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1.0 INTRODUCTION 1.

1 ORIGIN OF THE REPORT


Bank Asia Limited is the place where I have gathered experience about the operations of the financial institution. This report is the outcome of three-month internship program. The study will be conducted as a partial requirement of the of the internship program of school of Business of Independent University, Bangladesh. University supervisor Dr. Ayub Islam has also approved the topic that I assigned for my internship report.

1.2 OBJECTIVE OF THE STUDY


From the very beginning of the study I tried my level best to conduct my internship with a view to achieve some specific objectives. The objectives of my study were as follows: 1) To acquire practical knowledge of institutional operations. 2) To get idea about the procedure of consumer credit policy. 3) To identify the consumer credit operations.

1.3 SCOPE OF THE STUDY


This study is based of on theoretical and practical analysis. However the scope of the study is confined within the region of CDA Avenue Branch, Chittagong. The study will focus on the following areas --- The kinds of consumer credit facilities extended by Bank Asia Limited. General Procedure for getting different kinds of consumer credit facilities. How different kinds of projects are appraised at Bank Asia Limited. Present scenario of Consumer Credit Policy.

Each of the above areas is critically analyzed in order to determine the efficiency of Bank Asia Limited, CDA Avenue Branch.

1.4 Methodology:
A method involves a process or technique in which various stages or steps collecting data/information are explained and the analytical techniques are defined. The report is composed of both primary and secondary data or sources. Primary Data: Primary data have been collected by informal interview with the officers. Some information regarding my report objects has been collected through discussion with different executives of the Bank. Secondary Data: Secondary data means data those are already available i.e. they refer to the data, which have already been collected and analyzed by someone else.

I used the following sources of secondary data. i. ii. iii. Credit Manual of the Bank. Annual Reports of the Bank. Different Documents of the Bank.

1.5 Limitation of the study


This study report is based upon primary and secondary source of information from the documents and databases of the Bank. Though I tried my level best to produce a comprehensive and well-organized report on the Bank. The study that has been conducted in Bank Asia Limited has certainly some limitations, which are as follows A short course of time is allowed for the program. The customers some times unable to provide information because of their busy time. The employees of the Bank are very busy to provide accurate information about some particular matters. The bank has naturally shown us some indifference connecting its most confidential information.

2.0 AN OVERVIEW OF THE BANK 2.1 THE WORD BANK


The word Bank originated by Italian word Banco means long tool. In ancient time Italian Jews merchants used to do business of lending money by setting on the tools. Audit is assumed that, the Word Bank derived from the word Banco (Tools) to meet the expenses of war 1171 one type credit certificate was launched in Italy at an interest rate 5%. It was called a Monte in Italian language and Bank in German language. Then German was widely used in Italy. As a result, the Word Bank gradually changed to the word Banco from which the word Bank originated.

2.2 Bank Asia


The present day Banking structure has evolved over several decades. The far-reaching program of economic reform is being carried out at present towards efficient utilization of scarce resources and the development of private entrepreneurship. In a fast changing business environment, financial intermediaries are lift to be guided by market forces rather than regulations. Competition is strengthened by the entry of new and innovative providers of financial services through the development of money market and the capital market under the ongoing financial liberalization program. Bank Asia Ltd. emerges as a new Bank in the private sector to operate in the commercial area of the country. Presently the Bank is not operating in the rural area. But in near future they have plan to extent the branch lithe rural areas.

Management of the bank

The members of board of directors sponsor the paid up capital of the Bank. The Bank is managed by experienced officers committed to provide highly efficient personalized and quality services. There is no conventional system of Clark guard &peon in the Bank. The security aspect is locked & managed through private security agency. The Bank has a good number of professional managers to manage competitive & complex situation efficiently & effectively. They follow the formal relationship among the different level of the management.

Board of Directors

The first Board of Directors of the Bank was constituted with 13 Directors. According to Article 128 of the Articles of Association of the Bank, four Directors of the Bank will retire in this Annual General Meeting. They all have expressed their desire for reelection, being eligible for the same. Since the Bank has floated its share, for public subscription, two Directors will be elected from the public shareholders

Organogram Of Bank Asia Ltd.


MANAGING DIRECTOR

SENIOR EXECUTIVE VICE PRESIDENT(SEVP) EXECUTIVE VICE PRESIDENT (EVP)

SENIOR VICE PRESIDENT (SVP)

VICE PRESIDENT (VP)

FIRST VICE PRESIDENT (FVP)

ASSISTANCE VICE PRESIDENT (AVP)

FIRST ASSISTANCE VICE PRESIDENT (FAVP)

SENIOR EXECUTIVE OFFICER

EXECUTIVE OFFICER

SENIOR OFFICER

OFFICER

JUNIOR OFFICER ASSISTANCE OFFICER

BANKING OFFICER

TELLER

2.3 LEGAL FRAMEWORK OF BANK ASIA LTD.


Bank Asia Limited is a scheduled Bank under private sector established within the ambit of Bank Company Act, 1991 and was incorporated as a Public Limited Company under Companies Act, 1994 on September 28, 1999. The Bank started commercial banking operations from November 27, 1999. It is one of the most successful banks among the third generations Private banks. The bank has successfully entered its fifth year of operations. The Bank has been widely acclaimed by the business community, from small entrepreneurs to large traders and industrial conglomerates, including the top rated corporate borrowers for forward-looking business outlook and innovative financing solutions. In the beginning of 2001 Bank Asia acquired the operations of the Bank of Nova Scotia of Canada in Bangladesh. In September 2001 a Memorandum of Understanding was signed with the Muslim Commercial Bank Limited (MCB) of Pakistari to take over their operations in Bangladesh. Eventually MCB's operations were taken over through acquisition with effect from January 1, 2002. By these two events of acquisition the bank could expand its area of operation and have added new dimensions to the banking industry in the country. The acquisitions have provided wider access to Bank Asia regionally and internationally and helped the Bank to expand its clientele. The Bank is involved in most of the areas of commercial banking operations. The core business of the Bank comprises of trade finance, term finance, working capital finance and corporate finance. Bank Asia has acted as the lead arranger in raising term loan for a number of projects under syndicated finance and also participated in some cases under such financing arrangement. The Bank is also providing personal credit, services related to local and foreign remittances and several other products.

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Recently Bank Asia offers its second IPO of 20 Crore and for this amount of share the initial application was for Tk- 1100 crore which indicates that the Bank has got a brand image in the market and has got the faith of the customer. Such response from the investor provides the bank more confidence over its operation and helps to take forward looking decision.

2.4 BOARD OF DIRECTORS

The Board of directors of the Bank comprises of 13 members, out of which 11 members are from the Sponsor group and 2 members ere elected by the public shareholders. According to Article 128 of the Articles of Association of the bank, Directors Mr. Rumee A Hossain, Mr. Nafees Khundker, Mr.Md.Anwar Hussain and Mrs. Sabrina Chowdhury will retire in this Annual general Meeting. The Board of directors sets the strategy, provides guidelines for management of the Bank, approves the annual business plan and regularly reviews management performance, ensuring that regulatory guidelines are honored at all times. The Board is keen to make sure that all employees at all levels are well informed about the policy guidelines of the Board and become involved in all new initiatives taken to feel proud of their institution. In particular, the bank takes serious view of any violation of regulatory guidelines by any employee at any level.

Designation CHAIRMAN VICE CHAIRMAN DIRECTORS

Name Mr.M.Syeduzzaman Mr.A.Rouf Chowdhury Mr.Arifur Rahman Sinha Dr.Md.Shafiuddin Chowdhury Mr.Mohd.Safwan Chowdhury Mr.Md.Sirajul Haque Mr.Jahir Uddin Mr. Rumee A.Hossain Ms.SohanaRouf Chowdhury

PRESIDENT&MANAGING DIRECTOR COMPANY SECRETARY 2.5 MISSION

Mr.Faisal Samad Mr.M.Shamsul Alam Lt.Col.(Retd.)Fariduddin Ahmed Mr.Syed Anisul Huq Mr.Aminul Islam

To assist in bringing high quality service to our customers and to participate in the growth and expansion of our national economy. To set high standards of integrity and bring total satisfaction to our clients, shareholders and employees. To become the most sought after bank in the country, rendering technology driven innovative services by our dedicated team of professionals.

2.6 VISION
Bank Asias vision is to have poverty free Bangladesh in course of a generation in the new millennium, reflecting the national dream. Our vision is to build a society where human dignity and human rights receive the highest consideration along with reduction of poverty.

3.0

CONSUMER

FINANCING-

AN

OVERVIEW

OF

POLICY
'Consumer financing' means any financing allowed to individuals for meeting their personal, family or household needs. The facilities categorized as Consumer Financing are given as under: (i) Credit Cards forms of clean lending with a maximum limit of Tk. 500,000/- to a single borrower. Supplementary credit cards shall be considered part of the principal borrower for this purpose. The bank shall secure the limits exceeding Tk. 500,000/- appropriately. Corporate Card will not fall under this category and shall be regulated by exiting guideline/regulations for lending. (ii) Auto Loans (Secured by way of hypothecation /charge on vehicle). (iii)Housing Finance (secured by mortgage on the property. e.g. house/flat/land). (iv)Consumer Durables Loans for purchasing various consumer items for personal use or use in the family. (v) Loans for Professionals only for professionals like doctors, engineers, architects, IT professionals, and management consultants. (vi)Unsecured Personal Loans for payment/ purchase of goods service and expenses.

3.1

MINIMUM

REQUIREMENTS

FOR

CONSUMER

FINANCING.
Apart from the specific regulations given under each mode of financing separately, general requirements laid down here should also be followed while undertaking consumer financing. It may be noted that these are the minimum requirements and should not in any way be construed to restrict the role of the management processes through establishing comprehensive credit risk management systems appropriate to their type, scope, sophistication and scale of operations. The Board of Directors of the bank establishes policies, procedures and practices to define risks, stipulate responsibilities, specify security requirements, design internal controls and then ensure strict compliance with them. For consumer financing, the bank shall implement/follow the guidelines given below:
1.

Bank shall establish separate Risk Management capacity for the purpose of consumer financing, which will be suitably staffed by personnel having sufficient expertise and experience in the field of consumer finance/business.

2.

The bank shall prepare Comprehensive Consumer Credit Policy duly approved by the Board of Directors, which shall interlaid cover loan administration, including documentation, disbursement and appropriate monitoring mechanism. The policy shall explicitly specify the functions, responsibilities and various staff positions, powers/authority relating to approval/sanction of consumer finance facility.

3. For every type of consumer finance activity, the bank shall develop a specific Product Program Guide (PPG). The program shall include the objective/quantitative parameters for the eligibility of the borrower and determining the maximum permissible limit per borrower. The PPG will also indicate the maximum permissible exposure bank will take against each product.

4. Bank shall put in place an efficient computer based MIS for the purpose of consumer

finance, which should be able to effectively cater to the needs of consumer financing portfolio and should be flexible enough to generate necessary information reports used by the management for effective monitoring of the bank's exposure in the area. The MIS is expected to generate the following periodical reports: Delinquency reports (for 30, 60, 90 180 & 360 days and above) on monthly basis. Reports interrelating delinquencies with various type of customers of various attributes of the customers to enable the management to take important policy decisions and make appropriate modifications in the lending program. Quarterly product wise profit and loss account duly adjusted with the provision on account of classified accounts. 3. The bank shall develop comprehensive recovery procedures for the delinquent consumer loans. The recovery procedures may vary from product to product. However, distinct and objective triggers should be prescribed for taking preplanned enforcement/recovery measures.

4.

The bank shall impart sufficient training on an ongoing basis to their capability building regarding the various aspects of consumer finance.

The bank shall prepare standardized set of borrowing and recourse documents (duly cleared by panel legal counsels) for each type of consumer financing.

3.2 Operations:
1. Consumer financing, like other credit facilities, must be subject to the Bank's risk

management process setup for this particular business. The process may include, identifying source of repayment and assessing customer's ability to repay, his/her past dealings with the bank, the net worth and information obtained from a Credit Information Bureau approved by Bangladesh Bank. 2. At the time of granting facility under various modes of consumer financing, bank shall obtain a written declaration from the borrower divulging details of various facilities already obtained from other institutions. The bank should carefully study the details given in the statement and allow fresh finance/limit only after ensuring that the total exposure in relation to the repayment capacity of the customer does not exceed the reasonable limits as laid down in the approved policies of the bank. The declaration will also help bank to avoid exposure against a person having multiple facilities from different institutions on the strength of an individual source of repayment. 3. Internal audit and control function of the bank, apart from other things, should be designed and strengthened so that it can efficiently undertake an objective review of

the consumer finance portfolio to assess various risks and possible weaknesses. The internal audit should also assess the adequacy of the internal control and ensure that the required policies and standards are developed and practiced. Internal audit should also comment on the steps taken by the management to rectify the weaknesses pointed out by them in their previous reports for reducing the level of risk. 4. The bank shall ensure that its accounting and computer systems are well equipped to avoid charging of mark-up. For this purpose it should be ensured that the mark-up charged on the outstanding amount is kept separate from the principal. 5. The bank shall ensure that any repayment made by the borrower is accounted for before applying mark-up on the outstanding amount.

3.3 Disclosure/Ethics:
The bank shall clearly disclose all the important terms & conditions. Fees, charges and penalties, which are internal including interest rate, pre-payment penalties and the conditions under which that apply. For ease of reference and guidance of its customers, bank shall publish brochures regarding frequently asked questions.

3.4 PRUDENTIAL REGULATIONS


3.4.1 REGULATION 1 FACILITIES TO RELATED PERSONS

The consumer finance facilities extended by banks to their directors, major shareholders, employees and family members of these persons shall be at arms length basis and on normal terms and conditions applicable for other customers of the banks. The Banks shall ensure that the appraisal standards are not compromised in such cases and market rates are used for these persons.

3.4.2 REGULATION 2 LIMIT ON BANKS EXPOSURE AGAINST TOTAL CONSUMER FINANCING.


Banks shall ensure that the aggregate exposure under all consumer financing facilities at the end of first year and second year of the start of their consumer financing does not exceed 2 times and 4 times of their equity respectively. For subsequent years, following limits are placed on the total consumer financing facilities:

PERCENTAGE OF CLASSIFIED CONSUMER FINANCE TO TOTAL CONSUMER FINANCING a) Below 5% b) 6% - 10% c) 11% - 15% d) 15% and over

MAXIMUM LIMIT 10 times of the equity 6 times of the equity 4 times of the equity Equal to equity

Method of classification for the above purpose shall be in accordance with the classification requirement as prescribed under Prudential Regulation

3.4.3 REGULATION 3
TOTAL FINANCING FACILITIES TO BE COMMENSURATE WITH THE INCOME
While extending financing facilities to their customer, the banks would ensure that the total installment of the loans extended by the financial institutions is commensurate with the take home income/disposable income and repayment capacity of the borrower. This measure would be in addition to banks' usual evaluations of each proposal concerning credit worthiness of the borrowers that the banks' portfolio under consumer finance fulfills the prudential norms and instructions issued by the Central Bank and does not impair the soundness and safety of the bank itself.

3.4.4 REGULATION 4 3.4.4.1CLASSIFICATION ASSETS


1.

AND

PROVISIONING

FOR

Banks shall observe the prudential guidelines in the matter of classification of

their Consumer Finance portfolio (irrespective of all consumer banking products) and provisioning there-against.

2.

In addition to the time-based criteria subjective evaluation of performing and

non-performing credit portfolio shall be made for risk assessment and, where considered necessary, any account including the performing account will be classified, and the category of classification determined on the basis of time based criteria shall be further downgraded. Such evaluation shall be carried out on the basis of credit worthiness of the borrower, its cash flow, operation of the account, adequacy of the security, inclusive of its realizable value and documentation covering the advances.

3.

Apart from specific provisioning requirement as prescribed above, banks shall

maintain a general reserve at least equivalent to 3% of their consumer finance portfolio to protect them from the risks associated with the economic cyclical nature of this business.

3.4.4.2 SUBMISSION OF RETURNS:


Banks shall submit the borrower-wise annual statements regarding classified loans/ advances to the Banking Inspection Department. 3.4.4.3 TIMING OF CREATING PROVISIONS:
5.

Banks shall review, at least on a quarterly basis, the collectibles of their loans /

advances portfolio and shall properly document the evaluations so made. Shortfall in provisioning, if any, determined, as a result of quarterly assessment shall be provided for immediately in their books of accounts by the banks on quarterly basis.

3.4.5 REGULATION 5 RESCHEDULING OF LOAN


Rescheduling of loan will be governed by rules & regulations as prescribed by Bangladesh Bank from time to time.

3.4.6 REGULATION 6 TRANSFER FACILITIES FROM ONE ANOTHER TO AVOID CLASSIFICATION CATEGORY TO

The bank shall not transfer any loan or facility to be classified from one category of consumer finance to another to avoid classification.

3.4.7 REGULATION 7 CREDIT INFORMATION BUREAU (CIB) CLEARANCE

While considering proposals for any exposure, banks should give due weight age to the credit report relating to the borrower and his group obtained from a Credit Information Bureau (CIB) of Bangladesh Bank. The condition of obtaining CIB report will be governed by rules & regulations as prescribed by Bangladesh Bank from time to time.

REGULATIONS FOR CREDIT CARDS 3.4.8 REGULATION 8


The banks should take reasonable steps to satisfy themselves that cardholders have received the card, whether personally or by mail. The banks should advise cardholders of the need to take reasonable steps to keep the card safe and the PIN secret so that frauds are avoided.

3.4.9 REGULATION 9

Banks shall provide the credit card holders with the statements of account at monthly intervals, unless there has been no transaction of any outstanding balance on the account since last statement.

3.4.10REGULATION 10
Banks shall be liable for all transactions not authorized by the credit card holders after they have been properly served with a notice that the card has been lost/stolen. However, the bank's liability shall be limited to those amounts wrongly charged to the credit card holder's account. In order to mitigate the risks in this respect, the banks are encouraged to take insurance cover against wrongly charged amounts, frauds, etc.

3.4.11 REGULATION 11
In case the cardholders make partial payment, the banks should take into account the partial payment before charging service fee/mark-up amount on the outstanding/billed

amount so that the possibility of charging excess amount of mark-up could be avoided.

3.4.12 REGULATION 12
Due date for payment must be specifically mentioned on the accounts statement. If fine/penalty is agric to be charged in case the payment is not made by the due date, a clear mention of the same should be given in the agreement.

3.4.13 REGULATION -13


Maximum unsecured limit under credit card to a borrower (supplementary cards shall be considered part of the principal borrower) shall not exceed Tk. 500,000/-. The banks may allow financing under the credit card scheme in excess of the limit of Tk. 500,000/-, provided the excess amount is secured appropriately. However, in no case the limit will be allowed to exceed Tk. 2 million.

In case of foreign currency cards, cards can be issued subject to repayment is made against respective foreign currency account or against lien of foreign currency quota allocated to Bangladeshi nationals by Bangladesh Bank from time to time.

REGULATIONS FOR AUTO LOANS 3.4.14 REGULATION 14


The vehicles to be utilized for commercial purposes shall not be covered under the Prudential Regulation for consumer finance. Any such financing shall ensure compliance with existing regulations covering lending. These regulations shall only apply for financing vehicles for personal use.

3.4.15 REGULATION 15
The maximum tenure of the auto loan finance shall not exceed five-year.

3.4.16 REGULATION 16
The banks shall not allow auto loan (including insurance) exceeding TK. 5 million per individual under this head. For the purpose of this regulation, auto facility to the dependent members of an individual shall also be treated as part of the exposure of that individual. While allowing auto loans, the banks shall ensure that the minimum down payment does not fall below 10% of the value of vehicle.

3.4.17 REGULATION 17
In addition to any other security arrangement on the discretion of the banks, the vehicles financed by the banks shall be properly secured by way of hypothecation.

3.4.18 REGULATION 18
The banks shall ensure that the vehicle remains properly insured (comprehensive) at all times during the tenure of the loan.

3.4.19 REGULATION 19
The clause of repossession in case of default should be clearly stated in the loan agreement. At least 15 days before enforcing repossession, banks shall send a legal notice to the borrower through courier service of registered mail against proper acknowledgment. The repossession expenses charged to the borrower should not be more than actual incurred by the bank. However, the maximum amount of repossession charges shall be listed in the schedule of charges provided to customer. The banks shall

develop an appropriate procedure for repossession of the vehicles and shall ensure that procedure is strictly in accordance with law.

3.4.20 REGULATION - 20
A detailed repayment schedule should be provided to the borrower at the outset. Where alterations become imminent because of late payment or prepayment and the installment amount or period changes significantly, the revised schedule should be provided to the borrower at earliest convenience of the bank but not later than 15 days of the change. Further even in case of insignificant changes, upon the request of the customer, the bank shall provide him revised repayment schedule free of cost.

3.4.21 REGULATION 21 The banks desirous of financing the purchase of used cars shall prepare uniform guidelines for determining value of the used vehicles. However, in no case the bank shall finance the cars older than five year.

3.4.22 REGULATION 22
The banks should ensure that a good number of authorized auto dealers are placed at their panel to eliminate the caches of collusion of other unethical practices.

REGULATIONS FOR HOUSE FINANCE 3.4.23 REGULATION 23


The maximum per party limit in respect of housing finance by the banks will be Tk 7.5 million. The housing finance facility shall be provided at a maximum debt equity ratio of 80:20.

3.4.24 REGULATION 24
Commercial banks shall ensure that at no time their total exposure under house financing exceeds 10% of their net consumer advances.

3.4.25 REGULATION 25
Banks are free to extend mortgage loans for housing, for a period not exceeding twenty year. Banks should be mindful of adequate asset liability matching.

3.4.26 REGULATION 26
The house financed by the banks shall be mortgaged in bank's favor by way of registered mortgage with registered Power of Attorney.

3.4.27 REGULATION 27

Banks shall either engage professional staff or arrange sufficient training for their concerned officials evaluate the property, assess the genuineness and integrity of the title documents, etc.

3.4.28 REGULATION 28
The bank's management should put in place a mechanism to monitor conditions in the real estate market (or other product market) to ensure that its policies are aligned to current market conditions.

3.4.29 REGULATION 29
Banks must develop floating rate products for extending housing finance, thereby managing interest rate risk to avoid its adverse effects. Banks also must develop inhouse system to stress test their housing portfolio against adverse movements in interest rates as also maturity mismatches.

REGULATIONS FOR PERSONAL LOANS LOANS FOR THE PURCHASE OF DURABLES 3.4.30 REGULATION 30

INCLUDING CONSUMER

Limits per person for such loans will be Tk.3 lakh with out any securities. However, banks may lend higher amounts provided the loans are secured appropriately. But, in no case, the loan amount will be allowed to exceed Tk.10 lakh. The loan secured against liquid securities shall however, be exempt from this limit.

3.4.31 REGULATION 31
In cases, where the loan has been extended to purchase some durable goods/item, the same will be hypothecated with the bank besides other securities, which the bank may require on its own.

3.4.32 REGULATION 32
The maximum tenure of the loan shall not exceed 5 year.

3.5 CREDIT APPROVAL


Applications are received at Risk Management Unit from Sales/ Marketing Department/ Branches. Applications are evaluated / assessed by Credit Analysts / Managers. The evaluation process is carried out based on the agreed and standard guidelines for different loans product and the documents checklist. The detailed credit and risk assessment should be conducted prior to approving any loan. Sales Team/ Branches must complete a documentation checklist to ensure all documents have been properly obtained. The sales team / branch staff are responsible for loan sales and should be the owner of the customer relationship, and must be held responsible to ensure the accuracy of the loan application submitted for approval. They must be familiar with the banks Lending Guidelines and should conduct due diligence on new borrowers, purpose of the loans and guarantors.

Besides, Know Your Customer (KYC) and Money Laundering guidelines should be adhered to at all times. Credit Applications should include, as a minimum, the following details: Amount and type of loan(s) proposed. Purpose of loans. Loan Structure (Tenor, Covenants, Repayment Schedule, Interest) Security (if any) Budget Plan.

To illustrate the process of marketing a loan at the front end till disbursement at the Credit Administration Department, please refer to sample process workflow chart.

1.5.1.

Credit Approval Authority:

Lending Authority is delegated to individual credit analysts and credit manager or senior credit executives by the Head of Consumer Credit. Records of such authority are retained with Head of Consumer Credit. Copies of all Delegated Lending Authority (DLA) are also retained by Credit Administrations Department. Initially the powers will be with Head of Consumer Credit only. Primary steps for selection of borrower:

1. Proposal of the client

Understanding the proposal

To know the business

2. Credit investigation and credit report :

Market reputation CIB Credit worthiness

3. Declaration from the client

: Market

Management Technical aspect Financials Net worth

4. Checking the declaration

Prime responsibility: Checking & Cross checking the Cash flow, Cash flow, Cash flow Gathering the information Verification of net-worth Validation of financial statement

5. Counseling with the client

Counseling with the management group

6. Preparation of credit report

On the basis of followings: a. Character b. Capacity c. Capital d. Condition e. Collateral f. Control

g. Constitution Some other important matters: Whether the firm is registered or not Borrowing powers Worth of the client in the business and as well as partners Purpose of the advance consistent with the company object Existing borrowing Verification of prior charges

3.6 Preferred Organizational Structure


An appropriate structure for Consumer Credit must be in place to ensure that the segregation of the marketing / sales function from Approval / Risk Management and also Credit Administration. Credit approval should be centralized within the Consumer Credit Division. All applications must be approved by the Head of Consumer Credit or delegated Corporate Office Executive/ Regional Head.

chart represents the preferred management structure: Consumer Credit Division

Sales/ Marketing (By Branch/ Agency) Customer relationship

Risk Management Credit application Collection and Forwarding to Credit Risk management

Credit Administration

Credit Risk Analysis

Documentation

Contact Point Collection and Recovery Credit Approval Maintenance of Credit

Disbursement Custodial Service Compliance Monitoring

4.0 CONSUMER FINANCING- AN OVERVIEW OF OPERATION


PROCESS FLOW CHART OF CONSUMER LOAN PROCESSING

Application received from customer

Sales / branch scrutinizes the application

No
Application Meets basic PPG criteria? Application declined and returned to customer

Yes
Sales officer/Manager recommends the loan and sends to credit

Application is received at Risk Management Unit

Credit Approved?

No

yes
Application sent to Credit Administration Unit

Application sent back to source

Documents in order?

No

Loan disbursed and application and charge documents lodged in safe custody

Yes Application sent back to source Application sent back to source

4.1 Auto Loan


This product will allow car financing to the customer segment. Under this scheme, the vehicle is hypothecated to the bank only. In addition to this registration requirement, on a case-to-case basis, bank may also secure the loan partially by the commonly acceptable form of cash/quasi cash securities available in the market. Auto Loan :Customer Segment Any Bangladeshi who has the capacity to repay bank loan. In specific terms, these could be salaried executives of multinational and middle to large size local corporate, Government officials, Officials working in reputed NGOs (Non Government Organizations), international aid agencies & UN bodies, any tax paying businessmen of repute, any employed / self-employed tax-paying individual having a reliable source of income Auto Loan : Purpose Purchase of non-commercial new and reconditioned vehicles for personal use only. Auto Loan : Nationality Bangladeshi only Auto Loan : Age Limit

Minimum age (years): Maximum age (years): Auto Loan : Minimum Income

25 65 at the time of maturity of loan.

Monthly surplus income (after meeting all expenses) shall be at least Tk. 15,000/=. Auto Loan : Loan Size (including all costs) For New Cars: Maximum Tk. 2.0 million. For Reconditioned Cars: Maximum Tk. 1.0 million. May be revised time to time by the management. Auto Loan : Loan to Price Ratio Loan amount cannot exceed 80% of the vehicle price in case of new cars and 70% in case of reconditioned cars. Auto Loan : Security/ Collateral a) Hypothecation over the car (lien mark- Hire Purchase raised in the BRTA and blue-book of the car). b) First party comprehensive insurance of the car (Policy must be renewed every year and copy of the policy must be submitted to the bank)

c) Post dated cheques for each 6 monthly installment


d) One undated cheque for full loan value including full interest to be taken in

advance. e) Personal Guarantee of spouse/parents and an individual having minimum solvency/income not less than that of the borrower supported by income proof. Auto Loan : Legal Documents a) Duly filled in Car Loan Application Form Terms and conditions signed b) Demand Promissory Note c) Letter of Set-Off d) Irrevocable Letter of Authority to repossess the vehicle e) Ownership transfer form signed by customer f) Letter of Offer with full terms and conditions stated therein and duly accepted. Auto Loan :Interest Rate To be prescribed time to time by the management. At present being @ 14% p.a. with quarterly rest. Auto Loan : Loan Processing Fee @ 0.5% on sanctioned amount, minimum Tk. 5,000/= to be realized at the time of disbursement.

Auto Loan : Maximum Term of Loan For New Cars: For Reconditioned Cares: 60 months 36 months

Auto Loan : Repayment Method Equal Monthly Installments Auto Loan : Disbursement Mode After loan approval vendor will receive a facility confirmation letter. On the basis of that vehicle will be registered with a lien marked on it. After registration, vendor will be paid the total value of the vehicle in the form of Pay Order. Customer should pay the down-payment/total value prior to issuance of facility confirmation letter. Auto Loan : Disbursement pre-condition Comprehensive Insurance coverage and Registration Document must be in place before giving the Pay Order.

Auto Loan : Debt Burden Ratio (DBR %) Monthly Installment size will be maximum 33% of Monthly Net Income.

Auto Loan : Verification of Personal Details and Quotation Details of an applicant to be verified by a banks officer/ third party (engaged by bank) before an approval is accorded. Letter from employer with details of employment and salary Borrower and Guarantors (if any) details (addresses both present and permanent, all telephone numbers of residence, office & mobile no.) Personal net-worth statement Car quotation Referee details Bank statement (minimum 6 months)

Auto Loan : Substantiation of Income Proper substantiation of income will be mandatory. All or any of the following original / true copy of original (accepted only after seeing the originals) documents are accepted for the purpose: Last Tax Return

Bank Statements for minimum last 6 months Personal Net-Worth Statement Any other document that may stand as a proof of income

Auto Loan: Residential History The customer must have permanent residency in his own/ spouses/ parents house within the command area/ City of the bank/ branch. Auto Loan : Maximum exposure under this product 20% of banks equity. Auto Loan : Others Cars to be financed must be unregistered in Bangladesh. Loan size will not be below Tk. 0.3 million. Maintenance cost to be borne by the borrower.

4.2 Consumer Durable Loans


A personal loan scheme that supports purchase of various consumer durables such as Television, Refrigerator, Air Conditioner, Audio-Video Equipments, Washing Machine, Personal Computers, other household furniture/ appliances etc. Under this scheme, the item purchased to be hypothecated to the bank. In addition, on a case-to-case basis, bank may also secure the loan partially by the commonly acceptable form of cash/ quasi cash securities available in the market.

Consumer Durables Loan: Customer Segment


Any Bangladeshi individual who has the capacity to repay bank loan. In specific terms, these could be salaried executives of multinational and middle to large

size local corporate, Government officials, Officials working in reputed NGOs (Non Government Organizations), international aid agencies & UN bodies, any tax paying businessmen of repute, any employed / self-employed tax-paying individual having a reliable source of income. Consumer Durables Loan : Purpose Consumer durables for personal/ family use. Items like Television, Refrigerator, Air Conditioner, Audio-Video Equipments, Washing Machine, Personal Computers, other household furniture/ appliances etc. Consumer Durables Loan : Nationality Bangladeshi only Consumer Durables Loan : Age Minimum age (years) Maximum age (years) maturity Consumer Durables Loan : Minimum Service / length of business
- For salaried individual, minimum total service length of 3 years;

: :

25 65 years at loan

- Govt Employees must be confirmed on job; - For self employed individual, a business record of minimum 4 years.

Consumer Durables Loan : Minimum Income Monthly surplus income (after meeting expenses) shall be at least two times of the installment amount.

Consumer Durables Loan : Loan Size Minimum Maximum : : Tk. 50,000/= Tk. 300,000/=

Consumer Durables Loan : Loan to Price Ratio Financing maximum 80% of the cost of the item is allowed. Consumer Durables Loan : Security/ Collateral Hypothecation over purchased assets. Comprehensive insurance over assets (Policy must be renewed every year and copy of the policy must be submitted to the bank) Post dated cheques for each 6 monthly installment One undated cheque for full loan value including full interest to be taken in advance.

Personal Guarantee of spouse/parents and an individual having minimum


solvency/income not less than that of the borrower supported by income proof . Consumer Durables Loan :Legal Documents Duly filled in Loan Application Form Terms and conditions signed Demand Promissory Note Letter of Set-Off Irrevocable Letter of Authority to repossess the purchased item

Letter of Offer with full terms and conditions stated therein and duly
accepted . Consumer Durables Loan : Interest Rate To be prescribed time to time by the management. At present being @ 14% p.a. with quarterly rest. Consumer Durables Loan: Processing Fee/ Service Charge @ 1% on sanctioned amount, minimum Tk. 1,000/= to be realized at the time of disbursement. Consumer Durables Loan :Tenor Minimum 6 months Maximum 36 months

Consumer Durables Loan : Repayment Method Equal Monthly Installments Consumer Durables Loan : Disbursement Mode Payment to be made by issuing Pay Order in favor of vendors or by crediting customers Savings/ Current account with our bank. Consumer Durables Loan : Debt Burden Ratio (DBR %) Monthly Installment size will be maximum 33% of Monthly Net Income. Consumer Durables Loan :Verification of Personal Details and Quotation Details of an applicant to be verified by banks officer / a third party (nominated by bank) before an approval is accorded. Letter from employer with details of employment and salary Borrower and Guarantors (if any) details (addresses both present and permanent, all telephone numbers of residence, office & mobile no.) Personal net-worth statement Quotation of the item to be purchased Referee details Bank statement

Consumer Durables Loan : Substantiation of Income

Proper substantiation of income will be mandatory. All or any of the following original / true copy of original documents are accepted for the purpose: Last Tax Return Bank Statements for minimum last 6 months Personal Net-Worth Statement

Any other document that may stand as a proof of income

Consumer Durables Loan : Maximum exposure under this product 40% of banks equity.

4.3 Loans for Professionals


A personal loan scheme meant for professionals only (doctors, engineers, architects, IT professionals, management consultants etc.) to support their small scale purchase of different equipment, tools and small machineries for installation at their business sites / offices. Under this scheme, the item purchased to be hypothecated to the bank. In addition, on a case-to-case basis, bank may also secure the loan partially by the commonly acceptable form of cash/ quasi cash securities available in the market. In addition, we believe, this particular product is of an inherently safe nature because the target customers are the established doctors, engineers or highly qualified other professionals of the society.

Professional Loans : Customer Segment Any Bangladeshi in the following professions as self employed or salaried people: Doctors or medical professionals Engineers Architects IT professionals Management Consultants

Professional Loans :Purpose For purchase of items to support professional needs of above customer segment (e.g. purchase of X-ray machine, Dental chair, medical beds, ultra- sonogram machine, engineering/ mechanical tools, purchase of office equipments/ accessories, etc.) Professional Loans: Nationality Bangladeshi only Professional Loans : Age Minimum age (years) Maximum age (years) : : 25 65 years at loan maturity

Professional Loans : Minimum Service / length of business For salaried individual, must be confirmed employees of a relevant firm For self employed individual, a business record of minimum 2 years

Professional Loans : Minimum Income Monthly surplus income (after meeting expenses) shall be at least two times of the installment amount.

Professional Loans : Loan Size


Minimum Maximum : : Tk. 50,000/= Tk. 500,000/=

Professional Loans : Loan to Price Ratio Financing 80% of the cost of the item is allowed. Professional Loans : Security/ Collateral Hypothecation over purchased assets. Comprehensive insurance over assets (Policy must be renewed every year and copy of the policy must be submitted to the bank)

Post dated cheques for each 6 monthly installment

One undated cheque for full loan value including full interest to be taken in advance.

Personal Guarantee of spouse/parents and an individual having minimum solvency/income not less than that of the borrower supported by income proof.

Other documents prescribed time to time.

Professional Loans : Legal Documents Duly filled in Loan Application Form Terms and conditions signed Demand Promissory Note Letter of Set-Off Irrevocable Letter of Authority to repossess the purchased item Letter of Offer with full terms and conditions stated therein and duly accepted. Professional Loans: Interest Rate To be prescribed time to time by the management. At present being @ 14% p.a. with quarterly rest. Professional Loans : Loan Processing Fee @ 1% on sanctioned amount, minimum Tk. 1,000/= to be realized at the time of disbursement.

Professional : Tenor Minimum 12 months Maximum 48 months

Professional Loans: Repayment Method Equal Monthly Installments Professional Loans :Disbursement Mode Payment to be made by issuing Pay Order in favor of vendors by crediting customers Savings/ Current account with our bank. Professional Loans : Debt Burden Ratio (DBR %) Monthly Installment size will be maximum 33% of Monthly Net Income. Professional Loans : Verification of Personal Details and Quotation Details of an applicant to be verified by a banks officer/ third party (nominated by bank) before an approval is accorded. Letter from employer with details of employment and salary

Borrower and Guarantors (if any) details (addresses both present and permanent, all telephone numbers of residence, office & mobile no.)

Personal net-worth statement Quotation of the item to be purchased Referee details Bank statement

Professional Loans : Substantiation of Income Proper substantiation of income will be mandatory. All or any of the following original / true copy of original (accepted only after seeing the originals) documents are accepted for the purpose: Last Tax Return

Bank Statements for minimum last 6 months Personal Net-Worth Statement Any other document that may stand as a proof of income

Professional product

Loans

Maximum

exposure

under

this

30% of banks equity.

4.4 Unsecured Personal Loans


Unsecured Personal Loan (UPL) is a terminating facility offered by Banks Retail Banking Division to individual salaried persons living in the cities / towns where the Bank has its operations. It is a clean or unsecured loan in the sense that only security in this type of loan product is: a) Letter of Introduction from employer; and/or b) Transfer of monthly salary and assignment of Terminal Benefits; and/or c) Personal Guarantee taken from specific section of people.

Unsecured Personal Loan : Customer Segment Employees of reputed MNCs, large local corporate, commercial banks, UN bodies, reputed NGOs, Government Employees, etc.

Unsecured Personal Loan: Purpose Miscellaneous personal financial requirements. The customer has to declare the purpose of the loan but submission of supporting document is not mandatory. Purposes may be as follows: Marriages in the family Advance rental payments Hospitalization or other emergency medical needs Education (Technical/ Professional) in the family

Unsecured Personal Loan : Nationality Bangladeshi only

Unsecured Personal Loan : Age Minimum age: Maximum age: 25 years 65 years at loan maturity

Unsecured Personal Loan : Minimum Service Must be confirmed employees with end-service benefit options. Unsecured Personal Loan : Minimum Income Monthly surplus income (after meeting expenses) shall be at least two times of the installment amount.

Unsecured Personal Loan : Loan Size Minimum Maximum : : Tk. 25,000/= Tk. 200,000/=

Unsecured Personal Loan : Security/ Legal Documents Letter of Introduction from the employer Letter of undertaking for salary and Terminal Benefits assignment Complete Loan Document Personal Guarantee of Spouse/Parents Third party personal guarantee acceptable to bank

Bank Statement (minimum 6 months) Personal Net-Worth Statement Post dated cheques equivalent to 6 monthly installment

One undated blank cheque (for future default covering)

Unsecured Personal Loan : Interest Rate To be prescribed time to time by the management. At present being @ 14% p.a. with quarterly rest.

Unsecured Personal Loan : Loan Processing Fee @ 1% of loan amount, minimum Tk. 1,000/= to be realized at the time of disbursement. Unsecured Personal Loan : Tenor Minimum 12 months Maximum 36 months

Unsecured Personal Loan : Repayment Method Equal Monthly Installments Unsecured Personal Loan : Disbursement Mode By crediting to customers Savings/ Current account

Unsecured Personal Loan : First Repayment Date


Generally, one month after the date of customers availing the loan. May be earlier if customer wants.

Unsecured Personal Loan : Debt Burden Ratio (DBR %) Monthly Installment size will be maximum 33% of Monthly Net Income.

Unsecured Personal Loan : Verification of Personal Details


Banks officer / nominated agency will verify the addresses both present and permanent, cases. After the verification is done, the agency will submit a report on their findings in the prescribed form. The report will be kept attached to the borrowers loan file. all telephone numbers of borrower, guarantor, referee, employment/occupational details, invoice etc. This will be a physical verification in all

Unsecured Personal Loan : Substantiation of Income Following as appropriate: Salary Certificate / Salary Slip Bank Statements Income Tax returns of last period

Any other document that may stand as a proof of income

Unsecured Personal Loan : Residential History The customer must have permanent residency in his own house/ spouses house/ parents house within the command area of the bank/ branch.

Unsecured Personal Loan: Maximum exposure under this product 20% of banks equity.

4.5 House Finance


This product will facilitate the customer to have financing for purchase of flat, house, construction of new house, extension of existing house etc. House Finance: Customer Segment Any Bangladeshi individual who has the means and capacity to repay bank loan. In specific terms, these could be salaried executives of multinational and middle to large size local corporate, Government officials, Officials working in reputed NGOs (Non Government Organizations), international aid agencies & UN bodies, any tax paying businessmen of repute, any employed / self-employed/ tax-paying individual having a reliable source of income.

House Finance : Purpose For purchase of flat, house, construction of new house, extension of existing house etc. within the command area of the bank/ branch. House Finance : Nationality Bangladeshi only House Finance : Age Limit Minimum age: Maximum age: 25 years 65 years at loan maturity

House Finance: Minimum Income Monthly surplus income (after meeting expenses) shall be at least two times of the installment amount. House Finance : Loan Size Minimum Maximum : : Tk. 300,000/= Tk. 3,000,000/=

House Finance: Loan to Price Ratio Financing up to maximum 50% of cost. House Finance : Security/ Collateral/ Legal Documents

Registered mortgage of project land with building/ flat thereon Registered irrevocable power of attorney empowering the bank to sell mortgaged properties Complete standard Loan Document Personal Guarantee of Spouse/Parents

Personal Net-Worth Statement Post dated cheques equivalent to 6 monthly installment One undated blank cheque (for future default covering)

House Finance: Interest Rate Two years Treasury Bills Rate + 7%, minimum @ 13% p.a. on quarterly rests. House Finance: Tenor Maximum 10 years including grace period House Finance: Repayment Method Equal Monthly Installments House Finance: Disbursement Mode By crediting to customers Savings/ Current account House Finance: Grace Period

Upon assessment of case to case basis but not more than 12 months House Finance: Debt Burden Ratio (DBR %) Monthly Installment size will be maximum 33% of Net Monthly Income.

House Finance: Loan Processing Fee @ 0.5% of loan amount or minimum Tk. 5,000/= to be realized at the time of disbursement.

House Finance: Verification of Personal Details Banks officer/ nominated agency will verify the addresses both present and permanent, cases. After the verification is done, the officer/ agency will submit a report on their findings in the prescribed form. The report will be kept attached to the borrowers loan file. all telephone numbers of borrower, guarantor, referee, employment/occupational details, invoice, etc. This will be a physical verification in all

House Finance: Substantiation of Income Following as appropriate: - Salary Certificate / Salary Slip - Bank Statements - Income Tax returns of last period - Any other document that may stand as a proof of income

House Finance: Maximum exposure under this product 20% of Banks equity.

4.6 Credit Card


The target market consists of salaried and self-employed individuals generally with a minimum gross income of Tk. 10,000 per month and usually at least 21 years of age for a primary card and 18 years of age for a supplementary card. Cards are not normally issued to individuals over 60 years old. Applicant must be a citizen of Bangladesh.

Credit Card: Target Market Salaried & Self-employed. Credit Card: Nationality Bangladeshi only. Credit Card: Age For Primary card For Supplementary card 21 years to 60 years 18 years to 60 years

Credit Card: Business Existence 1 year for self employed only.

Credit Card: Cash Advance Limit 50% of total limit

Credit Card: Interest Free Period Minimum 15 days Maximum 45 days Credit Card: Interest Accrual On daily average balance Credit Card: Interest Application Monthly from transaction date Credit Card: Validity Period 1 year Credit Card: Renewal Cards will be automatically renewed unless revoked by the bank or requested by the customer. Last 12 months Currently not 30+ DPD Never became 60+ DPD

Credit Card: Determination of Income Salaried: Gross Monthly Income (GMI) is defined as the total income of an applicant including overtime and other allowances received on a regular basis before any deductions/loan installments as reflected in the salary certificate or payslips or the bank statements.

Where free accommodation is provided by the employer, up to 25% of the salary and allowances as mentioned in the salary certificate may be added to arrive at G

Self-employed: GMI is defined as the average monthly income of an applicant after deduction of all business expenses. GMI is determined on the basis of Income Tax Return (IT 88) and/or Bank Statement(s). a. Income Tax Return (IT 88) shows gross yearly income (before deduction), which is divided by twelve to arrive at GMI.

b. Personal (or company account statement in case of sole proprietorship) and/or company bank statements are considered as supporting income documents. Bank statement is analyzed to calculate average monthly credit (both frequency & volume) and average monthly balance. In calculating GMI, maximum 50% of average monthly credit can be taken into consideration. Depending on the nature, frequency and size of business and cash flow, credit

c. Analysts will use their discretion to decide on the appropriate discounted percentage to be taken to calculate GMI. As a general rule, the average monthly balance should cover at least 30% (minimum repayment option being 5%) of the approved credit limit. For calculating GMI from company bank statement, the appropriate discounted percentage will be applied first and then the applicants share of the business (ownership share %). Credit Card: Debt Burden Ratio Defined as the amount of monthly loan repayments of an individual as

declared in the application or identified in the bank statements taken as a percentage of the gross income. For applicants provided with accommodation by employer/having own house, up to 25% of gross income may be added to gross income while calculating the DB ratio. In cases where DB ratio exceeds prescribed norms, spousal income may

be added to enable recalculate DB ratio provided this income is substantiated and the proof of relationship is given. Credit Card: Documentation Documents usually sought from the applicants are: Salary certificate: Signed by Manager

Accounts/HR/Admin/Finance/Personnel or equivalent on official letterhead). In case of Govt. Employees copy of Pay Bill acknowledged by Treasury.

Pay Slip: Latest months (not more than three months old) pay-slip stating companys name.

Bank Statement: Latest (no more than two months old) six months bank statement is required.

Income Tax Return: Latest (not more than two years old) IT 88 acknowledged by ITO. Trade License: Owners name should be clearly stated. Memorandum of Association: Ownership share should be mentioned. Rent Agreement: Should be on govt. revenue stamp paper. Passport Copy: In Bangladesh, we do not have any national ID or social

security number. Alternatively, as a proof of customers identity, passport photocopies will be sought. However, it is not a mandatory requirement considering the fact that a sizeable portion of our target customer does not have a passport. Authentication: The application receiving person (Sales/Branch) will

verify all copies of documents against original and mark O/S (original seen) with his/her name and signature on it.

Credit Card: Maximum exposure under this product 40% of Banks equity.

5.1 PROBLEMS

Many customers are coming in Bank Asia. They cant


understand the credit approval because it is written in English. Because of that they are facing many problems to fill that credit approval .

The loan-processing time is lengthy, which is not good for borrower. Most of the time spent for correspondence between Head Office and branch. There Human resource management are not that much efficient to do the work. Their lacking of knowledge and they are not that much well organized.

6.1 RECOMMENDATION
It is highly recommended to improve and diversify in accordance with the customers need and expectations to more than loyal in the long run business.

Different Programs should be taken to educate the clients regarding different aspects of Consumer credit policy. Leaflets including all basis information written both in easy English and Bengali can be used when a customer comes for loan. Bank should be more innovative and diversified in its services There procedure are very lengthy. So in my suggestion they can change or can short their credit approval. So that customer can feel easy to fill up these. Human resource is another sector for the branch to be developed urgently. Human resources, in this branch, are not equipped with adequate banking knowledge. Majority of the human resources are lack of basic knowledge regarding money, banking finance and accounting. Without proper knowledge in these subjects, efficiency cannot be optimized.

7.1 CONCLUSION

It was great pleasure for me to do my internship program in an esteemed organization like Bank Asia Ltd. Though my practical exposure in Bank Asia Ltd. CDA Avenue for just twelve weeks, it provides me a wide range of scope to observe the factions of bank

through the cordial assistance of its members. I had the scope to focus on consumer credit policy. After completion the whole project it can be realized that Bank Asia is in a competitive position in this viable environment. Working as an intern in the Bank Asia, I got practical experiences of the demands of consumer credit and also the banks effort to meet them. The bank should maintain a well-structured communication from upper level to lower level. Each official should be valued and treated as a part of the bank and they must have the privilege to devote themselves for the betterment of services of the bank.

This is a company, which has so far shown good performance and holds the strongest position in the banking market. Overall, the bank must make a positive attempt to be more outward looking in their goals and aware of what is happening. I hope, in spite of my all limitations, this experience of sharing works with such working environment will help me a lot in professional life. This has a remarkable impact on the economic growth of our country and financial support of individuals.

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