Chapter 1

1.1 Introductions
This report is an Internship Report prepared as a requirement for the completion of the BBA Program. The primary goal of internship is to provide an on the job exposure to the student and an opportunity for translation of theoretical conceptions in real life situation. Students are placed in enterprises, organization, research institutions as well as development projects. The program covers a period of 3 months of organization attachment.

After completion of BBA program, I, Md. Akter Hossen of BBA, was placed in AB Bank Ltd, CDA Avenue Branch, for the internship program under the guidance of my faculty advisor Mr. Md. Iqbal Hossain Lecturer, DBA. The duration of my organizational attachment was, by policy: 3 months, starting from March 1st to May 30th. As a requirement for the completion of the program I needed to submit this report, which would include an overview of the bank SME loan system, customer satisfaction and a comparison the AB Bank SME loan products with other banks I was attached with and elaboration of the project I was supposed to conduct during the internship period.

During this internship period I have engaged at the credit department of the AB Bank, CDA Avenue Branch.

1.2 Objectives of the Report

The main objectives of this report are:

1. To know the customer satisfaction about SME loan products.

2. To make a comparison AB Bank SME loan products with other Banks.

3. To scrutiny the problem of SME loan products of AB Bank.

4. To suggest the way to overcome the various problems related with SME loans.

1.3 Methodology:
In the organization side, most of the information has been collected from published articles, journal, brochures, and web sites. All the information incorporated in this report has been collected both from the primary sources and as well as from the secondary sources.

Primary Sources of Information

o Interview & discussion with existing & Prospective SME loan Clients.

o o

Interview & discussion with other banks officials. Discussion with officials, Credit Dep. of AB Bank,CDA Avenue

Branch.

Secondary Sources of Information

o Data form others Banks.

Relevant AB Bank paper and published documents.

Secondary information has been collected from different articles.

Internet.

Credit related data and circular of AB Bank.

Data form AB Banks computerized system.

1.4 Scope:

The scope of this report is limited to the Customer Satisfaction of AB Bank SME Loan Product in CDA Avenue Branch & a comparison of these loan products with others banks.

1.5 Limitation:
Time Constraints:

To prepare this kind of report is required more time. As my internship program was only for three months it was difficult to figure out the absolute information and required data. Another limitation restricting in this report is a more detailed and analytical one.

Organization constraints:
Past and present financial information that are confidential could not be accurately obtained. Like all other banking institutions, AB Bank is also very conservative and strict in providing financial information. So the hidden information that is not possible to present in the report. As organizations permanent employee one can know it but not so this is one of the limitation of my report.

Data constraints:
Last few decades our banking system developed much with its resources and collaborations. Required data collection is difficult. These are scare in our country. Whether it is primary or secondary data with the best available data this report is illustrated.

Experience constraints:
To prepare and produce such kind of report properly it is needed previous experiences. In the facility we have produced some reports but not as great as it is. In preparation of the internship report I also used my previous experience although it is needed much more. I think experienced could have a great deal.

Chapter 2 AB Bank Overview

2.1 Background of AB Bank

AB Bank Limited, the first private sector bank under Joint Venture with Dubai Bank Limited, UAE incorporated in Bangladesh on 31st December 1981 and started its operation with effect from April 12, 1982 .

Dubai Bank Limited (name subsequently changed to Union Bank of the Maddle east Limited) decided to off-load their investment in AB Bank Limited with a view to concentrate their activities in the UAE in early part of 1987 and in terms of Articles 23A and 23B of the Articles of Association of the Company and with the necessary approval of the relevant authorities, the shares held by them in the Bank were sold and transferred

to

Group

"A"

Shareholders,

i.e.

Bangladeshi

Sponsor

Shareholders.

As of December 31, 2007 ; the Authorized Capital and the Equity (Paid up Capital and Reserve) of the Bank are BDT 2000 million and BDT 4511.59 million respectively. Authorized Capital of the Bank has been increased to BDT 3000 million in the Extra Ordinary General Meeting held on July 16, 2008 .

Since beginning, the bank acquired confidence and trust of the public and business houses by rendering high quality services in different areas of banking operations, professional competence and employment of the state of art technology.

During the last 27 years, AB Bank Limited has opened 73 Branches in different Business Centers of the country, one foreign Branch in Mumbai , India and also established a wholly owned Subsidiary Finance Company in Hong Kong in the name of AB International Finance Limited. To facilitate cross border trade and payment related services, the Bank has correspondent relationship with over 220 international banks of repute across 58 countries of the World.

AB Bank Limited, the premier sector bank of the country is making headway with a mark of sustainable growth. The overall performance indicates mark of improvement with Deposit reaching BDT 53375.35 million, which is precisely 26.85% higher than the preceding year. On the Advance side, the Bank has been able to achieve 30.76% increase, thereby raising a total portfolio to BDT 40915.35 million, which places the Bank in the top tier of private sector commercial banks of the country.

On account of Foreign Trade, the Bank made a significant headway in respect of import, export and inflow of foreign exchange remittances from abroad.

2.2 Entering in IT based Banking:

2.2.1 Business Automation
Being the first private sector Bank of the country, your Bank has prided itself in the quality of the banking services it provides by taking conscious decision to employ the best available banking technology to serve the customers which now stands over 200,000 in all. Core Banking System Kapiti was employed along side the manual banking operations ever since 1984. Later on in the year 2004, Misys core banking solution was selected for implementation to take AB in to super highway of real time online banking of today. Beginning, 2005 Misys implementation was taken-up and in the 1st Phase seven (7) Branches were upgraded to the new core banking system. For the year 2006, in line with the growth strategy, service quality improvement and availability were put into focus whereupon coverage of remaining Branches under Misys became all the more important. Bank took up a massive Project of migration, connectivity and standardization of processes and hardware throughout.

2.3 Activities of AB Bank:

2.3.1 Corporate Banking

AB Bank provides complete range of solutions to meet Corporate Customers' requirement. AB Bank Corporate Banking solutions include a broad spectrum of products and services backed by proven, modern technologies. Corporate Lending AB Bank specialist teams offer a comprehensive service providing finance to large and medium-sized businesses based in Bangladesh . Structured Finance AB Bank have a specialist Structured Finance Team who arrange and underwrite finance solutions including Debt and Equity Syndication for financial sponsors, management teams and corporate. Also provide corporate advisory services. AB Banks aim to provide tailored financing solutions with a dedicated team who can rapidly respond to client needs. Following are some of the products and financial tools of Corporate Banking:

Project Finance Working Capital Finance Trade Finance Cash Management Syndicated Finance, both onshore & off-shore Equity Finance, both onshore & off-shore Corporate Advisory Services

2.3.2 Cards
In the present context of banking business in the world, Card is the future of any bank. Electronic payment system is now ruling the world and some days from now cash

transactions system will turn into a history found only in the text book. AB Bank Limited is one of the leading first generation private sector commercial banks with Branch Network all over the country. The Bank started issuing VISA Credit Cards from the end of year 2004 as a principal member of VISA International

Card Conversion & Balance Transfer Plan

'Card Conversion & Balance Transfer Plan' to AB Bank VISA Credit Card will be extended towards all local Credit Cardholders of the market, provided that their 'other banks' credit card is in 'regular' state, not in 'overdue' state. Cardholders will repay the approved transferred amounts to AB Bank Credit Card Account in monthly installments stated in their monthly statements. Other bank credit cardholders having regular payment history will also be allowed to apply for this facility along with their new AB Bank Credit Card application form. Client can convert his/her other bank card to AB Bank Card and get interest facility @ 19.95% on his/her outstanding.

EasyBuy
'EasyBuy' Installment Plan to AB Bank VISA Credit Card will be extended towards all AB Bank Visa Credit Cardholders. Cardholders can convert any retail purchase done using AB Bank credit card into an installment scheme where they can pay back the amount at rate of interest of 19.95% per annum over a tenor ranging from 6 months to 48 months.

Easy, convenient and affordable

Under the Easy buy program, cardholder can choose own installment plan, ranging from 6 to 48 months. 1. Simple procedure, no documentation, no down payment 2. Available in comfortable payment options of 6 months to 48 months

2.3. 3 Deposit Rates

Interest Rates with effect from April 09, 2009
Products Savings Deposits STD for minimum Tk 5.00 lac and above Security Deposit Receipts (SDR) / Call Dep NFCD RFCD (Minimum balance USD 2,000 or its equivalent for other currency & min tenor one month) Fixed Deposit (Time Deposits) 1 (one) Month 5,00,00,000 & above 3 (three) Months 1 to 10,00,000 10,00,001 to 20,00,000 20,00,001 to 30,00,000 30,00,001 & above 6 (six) Months 1 to 10,00,000 10,00,001 to 20,00,000 20,00,001 to 30,00,000 30,00,001 & above 1 (one) Year 1 to 10,00,000 10,00,001 to 30,00,000 30,00,001 & above 2 (two) Years 10.50% 11.00% 11.50% 11.00% 11.00% 11.50% 11.75% 12.00% 11.25% 11.75% 12.00% 12.25% 10.00% 6.00% 5.00% 3.50% Rate as per daily FX rate Rate as per daily FX rate

2.3.4 Brokerage Service:

AB Bank Foundation (ABBF) is one of the countrys leading securities broker houses of Dhaka Stock Exchange (member # 201) and Chittagong Stock Exchange (member # 101). ABBF has started its operation by soft launching on 28th August 2006 . Initially, AB Bank has started its operation by giving service to client of AB Bank Merchant Banking wing. AB Bank has already started its operation in full swing in its corporate head office and Chittagong . In near future, AB Bank will start its Mohakhali and Agrabad branch operation.

Services:
1. Brokerage Services AB Bank's subsidiary, AB Bank Foundation, which has corporate memberships on the Dhaka and Chittagong Stock Exchanges, can act as brokers on behalf of local and foreign individual and institutional client to trade in the local capital market. AB Bank's Sales & Trading Department will also support brokerage service for offloading shares through direct listing. CDBL services, a) BO (Beneficial Owner) accounts opening and maintenance. b) Dematerialization & c) Rematerialization c) Freeze (freeze request and release request) and suspensions d) Pledging, unpledging and confiscation Services as full service Depository Participant (DP)

As a full service depository participant, AB Bank Foundation provides following

e) BO ISIN balances and master maintenance enquiry

2.3.5 Custodial Service:

Services:
Safe custody of client securities Foreign Trade Execution and Settlement Share transfer in the name of client Complete the Dematerialization process as per client request IPO, Private Placement & Right share subscription as per client instruction with deposit All types of corporate action that includes cash dividend, bonus share and right share collection Open BO account Instant information regarding client securities position as per their request Quarterly reporting to the client by Custodial Department

Customers:
Investors Who Are Interested to Invest In the Bangladesh Capital Market Non Resident Bangladeshi (NRBs) Foreign Institutional and individual clients Local Institutions Sponsors' group and High net worth client

2.3.6 Islamic Banking:

To provide the Islamic banking services in accordance with the principles of Islamic Shariah, AB Bank has established Islamic Banking Wing and started its functioning by opening full-fledged Islamic banking branch on 23.12.2004. Under this wing AB Bank extends the following Islamic banking services:

Deposit services Investment services

Under Deposit services the following services are being rendered:

Mudaraba Savings Account Mudaraba Short Noticed Account Mudaraba Term Deposit Account (with different terms) Mudaraba Monthly Profit Account Al-Wadiah Current Deposit Account Mudaraba Deposit Pension Scheme

Investment Services
AB Bank Islmic Banking Wing provides investment facilities for project finance, working capital finance, SME finance, consumer / retail baking finance etc. under following modes: Hire-Purchase under Shirkatul Melk (HPSM Ijara or Leasing Bai-Muajjal / Bai-Murabaha Musharaka Mudaraba

Foreign Trade:
Islamic Banking Wing provides the following services at its foreign trade desks:

Opening of LC's Post -Import Finance Export bill purchase and negotiation Pre-shipment financing etc

2.3.7 Large Loan & Project Finance

In order to cater the demand of client AB Bank has segmented its portfolio in terms of loan size. As per this segmentation any loan over Tk. 10.00 Crore falls under the purview of Large Loan Unit.

At the moment AB Bank s exposure in Large Loan & Project Finance portfolio is distributed in the following sectors:
SL Sector 1 2 3 4 5 6 7 8 9 Agro- Business Cement Power, Glass Consumer Products Edible Oil Engineering & Construction Financial Institution Food & Beverage Hotel Health Care ABBL Exposure (Limit) (Fig. in Lac Tk.) 12,717.56 38,691.92 21,855.00 36,057.53 18,106.42 1,414.70 27,044.24 2,505.26 3,928.62 11,867.61 10,451.49

10 Printing & Packaging 11 Real Estate

12 Micro-finance 13 Export 14 RMG & Backward Linkage 15 Ship Breaking 16 Steel 17 Telecom & Computer Accessories 18 Trading Total ( including syndicated exposure) Less Syndicated Exposure Total Large Loan & Project Finance portfolio without syndicated exposure

5,763.15 9,441.63 94,826.13 18,029.20 42,824.97 11,479.89 77,579.89 444,585.21 51,560.29 3930,24.92

2.3.8 Merchant Banking Wing (MBW)

AB Bank Limited is the first Private Sector Joint Venture Bank in Bangladesh , which is now fully owned by the Bangladeshis. Since our inception in 1982, AB Bank have been participating in different industrial and national development activities in addition to normal Trade Finance and SME development. In addition to the 73 Branches within the country ABBL has a branch in Mumbai , India . Beside that AB Bank have a wholly owned Finance Company in Hong Kong in the name and style of AB International Finance Limited and representative offices at London and Yangoon. To expand its horizon, ABBL launched its Merchant Banking operations in the year 2003. As a full fledged merchant banker, we provide the following services: 1. Portfolio Management 2. Issue Management 3. Underwriting 4. Corporate Advisory 5. Bankers to the Issue

6. Private Placement The Merchant Banking Wing (MBW) of ABBL has made notable progress and is presently equipped to serve customers needs by offering a comprehensive range of financial solutions. We have also launched Custodial Services with a view to provide one-stop Capital Market services to our valued clients. We understand an entrepreneurs need for stability, trust, innovation and creativity required for the consolidation and growth of investments and endeavors to prosper. The professionals in our MBW with its state of the art integrated computerized system, are always there to provide their vision, knowledge and service for your success.

2.3.9 Retail Banking:

Unsecured Loans Secured Loans

Unsecured Loans Personal Loan Auto Loan Easy Loan (For Executives) Gold Grace - Jewellery Loan House/Office Furnishing/Renovation Loan Staff Loan

Secured Loans Education Loan Personal Loan Personal Overdraft

2.3.10 SME Banking

SME Loan
Considering the volume, role and contribution of the SMEs, in the last two decades AB Bank has been patronizing this sector by extending credit facilities of different types and tenor. As of now 54% of the banks total loan portfolio is segmented to the SMEs which deserve all out attention in our plans, projections and forecasting. As such the bank has emphasized on the following issues:

To provide the best services to the SME sector To increase the SME portfolio of ABBL significantly To improve the quality of ABBLs portfolio

2.4 ABBL Performance & Growth:

Figure 2.1

Growth Overview

Million Taka 31-Dec 2008 Gross Interest Income Net Interest Income Operating Profit (PBP & T) Net Operating Profit (PBT) Profit after Tax (PAT) 7,366.85 2,030.69 4,298.39 3,600.62 2,300.62 31-Dec 2007 5,269.90 1,439.28 3,325.29 2,817.99 1,903.49 % Change 39.79 41.09 29.26 27.77 20.86

Deposits Loans & Advances Total assets Shareholders' Equity

68,560.47 56,708.77 84,053.61 6,722.51

53,375.35 40,915.35 63,549.86 4,511.59

28.45 38.6 32.26 49.01

NIM% Non Interest Income to Operating Income (%) Cost Income Ratio Return on Equity - ROE (%) Return on Assets - ROA (%) Advance Deposit Ratio (%) Capital Adequacy Ratio NPL as % of Advances Earnings per Share (Tk.)

2.75 66.98 62.57 40.96 3.12 82.71 12.84 2.99 103.18

2.58 69.09 28.59 42.19 3.41 76.66 10.75 4.31 85.37

Figure in 000

Sector Wise LDOs position as on December 30, 2008

Industrial sector Limit % Outstanding %

Trading Agriculture Manufacturing Services Contractual Works Energy & Mining Others 100% Secured Loan Special Scheme Loans

15,064,919 6,444,920 23,816,061 6,427,150 1,693,475 1,016,647 393,408 2,633,006 2,095,618 59,585,204

25% 11% 40% 11% 3% 2% 1% 4% 4% 100%

12,130,869 5,477,990 18,695,354 5,376,696 1,108,986 945,776 350,843 2,098,487 2,730,863 48,915,864

25% 11% 38% 11% 2% 2% 1% 4% 6% 100%

Figure 2.2

Figure 2.3

Chapter 3 SME Overview Of

AB Bank Ltd.

SME Overview of AB Bank Ltd

Small and Medium enterprise has emerged as the cornerstone of economic development of Bangladesh in the terms of job creation, income generation, development of forward & backward industrial linkage and meeting local needs. SMEs provide over 87% of the total industrial employment and contribution about 90% of the total export earnings. Thus SMEs occupy a unique position in Bangladesh .

3.1 Definition of SME form Different views

SME defined by Bangladesh Bank:
Small Enterprise Total Assets ( Tk. In Lac) Service Concern Trading Concern Manufacturing Concern .50 to 30.00 .50 to 50.00 .50 to 100.00 No. of Employee Less than 30 Less than 20 Less than 60 Medium enterprise Total Assets ( Tk. In Lac) 30.00 to 100.00 50.00 to 200.00 100.00 to 500.00 No. of Employee Less than 50 Less than 50 Less than 100

Defined by Ministry of Industry

Small Enterprise Total Assets ( Tk. In Lac) No. of Employee Medium enterprise Total Assets ( Tk. In Lac) No. of Employee

Trading Concern Not define Manufacturing Concern Up to 150.00

Up to 24 Not define

Not define

25 to 100

150.00 to 1000.00 Not define

Defined by AB Bank;
Small Enterprise Turn over Service concern Up to 500.00 Lac Trading Concern Manufacturing Concern 500.00 Lac 500.00 Lac Total assets Up to 100.00 Lac 100.00 Lac 200.00 Lac No. of Employee Up to 30 Up to 30 Up to 75 Loan size Up to 50.00 lac Up to 50.00 Lac Up to 50.00 Lac

Medium Enterprise Turn over Service concern 1500.00 Lac Trading Concern Manufacturing Concern 2500.00 Lac 2000.00 Lac Total assets Up to 500.00 Lac Up to 500.00 Lac 1000.00 Lac No. of Employee Up to 100 Up to 100 Up to 500 Loan size Up to 500.00 lac Up to 500.00 Lac Up to 500.00 Lac

In the changed scenario of increasing competition in the large loan sector and curtailment of single obligor exposure limit by Bangladesh bank. It has become necessary to shift dependence from large corporate to medium and small enterprise. This is also in conformity with Banks policy to explore potentials in the SME sector which comprise the largest chunk of the National economy.

3.2 AB Banks Strategies for SME

There is a significant demand for such product in the Market and to

fill up a segment gap of Banks portfolio.

Maximize the return from each customer by cross selling the new

products to existing customers.

Provide the range of lending products to meet customers needs so as

to strengthen the Banking relationship through the asset products.

Increasing & Diversification of the assets portfolio.

Empirically proven lower default rate of the small & medium size borrowers.

Increasing borrower base.

Increasing image of the bank.

3.3 AB Bank SME Loan Products

1. Gati 2. Proshar 3. Digun 4. Sathi 5. Chhoto Puji 6. Uddog 7. Awparajita

Gati
Term
Purpose A loan Facility for meeting regular as well as additional requirement of business; i.e. it will be part of working capital of business. Maximum Tk. 50.00 Lac Limit will be determined by the stock and / or volume of sales Maximum 80% of the stock value to be financed.

Loan Amount

Interest rate Service charge Tenor Repayment Security and / or Collateral 1.00%

15.00% p. a. to 17.00% p.a. Maximum 3 (three) years Through EMI/ lump sum ( No Moratorium) i. Hypothecation of stock and / or receivable.

ii. Registered mortgage of land & buildings and/or Tripartite agreement for shop and/or business premise and/or any other collateral.

Proshar
Term
Purpose Loan Amount It is long term finance for infrastructure development/ capacity building etc. i.e. term loan for expansion & BMRE. Maximum Tk. 50.00 Lac Interest rate Service charge Loan amount will be maximum 80.00% of the proposed additional investment / expenditure.

15.00% p. a. to 17.00% p.a. 1.00%

Tenor Repayment Security and / or Collateral

Maximum 3 (three) years Through EMI/ lump sum ( Moratorium period: Maximum 6 months ) i. Hypothecation of stock and / or receivable and/or machinery and/or furniture and fixture etc. ii. Registered mortgage of land & buildings and/or Tripartite agreement for shop and/or business premise and/or any other collateral.

Digun
Term
Purpose Loan Amount Interest rate Service charge Tenor Repayment Security and / or Collateral Double amount of loan against value of the savings instrument (ABBL FDR, DDS) to meet any type of business requirement. Tk. 10.00 Lac to Tk. 50.00 Lac 8.00% above the instrument interest rate p.a. subject to minimum loan interest rate of 17.00% p.a. 1.00% Maximum 3 (three) years Through EMI/ lump sum i. Hypothecation of stock and / or receivable. ii. lien of savings instrument (ABBL FDR, DDS) covering minimum 50.00% of loan size. iii. PG of the spouse of the borrower. iv. 1 (one) 3rd party guarantee.

Sathi
Term
Purpose Loan Amount Term loan for CNG Refueling conversion / light engineering / project finance ( Package Deal including Non-funded) Maximum Tk. 50.00 Lac Interest rate Service charge Tenor Repayment Loan amount will be maximum 90% oof the value of the imported and/or locally procured machineries.

15.00% p. a. to 17.00% p.a. 1.00% Maximum 3 (three) years Through EMI Moratorium period: maximum 6 months

Security and / or Collateral

i. Hypothecation of Machineries and/or stock and / or receivable. ii. Registered mortgage of project land & buildings; additional land ( if any) iii. PG of the spouse of the proprietor / PG of the Directors.

Chhoto Puji
Term
Purpose Loan Amount Mortgage free Term loan for Working capital / fixed investment requirement. Up to Tk. 10.00 Lac Tk. 10.00 lac Urban Br.

Tk. 10.00 lac Rural Br. Limit will be determined by the stock and/ or receivables or volume of sales. Maximum 80.00% of the stock and/or stock value to be financed.

Interest rate Service charge Tenor Repayment

17.00% p.a. 2.00% Maximum 3 (three) years Through EMI i. Hypothecation of stock and / or receivables and/or Machineries / equipment etc. and/or furniture, fixtures and other moveable assets. ii. Possession rights of the shop / business premises. iii. Assessment of advance / security deposits. ( if the shop is on rental basis ) iv. PG of the spouse and/or other able family member of the borrower. v. Third party guarantee from a person acceptable to the Bank. Condition: letter of Comfort from the local trade body / union Parishad to be taken. (Format to be vetted by legal advisor.)

Security and / or Collateral

Uddog
Term
Purpose Loan for new entrepreneur / business. (For working capital as well as fixed capital investment.) Maximum Tk. 50.00 Lac Loan Amount Interest rate Service charge Tenor Repayment 15.00% p. a. to 17.00% p.a. 2.00% Maximum 3 (three) years Through EMI i. Hypothecation of stock and / or receivable. ii. Registered mortgage of land & buildings and/ or any other collateral. iii. PG of the spouse of the borrower and/ or able family member ( s) .

Security and / or Collateral

Awparajita
Term
Purpose A loan facility for meeting working capital

requirement as well as fixed investment in business for women entrepreneur Maximum Tk. 50.00 Lac Loan Amount Limit will be determined by the stock and/ or volume of sales. Loan amount will be maximum 80% of the proposed additional investment / expenditure.

Interest rate Service charge Tenor Repayment

14.00% p. a. to 16.00% p.a. 1.00% Maximum 3 (three) years ( no moratorium period) Through EMI / Lump sum. i . Hypothecation of stock and / or book debts.

Security and / or Collateral

ii. Registered mortgage of properties / tripartite agreement for shop or business premises. iii. PG of the spouse of the borrower.

3.4 SME Income, Investment Overview:

3.4.2 SME Investment overview of Bahaddarhat Branch:

(Figure in Tk.)
December January 32426559 28934922 February 128210660 March 9244951 April 11717323

SMEs Investment

Figure 3.1

The above chart indicates a clear picture of SME investment of the AB Bank, Bahaddarhat Branch. It is mark able that in the month February the bank provides a large volume of loan and after that the lending amount is decreased. But one thing is important that bank has to ensure the sound level of lending which significant fluctuation is not good.

3.5 Analysis the relationship between The Bankss Cost of Fund and SME interest Income of Bahaddarhat Branch:

(Figure in Tk.)
December January 4138775 4428364 2251804 2311042 February 4582829 1953342 March 4637307 2321298 April 4919087 2470863

Cost of Fund SME Interest Income

Figure 3.2

Co-efficient of Correlation between SME Interest Income and Cost of Fund: (Figure in Tk 000)
Month December January February March Cost of Fund (Y) 4,138.78 4,428.36 4,582.82 4,637.30 SME Interest Income (X) 2,251.80 2,311.04 1,953.34 2,321.29

April
Total

4,919.08
59,955.33

2,470.86
11,308.33

Co-efficient of Correlation between SME Interest Income and Cost of Fund of the Bank:

r=

= 0.32

There is a medium positive correlation between SME interest Income & Cost of Fund (here Cost of Fund include the interest of all sort of savings) which indicate that if the amount of cost of fund will increase than SME interest income will increase because increasing deposit also increase the cost of fund of the Bank that time Bank has available fund to lend the fund. So when Bank uses this fund to SME loan than Interest income will increase.

Chapter-4
Findings & Their Analysis

4.1 Customer Satisfaction

4.1.1 Customer Satisfaction, In respect of delivering detail information regarding SME Loan Products.

Figure 4.1

Standard Deviation 1 = 1.3326665

On the above chart, it indicates that the officials who are in the credit department they give more concentration to their client. When a client comes to the bank to know about the SME loan products of the bank than the official of credit department told them about the loan products of the bank and make them clear what are the requirements of their loan. Here client is satisfied.

4.1.2 Customer Satisfaction, regarding Interest Rate:

Figure 4.2

Standard Deviation 2 = 0.5571355

From the above chart, it can be stated that the clients are satisfied regarding interest rate because other banks are charge little more than the AB Bank charge but some of client are extremely unsatisfied because interest rate is little high against tenor period. They want the repayment period should be maximized.

4.1.3 Customer Satisfaction regarding Loan sanctioning time:

Figure 4.3

Standard Deviation 3 = 0.2039608

On the above chart it is clear that customers are extremely dissatisfied regarding loan sanctioning time. When bank send to Bangladesh Bank for CIB inquiry than it takes more time. And bank takes little time to process the loan and overall time to sanction a loan requires one and half or two months. So when a client receives his proposed loan after

one or two month than the loan becomes less effective to generate clients income. It is very important factor that the bank should be concentrated.

4.1.4 Customer Satisfaction Regarding Documentation:

Figure 4.4

Standard Deviation 4 = 0.257682

The documentation that required for SME loan is more compliable, because lot of documentation have been required and detail, so most of case client become bothered for this reason. But it is necessary for Bank that they should kept detail information & documentation those clients whose intention is not good for the purpose of loan. Another reason of dissatisfaction is the delaying the processing of the documentation at legal Advisor of the Bank. Some of clients claim that the advisor took much time even

processing of re-mortgage. On the above table clients are dissatisfied regarding Documentations.

4.1.5 Customer Satisfaction Regarding Service Charge:

Figure 4.5

Standard Deviation 5 = 0.7138627

Service charge is comfortable for the client. But some sights bank has to be focused such the charge of the Legal Advisor of the Bank is high. Some clients are claimed on this

matter. Because they assume that the other banks do not charge the high rate fees that the Bank does.

4.1.6 Customer Satisfaction Regarding Loan Installment & Adjustment System.

Figure 4.6

Standard Deviation 6 = 0.6811755

Customers are satisfied regarding loan installment & adjustment system of the bank. AB Banks OD system is good and maximum client want this sort of loan installment & adjustment facility from this bank.

Now, Comment on analyzing above table, chart, and figure:

4.1.7.

Very Satisfactory No. of Respon dent 2.17 %

Satisfactory No. of % Responde nt

No Comment No. of % Responde nt

Unsatisfactory No. of % Responde nt

Extremely unsatisfactory No. of % Responde nt 15.00%

21.70% 3.17

31.70% 1.33

13.33% 1.83

18.30% 1.50

Figure 4.7

On the above chart it is clear that 31.70% clients are satisfied and 21.70% clients are very satisfied. So it is good for the bank but Bank has to concentrate of those clients who are in the zone of the unsatisfactory and extremely unsatisfactory, the percentage of this zone are 18.30% and 15.00% respectively. If Bank does not concentrate on those clients Bank may loss the clients. Specifically The Bank has to Developed or Modified or Change the following matter:

1. Loan sanctioning Time 2. Making easy way to process of the Documentation.

4.2 Comparison of AB Bank SME Loan Products with other Banks

AB Bank
Working Capital, Infrastructural development, Light engineering, new entrepreneur, women entrepreneur, other

Key Character
Purpose

Other Banks
Same as that covered by AB Bank.

business requirement 14%-17% Hypothecation of Stock/receivable/m achinery/ furniture/book debts. Personal guaranty of person Mortgage property/land building etc. 500 Lac Security and Collateral two Interest Rate 14%-18% Same as AB Bank but some of Bank provide unsecured loan up toTk. 5 Lac (EBL,SIBL, BRAC)

of / Maximum Loan Amount 1000 Lac

1%-2%

Service Charge

1%-2%

EMI/Lump sum 30-60 days

Repayment System

EMI/Lump sum

Processing Time

15-45 days

Maximum three years

Tenor

Maximum three years

3-6 months only for Prosher and Shati Loan.

Moratorium Period

3-6 Months only to meet short term working capital financing like festival loan. Provide

Provide

Additional Loan

30%

Debt Burden Ratio

30%-60%

4.3 Problem Identification

1. Lack of local marketing. 2. No information of AB Bank loan product in their website. 3. Low furnished building.

Chapter-5

5.1 Recommendation: Bank may engage an official for providing SME loan products information to the clients and also do local marketing in the local area of the Bank. Interest Rate of the SME loan product is satisfactory. But bank can improve this important matter through reducing interest rate, because recently Govt. circulated for reducing the interest rate of savings so cost of fund is also decreased. The most important problem of the Bank is loan processing time. Because maximum time Bank takes more time to sanction a loan proposal, even it takes 2 (two) month to sanction a loan. If a client does not get fund bank in proper time than the loan become idle. But what is doing BRAC? They are doing good job in the SME sector. They takes maximum 1 (one) month to sanction a loan proposal. Eastern Bank doing same job like BRAC. So why dont AB Bank? Another problem regarding SME loan product is documentation. Specifically security against loan. AB Banks most of SME loan products are secured. So lot of documentation required of this reason. Maximum loan is secured by the Mortgage of Land, Building, and Shop etc. But other bank like BRAC, Shahjalal Islamic Bank, Trust Bank are provide mortgage free loan Up to 5 Lac, in this regard they dont take any mortgage of property. They just take hypothecation, two personal guarantees, and other required documentation. So AB Bank should consider this matter as very important. Bank should provide the detail SME loan products information in their web site. As an online Bank, AB Bank should take better care in this issue. AB Bank may introduce a loan Product for those segments who has required fund in seasonal basis. Such sort of loan product is exists in Eastern Bank. Agrim is the loan product for the short term loan. Detail about this loan product are given below: Purpose Tenor Interest Rate Loan Amount Security Repayment Service Charge : Short term financing for business. : Maximum 3-6 month. :19% : Maximum 50 Lac. : Personal guaranty, Spouse guaranty, third party. : (Full Principal + Interest) : 2%

7. Bank should renovate their building. Because other Banks alongside AB Bank (Bank Asia) have glorious building. 5.2 Conclusion

Our country is a developing country. To be a developed country, have to give more concentration in the different industrial sector. In our country, the size of small and medium enterprise is greater than the large enterprise and the contribution of this small and medium enterprise in GDP is more significant than the large enterprise. So development can be started from the hand of Small and Medium Enterprise. In this regard, Small and Medium Enterprise Loan is very much supportive for the SME. As the first private sector Bank in Bangladesh, AB Bank Ltd. is doing a significant roll to the development of the SME through their seven SME Loan Products. AB Bank Ltd. provided their SME loan products for different purpose of their client. New entrepreneurs, women entrepreneur are also get support from AB Bank to meet their required their capital. And AB Bank trying to satisfied their entire SME clients.

APPENDIX

1. Customer Satisfaction, In respect of delivering detail information regarding SME Loan Products. Table: 01 Very Detail Detail No Comment Not Detail Not Response (5) No. of % Respond ent 07 70% Gro 35 ss Mea 3.5 n (4) No. of % Responden t 02 20% 08 00.80 (3) No. of % Responden t 00 00% 00 00.00 (2) No. of % Responden t 01 10% 02 00.20 (1) No. of % Responden t 00 00% 00 00.00

2. Customer Satisfaction, regarding Interest Rate:

Table: 02 Very Satisfactory (5) No. of % Respond ent 02 20% Gro 10 ss Mea 01 n Satisfactory Extremely unsatisfactory (4) (3) (2) (1) No. of % No. of % No. of % No. of % Responden Responden Responden Responden t t t t 04 40% 01 10% 01 10% 02 20% 16 1.6 03 00.30 02 00.20 02 00.20 No Comment Unsatisfactory

3. Customer Satisfaction regarding Loan sanctioning time: Table: 03 Very Quick (5) No. of % Respond ent 00 00% Gro 00 ss Mea 00 n Quick (4) No. of % Responden t 01 10% 04 00.40 No Comment (3) No. of % Responden t 02 20% 06 00.60 Slow (2) No. of % Responden t 02 20% 04 00.40 Extremely Slow (1) No. of % Responden t 05 50% 05 00.50

4. Customer Satisfaction Regarding Documentation:

Table: 04 Very Easy (5) No. of % Respond ent 01 10% Gro 05 ss Mea 00.50 n Easy (4) No. of % Responden t 02 20% 08 00.80 No Comment (3) No. of % Responden t 02 20% 06 00.60 Difficult (2) No. of % Responden t 04 40% 08 00.80 Very Difficult (1) No. of % Responden t 01 10% 01 00.10

5. Customer Satisfaction Regarding Service Charge: Table: 05 Very Comfortable (5) No. of % Respond ent 02 20% Gro 10 ss Mea 01 n Comfortable Uncomfortable Very Uncomfortable (4) (3) (2) (1) No. of % No. of % No. of % No. of % Responden Responden Responden Responden t t t t 05 50% 01 10% 01 10% 01 10% 20 02 03 00.30 02 00.20 01 00.10 No Comment

6. Customer Satisfaction Regarding Loan Installment & Adjustment System.

Table: 06 Very Satisfactory (5) No. of % Respond ent 01 10% Gro 05 ss Mea 00.50 n

Satisfactory

Extremely unsatisfactory (4) (3) (2) (1) No. of % No. of % No. of % No. of % Responden Responden Responden Responden t t t t 05 50% 02 20% 02 20% 00 00% 20 02 06 00.60 04 00.40 00 00

No Comment

Unsatisfactory

Questioner Does the official provide detail information about your loan? Very Detail No Comment Not Response What is your opinion regarding interest rate? Very satisfactory No Comment Extremely unsatisfactory What do you think about Loan sanctioning time? Very Quick No Comment Extremely slow What is your opinion regarding Documentation? Very easy Easy Quick Slow Satisfactory Unsatisfactory Detail Not Detail

No Comment Extremely difficult

Difficult

What do you think about service charge? Very comfortable No Comment Extremely uncomfortable How do you evaluate the loan installment & adjustment system? Very satisfactory No Comment Extremely unsatisfactory Name: Address: Contact No: Satisfactory Unsatisfactory Comfortable Uncomfortable

Reference AB Bank Annual Report 2008 AB Bank web site www.abbank.com.bd BRAC web site www.brac.com.bd Shahjalal Islami Bank web site-www.sjibl.com.bd Trust Bank web site-www.trustbank.com.bd

Eastern Bank web site www.ebl.com.bd