SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 1.

1 Background of the study:
Enterprises and financial institutions in Bangladesh face an insuperable obstacle to efficient credit transactions. Specially Small and Medium Enterprises (SME) are one of the potential sector of a developing country like us. It is now recognized that the small and medium enterprises (SMEs) are playing an increasingly important role as engines for economic growth and employment in many regions of our country. SME

development, as instruments of employment and income generation, human development and poverty alleviation, export promotion, stimulation of private ownership, competition and entrepreneurship and hence the driving forces behind the growth of a vibrant industrial market economy, has generated considerable interest among the policymakers, academics, business circle and the international donor agencies in recent times. So we have selected specialized bank for SME financing like BASIC Bank Ltd. Moreover, other private commercial bank like BRAC Bank Ltd, Mercantile Bank Ltd, are taking SME financing not for their business expansion but also for as a competitive market for emerging market. The term Green Banking is now popular worldwide now-a-days. It is for stopping the environmental degradation and making this planet habitable. Bankers are the important professional group who has interaction with the other groups of people and also with general masses. They can adopt different green activities within their in-house environment and also can initiate the protection of the air pollution, water pollution by their clients. Bankers can finance the green projects, which are environmental friendly and discourage the projects that damage the environment.


SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 1.2 Objectives of the Report
General objective: The general objective of the study is to draw a comparative picture of SME loan of BASIC Bank Limited with other banks as well as view the current status of SME loan. This report also presents an elementary study about the new concept of Green Banking directed by Bangladesh Bank for inspiring the environment friendly projects.

Specific objectives: The specific focuses of the study are: To depict the procedures they follow for lending credit to the customers. To critically analyze the performance of Asset Product and Liability product of BASIC Bank Ltd. To describe the detailed operational procedure of SME Loan along with their associated benefits. To know how Green banking operates to encourage the small and medium enterprises (SME).

1.3 Methodology
Type of research: I want to classify my research report into Analytical Research as I will use facts or information already available and analyze these to make critical evaluation about the performance of BASIC Bank Limited in comparison to other three commercial banks. Research approach: According to the above research type I basically will use both quantitative approach and qualitative approach. Under quantitative approach I will collect information related research and use database from which to infer characteristics or relationships of population. 2|Page

SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.
Data Collection:


Primary Sources

Secondary Source

Internal Sources

External Sources

a. Primary Sources: Discussion with the respective organization's officials about
the small and medium enterprises financing activities, their monitoring, classification and maintaining a long-term relationship with these firms.

b. Secondary Source: For the completion of the present study, secondary data
will be collected. The main sources of secondary data are:

i. Internal Sources:
Annual Report of BASIC Bank Ltd, BRAC Bank Ltd, Dhaka Bank Limited and Mercantile Bank Ltd. Manuals, and brochures of BASIC Bank limited and different publications of Bangladesh Bank.

ii. External Sources:
Credit Manual of BASIC Bank Ltd and other three banks. Internet Guideline of Bangladesh Bank. Green Banking Policy Guideline of Bangladesh Bank & BASIC Bank Ltd.


SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.
Informal discussion with customers and observation while working in different desks.

Method employed:
Some specific methods are being used for making this report. Some of the decisions are made based on the interpretation of the analysis. In my report I use the following statistical tools:   

Correlation Multiple regressions. Analysis of variance.

Data analysis and interpretation:
I have made graphical analysis of various variables of SME Financing. The tables of the respective graphs are presented in appendices part. I interpret the variables according to their trend.

Sequence of the Report:

Chapter 01: Introduction Chapter02: Textual Knowledge of SME Chapter03: Review of the literature Chapter04: SME Contribution in Bangladesh Chapter05: Organizational overview of BASIC Bank Ltd. Chapter06: SME financing in BASIC Bank Ltd. Chapter07: SME Financing Performance of BASIC Bank Ltd Chapter08: Comparative Analysis among BASIC, BRAC & Mercantile bank Ltd. Chapter09: Green Banking in BASIC Bank Ltd. Chapter10; Indentification of Problems Chapter11: Policy Suggestions Chapter12: Conclusions 4|Page

types of SME and sector of SME credit allocation of different thrust sectors of BASIC Bank Ltd. identification of problems regarding SME loan. 1.4 Rationale of the study The report covers the over view of SME loan. 1. to those sectors. The banks by playing the role of an intermediary can mobilize the excess fund of surplus sectors to provide necessary finance.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. In an economy like this. which are needed to promote for the sound development of the economy. I am having opportunity to work with BASIC Bank Limited. 5|Page . and BRAC Bank Ltd. The report also includes the new concepts of Green Banking that would create a competitive advantage of banking sector to finance environment friendly SMEs. Bangladesh is one of the underdeveloped countries in the world.5 Scope of the study Internship is the part of BBA course and it is an opportunity to any fresh graduate gain practical experience in corporate world. The economy of the country has a lot left to be desired and there are lots of scopes for massive improvement. Mercantile Bank Ltd. banking sector can play a vital role to improve the overall social-economic condition of the country. With this bank I am trying to implement educational experience in this bank.

e. This paper has focused on the most sensitive part of the organization i. loan and advance. it is obvious that employees would not disclose enough information for the sake of confidentiality of their respective organization. Every organization has their own secrecy that is not revealed to others. time might be a major constraint in accumulating all sorts of information.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. I will get only one month to prepare this report.6 Limitation of the study Though I will have given utmost effort to prepare this paper but there will be some limitations of the study. 1. 6|Page . Due to time limitation many aspects could not be discussed in the present study because SME is a vast subject. Confidentiality of data might be another important barrier that might be faced during the conduct of this study. So the bank authority hesitated to disclose important information to maintain business secrecy. They are as follows- Since the report has to be made parallel to office work within three months. While collecting data on different banks.

000 to Tk. 50.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. A variety of definitions concerning small and medium enterprises exists in Bangladesh.00. Medium Enterprises Medium enterprises refer to those enterprises which are not any Public Limited Companies and which fulfill the following criteriaService Concern Having an investment of Tk.000 to Tk. 50. 1.50.000 excluding land & building and / or employing up to 25 workers. Business Concern Having an investment of Tk. 7|Page . In context of Bangladesh. Source: Bangladesh Bank.00. Small Enterprises Small enterprises refer to those enterprises which are not any Public Limited Companies and which fulfill the following criteriaService Concern Having an investment of Tk.00. 10.00.000 to Tk. Business Concern Having an investment of Tk.1 Definition of SME: Small & Medium Enterprises SMEs are recognized as engine of economic growth and employment generation for sustainable industrialization in both developed and developing countries of the world. 50. 00. Manufacturing Concern Having an investment of Tk.00. there is no alternative of small and medium enterprises for rapid industrialization and national economic growth through lower capital investment and employment generation. Small & medium enterprises are those industrial and business concerns having fixed asset not more than taka10 million.000excluding land & building and / or employing up to 50 workers.00. 10.20. 00.00. 50.000 excluding land & building and / or employing up to 150 workers. Some of the definitions that are used in Bangladesh are given below: BANGLADESH BANK defines Small & Medium Enterprise sector: 1. 50.000 excluding land & building and / or employing up to 50 workers.000excluding land & building and / or employing up to 50 workers.000 to Tk.00.50.000 excluding land & building and / or employing up to 25 workers.000 to Tk.00.00. 50.000 to Tk. 50. 2. 1. Manufacturing Concern Having an investment of Tk. 2.

5 Million Trade Total asset worth Tk. finally. 50000-Tk. 20 Million Less than 150 Less than 50 Less than 50 Less than 25 Less than 25 Less than 25 Table: A 8|Page . 5 Million excluding the value of fixed asset Manufacturing Total fixed asset excluding land & building Tk. Establishments employing between 10 and 49 workers are called ‘small’. those employing between 100 or more workers are called ‘large Source: BBS Bangladesh Better Business Forum (BBBF) definition in 2008: Enterprise Sector Asset size No. and. 15 Million -Tk. 10 Million Trade Total asset worth Tk. 5 Million Medium Service Total fixed asset excluding land & building Tk. 5 Million -Tk.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 50000-Tk. 50000-Tk. of employees Small Service Total fixed asset excluding land & building Tk. Bangladesh Bureau Statistics (BBS) definition: BBS uses a definition of size based on ‘employment size’. 5 Million -Tk. those employing between 50 and 99 workers are called ‘medium’. 10 Million excluding the value of fixed asset Manufacturing Source: BBBF Total fixed asset excluding land & building Tk.

Ministry of Industries definition: Enterprise Small Sector Trade Manufacturing Asset size No position taken Total fixed asset excluding land & building of up to Tk. 15 Million No position taken Total fixed asset excluding land & building of between Tk.53% 71. 15 Million -Tk.88% 69.98% 55.20% 9|Page . SME in China: SME are a vital force for the sustained development of the Chinese economy. Source: Internet Contribution in % 98. Fiscal revenue.2 Developing Country SME There are many countries which are developing giving concentration on the SME sector. 10 Million No. employment creation and export.15% 68. Tk.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. Here some of the country positions in SME are given below to have an overview about the contribution of SME in GDP. The contribution of SMEs in Chinese economy is shown below according to the year of 2006: Ratio SMEs/ Total enterprise SMEs total asset/ All Enterprises SMEs production/ All Production SMEs jobs/ Total jobs New Jobs Export earning Table: C. SMEs account for 99% of all enterprises in China. employment generation and export.7% 74. of employees Less than 25 No position taken Medium Trade Manufacturing more than 25 No position taken Table: B Source: SME Policy Strategies-2005 2. SMEs are already making contributions to the growth of GDP.

trading houses and export houses. readymade garments. it accounts for nearly 35% of the gross value of output in the manufacturing sector and over 40% of the total exports from the country. processed food and leather products. SMEs Sector plays a major role in India's present export performance. The product groups which dominate the exports from SMEs sector include sports goods. SMEs sector has emerged as a dynamic and vibrant sector of the economy. The exports from SMEs sector have shown excellent growth rates in this decade. it is estimated that small-scale industrial units contribute around 15% to exports indirectly. They may also be in the form of export orders from large units or the production of parts and components for use for finished exportable goods. Besides direct exports. SME in India: The small and medium enterprises today constitute a very important segment of the Indian economy. In terms of value added this sector accounts for about 40% of the value added in the manufacturing sector. 5 million new jobs in the Union. SME in Europe: SMEs account for a dominant proportion of EU’s economic activities. More than 10 % of one-person European SMEs would recruit new employees. plastic products. This takes place through merchant exporters. 45%-50% of the Indian Exports is contributed by the sector. Direct exports from the sector account for nearly 35% of total exports. 10 | P a g e . this could translate into 1.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. The sector's contribution to employment is second highest next to agriculture. Today. Since these enterprises make up more than 50% of all businesses in the EU. woolen garments and knitwear.

It means the eco-friendly or environmentfriendly banking and it also refers to ethical banking or sustainable banking. Research papers developed by Bakht. A study by Dr. sectors which play also an important role in the European fair business within tradition SME’s account for more than 80 p. Andrzej Byrt defines Small is beautiful. particularly in emerging countries. Zaid (1998) and Ahmad.c. The concept of Green Banking developed in the western countries. A study on SME activities of BRAC Bank Ltd by Khondhokar Mamnun Ahmed shows that BRAC Bank is one of the leading banks to foster the growth of SME in Bangladesh.Issues & Prospects” illustrates the present scenario of SME financing position in India. Study on “SME and economic development in Europe” by Dr. Srinivas on “Banks Finance to SME sectors. regulatory and administrative constraints to employment creation by SMEs. In certain sectors such as textiles. 11 | P a g e . Salahuddin et al.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. which has been replicated by many developing countries. two thirds of all private sector jobs in the EU are in SMEs which make them all in all a giant on the EU Single Market. i. although the average firm in the EU employs only 7 people.e. In practice 75 million jobs. This research found out that SMEs account for a dominant proportion of EU’s economic activities. Though most of the banks in India were reluctant to give financial support to SME sector in the past. The robustness of SME contributions to employment generation is a common phenomenon in most developing countries in that the magnitude varies between 70% to95% in Africa and 40% to 70% in the countries of the Asia-Pacific region. BRAC Bank Ltd also presents attractive interest rate to its valued clients in order to support their business. they are now becoming eager to help the SME as SME contributes greatly in their economy. Small and Medium Enterprises (SMEs) play a major role in economic development. (1998) described that the policy environment within which SMEs in Bangladesh operateaccom panies legal. of employment. furniture and construction. Small and medium-sized businesses are a major part of the economy and the effective financing of such businesses makes a significant contribution to economic growth and performance generally.

Modern secured finance mechanisms offer a powerful means of mobilizing the value of a broad range of capital as a loan security. Assistant Professor (Economics and Business Studies). Project report on “Green Banking: An Innovative Initiative for Sustainable Development” by Mridul Dharwal. and thereby creating profitable opportunities for a wide spectrum of potential users and providers of financial services. a lower vulnerability to manual errors and fraud. and cost reductions. This report also illustrates different strategies of green banking and the performances of Indian banks’ implication of green banking. Greater Noida shows how green banking reduces the firms risk position. Sharda University. Study by Patrick Meagher on “Secured Finance for SMEs in Bangladesh” describes enterprises and financial institutions in Bangladesh face an insuperable obstacle to efficient credit transactions. businesses will not only be helping the environment. 12 | P a g e . and are critically important to other industrial economies. Study on “Global cash management: Going Green” shows that Green banking is a win-win situation for all participants.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.S. but will also benefit from greater operational efficiencies. School of Business Studies. By adopting greener banking practices. Policies and legal institutions prevent these parties from reaping the potentially huge gains that are available on the basis of secured finance transactions. The transactions make up an estimated 80 percent of finance for small and medium enterprises in the U. increases the efficiency of the bank and profitability. . and banks would be well served in their efforts to bring these benefits to the attention of the corporate clients in an increasingly competitive marketplace..

Rural Bangladesh accounts for the rest. The Industrial Policy 1999 had identified the following 16 thrust sectors: Agro-based industries Artificial flower making Computer technology Electronics Frozen foods Oil and gas Sericulture and the silk industry 13 | P a g e software and Jute goods Jewellery and diamond cutting and polishing information Leather .5 million workers employed in them. 4. There are some thrust sectors identified by the government as likely to have both better growth prospects as well as some comparative or competitive advantage for Bangladesh. The urban Bangladesh accounts for some 60% of units and 76% of employment in the private-sector enterprises. 4. SMEs account for only 44% of the total employment of the enterprise sector.2 Thrust Sector of SME in Bangladesh As Bangladesh is a developing country small and medium enterprises play a vital role in economic development and profit generation.440 private sector establishments of various sizes in Bangladesh with some 3. 93% of all units in Bangladesh belong in the SME category have between 20 and 99 employees. Private companies limited by liability account for strictly a very small proportion of the total number of SMEs in Bangladesh. The government has formulated a comprehensivein dustrial policy 2005 by putting special emphasis for developing SMEs as a thrust sector for balanced and sustainable industrial development in the country to help deal with the challenges of free Market economy and globalization. There are some 78.1 Overview of the SMEs in the economy of Bangladesh: There is a great interest in small and medium enterprises (SME) as a major plank of poverty reduction in Bangladesh.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. However.

SME sector requires lower energy supply. SME sector employs 25% of the total labor force. They contribute towards better utilization of local resources and skills that might otherwise remain unutilized. this sector is the present available sector for creation jobs.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. As a result. 14 | P a g e .35 million jobs were created against the target of 0.5% during the period from2004-2005 to 2007-2008 despite decline in the amount of advances by the banking sector to this sector. Floriculture Gift items Infrastructure Table: D: Source: SME Foundation Stuffed toys Textiles Tourism 4. These are reflected in the following performance /activities of this sector: Contribution of SME sector to GDP remained above 4. increase income level of rural people and promote agro-industrial linkage in Bangladesh.4 million. lower infrastructure facilities and this sector imposes less environmental risk. SME sector help alleviate poverty. A total of 0.3 Contribution of SMEs in the Economy: In view of present economic development effort in Bangladesh the SME sector plays an important role.

00% 4.5 SME Credit-Distribution Package in Bangladesh: A credit-distribution package shall be worked out by the Ministry of Industries.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. both for poverty alleviation and for contribution to the GDP.00% 2005 2006 2007 2008 2009 2010 From 2005 the SME contribution to our economy is increasing which shows a good sign to our country. Donor financial resources made available specifically to help with implementation of SME policy being enunciated here would only be allocated to 15 | P a g e .86% 2008 6.47% 2009 7.26% Small & Medium Enterprises 8. The contribution of SME sectors in our country’s GDP is given below: Sectors Small & Medium Enterprises Table: E.4 SME Contribution in GDP of Bangladesh: The small and medium enterprises as the most cost-effective and advisable means of providing employment and injecting dynamism into industrial growth. Source: Internet 2005 4.00% 2. 4. Our SME industry is also flourishing year after year.09% 2010 7.23% 2007 5.00% 0. 4.78% 2006 5. An innovative scheme---rather like a two-stage screening mechanism---that can really probe for the bone fide of the applicants as entrepreneur material will be deployed.00% 6.

(This does not have anything to do with debt-equity ratio relevant in discussions of enterprise financing. 16 | P a g e . as the case may be. the distribution of the credit fund and venture-capital fund will be the task of the BASIC Bank.) In the short run. Such projects have a-typically high risk and high returns. with regard to the leaching of shareholder’s value outward from the enterprise. it being borne in mind that BASIC Bank will closely work with the Advisory Panel. It will also give a stimulus to the morale of entrepreneurs who commit in-house capital to projects with novel and potentially innovative processes and technologies with demonstrable potential for commercial success. A publicly-mandated venture-capital scheme will be created in deference to the rationale cited in the main text. The remainder will be allocated to a credit fund. no more than 20% may be earmarked for medium enterprises.) The Ministry of Industry and the SME Advisory Panel/Foundation. This recommendation is rationalized in terms of the private underinvestment based on extensive. will be earmarked for small enterprises. (Over the medium term. negative pecuniary externalities in certain among the booster industries prescribed here. Of the total resources available.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 80%. while the remainder. the resources will be divided up into a publicsector venture-capital fund (10%). even potentially crippling. will determine modalities of how to implement both the credit-fund and the venture-capital fund. competitively-selected enterprises within the booster industries here being prescribed. Within each division. this responsibility will devolve to the SME Foundation. which is here being recommended as the lead bank. approximately on the lines of the currentlyimplemented EEF at the Bangladesh Bank.

and the SME Foundation in the medium. 17 | P a g e . Within the purview of the Advisory Panel. The Advisory Panel working together with the Lead Bank in the short-term. The development of human resources in both the BASIC Bank and the SME Foundation with regard to effective targeting of resources made available under public equity funding would remain imperative.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. projects to be funded from the venture-capital fund will be evaluated by a team of experts which will be constituted as a part of the implementation of SME Policy.and long-term would implement a transparent and meritocratic arrangement for steering public equity and debt resources into a genuinely deserving selection of enterprises.

SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. The Bank was established as the policy makers of the country felt the urgency for a bank in the private sector for financing small scale Industries (SSIs). started its operations from the 21st of January. 5. the Bank is not nationalized. At the outset. 1989. it operates like a private bank as before. BASIC Bank Limited is unique in its objectives. the Bank started as a joint venture enterprise of the BCC Foundation with 70 percent shares and the Government of Bangladesh (GOB) with the remaining 30 percent shares.2 Objectives of BASIC Bank Ltd: Adjudged as one of the soundest banks in Bangladesh. Special importance is given to individual clients through providing personalized services. Their objectives are: Steady growth in client base and their high retention rate since Bank’s inception testify to the immense confidence they repose on its services. 5. Diversified products in both liability and assets sides particularly a wide range of lending products related to development of small industries and micro enterprises. BASIC Bank is unique in its objectives. The BCC Foundation being nonfunctional following the closure of the BCCI. and commercial and trading activities attract entrepreneurs from varied economic fields. It is a blend of development and commercial banking functions. It is a blend of development and commercial banks. However.1 Historical Background of BASIC Bank Ltd: BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited) registered under the Companies Act 1913 on the 2nd of August. The Memorandum and Articles of Association of the Bank stipulate that 50 percent of loanable funds shall be invested in small and cottage industries sector. Thus the Bank is state-owned. 18 | P a g e . 1988. It is governed by the Banking Companies Act 1991. the Government of Bangladesh took over 100 percent ownership of the bank on 4th June 1992.

Provide full-fledged commercial banking services like collection of deposits. BASIC Bank maintains close connections with its clients. the regulatory authorities. Attach special importance to technical and advisory support to small scale industries in order to enabling them to run their enterprises successfully. short term trade finance.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 5.4 Functions of BASIC Bank Ltd: As a blend of development and commercial banking the bank provide clients with a full range of service to help them grow their assets and net worth. Micro Credit to the urban poor through linkage with NGOs with a view to facilitating their access to the formal financial market for the mobilization of resources is another diversification of our services. They place particular emphasis on small balance sheet size composed of quality assets and steady and sustainable growth. working capital finance in processing and manufacturing units and financing and facilitating international trade. Provide an environment in which our staff members feel they can exercise their initiative and judgment within a clearly established framework. the shareholders (the Government of Bangladesh). 5. Coping with the competitive and rapidly changing financial market of the country. The Bank is particularly eager to the following facts: Offer term loans to clients. 19 | P a g e . other banks and financial institutions. especially to develop small scale enterprises.3 Motto of BASIC Bank Ltd: Development of clientele as well as human resources of the Bank.

Chartered Accountants Table: F. To establish linkage with other institutions which are engaged in financing micro enterprises. Investment in a cautious way. Their corporate strategies are: Steady and sustainable growth. To employ funds for profitable emphasis on small scale industries. Adoption of new banking technology. Dhaka-1000 Credit Rating Report Credit Rating Agency Auditor AA2 (Long Term). purposes in various fields with special 5.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. ST-2 (Short term) CRAB Syful Shamsul Alam & Co.6 Corporate Information: Head Office Sena Kalyan Bhaban (5th Floor). Source: Annual Report 20 | P a g e . To search for newer avenues for investment and develop new products to suit such needs.195 Motijheel C/A. To undertake project promotion on identify profitable areas of investment.5 Corporate Strategy of BASIC Bank Ltd: Financing establishment of small units of industries and business and facilitate their growth Small Balance Sheet size composed of quality assets. To cooperate and collaborate with institutions entrusted with the responsibility of promoting and aiding SSI sector. Dhaka-1000 Main Branch Bana Shilpa Bhaban (Ground floor) 73 Motijheel C/A. 5.

BASIC Bank Ltd also has different department to accomplish all the works in an efficient manner.              Corporate Office Credit Department Foreign Exchange Department Human Resources Department Treasury IT (Information Technology) Industrial Credit Division Commercial Credit Division Micro Credit & Special Finance Division Small Enterprise Finance Division Establishment Division Research &Development Division Finance & Accounts Division Green Banking Policy Implementation Unit Branch Office    General Banking Department Credit Department Export import Division 21 | P a g e . account opening. 5. BASIC Bank Ltd. remittance collection. export and import. So departmentalization is necessary in doing all works in an orderly manner.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. human resource management etc are done in one department.7 Departments of BASIC Bank Ltd: It would be hazardous if all of the activities like deposit collection. These are the following departments of BASIC Bank Ltd’s head office and branch office.

87 549.96 11.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. BASIC Bank Ltd provides different types of accounts.58 15339.35 22270.69 29261.93 2009 2000. It also pays a vital role in deposit mobilization of the branch.90 660.49 Table: G.77 38368.00 1964.96 (Amount in millions) 2006 2005 2000.27 15463.00 1309. All other departments are linked with this department.51 42205.40 31947.86 2007 2000.097. 5.00 24084.77 22270.00 945.00 1455. We all know that banks are the intermediaries to collect deposit from customer through different bank account with attractive interest rate ant make investment and credit facility that are profitable to the bank in order to generate enough interest income for interest payment and profit generation.60 46341.8 Financial Highlights: Particulars Authorized Capital Paid up Capital Deposits Loans and Advances Import Export Net Profit 2010 2000.1 General Banking: The general banking department does the most important and basic works of the bank.65 22263.9 Products and services: 5.9.35 14094.23 285.90 42205.00 810.65 49259. locker facilities and special types of saving scheme under general banking.85 2008 2000. 5. Source: Annual Report From the table. 22 | P a g e .87 16794.60 19887.23 27269.74 554.14 2000.30 34501.00 22325. it is clear that year by year the performance of deposit collection.53 33976.96 282.00 1247.35 17804. loan & advance & net profit generation is well.98 22263.13 27359.70 648.

Account enquiry 8. Pay order issue 4. Return of Bangladesh Bank and Head office statements Table: H. Account opening 3. Account closing 2. Signature Scanning 7. Dispatch 13. 23 | P a g e .SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. Telephonic Transfer 6. Source: BASIC Bank Ltd. Account transfer 12. Solvency certificate issuing 11. Providing Accounts Statements 10.2 Functions of General Banking Division: Functions of General Banking Division 1. Demand draft issue 9. For proper functioning and excellent customer service this department is divided into various sections namely as follows- Deposit section Account opening section General Banking Bills and clearing section Cash section FDR section Accounts section Remittance section 5. Cheque book issuing 5.9.

T. This department also facilitates local L/C. T.T & M.T Issues and encashment traveler’s Cheque Sale and encashment of foreign currency notes Non-residence accounts 24 | P a g e .9.T. M.D.3 Foreign Exchange Department: Foreign Exchange department facilitate the inflow and outflow of foreign currency exchange by opening export-import L/C. Payment of D.D.T.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 5. The foreign exchange department of BASIC Bank Ltd includes the following activities: Import:     Foreign Exchange Department Opening of letter of credit Advance bills Bills for collection Import loans and guarantees Export:        Pre-shipment advances Purchase of foreign bills Negotiating of foreign bills Export guarantees Advising/ conforming letters of credit Advance for deferred payment export Advance against bills for collection Remittance:      Issue of D.

9.4 Different Deposit Accounts: Like all other commercial banks. BASIC Premium plus Current Account: This is a special current account. c. 25 | P a g e . savings deposit accounts. They offer long term loan. So their loan and advances are for the small and medium scale industries. this BASIC Premium plus Current account offers customer interest. But there are some special bank accounts that provide the customers with special benefits like high interest rate. BASIC Double Benefit Scheme: Under this scheme. The special feature of this account is if the customer deposit taka one lac (Multiples). Though current account does not contain interest. loan against trust receipt. doubling the monetary benefit etc.9. 5.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. BASIC bank Ltd also offers current deposit account. special noticed deposit scheme & fixed deposit accounts with attractive interest rate and loan available facility. Moreover there are no remittance charges for this account. secured overdraft etc to its customer. An overview of loan and advances will be given in SME financing and BASIC Bank section. working capital loan. he/ she will get one thousand (multiples) monthly. BASIC Monthly Benefit Scheme: The depositor of this account will get the regular benefit of savings account.5 Loans and advances: BASIC Bank Ltd mainly deals with small and medium enterprises. Some of the special accounts are: a. 5. one can deposit a certain amount of money for a period of 6 years and will get back the double amount that he/she deposited. b.

Main principles of lending operations in BASIC Bank are as follows: 50% of total credit will be invested to small and medium industry. Besides the bank is rendering all kinds of banking services like commercial banks. With the pace of time and redefinition of scale of industries the bank is now focused on small and medium sector industries (SMI) to accelerate the pace of development to small and medium industry of Bangladesh. Extending financial assistance to micro enterprises and collaborate with other institutions engaged in financing and developing such enterprises. BASIC Bank gives importance to finance export oriented industry or import substitute industry. medium term and ling term capital finance to new projects and BMRE of SSI & MSI. 26 | P a g e . Co-operate and collaborate with institutions entrusted with the responsibilities of promoting and aiding SMI sector. As a broad policy objective in respect of small and medium industry sector financing the bank undertakes the following tasks: Extending financial assistance to small & medium industries in private sector in the form of short term working capital loan. BASIC Bank always welcomes any new type of projects rather than conventional industry. 6.1 Objectives of SME Financing: BASIC Bank Ltd started its journey as a specialized bank to provide project loan and working capital support to small & cottage industries.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.2 Main principles of BASIC Bank Ltd for SME Financing: At the time of extending credit BASIC bank limited follows certain principles. It is mandated in the Article of Association of bank to provide credit a minimum of 50% of its loanable fund to the small and medium industry sectors. 6.

Bank does not fall short of short term temporary funds o0r borrowings from other banks or through short term money market operations. Bank maintains credit deposit ratio nearly 80% to maintain liquidity and not to be in crisis of fund. Bank offers premium interest rate to high credit rating borrowers. most of the deposit chunk is in fixed deposit.3 Loan product of BASIC for SME financing: BASIC Bank Ltd has been offering a wide range of credit facilities to meet the financial needs of its customers. Common practice of debt ratio is 70:30. There should be debt to equity ratio as determined by the bank on individual case basis. fixed costs within 20 crore (excluding land& building) is defined as SMI. End use of term loan and working capital facilities will be closely monitored to ensure that the funds are used for the purpose of which those were advanced. In BASIC bank. Thus the bank can easily go for term lending. All lending will adequately be secured with acceptable collateral security and margin requirements. Grossly the products are of the following two types: 27 | P a g e .SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 6. So BASIC Bank expects the proposed projects are within 20 crore. Projects.

The term loan is categorized according to its tenure. The bank is very analytical to allow the period of the loan because if insufficient period for repayment is allowed. Generally mid term loan is allowed where the bank thinks the project has a higher rate of return (IRR). and hypothecation of machinery. Repayment of term loan is generally made in some installments.3. Term loan is secured by registered mortgage of immovable property such as land. 28 | P a g e .1 Funded credit facilities: a. Following are the types of term loan: Mid term loan: the tenure of mid term loan is greater than one year up to 3 years. Term loan: Term loan is allowed for procuring fixed assets of the project.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. Right now BASIC Bank is in practice to finance term loan at the rate of 70:30 debt to equity ratio. Repayment pattern is made as per nature and momentum of cash inflow of the projects. To increase the stake of the sponsors. The loan is sanctioned at a debt to equity ratio. There are many instances that due to poor equity participation projects have become sick. Term loan Funded Credit Working Capital Trade Finance SME Credit Facilities Letter of Credit Bank Guarantee Non-Funded Credit 6. the project will be in trouble. building. Generally 6 month grace period is allowed before commencement of repayment of installments. BASIC Bank always emphasizes on equity participation.

Cash credit: Like overdraft. all current asset requirement is summed up and 30%margin is deducted. There are following forms of working capital: Secured overdraft (SOD): This is an overdraft facility secured by encashable securities like FDR. 29 | P a g e . Only the right belongs to the bank through creating the charge of hypothecation. the stock remains under the possession and ownership of the borrower. Working capital: Working capital is needed by a concern for its current operational purposes. price hike etc. In this case of hypothecation. The loan is allowed keeping some margin generally 5%. Proper turnover in an overdraft limit is a must. the banker keeps watch on each and every transaction. Several factors to be considered while assessing the working capital requirement of a concern like operational cycle. Long term loan: Long term loan is allowed for 5 years. After assessing the working capital requirement and keeping proper margin a limit is sanctioned though the client is entitled to overdraw within the sanctioned limit. It is regarded as life blood of the concern. Most of the cases the bank sanctions this sort of loans. For a new project where substantial machinery is to be financed by a bank and IRR is not too much high to repay the loan within less than 5 years. b. In this case the client has to submit stock report regularly which is to be verified by the bankers time to time. wage earner bond etc. growth and expansion. The rest amount is maximum permissible portion of bank to finance. Government bond. cash credit is a continuous credit which is generally sanctioned for one year which is further renewable as per requirement of the borrower.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. There are two types of cash credit: Cash credit (Hypothecation): when cash credit is sanctioned under hypothecation of stock of goods it is called CC (Hypo). It represents permission to overdraw its current account up to sanctioned limit.

Discounting of bill of exchange. Negotiation and purchase of export bills. it has arranged correspondent relationship with large number of international banks. It offers following services:      Issuing advising and confirming of documentary credits. Collection of bills. Each loan be related to one specific import transaction and the term of the financing can vary depending on the type of products imported on the need of the importer. who negotiates the documents. control and right remain with bank. The bank provides back to back L/C and pre-shipment finance facilities like packing credit and post shipment finance like foreign bill purchase to exporters.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. The possession. c. Cash credit (Pledge): in case of cash credit pledge. Import finance: Loan is given to importers for buying imported items. The foreign correspondent. The nature of operation in CC (Pledge) account is different than that of CC (hypo). Trade finance: International trade dealings are one of the major business activities undertaken by BASIC Bank Ltd. BASIC Bank offers a complete range of Trade Finance services. The bank provides finance related to L/C and post import finance like loan against imported merchandise and loan against trust receipt to the importers. gets payment as 30 | P a g e . BASIC Bank extends finance to the importers in the form of: Payment against documents (PAD): After establishing the letter of credit. the bank is bound to honor its commitment pay for import bills when these are presented for payment. D. which are active across the globe. Pre-shipment and post shipment finance. To facilitate international trade transactions. branch are staffed by personnel experienced in International Trade Finance for processing import and export transaction. A. only the ownership belongs to the borrower. i.

Export finance: Pre-shipment finance: loan given by BASIC Bank to the exporter to provide liquidity for buying or processing goods to be exported. is essentially a very short term advance granted by the bank to an exported to enable him to produce. Bank allows LTR facilities for retirement of import documents instead of LIM. Documents are given to the party adjusts the LTR.C account. 31 | P a g e . per stipulated reimbursement terms of the L/C to the debit of the account of L/C opening bank. F. If the party has the storage of money to clear the goods from the airport. then he wants bank loan. Loan against trust receipt for retirement of import bills (LTR): It is post import finance. manufacture pack and ship the goods to the buyers abroad in conformity with the terms & condition of export L/C contract. The merchandise is cleared by the bank through its approved clearing agents. Loan against imported merchandise (LIM): it is allowed against imported merchandise storing the same in bank’s custody. The opening bank lodges the shipping documents in their books and responds debit advice originated by foreign correspondent to the debit of payment against document account. The documents remain with the bank. post shipment finance in the form of: Foreign bill purchase (FBP)/ local bill purchase (LBP): The foreign or local bill purchased or discounted is a facility granted by the bank to its customer whereby the bank purchases or discounts the customer’s sight export documents. In case of manufacturing concern. Pre-shipment finance in the form of: Packing credit (PC): Pre-shipment finance under the name of “packing credit “. ii. The advance is adjusted by delivering the goods against payment by importer. LTR facilities are usually allowed for 90 days for each case. Depending on the relationship with the client. process. production and operation cycle must be taken into consideration for allowing the tenure of LTR. Post shipment finance: Loan provided to the exporters against their export receivables.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.

6. Documentary letter of credit is subject to the Uniform Custom & Practice for Documentary Credit (UCPDC). According to the purpose of guarantee. the bank does not purchase or discount the bill rather the bank makes short term advances to the extent to the extent of a certain percentage (say 90%) of a bill amount.2. of the International Chamber of Commerce (ICC) in Paris. BASIC Bank allow loan against lien of pending claimed cash incentive. b. Letter of credit is more formally called documentary letter of credit because the banks handling the transaction deal in documents as opposed to goods.2 Non-funded credit facilities: Non funded credit facilities are those where bank doesn’t have to outlay cash. Loan against documentary bill (LADB): In some cases when we get local currency instead of foreign currency (in case of sight bill). companies involved in transaction etc. Brochure no. bank guarantee can be classified in following ways: 32 | P a g e . This is issued by the bank at the request of contractors. rather than merely giving a commitment or promise to pay. Cash incentive payment is a time consuming procedure and there is always uncertainty. Bank Guarantee: A bank guarantee is a written irrevocable obligation by the bank to pay a agreed sum of money to the beneficiary in the event of default by a third party in fulfilling their obligations under the terms of the bank guarantee. 600.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.3. Local general against cash incentive: In case of fund shortage of exporter. Loan is adjusted from receivable cash incentive proceeds.1 Letter of credit: A letter of credit is a document issued by a bank stating its commitment to pay someone (supplier/ exporter/seller) a stated amount of money on behalf of a buyer as long as the seller meets very specific terms and conditions. Two types of credit facilities are: a. for the purpose of handling the guarantee request they receive in their operation. 3. wholesalers.

SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. Advance payment guarantee: This is issued by the bank in favor of a buyer and at the request of the seller/ contractor (who receives in advance) representing the bank’s commitment to repay the sum in the event that the seller fails to honor the contract terms in their entirely or in part. Supplier’s credit guarantee: Such guarantee is issued by the bank to meet any claims to be made by the local or foreign supplier in case of the debtor fails to repay in accordance with the terms and conditions of the contract. 33 | P a g e . whereby the bank undertakes to make payment to the beneficiary in the event of default by the principle (Supplier/ service provider) in due performance of the terms of the contract. Performance bond/ guarantee: Performance bond is a n undertaking issued by the bank in favor of the buyer/ employee at the request of the supplier/ service provider. Retention guarantee: A guarantee issued at the request of contractor to secure repayment of the retention money held by the employer during different phases of the project. Bid Bond: Bid Bond or tender guarantee is a surety bond issued by the bank upon the request by the bidder/ tenderer expressing the bank’s commitment to meeting the claim of the beneficiary (the party who invites tender) in case of the bidder withdraws from the bid during the bid period or fails to accept the award when he/ she becomes the winner.

the bank has developed its own credit policy keeping in view the government policy in this respect and provisions contained in the Banking Companies Act 1991 and other related rules and regulations. Market prospect and potential should be ensured at competitive prices. Project should be designed with appropriate machinery.4. The entrepreneur of small industry concern/ project requiring financial assistance from BASIC need to fulfill the following criteria: Appraisal criteria: Standard loan application form is issued only after the promoter is found credit worthy and acceptable after evaluation of information submitted in First Information Sheet.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. The bank by its memorandum and Article of Association is entrusted with the responsibility of providing medium and long term loans and other financial assistance for promotion of small scale industries sector. Viability of each and every project recommended for financing is subjected to thorough scrutiny and detailed appraisal. Project should have necessary infrastructural facilities and environment aspect shall be carefully examined. It is blend of development finance and commercial banking.1 Credit Policy of BASIC Bank Ltd: To supplement the effort of the government for the economic uplift of the country through industrialization. The bank operates as scheduled bank undertaking all types of banking transactions. 34 | P a g e . It is stipulated in its MA & AA that at least 50% of the bank’s loanable fund shall be used for financing SSI.4 SME Credit operation of BASIC Bank: BASIC Bank Ltd is a banking company registered under the Companies Act 1913. The report must cover the basic areas of project viability. 6. 6.

The period of loan should be determined based on cash flow potential and payback period and shall not normally exceed 5 years. The growth in the number and amount of loans and advances should not exceed the capability of the bank’s manpower in terms of close monitoring and supervision. No credit shall be extended to customer entity which exceeds in total commitment more than 10% of the Bank’s capital and free reserve except with the approval of the board of directors. 3. The project should have satisfactory breakeven point and margin of safety. equipment and other inventories and floating charge on all other assets.00 crore or equivalent shall require the prior approval of the board. building/structure of the project. Hypothecation/ pledge of machinery. 35 | P a g e . Comprehensive insurance coverage on the project assets and goods. Maximum investment & assistance: Aggregate loans and advances shall not exceed 10 times the bank’s net worth or 65% of customer deposits whichever is lower. Life insurance on the life of the promoter/sponsor of the project to the extent of 20% of individual shareholding Deposit of share certificate of sponsor equity. All credit extension tone customer or group exceeding tk. Debt service coverage ratio should be at least 2.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.5 times at the optimum level of production. Of this generally 50% shall be deployed in financing small industries both as term loam against foxed assets and working capital. For leasehold land or rented premises the security coverage should be available in the form of acceptable collateral of urban properties. Security criteria: Registered mortgage by way of creating first charge/ mortgage on the land.

5. After getting the project the bank analyses the project’s viability from the following perspective: 6.2. Conceptual skill to understand the complexities in overall organization. bio data of key personnel and organogram are analyzed to apprai8se the management feasibility. Entrepreneur/promoter has to be creditworthy and competent enough to run the proposed industry. risk involved.2. Loan should be dispersed to cover wide sector of industries. 6. Besides the management of the proposed project.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.2 Marketing viability: Marketing aspect is very crucial part of project appraisal. 6. However loans to a particular sector shall not exceed 25% of its total loan at any given time. BASIC Bank ltd considers the following points for assessing marketing feasibility:     Product mix Demand supply gap Market prospect for the product at competitive price Distributional channel. education and training) to perform the job. management aspects. forecast about future marketability of the product. profitability. product.1 Management aspect: Managerial feasibility refers to the assessment of ability of management personnel in managing a project efficiently. method and technique (acquired from experience. manpower planning. 36 | P a g e . Human skill to maintain interpersonal relationship within or outside of the organization. The management personnel should have:    Technical skill to use knowledge. promotional activities.2 Project appraisal by BASIC Bank Ltd: When a firm approaches for loan to BASIC Bank Ltd it has to make a project profile consisting of project details.4.4.

raw material availability. Climatic position in the project area. water etc. sources of raw materials. Manufacturing process and its flow diagram Safety provision Project completion schedule Availability of infrastructural facilities such as road and transport Availability of utilities such as gas.5. 37 | P a g e . Proximity to complementary project. Technical team is essential in assessing technical aspect of a project. electricity. Availability of required labor.2. The project submitted by the borrower is judged from technical point of view effectively. Following items are considered to assess technical viability:                Location of the project Land. land development and civil construction Availability of required machinery and its technology Rated capacity and attainable capacity of machinery Installation of machinery Raw material requirement. industrial [policy of government. Political factors such as government patronage.3 Technical viability: BASIC Bank has been practicing the concept of “project based lending rather than traditional security based lending approach”. Most of the projects are typically capital intensive and engineering supervision prior to approval of credit is a prerequisite. 6.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. Head office is having a technical team under industrial credit division whose exclusive job is to assess the technical matters.

Under discounted method time value of money is considered. IRR should preferably be not less than 25%. A project can be accepted if PI>1.5. IRR tells the minimum required rate of return from an investment.Profit (CVP) analysis. Breakeven analysis shows the relationship between cost and revenue with output or sales that is required to equate the cost. 6. Generally BASIC Bank Ltd prefers projects having payback period less than 5 years.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.Volume. Under non discounted method bank use the following method: Payback period: the period within which the volume of investment is expected to be returned from the project. Here the following calculations are being used: Net present value: It is the difference between present value of expected inflow or benefit and that of outflow or investment. A positive NPV at the rate 25% discount rate is a must.4 Financial viability: Various financial tools and techniques are used in testing financial viability of project such as: a.2. Acceptable IRR is being determined by considering the opportunity cost. the prevailing maximum return in the economy etc. Payback period must be less than the tenure of the term loan. Moreover. Capital budgeting: Under capital budgeting technique there are two methods.non discounted method and discounted method. Breakeven analysis: Break even analysis is commonly known as the Cost. Under this method expected future benefits are being converted into present value using reasonable rate of discount. cost of capital. break even analysis provides a clear 38 | P a g e . Profitability Index: It is calculated by dividing present value of inflow with the present value of outflow. Internal Rate of Return (IRR): It is a rate at which the present value of inflow equates the present value of outflows. b.

debt service coverage ratio (not less than 2).SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.4. Break even analysis is done to check whether the project is capable to generate profit using the attainable capacity. As a part of socio economic feasibility study BASIC Bank studies following parameters:      Employment generation Foreign exchange earning Environment impact Economic linkage impact Contribution to GDP 6. interest coverage ratio (not less than 2). 6. Socio economic aspect: The observation of this aspect is to see whether the project is socially. Debt to Equity ratio (70:30). 3 Sanction procedure: The term loan application for small industries will preliminary by scrutinized taking into account personal credibility of the sponsors. 5. Thus break even analysis helps the decision criteria. past history of activity.4. the bank. Ratio analysis: The common ratios that are being practiced in BASIC Bank ltd is current ratio (not less than 1). account/ deposit relationship with transaction etc. d.2. Sensitivity analysis: Sensitivity analysis provides the picture of relative changes in overall profitability due to change in any one variable. Usually changes in material and other variable cost or change in selling price are being taken into consideration for making sensitivity analysis in BASIC Bank ltd. idea about the required volume of sales to earn a target profit. availability of owner’s equity. operating profit margin (not less than 5%). c. other bank’s 39 | P a g e .

Equity deposit so realized will be kept in STD A/C carrying interest at STD rate.00 lac and tk. 50. If prima facia of the project appears viable and acceptable to the bank then full dressed appraisal report shall be carried out taking into account the management. 5000. Formal application in standard form of the bank shall be obtained along with required project examination fee tk.10000.00 for project having investment cost below tk. value of land may be determined through spot survey of the land by a surveyor registered at Registrar of Land during past 3 years. stake is to have ready to liquid asset for investment in the project and as practiced by other DFIs of the country BASIC may also continue to ask for equity deposit as under: 20% and 30% of the proposed equity along with loan application form to be deposited. The said equity deposit will be realized as per need of the project to be determined after assessing investment needs of the project. market risk that includes foreign exchange risk. The covered area of the factory to be determined on the basis of actual requirement for production process. means of transport. In case. storage facilities and other necessary structure.4 Procedure for valuation of land & building: In choosing the right location suitable site should be inspected from technical viewpoint like availability of utilities. liquidity risk. Balanced equity amount as per terms of sanction to be realized after sanction of loan. 50. The risk management of the Bank covers core risk areas of banking viz.4. if felt so.00 lac. credit risk.5 Risk Faced in SME credit & its management: The risk of BASIC Bank Limited is defined as the possibility of losses. etc. 6. Clearance from environment pollution control authority to be taken when necessary. Price of land should be determined based on present forced sale value of the land. In order to build up sponsor. marketing and financial aspects.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. interest rate 40 | P a g e . technical.4. availability of manpower. 6.00 for the project having cost above tk. financial or otherwise.

operational risk and reputation risk arising from money laundering incidences. etc. exploring new business opportunities. administration. leasing and treasury businesses. The prime objective of the risk management is that the Bank evaluates and takes well calculative business risks and thereby safeguards the Bank’s capital. historical performance of the customer. the Bank’s credit risk management activities have been designed to address all these issues. approval and monitoring/recovery functions. Internal audit is conducted at periodical intervals to ensure compliance of Bank’s and Regulatory policies. financial statement analysis. The Bank takes its lending decision based on the credit risk assessment report by appraisal team. equity risk. Therefore. This can be described as potential loss arising from the failure of a counter party to perform as per contractual agreement with the Bank. A separate Corporate Division has been formed at Head Office which is entrusted with the duties of maintaining effective relationship with the customers. Another division naming Credit Administration Division (CAD) has also been established to oversee mainly documentation facilities. Loans are classified as per Bangladesh 41 | P a g e . its financial resources and profitability from various business risks through its own measures and through implementing Bangladesh Bank's guidelines and following some of the best practices as under:  Credit risk: It arises mainly from lending.  Credit Risk management: The Bank has segregated duties of the officers / executives involved in credit related activities. security of the proposed credit facility and market reputation of the borrower etc. The failure may result from unwillingness of the counter party or decline in his / her financial condition. the instructions of Bangladesh Bank are strictly followed.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. In line with Bangladesh Bank guidelines the Bank has segregated marketing. marketing of credit products. In determining Single borrower / Large loan limit. monitoring and recovery functions have been segregated. risk. credit approval. industrial analysis. trade finance. Moreover. The credit risk management includes borrower risk analysis.

Interest rate risk of non-trading business arises from mismatches between the future yield of an asset and its funding cost. 42 | P a g e .  Interest rate risk Management: Asset Liability Committee (ALCO) monitors the interest rate movement on a regular basis.  Foreign exchange risk Foreign exchange risk is defined as the potential change in earnings due to change in market prices.  Foreign exchange risk Management: Treasury Department independently conducts the transactions and the back office of treasury is responsible for verification of the deals and passing of their entries in the books of account.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. The position maintained by the bank at the end of day was within the stipulated limit prescribed by the Bangladesh Bank. Concentration of single borrower / large loan limit is shown in the notes to the financial statements. All foreign exchange transactions are revalued at Mark-to-Market rate as determined by Bangladesh Bank at the month-end.  Interest rate risk: Interest rate risk may arise either from trading portfolio or non-trading portfolio. Bank’s guidelines. All Nostro accounts are reconciled on a monthly basis and outstanding entry beyond 30 days is reviewed by the management for its settlement. The foreign exchange risk of the Bank is minimal as all the transactions are carried out on behalf of the customers against underlying L/C commitments and other remittance requirements.

00% p.a 16. Flow chart for processing SME loan is given below: Rate of Interest on Lending Category Small Industry / Enterprise: a.a 17.00%p.00%p.a Interest Rate 15.00%p.00%p. approval is given by the higher authority. Then scrutinizing and collection of information from primary and secondary sources take place.a 15. Source: WWW.basicbanklimited.00%p. Small Industry / Enterprise: Service and Manufacturing Term Lending Working Capital b. Medium Industry / Enterprise: Service and Manufacturing Term Lending Working Capital b. 6.a 18.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.a 16.6 Credit pricing: BASIC Bank Ltd.00% p.a 43 | P a g e .00%p.a 17. On the basis of appraisal.4. The first step of credit proceedings is the request for credit from the clients. Credit appraisal is the core part of credit operation. Medium Enterprise: Business / Commercial / Trading Term Lending Working Capital Table: I. Small Enterprise: Business / Commercial / Trading Term Lending Working Capital Medium Industry / Enterprise: a. follows the credit policy of the bank and instruction of Bangladesh Bank and Bank’s Head Office time to time.

sister concern (if any) Customers come to unit office with Guarantor & fills LAF & A/C opening form CRO visits customer residence Appraisal at branch level by branch credit committee. 44 | P a g e . Monitoring & control Figure: Flow chart of credit operation system of BASIC Bank Ltd.Charge Borrower submits Loan Application in prescribed format along with relevant paper CRO applies for CIB enquiry CRO visits the business again to assess sales. same time CIB report from Bangladesh Bank is obtained. and Branch –in. credit –in-charge.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. stocks. 6.7 Credit approval process of BASIC Bank ltd: Borrower approaches the branch for credit Interview with relationship officer.4. go-down. legal opinion from Legal Advisors & Valuation report from enlisted surveyors are collected Credit Line Proposal (CLP) is sent to Head office Credit & Loan Administration Loan Admin checks the docs and sends them to credit committee for appraisal Appraisal at Head office by Head Office Credit Committee Approval by Board of Director (if necessary) Sanction letter to the Borrower mentioning the terms & conditions Completion of documentary requirement Disbursement of loan after getting all the required original docs including CIB Clearance from Bangladesh Bank Loan supervision.

The bank has been following a series of measures. Particular care is taken when the balance in the account remains very near or goes beyond the drawing limit or there is no good turnover. Supervision gives more emphasis on proper end use of fund lent. 45 | P a g e .SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. It includes adequate arrangements by bank for maintaining close contact with the borrower and its activities in order to remain well informed about the position and progress of the purpose financed and to offer appropriate guidance to the borrower. BASIC Bank tries to ensure that money lent is properly used for generation of income through increased economic activities and money is repaid in time. Recovery of advances largely depends on effective follow-up. BASIC Bank follows the undernoted methods: Keeping watch over the accounts to ensure that operations are regular and as per procedure. The supervision of projects includes adequate control procedures in disbursement of loan and the continuous monitoring of project operations during its period of construction and implementation through report requirement as well as plant visits. A project under implementation is visited every month and progress report is submitted to the management. 6. The two terms supervision and follow up are closely related. where necessary. All these are ensured through as effective supervision and follow up system.5 Supervision and follow up of credit BASIC Bank Ltd: The basic objective of monitoring and follow up is to ensure that the credit granted by the bank are safe as the fund lent by the banks belong to the depositors and bank management has tremendous responsibility in safeguarding the interest of depositors. It also includes effort to regularize the irregular advances. In conducting supervision and follow up. Bank official on project supervision keeps watch over the estimation made and notes the deviation for taking quick remedial measures. Follow up includes effort to ensure that the terms and conditions are complied with and money lent is repaid as per schedule of repayment. to follow up and supervision of loan and advances to avoid and minimize non performing loan of the bank. both in Head Office and branch level.

) of the borrowing accounts. Ensuring the inputs/ materials are purchased/ procured as per procedures/ terms of sanction and are used properly and outputs are sold properly.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. Ensuring that the documents have been obtained as per terms of sanction and as per procedure for such type of advance. To check that borrower’s business is being satisfactorily conducted as reflected through a review and analysis of the financial and operating statement. Obtaining periodical balance confirmation from the borrower and necessary fresh document is obtained (in case of renewal/ enhancement of loan). Keeping watch over the inflow and outflow of fund. 46 | P a g e . Ensuring that security/ collaterals have been obtained as per terms of sanction and valuation has been assessed correctly and security is maintained properly. Ensure that appropriate actions are taken in time to regularize the irregularities and recover the loan as per schedule. To check whether there is any adverse trends in market. economic and political conditions which may endanger the reliability of the facility. Keeping regular contact with the borrower both formally and informally and pay regular visit to the projects/ enterprise financed. Collecting periodical reports. Ensuring that property has been properly insured where required as per policy. returns and information about the borrower and examine the activities of the project/ enterprise financed. To make sure Compliance of term of approval. Keep watch over the repayment trend and see that the advance does not turn up as irregular or stuck up and becomes time barred. If not get the documents regularized. procedures and practice. regularity of repayment etc. To check satisfactory conduct (turnover.

SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.
To assess the adequacy of collateral value. In order to ensure an effective supervision BASIC Bank ensures end use of fund. To see that the fund lent to the borrower are used for the purpose for which they have been given. In order to ensure end use of term loan funds, it is practice to disburse the money directly to the supplier who has supplied the fixed assets and not to the borrower directly. On the other hand in case of working capital advance the objective to acquire current assets, supervision of end use of fund is comparatively hard and possibility of diversion in case of cash credit (hypothecation) is more. The working capital utilization is checked to great extent by ensuring that the borrower computes his working capital requirements and furnishes a statement regarding inventory and book debts as shown in monthly statements. Bankers frequently visit the business house to verify the actual position of current assets. Moreover, the borrower is required to maintain the proper current ratio.

6.6 Recovery of nonperforming loan (NPL):
BASIC Bank Limited has been following a series of measures to recover the default amount of loan and advances both in Branch and Head Office level. Branches have been given yearly target to recover dues from the existing default borrower to reduce the classified loans and advances up to minimum level. BASIC bank takes the following steps to recover the stuck up credit: Exerting moral pressure: The bankers visit the borrower’s place of business again and again and find out the cases of nonpayment of the bank’s dues. The banker may also request some influential customers of the area to exert pressure on the borrower to clear bank’s dues. If there is a guarantor, he is also called upon to adjust the account or have it adjusted by the principal.

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SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.
Legal procedure: In case the borrower does not adjust the default loan, the only course left open to the bank is to sent a legal notice stating the undesirable character of the credit and recall and ask the party to liquidate it within a stipulated time falling which the securities will have to be disposed off without further reference to him at the best possible market rate either in public auction or by private negotiation according to the convenience of the bank. After the securities have been sold and the bank will resort a legal auction to recover the dues. If no favorable response is made by the borrower guarantor after sending notice, the bank disposes of the securities and adjusts the account. Presently banks are empowered to dispose of the securities without intervention of the court under the Artha Rin Adalat Act 2003. If the credit is not fully secured and where there is a shortfall to adjust the advance after disposal of securities, bank file a suit against the borrower and guarantor for recovery of bank’s dues.

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SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.

7.1 SWOT Analysis of BASIC Bank Ltd:
The comparison of Strengths, Weaknesses, Opportunities and Threats is normally referred to as a SWOT analysis. Its central purpose is to identify the strategies that will create a firmspecific business model that will best align, fit, or match a company’s resources and capabilities to the demands of the environment in which it operates. It helps the organization to identify how to evaluate its performance and scan the macro environment, which in turn would help organization to navigate in the turbulent ocean of competition.

Strength: BASIC Bank Ltd has a vast line of services, which can attract people of different segment of the society. Low lending interest rate compared to other PCB’s & FCB’s interest rate. Lower interest in term loan than other working capital loan which is very exceptional in financial market. Team work at mid level and lower level Interactive corporate culture Customization and flexibility in credit products. No loan processing fees No commitment fees Substantial grace period in term loan as per cash flow of the project. Bank offers supplementary service such as financial advisory services and technical advisory services by dint of its divergent and resourceful pool of human resources. Loyal and strong customer base. Sufficient repayment period (up to 5 years).

Weakness: BASIC Bank Limited currently don’t have any strong Marketing Activities through mass media e.g. Television. Deposit product is not well diversified 49 | P a g e

SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.
Conservative approaches in lending operations. Loan processing time is a bit longer Opportunities: Huge untapped sub-urban and rural SME market. As SME concept is getting popular day by day in the country, so there will be more opportunities to explore new customer. Apart from government low cost deposit, BASIC Bank receives low cost fund from Bangladesh Bank, various international development banks and development agency for relatively longer period. Threats: The main threat for BASIC Bank Limited is a wide range of competitors. About ten of them are multinational. The multinational banks came to our country with vast resources, like financial and marketing skill. Also new invented business tools and techniques are channeled to them from their parent organization. Economic recession that results in industrial depression. There are some upcoming banks that are joining in our banking industry and create a great challenge for BASIC Bank Limited in customer attraction and retention with attractive interest rate. Matching of Strength and Opportunities with Weaknesses and Threats: In the credit policy I have found everything all right except the techniques used for screening the client. BASIC bank has some very efficient and highly educated professionals who can easily solve the problem if they concentrate on the issue. So the weakness can be eliminated easily through its strength. The credit policy of BASIC has been perfectly designed depending on the government funds and assistance. But as it is sure that, government will sell its share in near future BASIC has to revise its credit policy by considering alternative source of fund. International funds can be alternatives for government source if BASIC can continuously reduce its classification rate. 50 | P a g e

And small revise of the policy can be the best policy that can lead a bank to the peak of success. the credit policy of BASIC Bank is sound with some exception. Alike other bank BASIC can enforce its marketing operation to grab the small savings of the middle class. 51 | P a g e . And a small change is enough to do so as the strength of the present credit policy is capable to take any pressure. So from the SWOT analysis of the credit policy of the bank I have found that.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.

This bank does both commercial lending and lending to Small and Medium enterprises. Loan to deposit liabilities ratio show how much amount of deposit collection is being utilized in credit making. Though it is engaged in commercial lending its maximum amount of deposit collection goes to support the small industries. Almost all of the year the percentage is high and equal with each other.2 Individual Company Analysis Loan to deposit liabilities & SMI loan to total loan ratio Interpretation: Bank’s main activities are deposit collection and giving loan in different 0.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.70 0.60 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Loan to deposit liabilities profitable sectors.65 0. 7. From SMI& SSI loan to total loan ratio we see that almost 50% to 69% loans goes to SME sectors. From the chart and graph we can see that BASIC Bank Ltd Graph: 01 Ref: Appendix: Table 1 Interpretation: is performing well in deposit utilization as the ratio is in increasing trend.85 0. Through this bank can made proper balance in spread generation which is the difference between interest earned on loan and interest given in deposit. Graph: 02 Ref: Appendix Table 2 52 | P a g e . SMI/SSI Loan to Total Loan 70 60 50 40 30 20 10 0 BASIC Bank Ltd is a specialized bank.80 0.75 0. If the bank cannot make successful balance between deposits utilization bank will run short in interest payment to its depositors.

Deposit mobilization is low in 2006 but industry. in 2010 more new SMEs are interested to take loan from this bank for their attractive interest rate and grace period consideration. As the bank is basically concentrated on small and medium enterprises. The maximum amount of loan goes to industrial sector in the form of term loan. all the years are more consistent with one another. it is in higher trend in the following years. 53 | P a g e Graph: 04 Ref: Appendix Table 4 70% 60% 50% 40% 30% 20% 10% 0% Deposit Growth rate Loan & advance growth rate industries especially in textile . Except 2003 & 2006. working capital loan. In 2010 BASIC Bank Ltd of the bank offering different attractive has made the highest industrial loan to accounts. This indicates that the bank is performing well making investment of its fund in profitable sectors. Bank Graph: 03 Ref: Appendix: Table 3 is encouraging new small industries and women entrepreneur giving their financial support and technical knowledge. loans to customers and loans to industrial sectors. The deposit growth is in fluctuating different trend. Here. Industrial credit disbursement Deposit and Loan and Advances Growth Industrial Credit 80% 60% 40% 20% 0% Interpretation: BASIC Bank Ltd gives loan to three partiesloans to directors.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. In this Bank the loan growth rate in 2010 is remarkable. 10 Interpretation: years industrial credit disbursements are Deposit growth shows the deposit mobilization shown graphically. The loan and advance growth rate measures the year to year performance of loan and advances increment.

Here I have used data of 20 small and medium enterprises of BASIC Bank Ltd Main Branch. management efficiency etc. Average Standard Deviation Coefficient of Correlation (Ref: Appendix Table 5) 72. operational risk.43 72 9.47 0. Moreover regulatory body also defines the performance of these firms depending on their evaluation and judgment.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. For making analysis I have selected 20 small and medium enterprises that are doing business with the bank. the customer is given a score by the bank that is regarded as credit risk grading.82 In this part I tried to make an illustration about the performance of BASIC Bank Limited comparing the SMEs credit grading by the bank with their grading given by external regulatory body. Dhaka. There is highly positive correlation between bank’s defined risk grading and actual grading by regulatory body. What is the recovery performance of these 20 borrowers is being analyzed finding the correlation between CRG grading by bank and regulatory defined score. leverage status. Correlation coefficient measures the degree of relationship between two set of figures. This 54 | P a g e . But there is little bit fluctuation in standard deviation of both of the grading.3 Correlation analysis: Determining correlation between the credit risk grading and actual performance of loan: Through this analysis the efficiency of some Small and Medium Enterprises performance in loan utilization and repayment in due time. liquidity position. In my analysis I tried to find out the performance of some of the borrowers of BASIC Bank Ltd which borrowed from the bank.7 8. The average value of both of the grading is same. The correlation coefficient of 82% shows that the present loan performance represents the actual performance. Based on the customer profitability condition. 7.

BASIC Bank Ltd gives priority to the SME financing and this has brought the line share of interest income.9% Interpretation:  For analyzing I have used interest income as response variable. Here the R square denotes what percentage of change in response variable due to the change of predictor variables. the interest income is 2365.1 Multiple regression equation of Interest Income on SME credit and Credit other than SME: For this analysis I have taken interest income as dependent variable and SME credit & credit other than SME as independent variables. The firm will perform well in their loan repayment timely. Rest of the change may be due to the change of other independent variables.4 Regression analysis: How much change is occurred in dependent variable in response to the change of independent variable is shown by regression analysis. In this report multiple regressions is used to demonstrate the following relationships: 7.9% is representing that 93. There are two types of regression analysis.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.4. The regression equation is: Interest Income = 2365 + 0. Interest income is the main source of bank’s profitability.132 SME Credit + 0. interprets that if the regulatory defined value is higher than the bank’s grading will be higher. One is linear regression and another is multiple regressions. SME Credit and Loan other than SME as predictor variables. This interest comes from interest on 55 | P a g e . The value R-square of 93.  The constant value of 2365 represents that if there is no SME credit and other loans.190 Loans other than SME (Ref: Appendix table 6) R-Sq = 93. 7.7% change in Interest income occurs for the change in SME credit and Loans other than SME.

010 0. If the value of SME credit changes by taka 1 (holding loans other than SME constant) then the interest income will be changed by taka 0. the equation looks like the following: Interest Income = 2365 + 0.03 56 | P a g e .30 P 0.132(0) SME Credit + 0.132 for SME credit variation and 2365.190(1) Loans other than SME = 2365. B2 = 0 Predictor SME Credit Loans other than SME Coefficient 0.19045 T 5.132 and 0.190(0) Loans other than SME = 2365  The coefficient of SME credit and Loans other than SME are 0.132(1) SME Credit + 0. depositing balance with other banks and Bangladesh Bank. Interest Income = 2365 + 0. One is null hypothesis (H0) and another one is alternative hypothesis (H1) for the coefficients.77 2. The equation will be: Interest Income = 2365 + 0.132(0) SME Credit + 0.13218 0. has altered the Interest income by 0.190.190 implicating that change in loan other than SME of taka 1. B2(Coefficient of loans other than SME credit) =0 H1: B1 = 0.190 holding constant the SME credit. H0: B1(Coefficient of SME credit) =0.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.132 in total.190 Significance of the coefficient: To analyze whether the coefficients of SME credit and loan other than SME are significant I have made two hypotheses.190(0) Loans other than SME = 2365.132  The coefficient of loans other than SME is 0.

the H0: coefficient (B2) = 0 can also be rejected.010 (less than table value of 0. This hypothesis means that response variable interest income is not related to any of the predictor variables.4.77 (Table value of 5 degrees of freedom 2. This tells us that the equation is representative to predict the interest income.30 (Table value of 5 degrees of freedom 2. That’s why we can reject the H0: coefficient (B1) = 0. n-k-1.statistic of 2. SME credit and loans other than SME.015) for SME credit variable and its small p value of 0.05 = 9.39) is used to test the significance of the regression as a whole considering both of the coefficients collectively.015 The computed F value (48.05) indicate the coefficient of SME credit is significantly different from zero. Source Regression Residual Error Total DF 2 3 5 SS 10733599 692830 11426429 MS 5366799 230943 F P 23. ANOVA table based on the decomposition of the total variation in dependent variable (SST) into its explained (SSR) and unexplained (SSE) parts. H1: At least one coefficient = 0 If the regression model assumptions are appropriate and H0 is true. The large F ratio and 57 | P a g e . The table value of F ratio at 5% significance level with 2 and 3 degrees of freedom is F0. the ratio F = MSR (Mean square of regression) MSE (Mean square of error) has an F distribution with df = k.03 indicate the coefficient of loans other than SME variable is significantly different from zero. 7. Let.2 Analysis of variance for regression significance: The analysis of variance (ANOVA) examines the significance of all the coefficients collectively. H0: coefficient (B1) = coefficient (B2) = 0.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. In summary the coefficient of both predictor variables are significantly different from zero.24 0.statistic of 5.55.015) for loans other than SME variable and its small p value of 0. Similarly the large t. The t. So.

The regression function explains a significant amount of variability in interest income. Provision for loan and advances = 167 + 0.3. The value 167 is constant and intercept of provision for loans and advances. 7.883 (1) Substandard + 0. Doubtful & loss: The regression equation is provision for loan and advances = 167 + 0.153 (0) Doubtful & loss = 167  The coefficients 0. the provision amount would be equal of 167 because of other provision maintained for unclassified loans. This means if there is no substandard or doubtful & loss loans. Provision is kept for both classified and unclassified loans. Multiple regression equation of Provision for loans & advances versus Substandard.883 (0) Substandard + 0. Provision for loan and advances = 167 + 0.   Here the response variable is provision for loans and advances that is related to the independent (Predictor) variables substandard and doubtful & loss loans.153 measure the average change in provision per unit change in the relevant independent variables. Here coefficient value of 0.883 Substandard + 0.4. The SME credit and loans other than SME credit has significant control over interest income.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. H0: coefficient (B1) = coefficient (B2) = 0 is rejected.883 58 | P a g e . its small p value show the regression is significant. So.153 (0) Doubtful & loss = 167.883 taka.883 indicates that each increase of 1 taka in substandard loan when doubtful and loss loans are held constant increases the provision for loan loss by an average of 0.0% Interpretation:  Provision for loan and advances is kept as safety of the classified loans. Through this regression equation I want to find out the substandard and doubtful & loss loans’ influence in the provision kept from the profit.883 and 0.153 Doubtful & loss (Ref: Appendix table 7) R-Sq = 97.

0% means that the regression equation explains 97% of the variation of provision for loan loss.70 (Table value of 5 degrees of freedom 2.153  Here the R.70 P 0. That’s why we can reject the H0: coefficient (B1) = 0.015) for Doubtful and loss variable and its small p value of 0.36 (Table value of 5 degrees of freedom 2.15268 T 9.36 7.statistic of 9.003 0. H1: at least one coefficient = 0 Whether the hypothesis is accepted or rejected it can be determined from t value and p value.883 (0) Substandard + 0. Similarly the large t.005 indicate the coefficient of 59 | P a g e .88347 0.015) for substandard variable and its small p value of 0.05) indicate the coefficient of substandard loan is significantly different from zero. For multiple regressions the t-test: Predictor Substandard Doubtful & loss Coefficient 0.statistic of 7. substandard and doubtful loans. This hypothesis means that response variable provision is not related to any of the predictor variables.153 means that provision for loan loss increasing to 167.square is 97. Significance of the coefficient: To determine the significance of the coefficient we firstly consider two hypotheses: H0 : coefficient (B1) = coefficient (B2) = 0.003 (less than table value of 0.  Similarly the coefficient value of 0.153 (1) Doubtful & loss = 167. Provision for loan and advances = 167 + 0.005 (Ref: Appendix Table: 7) The t.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.153 due to 1 taka change in doubtful and loan loss holding constant the value of substandard.

39 P 0. H0: coefficient (B1) = coefficient (B2) = 0. The regression function explains a significant amount of variability in provision for loan loss. 60 | P a g e .55. the ratio F = MSR (Mean square of regression) MSE (Mean square of error) has an F distribution with df = k. The large F ratio and its small p value show the regression is significant. n-k-1.05 = 9. The table value of F ratio at 5% significance level with 2 and 3 degrees of freedom is F0.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. H1: at least one coefficient = 0 If the regression model assumptions are appropriate and H0 is true.005 The computed F value (48. substandard and doubtful loans.4. So. 7. Source Regression Residual Error Total DF 2 3 5 SS 37505 1162 38667 MS 18752 387 F 48. the H0: coefficient (B2) = 0 can also be rejected. In summary the coefficient of both predictor variables are significantly different from zero. H0: coefficient (B1) = coefficient (B2) = 0 is rejected. Doubtful and loss loan variable is significantly different from zero.4 Analysis of variance for regression significance: Let. So.39) is used to test the significance of the regression. This hypothesis means that response variable provision is not related to any of the predictor variables.

small country with large population. BASIC Bank ltd made 60% contribution to the food industries while Graph: 05 Ref: Appendix table: 8 BRAC Bank Ltd had 35% and Mercantile Bank Ltd Had only 5% contribution. 8.BRAC Bank Ltd & Mercantile Bank Ltd. the demand of food is always increasing. 5% BRAC Bank Ltd.1 Sector wise disbursement comparison: BRAC Bank Ltd and Mercantile Bank Ltd are also two leading banks in our country. So to compare the performance of BASIC Bank Ltd with the two private sector banks as BASIC Bank Ltd is specialized for SME sector financing. food and allied industries are promising industrial sectors.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. From the graph we see that BASIC Bank Ltd has made great contribution to the 35% 60% food industries through giving loan facilities than other two banks. So. Here based on the following two points comparison among these three banks will be made:  Sector wise loan Disbursement Interpretation Food and allied industries are one of the leading industries in our economy. These banks are also contributing in our small and medium enterprise sector development. BASIC Bank Ltd. As Bangladesh is Food & allied ind. Mercantile Bank Ltd. 61 | P a g e .

Interpretation: Textile industry is the leading BASIC Bank Ltd. BRAC Bank Ltd has 35% contribution and Mercantile Bank Ltd has 20% loan contribution in this sector. Mercantile  Percentage 35% of classified loan Bank Ltd. BRAC Bank Ltd. 47% 52% Graph: 06 Ref: Appendix table: 8 Interpretation: RMG(Ready Made Garment) 20% BASIC Bank Ltd. 45% From the graph it can be seen that BASIB Bank Ltd has made 45% loan investment in readymade garments sector among these three banks. Textile 1% industry in Bangladesh. BRAC Bank Ltd. BRAC Bank Ltd has also doing well having 47% contribution. Mercantile Bank Ltd. BASIC Bank Ltd has concentrated small sector industries in this sector for Z Graph: 07 Ref: Appendix table: 8 loan disbursing. Among the three banks BASIC Bank Ltd has made the best contribution in this industry. This industry has great contribution in our GDP.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 62 | P a g e . BASIC Bank Ltd has 52% loan to this industries. This industry has market outside Bangladesh. The performance of Mercantile Bank is greatly low on this sector.

But the percentage is high for Mercantile Bank Ltd. Its recovery rate is quite 76% 82% 87% Mercantile Bank Ltd. But the recovery of BRAC Bank Ltd is 82% while their disbursement is tk. The higher the percentage of classified loan the worst the performance of the bank. From the above analysis we came to know from the analysis that BASIC Bank is the most dominant player in the market. Actually the employees who are dealing with customer are vigilant to recover the outstanding loan.78 core. 560.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. Here the BASIC Bank’s classified loans amount is low at 5%. The disbursement amount is tk. 476. Mercantile Bank Ltd. doubtful and bad & loss. Graph: 08 Ref: Appendix table: 9 Interpretation: Rate of recovery BASIC Bank Ltd. 8.classified loans and unclassified loans. BRAC Bank Ltd. The recovery percentage of BASIC Graph: 09 Ref: Appendix table: 10 Bank is 87%. consist of substandard.79 crore.2 Comparison based on percentage of classified loan & rate of recovery: Interpretation: According to BRPD Circular by Percentage of classified loan Bangladesh Bank loan and advances are divided in two forms. satisfactory. Classified loans 8% 5% 10% BASIC Bank Ltd. BRAC Bank Ltd. 63 | P a g e .

This can be the bank’s competitive advantage than other commercial bank operating in Bangladesh. Interpretation: Here we see that BASIC Bank Ltd is providing both term loan and working capital loan for SME financing. As the bank is specialized in Small and Medium sector and its business area in more concentrated the bank is performing well. 8.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 64 | P a g e . From the above chart and illustration it is clear that BASIC Bank is performing well that BRAC Bank Ltd and Mercantile Bank Ltd.3 Comparison based on Mode of SME Finance: BASIC Bank Ltd Term loan and working capital loan & BASIC Kollaniya for women Entrepreneur Only Term loan Only Term loan BRAC Bank Ltd. They also have a special package for women entrepreneur. But both BRAC Bank and Mercantile Bank provide only term loan for financing SME sector. Mercantile Bank Ltd.

water pollution etc. Green banking is a component of the global initiative by a group of stakeholders to save environment. Green banking makes great contribution to the transition to resource efficient and low carbon industries such as green industry and green economy in general. Green Bank means an ethical bank which is socially responsible for making sustainable development of environment. 9.1 Green Bank and Green Banking: Banks play an intermediary role in the economy. such as environmental. If clients are concerned with more than simple return then they may need to turn to an ethical bank to find ways in which they can garner return while keeping to their own moral concerns. which gives them a comparative advantage in knowledge. Banks have extensive and efficient credit approval systems. Conventional banks are legally bound to maximize return for their clients. which are mostly non-excludable and non-rival in nature. Banks are well seasoned and well equipped to weigh risks and attach a price to these risks. Business firms and consumers are the main players accountable for negative externalities in the form of air pollution. Banks can also widen more sustainable products. Green banking takes responsibility safeguarding the planet from the unusual weather pattern. rising green house gas and declining air quality. 9. or ethical investment funds. social. Because of this the possibility for banks to contribute to sustainable development is potentially profound.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. Green banking provides support to innovative green products and the activities that are not hazardous to the environment and helps to conserving the environment. The efforts are expected to bring positive changes in the environment. banks may be able to prop up progress toward sustainability of society. When depositors allow a bank to invest for them they are able to assume that the bank will know which investments will maximize their returns.2 Green Banking as a part of economic assumption: The environmental dreadful conditions and rectifying measures are related with the economic theory of market failure –externalities and public goods. Through their intermediary role. 65 | P a g e . Banks can charge more interest on those companies which are indifferent to environmental safety issues.

Green products help to create favorable impact on environment have positive externalities. which are environmental welcoming and discourage the projects that spoil the environment. Bankers are the important specialized group who has dealings with the other groups of people and also with general masses. which will directly affect the low lying countries of the world. bank can initiate the following measures: Online banking & mobile banking: Green banking can be done by using online banking instead of branch banking. The concept of Green Banking developed in the western countries. paying bills online instead of mailing them. It is for bringing to an end of the environmental squalor and making this planet fit for human habitation. paper. water pollution by their clients.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. We all know that the peoples of the whole world are fretful about the environmental degradation. electricity. especially the rising of global high temperature and thereby melting of glaciers and ice-berg in the Antarctic region and consequently rising of sea level. foods etc. They would try to control the wastage of resources like water. as a whole. Bankers can finance the green projects. Waste Management: A green banker must be vigilant about wastage and waste management. gas. Thus. 66 | P a g e . recycling of materials also creates benefit for the environment. Customers can also get their account information through mobile phone instead of going physically to the banks and get the account documents in paper form.3 Way of doing Green Banking: At present the term Green Banking is now popular globally. To implement the green banking. which has been replicated by many developing countries. the ongoing green banking initiatives by different banks is an effort where the society as a whole is the target beneficiary. Moreover. 9. They can adopt different green activities within their in-house environment and also can make the first move the protection of the air pollution. Use of computer saves papers which ultimately saves trees.

The key areas of deterioration include land degradation. recycling facilities and smoke and gas arresting unit. Green Bank is socially responsible. Bangladesh Bank play as important role in implementing green banking policy in banks. Comply with the guidelines on corporate social responsibility(CSR) To concentrate on linking CSR at the highest corporate level. positive effect on the environment. Banks must not finance any grubby project that pollutes the environment. 9. improper use of land. but the benefits go much further reaching into security and cost. Finance in solar energy. Bio gas and ETP. chemicals or smoke to the environment. The industries must not release any kind of effluents. poor resource management and uncontrolled discharge of pollutants are the major causes. The industries that are financed by the banks must have effluent treatment plant (ETP). Bangladesh Bank instructs for the banks to: Facilitate their clients with utmost care in opening L/C for installation of Effluent Treatment Plant (ETP) in the industrial units. Green banking clearly has a direct. air pollution. Financing Green Projects: Being aware of the environmental issues banks must go for financing the projects that do not pollute the environment.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. biodiversity resources and impacts of natural disasters. 67 | P a g e . It will create healthy working environment. This is not only beneficial for the clients but also for the employees. environmentally mindful and follows a path of sustainability with automation and efficiency. water pollution and scarcity. Rapid population growth. As the banker of all the banks in Bangladesh.4 Green Banking Guidelines of Bangladesh Bank: The state of environment in Bangladesh is deteriorating significantly. Reduction of sound pollution: Within the bank all the employees and customer should maintain low voices in conversing with one another.

2011 Phase II December 31. water resistant crops in the water locked areas and flood prone areas. Banks have been brought under the purview of E. Bangladesh Bank has launched a refinance program of tk. 2. drought resistant crops in drought prone areas. Engaging with borrowers in scrutiny of the environment and social impacts.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 2011 Phase III December 31. Green Banking Policy Implementation Deadline Phase I December 31. Encourage the farmers to cultivate salinity resistant crops in the salty areas. ETP and hybrid Hoffman Kiln (HHK) in brick field. An indicative Green Banking policy and strategy framework has been developed. Implementation of green banking policy into three phases. Use surface water instead of underground water for irrigation. 2011 68 | P a g e .commerce with a view to providing the customers with online banking facilities covering: Payments of utility bills Money transfer Transaction in local currency through internet.00 billion for Bio Gas plan. Solar Plant. insecticides by natural means instead of using chemical fertilizers and pesticides. For engraining environmentally and socially responsible practices. Use organic fertilizer. Bangladesh Bank advises banks to Be cautious about the adverse impact of natural calamities.

The bank allocates considerable fund in their annual budget for implementing & practicing green banking. Introducing Green Finance: Financing in eco friendly and environmentally sustainable business activities and energy efficient industries shall be extended through preference by all the credit delivery points.5 Green Banking Policy of BASIC Bank Ltd A High-Powered Committee comprising of the director(s) from the Board of the Directors of the bank shall review environmental policies. 9. clean water supply project. water and energy to make sure that the best value is received from the resources they use through formulating effective strategies with the boundaries of the policy. The other policies are: The bank has established a separate Green Banking Policy Implementation Unit (GBPIU) which has been assigned responsibility for designing. The stakeholders of the bank are encouraged to reduce their consumption & wastage of physical resources like raw materials. bio-gas plant. The unit will report to the high powered committee time to time. waste water treatment plant. bio-fertilizer plant are encouraged those will be financed by the bank. evaluating and administering related Green Banking issues of the bank. solid and hazardous waste disposal plant. Viability of environmental infrastructures for financing shall be assessed in line 69 | P a g e . This policy ensures that services to be provided by all of the credit delivery points of the bank shall comply Green Banking Policy and activities to be designed within the Green Banking Policy implementation strategy. Environmental infrastructures such as renewable energy project. A senior executive has been assigned with the responsibility of heading the unit and a permanent position playing the role of coordinator of the unit shall be created. strategies and programs of the bank.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.

Creation of Climate Risk Fund The bank addresses environmental issues & assesses environmental risks (high/ moderate/low) of projects/businesses of different sectors in different areas those are financed by the bank and create climate risk fund. Introducing Green Marketing Green Marketing incorporates a broad range of activities. R&D Division shall plan for developing & marketing Green Banking products for offer. it won’t be difficult to adopt paperless banking practices. engineering. A comprehensive risk exposure matrix shall be developed for assessing environmental risks and reported to different credit committees of the bank by the branches in the risk exposure matrix.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. Ensuring all out “Online Banking practices” As the bank has already adopted on-line banking practices to operate its regular transactions. bank effectively uses green marketing channels more for widening target markets of usual products. how the purpose of the project/ business & to what extent this/these is/are rewarding to the environment. As such. The fund to be allocated/created for “Green Banking” may be used as a part of CSR activities at the time of emergency. the GBPIU shall accentuate the process of commencing e-banking related to processing of proposals avoiding the use of physical resources like paper. Most viable project/business/ sector shall be prioritized for financing to position the bank gradually as a “Carbon Neutral Bank” first & then as a “Climate Positive Bank”. Bank takes steps that will help building awareness among common people for promoting products/services which cause least harm to the environment. including products/services design.e. changes to the production process & packaging encouraging the potential clients for designing Green Project as well as modifying advertising. printer cartridge etc. MIS Division is responsible for preparing effective communication strategy while ICT Division provides software support & 70 | P a g e . with the environmental issues i. with the help of ICT & MIS Division of the bank. modification. Besides. new product innovation.

Use of appropriate technologies The bank addresses the use of appropriate technologies through installation of energy efficient machinery/equipments that will upgrade & expand its ATM services and introduce SMS services & e-mail to its customers for providing better and paperless services to its customers. The bank shall make the provision for installing water treatment and effluent treatment plants mandatory for clients having textile. Sector specific Environmental Policies The bank shall formulate strategies to design specific policies for different environmentally sensitive sectors such as agriculture. agri-business (poultry and dairy).SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. The environmentally sensitive sectors may be listed as follows: i) ii) iii) iv) v) Agriculture Agri-Business (Poultry & Dairy) Agro Farming Leather (Tannery) Fisheries 71 | P a g e . leather processing factories to qualify themselves for receiving financial support from the Bank. necessary training to the employees of the bank in a manner that all of employees are trained in “Online Banking practices”. spinning. Consumer Awareness and Green Event Exclusive training programs or specialized/befitting classes in foundation or other credit related courses for incorporating Green Banking Policy Guidelines as a part of awareness building among the employees of the Bank are arranged in consultation with GBPIU by the Training Cell. dyeing. Supporting employee training. agro farming etc. Training programs on environmental and social risk and employee awareness development should have to be implemented by the training cell as a continuous process.

hazardous by-products and increase productivity. Pricing Strategy The bank shall formulate its pricing strategy for its products in line with the global green banking issues. Green strategic planning The bank shall determine green targets to be attained through specific planning. vi) vii) viii) ix) x) xi) xii) xiii) xiv) xv) xvi) xvii) Textile & Apparels Renewable Energy Pulp & Paper Sugar & Distilleries Construction & Housing Light Engineering & Basic metal Chemicals (Fertilizers. preservation of natural water stream & water resources. waste materials. It shall determine a set of achievable targets and strategies. energy utilization. Pesticides & Pharmaceuticals) Rubber & Plastic Industry Hospital/Clinic Chemical Trading Brick Manufacturing Ship Breaking etc. and disclose these in their annual reports and web sites for green financing and in-house environment management as well. ICT Division shall time to time up-date the Website of the bank with new and easy navigation slots or publish a separate webpage for the purpose of marketing/advertising green banking products of the bank. efficient use of materials. The clients complying green policy of the bank and adopting appropriate technology for addressing ERM issues from their part shall be eligible for receiving facilities at a reduced rate than the usual rate of the bank. Premium pricing strategy shall be adopted and practices for the clients to reduce carbon/heat emission. 72 | P a g e .SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.

Setting up Green Branches The bank shall set up Green Branches which will be featured by the provision of using natural light. for assessing project/business proposals and monitoring of project/business & working capital loans until it develops an ERM manual or guidelines of its own. provided by Bangladesh Bank. Environmental Risk Management (ERM) Guidelines. the bank shall follow the Environmental Risk Management manual. 73 | P a g e . renewable energy and surface & recycled water to the highest possible extent and implementing energy efficient lighting & cross ventilation air movement system and replacing gradually the less energy efficient machinery/equipments by higher energy efficient machinery/equipments. However. Incorporation of Environmental Risk Management plan and guidelines The bank incorporates Environmental Risk Management (ERM) section in the Credit Risk Management guidelines of the bank for evaluating/sanctioning new as well existing loan proposals through Assessment of Environmental Impact (EIA) of those projects/businesses.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. this policy keeps the provision for all future regulatory directives. imposed or to be imposed time to time by the regulatory authorities. to be issued by different authorities of the Government of Bangladesh. shall be handy for use as a reference manual. to be taken into cognizance for addressing concurrent Environmental risk issues and incorporating those issues in the policy matters without any change in the policy. Initiation of Programs for educating clients The bank formulates effective strategies for introducing programs to educate existing & potential clients (both personal/corporate level) so that they are and/or will be equipped to comply environmental regulations. The branches shall be decorated in such a manner that will promote the activities of “Environmental”/”Green Banking” issues to the people. issued by Bangladesh Bank. As such.

SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. to be dictated by organizations of Government of 74 | P a g e . Reporting in Standard Format with External verification  Bank has to publish independent Green Annual Report following internationally accepted format like Global Reporting Initiative (GRI) targeting their stakeholders. Eco Landscaping The bank shall prepare eco landscaping of its branches/sales offices for encouraging environmental infrastructures such as renewable energy project(s). Designing and introducing innovative products The bank shall introduce environment friendly innovative green products addressing the core national/global environmental challenges. bio-fertilizer plant(s) and implement the “Green Banking Policy” effectively. current activities and future initiatives. Disclosure and reporting of Green Banking activities The bank shall start publishing independent Green Banking and sustainability reports showing past performances. bio-gas plant(s). Research & Development (R&D) Division of the bank shall formulate plan for developing & marketing Green Banking products to offer for public. solid and hazardous waste disposal plant(s). clean water supply project(s).  Bank shall report its initiatives/activities under the said program to the department of off-site supervision of Bangladesh Bank on quarterly basis as instructed by Bangladesh Bank within the next 15 days of the respective quarter end. Provision for co-opting intermediary regulations/guidelines There will be provision for co-opting intermediary guidelines and/or restrictions on financing in a specific sector/industry. waste water treatment plant(s).

fuel etc by its office. related to Green Banking issues without changing any of the clauses of the policy just by initiating note within the discretion of the Management when the guidelines and/or restrictions will be considered befitting for the environment. Green Banking policy implementation unit (GBPIU) will formulate and adopt broad environmental or Green Banking policy and strategy which has to be approved by the Board of Directors of the Bank. stationery. Branch Control and Marketing Division will monitor and guide all branches regarding implementation of in-house environment management issues such as preparation of an inventory of the consumption of water. Monitoring and follow up: Establishment Division will monitor and follow up the activities for implementing above noted issues at Head Office level. All Branch In-charges are entrusted with the responsibilities for materializing the preceding directives of In-House Environment Management. electricity. All Credit Related Divisions mentioned above. Bangladesh and regulatory bodies. paper. Segregation of Green banking Activities among different departments: Apart from policy formulation and governance. Micro Credit & Special Finance Division Trade Finance Division Small Enterprise Finance Division Consumer Credit Division Introducing Green Finance. The activities are given below: Name of divisions/units         Green Banking Activities Incorporation of Environmental Risk Industrial Credit Division Management in Credit Risk Management Commercial Credit Division (CRM).SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. Research &Development Division 75 | P a g e . green banking activities are divided among different department of the bank’s Head office to properly implement and monitor the green banking activities. A monthly progress report shall be submitted by Branch Control and Marketing Division and Establishment Division separately to GBPIU for overall progress of green banking activities of the bank.

As such progress report of the consumption pattern of paper. Creation of Climate Risk Fund. Online Banking. as a part of implementing one of the policy issues of Phase-I i. 76 | P a g e . paper and stationery consumption. Disclosure and reporting of Green Banking Activities 9. following action plans are taken by branches and Head Office Divisions of the Bank: Take measures to save electricity. electricity. In-house Environment Management immediately. water etc. stationery. According to Bangladesh Bank BRPD Circular No. on line communication should be extensively used (wherever possible) for office management to save papers. energy. Consumer Awareness and Green Event.  Research &Development Division Introducing Green Marketing. has adopted a comprehensive Green Banking Policy in a formal and structured manner in line with global norms so as to protect environmental degradation and ensure sustainable banking practices. Now. Human Resource Division Training Cell Green Banking Policy Implementation Unit ICT Division Supporting Employee Training and awareness building. In place of relying on printed documents. water. energy. is required to be prepared and reviewed periodically (at least monthly ) by the branches and Head Office divisions for taking necessary appropriate measures for improving efficiency i. development of robust Management Information System (MIS).e. 02 dated February 27. 2011 on policy guidelines for Green Banking BASIC Bank Ltd.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. establishing       Establishment Division Finance & Accounts Division  ICT Division  MIS Division full fledged e- communication system.e. utilization of resources.6 Green Banking implementation in BASIC Bank Ltd.

Create awareness among the employees for efficient use of electricity. Preserve maintenance schedule of Generator and Air Conditioner and other major electrical and electronic equipments for monitoring its performance as well as fuel/energy efficiency. Installation of energy efficient electronic equipments and automatic shutdown of computers. Take steps to save fuel from corporate business travel. All officials of the bank are advised to ensure that their PC. fans. Replacement of normal bulbs in branches/offices of the banks with energy saving bulbs may be taken as an immediate step in this regard. Air Coolers etc shall be implemented in consultation with concerned division of Head Office gradually for reducing electricity consumption. All divisions should focus on minimizing resources at every possible aspects of work. Office schedule should be maintained properly so that unnecessary stay in Branch/office could be avoided and as such office period should be utilized effectively. stationery. paper. water. All officials of the bank are advised to discharge their duties in environmentally responsible ways. In procurement of vehicle and other electrical and electronic equipments.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. fuel/energy efficiency should be considered with priority. Officials are encouraged to print both side of a page for draft copy. fuel and reuse of equipments and paper. Fan and other office equipment is turned off whenever those equipments are not in use for prolonged period of time. lights. 77 | P a g e . Making use of solar energy at the premises as an alternative source of electricity may be initiated in consultation with and approval from concerned authority of the Bank.

The bank conforms the instructions stipulated in the detailed guidelines on Environment Risk Management (ERM) of Bangladesh Bank in consideration of a part of the Green Banking policy. Green Banking Policy of BASIC Bank Ltd ensures necessary measures to protect environmental pollution while providing service or financing customers as well as to improve in-house environment management through efficient use of various resources.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. 78 | P a g e . The Green Banking Policy also encompasses the Environmental Risk Management Policy and covers the overall environmental concerns – arising out of both external or internal sources and the respective measures to manage it.

approximately 50% of the loans and advances will be given to small-scale industries. Approximately 75% of the loans and advances have been given to small and cottage industries: In the credit policy it has been specified that. to determine some important points and recommendation are required. By examining the figures we have found that. Thus any kind of ill practices at the branch level are restricted. every proposal are forwarded to the Head office for granting the loan and Head office has the full authority to reject any kind of proposal. The significant findings found out while making the report are: Important points for SME Financing: Head Office of the bank is monitoring all kind of loans and advances: The Head office of the bank perfectly monitors the banking operation and execution of the credit policy. Higher recovery percentage of disbursed loan: As a specialized bank BASIC Bank’s main focus on small and medium enterprises. Along with that. With proper credit policy and recovery management BASIC Bank Ltd maintains high recovery rate at 87% that creates competitive advantage than other commercial banks. 79 | P a g e . After analyzing all the parts of the report. When I have examined the credit extension procedure of the bank I have found that. Competitive benefits of SME loans for BASIC Bank Ltd: SME loan is most suitable in Bangladesh to create employment opportunity boosting rural economy and to increase income level of the people. some power has also been forwarded to the branch manager most of whom also are well conversant about the credit policy of the bank. Pointing out momentous finding about the SME financing prospects of BASIC Bank Ltd in comparing to other two private commercial banks and based on the findings recommending what development is made. BASIC Bank Ltd employed 75% of its loan able funds to small-scale industries.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. Through financing SME BASIC Bank ltd is ultimately contribution to the economic development and employment generation of Bangladesh.

This is because of the fact that. 50% of doubtful loan and 100% of bad loss loan are kept as provision. This is the newly introduced concept in banks in Bangladesh. Strong dependency of interest income on SME credit and loans other than SME credit: When analyzing the regression of interest income on SME credit & loans other than SME credit. In SME loan.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. Important points for Green Banking: „Green Banking‟ a new concept in Bangladesh: As the world is becoming more and more vulnerable environmentally. 80 | P a g e . all of the habitats are concerned about environmental degradation. in SME risk is distributed among a big number of customers with small amount of loan. it is clear that provision for loan loss is greatly influenced by substandard and bad loss loan. higher amount of these types of loans requires more provision. default rate is low representing around 87% recovery. As a result. Loan growth goes almost 65% while deposit growth rate is 40%. If the SME credit can be enlarged it will generate huge interest income for the bank. For this reason the will be hampered. Green Banking unit of BASIC Bank Ltd: BASIC Bank Ltd has a unique green banking cell for formulating green banking policy Disclosing and reporting of Green Banking Activities. I have found out that income comes from SME has great influence on total interest income. Loan growth rate is higher than deposit growth rate: As we have seen in individual company analysis part that the deposit growth rate is lower than the loan growth rate. Bangladesh bank has formulated Green banking policy and instructed to all the banks to follow the Green Banking policy in their banking operation. 5% to 20% amount of substandard loan. High influence of substandard and doubtful loan on provision: From the regression analysis. 95% variation occurred due to substandard and bad loan loss. banks are also careful about it and work as a part to save the environment through Green Banking.

But in some case it should be careful in retaining its position. So adequate measure should be taken before disbursing the loan. Make balance between loans and deposit: Amount of loan can be raised in proportion with the deposit collection which reduces the liquidity risk of the bank.a. some of the small industrial loans (Bashundhara Paper Mill Ltd. Now. 81 | P a g e . This is due to the weak financial capacity of the firm. it should work more efficiently to reach recovery percentage from 87% to 100%.) become bad or classified.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. All the officials dealing with the clients should be vigilant in installment collection as the firms cannot be classified. They should always maintain a close relationship with their clients. For this reason I have made the following suggestions: Adequate measure should be taken for small industrial loan: In my study I have revealed that. Zaman Flower Mill Ltd. From the above findings it can be said that BASIC Bank ltd is performing well in SME financing. Especially alternative sources of repayment or adequate security coverage should be checked and satisfied in this regard.days BRAC Bank Ltd is performing successfully in SME financing. Proper monitoring for loan recovery & classification: Though the recovery percentage of BASIC Bank Ltd is good. Introduce more and more new loan products to have competitive position: There are many commercial banks especially private commercial banks are getting more interested in SME financing with attractive loan policy and interest rates. For this reason BASIC Bank Ltd should be cautious about the competitor.

symposium.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited. More SME service center need to be added to fully take the advantage of the huge potential customer segments. the bank should encourage their clients to do business in eco friendly way. Be more pragmatic about Green Banking Implementation: Green Banking policy can be a competitive advantage for BASIC bank ltd. Support for SME development: The Bank should have more conference in overseas. and seminar for more expansion of SME loan. work shop. They should monitor client’s business activities whether it hampers the environment. 82 | P a g e . They should also check out that whether the newly approaching firms are maintaining green banking strategy. Green Banking Policy Unit(GBPI) should make sudden visit at different branches to come across about the Branch’s implementation of Green Banking & use rating and award system to best Green Banking performing Branch.

The BASIC Bank Limited has been trying to operate its business successfully in Bangladesh since 1994. The working atmosphere of the BASIC Bank Limited is very simulating. 83 | P a g e . the success of SME banking depends on the expertise and dedication of the field level officers.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.SME Financing. That is why continuous training and motivation is very much relevant to run the SME banking successfully. As the bank is concentrated in one of the thrust sectors of Bangladesh. commitment and dynamic leadership among its management over the periods. Nevertheless. The bank must accept any failures and think of them as an objective to pursue future goals instead of blaming such failures on other factors and in this way the Bank will be able to keep on playing its important roles in our economy.the bank must emphasize on the domestic scenario more closely and analyze any certain trends and strategies of their competitors. Credit division and Foreign Exchange divisions. Basic Bank has already developed goodwill among its clientele by offering its excellent services through General banking. the bank has been successfully to the position itself as a progressive and dynamic financial institution in the country. During the short span of time of its operation. This success has resulted from the dedication.

basicbanklimited.   Gupta. New Pearson Education. Page # http://en. Brother’s Publications. ISBN 81-7758-006-X. Page # 393. G. New Age International Publisher.htm http://www. 573-599 Khan. New A.P.R.php http://www.bangladesh-bank. Page # 56-59 Websites:         http://ec. Dhaka.P. E. 2012-2013: Research Methodology Methods & Techniques. ISBN & Gupta M.SME Financing and Green Banking by Commercial Banks: A Case Study of BASIC Bank Limited.europa.php?about_us=1 http://www. from 2005 to 2010 84 | P a g e .org/wiki/Small_and_medium_enterprises http://www..php?activities=1 file:///C:/Documents%20and%20Settings/USER/Desktop/Case%20Study%20on %20SME%20Banking.php Annual Report:    Annual report of BASIC Bank Ltd From 2005 to 2010 Annual report of BRAC Bank Ltd from 2005 to 2010 Annual report of Mercantile Bank Ltd. Ltd. ISBN: 978-81-224-1522-3 Page # Books:  Kothari.smef. 2009: Entrepreneurship Small Business & Lives of Successful Entrepreneurs. S.basicbanklimited. 2008-2009: Business Statistics Sultal Chand & Sons. Jhon & Reitsch.2005: Business Forecasting Dorling Kindersley(India) Pvt.  Hanke .

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