What is The BRAC Bank in Bangladesh and what are their operations

Bangladesh is a underdeveloped state of 3rd universe. It has been developing bit by bit. After acquiring it ‘s independency in 1971, It has progressed in assorted sector. But some obstructions shackles it ‘s development. Banking sector is one of the most of import sector. Since 1971 when Bangladesh Bank was established it has increased it ‘s banking activities. Some public Bank besides run their activities. But it was non sufficient. There had a demand of speedy and smart Banking. From this respection different types of commercial Banks was established. Brac Bank is one of them. It was established as a commercial Bank. It started it ‘s operation July 4, 2001 prosecuting the mostly undiscovered little and average endeavor concern section in Bangladesh. The Bank is promoted by the Bangladesh Rural Advanced Committee ( BRAC ) . A taking Non-Government Organization ( NGO ) in poorness relief and authorization of hapless, particularly adult females in rural countries. The Bank has become one of the fasted turning Banks with a web 36 subdivisions and 392 SME unit offices as at December 2007.

BRAC Bank started it ‘s operation through the acquisition of a operation of recognition activities of BRAC. The Bank is backed up by BRAC ‘S huge experience. and path record of successful disposal of little indirect free, supervised recognition with a sound human and physical substructure supports towards the recognition plan.

While holding a major concern in SME financing the Bank is besides actively involved in retail Banking a board scope of consumer loans in add-on to a sound market portion in the significant worker remittal concern, runing with a web of international money transportation bureaus.

As a commercial Bank, BRAC Bank is making a batch of occupation. It has a corporate vision. The corporate vision of BRAC Bank has been given in the below.

Corporate vision

Constructing profitable and socially responsible fiscal establishment focused on Market and concern with growing potency, thereby helping BRAC and stakeholders to construct a merely, enlightened, healthy democratic and poverty free Bangladesh ” .

Corporate Mission

Sustained growing in little & A ; Medium Enterprise sector.

Continuous low-priced depsit growing with controlled growing in retail assets.

Corporate assets to be funded through self-liability mobilisation. Growth in assets through syndication and investing in faster turning sector.

Continuous enterprise to increase non-funded income.

Keep our dept charges at 2 % to keep a steady profitable growing.

Achieve efficient synergisms between the Banks subdivisions, SME unit offices and BRAC field offices for bringing of remittal and Bank ‘s other merchandises and services.

Manage assorted lines of concern in a full controlled environment with no via media on service quality

Keep a frogmans, far flung squad to the full controlled environment with no via media on service quality

Keep a diverse, far flung squad to the full motivated and driven towards happening the bank ‘s vision into world

Core Valuess

Our strength emanates from our owner- BRAC. This means, we will keep the undermentioned values and will be guided by BRAC as we do our work.

Value the fact that one is a member of the BRAC household

Making an honest, unfastened and enabling environment

Have a strong client focal point and construct relationships based on unity, superior service and common benefit

Strive for net income & A ; sound growing

Work every bit squad to function the best involvement of our proprietors

Relentless in chase of concern invention and betterment

Value and respect people and do determinations based on virtue

Base acknowledgment and wages on public presentation

Responsible, trusty and observant in all that we do.

BRAC Bank is one of fastest turning Bank ‘s in the state, entering strong growing with an ROAE in surplus of 20 % while keeping a rapid growing loan, averaging at 64 % over the past three old ages good above the industry norm. The Bank besides continues to drive sound net incomes from non-interest income beginnings while scale benefits are assisting the Bank lower its cost to income ratio. The aggressive incursion into the SME section carries with it a hazard of turning non-performing assets, nevertheless the current NPL ratio is still good within manageable degrees.

Despite sound success of its organic growing, it has expressed involvement to diversify into other alternate income watercourses via acquisitions trusting to come in into different services including merchandiser banking, leasing and other fiscal services. It has announced its purpose to get 51 % of the station public issue paid up capital of GSP Finance Limited, a fiscal service supplier company in Bangladesh, after acquiring necessary blessings from all concerned regulative governments.

An expected net incomes growing of 59.7 % and 76 % in FY08 and FY09 correspond to PER of 16.2x severally at a current market monetary value of BDT 980. The counter trades at a 2.7 % Premium to the sector and at 14.8 % price reduction to the market. Sing the bank ‘s high loan growing and the market chances of the untapped SME sector along with strong support by its parent BRAC, it is our position that BRAC Bank ought to go on to merchandise at a premium to the sector.

BRAC Bank limited started its commercial banking operations in July 2001, and has become one the fastest turning Bankss in the state chiefly focused on loaning to the mostly untapped little and average endeavor section. Having acquired a significant market portion of SME loan expense by private commercial Bankss, the bank is at present the market leader in the SME section.

The bank registered a strong loan growing of 66 % for FY07, driving involvement income by 64 % . BRAC Bank is expected to enter loan growing of 60 % in FY08 and 55 % in FY09 while sedimentation growing is expected to stay stable at 50 % in FY08 and in FY09 assisted by an extra 15-20 subdivisions being opened each twelvemonth.

The bank ‘s sedimentation mix is weighted toward term sedimentations, accounting for 74 % of sedimentations while current sedimentations and nest eggs sedimentations account for 15 % and 10 % of entire sedimentation severally and it is assumed that the sedimentation composing will stay integral over the following three old ages.

Net Interest Margins have increased from 5.77 % in 2006 to 6.16 % in 2007 and expected to go on to increase reasonably over the following three old ages as the bank continues to concentrate it plus exposures on higher giving up SME and retail section.

The bank ‘s cost to income ratio was high as 64 % for 2007 and is expected to worsen to about 63 % and 57 % over the following two old ages on graduated table benefits.

Non-interest income accounted for 42 % of entire runing income last twelvemonth and has grown at a CAGR of 69.45 % over the last five old ages. It is expected to increase farther from growing in the same gross watercourses over the following two old ages.

BRAC bank ‘s Gross Non Performing Loan ( NPL ) stood at 4.5 % in 2007 up from 3.04 % in 2006. Relatively high gross NPLs ‘ in the SME sector increased the overall gross NPL of the bank over the past old ages. We expect NPLs ‘ to spread out marginally to 4.7 % for the following two old ages.

The Bank exhibits chance of strong loan growing in a mostly untapped market section with considerable operational support from its parent BRAC. An expected earning growing of 59.7 % and 76 % in FY08 and FY09 correspond to PER of 16.2x and 9.21x severally at a current market monetary value of BDT 980. The counter trades at a 2.7 % Premium to the sector and at 14.8 % price reduction to the market.

Market leading

The bank possesses a loan book dominated by SME loans, accounting for 60 % of its portfolio while retail, corporate and other taking histories for 40 % of its loan book. Having acquired a 12.14 % market portion of SME loan expense by all Bankss and fiscal establishments, within the first 7 old ages of operations, BRAC bank is the individual largest SME Bank in the state. The bank aims to go on to concentrate its attending in this sector via aggressive enlargement in its subdivision web leveraging on the expertness of its parent.

The bank offers a wode scope of merchandises tailored to the owners of SME ‘s developed with the expertness of its parent coupled with an extended selling thrust which includes an aggressive state broad enlargement of subdivisions and SME unit offices. The comparatively higher hazard exposure undertaken in loaning to the SME section is besides reflected in wider spreads

retained to counterbalance for its increased hazard exposure. Competition in this section is nevertheless increasing with the authorities promoting more establishments to set about funding of the SME sector. BRAC bank, the innovator in SME loaning in the state nevertheless continues to be regarded as the merely dedicated loaner to the SME section mostly due to its intrinsic expertness and tested and tried procedures in covering with little concerns.


A 1 for 5 rights issue announced at Tk 500/- per portion is expected to raise BDT 1.32 bn for the bank which will hike its ‘ Tier1 capital to 10 % in the 1H FY08 from 8 % recorded at the year-end FY07. Deposits accounted for 85 % of liabilities in FY07, being the primary beginning of support. The sedimentation mix is weighted toward term sedimentations, accounting for 74 % of sedimentations while current sedimentations and nest eggs sedimentations account 15 % and 10 % of entire sedimentation severally. Though the bank is be aftering to concentrate on low cost support beginnings, we cautiously assume that the sedimentation composing will stay same for the following three old ages.

The bank continues to follow with both the 5 % hard currency modesty ratio and the Statutory Liquidity Ratio ( SLR ) of 18 % . The Bankss SLR as at December 2007 stood at 18.40 % .


Over the old ages, bank ‘s cost to income ratio has declined steadily though the ratio is still comparatively high compared to its equals. The ratio is expected to go on to enter a modest diminution as scale benefits begin to be realized assisted by a continued streamlining and mechanization of procedures. The bank ‘s cost to income ratio was 64 % for 2007 and expected to worsen to about 63 % and 57 % over the following two old ages. Operating disbursals are expected to turn at a CAGR of 47 % over the following three old ages stemming from branch enlargement.

Board of Directors

Brac Bank ‘s Board of Directors are as follows:

1. Chairman: Mr Mohammd A ( Rumee ) Ali.

2. Director:

i. Mr. Shib Narayan Kairy

two. Md. Kazi Shariful Alam

three. Md. Nihad Kabir

four. Dr. Hafiz G.A Siddiqi.

v. Ms. Tamara Hasan Abed.

3. Pull offing Director and CEO: M. Syed Mahhubur Rahman.

Subject Analysis

Definition of SME:

The Small and Medium Enterprises worldwide are recognized as engines of economic growing. In recent yearss the Small and Medium Enterprise ( SME ) Financing has become an of import country for Commercial Banks in Bangladesh. To aline its corporate policy with the ordinance of Central Bank, Bankss have become more concerned about SME and opened Windowss to carry on concern in this peculiar country. Harmonizing to the latest handbill of Bangladesh Bank ( Date – 26/05/2008 ) , the definition of Small and Medium Enterprise sector is given below:

Small Enterprises:

Small endeavors refer to those endeavors which are non any Public Limited Companies and which fulfill the undermentioned criteria-

Service Concern:

-Having an investing of Tk. 50,000 to Tk. 50, 00,000 excepting land & A ; edifice and / or using up to 25 workers.

Business Concern:

– Having an investing of Tk. 50,000 to Tk. 50, 00,000 excepting land & A ; edifice and / or using up to 25 workers.

Manufacturing Concern:

Having an investing of Tk. 50,000 to Tk. 1, 50, 00,000 excepting land & A ; edifice and / or using up to 50 workers.

Medium Enterprises:

– Medium enterprises refer to those endeavors which are non any Public Limited Companies and which fulfill the undermentioned standards:

Service Concern:

– Having an investing of Tk. 50, 00,000 to Tk. 10, 00, 00,000 excepting land & A ; edifice and / or using up to 50 workers.

Business Concern:

– Having an investing of Tk. 50, 00,000 to Tk. 10, 00, 00,000 excepting land & A ; edifice and / or using up to 50 workers.

Manufacturing Concern:

– Having an investing of Tk. 1, 50, 00,000 to Tk. 20, 00, 00,000 excepting land & A ; edifice and / or using up to 150 workers.

Definition by Ministry of Industries ( MOI ) :

SMEs in Bangladesh are besides defined for intents of industrial policies by Ministry of Industries ( MOI ) . Historically, this definition has been in footings of fixed investing brackets, and a double manner definition is in topographic point, separate for fabricating constitutions, and service constitutions. Harmonizing to the Industrial policy 2005, Small and medium endeavors shall be categorized utilizing the undermentioned definitions:

Manufacturing endeavor:

Small endeavor

– An endeavor should be treated as little if, in current market monetary values, the replacing cost of works, machinery and other parts / constituents, fixtures, support public-service corporation, and associated proficient services by manner of capitalized costs ( of bend cardinal consultancy services, for illustration ) , etc, excepting land and edifice, were to be up to tk. 15 million ;

Medium endeavor –

-An endeavor would be treated as medium if, in current market monetary values, the replacing cost of works, machinery and other parts / constituents, fixtures, support public-service corporation, and associated

Medium endeavor –

-An endeavor would be treated as medium if, in current market monetary values, the replacing cost of works, machinery and other parts / constituents, fixtures, support public-service corporation, and associated

Small endeavor

– An endeavor should be treated as little if it has less than 25 workers, in full clip equivalents ;

Medium endeavor –

-An endeavor would be treated as medium if it has between 25 and 100 employees

Contribution of SMEs in the Economy:

There is a great involvement in little and average endeavors ( SME ) as a major board of poorness decrease in Bangladesh In position of present economic development attempt in Bangladesh the SME sector plays an of import function. These are reflected in the undermentioned public presentation /activities of this sector:

During the Fourth Five twelvemonth program, a sum of 0.35 million occupations were created against the mark of 0.4 million.

SME sector employs 25 % of the entire labour force. As a consequence, this sector is the present available sector for creative activity occupations.

SME sector aid relieve poorness, increase income degree of rural people and advance agro-industrial linkage in Bangladesh.

SME sector requires lower energy supply, lower substructure installations and this sector imposes less environmental hazard.

They contribute towards better use of local resources and accomplishments that might otherwise stay unutilized.

Small industries being labour oriented are capable of bring forthing more employment.

They are necessary to keep and retain traditional accomplishments and handcrafts.

They are the lone medium for variegation of rural economic system and for peaceable and coincident socio-economic development of all categories of people.

From the above treatment, we can state that SMEs are playing an of import function in our economic system in assorted ways.

SME Financing by Banks in Bangladesh:

The National Commercial Banks ( NCBs ) are pay outing important sum of recognition under assorted plans like Small Enterprise Development Project, Self-help Credit Program, and Undertakings for Small Entrepreneurs, Particular Investment Program and Agro-based Supervisory Industrial Credit etc. for the publicity and development of SMEs. The investing of private sector Bankss in funding SMEs remains undistinguished in Bangladesh. Of all the private sector Bankss, BRAC Bank, AB Bank Limited. ( ABBL ) Eastern Bank Ltd. ( EBL ) , Prime Bank Ltd, Dhaka Bank Ltd, Mercantile Bank Ltd, Dutch-Bangla Bank Ltd, Islami Bank Bangladesh Ltd, IFIC Bank Ltd. have the prima function in SME funding. Bank of Small Industries and Commerce Bangladesh Ltd. ( BASIC ) are entrusted with the duty of supplying medium and long-run loans for publicity and development of small-scale industries. The memoranda and Articles of Association of the bank stipulates that 50 % of loan able financess shall be used for financing little graduated table and bungalow industries.

SMEs – figure and success

No 1 knows for certain how many SMEs there are in Bangladesh today. It was around 1978 that the BSCIC ( Bangladesh Small and Cottage Industries Corporation ) , under the Ministry of Industries, conducted a study to happen out the figure of bungalow and little industries of the state. Inspite of the inquiry about the cogency and dependableness of the study, in absence of any other attempt by the Bangladesh Bureau of Statistics ( BBS ) or any other bureau, this enterprise did supply a utile benchmark but it was ne’er updated. The International Consultancy Group ( ICG ) of the UK, in coaction with the Micro Industries Development Assistance and Services ( MIDAS ) , conducted in 2003 the National Private

Sector Survey of Enterprises in Bangladesh with support from the Department of International Development ( DFID ) of the UK Government, the United States Agency for International Development ( USAID ) , the Swiss Agency for Development and Cooperation ( SDC ) and the Swedish International Development Cooperation Agency ( SIDA ) . The study consequences drew the decision that there were about 6 million micro, little and average endeavors ( MSMEs ) , which included endeavors with up to 100 workers

using a sum of 31 million people, tantamount to 40 per cent of the population of the state of age 15 old ages and supra. About three quarters or more of the household income in both urban and rural countries is provided by the MSMEs

The high degree of income part was attributed to the fact that the endeavors worked 10 hours per twenty-four hours, 28 yearss per month for 11 months a twelvemonth. The study besides found that the industrial construction of SMEs consisted of chiefly sweeping and retail trade and fixs ( 40 per cent ) , production and sale of agricultural goods ( 22 per centum ) , services ( 15 per centum ) , and fabricating merely ( 14 per cent ) . Thus the study brought out really conspicuously the fact that the big untapped potency for enlargement in industry and production could be exploited ( or lending more significantly to the national economic system. Another critical determination of the study under treatment was that SMEs contributed BDT 741 ( $ 12.5 ) billion or about 25 per cent of the GDP ( BDT 2,996 billion ) in 2003. Those who tend to look down on micro and little industries may be shocked to observe that endeavors using 2-5 workers are credited for holding contributed 51 per centum portion of the entire SME part to the economic system, followed by 26 per centum by those holding merely one worker and 10 per cent by those holding 6-10 workers

Monitoring of SME Credit:

Like monitoring of agricultural recognition, three tier supervising systems ( BB Head Office, BB Branch Offices

and Banks ) will be established in instance of SME recognition.

Purpose of the Monitoring of SME Credit:

To accomplish the overall mark of SME loan expense ;

To accomplish sector wise industrialisation ; such as higher growing of industry and service sector, increasing the figure of adult females enterprisers and their development, territory wise employment coevals and poorness decrease ;

To supply required recognition to the little enterprisers without any torment ;

Particular monitoring of the Bankss public presentation in supplying recognition to the adult females entrepreneurs ;

To guarantee country attack and cluster-based recognition expense.

To guarantee satisfactory recovery of the disbursed recognition in this sector to turn to any liquidness crisis ;

And so on.

Financing SME Sector:

Access to finance is critical for SME sector development. In many cases, enterprisers raise complain sing high rate of involvement. Indeed, higher rate of involvement is a major hinderance, but handiness of equal fund is really much of import. That is why, Bangladesh Bank is committed to ease SME recognition through refinance window. To develop SME sector, the fund of BB, IDA and ADB is being channelised through refinance strategy. So far a sum of Tk.1,432 crore has been refinanced ( up to December 2009 ) to 14,122 endeavors utilizing the revolving fund ( Tk.918 crore ) of BB, IDA & A ; ADB. Furthermore, Bangladesh Bank is traveling to establish an drawn-out refinance strategy of Tk. 660 crore really shortly with the freshly arranged ADB fund.

Action Plan to back up the SME Centers, Women Entrepreneurship and one-stop installation:

Bangladesh Bank issued a handbill in 2008 to convey uniformity in SME efinition, in audience with National Board of Revenue ( NBR ) , Board of Investment ( BoI ) & A ; Ministry of Industries ( MoI ) ( Circular attached ) .

Following financess are now in operation in Bangladesh governed by different entities like Bangladesh Bank, SME Foundation & A ; Ministry of Finance ( Banking & A ; Financial Institutions Division ) :

Bangladesh Bank Fund ;


ADB Fund and

SME Credit Wholesaling Foundation Fund.

– These financess have already been channelized through different Banks/NBFIs with a position to assisting easy entree to SME enterprisers.

The undermentioned handbills with necessary guidelines have already been issued through Bangladesh Bank:

BB ‘s ACSPD Circular No. 01 dated 02-05-04 has introduced a Refinance Scheme for Small Enterprise Sector to supply maximal 100 % refinance installations to back up the development of the little endeavors.

BB ‘s ACSPD round No-02 dated 19/07/2005 was issued to promote & amp ; hike up the SME sector availing the ADB Fund.

BB ‘s SMESPD Circular issued on 19-07-10 has introduced a Refinance Scheme for SME Sector to supply refinance installations to endeavors outside Dhaka & A ; Chittagong metropolitan country.

BB ‘s SMESPD issued a round on 15/02/2010 to cut down the lower loan bound of the enterprisers.

BB, ACSPD circular No. 05 dated 04/05/08 issued by Bangladesh Bank with following of import footings & A ; conditions:

The Banks & A ; Financial Institutions should inform BB about the mark of

their SME recognition expense within the yearly disbursed of entire loanable fund.

40 % of the entire SME loan would be provided for Small Entrepreneurs & A ; remainder of the 60 % for Medium Entrepreneurs.

Puting up dedicated desk for SME etc.


BRAC Bank has approached to keep the spread of capital of little and average endeavor. BRAC Bank the innovator in SME taking in the state. However continues to be regarded as the merely dedicated loaner to the SME section mostly due to its intrinsic expertness and tested and tried procedure in covering with little concern. Most SMEs in Bangladesh today grew on their ain enterprise. Among them one extremely successful sector did profit from a comparative freedom from overregulation and from aid from authorities. Readymade garments ( RMG ) being the success narrative of Bangladesh enjoyed important relaxation in authorities control, advanced aid like proviso for bonded warehouse installations, transportation of many of the regulative maps to the BGMEA and, to some extent, slightly relaxed enforcement of the commissariats of the Factories Act, Labour Laws, etc. But for a little figure of brave and prima enterprisers of earlier yearss, most of the investors followed others more or less blindly and machinery procured for production has been largely vendor driven. No particular attempt was made by them to leave proficient preparation to the 1.8 million adult females workers with small instruction, and so their productiveness has remained lamentably low. Initially the enterprisers had no accomplishment of international selling, when they were largely dependent on Korean, Indian and Sri Lankan “ purchasers ” , who were nil but self-appointed agents of western importers. Value add-on to the industry except for knitwear has been low for deficiency of autochthonal backward linkages with providers of cloths and accoutrements. Most significantly, the industry benefited from quotas for North American markets and GSP installations in EU markets. The luxuriant description, though good known to everybody in the industry, is narrated here to foreground the fact that, without the debut of suited machinery to guarantee high quality, without the sweetening of productiveness and accomplishments of workers through preparation and retraining, without significant betterment in coating, packaging and transit systems, and without larning to exchange over to e-commerce, most RMG operators will get down falling behind. This will impact their ain income every bit good as the export net incomes of the state, 80 per cent of which is contributed by the RMG sector. Besides occupation losingss for a big proportion of the 1.8 million female workers and 2.0 million or so in the related services, there will be immense societal impacts that need non be discussed here. Acerate leaf to state, variegation of the industrial production system will be needed non merely to get the better of the appreciated losingss of occupations and incomes but besides to enlarge the skyline, with the universe as the market. SMEs can absorb an limitless figure of investors, each necessitating comparatively small capital to bring forth the maximal per unit production and employment, and therefore keep the key to the hereafter of the economic system. Exports will assist increase the buying power of the pullulating 1000000s of rural and urban hapless, utilizing goods from the SME sector. It is therefore really clear why SME development should continue manus in manus with micro endeavor development. It is interesting to detect that the conditions for little industry development that we find today, being at the threshold of entire globalisation, are really much the same as ascertained several-decades ago. Inspite of the unfavorable judgment and disregard of the SME sector on the evidences of inefficiency and non-optimal usage of productive factors compared to larger industries, SMEs are get downing to be extolled for their greater dependance on labor-intensive production techniques, lower demands of imported inputs and better geographical scattering. It is besides being recognized that little beads make an ocean, so much hope is being pinned on micro and little endeavors for chanting up the rural economic system, without which the national economic system can non be sustained. Out of many empirical surveies done in this country, the work of Professors Sadrel Reza, Momtazuddin Ahmed and Wahiduddin Mahmud of Dhaka University, published under the rubric Small and Medium Scale Enterprises in Industrial Development, The Bangladesh Experience ( Academic Publishers, Dhaka, 1992 ) strongly corroborates the present experience and the future mentality. ( Note: The sum-up of the findings and policy recommendations of the said publication could be made available from APCTT on petition. ) In the context of publicity, development and sustainability, among many other things, four issues were highlighted by the writers:

Fiscal support strategies ;

Technology and preparation ;

Selling and substructure ; and

Rule of external development establishments ( intending givers ) .

All the above issues are really much within the appreciation of the authorities and easy soluble within a sensible clip frame, except possibly for engineering and preparation. The skyline for technological development and accomplishment development remains brumous. International cooperation in this respect, through strategies like TCDC ( Technical Cooperation Developing Countries ) , have been most frustrating. Import of engineering has non been really inexpensive ; in any instance, foreign states are non expected to be able to develop and provide ready-made engineerings and machineries for Bangladesh ‘s demands, so there is no alternate to development of local R & A ; D capablenesss. SMEs can non finance R & A ; D costs and attempts and the lone industrial research establishment of the state in the populace sector, BCSIR ( Bangladesh Council of Scientific and Industrial Research ) has been engaged in instead inconsequential chases.