01. Define SME?

Definition of SME:
Existing definition of SME is recommended by Better Business Forum and accepted as a uniform
one by Ministry of Industry and Bangladesh Bank.

According to the Industrial policy 2005, SME definition has been in terms of fixed assets and no.
of employees of three major sectors: service, manufacturing and trading but the present
definition which was recommended by Better Business Forum and accepted as a uniform one by
Ministry of Industry and Bangladesh Bank included Cottage and micro industry as SME in
Bangladesh. Bangladesh Bank has revised the SME definition through its ACSPD Circular No.08,
dated 26th May, 2008 and then through its SMESPD Circular No.01, dated 19th June, 2011. The
present SME definition is given below:

Medium Industry /Enterprise

Sector Total Fixed Asset (in Lac Tk.) No. of Employees
Service / Others Concern : 100-1500 50-100
Trading Concern: 100-1500 50-100
Manufacturing Concern: 1000-3000 100-250
Small Industry / Enterprise
Service/Others Concern : 5-100 10-25
Trading Concern: 5-100 10-25
Manufacturing Concern: 50-1000 25-99
Micro Industry /Enterprise
Service/Others Concern : Less than 5.00 Less than 10
Trading Concern: Less than 5.00 Less than 10
Manufacturing Concern: 5.00-50.00 10 - 24
Cottage Industry / Enterprise
Family Concern Less than 5.00 Less than 10
* Total Fixed Asset is excluding land and building but including replacement value.

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02. SME is considered as employment Generating Machine- Explain?

SME is considered as employment Generating Machine for the following reason:

 SME sector is the largest provider of employment in most countries, especially of new
jobs.
 SMEs tend to employ poor and low -income Workers.
 SMEs are sometimes the only source of employment in poor regions and rural areas.
 There are approximately six million SMEs in Bangladesh, which include enterprises with
up to 100 workers employing a total of 31 million people – equivalent to 40 per cent of
the population of Bangladesh aged 15 years and above.
 SME has huge Employment generation potential due to labor intensive nature of most of
the SME activities. Between 1986 and 2006, the labor force grew by nearly 3 percent
while employment grew by 2.6 percent. In the small enterprises, employment grew by
4.8 percent during 1978-1991 and by 5.5 percent during 1991-2001. Employment
growth in the medium enterprises is estimated at 9.6 percent during 1988-2003. SEDF
reports that between 80 percent and 85 percent of the total industrial employment and
23 percent of the country’s overall employment is accounted for by the SMEs.

03. How would you identify and select entrepreneurs for financing SME projects? Discuss.

Entrepreneurs are those persons (business owners) who seek to generate value, through the
creation or expansion of economic activity, by identifying and exploiting new products,
processes or markets. A desire for independence and a strong sense of initiative are usually
characteristics of a successful entrepreneur. They have the following characteristics:

 They are dedicated to their workings.

 They have Entrepreneurial Personality
 They have basic business competency, industry specific knowledge.
 They desire to win and succeed coupled with vision
 They are the creative type.
 They take risks and succeed. Risk involves looking into the future and believing that
there is a probability of the occurrence of certain events. And on this basis a decision is
taken to do or not to do something.
 Successful entrepreneurs react quickly to change.

There are many types of entrepreneurs like Spiral (Helical) entrepreneurs, Occasional
entrepreneurs, Habitual entrepreneurs, Growth entrepreneurs etc. We need to select true
entrepreneurs by their characteristics. We can say, the characteristics which are discussed
above are considerable to select entrepreneurs for financing SME projects.

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04. Discuss the roll of SMEs in the economic development of Bangladesh.

Small & Medium Enterprise (SME) plays a pivotal role in the economic growth and development
of Bangladesh. Actually, SME works as the platform for job creation, income generation, and
development of forward and backward industrial linkages and fulfillment of local social needs.
SMEs occupy a unique position in the economy of Bangladesh. Mainly private sector
development depends on them.

In view of present economic development effort in Bangladesh the SME sector plays an
important role. These are reflected in the following performance /activities of this sector:

 SME contributions to value addition in manufacturing is in the range of 20 to 25 percent

of GDP
 There are approximately six million SMEs, which include enterprises with up to 100
workers employing a total of 31 million people – equivalent to 40 per cent of the
population of our country aged 15 years and above. Some private survey also found that
the industrial structure of SMEs consisted of primarily wholesale, retail trade and repairs
(40 per cent), agricultural goods (22 per cent), services (15 per cent) and manufacturing
(14 per cent).
 During the Fourth Five year plan, a total of 0.35 million jobs were created against the
target of 0.4 million.
 SME sector help alleviate poverty, increase income level of rural people and promote
agro-industrial linkage in Bangladesh.
 SME sector requires lower energy supply, lower infrastructure facilities and this sector
imposes less environmental risk.
 They contribute towards better utilization of local resources and skills that might
otherwise remain unutilized.
 Small industries being labor oriented are capable of generating more employment.
 They are necessary to maintain and retain traditional skills and handicrafts.
 They are the only medium for diversification of rural economy and for peaceful and
concurrent socio-economic development of all classes of people

To put it simply, SMEs are the heart of the industrial sector of the country, employs the bulk of
the working population and are owned by Bangladeshi entrepreneurs. They provide a huge
range of goods and services to the Bangladeshi population, especially in the rural areas,
alongside providing vital support in the production chain to large industries. From the above
discussion, we can say that SMEs are playing an important role in our economy in various ways.

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05. Discuss the main constraints to the growth of SME finance in Bangladesh?

The main Barriers / Constraints to the promotion of the SME Sector in Bangladesh are:

Lack of capital support: A majority of our small and medium industry entrepreneurs belong to
the lower class or lower middle class. They are hard workers, innovators, and-challenge-takers,
but cannot get funding from commercial banks due to their inability to provide collaterals.

Absence of policy for transfer of modern technology: The sector is suffering from lack of
technological support for upgrading the product quality.

Unavailability of appropriate infrastructure facilities: An Infrastructure facility as water,

electricity and gas hampers industrial activities.

Lack of marketing opportunities: SME sector includes a wide range of small and medium
industries, but they do not have marketing knowledge and capability to promote their products.

Inadequate policy reforms: Till now, do not have uniform definition of SME. The Bangladesh
Bank, Bureau of Statistics, and SME Foundation have different definitions of SMEs. Government
may take necessary initiatives to make it uniform.

Lack of exposure to international markets: Our SME sector is producing handicrafts and
decorative and household items having high demand in the developed market, but having the
demand women entrepreneurs are unable to attend international markets due lack of exposure
and promotion.

Law and order situation: The members of the business community, especially those involved in
the SME sector, suffer because of the law and order situation

Illegal imports and non-tariff barriers: Both illegal import and non-tariff barriers are threats to
our SME sector. If banned products are smuggled into the country domestic production will be
harmed. Our SME products are facing many non-tariff barriers in different markets.

Lack of adequate investments:

High rate of interest on bank loans:

Inadequate availability of raw materials:

Fierce competition:

Lack of skilled technicians and workers:

Lack of research and development facilities:

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06. What are the existing sources and areas of SME Financing in Bangladesh?

Existing Sources of SME Financing:

The main sources of SME Financing are basically personal funds, family and friends, banks and
NBFIs. Some refinance Schemes from different organization are also available. These are
discussing below:

SME Financing by Banks & NBFI: An important element of SME finance is not directly provided
by banks through traditional loans but rather by leasing or factoring companies. Bank loans and
overdrafts are the most widespread debt financing tools for SMEs, but also those alternative
sources like leasing and factoring are of high relevance.

The EEF: The Government had instituted the Equity Entrepreneurship Fund (EEF) in early 2002 in
an effort to make funding more widely available for agro-processing and information technology
businesses in the country.

Small Enterprise Fund (SEF): Small Enterprise Fund (SEF), a scheme to refinance banks and other
financing institutions that lend to the SME sector create a capacity to specifically channel
needed debt-finance. Disbursements made by financial institutions and leasing companies into
small-enterprises will be refinanced from the proceeds of the SEF.

ADB Fund: The Small and Medium Enterprise Sector Development Program (SMESDP), which is
financially assisted by The Asian Development Bank, Manila and implemented by the Ministry of
Industries, Govt. of Bangladesh introduce a fund for SME entrepreneurs by Banks & NBFI.

Other Refinance Scheme:

1. Bangladesh Bank Fund:
2. EGBMP (IDA) Fund:
3. Japan International Cooperation Agency (JICA) Fund

The areas of SME Financing in Bangladesh:

 Agro Process, agro-based and agro supportive  Pottery

industries.
 Handicrafts & other Cottage industries
 Computer software and ICT
 Plastic & Other Synthetics
 Poultry & cattle
 Jute goods (with renewed vigor)
 Electronics and Electrical appliance
 Leather and leather goods
 Light engineering
 Textile, RMG, Knitwear etc.
 Educational Services
 Health Care & Diagnostics Centers
 Pharmaceuticals/Cosmetics/Toiletries
 Event Management
 Internet Service Providers

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07. Discuss the roll of SME foundation in SME Development in the country.
Small and Medium Enterprise Foundation, an independent and unique non-profit organization
got registration in 2006. After formatting SME Foundation, it is playing its role in helping the
SME entrepreneurs including the women entrepreneurs by conducting various programs with
an aim to develop the SMEs of Bangladesh. One of the major aims of SMEF is to bring the
grassroots entrepreneurs into the main stream of economic development through employment
generation, reduction of social discrimination and poverty alleviation.

The major rolls of SME foundation in SME Development in the country are:

 Implementing SME Policy Strategy adopted by the Government of Bangladesh.

 Recommending SME friendly policies to different government ministries and
agencies.
 Providing business support services to the SME entrepreneurs.
 Providing information and proper guidance for establishing new SMEs.
 Conducting sectorial study to ensure availability of latest information,
 Identify challenges and recommend preventing measures.
 Operating credit wholesaling programs for the SMEs through different banking and
non-banking financial institutions.
 Conducting training programs to create skilled labor for different SME sub-sector
based on their demands.
 Technology development, adopting new technology, conducting reverse
engineering and supporting SMEs to get quality certifications.
 Supporting SMEs in marketing their products and promotion of services.
 Bringing women entrepreneurs into the mainstream of development and helping
them to achieve economic self-dependency.
 Assisting SMEs in creating institutional bondage with foreign companies for
capacity building, technology transfer and improving productivity.
Training up and motivating SMEs in using ICT tools for more productivity and
improving quality.

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08. Explain the different aspects of appraising a SME project.

The purpose of project appraisal is to establish whether a project is worthwhile in the light of its
costs in terms of resource commitments and the projects expected benefits. That is, appraisal is
an ex-ante assessment of a project and is the key element in the decision as to whether or not
to proceed with a project. This will involve the consideration of alternative projects, or
alternatively, by comparison with the status quo. In practice, this is an intricate and
sophisticated process of enquiry, with substantial data requirements. Examination of the
viability of the project may require the specialized services of appraisal missions and appointed
consultants. Appraisal covers four major aspects of the project: technical, institutional, financial
and economic.

Technical aspects:

This is mainly concerned with issues related to physical scale, layout, location of facilities,
technology used, cost estimates and their relation to engineering or other data on which they
are based, the potential impact on the human and physical environment, and a range of other
similar concerns related to the technical adequacy and soundness of the project.

Institutional aspects:

The objective of many projects is not merely to add to physical assets and capital, but also to
create and enlarge human and institutional capabilities to manage and maintain development
undertakings. This is possibly the most challenging aspect of the project’s overall success. There
may be no shortage of technically well-designed and well-endowed projects. However, many
projects have limitations at the human and institutional level. Therefore project appraisal
requires careful and sensitive consideration of the institutional dimension and local conditions.

Financial and economic aspects:

Financial appraisal (investment appraisal) is concerned with such questions as the adequacy of
funds, the financial viability of the project, the borrower’s ability to service debt, procedures for
recovering investment and operating costs, etc, This is different from economic appraisal which
addresses the issue of whether a project is worthwhile from the broader point of view of its
contribution to aggregate or national economic and social welfare through the use of social
cost-benefit analysis as the appraisal technique.

09. What are the risks inherent in lending? What are the risk mitigation tools and techniques?
Discuss.

Credit risk arises from the potential that a bank’s borrower will fail to meet its obligations in
accordance with agreed terms. Credit risk also refers the risk of negative effects on the financial
result and capital of the bank caused by borrower’s default on its obligations to the bank.

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The following risks are inherent in lending.
Business/ Industry risk Financial risk
 Industry  Profitability
 Size  Liquidity
 Maturity  Debt management
 Production  Post Balance sheet events
 Distribution  Projections
 Vulnerability  Sensitivity Analysis:
 Competition  Peer Group Analysis:
 Demand- supply situation  Other Bank Lines:
 Strategic importance for the group and
for the country
 Concentration
 Market reputation

Management Risk Structural Risk

 Experience/relevant background  working capital requirement
 Track record of management in see  requirement of asset conversion cycle
through economic cycles  Purpose of the facilities
 Succession  Payments of wages & salaries and
 Reputation other daily expenses.

Security Risk Account Performance Risk

 Perishability  Credit Turnover vs stock movement &
 Enforceability /Legal structure sales
 Forced Sale Value  Hard Core element or good swing
 Repayment track record of working

Risk mitigation Tools & Techniques:

Introduction to Accrual Accounting
1. Scrutinize the information provided by the balance sheet and profit and loss account
2. Identify the connecting links between the two statements
3. Prepare and manipulate simple financial statements that reflect the business activities of
a small company

Industry Risk Analysis:

Managers should be addressing: Cost structure, Maturity, Cyclicality, Profitability, Dependence,
Vulnerability to substitute products & Regulatory environment (like Bangladesh Bank guidelines,
Judiciary, Tax authority guidelines e.g. work hazard, child labor etc.)

Business Risk Analysis

1. Determine whether the business’s strategy increase or decrease the risks faced by all
businesses in its industry
2. State what additional risks are inherent in the company’s strategy and practices on its
financial statements- state how you would expect those statements to look

Internal Credit rating system as like CRG & rating from authorized rating agency like CRISL, CRAB
can mitigate the credit risk some extent.

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10. Consumer Credit provokes inflation, do you agree with this statement? Discuss in the light
of monetary policy of Bangladesh Bank?

The word "inflation" originally applied solely to the quantity of money. It meant that the volume
of money was inflated, blown up, overextended. Inflation, always and everywhere, is primarily
caused by an increase in the supply of money and credit. When the supply of money is
increased, people have more money to offer for goods. If the supply of goods does not
increase—or does not increase as much as the supply of money—then the prices of goods will
go up.

When banks lend money for consumer purchases (e.g. through personal loans or credit cards) in
effect they are increasing the purchasing power in the economy without increasing the amount
of goods available. If the economy operating at near to its full capacity (i.e. low unemployment,
using all its available resources etc. ) then this is likely to push up prices as there is no way to
increase production any further. If the economy is operating below its full capacity then the
increase in demand from the consumer loan might lead producers to produce a bit more, so
that even though there is more demand and purchasing power there are also more goods to
spend it on.

From the above discussion we can say Consumer credit provokes inflation.

The current monetary policy stance of the Bangladesh Bank intends to ensure reasonable price
stability and provide support to high and sustainable economic growth. In this context, the
policy keeps in view an average inflation rate of around 7.5 percent in FY13. For this reason, BB
aims to ensure that the composition of credit is focused on productive sectors with an
envisaged reduction in the share of consumer credit.

11. Discuss the importance of monitoring & counseling in improving the quality of a SME Loan?

Banks need to enunciate a system that enables them to monitor quality of the credit portfolio
on day‐to‐day basis and take remedial measures as and when any deterioration occurs. Such a
system would enable a bank to ascertain whether loans are being serviced as per facility terms,
confirm the adequacy of provisions, and establish that the overall risk profile is within limits
established by management and compliance of regulatory limits. Monitoring procedures and
systems should be in place so as to provide an early signal of the deteriorating financial health of
a borrower.
An Early Alert Account is one that has risks or potential weaknesses of a material nature
requiring monitoring, supervision, or close attention by management. If these weaknesses are
left uncorrected, they may result in deterioration of the repayment prospects for the asset or in
the Bank’s credit position at some future date with a likely prospect of being downgraded to
worse. Despite a prudent credit approval process, loans may still become troubled. Therefore, it
is essential that early identification and prompt reporting of deteriorating credit signs be done
to ensure swift action to protect the Bank’s interest. Regular contact with customers will
enhance the likelihood of developing strategies mutually acceptable to both the customer and
the Bank. Representation from the Bank in such discussions should include the local legal
adviser when appropriate.

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12. What legal & non-legal measures would you take to recover a loan when it becomes bad?

Non-Legal Measures:

1. Review all documentation, meet the customer, and prepare a Classified Loan Review
Report.
2. Letter, Follow up & Persuasion over phone, Group visit by team member.
3. Letters to Guarantor, Employer, and Reference all above effort follows.
4. Final Reminder & Serve legal notice
5. Letter to different banks/Association
6. Repossession starts & Legal proceedings begin.
7. An incentive package for bank officials of NCBs to speed up the recovery of bad loans
8. Rescheduled Loan as per Bangladesh Bank reschedules guideline.

Legal Measures:
There is a famous maxim “justice delayed is justice denied”. This can be applied to banks,
especially in developing countries like Bangladesh, owing to the presence of corruption and
opaqueness in the settlement process as well as poor enforcement of laws that usually create a
fertile ground for the willful defaulters. The following legal measures should take:

1. Suits filed to Artha Rin Adalat.

2. Suits file at bankruptcy court as per the Bankruptcy Act and the PDR Act.

Concerning recovery strategies, it is observed that Bangladesh has concentrated mainly on legal
measures to address the recovery of bad loans. Unfortunately, these legal measures have been
found to be very time consuming, resource draining and ineffective, and have ultimately
resulted in poor recovery performance. Despite being aware of this fact, non-legal measures
such as out of court settlements, compromise settlement schemes are better for loan recovery.

13. What are the various methods of creating charge on securities? Explain in details.

Security can be obtained through various forms. These are:

1. Charge
2. Assignment
3. Pledge
4. Lien
5. Hypothecation

Charge: A charge is probably the most common form of security particularly when properties
are frequently taken as security. It can also be referred to as a Mortgage which usually relates to
land or immovable property. A charge or mortgage may be either legal or equitable. It is an
interest in a property that passes conditionally to a charge, normally without physical
possession.

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Charges can be either fixed or floating:

1. A fixed charge over the chargor’s overall fixed assets. Fixed charges can also be
created over specific machinery, property and shares.

2. A floating charge, however, can be regarded as a charge coupled with permission to

the company to continue deal with its assets until the charge crystalizes upon the
appointment of a receiver.

Assignment: An assignment involves a transfer of the rights under a contract by an assignor

(borrower) to an assignee (lender)

Pledge: In law, a pledge means the transfer of a movable asset. Possession of the asset is passed
to the pledgee, but the legal ownership remains with the pledger who has an equity of
redemption for the physical possession. This usually applies to cash deposits, shares, stocks and
accounts receivable.

Lien: A lien can be taken on personalty or on realty. A lien is understood to be the right of a
bailee to retain possession of a mortgage entrusted to him until the debt due is paid. For
example, a banker’s lien conveys a general right over documents of title subject to pledge (such
as negotiable instruments) that pass through the banker’s hands while a debt is owing to him.

Hypothecation: This is a security whereby a debt is acknowledged and the particular goods or
things are not in the lender’s possession. It is similar to the concept of pledge except that
physical possession of the security is not with the lender.

SHORT NOTES

Working Capital:

Working capital is considered a part of operating capital. Working Capital measures company's
efficiency and its short-term financial health. Net working capital is calculated as current
assets minus current liabilities.

Positive working capital means that the company is able to pay off its short-term
liabilities. Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash, accounts receivable and inventory).

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Factoring

Factoring is an alternate receivable financing instrument widely used in the developed countries.
Over the last decade, Factoring has been successfully introduced in many developing countries
including neighboring countries. Factoring is ideally suited to finance receivables of SMEs who
generally suffer from shortage of working funds.

Three parties are involved in factoring operation. Factor (Financier), Supplier/Manufacturer

(Client), and Buyer (Debtor). In the operational process a client sells its accounts receivable
invoices to the factor at a discount in exchange for immediate cash to cover financial needs
during periods in which his needs exceed prospective cash inflow. At the end of the payment-
waiting period, the invoices are fully paid by the debtor directly to the factor; the factor deducts
the amount financed plus interest applicable for the waiting period plus service charge and pays
back the remaining amount to the client. By factoring a borrower can devote more time to
market and product development and improve his customer service.

Factoring ensures cash flow of fund constantly. Beyond this, factoring provides professional
benefits such as: Instant cash payments, No headache for credit collection, Continuous
production, Time saving.

Venture Capital:

Venture Capital is a powerful and effective way for doing big and interesting things in cutting-
edge technologies. Venture Capital enables entrepreneurs to pursue their dreams by providing
funds for their projects in exchange for a share of the business they are creating. Venture
Capital investment is not a loan; risks in funding a Venture Capital project are very high.

Lack of an exit strategy and poor minority rights certainly are a hindrance to the development of
the Venture Capital sector, which is integral to proper SME growth in the country. However, a
few cases of venture capital financing took place in Bangladesh by different financial
organization such as Grameen fund, UAE Bangladesh Investment Company limited. Equity &
Entrepreneurship fund (EEF) of Bangladesh Bank is a classic example of venture capital financing
in Bangladesh. Venture Capital companies are needed to serve and create entrepreneurial cadre
in Bangladesh. The government can create the environment by (i) formulating law to regulate
Venture Capital, (ii) by enacting venture-capital fund rule to raise Venture Capital fund and (iii)
by streamlining tax law, in such a manner that investors of Venture Capital don't need to pay
double or additional tax.

Equity and Entrepreneurship Fund (EEF Fund):

In order to encourage investments especially in risky but prospective agro-based, food

processing and IT sector industries, the Equity and Entrepreneurship Fund (EEF) was established
in 2002 through budgetary allocation of the government. Initially, the government allocated Tk.
one billion in FY01 for EEF and BB was entrusted with the responsibility of administering the
fund. Since its inception, a wide range of enterprises have availed the EEF, most of which are

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SMEs. The major sectors include: poultry and feed, fish hatchery, shrimp hatchery, cattle and
goat feeding, meat processing, fruit processing, wood processing, and software development.

Until March2008, a total of 247 entrepreneurs received Tk 4,677.5 million from the EEF. The
disbursement to fisheries and fish cultivation sub-sector was the highest followed by software
development, poultry and fish feed, grand parent hatchery, potato flask, and fruit processing.

Break-even point:

Break-even point is that level of activity where there is no profit or loss. At this level, total
revenue equals to total expenses and company’s profit is zero, i.e., Total Sales Revenue = Total
Variable Costs + Total Fixed Costs. If the company exceeds break-even level, then the company
earns profit and if the activity level is under the break-even point, company suffers a loss. There
are two methods for calculating break-even point, which are as follows:

 The Equation Method

 The Contribution Margin Method
BEP calculation is widely used in Cost-volume-profit (CVP) analysis, which is one of most
powerful tools that help management to make their decision. It helps management to
understand the interrelationship between cost, volume and profit in an organization by focusing
on interactions among the following five elements:

 Prices of products
 Volume or level of activity
 Per unit variable cost
 Total fixed costs
 Mixed of product sold

Internal rate of return (IRR):

The internal rate of return (IRR) or economic rate of return (ERR) is a rate of return used
in capital budgeting to measure and compare the profitability of investments. The internal rate
of return on an investment or project is the "annualized effective compounded return rate" or
"rate of return" that makes the net present value of all cash flows (both positive and negative)
from a particular investment equal to zero.

In more specific terms, the IRR of an investment is the discount rate at which the net present
value of costs (negative cash flows) of the investment equals the net present value of the
benefits (positive cash flows) of the investment.

The formula for IRR is:

0 = P0 + P1/(1+IRR) + P2/(1+IRR)2 + P3/(1+IRR)3 + . . . +Pn/(1+IRR)n

where, P0, P1, . . . Pn equals the cash flows in periods 1, 2, . . . n, respectively;

and IRR equals the project's internal rate of return.

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Cash flow analysis:

Cash flow analysis is the study of the cycle of cash inflows and outflows of a business. Cash flow
analysis involves examining the components of a business that affect cash flow, such as
accounts receivable, inventory, accounts payable, and credit terms. By performing a cash flow
analysis on these separate components, ability to more easily identify cash flow problems and
find ways to improve cash flow.

A quick and easy way to perform a cash flow analysis is to compare the total unpaid purchases
to the total sales due at the end of each month. If the total unpaid purchases are greater than
the total sales due, need to spend more cash than receive in the next month, indicating a
potential cash flow problem.

Cash flow analysis is a very important tool to analyze credit risk to some extent. It also gives an
idea about working capital requirement.

Consumer Banking:

Consumer banking is the cluster of products and services that banks provide to consumers and
small businesses through branches, the Internet, and other channels. The key Consumer banking
products are consumer credit and small business loans. Consumer credit includes credit cards,
mortgages, home equity lending, auto loans, education loans, and other personal loans.
Although loans and deposits are the primary products, Consumer banking units provide a range
of other financial services to consumers and small businesses. Consumer Banking offer
mortgage services, debit and credit card services and ATM services--all of which have become
essential to today's consumers.

Now-a- day’s people are very much concerned about enhancement of their standard of living
with their limited earnings. By considering this behavior pattern of people, banking sector
especially private one is expanding their services horizon toward community based services
through Consumer Banking. At the bank level, the principal attraction of consumer banking
seems to be the belief that its revenues are stable and thus can offset volatility in the corporate
and commercial real estate lending, trading, and capital market activities.

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Leasing

Leasing can be defined as “a contract between two parties where one party (the lessor) provides
an asset for usage to another party (the lessee) for a specified period of time, in return for
specified payments”. Leasing is referred to as asset based financing. As lessors retain ownership
of the assets they lease throughout the life of the contract, these leased assets are therefore an
inherent form of collateral in such contracts.

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