Management Information System
Introduction:
Small and Medium Enterprise (SME) Financing is a topic of significant research interest of academics and an issue of great importance to the policy makers around the world. Economic, as well as technical and social arguments warrant the promotion of SMEs, as they create large scale, low-cost employment opportunities, use locally available inputs and technologies, mobilize small and scattered private savings, develop entrepreneurship, and correct the regional imbalance in development that exists in developing countries. Despite all these potentials, SMEs are disappearing, abandoning the potential role they could have played in economic development. Several studies have identified the major obstacles that include, but not limited to, financing, infrastructure facilities, taxes and regulations and stability in policies. This paper focuses on the financial constraints in Bangladesh. In Bangladesh, among the formal sources, commercial banks are not interested because of the high risk and high supervision cost associated with this type of financing. Absence of sound collateral puts SMEs at a relative disadvantage. However. we have found that some of the commercial banks have some innovative. products or services targeting at SMEs only, while others have repackaged some of their existing products as SME products. The contribution of commercial banks is meager except BASIC bank Ltd. and BRAC Bank Ltd. It has been observed in the study that commercial banks disburse loans to this sector only when government introduces credit guarantee scheme in different capacity. Relationship lending technologies should be introduced in case of the existing transaction lending technologies.
GENERAL CONTEXT OF THE STUDY:
Like many other developing countries, Bangladesh has utilized the traditional blunt. approaches to rural development, such as the green revolution in agriculture, which was once thought to be capable of eradicating poverty through trickle-down effects on income and employment for the poor. In the 1960s, industrialization. was also thought to be able to absorb the surplus labor released from agriculture following capital-intensive technological innovations, which was also failed. the policy makers failed to realize that we should develop labor-intensive. Industries rather than capital-intensive industries because Bangladesh is a labor abundant but capital scarce country and SMEs have a natural comparative advantage. And it is widely claimed that relative to large capital-intensive industries, SMEs are more labor-intensive, that is they employ more labor.
Relative to capital than large enterprises producing the similar products. Moreover, SMEs have high potential for employment generation; require much lower investment per worker compared to large industries. A Bangladesh Small and Cottage Industries Corporation (BSCIC) estimate shows that BDT 50,000 and BDT 5,000 are required per worker in small industries and cottage industries respectively compared to BDT 500,000 in large scale industries (BSCIC Annual Report, 1997 – 98).
Origin of the study:
This project report is generated under the academic supervision of Mr. Rahmat Ullah Mia lecturer, Department of Business Administration, Leading University, Sylhet. This report is prepared as the partial requirement of MBA program under Business Administration Department. The topic is “SME Banking Practices in Prime Bank Ltd.
Objectives and Scope of the study:
Ø To know about overall SME banking activity around Bangladesh.
Ø To observe and understand the process of SME banking.
Ø To identify the prospect of SME loan
Ø To identify the sector of SME investment.
Methodology of the study:
All the information incorporated in this report has been collected both from the primary sources and as well as from the secondary sources. The details of these sources are highlighted in the following.
Primary Source of Data:
Ø Discussion with officials of SME banking divisions.
Ø Face to face conversation with the clients.
Secondary Sources of Data:
Ø Annual Reports of SME banking Division.
Ø Other published documents.
Ø Internet.
Data Collection and presentation Techniques:
For collaborating the data and information collected through primary and secondary sources I have used both qualitative and quantitative method. I choose the SME banking Practices in Prime Bank Ltd. I tried to analyze the major or critical findings. Then, based on everything; I provided recommendations and conclude the research paper.
Limitations of the study:
Ø The Bank was a busy one having heavy rush of people, whom officers need to deal with. So allocation of time for an external researcher is very much tough.
Ø Time period was the other limitation for collecting information, which was only three month long.
Ø Insufficient supply of relevant books and journals.
Historical background of Prime Bank Limited:
Prime Bank Ltd. incorporated in 12th February 1995 and started operation in 17th April 1995. The sponsors are reputed personalities in the field of trade and commerce and their stake ranges from shipping to textile and finance energy etc. The bank has a network of 84 branches strategically located in different cities. All the branches are functioning in computerized environment. As a fully licensed commercial bank, Prime Bank Ltd. is being managed by a highly professional, prompt, and dedicated team with long experience in banking. the constantly focus on understanding and anticipating customer needs. The bank has already occupied an enviable position among its competitors after achieving success in all area of business operation. The growth of the deposit is growing fast. At the end of 2005 total deposits stood at TK.36022.4551 million. At the end of 2009 total deposits stood at TK. 106956 million. And to operate in commercial arena of Bangladesh Prime Bank Ltd emerges as a new bank in the private sector with their vision- “To be the most efficient in terms of customer services, profitability and technology application.
Product of SME (PBL)
Types of Loans: - There are different kinds of loans are preferred for different customer who can be fulfill the banking terms & condition. These are:
Ø SAHJA RIN (EASY LOAN)
Ø SAMPAD RIN (LOAN FOR CAPIRAL EXPENSES)
Ø CHALTI RIN (WORKING CAPITAL LOAN)
Ø MOUSHAMI RIN (SEASONAL LOAN)
Ø DIGUN RIN (DOUBE LOAN)
Ø ANCHOL RIN (LOAN)
Ø SAHJA RIN (EASY LOAN)
Item
Description
Product Description
Small enterprise (“SE”) customers are spread all over Bangladesh doing their business in a dignified manner. However, a commercial bank like Prime Bank Ltd. may not have its Branch network present in many pocket areas. Therefore, the Bank has established a handful number of SME Service Centers as well as engaged number of outsourcing agents to makes SE loans available in remote places to help improve SE’s access to bank finance.
To specifically cater to the financing needs of these remotes SE customers, Prime Bank Ltd. has introduced a new loan product stye\led “Sahaj” to provide easy access to SE customers.
1. Customer segment
Any SE customers
2. Purpose
Any justifiable business purpose.
3. Nationality
Bangladeshi
4. Age limit
From 21 years up to 60 years
5. Minimum income
Minimum income must commensurate with the amount of loan requested
6. Loan size
· Tk 21ac to Tk 6 lac
· The full amount may be allowed without any collateral security.
SAMPAD RIN (Loan for Capital Expenses)
Item
Description
Product Description
Small and medium enterprise (“MSE”) customers strive to grow by the dint of their dedicated and hard work. However, to sustain the business operation and secure a continual growth, they require external (financial) suport in addition to their hard work to position themselves in the environmental supra-system. Moreover, to meet increased customers demand successful SME business often find it necessary to go for profitable expansion. However, they fail to address such demand most of the times due to dearth of capital.
In order to help SME customers to achieve their desired and justified level
Any SE customers
To provide capital for business expansion
to finance purchase of capital machineries
3. Nationality
Bangladeshi
4. Age limit
From 21 years up to 60 years
5. Minimum income
Minimum income must commensurate with the amount of loan requested
6. Loan size
· Tk 2 lac to Tk 50 lac for SE customer
· Tk 2 lac to 300 lac for ME customers
Ø Chalti rin (working capital loan)
ltem
Description
Product Description
Small enterprise and medium enterprise (“SME”) customers are may need running capital at any time to operate their business smoothly. Therefore, These entrepreneurs are required to ensure source of continuous finance so that their business activities are not interrupted. In order to hilp SME customers rin their business in an uninterrupted manner, prime Bank Ltd. has introduced a product styled “Chalti rin to augment working capital base of these customers to help finance day to day business.
1. Customer segment
Any SME customers
2. Purpose
To meet any justifiable working capital need.
3. Nationality
Bangladeshi
4. Age limit
From 21 years up to 60 years
5. Minimum income
Minimum income must commensurate with the amount of loan requested
6. Loan size
Tk 2 lac to Tk 50 hlac for SE customers
Tk 2 lac to Tk 300 lac for ME customers
Recommendation
A bank is a institution that is to remain active for a long term. In this mean time if the good will of the bank is affected due to negative word of mouth and poor services, ultimately a major section of the customer will switch the banks because of competitor finding the gap and filling it.
· At present the SBI branch is not able to sanction loan that are provide by the other branches of SBI in Bangladesh.
· SBI branch is not able to sanction loan without the consent of main branch.
· The bank should provide loan to poor people and motivate them for repay loan on time.
· They also provide loan on productive sector which improve the socio economic condition of the reason.
Small and Medium Enterprise (SME) Financing is a topic of significant research interest of academics and an issue of great importance to the policy makers around the world. Economic, as well as technical and social arguments warrant the promotion of SMEs, as they create large scale, low-cost employment opportunities, use locally available inputs and technologies, mobilize small and scattered private savings, develop entrepreneurship, and correct the regional imbalance in development that exists in developing countries. Despite all these potentials, SMEs are disappearing, abandoning the potential role they could have played in economic development. Several studies have identified the major obstacles that include, but not limited to, financing, infrastructure facilities, taxes and regulations and stability in policies. This paper focuses on the financial constraints in Bangladesh. In Bangladesh, among the formal sources, commercial banks are not interested because of the high risk and high supervision cost associated with this type of financing. Absence of sound collateral puts SMEs at a relative disadvantage. However. we have found that some of the commercial banks have some innovative. products or services targeting at SMEs only, while others have repackaged some of their existing products as SME products. The contribution of commercial banks is meager except BASIC bank Ltd. and BRAC Bank Ltd. It has been observed in the study that commercial banks disburse loans to this sector only when government introduces credit guarantee scheme in different capacity. Relationship lending technologies should be introduced in case of the existing transaction lending technologies.
GENERAL CONTEXT OF THE STUDY:
Like many other developing countries, Bangladesh has utilized the traditional blunt. approaches to rural development, such as the green revolution in agriculture, which was once thought to be capable of eradicating poverty through trickle-down effects on income and employment for the poor. In the 1960s, industrialization. was also thought to be able to absorb the surplus labor released from agriculture following capital-intensive technological innovations, which was also failed. the policy makers failed to realize that we should develop labor-intensive. Industries rather than capital-intensive industries because Bangladesh is a labor abundant but capital scarce country and SMEs have a natural comparative advantage. And it is widely claimed that relative to large capital-intensive industries, SMEs are more labor-intensive, that is they employ more labor.
Relative to capital than large enterprises producing the similar products. Moreover, SMEs have high potential for employment generation; require much lower investment per worker compared to large industries. A Bangladesh Small and Cottage Industries Corporation (BSCIC) estimate shows that BDT 50,000 and BDT 5,000 are required per worker in small industries and cottage industries respectively compared to BDT 500,000 in large scale industries (BSCIC Annual Report, 1997 – 98).
Origin of the study:
This project report is generated under the academic supervision of Mr. Rahmat Ullah Mia lecturer, Department of Business Administration, Leading University, Sylhet. This report is prepared as the partial requirement of MBA program under Business Administration Department. The topic is “SME Banking Practices in Prime Bank Ltd.
Objectives and Scope of the study:
Ø To know about overall SME banking activity around Bangladesh.
Ø To observe and understand the process of SME banking.
Ø To identify the prospect of SME loan
Ø To identify the sector of SME investment.
Methodology of the study:
All the information incorporated in this report has been collected both from the primary sources and as well as from the secondary sources. The details of these sources are highlighted in the following.
Primary Source of Data:
Ø Discussion with officials of SME banking divisions.
Ø Face to face conversation with the clients.
Secondary Sources of Data:
Ø Annual Reports of SME banking Division.
Ø Other published documents.
Ø Internet.
Data Collection and presentation Techniques:
For collaborating the data and information collected through primary and secondary sources I have used both qualitative and quantitative method. I choose the SME banking Practices in Prime Bank Ltd. I tried to analyze the major or critical findings. Then, based on everything; I provided recommendations and conclude the research paper.
Limitations of the study:
Ø The Bank was a busy one having heavy rush of people, whom officers need to deal with. So allocation of time for an external researcher is very much tough.
Ø Time period was the other limitation for collecting information, which was only three month long.
Ø Insufficient supply of relevant books and journals.
Historical background of Prime Bank Limited:
Prime Bank Ltd. incorporated in 12th February 1995 and started operation in 17th April 1995. The sponsors are reputed personalities in the field of trade and commerce and their stake ranges from shipping to textile and finance energy etc. The bank has a network of 84 branches strategically located in different cities. All the branches are functioning in computerized environment. As a fully licensed commercial bank, Prime Bank Ltd. is being managed by a highly professional, prompt, and dedicated team with long experience in banking. the constantly focus on understanding and anticipating customer needs. The bank has already occupied an enviable position among its competitors after achieving success in all area of business operation. The growth of the deposit is growing fast. At the end of 2005 total deposits stood at TK.36022.4551 million. At the end of 2009 total deposits stood at TK. 106956 million. And to operate in commercial arena of Bangladesh Prime Bank Ltd emerges as a new bank in the private sector with their vision- “To be the most efficient in terms of customer services, profitability and technology application.
Product of SME (PBL)
Types of Loans: - There are different kinds of loans are preferred for different customer who can be fulfill the banking terms & condition. These are:
Ø SAHJA RIN (EASY LOAN)
Ø SAMPAD RIN (LOAN FOR CAPIRAL EXPENSES)
Ø CHALTI RIN (WORKING CAPITAL LOAN)
Ø MOUSHAMI RIN (SEASONAL LOAN)
Ø DIGUN RIN (DOUBE LOAN)
Ø ANCHOL RIN (LOAN)
Ø SAHJA RIN (EASY LOAN)
Item
Description
Product Description
Small enterprise (“SE”) customers are spread all over Bangladesh doing their business in a dignified manner. However, a commercial bank like Prime Bank Ltd. may not have its Branch network present in many pocket areas. Therefore, the Bank has established a handful number of SME Service Centers as well as engaged number of outsourcing agents to makes SE loans available in remote places to help improve SE’s access to bank finance.
To specifically cater to the financing needs of these remotes SE customers, Prime Bank Ltd. has introduced a new loan product stye\led “Sahaj” to provide easy access to SE customers.
1. Customer segment
Any SE customers
2. Purpose
Any justifiable business purpose.
3. Nationality
Bangladeshi
4. Age limit
From 21 years up to 60 years
5. Minimum income
Minimum income must commensurate with the amount of loan requested
6. Loan size
· Tk 21ac to Tk 6 lac
· The full amount may be allowed without any collateral security.
SAMPAD RIN (Loan for Capital Expenses)
Item
Description
Product Description
Small and medium enterprise (“MSE”) customers strive to grow by the dint of their dedicated and hard work. However, to sustain the business operation and secure a continual growth, they require external (financial) suport in addition to their hard work to position themselves in the environmental supra-system. Moreover, to meet increased customers demand successful SME business often find it necessary to go for profitable expansion. However, they fail to address such demand most of the times due to dearth of capital.
In order to help SME customers to achieve their desired and justified level
Any SE customers
To provide capital for business expansion
to finance purchase of capital machineries
3. Nationality
Bangladeshi
4. Age limit
From 21 years up to 60 years
5. Minimum income
Minimum income must commensurate with the amount of loan requested
6. Loan size
· Tk 2 lac to Tk 50 lac for SE customer
· Tk 2 lac to 300 lac for ME customers
Ø Chalti rin (working capital loan)
ltem
Description
Product Description
Small enterprise and medium enterprise (“SME”) customers are may need running capital at any time to operate their business smoothly. Therefore, These entrepreneurs are required to ensure source of continuous finance so that their business activities are not interrupted. In order to hilp SME customers rin their business in an uninterrupted manner, prime Bank Ltd. has introduced a product styled “Chalti rin to augment working capital base of these customers to help finance day to day business.
1. Customer segment
Any SME customers
2. Purpose
To meet any justifiable working capital need.
3. Nationality
Bangladeshi
4. Age limit
From 21 years up to 60 years
5. Minimum income
Minimum income must commensurate with the amount of loan requested
6. Loan size
Tk 2 lac to Tk 50 hlac for SE customers
Tk 2 lac to Tk 300 lac for ME customers
Recommendation
A bank is a institution that is to remain active for a long term. In this mean time if the good will of the bank is affected due to negative word of mouth and poor services, ultimately a major section of the customer will switch the banks because of competitor finding the gap and filling it.
· At present the SBI branch is not able to sanction loan that are provide by the other branches of SBI in Bangladesh.
· SBI branch is not able to sanction loan without the consent of main branch.
· The bank should provide loan to poor people and motivate them for repay loan on time.
· They also provide loan on productive sector which improve the socio economic condition of the reason.
* * *
