it has been specified that, approximately 50% of the loans and advances will be given to small-scale industries. By examining the figures we have found that, BASIC Bank Ltd employed 75% of its loan able funds to small-scale industries. Higher recovery percentage of disbursed loan: As a specialized bank BASIC Banks main focus on small and medium enterprises. With proper credit policy and recovery management BASIC Bank Ltd maintains high recovery rate at 87% that creates competitive advantage than other commercial banks. Competitive benefits of SME loans for BASIC Bank Ltd: SME loan is most suitable in Bangladesh to create employment opportunity boosting rural economy and to increase income level of the people. Through financing SME BASIC Bank ltd is ultimately contribution to the economic development and employment generation of Bangladesh. 79 | P a g e
In SME loan, default rate is low representing around 87% recovery. This is because of the fact that, in SME risk is distributed among a big number of customers with small amount of loan. Loan growth rate is higher than deposit growth rate: As we have seen in individual company analysis part that the deposit growth rate is lower than the loan growth rate. Loan growth goes almost 65% while deposit growth rate is 40%. Strong dependency of interest income on SME credit and loans other than SME credit: When analyzing the regression of interest income on SME credit & loans other than SME credit, I have found out that income comes from SME has great influence on total interest income. If the SME credit can be enlarged it will generate huge interest income for the bank. High influence of substandard and doubtful loan on provision: From the regression analysis, it is clear that provision for loan loss is greatly influenced by substandard and bad loss loan. 95% variation occurred due to substandard and bad loan loss. 5% to 20% amount of substandard loan, 50% of doubtful loan and 100% of bad loss loan are kept as provision, higher amount of these types of loans requires more provision. For this reason the will be hampered.
Important points for Green Banking:

Green Banking a new concept in Bangladesh: As the world is becoming more and more vulnerable environmentally, all of the habitats are concerned about environmental degradation. As a result, banks are also careful about it and work as a part to save the environment through Green Banking. This is the newly introduced concept in banks in Bangladesh. Bangladesh bank has formulated Green banking policy and instructed to all the banks to follow the Green Banking policy in their banking operation. Green Banking unit of BASIC Bank Ltd: BASIC Bank Ltd has a unique green banking cell for formulating green banking policy Disclosing and reporting of Green Banking Activities.
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From the above findings it can be said that BASIC Bank ltd is performing well in SME financing. But in some case it should be careful in retaining its position. For this reason I have made the following suggestions: Adequate measure should be taken for small industrial loan: In my study I have revealed that, some of the small industrial loans (Bashundhara Paper Mill
Ltd, Zaman Flower Mill Ltd.) become bad or classified. This is due to the weak
financial capacity of the firm. So adequate measure should be taken before disbursing the loan. Especially alternative sources of repayment or adequate security coverage should be checked and satisfied in this regard.
Make balance between loans and deposit: Amount of loan can be raised in proportion with the deposit collection which reduces the liquidity risk of the bank. Proper monitoring for loan recovery & classification: Though the recovery percentage of BASIC Bank Ltd is good, it should work more efficiently to reach recovery percentage from 87% to 100%. All the officials dealing with the clients should be vigilant in installment collection as the firms cannot be classified. They should always maintain a close relationship with their clients.
Introduce more and more new loan products to have competitive position: There are many commercial banks especially private commercial banks are getting more interested in SME financing with attractive loan policy and interest rates. Now- a- days BRAC Bank Ltd is performing successfully in SME financing. For this reason BASIC Bank Ltd should be cautious about the competitor.
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Support for SME development: The Bank should have more conference in overseas, work shop, symposium, and seminar for more expansion of SME loan. More SME service center need to be added to fully take the advantage of the huge potential customer segments.
Be more pragmatic about Green Banking Implementation: Green Banking policy can be a competitive advantage for BASIC bank ltd. the bank should encourage their clients to do business in eco friendly way. They should also check out that whether the newly approaching firms are maintaining green banking strategy. They should monitor clients business activities whether it hampers the environment. Green Banking Policy Unit(GBPI) should make sudden visit at different branches to come across about the Branchs implementation of Green Banking & use rating and award system to best Green Banking performing Branch.
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The BASIC Bank Limited has been trying to operate its business successfully in Bangladesh since 1994. Basic Bank has already developed goodwill among its clientele by offering its excellent services through General banking, Credit division and Foreign Exchange divisions. This success has resulted from the dedication, commitment and dynamic leadership among its management over the periods. The working atmosphere of the BASIC Bank Limited is very simulating. During the short span of time of its operation, the bank has been successfully to the position itself as a progressive and dynamic financial institution in the country. As the bank is concentrated in one of the thrust sectors of Bangladesh- SME Financing- the bank must emphasize on the domestic scenario more closely and analyze any certain trends and strategies of their competitors. The bank must accept any failures and think of them as an objective to pursue future goals instead of blaming such failures on other factors and in this way the Bank will be able to keep on playing its important roles in our economy. Nevertheless, the success of SME banking depends on the expertise and dedication of the field level officers. That is why continuous training and motivation is very much relevant to run the SME banking successfully.
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Books:
Kothari,C.R. 2012-2013: Research Methodology Methods & Techniques, New Age International Publisher, New Dilhi, ISBN: 978-81-224-1522-3 Page # 1400. Hanke , E. Jhon & Reitsch, G. Arthur,2005: Business Forecasting Dorling Kindersley(India) Pvt. Ltd, Pearson Education. ISBN 81-7758-006-X. Page # 241-267. Gupta, S.P. & Gupta M.P, 2008-2009: Business Statistics Sultal Chand & Sons, New Dilhi, ISBN 8054-327-7, Page # 393, 573-599 Khan, A.R., 2009: Entrepreneurship Small Business & Lives of Successful Entrepreneurs, Brothers Publications, Dhaka, Page # 56-59
Websites:
http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/smedefinition/index_en.htm http://en.wikipedia.org/wiki/Small_and_medium_enterprises http://www.smef.org.bd/ http://www.basicbanklimited.com/about_us.php?about_us=1 http://www.basicbanklimited.com/Activities.php?activities=1 file:///C:/Documents%20and%20Settings/USER/Desktop/Case%20Study%20on %20SME%20Banking.htm http://www.bangladesh-bank.org/openpdf.php http://www.bangladesh-bank.org/aboutus/dept/sme/sme_segmentrpt.php
Annual Report:
Annual report of BASIC Bank Ltd From 2005 to 2010 Annual report of BRAC Bank Ltd from 2005 to 2010 Annual report of Mercantile Bank Ltd. from 2005 to 2010
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SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 1.

1 Background of the study:

a. Primary Sources: Discussion with the respective organization's officials about

ii. External Sources:

Correlation Multiple regressions. Analysis of variance.

Data analysis and interpretation:

Sequence of the Report:

Rationale of the study

Scope of the study

1.6 Limitation of the study

2.1 Definition of SME:

more than 25 No position taken

Table: B Source: SME Policy Strategies-2005

2.2 Developing Country SME

4.1 Overview of the SMEs in the economy of Bangladesh:

4.2 Thrust Sector of SME in Bangladesh

4.3 Contribution of SMEs in the Economy:

4.4 SME Contribution in GDP of Bangladesh:

Sectors Small & Medium Enterprises Table: E, Source: Internet

Small & Medium Enterprises

4.5 SME Credit-Distribution Package in Bangladesh:

Donor financial resources made available specifically to help

implementation of SME policy being enunciated here would only be allocated to

5.1 Historical Background of BASIC Bank Ltd:

5.2 Objectives of BASIC Bank Ltd:

5.3 Motto of BASIC Bank Ltd:

5.4 Functions of BASIC Bank Ltd:

5.5 Corporate Strategy of BASIC Bank Ltd:

5.6 Corporate Information:

Table: F, Source: Annual Report

5.7 Departments of BASIC Bank Ltd:

BASIC Bank Ltd.

General Banking Department Credit Department Export import Division

5.8 Financial Highlights:

Table: G, Source: Annual Report

5.9 Products and services:

5.9.2 Functions of General Banking Division:

13. Return of Bangladesh Bank and Head office statements

6.2 Main principles of BASIC Bank Ltd for SME Financing:

6.3 Loan product of BASIC for SME financing:

6.3.1 Funded credit facilities:

6.3.2 Non-funded credit facilities:

a. 3.2.1 Letter of credit:

6.4 SME Credit operation of BASIC Bank:

6.4.2 Project appraisal by BASIC Bank Ltd:

Credit Risk management:

Interest rate risk:

Interest rate risk Management:

Foreign exchange risk

Foreign exchange risk Management:

16.00% p.a 17.00% p.a

6.5 Supervision and follow up of credit BASIC Bank Ltd:

6.6 Recovery of nonperforming loan (NPL):

7.1 SWOT Analysis of BASIC Bank Ltd:

collection and giving loan in different

Loan to deposit liabilities

Graph: 01 Ref: Appendix: Table 1

is performing well in deposit utilization as the ratio is in increasing trend.

Ref: Appendix Table 2 52 | P a g e

Industrial credit disbursement Deposit and Loan and Advances Growth

Graph: 03 Ref: Appendix: Table 3

years industrial credit disbursements are