You are on page 1of 42

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet


Page | 1

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

1.1 Introduction:
Business environment are becoming more and more complex with the passage of time. To
understand and deal with such riddle phenomena, one needs a lot of energy and knowledge. So
business education has become an evolving science, which helps to solve the business problems.
Academic education provides general knowledge about business decision and policies.
Internship as an integral part of BBA provides the opportunity of peeping into real professional
life of the business people. Its enable us to evaluate and understand the practical application of
all the terms and techniques that we have studied during our course work. I was assigned to
complete my internship comprising practical work of 3 months, at Mutual Trust Bank,
Shahparan Branch. In this internship report, I have tried my best to explain the operation of the
branch comprehensively.

1.2 Background of the study :

Internship program is an essential part of the regular BBA program of the department of the
Business Administration of Leading University. It gives chance to a student to get a brief idea
about the professional world. At the end of the program, the students are required to place the
accomplishment and findings of the work through the writing of report covering the topic
assigned to them. The department assigned the report for which the students study thoroughly
about the organizations. During the program each student is supervised and guided by a teacher
of the department. It enables the students to develop their analytical skills and scholastic
This internship report is generated under the academic supervision of Tahmina Khanom, Senior
Lecturer, Department of Business Administration, Leading University, Sylhet. To complete
the Internship program, I have selected and got opportunity to work as an internee Mutual Trust
Bank Shahparan Branch, Sylhet.

Page | 2

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

1.3 Justification of the study

Internship report is a prerequisite for acquiring BBA degree. Before completion of the degree, a
student must undergo the internship report. Internship report is a perfect blend of the theoretical
and practical knowledge. As the classroom discussion alone cannot make a student perfect in
handling the real business situation, therefore it is an opportunity for the students to know about
real life situation through this report. This report consists of three phases.

Organization orientation to acquaint at the interns as whit structure, function and

performance of the organization.
The work pertaining to a particular problem or problems matching with the interns area
of specification and organizations requirement and
The report writing to summarize the interns analysis findings and achievements in
proceeding two phases.

And conclusion is written. It could help improving the existing service.

Page | 3

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

1.4 Objectives of the study

General Objective:
The General Objective for the report is to make an analysis of the SME Banking procedure of
Specific objectives:

To monitor and understand the activities of the SME Department of Mutual Trust Bank


Limited, and to accumulate practical knowledge on the SME operations.

To evaluate importance of SME loan.
To identify the requirements to get SME loan.
To recognize the enterprise selection criteria to provide SME loan.
To analysis the loan sanctions, disbursement and recovery procedures of SME loans.
To make comparison of different product, services, SME Loan of MTBL & Some other


commercial Bank.
To make some recommendations for further development of SME loan products of

1.5 Scope of the study

Mutual Trust Bank is one of the successful private banks in our country. But the scope of the
study is limited to shahparan branch only. The report covers the organizational structure,
background, function and performance of the bank. I have mainly worked in the SME Banking,
so my report covers all the activities of SME service. Basically focuses on the study on SME
services of Mutual Trust Bank Shahparan Branch.

1.6 Methodology of Data Collection

Methods of data collection
Page | 4

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

The Primary Sources are as followsFace-to-face conversation with the respective Executives & officers of the Bank.

Practical work exposures form the different desks of the various departments of the
Branch covered.
Relevant file study as provided by the officers concerned.

The Secondary Sources of data and information are Annual Reports of Mutual Trust Bank Limited.
Periodicals published by Bangladesh Bank.

1.7 Limitations Of The study

A number of drawbacks appeared during preparing the report and hindered the total work
process. The report may have some incompleteness due to some of the limitation I mentioned
This report may be too narrow because I worked only in one branch instead of different
branches located in different location of Bangladesh. My area of study was limited.
The time period was very short; it is very tough to know the entire service process in
short time period. The Bank was a busy one having heavy rush of people, whom officers
need to deal with. So allocation of time for an intern is very much tough for the officers
of the bank.
I had to focus on the bank job because of high work pressure which leads me hurry to
preparing this report.
I request to overlook the errors in the report by considering my genuine efforts to avoid

these errors by myself.

Page | 5

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet


2.1. Banking System in Bangladesh:

The Nation can look back with certain justifiable pride at the achievements of the banking
sector of Bangladesh. In the wake of liberation struggle, the banking structures of Bangladesh
were in shambles in the war ravaged economy of the country. The banking business in the

Page | 6

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

country was performed entirely by the nationalized banks till 1981/82. Thereafter, some banks
were allowed to function as private sector banks for the purpose of widening the area of private
sector operation. Two nationalized banks, the Uttara Bank and the Pubali Bank Were
denationalized, and they started operation as private commercial bank. The banking system of
Bangladesh has undoubtedly made significant strides during the last years. Banking network
now covers the entire country. Commercial banks play a very important role in our economy; in
fact, it is difficult to imagine how our economic system could function efficiently without many
of their services. They are the heart of our financial structure since they have the ability, in cooperation with Bangladesh bank to add to the money supply of the nation and thus create
additional purchasing power. This characteristic sets commercial Banks apart from other
financial institutions. In addition to issuing deposits payable in demands, they accept time
deposits. By Lending and investing these resources, and by transferring funds throughout the
nation and even between countries, they make possible a more complete utilization of the
resources of the nation. Although banks create no new wealth, their lending, investing and
related activities facilitate the economic processes of production, distribution and consumption.
Human resource development through training is most crucial for organization growth. Training
is a means to reduce obsolesce among the people in organization in the face of relentless
innovation. Training is the process of increasing the skills and knowledge of personnel for the
purpose of improving individual and organizational performance. Training is essential for the
continued growth and development of both individual employee and the organization.

2.2 Background of MTBL

The Company was incorporated as a Public Limited Company in 1999, under the Companies Act
1994, with an Authorized Share Capital of BDT 1,000,000,000 divided into 10,000,000 ordinary
shares of BDT 100 each. At present, the Authorized Share Capital of the company is BDT
10,000,000,000 divided into 1,000,000,000 ordinary shares of BDT 10 each.The Company was
Page | 7

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

also issued Certificate for Commencement of Business on the same day and was granted license
on October 05, 1999 by Bangladesh Bank under the Banking Companies Act 1991 and started its
banking operation on October 24, 1999. As envisaged in the Memorandum of Association and as
licensed by Bangladesh Bank under the provisions of the Banking Companies Act 1991, the
Company started its banking operation and entitled to carry out the following types of banking

Wholesale Banking

Retail Banking

International Trade Financing

Small and Medium Enterprises (SME) Banking

NRB Banking

Privilege Banking

Card Services

Treasury Operations

The Company (Bank) operates through its Head Office at Dhaka and 103 branches. The
Company/ Bank carry out international business through a Global Network of Foreign
Correspondent Banks.

2.3 Organizational Chart of MTBL

The expansion of an organization depends on the management style of their organizations. The hierarch
of the MTBL is given below:
Page | 8

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

Table: 1. Organogram of MTBL

Board of Director
Managing Director
Deputy Managing Director
Senior Executive Vice President
Executive Vice President
Senior Vice President
First Vice President

Senior Asstt. Vice President


Asstt. Vice President

Senior Principal Officer
Management Trainee

Principal Officer

Management Trainee

Executive Officer
Senior Officer
Junior Officer

Trainee Asstt. Officer

Assistant Officer

Computer Trainee

Computer Operator

Cashier Trainee


2.4 Mission & Vision


Page | 9

Probationary Officer

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

Aspire to be the most admired financial institution in the country, recognized as a dynamic,
innovative and client focused company that offers an array of products and services in the search
for excellence and to create an impressive economic value.
Mutual Trust Bank's vision is based on a philosophy known as MTB3V. We envision MTB to

One of the Best Performing Banks in Bangladesh

2. The Bank of Choice


A Truly World-class Bank

2.5 Products & Services of MTBL

1. Accounts Services
Account Balance Information
Transaction Details Information
Customer Feedback & Complaint
2. Card Services
Debit & Credit Card Activation
Card Transaction Details
Card Block, Lost & Stolen Report
Credit Card Balance Inquiry
Card Cheque Activation & Block
Card Replacement
Credit Card Application Status Inquiry
Credit Card Payment Inquiry
Credit Card Statement Inquiry
Card Dispute Resolving Request
Customer Feedback & Complaint
E-statement Enrollment Request
Email Address Update Request
Complaint regarding E-statement
3. Value Added Services
Internet Banking & SMS Banking related information
Internet Banking User Unlock
Internet Banking Password Recovery
Internet Banking Access change
Internet Banking Mobile number change

P a g e | 10

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

Internet Banking User Type change

Complaint regarding Fund Transfer or Mobile top up
Complaint regarding SMS Banking
4. Services
Remittance Send & Receive Inquiry
Exchange House Related Inquiry
NRB Account Balance & Transaction Details
5. Product Information
Deposit Product Information
Loan Product Information
Cards Product Information
NRB Product information
SME Product Information
Value Added Services Information
Application for New Credit Card

Of The Banking Service Of
Mutual Trust Bank Ltd.

P a g e | 11

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

3.1 General Banking service:

Customer Service.
Accounting Opening.
Instrument issued by bank.
IBS/OBC Collection.
Locker Service.
Cash & Account Department.

3.2 Types of Accounts: General Products are:

Current Deposit: Interest Rate 0.00%

Individual Account.
Joint Account.
Proprietor Ship Account.
Limited Company Account.

Savings Deposits: Interest Rate 5.25%

P a g e | 12

Individual Account.
Joint Account.
Proprietor Ship Account.

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

Limited Company Account.

Short Term Deposits: Interest Rate 6.00%

Individual Account.
Joint Account.
Proprietor Ship Account.
Limited Company Account.

Fixed Deposits: Fixed deposit is one, which is repayable after the expiry of a predetermined
period fixed by him. The period varies from 1 month to 12 months. These deposits are not
repayable on demand but they are with draw able subject to a period of notice.

3.3 Instrument issued by bank:

Instruments are:
Pay order.
Demand Draft.
3.4 IBC/OBC:
By OBC (Outward Bills Collection), we mean that those cheques drawn on other banks which
are not within the same clearing house. Officer gives OBC seal on this type of cheques and later
sends a letter to the manager of the branch of the some bank located in the branch on which
cheque has been drawn. After collection of that bill branch advices for the concerned branch in
which cheques has been presented to credit the customer account through Inter Branch Credit
Advice (IBCA).
Transfers play a vital role in banking sector. So now we have to know what transfer is:
Basically transfer is a type of register maintaining matter. In this register officer write down
every day transactions in Debit and Credit side then the officer calculate both the side of the
register if both side shown same amount.
3.5-2 Clearing:
Clearing is one of the magical parts of banking. Every bank has an officer of clearinghouse who
is work with Bangladesh Bank clearing house. Actually most of major client deposit their

P a g e | 13

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

account in different kinds of bank cheques. Clearing officer check all the cheques and deposit
slip very carefully and then he received the cheque. After that the clearing officer posting all the
cheques in computer software which is recognized through Bangladesh Bank computer
department. Then clearing officer seal all the cheques in advance date after that the officer
endorsement all the cheques and sign all the cheques.All the cheques are posted in the computer
by branch wise.

3.6 Foreign Remittance

Foreign remittance is the transfer of foreign currency from one country to another country. In
another word, foreign remittance means, remittance in foreign currency that are received in and
made out abroad. Actually, foreign remittance is purchase and sale of freely convertible foreign
currencies as permissible under exchange control regulations of the country. Foreign remittance
is very important for the country as valuable foreign exchange is involved in the transfer
mechanism. Foreign remittance takes place in two waysRemittance
(Inward & Outward )



Figure 3: Foreign Remittance

Inward Remittance
Any person can remit funds to another through Inland remittance by using the following means
of remitting funds with charges

Pay order (PO).

Demand draft (DD).
Telegraphic Transfer (T.T).
Mail Transfer.

P a g e | 14

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

Outward Remittance
Remittance from our country to foreign countries is called outward foreign remittance. On the
other word, sales of foreign currency by the authorized dealer or formal channels may be
addressed as outward remittance. The authorized dealers must utmost caution to ensure that
foreign currencies remitted or released by them are used only for the purposes for which they
are released. Out ward remittance may be made by appropriate method to the country to which
remittance is authorized. Most outward remittance is approved by the authorized dealer on
behalf of Bangladesh Bank.
Outward remittance may be made for following purposes:

Medical treatment
Educational purpose
Attending seminar etc.
Balance amount of F.C account.
Profit of foreign companies.
Technical assistance
New exporters up to USD 6,000/- for business promotion

Foreign Remittance Process

Fund transfer from one country to another country goes through a process which is known as
remitting process. Suppose a local bank has 200 domestic branches. The bank has corresponding
relationship with a foreign bank say-X, and maintaining Nostro Account in US $ with the
bank. Bangladeshi expatriates are sending foreign remittances to their local beneficiary, through
that account. Now, when the Bangladeshi expatriates through other banks of different countries
remit the fund to their Nostro Account with X, then the local banks Head Office
international division will receive telex message and the remittance section will record the advice
and generate the advice letter to the respective branch of the bank. The branch will first decode
the test, verify signature and check the account number and name of the beneficiary and intimate
the beneficiary accordingly. But sometimes the complexity arises, if the respective local bank has
no branch where the beneficiary maintains his account. Then the local bank has to take help of a
third bank who has branch there.

P a g e | 15

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

Theoretical Overview
Of SME Banking

P a g e | 16

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

4.0 SME Banking Overview

4.0.0 SME- Background
Small and Medium-size Enterprises (SMEs) have been playing a pivotal role in terms of
economic growth, employment generation, and industrialization (e.g. through entrepreneurship
development). Although the role of SMEs is different at different stages of economic
development, their role is particularly important for developing countries and LDCs. SMEs
development in agriculture and non-agriculture sector in developing countries and LDCs is
strategic for employment generation and rural development.
4.0.1 Definitions & Different Forms
SMEs are characterized on the basis of size, investment and employment in most countries
across the world. Here small enterprises are those which have employed less than 50 persons and
have an investment of less than Tk. 250 million. On the other hand, medium industrial units are
those which have investment between Tk. 250 million and 500 million with the number of
employed workers ranging between 50 and 99.
SMEs do not have any common and universally acceptable definition used in Bangladesh. The
practice of different institution/agencies is to define SMEs keeping their own perspectives and

P a g e | 17

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

strategies in view. For policy purposes, it is important therefore to adopt a uniform definition of
SMEs to facilitate regular monitoring of growth and structural change in the sector and evaluate
the impact of policies based on comprehensive information covering the entire SME sector. The
Government of Bangladesh has categorized SME into two board classesi.

Manufacturing enterprise where an enterprise would be treated as small enterprise if, in

current market prices, the replacement cost of plant, machinery and other parts/components,
fixtures, support utility, and associated technical services by way of capitalized costs (of turn-key
consultancy services, for example), etc., excluding land and building, were up to Tk. 15 million;
On the other hand, an enterprise would be treated as medium enterprise if, in current market
prices, the replacement cost of plant, machinery and other parts/components, fixtures, support
utility, and associated technical services by way of capitalized costs (of turn-key consultancy
services, for example), etc., excluding land and building, were up to Tk. 100 million;

Non-Manufacturing activities (trading or other services)- where an enterprise should be

treated as small if it has less than 25 workers, in full-time equivalents; oppositely, an enterprise
should be treated as small if it has between 25 and 100 employees.
Different Legal Forms of SMEs
SMEs can be formed in different legal formats. According to CRISIL Ratings Agency SMEs can
be registered in the following legal forms;
Figure 4: Different Legal Forms of SMEs
Different Legal Forms for
Private Limit Company

Public Limited Company

Partnership Firm


A Registered Trust

A Registered Society

In Bangladesh, although there are other forms of SMEs, mainly the SMEs are observed to be
formed as proprietorship concern. Generally, food processing, hand loon factories, leather and
tannery, ceramic, light engineering, electrical and electronics, handicrafts, specialized textiles

P a g e | 18

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

and garment units fall in the category of medium and small enterprises. There are also 10000 of
cottage industrial units and a large number of handloom and power loom factories in the country.
Despite having huge potential to flourish, the growth of SMEs in Bangladesh is being impeded
by multifarious problems; both are micro and macro levels.
4.0.3 Several studies on SME & CRM
Karmel and Bryon (2001) depicted closer relation of the SMEs with the equity and capital
markets in USA through GDP and SMEs growth is higher in Europe than USA. Through
efficient use of capital higher price earning share, higher return on equity, higher return on assets
etc. Variables can enhance the SMEs growth and profitability.
Credit risk Management is the core part of a financial institution and on every step of the
procedure the key points should be remind while assessing credit risks. Besides the key
challenges like strategic decisions faced in each steps of the process needed to be taken so that
the probability of risks may be mitigated. Moreover a new design of CRM cycle can be
developed for efficiency. Infosys.
Despite all the constraints of SMEs financing, banks and financial institutions have been
providing finance to the SME sector and the volume of finance is showing an increasing trend.
Most importantly the share of private sector banks in disbursement of credit to the SME sector
has been increasing in recent years comparatively at a higher rate than the NCBs and state owned
DFIs The Daily New Nation.
4.1.0 SME & SME Banking
SME- a short form of Small and Medium Enterprises, is now a demanding sector in any part of
the world. As because, SMEs causing an increase of income (GDP) of the economy of a country
as well as helping in reducing and expanding other governmental and social issue. Governments
of the developing countries like Bangladesh have undertaken some expansion and beneficial
measures to enhance SMEs to sustain. Even developed countries like USA, UK, India and Japan
etc are now placing more emphasis on the expansion of the SME sector. SME banking refers of
providing financial facilities through creating different financial packages like deposits, saving
deposits for individual or business person, term deposits, cards facilities, credit deposits etc. To
the SMEs to run business efficiently, so that increasing of income will contribute more in social
or governmental issue like employment generation and thus reducing poverty etc. But as, Credit
Risk Management department works alone with providing financial facilities, financial

P a g e | 19

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

institutions finds some risks or issues on providing access of financing to the SMEs. For having
insight, the following parts include an idea on SME and SME banking.

4.1.1 Scenario of SME and SME banking in Bangladesh

In recent surveys on SMEs in Bangladesh, available information shows that SMEs are increasing
rapidly in Bangladesh, especially since the 1990s. The data on the number of establishments
show that small enterprises grew by 4.6 percent per year over the period FY78 to FY03, while
medium enterprises grew by 6.4 percent during FY 82-FY 03. With special emphasis given to the
development of SMEs, it is likely that these growth rates have continued and probably increased
in recent years. The number of small enterprises increased to 55,916 in 2001 from 24,590 in
1981 (Source: PAU, BB).
In case of the contribution of the SMEs sector to the GDP of the economy, manufacturing SMEs
contribute the highest proportion of 38 percent to GDP; followed by agricultural SMEs (24
percent) and SMEs in wholesale and retail trade and repair activities (23 percent)
4.1.2 Importance of SMEs
In view of the present scenario of all over the world, SMEs are seems to be a very important
sector for developing country especially for the countries of Asia-Pacific region. Because
developing countries like Bangladesh through SMEs, employment increases, the resources are
well-used, as well as it contributes on the GDP of economy through increasing the income
deriving from the SMEs. Here are some reasons for the importance of SMEs

SMEs are engines of growth for the economies over the world. Globally, SMEs constitute

about 95% of the industrial units in most countries; most of the countries GDP and exports are

P a g e | 20

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

A vibrant SME sector is essential for creating a competitive and efficient market.


Small businesses act as the seed-bed for the development of entrepreneurial skills and


The smaller size of SMEs makes them flexible in their approach and ensures expeditious

decision making.

SMEs lower the cost of goods services significantly owning to lower overheads.

SMEs fit regional imbalance of growth, exploit local raw materials and talent.

SME sector is the largest provider of employment in most countries, especially of new


Thus the survey brought out the fact that the large untapped potential for expansion in

manufacture and production could be exploited (or contributing more significantly to the national
Therefore, Government of Bangladesh pointed SMEs as the trust sector and most important and
gainful sector for enhancing pro-poor economic growth. And so, refocus on SME financing is
being made every year to access finance to the SMEs properly.
4.1.3 Issues and Challenges Faced by SMEs
Though SMEs have inherent strengths, even it creates importance in contributing the economy of
most of the countries; still there are some issue and challenges that the SMEs are facing. These

Lack of adequate finance- In Bangladesh, a number of financial and non-financial

institutions are providing financial facilities to the SMEs. But still the SMEs are not having
adequate finance.

Lack of adequate infrastructure- The infrastructure of the developing countries like

Bangladesh is not well supportive.

Lack of manpower- From Bangladesh scenario, SMEs are facing the following issue due

to high cost of the oil and other materials worldwide and thus employees those works from early
age for financing problem do not get proper education.

P a g e | 21

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

Raw materials & Technology- For expansion and development of SMEs operation

adequate resources are needed. But high cost of raw materials and technologies are not reaching
to this business entity.

Marketing- In present, to run business effectively and efficiently, marketing knowledge

and use of it is important. Though most of the SMEs are run by the employees who are less
educated, cannot access or run the business with efficiency.
Apart from these there are several other issues like, Government policies and regulation, Tariffs
and trade barriers, Low bargaining power, Low level of transparency and Low emphasis on
corporate governance etc. are also challenging to SMEs to operate.

4.1.4 Risk Involves in Leading to SMEs:

Today, access to credit is recognized as a right of people globally. But it seems availability of
finance is thought to be a major constraint to formation and growth of SMEs in Bangladesh.
Banks are reluctant to expand their SME credit portfolio because they do not consider SME
lending an attractive and profitable undertaking. This is so because SMEs are regarded as high
risk borrowers because of their low capitalization, insufficient assets and their inability to
comply with collateral requirements of the banks. Administrative costs are also higher because
close monitoring and supervision the SME operation becomes necessary.
Although all these facts, banks and financial institutions have been providing finance to the SME
sector and the volume of finance is showing an increasing trend.
4.1.5 Recent Developments
In the FY10 budget, the government announced provisions to keep the income of manufacturing
SME articles free from taxes and defined SMEs as entities having an annual turnover not
exceeding Tk.2.4 million, which was 2.0 million earlier. The BB has also adopted a preferential
lending policy to remove obstacles from the way of accessing needed finance by the SMEs. In
order to insure cost effectiveness, BB has given permission to the scheduled banks to open SME
service centers to receive application and disburse, monitor, and recover loans to the SME sector.
The banks have also been allowed to use the SME service centers to receive and deliver foreign
remittance and open separate desks for women entrepreneurs in the SME sector. For promoting

P a g e | 22

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

small enterprises, BB has directed the banks that at least 40 percent of their total targeted loan for
the SME sector should be earmarked for financing small entrepreneurs. BB has also expanded its
spectrum of SME financing by including broadband and IT having enormous possibilities within
the service sector activities.
The above developments indicate that financing from formal source to SMEs is growing at a
faster rate in recent years. Since access to finance is one of the key constraints of the SMEs, it is
expected that higher flow of institutional credit would enable the SME sector to expand at a
faster pace with positive impact on growth acceleration and employment generation in the

SME Banking
Mutual Trust Bank Ltd.

P a g e | 23

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

5.1 SME Banking- The Mutual Trust Bank Limited

Among all the functional areas, SME banking is emerging area for the bank. To serve SME
clientele, recently bank has established 16 SME centers with 85 branches. It is also providing
different banking facilities like- LC, STRL, BG, STL, OD etc. with specialized product namelyIn the year 2010, major initiatives were taken to re-launch SME banking. Organization and
processes are being restructured with focus to enhance business.
The segment of the bank has divided in two parts for efficient and smooth operation. The
segments are namely- SMEM (for medium enterprises) and SMES (for small enterprises). The
bank is providing complete banking solution to SMEs by devising both cash and non-cash based
products appropriate and fit to support the requirements of the concerned businesses. The namely
products above mentioned are the PPG based funded products served to the small
businesses. The needs for medium enterprises are fulfilled through multiple products in the
conventional manner.
5.2 SME Scenario up to 2010
MTB SME division started it expedition from 2007. It is progressing toward providing our
corporate service for urban, semi urban and rural customer. SME is a growing area of the country
and MTB strong commitment to this sector is demonstrate by the fact that it offers one of the
lowest lending rate in the market for SME client. MTB has accomplished a lot in 2010, with the

P a g e | 24

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

expansion and diversification of various line especially linkage with micro level customers,
sharecroppers, marginal farmers, hawar area beneficiaries potential organizational enterprise.
5.3 Special attention for women entrepreneur
In Bangladesh, the women are the most disadvantage group in acceding the finance facility of
commercial banks. Women entrepreneur need for bank finance and other banking service depend
on customers need to ensure good repayment of loan.
MTB deigned its first women entrepreneur product MTB Bhagyabati. After lunching the product
the bank arranged a workshop jointly with SME Foundation for better understanding of access to
bank finance for women entrepreneurs. The product MTB Bhagyabati is running successfully. A
good number of success stories inspired MTB to design another separate and special product for
women entrepreneur who are involved in the manufacturing sector. The product is named MTB

These to product are design to aid women entrepreneur actual need to develop their business,
some special feature are offered to women entrepreneurs in these to product, like low interest
rate, collateral free, very small amount of processing system and flexibility in repayment system,
sometime give grace period depend on business nature.
MTB women entrepreneurs cell in providing all type of support to the women entrepreneurs like
arranging workshop for bank financing knowledge, link up with other training, support the
women entrepreneur to attend local and international fair to display their product, running
business advisory service and dealing with legal issues.
5.4 MTB focused on SME banking Division with products
Since inception of structured SME lending. MTB has given top most priority to rural SMEs.
MTB has 67 branches (including 12 SME/Agri branches), all SME/agri branches of them are
located in rural area, where there is limited access to modern banking facilities as well as access
to credit. Say, they have opened MTB Dhanbari SME/agri branches, MTB Gaffargaon SME/agri
branches, where there is no branch of other private bank.
MTB has developed specific loan product to serve the different sector of SMEs, renewable
energy, agriculture, women entrepreneurs etc. the product are briefly described below:
MTB Gunabati: designed to finance the women led SMEs ho are engaged in only
manufacturing business that is 100% pre-financed by SME foundation. E apply single
digit rate of interest, i.e. 9% p.a under the MTB Gunabati loan scheme.

P a g e | 25

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

MTB Bhagyabati: designed for the women entrepreneurs which is 100% re-finance by
Bangladesh bank.
MTB Mousumi: designed to finance the SMEs who are engage in seasonal business.
MTB Krishi: the loan scheme to finance in the agri sector and it subsector.
MTB Revolving Loan: designed to meet working capital requirement to support their
continuous growth. It is a CC (H) & Revolving type Loan.
MTB Digoon: the product design on the basis of FDR.
MTB Small Business Loan: designed for all type of small business requirement.
MTB Microfinance: designed for the NGO (MF-NGO) the supply wholesele credit for
onward lending their beneficiary members in the form of micro credit.

5.5 MTB SME market strategy, why different?

MTB SME division drives to promote customer friendly service from grassroots level to urban
Customer by ensuring faster service with low cost. MTB explore and finance innovative and
ecofriendly projects and provide banking access to untouched market. MTB have linkage
programs with local and international organization to reach the banking services in proletariat
level all over the country. Our counseling service to the custoner has positive impact on
improving their capacity building which enable them easy access to credit.
5.6 Activities in 2014
To reach MTB visions and mission, MTB SME division arranged many training programs,
workshop, fairs and visited rural based customer. Some momentous programs are, Barguna
model inaugurated by Dr. Atiur Rahman, Governor of Bangladesh Bank and MTB Gunabati
pre financed by SME foundation, the programs are attended by Mr. Dilip Barua, Honorable
Minister, Ministry of industries, training and discussion with farmer about Krishi loan and solar
irrigation at Bodogsasa, Noga, MTB SME division attended ICC conference, on energy for
growth, fast renewable energy finance training course, MRA international conference, renewable
energy technology in agriculture and economy.
5.7 MTB SME outlook 2015

P a g e | 26

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

MTB SME Activities are running fast to develop countrys SME market and overall economic
growths. During the last fiscal year 2014 MTB has disbursed BDT 4698.60 million, including
agri loan. In 2015 MTB planned to finance the potter/kumars who are engaged in clay modeling,
marking earth area and various items. Pottery items are very creative, fashionable. Its huge
demand in the market.
For sustainable agri. sector need to develop the integrated model for agri. financing, MTB has
planned to develop the new model. MTB has started groundwork and got positive feedback from
the concerned parties. Under this model all the farmers in a particular farming land, say farmers
of 200 or 300 acre land will have access to agri. credit in every sowing season for purchasing
better seed, fertilizer, patricide etc. and repaying the loan after harvest.


& Analysis
P a g e | 27

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

6.1 SME Performance

Usually, in CRM, HOCRM monitors all the works performed by the RMs. To monitor
efficiently, MTBL introduced software called LPTS (Loan Proposal Tracking System)
where each RMs have to put all the information of loan proposal like- receive date, call
report date, application date, limit amount, maturity etc.
But in this part the performance is measured to assume the situation of SME not in
accordance with LPTS but the % amount of regular loan transaction and NPL as well as
the efficiency of MTBL.
In the first 3 months, MTBLs SME segment of CRM division has approved a good
number of credit proposals. In January 2014, the amount was about Tk. 6377.15 million
that decreased in February to Tk. 4010.27 million. But again it recovered to Tk. 7406.3
million in March 2014.
Approval amount for SME in first 3 months 14.
But in 2014 the first three months shows a decreasing position of proposal returned and proposal
declined. Because an increasing trend of declining or returning proposals indicates loosing
income from loan disbursement.
Again, in case of efficiency of CRMs management, amount of proposal under process in first 3
months in 2014 shows increasing trend. In March, Tk. 1983.12

P a g e | 28

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

Million in amounts of proposals under process has increased. It means it is taking time to assess
the proposal due to some queries that arises while assessing and so the graph interprets
inefficiency of the management; but comparing to approved proposal it shows an efficient
management procedure as the approved amount is higher i.e. Tk. 7406.3 million in March 2014
in figure 7 then the amount of Proposal under process showed in above graph.

This chapter focuses on the analysis part that is done to verify the actual financial performance of
CBL. In this part 4 types of analysis are performed.

Performance Analysis
Trend Analysis
Marketing Analysis
SWOT Analysis

Each and every part has been determined with clarity. In performance analysis, the evaluation
has been made in comparison with the Industry average situation. Industry data has been
collected from the BB source. SWOT analysis for MTBL has also been done and pointed out
6.2.1 Performance Analysis
Performance analysis explains an institutions financial position that is depended upon various
factors as like assets utilization, capitalization, loan disbursement, cash management etc. even
managerial decisions like credit decisions derived from credit risk management. In this analysis
section, performance analysis is executed to determine the MTBLs financial performance to
industry and SME NPL situation.
MTBLs Business Segment-wise NPL Position:
MTBL provide credit facilities through its different segments as shown in the Graph 6-6. But the
NPL position for 30th June 2014 shows deteriorate situation. Because, the Corporate and the
P a g e | 29

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

SME-M segment has a highest amount of Bad/loss loan respectively Tk. 80.45 million and Tk.
77.65 million. But others situation are not in danger. MTBL should take necessary action for
recover the bad/loss loan amount.
In total, the NPL amount in 30 th June 2014 is Tk. 260.85 million. From comparing with each
Business segment, Corporate has the highest NPL Tk. 137.99 million, then SME-M Tk. 95.23
million and SME-S Tk. 10.81 million. The below Graph 6-6 shows the percentage of these NPLs
to total NPL amount.The NPL target of MTBL was 5% in 2014. In 2013, MTBLs target was
below 6% but unfortunately the ratio was at last 6.30%.
6.2.2 Trend Analysis
Trend analysis is a forecasting technique that relies primarily on historical time series data to
predict the future. For this research report the trends are discussed for the credit related factors
like total loan disbursements, position of unclassified and classified loans amount etc. For this
trend analysis related data of loans and advances of MTBL for 5 years are shown in below table-

Table 6: Trends for 5 years of Loan related factors (Tk. in million)







Total Loans and & Advances






Unclassified Loans






























SME Loan
Classified Loans & Advance

Unclassified Loans & Advances

In the above Table, it seems MTBLs unclassified loan and advance in increasing. If we take a
closer look then we can find that there is an upward trend in the unclassified loans and advance,
it is good sign for them, and the Mutual Trust Banks unclassified loan in 2013 stood 32251.14
P a g e | 30

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

million which is higher than the previous 4 years. This indicates that the Mutual Trust Bank
follows a good credit policy and they are careful to give any low quality loan.
SME Loans and Advance
SME Loans are the credit types that arises when the dues arises, still MTBL includes these loans
as unclassified loans.
From 2010 to 2013 the amount of SME loans increases but in 2013 suddenly it fell down to Tk.
505.98 million from the peak point Tk. 2287.87 million in the year 2009 from the above Table 6.
Through it has decreased, the previous years increasing situation shown an upward trend of
MTBLs SME loans which should need to monitor so that it would not get worse further.
Classified Loans & Advance or (Non-performing Loan)
MTBLs Non-performing Loan has decreased over the last 5 years. In first 3 years the amount of
NPL fluctuates and in 2009 it reached to peak at Tk. 2209.73 million and then suddenly
decreased. In 2011 NPLs decreased to Tk. 1169.81 million. That means the City Bank performed
successfully their lending operation over the last couple of years.

Sub Standard Loans and Advance

Trend of Sub-standard Loans & Advance of MTBL over 5 years
Sub-standard is another category of NPL that due for 6 months or above unfortunately the
MTBLs Sub-standard Loans and upward trend which is not a good sign for MTBL.SS loans
reached to peak point in the year 2012 in Tk. 348.08 million but started to decrease that was Tk.
286.73 million in the year 2013.
Trend of Doubtful Loans & advance over 5 years of MTBL
Over the last five years the MTBLs Doubtful loans and advance has also increased. This is a
signal for the bank to take immediate action about these loans and advance. Through for the first
four years it has decreasing trend, but sudden increase at Tk. 461.79 million in 2013 from Tk.
129.86 million changed the trend to upward.
Bad/Loss Loans and Advance
Trends of Bad/Loss Loans & Advance of MTBL over 5 years
There is a downward trend in the amount of MTBLs bad/loss Loans amount the last five years.
Among the years they reduced their Bad/Loan from Tk. 1933.33 million which was at peak point

P a g e | 31

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

in the year 2011 to Tk. 421.29 million. It is a good sign for the banks reputation. This indicates
that their risk management technique is very good.
Trends of the Provision against Classified and Unclassified Loans & Advance of MTBL
According to BB, all banks keep a provision for all kind of loans in a required rate. In the below
Table, the provisions for Unclassified loans decreased in the year 2013 but for NPLs increased in
the same year.
Trend of 5 years of Loan related factors (Tk. In millions)
Provision for classified Loans
& Advance (As on 31






Provision for Unclassified

Loans & Advance (As on 31






That means in the last five years they emphasized more on classified loans and advance and
deemphasized on unclassified loans and advance. As a result they succeeded in monitoring the
NPLs but failed to maintain the unclassified loans.
Same calculation is done for Unclassified Loans. The below Table 7, the situation is positive as
the ratios for NPL to Total loan is in decreasing trend.
Table 7: Trends for 5 years of Loan related factors (%)
Loans to Total Loans
& Advance






Unclassified Loans to






Classified Loan (NPL) to Total Loan

P a g e | 32

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

From the below table, it seems that the MTBLs classified loan amount decreased in last three
years comparing to Total Loans and advances MTBL disbursed which increased in the year 2013.
It means, the CRM division of MTBL is well efficient in managing NPLs.
Classified Loan to Total Loan over 5 years in MTBL (Tk. In millions)
Classified Loans or
Loan (NPLs)













Unclassified Loan to Total Loans and Advance

Below Table shows an increasing situation of unclassified loans for MTBL for the 5 years.
Comparing with total loans unclassified amounts increased as it is seen in the year 2013 i.e. Tk.
32251.14 million. It can be said a positive trend exists in between the unclassified loans to total

Unclassified Loan to Total Loan over 5 years in MTBL (Tk. in Millions)

Unclassified loans
and advance






Total loans and







As in above Table, the shows an increasing trend of unclassified loans to total loans of MTBL for
the 5 years. From the Table, in year 2013, the ratio amount is higher i.e. about 9% but afterwards
it went down and again started to recover from the year 2014. Though the trend is upward, it can
be judged that the CBL is efficient in managing risk but it should also be careful for wealth and
profit maximizatio
6.2.3 Marketing Analysis

P a g e | 33

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

In my point of view this is the weakest part of the bank. Currently they are not focusing on the
marketing strategies; basically the bank has both functions commercial and loaning. But the
whole focus is on the loaning function, they are totally neglecting the commercial one. They
dont have any kind of marketing or advertising campaign and they are not advertising through
any king of media.

6.2.4 SWOT Analysis

Every organization is composed of some internal strengths and weaknesses and also has some
external opportunities and threats in its whole life cycle. This following will briefly introduce the
customer to The MUTUAL TRUST Bank Limiteds internal strengths and weaknesses, and
external opportunities and threat.

Stable source of fund.
Strong Liquidity position.
Concentrated market.
Wide network of branches.
Experienced top management.
Diversified product line.
Deposit is lower than advance.
Officer has limited experience and training.
Small market share in Banking-business.

P a g e | 34

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

Long-term credit is not sufficient.

Relatively high overhead expense.
Problem in Delivery.
Favorable regularity environment.
Private sector development.
Credit card business.
SME and Agro based industry loan.
Can increase the advertising of the Bank.
Deposit as well as quality assets.
Market pressure for lowering the interest rate.
Shrinkage in export, import and guarantee.
Poor business due to economic slump and war.
Frequency in Currency Devaluation.
Emergence of Competitors.
Govt. Pressures to reduce interest rate.


& Recommendation
P a g e | 35

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

Major Findings of the Study

Out of my problems, cumbersome procedure by Government agencies, taxation and other
charges promoting lack of documentation or incorrect documentation done by SME department,
inconsistent government policies discouraging entrepreneurs to develop long-term vision, lack of
formal technical education, non-internalization of new technologies, lack of basic infrastructure,
finance, marketing etc. and most important of all, these factors discouraged commercial banks
and other loaning institutes to extend financing to SME sector. Some of the other problems are
described below:

Poor record keeping by SMEs, particularly the accounting information.

Lengthy and cumbersome application procedures, which discourage SME.
Poor operational performance.
The limited knowledge of financing options for the SMEs.

P a g e | 36

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

Stringent collateral requirements and other banking regulations.

Lack of skills in banks for identifying needs and structuring the delivery of financial
assistance to SMEs
Lack of marketing practicing in bank to promote their product.
Approval from the head office takes weeks.
No promotion campaigns run by SME department, like sponsorship etc.
There was lack of understanding between the credit and commercial department.
Less focus on customer convenience because use to wait for the cash teller to come and
facilitate him.

The report is aimed at studding and understanding the SME and various product offered by the
MUTUAL TRUST Bank Limited to its clients. In addition, the report also studies how the bank
has managed credit risk on behalf of SME.
The MUTUAL TRUST Bank Limited is in leading position in financial Institutional sectors in
Bangladesh. The financial performance of the bank is recent years SME growth is pretty well.
The SME sector in Bangladesh holds enormous opportunities to contribute to economic growth,
and reduce poverty. The sector, however, has a very limited access to finance through the
institutional source. In this context, CRM should need to be restricted and redesigned for
efficient use while assessing risks in case of SME financing.

P a g e | 37

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

For developing the SMEs in Bangladesh, it is important to analyze the overall financial issues
facing these enterprises and understand the specific features of SME firms. Because these firms
are small, they find it more difficult to access institutional finance especially when they need it
due to their specific information problems.
The basic function of SME department is to provide loans to Small and Medium enterprise. SME
department tries to provide a friendly environment to its customers and try to win the trust of its
customers. Talking about the current scenario, the financials of SME departments shows it in
losses but trying to recover. It also has some internal problems like conflicts between
departments. Most importantly it is not focusing on its marketing activities due to which its
customer base is week. Employees of the organization are not satisfied due to lack of job security
which reduces their motivational level. To be at the top SME should focus on its marketing
activities and should bring something innovative to change its current position in the mind of the
Overall, the bank must make a positive attempt to be more onward looking in their goals and
aware of what is happening. They must also emphasize on the domestic scenario more closely
and analyze any certain trends and strategies of their competitors. The bank must accept any
failures and thick of them as an objective to pursue future goals instead of blaming such failures
on other factors.

Following are the recommendation that I would like to recommend,
Training is the key factor for development of the SME Division skills. Bank should have
a regular training and development program so that a manager does know every risk
matter and assessment techniques.

P a g e | 38

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

MTB should adapt according to the need and change in technology and should adopt the
new technology like other Multinational banks are using.
Banks moves by a team effort. So, strong co-ordination with the related divisions and
departments is very important. MTB should build some kind of cross functional teams in
order to bridge the gap between the SME and the other department.
Adequate information and documents should prove in the SME proposal so that Risk
managers can make their decision with a very minimum time.
A form should design for summarize the financials and necessary information of the
clients. It would save the valuable time for the SME managers of head office.
Credit quality depends on close follow-up and monitoring of loans. The follow-up and
monitoring of loans is not strong here. As a result Special Mention Accounts and
deteriorating credit are increasing day by day.
SME division should focus on innovation and creative products, it should bring
something new and transform their existing products so that the customer gets attract of
SME department should focus to improve their commercial activities because there is lot
of room for them to grab customers.
Bank should develop the relationship with the customer. SME department should try to
increase the number of account holders through effective means. SME department should
build marketing them in order to aware the customers about them.
As various papers focuses on the SME evaluation of the banks are not appropriate and SME
growth should be increased through financial assistance, the above recommendations can help in
create efficiency in CRM procedure and so SME lending will be attractive for the institution

P a g e | 39

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

Annual Report of Mutual Trust Bank Limited. 2012-2013

Mutual Trust Bank Ltd. At a Glance

BDT Millions
SL No.

P a g e | 40




Paid Up Capital
Total Capital
Surplus in Capital Fund
Total Assets
Total Deposits
Total Loan &
Total Contingent





SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet


Lending-Deposit Ratio
Classified Loans as %
Of Total Loan &
Profit after Provision &
Total Classified Loans
during the year
Total Provision
Maintained Against
Classified Loans
Surplus/(deficit) in
provision against
classified loans
Cost of Fund
Earning assets
Non-interest earning
Return on Investment
Return on Asset (ROA)
Income from
Earnings Per Share
Profit Per Share (BDT)
Price-Earning Ratio






















Annual reports of MTBL.

Bangladesh Bank (Nationalization) Order -1972
Bank Company Act -1991
Douglas A. Lind, William G. Marshal & Robert D. Mason, Statistics for Business & Economics
11th Edition. (USA: McGraw-Hill Book Company,1979)
5. Govt. of Bangladesh, Ministry of Finance, Bangladesh Economic Review.

P a g e | 41

SME (Small & Medium Enterprise) Banking of Commercial Bank.

A study on Mutual Trust Bank Shahparan Branch, Sylhet

6. Raymond V. Lesikar & John D. Pettit, Business Communication: Theory & Application, Richard
D. Irwin Inc. U.S.A -2003.


P a g e | 42